MainStreet Bank Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
July 29, 2024

Key Takeaways

  • Q2 EPS was $0.27 with a net interest margin of 3.15%, loans grew by $51.7 M and deposits by $22.6 M.
  • Balance sheet liquidity remains strong with $517 M available in secured advances and $129 M in unsecured lines of credit.
  • Loan portfolio discipline is highlighted by $1.8 B in outstanding loans, 63% fixed rates and 37% floating rates (with a 6.48% weighted floor) to manage rate risk.
  • Credit quality remains solid with net charge-offs at 0.08%, only 1.15% of loans nonperforming, and estimated loss exposure under 10% on troubled assets.
  • The Avenue banking-as-a-service platform is delayed to ensure full regulatory compliance, with Version 1.2 expected in September and initial clients entering beta after $17.2 M of capitalized build and $1.1 M in H1 fee income.
AI Generated. May Contain Errors.
Earnings Conference Call
MainStreet Bank Q2 2024
00:00 / 00:00

There are 7 speakers on the call.

Operator

afternoon, everyone, and thank you for joining our virtual earnings webcast. My name is Jeff Dick, and I'm the Chairman and CEO of Main Street Bancshares, Inc. At Main Street Bank. I'm joined here today with our CFO, Tom Shmellik our Chief Lending Officer, Tom Floyd and our Chief Accountant, Alex Barry. We'll open for questions after today's presentation.

Operator

We have 2 analysts on the webcast with us today, Chris Marinac from Janney Met with Montgomery Scott's and Matt Breese from Stephens Inc. Both analysts will be able to ask their questions and share their comments directly following the presentation. You can submit written questions throughout the presentation using the viewing portal. If we miss your question during the discussion, please reach out after the webcast. You should know that we have not authorized a transcription of today's virtual meeting.

Operator

Unauthorized transcripts may include errors, omissions, inaccuracies, and we don't encourage their use. We will post the video of this meeting on our website. Unauthorized transcripts also do not include our disclosures regarding forward looking statements and SEC filings referenced in our slide presentation. On that note, we'd also be remiss if we didn't point you to our Safe Harbor page that describes the context of forward looking statements. We use certain non GAAP measures which are identified as such within our presentation Virginia Community Bank celebrating our 20th year of business.

Operator

We serve the Washington D. C. Metropolitan area and we have a great organic growth story using a branch light strategy. We've always been a tech forward bank with strong online and mobile banking technology. We trade on the NASDAQ Capital Markets Index.

Operator

The D. C. Market is a great place to do business. We always talk about the strength of our market because we are in a region that hosts the federal government. But we also have world class universities, hospital systems, airports, tourism data centers and at least 16 Fortune 500 Companies.

Operator

As such, we also have low unemployment and a very high median household income for our workforce. We ended the quarter with a closing price of $17.73 $135,000,000 market cap. The closing price was 75 percent of tangible book value. At this point, I will turn the presentation over to Alex Barry. Alex is our Chief Accountant.

Operator

He works with Tom Schmellek to ensure the accuracy of all of our books and our records. Alex is going to talk you through our financial performance.

Speaker 1

Thank you, Jeff. Slide 6 summarizes our financial performance over the past 4 quarters. The quarter is down due primarily to increased deposit costs. I'll summarize in the following five ratios. Our EPS is $0.27 per share.

Speaker 1

Our efficiency ratio is 78%. Our return on average assets is 0.5%, and our return on average equity is 4.7%. And our NIM is 3.15%. Our net loans increased 51,700,000 for the quarter and our total deposits increased 22,600,000. Total assets held relatively steady quarter on quarter as did net charge offs at 8100th of a percent.

Speaker 1

Our liquidity remains strong with good ratios throughout. We have 517,000,000 available in secured advances through the Federal Home Loan Bank of Atlanta and an additional 129,000,000 in unsecured lines from 6 different providers. As you look at slide 8, you will see that our cumulative cycle loan beta is 54%, up slightly from year end 2023's 47%. Our cumulative cycle deposit beta is 63%, again up slightly from year end 2023's funding beta of 56%. Slide 9 provides our monthly net interest margin, which is important because it provides additional support indicating what should be a nice leveling off of the NIM over the last several months.

Speaker 1

We have some very exciting opportunities in the pipeline in addition to Avenue that will continue to reduce our funding costs over the second half of the year and further improve our net interest margin. Our core deposits continue to increase and now represent 78% of total deposits. Non interest bearing demand deposits and low cost demand deposits encompass 27% of core deposits and the overall weighted average cost of core deposits is 3.48%. Non core deposits represent 22% of total deposits with a weighted average rate of 5 point 0 4 percent. It's important to note that 62 percent of the non core deposits are adjustable rate.

Speaker 1

Included in that 62 percent is $173,000,000 of the term deposits with a weighted maturity of 39 months that are callable at our discretion. At this point, I'll turn the presentation over to Tom Floyd, our Chief Lending Officer, to discuss our loan portfolio and loan performance.

Speaker 2

Thank you, Alex. As we look at the loan portfolio, it is worth remembering that so much of lending is about discipline. Discipline. We have disciplined underwriting, which starts with an independent team of analysts. The team produces comprehensive credit memos that over the years have been commended by regulators, auditors and loan review specialists.

Speaker 2

This is an important first step in controlling and minimizing the riskiness of the loans we underwrite. We finished the first half of the year with $1,800,000,000 in outstanding loans. Our legal lending limit was $47,000,000 and our average loan size was $1,900,000 As we generate new opportunities, we also give strong consideration to the discipline of loan pricing. We are a commodity business. We don't set interest rates.

Speaker 2

We set a risk spread, which we define in our credit risk policy. A loan pricing isn't just about setting the rate. It is also about setting the duration for the rate. Just as we focus on writing floating rate loans during the low flat interest rate cycle leading up to 2022, we've now shifted the portfolio so that 63% of the loans have fixed rates and of the 37% of loans with floating rates, 57% have floors with a weighted average rate of 6.48%. Slide 15 shows that we manage our concentration on investor commercial real estate and construction well.

Speaker 2

This is our best asset, and it continues to perform at a very high level for us. The Federal Reserve Bank of Kansas City publication from April 18, 2024 did a nice job of identifying that banks commercial real estate risks are uneven. They determined that CRE risks can vary substantially across property types and geographic locations, exposure to CRE risk depends on more exposure to CRE risk depends on more than just loan concentrations. Other key factors include the stringency of the bank's underwriting, its willingness and ability to monitor existing borrowers and the capital and loan loss provisions that hold against potential losses. Finally, the authors add, despite a relatively strong economic outlook, investors continue to closely assess the risks that commercial properties post to banks, particularly those with sizable loan concentrations.

Speaker 2

Under closer examination, though, CRE risks are diverse and depend strongly on property type, property characteristics and geographic location. Slide 16 shows the results of our hard work. We charged off 8 100ths of a percent of gross loans in the 2nd quarter. Only 1.15 percent of our total gross loans are nonperforming. 76% of the nonperforming loans are comprised of 2 projects where the principals encountered significant delays which exhausted their liquidity.

Speaker 2

Each project is fully leveraged at near completion. We're actively working toward near term resolution for both projects. The remaining 24% non performing assets consist of 7 relationships that we feel will be favorably resolved. At this point, we estimate the loss exposure in non performing loans to be less than 10% of the current balance. Just 2.74 percent of our total gross loans are criticized or classified at this time.

Speaker 2

We originated $73,000,000 of new loans during the Q2 with a weighted average rate of 8.29 percent and with good loan to values. Our pure office exposure is down to $13,000,000 Slide 19 reflects the construction portfolio that's diversified both by type and by location. The construction book has a weighted average interest rate of 8.68 percent with good loan to values throughout. It is important to note that 89% of the construction portfolio loans have payment reserves funded by the customers. The remaining 11% of construction loans are to customers with strong liquidity and a good track record of performance.

Speaker 2

Likewise, our non owner occupied commercial real estate is also diversified by type and location with a weighted average interest rate of 6.54%, good loan to values and good occupancy. Our owner occupied loans also reflect good diversification with a weighted average rate of 6.19 percent in good loan to values. Slide 22 shows the trend in stress tests over the past 5 quarters and resulting impact to capital. The Q2 stress test for all earning assets reflects a worst case stress loss estimated 42,500,000 dollars In all quarters, we remain strongly capitalized. The stress test includes loan level testing for all construction and investor commercial real estate.

Speaker 2

For all other loan categories, we use the balance in each call report category multiplied by our worst ever loss for that call report category. For investments, we used the market price. And finally, for bank owned life insurance, we determined the liquidation value. That wraps it up for our loan presentation.

Operator

I'll turn

Speaker 2

it over to our CFO, Tom Schmellich

Speaker 1

now. Thank you, Tom.

Speaker 3

During the first half of twenty twenty four, we repurchased 41 1,858 shares of common stock for an average price of 17 point As Tom Floyd indicated, we are very well capitalized. We also have a good capital stack consisting of a good mix of common, preferred and subordinated debt. Our accumulated and other comprehensive income is just 3% of capital. Finally, as we look to the remainder of 2024, we offer the following guidance. The expense run rate will average 2% per month through the remainder of 2020 4, which includes the amortization of avenue capitalized expenses, and we project low single digit loan growth for the year.

Speaker 3

As Jeff said earlier, Main Street Bank has a strong culture and a focus on building shareholder value. We are in the business of taking risks continue to prove that to you quarter on quarter. I'll turn it back to Jeff at this point for an update on Avenue.

Operator

Thank you, Tom. I'd like to start this part of the presentation by discussing why we chose the banking as a service path, where we are in the process and where we go from here. Main Street Bank has always had a branch like strategy, but it is fair to look at where we are with respect to our peers. It seems most $2,000,000,000 banks have between 22,025 branches. So we looked at what adding 15 branch locations would do for us.

Operator

We estimated the fixed cost to be $130,000 per branch or 1,000,000 excuse me, dollars 1,950,000 dollars per year. In year 1, we estimated the branches would produce $75,000,000 in demand deposits, growing to $300,000,000 in demand deposits in year 5. We compared that with building out a banking as a service solution. Assuming annual fixed costs of 1,800,000 dollars we estimated the solution will produce $225,000,000 in demand deposits in year 1, growing to $1,000,000,000 in year 5. We also looked at the current environment for branch deposit gathering, particularly in a metropolitan area we serve.

Operator

The reality is customers bank online. Convenience is key. If convenience means opening another account, they will. As wealth transfers to the next generation, certificates of deposit as we know them will become a thing in the past. So when we go back to comparing the 2 strategies, branching doesn't make sense.

Operator

If customers don't need or want to go to the bank, building more locations doesn't solve for anything. If you didn't pick up on it, the background image on the last slide was from the site where they filmed the Field of Dreams. If you build it, they will come. Works well in the movies, but not so much for today's banking customers. The reason I included this comparison is because just a few years back, it would have been accepted without question.

Operator

In reality, some banks will continue with the branching strategy. The real comparison I think is in the opportunity and the opportunity cost. According to an article co authored by Boston Consulting Group and QED Investors, embedded finance will become all pervasive by 2,030. They estimate the small and medium sized business segment will account for $1,000,000,000 and the consumer segment $120,000,000,000 But since March of 2023, 3 prudential regulators have issued consent orders against 12 banks in the banking as a service space. Each consent order is different, but they have similar themes.

Operator

Banks aren't ensuring proper compliance systems. They aren't completing proper due diligence. They don't have ready access to information and they're relying upon someone else to do the heavy lifting. The problem is each time another bank receives a consent order, they raise the bar for the rest of us. Regulators and the industry can't help but looking at banking as a service providers with a jaded eye.

Operator

As a result, we need to reassess our last virtual meeting, but I think it merits a deeper dive. Our intention was to fully launch the first two versions of Avenue in an environment that included manual workarounds. Given the regulatory environment we have now, management and the board weighed the cost of going forward with a solution that included some manual workarounds. We thought a lot about the downside risk. With 12 banks having set the table with a lack of attention to detail and weak solutions, there would be no upside for regulators to give us credit for manual our attention from our goal.

Operator

Management and the Board decided that waiting until we had version 1.2, a complete version, was the right thing to do. And in reality, opportunities are still strong as many of our competitors will be busy for the foreseeable future working through their regulatory burdens. Talk to different people and estimate anywhere from 3 to 5 years to work out of a consent order. When fintechs come to us, they won't have to worry about whether we will be there for them. There's not another solution that can do what Avenue can.

Operator

Avenue is a software as a solution platform that was designed, built and owned by Main Street Bank. Through Avenue, we will enable fintechs, social media platforms and other solution providers with the ability to embed app based FDIC insured banking solutions for their customers. All the banking components reside under our control. We host the ledger along with the integrated tools for customer identification, anti money laundering, bank secrecy, compliance management, complaint management, case management, tokenization, reconciliation and multi factor authentication. I've said it before, but we've kept our regulators abreast of our solutions since the very beginning and we've shared ongoing progress reports along the way.

Operator

Just last week, the Avenue team spent the morning at the Richmond Fed providing an update on our solution from every angle, system architecture, compliance, cybersecurity, quality assurance and accounting. This meeting was at our request. We wanted them to see and hear that banking as a service can be deployed the right way. We did tell them that we recently delayed launching our first version until all solutions have been fully integrated.

Speaker 2

They know that we

Operator

take this very seriously. To bring this solution to market and they are working overtime. As we speak, our first client is finalizing their beta testing and will start scaling over the next several weeks. We have another client that will shift from the sandbox into production over the next few weeks. Yet another client that was previously reported as going into the Sandbox is soon ready to finally do so.

Operator

We actually had to put the brakes on them until they move their solution to a U. S.-based cloud. We met with them a week ago for an update and they indicated that the move has taken place. Once we've confirmed that they will go back into the sandbox. The team has done a great job of working through all of the priorities that we have to have to ensure that everything will be done as it should be.

Operator

Then the rest of the fintechs will continue to progress as version 1.2 is fully launched. As we've built this process, we've capitalized $17,200,000 building it. The build has been efficient. And as you know, the cost will be amortized over 10 years. Avenue deposits produced $1,100,000 in interest and fees over the first half of the year which covered half of their overall expenses.

Operator

This is truly an exciting time as we continue our transformative journey. Overcoming hurdles is what every successful business does, especially when innovating. I was going to say in spite of the delay, but really it's because of the delay and everything that's happened, we still have early mover advantage. Our avenue solution works. The remaining sprints to get to version 1.2 will be completed in September.

Operator

And finally, it's also worth noting that we took a fine tooth comb through each of those 12 consent orders and we've put a list together of the information that we think regulators are looking for. The good news is that we have that information at the ready. All of our upfront due diligence has been well documented. We've written durable contracts for all the services. And if we haven't already built the reports that the in the format that the regulators request, we'll be easily able to do that and produce them for them.

Operator

So again, we'll address the questions that you submitted through the portal after we hear from our analysts. At this point, if our technology is working correctly, we'll start with Chris Marinac from Janney Montgomery Scott. Chris, are you on the phone?

Speaker 4

Yes, Jeff. Can you hear me?

Operator

Yes.

Speaker 4

Alright. Great. Thanks for hosting us today. I guess I want to start where you finished with Avenue. If you look at the Avenue, situation here, does, does the regulatory actions of the last 6 to 8 weeks suggest that there was a problem at Main Street or that you simply need more time to find the customers to kind of get you?

Speaker 4

Because I know there was a I think a mission to try to have some additional traction by the 3rd Q4 this year. So, I just want to understand that better.

Operator

Yes. Good question. And like I said everything counts. And from the very beginning as you know we've been I've set out to build a fully compliant and well balanced solution. We just decided that like I said, there's just no credit for being almost right and then implementing something.

Operator

And from a regulatory standpoint, I was there, I remember that there's no upside. So when they come in, if they see something's missing, the easiest thing they can do is put it in the report. And whether that means you actually end up with anything from just matters requiring attention to an MOU and ultimately to a consent order, we just didn't want to we didn't want to risk that. It's so much easier to wait in the scheme of things 5 years to work yourself out of a consent order versus a few months or a few quarters to get it right and completely launch ready for scaling purposes. It just became sort of a no brainer for us And just getting it right, that landed steadfast on our risk management team.

Operator

And so that's where we are. There's nothing new, nothing that feedback wise from the regulators or anything else. It just we want to do this right so that we can stay in the space and not have to slow down before we can speed up.

Speaker 4

Okay. And is the pipeline bigger than it was before? It would seem that you have a bigger pipeline and maybe that just hasn't gelled yet because this is all, you know, last several weeks. But just curious if the pipeline ultimately is bigger or should be bigger than what you originally had?

Operator

Yes. Again, another good question. The Avenue team supplied me with numbers that were slightly more than what we put in the slide deck. I felt very comfortable and confident with the numbers that we put in there. I think there are more opportunities that are waiting in the sidelines.

Operator

And honestly, I feel like once we launch and people can start to see how robust the solution is, that those are going to come easy and quickly.

Speaker 4

Okay. I'm just looking at the pending decisions and the waiting for licenses. Those are lower numbers in last quarter. So that was kind of the pipeline question for

Operator

that. Yes. Go ahead.

Speaker 4

I have a question about the main banks, so we can finish Avenue first.

Operator

Well, if you want to go ahead with those questions.

Speaker 4

Sure. So my question, I guess, on the main bank is do you have a vision for net interest margin bottoming or is it still in a transitional point here? I know it's a little bit uncertain exactly where the cost of funds will go the next 2 quarters, but just want to get a sense of kind of margin and maybe some of the puts and takes that where you can kind of

Speaker 2

control where

Speaker 1

that goes. Yeah, yeah. Thanks for that question. As you can see in the slide deck, the NIM has kind of leveled off over the last few months. So, we feel very good about that.

Speaker 1

That's where we're seeing some nice level of consistency. If you're looking at interest income over the last quarter or so, you're seeing that continue to rise. And as I mentioned earlier, we have a lot of exciting opportunities in the second half of the year get some low cost deposits in addition to Avenue. And so we feel very optimistic that we're going to be able to lower funding costs and we continue seeing the nice growth in the interest side, which should help to increase the NIM in the back half of the year.

Speaker 4

Gotcha. Okay, great. I'll step back and pass this back to Matt and I may come back afterwards.

Operator

That sounds good. Matt, are you with us today? We'll wait and see if he does connect with us you might be having a sound problems. Do you want to take questions from the folks? Actually, if you don't mind reading.

Speaker 5

Can you hear

Operator

me? Good, Matt. All right.

Speaker 5

Let's try it this way. I'm sorry about that. Just trying to figure out the technology here. I'm sorry if I missed it. When do you plan or what is the updated year end avenue related deposit goal?

Speaker 5

I think previously we were targeting 2 $25,000,000 by the end of the year. When do you plan on hitting that level at this point?

Operator

So I mean we're still shooting for that because we put it out as earlier guidance. And we did feel like the second half of the year was where we were going to be generating most of the avenue deposit growth this year. That's an aggressive target. We're working on it. We hope to get to at least 100 by the end of the year.

Operator

We hope to do better than that. But so it's really how effective the Fintechs do with their marketing and everything once they are fully launched in order to bring the solutions in. And the first two fintechs have taken a little bit longer as I was talking to the members of the team that are involved in helping the fintechs connect through APIs and everything. But they were giving us an update the other day that each one is getting progressively faster and they're still looking at trying to get Fintechs who are app ready completely on the system within 2 to 3 months. They feel like that's completely doable.

Operator

So it is a function of again how well they do and how much they can put through us. But at a minimum I'm shooting for $100,000,000 we think is doable. I'd still like to get to that bigger number.

Speaker 5

And do those 2 fintechs represent the lion's share of the $100,000,000 you're talking about?

Operator

Actually, 3 of them do.

Speaker 5

Okay. I appreciate the thoughts on the margin for the rest of the year. I was curious your thoughts on loan growth throughout the rest of the year. I also noticed that the CRE concentration ticked up just a hair. So just wanted to get a sense for overall loan growth expectations and then comfort with that CRE concentration even if it's bouncing up a little bit?

Speaker 2

Sure. For loan growth at the end of the year, we're envisioning low single digits. The CRE growth, we don't expect a lot of major shifts from the level that it's at now, just depending on the timing of payoffs and new loan originations, funding's on already issued commitments, it's going to fluctuate in there, I would say, between 7% to 10%, but certainly below our upper limit of 375% where we have that set. But just some minor movements in there around that threshold of what we expect.

Speaker 5

And then on the credit front, NPAs jumped a bit this quarter. It's a low level granted, but what happened there? What were the credits that drove that increase? And what are you thinking for lost content, if there is any?

Speaker 2

Sure. We on the presentation, we spoke to this. So if you look at and if you want to look at the slide deck on number 17, where you've got the list of non performing, so the total balance is the $20,700,000 Roughly 76% of that is 2 projects. Okay. They're both, substantially completed.

Speaker 2

One's a multifamily project. One's a condo project. We're expecting resolutions for both those cases in the very near term. So that was the main driver in that number. That's the majority of it.

Speaker 2

The other 5 $1,000,000 give or take of the balance is spread across 7 relationships that are smaller and not all lumped into one particular bucket. So we feel like we're in good shape. I'd mentioned on the call that we feel the total loss exposure in that whole $20,000,000 bucket is less than 10% of that, so less than $2,000,000

Speaker 3

if that helps.

Speaker 5

Yes, very helpful. Okay. I had 2 other ones. One, I saw the expense guidance for increases of 2% per quarter. I'm assuming it's on the entirety of the expense base.

Speaker 5

Is that a good number to use into 2025 as well as build out on Avenue continues?

Speaker 1

I think it's probably premature to continue it out that far. Premature to continue it out that far. We're going to reassess and continue to provide guidance each quarter to the best that we know that time. But so just wanted to give you the insight for the remainder of the year for now.

Operator

And part of that, Matt, as you look at it's a function of how successful Avenue is. And as that continues to grow, the success brings in low cost deposits, it brings in fee income. And so if we're adding more features and functionality because we have those successes, then it's possible that we would continue to grow the team to support Avenue. But on the other side of it, it would be bringing in those low cost deposits and the fee income. So I think that's one of the reasons I think Alex's statement is absolutely spot on for right now.

Operator

That gets us to a point where you're fully taking on the capitalized build as we have it today. So that's probably the best way to look at it. Got it.

Speaker 5

Okay. And then last one for me and likely the hardest. Just given the stock performance this year, the avenue build out is certainly part of that and the timing of when we'll start to see the inflection point in the deposits, especially considering kind of your benchmark, the KRE and the bank index. At what point does that become an overarching issue? And when do you start to weigh independence if it doesn't start to hit some of your targets?

Operator

Yes. So I mean I think that's an ongoing question that we look at all the time. We look at it we like to look at it from the other side as we see the success of Avenue, how is that going to impact the share price and the opportunities that will come with it. And so again going back to the just for a second to the branch, we could easily have spent money building branches like a lot of banks have only to find that the Avenue will be successful. Day.

Operator

And Avenue will be successful. There's several players that are several fintechs that are coming into it. It's going to be successful. It's a measure now of how successful will it be. If it's only modestly successful, but it's covering all its costs and it's bringing in good deposits, it's worth keeping.

Operator

If it's hugely successful, we'll continue to grow, develop, put more architects, programmers in to give it more features and functionality. And all of that will help to even build a bigger deposit basis. Given what we see from industry reports, the opportunities are there. Where we are significantly different than everybody else, the people that were playing in that space up until now had middleware providers. And those middleware providers had their own capital costs to be covered.

Operator

And they were significant and they started to really charge the banks for the deposits that they were giving them and trying to make fees every way possible. We don't have any of that. We have our fixed solution that we're putting out that got pricing that we can always be more competitive than other folks because we've got those costs significantly controlled

Speaker 2

and we've got the profits built

Operator

into the company, not just getting it out there, bringing it in. As we've just getting it out there, bringing it in. Avenue works. I've had the systems main system architect. They've stress test from a volume of transaction process per minute per second, all that stuff.

Operator

It works and it's hardy. So like I said, it's a function of getting it out there. You always have to be aware of what happens with the downside. But just keep this in mind, the book value that we report on our stock is the book value not including Avenue, right? It's the tangible book value.

Operator

Avenue at this point is an intangible asset. So on our worst day, the tangible book value is still it's still real. It's there. If you had to do something with that $17,500,000 I don't see it happening. If we did that's a hit.

Operator

That changes the profile of the institution and everything changes from that point. But the fact is it's a great solution. It's taken longer to bring about because of what's happened the market. That doesn't mean it's not going to work. That just means when we bring it out, it's going to be that much better and easier to scale because we don't have any of those manual things that we would have had to do otherwise.

Operator

So I think it's a great question, Matt. But like I said, we're focused on it. From the other side, how do we go forward? When it's successful, what other things do we need to do? How do we determine the stickiness of those deposits that are bringing in?

Operator

Because every fintech is going to have a different profile. Some deposits will be stickier than others. So some we'll have to keep in funds, some we'll have to we'll be able to maybe lend in the construction book and some we'll just we'll have to maybe go a look we'll be able to go a little bit longer term depending upon what it is the app itself for the Fintech is trying to achieve. What you can be rest assured of is we're not going to take those funds that are due tomorrow and put them into 30 year securities. I think you said that was the last question.

Operator

I don't know if you have a follow on or not, but if not, can we go to Andrew, can you read the?

Speaker 6

Yes. The first question is regarding the buyback program that we talked about, do we continue will you continue it going forward?

Speaker 3

Yes. Right now, the current buyback program has $3,500,000 remaining in it. So we will continue to look at opportunities as they arise for us buy other blocks or just in the open market.

Speaker 6

All right. The next question is, we mentioned earlier that we have strategies to improve our core deposits outside of Avenue. Is it possible for us to elaborate on this?

Speaker 2

Sure. This is just your traditional banking and relationship banking. So we have a good pipeline with our commercial lending team and our business banking team that are focused on developing relationships in our community. And we have a good pipeline that we're excited about. We're actively trying to work it through.

Speaker 2

We're treating each opportunity like a nugget of gold and taking it through and trying to get it booked and opened up as soon as possible.

Speaker 6

The next question is, do we have an estimate of when we believe Avenue to be net positive to our earnings?

Operator

What we've talked about in the past is once we get to that $225,000,000 in DDA balances. That's what we're shooting for. That's sort of what that's why we came up with that number. That we have been using in the past sort of a bogey as kind of what Fed funds are as how we determine sort of the funds transfer pricing or sort of the value that those deposits bring to us. As we continue to go forward, we'll refine that better.

Operator

And if there's some of it that's lendable, some of it's that have to keep in short term GOVBs or Fed funds or whatever is the best place for it. We'll continue to determine and measure its success by how we can invest those deposits best. So I believe that's all the questions that we have at this point. If we find others that come up, we will definitely reach out to address those on a 1 on 1 basis. As I said before, we're always very happy to still take calls arranged for any kind of meetings that we can to further unpack anything to help better understand what it is we're trying to achieve.

Operator

And we thank you very much for staying with us today. I hope you found this informative and look forward to talking to you at the end of the next quarter. Thank you very much.

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