Q1 2021 TriState Capital Holdings Inc Earnings Call
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Good morning, everyone and welcome to the Tristate Capital Holdings Conference call to discuss financial results for the three months ended March 31 2021.
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<unk> or goals.
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Keep in mind that any forward looking statements made by Tristate capital speak only as of the day on which they are made.
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Tristate capital has no duty to and does not intend to update or revise forward looking statements. After the date on which they are made.
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About the factors that could affect tristate capital future results. Please see the company's most recent annual and quarterly reports filed with the Securities and Exchange Commission.
Please note that annualized information referenced is referenced in this presentation is not predictive of future performance may differ materially from annualized and for information.
To the extent non-GAAP financial measures are discussed in this call that will be presented with the most comparable GAAP measures and reconciliations of the non-GAAP measures can be found and tristate Capital's earnings release, which is available on its website at Tristate capital Bank Dot com.
Representing Tristate capital Holdings today are Jim Getz, Chairman and Chief Executive Officer and.
And Tim Riddle, managing partner and Chief Executive Officer of Chartwell investment partners.
They will be joined by David demand.
The financial Officer and.
Brian Fedorov, President and CEO of Tristate capital Bank for the question and answer session.
At this time I would like to turn the conference call over to Mr. Getz.
Good morning, and thank you for joining us.
And I state capitals first quarter performance underscores the earnings power and potential of this company.
Which today operates the $10 billion plus bank and at $11 billion plus asset management firm.
All three of our businesses have been built on our core capabilities and distribution strength to drive strong demand for our client focused products and services, which are and turn delivering continued and meaningful organic growth.
We again delivered record net interest income and total revenue during the quarter as well as all time high pre tax income and assets under management loans and deposits the.
And the performance enabled us to grow first quarter 2021, net income by 28% from the linked quarter and 26% over the same period last year.
These results were achieved thanks to the trust and confidence of our clients, which they placed on us and the unrelenting efforts of our talented investment management private banking and commercial banking teams.
Chartwell and build on last year's strong performance to deliver a breakout quarter for our asset manager.
Clearly the market has provided a tailwind which contributed to chartwell strategies performing very well against benchmarks.
At the same time Chartwell is also differentiated by what we believe is the best in class business development and distribution capability.
And the first quarter of 2021 of alone this business had more than $5 billion of net inflows led by Chartwells short duration high yield product.
And it's high grade fixed income product.
To continue its momentum Chartwell started the second quarter with more than $100 million and unfunded institutional commitments.
And its pipeline.
Together business development and investment performance led to assets under management growth of 35% over the last year to $11 2 billion on March 31 2021.
And all time high.
First quarter investment management fees of $9 million were up nearly 18% from the same period last year, while Chartwells run rate revenue as of March 31, 2021 was nearly $39 million and increase of 35% from one year prior.
At the same time Chartwells first quarter segment net income was up 77% from the same period last year and we expect to continue improving asset management's contributions the consolidated earnings as we scale of this business with the talent and infrastructure we have in place today.
Before we turn to our other businesses I would like Chartwells CEO, Tim Riddle to share a few of his thoughts with you given the standout performance of our asset manager had and the first quarter Tim.
Thank you Jim.
<unk> first quarter performance and our optimism about our ability to continue growing revenues and our contributions to tristate Capital's earnings are based on the strengths of our investment performance client relationships and distribution capabilities.
The majority of our $940 million in AUM growth during the quarter or <unk>, 54% of at risk.
<unk> from positive net flows from existing accounts and from new business.
So while AUM benefited from the market's tailwind in Q1, and our ability to generate new business and net flows from existing client relationships were the primary drivers of AUM growth.
We don't believe many active managers.
We'll be able to make that claim.
We also made strategic decisions to enhance chartwells operating leverage and segment profitability.
These efforts began well before the onset of the pandemic and continued throughout 2020.
As a reminder, by the end of 2019, we had taken active measures, which reduced our annual expense run rate by more than $2 million.
For the full year 2020, Chartwells expenses were down a full $4 million year over year.
The efforts we've made to date have been very successful and we believe position us well to deliver profitable growth and an even greater rate moving forward.
In fact with the team and infrastructure in place today, we believe we can grow chartwells AUM and revenue by another 50% or so.
All of that confidence is supported by the success of our unparalleled distribution team.
And by Tristate Capital's continued commitment.
Two investing in distribution.
We're also continues continuously developing new products and new avenues to deliver those products to our clients.
And to the perspective clients.
As one example, within the past year, we launched collective investment trusts and collective trust funds.
And Cts resonate with a broader base of prospective clients.
Particularly in the area of outsourced Chief investment officer programs, our OCI O.
Which have become increasingly popular in the institutional market.
And in fact, <unk> and Cts and have had a meaningful impact on our AUM growth, particularly over the last six months accounting for approximately $70 million and inflows.
Cherwell is hitting its stride with unique product offerings credible performance exceptional talent and an enviable distribution capability, we are focused on scaling our business and enhancing profitability and earnings.
With that I'd like to turn it back to Jim. Thank you Tim turning.
Turning to Tristate capital Bank.
Total loans grew by 23% over last year to $8 $5 billion on March 31 2021.
Growth continues to be led by our highly differentiated private banking business.
We of the nation's leading provider of marketable securities backed loans distributed through independent financial Advisors Trust companies family offices, and regional Securities firms and we now have 265 financial intermediaries and our referral network.
Private banking loans reached the record of $5 1 billion at quarter end and now make up 59% of total loans.
And and first quarter private banking loan application volume hit a new record level and 2021.
Some of 44% from the same period last year.
Commercial loans are up nearly 15% year over year as our in market commercial real estate lending more than offset paydowns on revolving credit lines, and our commercial and industrial portfolio during the first quarter.
As a reminder, we are coming off record C&I growth and the fourth quarter of $136 million. So over the last six months, we've increased commercial and industrial lending by $110 million or 10%.
Our commercial real estate and C&I portfolios remain well diversified with strong pipelines and.
New CRE and C&I originations and the first quarter continue to be primarily with our longstanding relationships.
This commercial loan growth is truly organic high quality middle market growth as we do not offer PPP or any small business products.
For example, with C&I, our single largest borrower category remains financial services and insurance, representing some 32% of commercial and industrial loans.
This includes our investment fund finance offering including call of lines of credit and net asset values of credit and.
And we see excellent C&I growth opportunities and this industry vertical.
There are some periods like the first quarter, where there may be timing differences and pay downs of lines based on capital calls made in prior quarters.
Also of note many of our financial services company borrowers are members of Tristate, Capital's intermediary network offering and our private banking loans to their high net worth clients.
Our equipment finance offering and our C&I business also continues to have strong opportunities and the improving economy that we are experiencing.
Considering what the rest of the industry has been reporting for the first quarter. So far we think our commercial loan growth to date and our expectations will continue to stand out.
Overall for full year 2021, we continue to believe our organic total loan growth goal of 15% to 20% remains very attainable based on the performance achieved in the first quarter and the strong pipelines we have in place today.
Our credit quality continues to be a differentiator among our peers and the industry.
And a fitting for the large proportion of private banking loans as well as the quality and the depth of our commercial lending relationships and our strong fundamental underwriting.
We did increase the NPA by $13 million and the first quarter. The non performers represented just 24 basis points of total assets on March 31.
The increase primarily related to two loans to borrowers managing unique situations related to challenges and commercial real estate markets.
We believe we are adequately reserved notably we have only four non performers among thousands of loans that are $8 5 billion portfolio.
With private banking, representing some 60% of loans the quality of our middle market borrowers and our credit challenge and underwriting processes. We continue to expect to experience low annual credit cost and superior asset quality metrics relative to peers.
Loan growth was fully funded by the continued expansion of our liquidity and Treasury management offerings.
Record deposits more than $9 2 billion at quarter and reflect 19% growth over the last 12 months.
Treasury management deposits, which remain an ongoing and strategic focus and grew by 64% from one year prior.
We've steadily manage deposit costs, which were down by eight basis points from the fourth quarter and played a key role and net interest margin expanding by some six basis points.
Even more important and our view is our success and consistently growing net interest income dollars across a variety of rate environments since launching the company back in 2007.
First quarter 2021, NII grew to a record $38 $7 million.
Up nearly 11% over the same period last year.
This marks tristate capital is 21 consecutive quarter of the annual net interest income growth.
And to increase NII dollars through high quality volume and margin expansion and responsible growth remains one of our goals for full year 2021.
NII and noninterest income excluding securities gains and losses combined to generate record quarterly total revenue and the first three months of 2021.
Revenue grew to a record $52 3 million, increasing eight 6% over the same period last year and four 8% from the linked quarter.
Based on the pipelines, we mentioned earlier and other expectations, our full year 2021 revenue growth goal of 15% to 20% remains unchanged.
First quarter operating expenses grew by only 7% from the same period last year.
As we continue invest and our growth companies clients people infrastructure and technology. Our previously disclosed operating expense growth target remains 10% to 12% for the full year 2021.
We built this company to thrive and all seasons with the three businesses supporting one another so that we consistently accomplish top and bottom line growth at superior rates over the long term, while continuously improving operating leverage and increasing earnings for our shareholders.
And is exactly what we achieved and the first quarter of 2021, providing a.
The solid foundation for what we believe will be a consequential year.
I have with me this morning, David Davis, our CFO, Tim Riddle, our CEO of Chartwell, and Brian Fedorov CEO Tristate capital Bank to assist with the call operator would you kindly open the line.
Ladies and gentlemen at this time, we will begin the question and answer session.
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Our first question today comes from Matt Olney from Stephens. Please go ahead with your question.
Hey, great. Thanks, Good morning, guys.
Good morning, Matt.
I wanted to start on the <unk>.
Net interest margin and I appreciate your expectations from here I think you mentioned last call that you have to be at that 160 margin by the end of the year and it looks like we made some good progress here and the first quarter at the home.
And company would love to hear any updated thoughts around around that.
Matt Good morning, it's David.
As you saw we were able to deliver on some of the improvements that we talked about with this group last fall and then again in January in terms of margin expansion and we see that continuing to occur in the current rate environment. The.
Expansion of its primarily driven by our deposit cost reduction and and we've made great progress there.
We were at 59 basis points on deposit cost on a spot basis at year end.
And that dropped to 48 basis points again on a spot basis at the end of the first quarter.
We believe we will continue to see improvement and deposit cost and when the year somewhere in the low forty's on a spot basis.
As you saw on NIM continued to expand from $1 53 at year end to $1 59 at the end of the first quarter and with deposit costs coming down and with our the floors that we have got in place and what we believe is the benign interest rate environment Youll see continued improvement from here and NIM will be and the mid to high <unk> by year end.
At the holding company and a little bit higher than that at the bank.
Okay perfect. That's helpful. David and then I'm also curious at this point, how youre managing the balance sheet around liquidity.
And Securities I think on the average basis, we saw liquidity move down securities move up would love to understand kind of how youre thinking about that as you as you move through the year.
Well I think just on real quick the.
This is Bryan I think.
We're doing a really good job of highlighting the structural.
Really the <unk>.
The structural alignment of the funding mechanism and then the asset deployment aspects of the company. So last year, obviously, you have seen a lot happened within the.
Within the funding base.
And not only responding to what we thought we wanted and the liquidity, but also responding to our best clients and making sure that we had.
Room and capacity for them and so we've been able to get through a lot of communication and sales management and prioritization and make sure that we're.
Really aligning our sort of what we would call it agile funding mechanism.
Our ability to do that so that.
And that predictability I think allows us to make some better use of our efficient use of the balance sheets of David for you on that.
Yes, so Matt.
<unk> been focused on bringing cash balances down and deploying the liquidity we have.
And built last year.
Into the longer term higher returning assets right. So.
We've built a fair amount of liquidity and the investment portfolio, which is high grade double way.
Agency U S government securities that are fully pledge of will.
At the fed and creates a lot of liquidity for us and so we've moved it from cash to other parts of the balance sheet, but we will continue to to focus on the liquidity of the overall balance sheet as we move through the year.
Okay, I'll step back and the queue. Thank you.
Our next question comes from Daniel Tamayo from Raymond James. Please go ahead with your question.
Good morning, everybody good morning.
Good morning again.
Maybe we talk about deposit growth just just quickly.
Very strong and the quarter.
And you touched on on the release the.
And the drivers there with the liquidity management.
The business, but maybe you can give a little more detail there about.
Whats driving that strong deposit growth and the expectations going forward.
Obviously, including the.
The environment is.
And you just touched on excess liquidity and anything else.
Yes, yes.
So.
Yes, we are.
I think pretty pleased with the.
The first quarter and if you look at fourth quarter last year and first quarter of this year. If you put them together six month time period, we think are.
Pretty representative of what we want to.
You'll be doing sort of yes, we approached this more stable environment, but and.
And I guess, we would classify that as meaningful meaningful growth meaningful clients and meaningful business so pretty.
The diversified across the platform actually and those two quarters charge.
The management was.
So our service based offerings.
The drive liquidity balances were a very significant driver of the deposit growth within the first quarter from a balanced perspective, and some new relationships mature.
Pretty excited about and that our national sales business and the family office business both contributing.
And in smaller accounts sizes, but with more names. So we're trying to really grow our relationships at this time, and then sort of build for the future of if you will and taking advantage of that but if you look.
Our overall expectations will be our service based offerings will be somewhere and range of 40% to 50% of our deposit growth this year.
So we did see probably.
A little bit more on the service base originations and the first quarter, but if you look the fourth quarter first quarter I think that's a pretty good.
And once there 40 years and 50% on the TM and service based side.
Yes, Dan this is Jim.
And what Youre, asking really falls in line with.
The whole nature of this company from time of inception, we've wanted to the consistently reducing the risk profile. So at this point as you heard earlier, we're close to about 60% of our loans being loans secured by marketable securities Theyre actually price ever.
Every single day, and and valued so we are of good understanding of what the nature of the collateral is and 60% of that portfolio, but more importantly, this situation, where we've been able to garnish.
Deposits, we've taken advantage of to build up the investment portfolio, which continues the lower the risk profile. If you look back.
A couple of quarters Youll see we took a very meaningful.
Gain and that portfolio of some $3 $8 million and.
Took took a day out of corporates and put it into agencies and that's what we've been consistently doing and as David pointed out we have an average rating of of double a plus but we also have of short duration of that of four three years. So we're really.
And it's been able to.
Create and.
And appropriate and bar.
<unk> for the type of circumstances that we find ourselves in.
Terrific and that's good.
Color. Thanks, and then maybe switching over to Chartwell.
You've had some nice expansion of EBITDA margins over the last few quarters.
And just mentioned the 50%.
AUM and revenue growth maybe.
Do you think you can continue to see EBITDA margins expand the in that business and then if you.
Touch on the timing of the 50% growth expectations within that business. Thanks.
Sure. This is this is Tim.
In terms of the EBITDA margin, we would expect that too to expand from here.
Obviously.
Put a great deal of time and effort and on.
Again controlling the.
And the expenses across the board within Chartwell, and again with our success and.
And continued success and.
The new business and inflows from existing accounts.
And that naturally will expand that EBITDA margin as time goes by and in terms of the the grille.
Growing of the AUM and the revenues by 50% from here again.
We could we could accomplish that task.
And in fact, the market cooperates and we continue to expand again, new product offerings and as I indicated also opening up new areas, where we can distribute those products, but that could happen over the course of and the next say three to perhaps five years.
Thanks for taking my question.
Yeah.
Yes.
And our next question comes from Russell Gunther from D. A Davidson. Please go ahead with your question.
Hey, good morning, guys and good.
Good morning Russell.
Bigger picture question.
Start if you could just give us an update on sort of where the financial intermediary network stands today and just curious how that's trended over the past year trying to get a sense for the pandemic slowed the growth rate of of on boarding new relationships and.
As the economy reopens and people travel again does that provide a bigger run rate of bring more folks on board.
And general thoughts there.
Yes.
Yes, Thanks Ross.
The.
I think overall.
Yes.
And to increase that number and to the mid 260 range.
And certainly we're very pleased with that.
And that type of growth is one of our actually larger growth quarters. Our applications are did hit a record number of were up 44% year over year same quarter.
And.
And so.
We are seeing I would say continued.
Sure.
Successful from our distribution platform and as well as just increased.
The warehouse and demand and acceptance around what we're doing here so.
And probably unprecedented in terms of our the opportunity the we have.
And the I guess accordingly, we're really focusing on our meaningful business, making sure. The were there for the most meaningful clients and making sure that sort of are.
The additions to the to the platform.
The relationships that we know we can serve really well at of premier level, but overall to your point we're seeing.
Yes, I would say unprecedented opportunity within the channel.
I appreciate it Brian Thank you for the update and then switching.
Switching gears a little bit.
You guys gave some good color on the C&I.
And.
The dynamics this quarter, just looking for a general update on the equipment finance vertical.
Expectations for growth there going forward. Thank you.
Yeah sure so I mean.
We're very happy with again.
Both of the private bank production and the the.
The first quarter again, when you put fourth quarter first quarter together.
The record production and again same thing on our commercial side right. So.
Overall.
I guess, our distribution capabilities of our internal ability to meet client expectations and be there for our clients.
I would say again on that.
As of this historic high level right now on the commercial side.
As we pointed out I think and the release if you look at the fourth quarter first quarter, we're pretty happy with.
Yes.
<unk> million dollars plus.
Growth on just again, we're talking of the C&I side, So we're happy with that.
We did.
The increase our equipment finance and the fund finance verticals of centers of excellence to make sure of that we were.
Had opportunities with good clients sort of in all environments and those are more agile products that did well.
Last year.
From a growth perspective.
And in the first quarter period.
Period, a bit of normalization around that fourth quarter into the first quarter, but as we look forward.
Yes.
Positive on growth of both of those businesses and I think as we get into the recovery of economy, We're very excited about our prospects within traditional C&I. So.
Yes.
Again focused a bit on that fund finance equipment finance.
Space and the in the last 12 months to 24 months and as we move forward from here. We know that those are working really well and we're really excited of what we think we can do and traditional C&I and.
Again. This is the time, when we really stand out to the people which is.
Yes, we will have to be more thoughtful when youre originating new C&I relationships. That's what were the best that Thats, what our people are the best that so we're excited about how we're going to differentiate ourselves.
Over the next 12 to 24 months and again, we think that has the market opens a little bit as you were talking about.
And just our ability to meet with people a little bit more and.
And convey that and person not just over the phone or by video will help our distribution efforts getting that message of really felt by our clients and prospects.
Our next question comes from Steve Moss from B Riley Securities. Please go ahead with your question.
Hey, everyone. This is gates schwartzman, Steve the associated southern and firms of day How's everyone doing.
Good morning.
Great.
So I wanted to start out on credit here the.
NPA has picked up $13 million of that was for the two CRE loans and.
Curious can we see any build and reserves moving forward from here due to that or I'm also sort of curious what the timeline is to get some of the loans off of the deferrals. Thank you.
So.
And if I understood. It I think maybe two questions.
And in terms of.
The the Npa's and provision and then the.
For all of the trajectory from here.
So I think on the provisions we feel that were adequately reserved and well reserved at this point.
And and we don't see any trends that are referenced by those as we indicated those are unique circumstances. So.
Well say anything that.
Those NPA is will really reflect on the broader portfolio and I'll, let David.
Give some further guidance, but on the deferral of basis as we indicated we're eight loans $62 million.
We're scheduled to reduce that pretty pretty significantly again here over the next one the two quarters.
And so we're really happy and pleased I guess and inspired if you will by the performance of the loans that we had and the deferral of portfolio. So.
Again.
The quality of people, we worked with just really on on demonstration here.
And those people manage their businesses and.
The properties through that but David if you wanted to give more guidance on provision I guess, yes, sure I'd be happy to Brian So we.
We're very pleased with the investments, we've made and talent and our credit culture.
And it continues to pay dividends, we believe that those investments will keep our annual credit cost well below our peer group.
Brian talked about the fact that we haven't seen any notable trends here.
And while we remain comfortable with our reserve levels and our credit book.
Cecil is a bit unique.
And the future volatility of Cecil with any potential macroeconomic issues that may emerge and the short and the medium term.
As you know.
In terms of dealing with the pandemic.
And in sort of of transition every period and.
And factors such as losses across the entire banking sector as loans come off deferral and need and a repayment status.
So the.
Micro and macroeconomic variables like commercial real estate price index vacancy rates and the underlying weaknesses mask or cloak some of the.
Our coke by of current fiscal policy.
You also have potential tax policy and here right. So theres, just a lot going on and with respect to what the CSO model needs to absorb and process.
And so we feel good about where we are right now.
We don't see any further losses emerging but we're going to be very.
And cautious and prudent before we release any reserves at this point.
Okay got you that's super helpful and.
And just on the it seems like you guys of putting a lot more money into investment securities here sort of curious.
Looking forward are you guys looking to continue that trend and also.
What are the current yield looking like on investment securities.
And you.
So the current invest.
The investment portfolio is as Jim mentioned double AA plus rated average duration of about four three years on agency securities that are.
We're seeing some repayments now, but those repaying of repayments will slow.
And the overall yield will.
The continued to improve we're probably somewhere around a $1 70, 175 overall yield of the portfolio at the moment and expect that to pick up a little bit of prepayments slow here over the course of the next few months.
Thank you thanks for taking my questions and I'll pass it off.
Yes.
Our next question comes from Michael Perito from <unk>. Please go with your question.
Yes.
Hey, good morning, good to have you all on this morning.
On a question for Tim.
Appreciate you being on today and given us the update on Chartwell.
Wondering if you could maybe expand a little bit on your expectations for the year.
And you kind of weighted average fee rate going forward. It looks like you took a very modest step down in the quarter is that to the mix and some of the trust and AUM growth you were talking about or is that just the timing.
Issue on revenue recognition and just any any expanded thoughts there are you willing to share.
Sure Michael how are you.
Sure.
It.
It is all about the mix. So when you take a look at where we had a lot of success in Q1 in terms of not only flows but also in terms of new business a lot of that was on the fixed income side slightly lower fee obviously.
So that's what drives that average fee rate did and again might move around the basis point or two.
Given the flow and the mix of the new business through.
Through the quarter.
Got it.
You want to keep in mind and this is Jim the when we acquired Chartwell and 2014.
And the.
Average weighted fee was 25 basis points and now it's 35.
The Euro Youre aware, we had put in place a family of mutual funds and the <unk>.
Yield on the those mutual funds to the company is higher and that to an extent drove that.
That business and if you look at the portfolio itself. It was overwhelmingly when we acquired and institutional business. It's much more competitive now of over 20% of it is retail and so but that 35 is probably going to be a pretty solid number Eric.
Rotate between 33, and 36 or 37%, but it's not going to get much.
Better than that and the portfolio the whole portfolio of the AUR.
And has been diversified meaningfully if you look at it now.
About 57%.
Fixed income, albeit well before it was probably not much more than 15%. When we bought bought the company and and environments that you find that you experience like we have last year. It added stability to the company.
Makes sense.
Thank you for that and then as my follow up maybe a question for David.
Apologize if I missed this earlier on the call, but I feel like the last couple of quarters here.
So and darts at the board on the FDIC insurance expense and I was just wondering if you of any clarity on kind of where the when and where that might settle into a more normalized run rate moving forward here, especially with the strong deposit growth debt that you guys are continuing to say.
Sure Mike.
And let me put some context two of the FDIC insurance expense was on an annualized basis.
The four basis points on average assets and the first quarter.
And that's down from about eight basis points from the fourth and down from about 13 in the third of last year.
I think we have shared with us through previously the.
And because we've crested over the $10 billion Mark the methodology in terms of calculating that.
Of that insurance premium is different and.
And we get the benefit of our private banking loan portfolio of the lower risk nature of that portfolio in terms of the calculation.
And so you will see the.
The insurance premiums tick up slightly from here based on growth.
But where we sit right now is probably a pretty good run rate of where it will go through the year, obviously adjusting a little bit for.
And for growth, but that moved from the third quarter to the fourth one we were able to apply for the first time and then to the first and most of that transition is now behind us and this will start to normalize from here.
Got it so we're growing off of the kind of the one point of $1 million and Kristen.
The methodology, you'll make the back half of last year, and a little less relevant from a calculation standpoint.
<unk>.
Got it well, it's good to hear from you all and thanks for taking my questions.
Thanks Kurt.
Once again, if you would like to ask a question. Please press star and then one towards the.
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Our next question is a follow up from Matt Olney from Stephens. Please go ahead with your follow up.
Yes, thanks for taking the follow up just wanted to circle back on the expense discussion and we were just having and just taking a step back on operating expenses were.
Sequentially low and the first quarter and you mentioned the FDIC insurance is.
And one of the reasons.
Okay.
The guidance of 10% to 12% growth and 2021 was maintained and implies quite a bit of ramp from these these levels and the first quarter, we'd love to hear more about kind of where you expect to see that ramp and which categories. Thanks.
So Matt.
You think about our growth last year and.
And our ability to manage expenses to about 10% we were able to continue to make significant investments last year as we built technology people processes regulatory compliance all to support what we view as a responsible growth by the organization.
For this year, our goals continue to be annual growth of loans and deposits of 15% to 20% and revenue of 15% to 20% to support that responsible growth.
Need to.
Continue to make investments in people process and technology.
So thats, where youll see the primary drivers of being and compensation and technology related expenses. We believe we can focus on driving all of that.
And those continued investments and keeping expense growth under 12%.
Naturally see as we move through the year improvements and operating leverage and operating efficiency ratio the.
On the noninterest expense to average assets ratio and return on equity, which is above nine for the quarter and we believe we will get that to double digits by the end of the year. So.
The responsible growth of lot of investments, we're making and people and technology to support that growth regulatory compliance related type items and.
We feel good about the projection of that Jim had in his remarks of the 10% to 12% Yeah and I.
I would just add yes.
Yes around the client engagement client experience piece of a lot of those are aligned with the risk management side.
A lot of the people and automation and technology that we're putting in place will absolutely enhance the client experience. So we'll reduce manual touches more automated touches so we're freeing up our people to focus on.
Higher level of client engagement and more meaningful engagement and.
And also as you can see sort of our <unk> and other client engagement expenses fairly low and the quarter. Our hope certainly is that.
We're finding ways.
To continue to engage with clients and person or more meaningfully over and over the future. So we'll certainly see some increases.
Do that as well.
Okay.
That's helpful and just a few more housekeeping questions here.
I guess more on the modeling front.
And it looks like and the first quarter the.
The diluted share count was a little bit.
The lower than I expected, but a higher higher preferred dividend David.
And David I think we've kind of talked about this a few months can you just kind of remind me of the puts and takes on that and the first quarter and how we should be thinking about that moving forward.
Yeah, Matt as the recovering accounts.
It's fine there's an inverse relationship between the amount of disclosure and its usefulness. We will continue to provide this table on page 14.
To you all.
Each quarter.
The diluted common shares or about 32.2 million shares that should stay relatively stable the.
And the biggest change this quarter was the share count of restricted stock the amount, which was dilutive that fluctuate with the market price and how much of what shares are in the money.
And with the improvement in the Tri state market price the restricted stock more shares became dilutive and so absent any significant change in terms of restricted stock.
For the remainder of the year of the diluted common share count should stay around $32 2 million, maybe a little higher and lower just based on market fluctuations. So.
We will continue to provide this disclosure and and continue to try to provide transparency and clarity here.
And on the preferred dividends and I think it was around $5 million this quarter, how will that fluctuate throughout the year.
That will stay relatively consistent as well it will grow slightly quarter to quarter to the extent that stone point elects to receive the dividend in additional shares versus cash to day.
They have done that they've elected additional shares.
But the overall dividend should stay relatively stable.
The first quarter levels.
And.
And then just lastly, David on the effective tax rate without and OCA and how youre thinking about that this year.
So we're a little higher than we had hoped to be and the first quarter, but we still believe we can get that down to 17 and 18% through the year we've got.
A couple of credits on the horizon, the potentially will help us get there if we're able to execute and try and transact on those and so the guidance of 17 and 18% is still still holds.
Okay, perfect come off of that and nice quarter. Thank you.
Thank you.
And ladies and gentlemen, and showing no additional questions I'd like to turn the conference back over to management for any closing remarks.
Thank you very much for your continued interest and tristate capital and your participation today.
And I'll look forward to updating you on our second quarter results in July have a great day.
And ladies and gentlemen, and with that we'll conclude today's conference call. We do thank you for attending you may now disconnect your lines.
Okay.
Okay.