Q1 2022 FNB Corp Earnings Call
Hello, and welcome to the F N B Corporation first quarter 'twenty to 'twenty two earnings call.
All participants will be in listen only mode should you need assistance. Please the dog conference specialist by pressing the star followed by zero.
After todays presentation, there will be an opportunity to ask questions.
To ask a question you May press Star then one on you touched on phone.
To withdraw your question. Please press Star then two please note today's event is being recorded.
And I would like to turn the conference over to Lisa Constantine Investor Relations, Wisconsin team. Please go ahead.
Thank you good morning, and welcome to our earnings call. This conference call are FMC Corporation and the reports are filed with Securities and Exchange Commission often contain forward looking statements and non-GAAP financial measures.
non-GAAP financial measures.
In addition to and not as an alternative for our reported results prepared in accordance with GAAP reckon.
Reconciliations of GAAP to non-GAAP operating measures to the most directly comparable GAAP financial measures are included in our presentation materials and in our earnings release.
Please refer to these non-GAAP and forward looking statement disclosure.
Related to material reports and registration registration statement.
With the Securities and Exchange Commission and available on our corporate website. A replay of this call will be available until Tuesday April 26, the webcast slides posted to the about us.
The Investor Relations section of our corporate website I will now turn the call over to Vince Kelly, Chairman President and CEO .
Thank you and welcome to our first quarter earnings call. Joining me today are Vince Calabrese, our Chief Financial Officer, and Gary Guerrieri, our chief credit.
F&B began 2022 with solid fundamental performance in the full integration of the Howard Bank acquisition.
We are pleased that the deal metrics associated with how it came in at or better than.
Plan with a positive impact of our capital ratios.
Howard added $1 8 billion of loans to the balance sheet, bringing our total assets to <unk> 42 billion.
In fact on a combined basis.
We had strong loan pipeline growth in the mid Atlantic region up 13% year over year.
61% linked quarter.
Our expectation is that the mid Atlantic region will continue to grow with the exceptional employees and new clients who joined F&B.
Additionally, we expect to receive revenue benefit from F&B is more robust product set as we offer these services to the existing customer base already in market.
Earlier this month F&B board of directors approved a new $150 million share repurchase program, providing additional flexibility to effectively manage capital and benefit our shareholders.
<unk> reported first quarter GAAP earnings per share 15.
In 2006 on an operating basis.
Revenue increased three 4% linked quarter led by net interest income increasing 5%.
We remain well positioned to grow net interest income given the strategic steps, we undertook to position our balance sheet.
And benefit from the current interest rate cycle.
These include favorable deposit mix changes and investing in a short term securities.
We remain well positioned with $16 billion of assets.
<unk> to short term rates.
Loans increased $2 billion or eight 2% when excluding PPP.
Well Howard contributed to the growth commercial loan production was more than $1 billion up 30% year over year.
As we look ahead pipelines have rebuilt from our strong growth in the fourth quarter and are up 23% quarter over quarter.
This gives us additional confidence in our mid to high single digit organic loan growth guidance for the full year.
Yeah.
Our fee income businesses contributed another solid quarter at <unk> 78.
Essentially flat to the last quarter wealth.
Wealth management continued to produce record results with revenues, increasing $1 $1 million linked quarter or nearly 30% annualized driven primarily by record organic sales activity.
Mortgage banking income increased 700000 linked quarter to 7 million amid significant interest rate volatility.
While rising mortgage rates are expected to reduce refinance activity. We are confident our diversified geographic footprint and consistent commitment to the home purchase and new construction market will help us outperform the industry.
In fact, nearly 80% of our originations this quarter were for purchase money mortgage yes.
<unk> investment in technology has also enabled us to efficiently bring in more mortgage clients with 66% of our mortgage application submitted through our online Easter.
As we continue to grow our balance sheet, we remain vigilant in examining the current macroeconomic environment of high inflation and supply chain disruption and geopolitical unrest.
We are proactively assess the risks and activated plans given the current environment.
Our credit team is continuously monitoring the industries that are potentially affected by the rising interest rates higher food oil and gas and commodity prices.
Supply chain disruption.
We will continue to assess the environmental risks and adjust our strategy appropriately to ensure consistent performance, while addressing the needs of our key stakeholders.
I will now turn the call over to Gary to discuss overall credit performance and the steps <unk> taken.
To position our portfolio.
Thank you Vince and good morning, everyone.
First quarter results remained strong and we are very pleased with the continued favorable positioning of our credit portfolio as evidenced by our key asset quality metrics.
The quarter also marked the successful completion of the Howard Bank acquisition, which I am pleased to report came over slightly better than expected and did not have a material impact to the overall credit portfolio.
I will provide some additional color on the transaction, including the day one on day two impact to the reserve levels.
We'll touch on later in my prepared remarks.
Let's first review, our GAAP asset quality results for the quarter.
As I have mentioned previously we entered 2022 with our credit portfolio and a position of strength.
With the newly acquired Howard Bond book now reflected in our total consolidated results. We saw only slight increases in our delinquency and NPL levels as compared to our very low year end results.
The level of delinquency ended March at a very solid 66 basis points, reflecting an increase of five bps driven entirely by Howard.
Exclusive of that acquired book of loans delinquency would have decreased slightly compared to the prior quarter.
Npls and Oreo also reflected a small increase on a linked quarter basis against very low year end results with the GAAP level up two basis points to end March at 40 bps, which was again due to the absorption of Howard's portfolio.
Net charge offs for the quarter were very low at $1.9 million or three basis points annualized as we continue to track at historically low levels over the past several quarters.
We recognize provision expense of 18 million for the quarter, including the $19 1 million initial provision for non P. C D loans associated with the Hollywood acquisition.
With the additional day one P C. The gross up of $10 million, our ending reserve position stands at 371 million or 1.38% of loans at quarter end.
Acquired P. C D loans were relatively low and represented just over 10% of the Howard long book.
Absent the Howard transaction and the associated provision in gross up activity. Our reserve level would have been down slightly compared to December which is consistent with the favorable credit quality trends we've seen.
Our NPL coverage position remains strong at 365%.
Regarding Howard's loan portfolio, we are very pleased with the successful conversion of the book and the ongoing tracking and monitoring our teams continue to perform to help us better manage risk.
This transition phase.
Oh, it's credit book performed slightly better than we were expecting leading up to the conversion with our loan risk profile and credit concentrations all remaining satisfactory.
We look forward to the additional lending opportunities and access to the expanded customer base within our mid Atlantic footprint.
It has helped support our overall loan growth objectives and provides us with deeper opportunities for our other fee based services.
I would like to congratulate the team for their tireless efforts to close the transaction and expand our position in this highly desirable market.
I would now like to briefly touch on recent global and macro economic activity that we have been monitoring including the potential effect on our borrowers and the markets in which we operate.
With the ongoing challenges of widespread inflation elevated input costs supply chain disruptions labor shortages and geopolitical influences. We are focused on these factors in our underwriting and in our credit discussions to address and mitigate these risks upfront.
Well, we have not seen any material impact to our credit portfolio. At this time, we remain vigilant and have tailored our credit decisioning approach to address the impact that these various factors could have on a borrower's EBITDA and margin levels, including the effects of fluctuating operational.
And supply costs as well as potential interest rate sensitivities that may lead to increased borrowing cost.
That said, we have been very proactive and utilizing interest rate instruments to provide borrowers the option to fix their borrowing costs and reduce their sensitivity to the rising rate environment.
In closing we remain very pleased with the position of our portfolio and the successful acquisition of Howard Bank and we remain focused on the year ahead to manage our growing credit book through a potentially softer economic environment.
Maintaining our strong credit culture stands front and center and we are well prepared and remain proactive in our approach.
Quickly identify and better manage emerging risks in our loan portfolio.
Our disciplined credit framework is built on a foundation of consistent underwriting attentive risk management and selectivity of high quality lending opportunities all of which has served us well and positions us for the year ahead.
I will now turn the call over to Vince Calabrese, our Chief financial Officer for his remarks.
Thanks, Gary.
As mentioned, we are very excited about Howard acquisition.
The potential of this deal offers to continue growing our fee based revenues.
I think the merger closing date onto deposits for both one $8 billion.
With 43% of deposits and noninterest bearing accounts.
In terms of significant items, the first quarter had $28 6 million in merger related expenses.
$2 1 million of initial provision for non PC demand.
$4 2 million in branch consolidation costs.
In conjunction with the acquisition F&B issued a little over 34 million shares of common stock at $12 99.
In exchange for $18 9 million shares of our common stock.
Going forward our will be included in all of our reported numbers, including guidance because they're now part of F N b.
Yeah.
With that let's turn to slide five discussing our first quarter financials, starting with the highlights.
First quarter reported EPS of <unk> 15.
And 26 cents on an operating basis after adjusting for the Howard related items and branch consolidation costs previously noted.
But excluding triple P and Howard loans as of the acquisition date, which is more reflective of underlying homegrown.
Period end total loans increased $259 7 million or four 3% annualized on a linked quarter basis.
Including an increase of $81 7 million in commercial loans, and leases and $178 million and consumer loans.
Average loans, excluding triple T and Howard increased $440 million or seven 4% annualized.
Let's continue with the balance sheet on slide seven.
First quarter average securities reached 7.0 billion, an increase of $469 million from the prior quarter as we increased our investing activity take advantage of the higher interest rate environment.
Securities growth, coupled with the loan growth contributed to a three 9% increase.
Average, earning assets.
Average deposits excluding Howard.
$31 7 billion, an increase of seven 8% year over year, reflecting continued organic growth in households, and account balances.
The offset by decline in time deposits.
Customer preferences to move funds liquid accounts.
Turning to slide eight net interest income totaled $234 1 million, an increase of $10 8 million or four 8% from the prior quarter, primarily due to growth in average earning assets.
Initial benefits from the higher interest rate environment, partially.
Partially offset by the $4 2 million decreased contribution from Triple T.
Our net interest margin increased six basis points to 261.
The early stages of benefiting upward movement in interest rates.
Total impact of Triple T purchase accounting accretion and higher cash balances. Our net interest margin was a reduction of 13 basis points for the quarter.
Similar to the 40 basis point reduction last quarter.
Now lets look at noninterest income and expense non.
Noninterest income totaled $78 3 million essentially flat from the prior quarter.
We have previously mentioned the strategy of investing in our diversified fee based businesses and this quarter again demonstrates its important.
For example, the insurance commissions and fees increase of $2 3 million linked quarter.
At the capital markets decreased $2 4 million as ever heard from elevated level in the fourth quarter.
We expect our diversified fee income strategy to be advantageous.
Can you along the economic cycle.
Reported non interest expense increased $45 8 million or 25, 2% linked quarter.
On an operating basis noninterest expense increased $13 9 million or seven 7% to $194 6 million.
Excluding merger related expenses and branch consolidation costs from the current and prior quarters.
On an operating basis salaries and employee benefits increased $8 1 million or seven 8% linked quarter, primarily related to normal seasonal work term compensation expense of <unk>.
$6 2 million in the first quarter of 2022 as.
As well as seasonally higher employer payroll taxes.
Also included in the quarter total is a little over two months of salaries and benefits for the Howard employees that joined F&B.
Occupancy and equipment increased $3 1 million or 10, 1%, primarily due to higher seasonal utilities costs.
Thanks shares and franchise taxes decreased $2 3 million due to the recognition of state tax credits in the prior quarter.
The efficiency ratio equaled, 67% compared to $58 seven.
The higher efficiency ratio resulted from nearly $20 million of lower Triple T and purchase accounting accretion income versus a year ago.
Excluding triple T and PAA, our efficiency ratio, what is improved around 220 basis points year over year.
We expect improvement in this quarter's efficiency ratio moving forward with it.
A positive impact from the expected rate hikes.
And synergies and revenue and expense associated with tower.
Tangible book value per share decreased linked quarter $8 nine.
Primarily related to 202 million or <unk> 57 per share and accumulated other comprehensive loss as of March 31 2022.
Reflecting the impact of higher interest rates on the fair value of <unk> Securities.
This compares to a $62 million or 19 negative impact at the end of the prior quarter.
Increased unrealized losses in the <unk> portfolio due to rising interest rates should come back into capital over time as securities mature or prepay.
During the first quarter of 2022, the company repurchased two 2 million shares of common stock.
The weighted average share price of $13 25.
For a total of $29 8 million.
To date, F&B repurchased 111 million under the program approved in September 2019.
Earlier this month, our board approved a new $150 million share repurchase program continuing to provide F&B was a tool to optimize capital management and enhance overall shareholder returns.
Yeah.
Now, let's turn to guidance on page 12.
We expect loans to increase in the low double digits to low teens.
Underlying organic growth in the mid to high single digits on a year over year spot basis.
Total deposits are projected to grow high single digits on a year over year spot basis.
Full year net interest income is expected to be between 1.0, and 1.04 billion with the second quarter between 249 $253 million.
Our base guidance currently assumes 125 basis points of rate increases for the remainder of the year, including a 50 basis point increase in May.
Full year noninterest income is expected to be between 315 and $330 million with the second quarter around $80 million.
<unk> full year guidance due to slightly lower than expected market related fee income.
There is no change to our full year guidance for noninterest expense.
Range of $760 million to $780 million on an operating basis for the full year and $190 million to $195 million for the second quarter.
This does not include the one time expenses associated with Howard Bank acquisition.
Positive credit quality is expected to continue throughout 2022 <unk>.
Provision guided to $20 million to $40 million.
This does not include the initial $19 1 million of provision related to Howard and is dependent on net loan growth experienced throughout the year.
Lastly, the effective tax rate should be between $17 five an 18, 5% full year.
Which assumes no changes to corporate income tax rates and it's dependent on the level of investment tax credit activity.
With that I will turn the call back to Vince Thanks, Vince.
Worked hard to build a strong differentiated brands.
Including our commercial lending wholesale banking business.
Our knowledgeable team and investments in products and technology results in a commercial banking experience that is unique for its high level of convenience and sophistication.
Our commercial business ranges from large corporate clients to small business lending, including highly specialized industry verticals, creating an opportunity for F&B to surpass the needs of most clients.
Thus far in 2022 F&B has been named as one of America's Best Banks and world's best banks by Forbes received 17, Greenwich Excellence and best brand.
And was recognized as a top workplace USA by energy age for a second consecutive year.
These awards add to an extensive list of honors F&B has received for its differentiated culture and business model, which focuses on doing what is right for its clients communities and employees and ultimately benefiting our shareholders.
For example, F&B is increasing our closing costs assistant grant to 5000 in April 2022, advancing our commitments to borrowers in low to moderate income communities.
We also enhanced our mortgage product offerings through Fannie Mae and Freddie Mac to provide additional access for homeowners with income at or below the area median income for their market.
Our goal is to ensure all stakeholders benefit from the products and services that we offer.
Our first quarter results provide a solid foundation for us to continue building momentum throughout 2022.
As always our performance is a testament to our team and I. Thank each employee for their dedication and contribution with that I'll turn the call over to the operator for questions.
Yes. Thank you.
This time, we will begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
If you're using a speaker phone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble the roster.
And the first question comes from Frank Schiraldi with Piper Sandler.
Good morning.
Jonathan.
In terms of Vince you mentioned.
Still a lot of confidence in the loan growth expectations for the year.
And I think you said that the current pipeline is up.
23% linked quarter and so I just wanted to follow up on that and is that the commercial pipeline and I Wonder if you could talk a little bit more about that pick up you know does it reflect a supply chain issues.
Proving is it more seasonal just wondering if you can frame a little further that significant tick up in the pipeline linked quarter.
Yes, I can I can address that I think it's pretty broad based if you look at the dispersion.
My little.
A little chart here for our own sake. It shows the trending.
You can see almost every region and the company has seen growth in the pipeline on a linked quarter basis, if you remember.
Back in the fourth quarter, we had a pretty strong.
Kurt production quarter for us so typically what happens the bankers are busy closing transaction the pipeline shrinks, a little bit and then we start moving back into prospecting or.
Accommodating borrowers request and the pipeline builds again.
I think youre seeing that here the other factor is the first quarter.
Is seasonally slower you don't have the financial results from your corporate borrowers.
Typically the companies haven't device their capex plans until now so now is the time when you start to see a pickup in the pipeline.
We're very pleased with the growth in the mid Atlantic region mid Atlantic up <unk>.
13% year over year, 61% quarter over quarter, So you've got a big boost because of that Howard acquisition, a lot of critical mass and scale.
Deeper penetration in the market.
And some great bankers that we picked up.
It seems to be pretty happy with our system. So.
We're very excited about the opportunities there. We also feel that as I mentioned on the call from a noninterest income perspective.
Fee based businesses that we have we have a tremendous opportunity to penetrate that customer base with some.
Sizable.
Fee opportunities in wealth and capital markets. So I think that should help us.
In that market. So that's a big driver Charlotte's up 33% year over year.
52% on a linked quarter basis, so theres.
There's quite a bit going on in the southeast I just spent some time spend a week.
In Charleston, and Raleigh.
And both of those markets are performing very well spent a lot of time with clients.
I think our brand is being received well in those markets were pretty well established we have regional headquarters that we've established in Greensboro.
Charlotte and Raleigh, and Charleston, South Carolina with highly visible signage Jen deason delivery channels. So things are starting to close their we've expanded from a de novo perspective into Asheville, North Carolina has been a couple of years now so thats starting to pick up.
For us as well as Greenville, South Carolina, we were on the outskirts upgraded go but we have a plan to move into that market more heavily which provides quite a few commercial opportunities for us, particularly C&I opportunities.
And then small business banking for us.
Historically this has lagged from a growth perspective, because we're consolidating portfolios every time, we did an acquisition that stabilized and has actually started to grow nicely for us across the footprint. So we're seeing a little bit of lift from our small business lending activity.
So that kind of gives you the landscape I think its more related Frank too.
When you look at line utilization rate.
Within the company, Chris Jana and I were just looking at that data.
What you see is a substantial drop off in utilization. So borrowings declined post pandemic beginning of the pandemic after the first quarter.
The pandemic in 2020.
Things things really fell off from a borrowing perspective for commercial borrowers. So a lot of those businesses went to cash they got stimulus or benefited from stimulus and drove down their balances and then.
A series of things occurred which were unpredictable, but supply chain disruption and all kinds of things happen that kind of slowed their ability to grow or expand and I think we're starting to see a pickup if you dive into that utilization or even though we haven't seen much of a global.
Wise in utilization rates across all the portfolios when you start to drill down into it we're seeing growth in the middle market now, we're starting to see things pick up so that's telling me that we're working through those supply chain issues.
Companies while.
The wars and Ukraine is probably a worry.
Thank you.
They are starting to get back to normal and you know from an operating perspective.
Anyway, that's we're still we still are very cautious as I've said.
My remarks.
We're still watching whats going on from a credit perspective, because there are concerns about additional supply chain disruption the price of oil and gas.
Rising and impacting certain industries, so we keep a close eye on it but.
All in we are seeing.
Haven't seen any significant weakness anywhere in the portfolio in fact, the credit quality is holding in there.
I hope that answers your question yes.
Comprehensive response.
No that's helpful. Thank you.
I guess just as a follow up in terms of just given how strong.
Just given your confidence on the Guam growth picture.
Is there any room to ramp up the buyback at all I was just wondering if with bank stocks have been pulled back a little bit.
If you know from where you bought back stock in the first quarter.
We should think about that maybe ramping up a bit if we should think about it any differently.
Than we did going into <unk>.
Yes, I think we are.
Our guidance on loan growth isn't crazy I mean were mid to high single digit growth. So there is some room for.
For us to fund that growth with capital that we generate internally plus.
Buy back shares.
Why the board approved the buyback program, we want to have options. So that we can continue to drive shareholder value and support the stock price. If we see movement downward in the company has performed admirably over the last few years. So there's a lot of confidence in the board and putting forward.
Our buyback program.
You look at the financial performance of the company, it's been very strong through some very difficult challenging.
<unk> and the actions of the theory and the credit team.
Taken in our commercial bankers, I mean really prepared ourselves well and gotten through.
And in pretty good shape, so that that gives them a lot of confidence on the buyback and if you look at the capital ratios I cant remember, Chris we're at 10%.
Okay.
Anyway.
From a regulatory capital perspective, we look good.
I think I think we're in really good place Frank.
So there are options for us.
Okay, Alright, great. Thank you Vince.
Thanks.
Thank you and the next question comes from Michael Young with Truest Securities.
Okay.
Please go ahead Mr. Yang Your line is live.
It sounds like you've got a horse.
Alright, well moving on to our next question will come from Daniel Tamayo with Raymond James.
Good morning, guys.
Alright.
Good morning doing well thank you.
Maybe first on the mortgage banking outlook you gave some good color on you know continuing to expect that to be.
I say outperform the industry going forward, but maybe.
Maybe if you could provide a little more detail on how youre thinking about how.
How we should be thinking about sizing that that revenue stream going forward or are you still expecting that to increase from here or flat or how from a from.
The overall perspective, you see Europe revenue trending from here.
Well I'll, let Vince answer that question, Vince Calabrese, but at before.
We'll tell you the pipeline has shifted as we've indicated.
We are very well positioned across the southeast and the mid Atlantic and some fairly dynamic housing market. So we have an opportunity.
To benefit from.
More heavily from purchase money mortgage origination.
I think were current our current pipeline is sitting at around 90%. So we purchased money. So we did make that shift.
To provide some support which is why I indicated in my prepared comments that we should outperform the industry and we're not as dependent on refinance activity and we are spread across a broad geography, and some very attractive markets.
50% of the franchise fits in very stable more stable markets gives us some stability.
And we're able to maintain lower growth trajectory and then half of it sits in more dynamic higher growth markets, where we're seeing more housing starts.
Lot of activity, but go ahead, Vince I don't know if you want to give them a little bit more color on the top line.
Yeah, No I would say for the quarter.
While the results they were off a little bit from a kind of a low last quarter you were thinking was going to be low.
The purchase versus refi mix as Vince mentioned positions us well to focus on purchases for the quarter was 77% and now it's up to you know the.
The Refis last night was moving down to 5% of the total so kind of the way our business is very well positioned in the activity on the purchase side, it's still been very strong.
I guess, if you boil it down to the mortgage banking income right. That's a function of how much yourself, how much shifting your portfolio to depending on the nature of the originations we've definitely seen some shift to customers wanting to get arms.
Seven one or 776 months, it's not want any more 10 year in six months.
We've seen some movement towards that so that stuff goes into the portfolio. So you'd have more portfolio higher net interest income a little bit less gain on sale on that I guess, if you kind of boil it all down I would expect mortgage banking income.
To move up from here from the first quarter were entering the seasonal second and third quarters, and our kind of high but kind of around the level to a little bit higher from here would be the best way to characterize it and it's really going to be a function of the mix of those originations, but there is still very healthy applications are very strong.
And I guess, just the purchase market continues to be strong.
To support the business activities there.
The other side of it too is there is quite a bit of activity in the <unk>.
Sumer lending.
Area relative to mortgage lending so outside of the mortgage bank itself, we'd have surgeon pipeline.
Yeah.
Yes.
One of the strongest pipeline, we've ever had right now.
Yes. So there is there's been a significant pick up there was a lot of pent up demand I don't know that there was the capacity to execute a lot of the construction project. So I think we've seen a surge in demand.
Across our footprint.
Pretty much every geography.
Continue that bankruptcy.
So all of that leads to the reason I brought that up is because ultimately that may lead people.
Take out a consumer loan.
<unk> by real estate and then they roll it into a larger.
Some of our larger mortgage loan and it's taken out.
Anyway, that's there's quite a bit of activity.
So we're feeling pretty good about the position.
Purchase money opportunities.
Growth in certain segments of our business geography.
Yeah.
All right that's terrific color I appreciate all of that.
And maybe switching gears here you know thinking on the AR about net interest income obviously, we're in a much different rate outlook environment now than we were last quarter.
Dated guidance to reflect that.
How should we think about or how are you thinking about.
Sure.
The change in the <unk>.
Sensitivity to rates from the.
Like we just had all the way out to what Youre forecasting by the end of the year is there any impact.
Are you expecting any difference in terms of loan betas like what youre able to reprice on the loan side and then just remind us if you're if you're still thinking that deposit betas and up around the 40% to 50% range by the end of the year.
Thanks.
Yes, I would say a few things as far as whats baked into the guidance you see what we have and are an additional 125 basis points with 50 in may.
We get more than that obviously, there's upside to the range there so.
And I know everybody's modeling it with interest rate projections. So.
Clearly, there's some upside to the range, depending on where we end up.
As far as debated long betas continue to be pretty strong.
No from the past I mean, we have close to 50% of total loans that are tied to LIBOR. So for.
Three months or last time, those two measures as well as prime so $13 billion.
8% of total loans, so that benefits as rates move up the cash position. We have now is benefiting.
While we still have around three to $3 2 billion that was earning 15 now is turning 40, and then we would expect that to move up.
If the fed moves.
50 basis points. If you got 50 itself, so thats, helping well that cash is not yet deployed in lungs, youre getting a benefit there too.
And then the investment portfolio, we've been able to take advantage of the higher rates in recent quarter to put some more money to work there and see that in the growth of the investment portfolio.
So that's kind of supporting the overall margin.
And triple piece almost gone. So if you kind of put triple T. On the side our loan yields were actually up five basis points kind of continuing business there. So.
And then on the deposit beta side.
Again, none of us really know how level liquidity in the banking system, obviously still a consideration for all of us.
When do you think will feel more pressure as we continue to move down this path of fed moves.
What kind of commercial municipal deposit roofing earlier in that process.
Our current projection for us based on what we see and what we think.
It would be.
Quarter, the rate hikes coming through in total cost of deposits.
5% on a total deposit basis and around 40% for interest bearing deposits at the end of the year.
That's kind of our current projections.
Terrific. That's all I had thanks for all of it.
Okay. Thank you.
Thank you.
Next question is from Michael Young with Trust.
Okay.
Yeah.
Please go ahead Mr. Yang Your line is live.
Hey can you hear me.
We can now look.
Okay, sorry about that.
Some technical issues here this morning I apologize.
It sounded like you were trading around on a horse for the first time [laughter], we just had a clicking noise.
But.
Good to have you on the.
Maybe it's it's the the the ghost of cell phone passed I don't know I apologize it always happens.
Okay go ahead.
At any rate just maybe Vince wanted to walk through kind of the fee income side, obviously kind of a lot of big swings this quarter would come in the MSR fair value adjustment. You know you can have big big moves and insurance to the upside but capital markets to the downside. It sounds like you know a slight weakening.
Just kind of the outlook, but is that more mortgage driven or are you seeing some things in some of the other business lines that you think will be a little weaker as we move throughout the year.
It's a combination of several areas.
I think the mortgage banking fee income in general year over year is going to be it's going to be challenging to meet last year's fee income obviously.
Because it was so strong.
But there are the way we've tried to build out our fee based businesses is to ensure that when one's not performing at the highest level, we have enough balance within our offering.
And kind of make up for it.
And the guide that we gave you implies some of that shifting as you mentioned.
<unk> capital markets.
Sure from a derivative pure derivative perspective interest rate hedging.
Obviously, a lot of customers clients took advantage of.
The hedging products during a time when rates were extraordinarily low so that business has come down a little bit but on the flip side and capital markets, We launched our debt capital markets platform. So we're seeing good activity there.
They're in good prospects there so we're expecting to have a pretty decent year in that space.
Have invested in our international banking platform and added products, we're expecting to see some growth there.
We've had some really solid growth in SBA we.
We expect that to continue so our SBA platform that we shrunk and then rebuilt.
And integrated into our.
Integrated more in depth play into our calling activities across the company versus being a stand alone business is starting to take off so those things are balanced.
Mortgage and derivatives business that's.
And then well well obviously of course, we rely on net asset values as well right I mean, if the market remains steady.
We should be able to benefit there as well because we're seeing a lot of organic growth, we're very opportunistic in DC and Baltimore with that Howard portfolio and the fact that they didn't have.
<unk> offering we're starting to see some good opportunities there.