Q1 2021 OceanFirst Financial Corp Earnings Call
Good day and welcome to the Ocean First Financial Corp Earnings Conference call. All participants will be of most of them and that should you need assistance. Please signal our conference specialist by pressing the star key followed by zero. After today's presentation, there will be and opportunity to ask questions to ask the question you May Press Star then one on.
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Like to turn the conference over to Jill Hewitt. Please go ahead.
Thank you good morning, and thank you all for joining us today, I'm, Jill Hewitt Senior Vice President and Investor Relations Officer, and Ocean first financial Corp. We will begin this morning's call with our forward looking statements disclosure. Please remember that many of our remarks today contain forward looking statements based on current expectations refer to our press release and other public.
Including the risk factors and our 10-K, where you will find factors that could cause actual results to differ materially from these forward looking statements.
Thank you and now I turn the call over to our host today, Chairman and Chief Executive Officer, Christopher Maher credit.
Thank you Jill and good morning to all who've been able to join our first quarter 2021 earnings conference call today.
This morning, I'm joined by our President Joe The Bell Chief Risk officer, graceful watching and Chief Financial Officer, Mike Fitzpatrick.
As always we appreciate your interest and our performance and are pleased to be able to discuss our operating results with you.
This morning, we will cover our financial and operating performance for the quarter and then provide some color regarding the outlook for our business in 2021.
Please note that our earnings release was accompanied by a set of supplemental slides that are available on the company's website.
We may refer to the slides during the call.
And after our discussion we look forward to taking your questions.
In terms of the financial results for the first quarter GAAP diluted earnings per share were 53 cents on the.
Another strong quarter for the company.
Earnings reflect the continuing economic recovery with the bank demonstrating improved credit trends and disciplined expense management and expansion in our core margin and the return of loan portfolio growth.
Reported earnings were impacted by a few items, including the final gains and our dividend focused financial equity strategy, which collectively resulted in non core net income and the amount of $5 $2 million after tax.
As a result, we pegged the quarter the core net income for the quarter to be $26 $5 million were 44 cents per share.
Which was almost 13% higher than the prior quarter.
Regarding capital management, the board declared a quarterly cash dividend of 17 cents per common share and approximately 44 cents per depository share of preferred stock.
The common share dividend as the company's 97th consecutive quarterly cash dividend.
The 17 cent dividend represents just 32% of GAAP earnings.
Over the past two quarters of robust earnings have driven and 68 cents or four 7% increase in tangible book value per share.
The common share dividend remains at a conservative payout ratio and will be evaluated later in the year and it's the post pandemic earnings trajectory is more established.
Tangible stockholders' equity to tangible assets remained strong at 8.83%.
Our balance sheet continues to be somewhat inflated as we carried $1.2 billion or 10% of the entire balance sheet at cash at quarter end.
I'd like to put that into perspective.
If the excess cash which provides no short term financial benefit we're simply removed from the balance sheet.
The reported NIM would increase by 36 basis points to 3.29%.
The reported return on assets would increase by 10 basis points, the 1.0 of 4%.
And the TCE ratio would increase by 97 basis points to nine 8%.
The excess cash is a direct result of positive trends and our business and should provide an incredible opportunity to build earnings overtime.
Deposits continued to grow during the quarter, while the deposit mix shifted.
A $262 million decrease and certificates of deposits was more than offset by $285 million of growth and non interest deposits.
The opportunity to add $285 million of non interest deposits could not be passed up on us.
It's a high class problem, we will address over time.
The mix shift from Cds to noninterest deposits was the driving force behind the seven basis point decrease in deposit costs during the quarter.
The excess cash position will continue to distort asset based performance ratios, including margins return on assets and capital levels and the short term, but it is a very positive development and the long term.
The company resumed share repurchase activities during the first quarter purchasing 500000 shares at a weighted average price of $19.94.
The company has approximately 1.5 million shares remaining and the current share repurchase program.
Before we discuss the outlook for our business I'll spend a minute reviewing market conditions and our area of operation.
During the first quarter, we observed a significant recovery and local economic conditions throughout our markets.
Despite some elevation of COVID-19 cases, and the New York, New Jersey, Pennsylvania region, our clients were able to continue the reopening process and are demonstrating notable resiliency.
All our markets are experiencing positive momentum, but the suburban markets and the New Jersey shore area continue to evidence, particularly strong activity.
Based upon some of reservations and depleted residential real estate inventories and the growth is likely to continue for quite some time.
Considering the experience after 911, we.
We expect the consumer habit changes to be durable.
The new generation comes to appreciate the attractions the shore region.
Our employees have also been exceptionally resilient, having done a terrific job supporting our clients throughout of difficult time.
With the support of our human resources team, 50% of our employee base has received the vaccination and we hope to see that increase further in the coming weeks.
And the commitment of our staff is demonstrated by the record loan originations for the quarter.
And in order to provide the highest level of support to our clients and our communities. We are transitioning our back office staff to on premise work this summer.
We've enhanced our remote work policies to take best advantage of the flexibility offered by our technology.
But once the balance of that with building our culture with regular and unscheduled opportunities for in person collaboration and staff development.
Turning to the bank's performance as the quality continues to improve with virtually all key performance measures, noting improvement including decreased levels of special mention substandard and nonperforming loans.
We recorded net recoveries for the quarter hold virtually no Oreo and delinquencies dropped to one of the lowest levels on record.
In fact delinquencies were among the three lowest measurements of the past 40 quarters and.
And very close to the lowest level, we have ever recorded.
As noted in our supplemental slides. This performance is further supported by exceptionally low levels of cares Act deferrals, which total just 13 basis points of the commercial loan portfolio.
At quarter, and 97, 4% of our loans were paid Curran and do their pre COVID-19 terms and conditions and are not under any form of cares act related deferral.
The modest reserve release was driven by these indicators and the trend suggests the credit costs will remain a tailwind.
We're also pleased to see the the early actions we took to address credit risk has allowed us to focus on building our business organically.
That focus will continue throughout the year and should help drive improved financial performance as cash is deployed and net interest income recovers.
At this point I'll turn it over to Joe to review, our progress related to organic growth initiatives as well as the outlook from margin and operating expenses.
Thanks, Chris.
The loan origination and set an all time record for the company and the first quarter with $748 million of new loans exclusive of some PPP originations.
And the commercial lending teams closed a record 548 million and loans and the quarter with the consumer bank generating 200 million.
Overall portfolio of growth of $116 million was net of $67 5 million of residential loan sales.
Income from the gains on the sale of loans was well above forecast due to the execution of available in the secondary market.
Much of the loan growth for Q1 came late in the quarter. So we will see the interest income and Q2 and beyond.
And the commercial bank, our Philadelphia of commercial region, crested 1 billion and loans outstanding and the quarter, joining our New York region with over 1 billion and loans and furthering our belief that branch light talented focused lending teams and robust vibrant metropolitan markets.
Makes sense.
On the hiring front, we added nine new commercial bankers and Q1 and early in Q2.
While I expect some ramp up time, we should see some activity from the new lenders and the second half of 2021 and normalized revenue streams and 2022.
We remain actively recruiting and our existing and adjacent markets and expect continued adds to revenue generating staff for the remainder of 2021.
In that regard, while we are eager to deploy the cash we have on the balance sheet I expect competition the rate environment and some customer hesitation as the pandemic receives the cash.
Cause some choppiness and loan demand.
We've seen a return of the life companies and the loan market on the long and for commercial real estate.
And there was no and insight to the overly competitive nature and the C&I business.
That said.
Fully expect normalizing business loan demand and more predictable activity and growth and the second half of this year.
We remain bullish on our local economies, especially sure businesses, which remain which rebounded strongly in the summer of 2020 and are prepared for the expected summer time consumer demand and 2021.
We still see some clients accumulating cash.
And while they are cautiously optimistic some industries, such as hospitality and foodservice have a way to go and the.
The new restaurant revitalization fund will really add some support to those still of need.
Our corporate Treasury team continues to drive deposit growth, adding 75 million and growth for the quarter.
But as but the growth number is misleading as noninterest bearing deposit cost deposits rose 285 million from ear and as we replaced high cost Cds with better long term low cost funding sources.
We have embedded treasury sales team members within our commercial teams throughout our geography and the collaborative effort is being realized on a daily basis.
Core NIM improved four basis points, and we will continue to build this cash is deployed and deposit costs decline.
We reduced deposit cost from 45 basis points at year end at 37 basis points, and Q1 and expect substantial improvement in Q2 as well on.
On the branch front, we consolidated four branches in April and plan to use the $1 million and annual savings for commercial bankers.
We are carefully reviewing customer patterns and our branches to further optimize efficiencies to support our investment.
And the commercial bank.
Our continued investment and technology, which accounted for nearly 90% of total core noninterest expense in Q1.
Versus 17.8% and 2020.
Represents our dedicated effort to maintain our competitive posture by investing in areas, where consumer of our customer behaviors are shifting.
We are of slide in our supplemental disclosures detailing this.
The investments and digital over the past years are notably reflected and almost 15% of our new checking accounts opening on line.
And digital adoption of our client base nearing 40%.
The D O transactions with customers accessing our interactive teller machines com.
Commonly referred to as Atms.
Now total over 220000.
That is a startling number that I'd like to repeat we have conducted over 220000 and financial transaction for customers over our video platform.
Our next step is to extend video banking to mobile devices, and our customers' hands, creating a personal high quality customer experience accessible on all of our client's personal devices.
We remain on track to provide this full video chat capability and our call center by late 2021.
We see firsthand the success rate when we have the ability to interact through video.
As our NASDAQ hybrid Robo advisor business has had over 2700 video chats.
The majority of which have resulted and product sales.
Oh and by noting that we also continue to invest and new digital financial service products with talented entrepreneurs.
We've recently invested in auxiliary are per.
Wider of asset based supply chain finance services.
Using the technology of the technology enabled credit and documentation platform for equipment leasing.
And our Noncontrolling equity investment will serve our clients well.
And the coming years.
With that I'll turn it over back to Chris.
Thanks, Joe before we turn to questions and I'll, just close out our comments by noting that you can see b of a lot going on in terms of commercial banker hires.
<unk> and digital and expected retail optimization.
During the second quarter, we expect to complete the bulk of our commercial bank hires for the year.
And will be and are positioned to assess post pandemic customer transaction patterns.
That will allow us to better forecast long term objectives for loan growth and expense trends and ultimately the degree to which we can deliver improved financial performance of the coming quarters.
As a result, we expect to host an Investor day, following our second quarter earnings release, the share that roadmap with you.
The event will be scheduled for early August and is expected to include both in person and remote access options we have.
Youll be able to join us for that.
At this point, we'll turn it over to questions.
Q&A portion of the call.
We will now begin the question and answer session Task of question you May Press Star then one on your touch on the phone you are using a speakerphone. Please pick up your handset before pressing the keys.
Of all your question. Please press Star then two at this time, we will pause momentarily to assemble our roster.
Our first question today comes from Frank Schiraldi with Piper Sandler. Please go ahead.
Good morning.
Right.
Since the.
Just wanted to make sure I have my numbers right in terms of Joe you mentioned, the benign and you put it and the released the non commercial lenders since.
Since the end of the year and then I think you hired a few in the fourth quarter as well. So is that is that accurate and then can you just give the break out in terms of geography.
The new items.
Sure Frank we did hire I think that we had four and the fourth of fourth quarter of the the nine we hired the bulk of those were and what I'd consider to be the core markets, which are you know Philadelphia, and New York and New Jersey, We did open a new loan production office in New Jersey, and Hasbrouck Heights, and we already have four folks up there.
Working and we created a new vertical for US one of the lenders is actually.
And the leader of the vertical construction vertical for US here in New Jersey, we've always been a good construction lending.
Lending company, but I felt the given the size and the scope of the company today that we needed a dedicated vertical for that space. So we've hired the Stan kariba to run that business for US. We've also hired two lenders and adjacent footprints for US we've hired a lender in the Boston and the lender.
In Washington D C of O.
Of which started this month and we're happy to announce that we have a we have our first team lift out of an additional.
For folks for lenders and and additional support person and Baltimore, Maryland, We expect them to start at the end of May.
But they have a day of it they have signed up with us. So we're excited about debt.
Okay. So it sounds like yeah, you've either got and the guys in place or you've got really good visibility into.
Hires that you want to make a Chris you mentioned that you expect the bulk of of new hires should take place by the second quarter. So I was wondering if you could update us.
And maybe it's too early but just in terms of if you do get these folks in place.
The updated thoughts to what run rate loan growth could look like by the time the closeout 2021.
Sure. So Frank just a note on the seasonality of hiring commercial bankers.
Not surprisingly you know everything has a season and the the top notch people are usually do some good year and incentives.
So the the best time to be recruiting and getting them to change their employment is after they've gotten those incentives that usually happens and the.
The first quarter early second quarter. So that's kind of why you would have of seasonality to to bring these folks on.
As they come on and they'll become increment incrementally more productive.
I'm, sorry, if we maybe of a technical issue.
And Frank still here.
Can you hear and hear your final debt yeah, Okay, and sorry, we made may of a technical issue. So sorry about that Frank anyway is the as those lenders come on there incrementally more productive during the course of the year. So I think what we've said before is by the end of the year, we should be growing our loan portfolio at about a 10% of better clip, which would equate to about 250 million.
And of.
Of growth per quarter, when you think about it that way.
And frankly, I would expect that the the CRE lenders, where we're hiring of mix of CRE and C&I lenders.
The business takes a little bit longer to ramp just by virtue of the the customer relationship aspect, but I expect that the CRE lenders that we hire as Chris noted, we will be more productive and a more rapid fashion I do expect in 2022 that everyone that we hire and 'twenty one will be fully.
Fully up to speed and the revenue streams.
Streams.
Right. Okay. Thank you.
Thanks Frank.
Our next question will come from David Bishop with Seaport Global Securities. Please go ahead.
Yes, good morning, gentlemen football as well.
Dave.
Hey on following up on the debt last question and not the Hirings you noted in the Boston D. C. Baltimore market. Just curious is this your typical of M O where you're hiring out of units sort of.
The larger regional players and just curious of any of these new hires were sort of impacted by.
Some of the ongoing market consolidation, we're seeing across the mid Atlantic northeast.
Yeah.
They've definitely you know so we look at bringing on CS and folks that have a long history of being effective commercial bankers and they typically come from larger companies and where talent driven first and so when we find the team that's where we want to go in terms of geography, we want to be able to drive to our markets and we're hop on and train or do something like that so this is stu.
All of relatively compact geography and the.
The last thing I'd add to it is that our experience and Philadelphia, and New York as well as our experienced during the pandemic helps us feel more comfortable about having a little bit of of distance between us and the lenders.
Got it and then as it pertains to I appreciate the color of the slide deck on page seven where you note. The tech spend accounted for about <unk> 19 per cent of core operating expenses.
And then the contemplating additional investments and the latter part of the year, just curious where maybe I don't know if you can provide specific guidance or where do you think that ratio trends to the full year relative to 2020.
I think you're going to see two offsetting things happen and so you're going to see that technology spend, especially as a percentage <unk>.
Increasing and then as we tune the retail distribution network, you're going to see some of those expenses decreasing over the course of the year and they should be so the percentage should be moving but the total shouldnt be moving as much of the a little bit of and increase in expenses, obviously as we add the commercial bankers, but at this point, we're hoping we can offset a good portion.
And of that later in the year with optimization of our retail network and I think the point of made about wanting to see customer transaction patterns is it's really important we're watching closely as you guys know we've consolidated 57 branches. So we're pretty good at that we get it right we tend to retain our customers and our.
Our relationships.
We're looking at the data now and watching who is using branches in what way and in <unk>.
What locations.
And that will enable us we just want the data to stabilize post pandemic.
Before we make further decisions about the optimization of the retail networks. So.
You may have the expenses come up a little bit and Q2 and Q3 as we add lenders and then towards the end of the year, we expect to be getting some more synergies.
Got it appreciate the color and.
And then in terms of the DDA growth the obviously strong again.
As this continue to represent some of the wins you've noted before in terms of expansion and wins and the the cash management Treasury management group.
It does Dave and if we.
We've talked about this before and as much as we'd like to deploy the money faster. We also can't tell our folks not to do their jobs on the other and it's one of the things and one of the reasons, we've more than doubled the size of our treasury team and the last two years and it's paying dividends for us.
And even with that.
They come in with new relationships exciting and the first thing Chris and I think about is how do we lend the money out.
Got it and the Joe a quick housekeeping question good tax rate to use moving forward.
And yet.
Mike.
The 24%.
I would use.
Great. Thanks, Mike.
Yeah.
Thanks, Steve.
Okay, and if you'd like to ask the question. It is star then one star then one.
The question.
The next question today will come from Erik Zwick with Boenning and Scattergood. Please go ahead.
Good morning, Eric.
Hey, good morning.
Our first one from me I guess.
It's a bit of a kind of a follow up in terms of the on the new lenders and I'm. Just curious that as you know what are your expectations in terms of the percentage of loans that they generate over the next one or two years comes from their of their prior book of customers versus new customers.
Well, it's a combination but typically Eric when you recruit lenders you recruit lenders that we recruit seasoned lenders that have significant books of business.
We expect that the bulk of their business typically is going to come from some portion of their existing relationships recognizing that it's always a.
It's always.
Based on the timeframe right and you're not going to get them almost immediately there are certain the strings of tying folks the prior locations but.
For us the value of seasoned bankers from larger companies is typically their COI network.
So that gives them the opportunity and they always have prospect list. So it gives them the opportunity to lever.
Pull different levers to get the activity for us.
And so just to give you some guidance of the.
Folks of usually probably contributing net to income within a year.
So these are not things, where you've got to wait a long long time, the first quarter of two they may be a little bit of a drag.
But the the good lenders, you're bringing people over immediately and they are building their books over the course of the first 234 quarters, you don't have to wait and see for years of good lenders going to producer and not very quickly.
That's helpful and and one last one on the new lenders and then I'll move on just curious as part of your evaluation process and your vetting process. How do you evaluate them in terms of kind of their past credit quality of experience up there at the former employers.
So for US Eric of lot of it is based on who the former employer was I mean, the neat thing about our businesses that we know.
And we know the credit quality and the credit metrics on the risk appetite of the larger companies and our and our footprints of the most of us of it's a small it's a small world and our industry. So we understand that and that's one of the reasons, we've focused on lenders coming from larger regional companies because of the risk appetite and those companies is well documented.
It's easy to follow and reputations of people are easy to track so and there's one of the tricks of bringing into the qualified experienced bankers our credit folks are actually pretty involved in these conversations because nobody wants to make the mistake of banker doesn't want to come to a company, where they can't do the business they need to do and we don't.
Want to of a banker who can't bring the of their typical clients into the bank. So as part of that bidding process.
All of our candidates have sat down with our credit folks they've talked about representative deals the way they plant and the past to make sure. There's an alignment because as you know they may have a different credit risk appetite and other bank, but we want to make sure that we're completely aligned and that otherwise, it's not going to be productive for them or us. We're just not going to make the loans that don't fit our mould.
We'll tell you Eric that the recruiting process today and our industry is very much.
The two sided.
Not only of we recruiting but the lenders if they have and interest or having those kind of conversations. It's a two way interview process, which I encourage and as Chris mentioned, we have a cadre of folks and our company from operations to credit to the lending.
To wealth to Treasury, all having interview conversations with with new lenders.
That's helpful. I really appreciate the detailed.
Color there I'm moving on to and I've said, it before but I just want and thank you guys again and I loved the detail you guys provided in terms of our existing pipeline pipeline and yell at origination data I'm.
Looking at the commercial statistics for the first quarter.
Pipeline yield from <unk> to the end of <unk>.
It remained pretty stable kind of three and three quarters per cent, but the origination yields and in the quarter were lower and kind of at three two per cent range with the.
Strong origination volume just curious what maybe drove that origination yield down are you selecting maybe some higher quality customers that had.
<unk> had lower yields are or what drove that just kind of given the stability and the pipeline yield.
Well residential is easy right and residential rates are still amongst the lowest it's been in 30 years the the.
The commercial business is a very competitive business and it has become more competitive with the with the significant amount of liquidity on the balance sheet of many of our competitors, including ourselves. So and I think it's also we're also focused on really really strong underlying transactions and when you for.
On those you are going to compete not only on a.
The structure and everything else, but on price. So if you're not going to give up on credit structure and it's really important to do the right thing for the client and the bank and to win business that will be accretive over time and a lot of the sponsors and companies. We look to do business with are larger in nature of that will have either other real estate projects.
Or other C&I needs and so you.
You need to be competitive when it makes sense to be competitive.
Got it and then last one from me on noninterest expenses, our first quarter had I think it was the $663000 benefit from P. P. P referral fees and safe to assume that there's maybe a little bit more and <unk> lower than that and and that trails off given that the ending of that program.
Yeah that's.
And that would be the first quarter event and.
And I might be the repeated in the second quarter.
Got it thanks, everyone for taking my questions.
Thank you.
Our next question will come from Russell Gunther with D. A Davidson. Please go ahead.
Hey, good morning, guys and.
Russell.
I wanted to follow up on the loan growth discussion so the.
The path forward is very clear with all of the hires did you guys spend a minute and terms of what drove the organic growth this quarter, whether that was any contribution from some previous commercial hires.
Or just specific geographies that contributed to the growth would be tough.
The way to get some color on this quarter's results.
So Russell Yeah, I think it's the combination of both so we did have some prior hires start to gain some traction which is good as we talked about the tends to take three to six months to get folks up to speed. I also I also think some of it's a combination of there were some renewed demand and the market, which is which is good to see I still think it'll be.
A little choppy over the coming quarter, just because of the environment I think.
Regionally, we saw all of our regions add to it so even though we've had.
We've had some noise and regions because of the environment you can talk about whether it's New York Metro or Northern New Jersey, we.
We saw growth from New Jersey, New York, and Philadelphia, So really happy about that and almost all of the lenders were successful.
Thanks, Joe and then in terms of the Choppiness Youre talking about it and is there a potential for.
Organic balances to retract and the coming quarter before rebuilding and the back half of the year or just kind of organic growth to be.
Perhaps less robust and it was this quarter.
Yeah, you know we're still early in the quarter I would hope we wouldn't see of contraction, but we may not see.
And as much growth as we think youre going to see and the second half of the year. So it was we think two things are going to come together. So think about as Joe mentioned, the four new hires you made and the fourth quarter were partially productive and the first quarter most of the hires the nine and the first quarter or just getting up the speed, we might start to see them contribute towards the end of the <unk>.
Second quarter, and then call. It a few more of that we make and the second quarter by the back half of the year, you're going to have a significant number of folks contributing and we time that and we started this process back last November and we've been at this for quite some time with.
We timed it because we knew coming out of the pandemic, where we expected coming out of the pandemic that loan demand in our markets would pick up so we want to make sure. We have all the right people and all of the right chairs there well situated theyre trained theyre up to speed on credit policies, and they're able to be productive and the back half of the year. So we see Q to Q.
Two will be probably an okay quarter, we may grow a little bit I don't think you're going to see is contract much. But then the back half of the year. We will look into Q3 and Q4, we should have all of our folks in place all contributing at the same point at which hopefully the market has got stronger demand and so you could see a particularly strong numbers and the second half if all of.
Of that comes together.
Understood. Thanks, Chris and Thanks, Joe I guess, just one housekeeping item and I apologize if I missed it but.
The end of period balances on PPP as they stand today do you have that.
At the $110 million.
Okay. Thanks, Mike.
And then just switching gears quickly so on the expense outlook.
And I understand the puts and takes as you talk.
About <unk> <unk> to <unk>, but maybe tying it altogether.
Kind of on annual basis.
I'm not sure how you guys define core but I was looking at of core noninterest expense number of around $209 million last year, even with some of the step up is this a result that you think you can hold relatively flat for 'twenty one.
Yes, I think so I think year over year to be relatively flat. So we did it was about 50 million and the first quarter.
It might be a little closer to the consensus and the second quarter may be closer to 51% and 52.
But then by that point, hopefully, we will be identifying expense reductions as well as we had that last group of lenders. So we should hopefully offset towards the latter half of the year, but.
Saying that the 2020 2021 that's probably a good comparison.
Okay.
Really helpful. Thank you all for taking my question. Thanks.
Thanks Russell.
And again to my task of question and the Star then one Star then one task of question.
Our next question today will come from Christopher Merrimack with Janney Montgomery Scott. Please go ahead.
Hey, Thanks, Good morning, Chris I wanted to circle back to your comment earlier about the I believe it was 36 basis points of the NIM the oxide from the excess cash do you think of it is that there is a scenario that this takes a way more than a year for it the unfold and that it.
It would be of prolong timeframe to utilize this and then does that impact your sort of strategy.
Going forward.
And it's certainly possible Chris when you think about absorbing that amount right. So let's say, we get to a run rate of 250 million a quarter, that's going to take a year rights on the thought hard math.
It's a little uncertain for us is exactly how strong the market will be and the second half of the year. If the market is strong.
We will have the capacity in place to be able to overshoot debt, a little bit and maybe do it a little faster.
And if theres a market setback for one reason or another or some new concerns and come up and Michael a little slower but.
I'd be thinking of it taking us about four quarters to get there.
Beginning in the second half of the year, when we really start to absorb it and there is another positive though if you we did put cash to work and the investment portfolio as well so although it's not going up to loan yields and we're bringing it off that low base of.
The 10 basis points, we were getting from the the fed keeping the cash there so that'll help a little bit as a tailwind to.
As an interim step as we kind of rotate into that into investments and then back into loans.
And then does this impact of Lora.
I'm sorry, one more thing Chris I Should've mentioned is all of that considers a yield curve, which is relatively static.
We have maintained and we will continue to maintain a strong asset sensitive balance sheet. So I think we could disproportionately benefit should the yield curve begins to move.
Got it thanks, Thanks for that Kristen and does this at all impact your interest on <unk>.
M&A or does it put them on the back seat because you have this to say grace on for awhile.
It's a great question and it doesn't impact our overall outlook for M&A, but it may impact of what targets are most attractive to us.
So when we begin M&A in 2016.
A very direct function and that was to provide cash balances for us to continue to grow our commercial lending business and it worked very effectively in that regard, we got great franchises, great low deposits and we're able to lever them.
That is not important force now given the cash that we have on the balance sheet. Today. So unless we found opportunities that were not just kind of relatively fully went but also with the capacity to continue to help us on the asset side, they would not be as attractive. The the last thing we need now is more deposits that are on the.
Leveraged so that that would not be as attractive for us so look at us.
Been a lot of M&A and the markets, we're watching like everybody else's, our focus would be on opportunities that help us advance the.
The commercial banking business.
Got it thanks, Chris I appreciate all the information today. Thanks.
Thanks.
Our next question will come from Judy Sandler of private and bus Sir. Please go ahead.
Hello.
My question is when and how will we be notified about the share repurchase program.
Okay. So the share repurchase program is active today and the way that we operate that program is that we're we repurchase shares and the open market. So over the exchanges and so were purchasing shares just like anybody else would be purchasing shares and the market.
From time to time, we have had investors contact us about of direct purchase of shares.
And if you'd like to do so I would suggest you reach out to us through our Investor Relations office and we'd be happy to talk with you further about that.
Thank you I have one other.
The other question, which branch officers did you close.
Okay.
And the worry we closed Newark.
However, because of the Islands Atlantic Islands.
I don't remember the other two the other.
The other two they were all in market and we had the.
As we've done over the years these branches of reasonably close to other branches. So customers continue to have access and we're also very careful to make sure.
Continuation of banking services, and those and those communities. So most often were closing of duplicate.
The branch and the community.
Thank you.
Thank you Judy.
And then you'd like to ask the question today. The Star then one Star then one task of question.
Okay.
Okay.
There being no further questions. This will conclude our question and answer session I.
And I would like to turn the conference back over to Christopher Maher for any closing remarks.
Thank you with that I'd like to thank everyone for their participation on the call. This morning, we will remain focused on building the business deploying cash and improving earnings.
Look forward to discussing our second quarter results with you in July Thank you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.