Q1 2022 Lakeland Bancorp Inc Earnings Call
Ladies and gentlemen, thank you for your patience. This call. There's two starts in a couple of minutes time.
[music].
Good morning, and welcome to the Lakeland Bancorp, Inc. First quarter earnings Conference call. My name is Elliot will now be COVID-19 of course, thank you.
You will have the opportunity to ask questions at the end of the presentation. If you would like to register for a question. Please press star followed by one on your telephone keypad. Please note that this event is being recorded.
I would now like to turn the conference over to Mary Russell Assistant Controller and director of financial reporting. Please go ahead ma'am.
Thank you Elliot and good morning, ladies and gentlemen, and thank you for joining us on our first quarter earnings call. Today's presenters are president and CEO , Thomas Sharon and Executive Vice President and Chief Financial Officer Thomas Splaine.
Before beginning the review of our financial results. We ask that you. Please take note of our standard caution as to any forward looking statements, which may be made during the course of today's call. Our full disclaimer is contained in this morning's earnings release, which has been posted to the Investor Relations page on our website Lakeland Bank Doctor.
Uh huh.
Now it is my pleasure to introduce Tom Massaro, who will offer his perspective on our first quarter.
Good morning, everyone and welcome to our first quarter earnings call I'm joined this morning by Tom Splaine, Our CFO , who will walk you through our earnings including the purchase accounting impact from first constitution.
As it relates to the first constitution, we closed the merger on January 6th and completed the conversion in February 14th.
In version, one extremely well and we're thrilled with the receptivity.
Customer base and are very impressed with the enthusiasm and energy of our associates.
Some highlights for the quarter, our organic loan growth for the quarter ex PPP was approximately $100 million or one 2%.
We experienced growth in every category, except TPP and warehouse, both of which declined $30 million for the quarter.
For mortgage warehouse, the first quarter is seasonally a slow quarter and was further impacted by the downturn in mortgage lending, which also impacted.
On sale results for the quarter and Tom will talk more about that in a minute.
Based on current trends, we do expect that the warehouse group will gain back all of the $30 million in the second quarter, we do expect PPP to completely run off either late second or early third quarter of this year.
I'm happy to report that commercial closings for the first quarter were up 34% from last year's first quarter and the pipeline at the end of the quarter was at record levels.
Very little of that increase is coming from the first constitution teams as they were focused primarily on our conversion and customer retention in the last few months, our healthcare lending team had tremendous momentum going into the quarter and we expect them to have a strong year as well recently, we're also starting to see opportunities for new really.
Asian shifts as a result of larger bank M&A in our markets, which will be.
Beneficial in the subsequent quarters overall, we expect a stronger loan growth in the second quarter and for the balance of the year.
As we reported in past quarters prepayments for this quarter remained elevated we do anticipated prepayment speeds to slow with a rapid rise in interest rates this quarter.
On the residential mortgage side with rates moving from the low threes to the low fives in the quarter originations declined 55% versus the fourth quarter of last year with refinance activity down 68%.
However to put some well priced jumbos and arms on our balance sheet. This quarter and will continue to look at that opportunity going forward based on the current mortgage pipeline, we expect an uptick in <unk> originations entering the spring sales season.
On the deposit side deposits decreased organically, 2% for the quarter in spite of a lodging decrease in time deposits noninterest bearing deposits were up three 3% last quarter and now totaled 12, 26% of total deposits core deposits now make up 90% of our total.
Positive.
On the credit side credit remains very solid for the quarter charge offs totaled $7 6 million all of which were for first constitution and we're fully disclosed during due diligence for the legacy Lakeland Bank charge offs for the quarter was negligible.
Nonperforming assets to assets at the end of the quarter were 19 basis points. The allowance finished the first quarter at $67 million or 94 basis points of loans versus $58 million and 97 basis points at year end.
Regarding our dividend based on our continued growth and positive outlook. The board authorized a seven 4% dividend increase payable in may our dividend payout ratio will remain in the low to mid 30 range consistent with our SaaS payout ratio.
I'd like to point out that our compounded annual growth rate of our dividend over the last 10 years has been approximately 9%.
As it relates to the central and Northern New Jersey economy remained healthy new jerseys unemployment rates continues to drive lower and stands at four 2% through March the state has recovered 93% of the jobs lost during the pandemic.
Our commercial customers are reporting strong results with a positive outlook. Although there are some concerns around inflation supply chain challenges and in some cases, a lack of staffing which is slowing new sales a bit overall the local economy remains very strong that concludes my remarks, and now I'd like to turn it over the balance of the present.
Patient to Tom once he has concluded with his comments, we're happy to answer your questions Tom take it away.
Thank you Tom and good morning, everyone.
<unk> financial results for Q1 included the acquisition of first Constitution Bancorp, which was completed in January this year.
The acquisition was accounted for under the acquisition method of accounting and accordingly, the assets acquired and the liabilities assumed in the acquisition were recorded at their estimated fair values as of the acquisition date.
First constitution results of operations have been included in the Companys consolidated statements of income from that date forward.
For Q1, our net income was $15 $9 million or 25 per diluted share compared to the fourth quarter of 2021.
$22 $2 million or <unk> 43 cents per diluted share in the first quarter of 2021 of $23 2 million or <unk> 45 per diluted share.
Q1 financial results as Tom mentioned were significantly impacted by the acquisition accounting, including merger related expenses of $4 $6 million.
And the seasonal day, one provision for credit losses on first constitution loans considered non purchase credit impaired.
$4 $6 million.
The non PCB provision was significantly less than our estimated $16 million provision due to the final classification of acquired loans as of the merger completion date and the improved macroeconomic conditions.
The rapidly changing interest rate environment creates an opportunity for us to deploy excess cash in two investments securities during the quarter.
While the east tailwind from the rising interest rates positively impacted net interest income those same higher rates have prompted headwinds for our newly acquired business lines of warehouse lending and residential mortgage banking business.
We expect these headwinds to persist in the short term.
These items were partially offset by continued earning asset growth and a remixing of the balance sheet into higher yielding assets.
On the balance sheet as Tom mentioned, our loan portfolio. Excluding first constitution acquired loans in PPP loans grew organically approximately $100 million as we experienced growth in various loan segments.
Loan prepayments remained fairly elevated but lower than the prior two quarters, well PPP loan forgiveness has reduced that portfolio to an insignificant level.
The investment portfolio continued to grow in Q1, as we deployed first constitutions excess liquidity to increase net interest income and improve earnings.
Investments, excluding the impact of first constitution increased $200 million during the quarter and the portfolio now totals $2 $1 billion or 21% of total assets.
Total deposits, excluding first constitution organically increased $132 million in Q1, or 2% compared to the trailing quarter.
Including non interest bearing deposits our cost of deposits remained at 19 basis points for the quarter and continued to remain among the best in our bank peer group.
We continue to remix.
Posit portfolio by growing noninterest bearing deposits and interest bearing transaction accounts, while continuing to run off higher rate time deposits.
Our average cash balance for Q1 remained slightly elevated due to the acquisition.
And comprise four 6% of average total assets for Q1.
Compared to a more normalized level of two 3%, which is where we finished 2021.
Our capital position remains strong and we continue to accrete capital through earnings retention.
During Q1, including the impact of the first Constitution acquisition, all regulatory capital ratios increased.
Total risk based capital ratio, which decreased slightly.
Our tangible common equity to tangible asset ratio decreased 24 basis points or two 9% to eight 7% at March 31, 2022 compared to $8 three 1% at December 31 2021.
The mark to market impact of increasing interest rates on our available for skip available for sale investment portfolio was muted by managements transfer $500 million of longer duration securities to held to maturity back in the summer of 2021.
We did not repurchase any common stock in Q1 under our existing authorized share repurchase program, which has two 4 million shares remaining to be repurchased under the program.
We will be commencing share repurchases during Q2 to provide support for the stock and further increase shareholder value.
As Tom mentioned the board of directors authorized an increase in the quarterly cash dividend per common share by 7% to $14.05 per quarter.
On the income statement, our net interest margin expanded four basis points versus the trailing quarter as the excess liquidity deployed in the later part of Q4 into loan growth and investment portfolio favorably impacted earnings.
Net interest income accretion on first constitutions acquired loans investments and deposits resulted in a 320.
Dollar reduction in net interest income in Q1 and will not be a significant factor in 2022.
Our provision for credit losses was an expense of $6 $3 million for the current quarter compared to $400000 in the trailing quarter as well as the benefit of $2 $7 million in the prior year quarter.
The current quarter provision was comprised of a $4 $6 million.
Credit for losses on loans of $1 2 million.
Credit losses on investments and a $400000 credit losses on unfunded loan commitments.
The Q1 $4 $6 million provision for.
Credit losses on loans was entirely related to the seasonal day, one provision on non PCB acquired loans.
The provision for credit losses on investments was a result of the decrease in the market value of the securities based on interest rates and not based on any credit downgrades of the securities.
Nonperforming assets decreased two basis points for the quarter to 19 basis points of total assets and credit remains stellar.
The Q1 charge offs of $7 $8 million are entirely related to the acquired first constitution purchased credit deteriorated loans.
At March 31, 2020 to the allowance for credit losses on loans represented 94 basis points of total loans compared with 97 basis points in the trailing quarter.
Noninterest income increased $900000 to $6 $8 million first the trailing quarter due to higher gain on sales on residential mortgages and SBA loans due to the addition of the first constitution business lines. However, this was well short of the budgeted results due to the rapid.
Increase in market interest rates.
Q1, operating expenses were negatively impacted by nonrecurring merger related expenses of $4 $6 million.
Excluding merger related expenses operating expenses increased $9 $8 million from the prior quarter, mainly due to the addition of our first constitution associates additional new Lakeland hires and the related medical and benefits expense.
The expected cost savings from the merger will begin to be realized in Q2 as we converted first Constitution records to our systems during Q1.
Our efficiency ratio of 58% for Q1 includes previously discussed merger related expenses as well as first constitution expenses for personnel and systems, which will not be reoccurring after Q1.
Our Q1 effective tax rate was 23, 9% as compared to 23, 4% in the trailing quarter.
Regarding our outlook for the remainder of 2022.
The forecast is complicated by the rapidly changing interest rate environment, and the federal reserve bank's anticipated moves to curb inflation.
We believe that we are well positioned for rising interest rates.
Our projected interest rate risk position shows that we are currently asset sensitive and this increases over time.
With the current excess liquidity in the financial system as.
As noted by the current low.
Alone to deposit ratios. It is likely that deposit betas will be much lower than modeled deposit betas, which will increase net interest income in the near term.
With the continued deployment of liquidity into loans and securities at the higher market rates. We anticipate net interest margin will increased 45 basis points in Q2.
As Tom discussed earlier, we expect the loan portfolio to grow organically.
Mid single digits in 2022 and asset quality to remain high.
Noninterest income for 2022 is expected to be approximately $7 million to $8 million per quarter down from prior forecast due to the increased interest rates negatively impacting our expanded residential mortgage secondary marketing and the SBA loan origination capacity acquired in the first constitution merger.
We have experienced renewed borrower interest and loan swaps, which may partially offset the reduction in gain on sale activity.
Noninterest expenses for 2022, incurring including merger related costs are on track to total in the high $170 million range inclusive of the higher run rate in Q1.
Salary and benefit expenses are likely to be higher than previous years due to the current hiring conditions companies are facing and hiring quality employees and our continued development of our digital initiatives.
Income tax expense for 2022 as forecasted.
To be reduced to approximately 24% to 24, 5% for the year.
Yes.
That concludes our prepared remarks, and we'll be happy to address any questions.
With that Elliot can you open the question period for Us. Please.
Of course for Q&A, if you'd like to ask a question. Please press star followed by one on your telephone keypad now if you change your mind. Please press star followed by two <unk>.
Unprepared to ask your question. Please ensure you'll find us on mute locally.
Okay.
Our first question comes from Frank Schiraldi from Piper Sandler Your line is open.
Good morning.
Hey, good morning, Frank.
I just wanted make sure.
Heard your comments right.
The beginning.
On.
Well, if you're talking about mid single digit loan growth.
In 2022 and does that include mortgage.
Warehouse from FCC why.
It does but we expect that to be muted Frank who's based on current conditions. So we expect them to recover the runoff they experienced in the first quarter.
But the growth trajectory there will be slower than we originally thought just based on mortgage conditions.
Sure.
And then I just wanted to make sure I understand.
The C. So mark just the charge offs that came on the first constitution side.
You mentioned.
It seemed that those were.
Credits that were familiar to you as potentially heating charge offs.
Is that why the see some mark came in lower than you guys had anticipated it's sort of the.
The charge offs, the difference or part of the difference.
Yes, you are on the right trail there Frank.
We the allocation of loans identified as purchase credit impaired.
Increased.
Reducing the the non PCB mark that goes through income.
And the the PCB loans.
<unk>.
Grossing them up under the accounting rules $12 million being allocated to the allowance for loan loss for them and with subsequent $7 6 million dollar charge off of those loans down to.
The current level.
It's just a reallocation of how the loans were identified come.
Coming onto our books.
That's helpful.
And then.
Tom You also mentioned the continued capital accretion you guys talked about buybacks I wonder if there was any.
More.
Color you could give on.
Buyback levels, and how that might translate to.
Capital levels.
Forward throughout the year.
Yes, right now Frank as you know we've had the.
The share repurchase plan in place for a number of years and <unk> been very very cautious about utilizing it based upon where we're trading due to the current softness bank valuations right now, it's an opportune time for us to step in and be prudent with.
Purchases of shares.
But we're not going to be gung Ho about it we'll do it we'll do it wisely as we move forward. So we're with our TCE ratio currently right now just above 8% oil per mindful of that as we go forward, but we also look at the overall risk of our of our of our bank and our operation where a low.
Risk institution. So we have plenty of capital, it's just a matter of picking our spots as we go forward. So we haven't set any firm limits or timing of size of repurchase as we head forward.
Okay, and just thinking about other uses of capital.
I realize you guys just closed on the deal but.
Just big picture just your thoughts on M&A here.
And has the macro picture gotten uncertain enough, where this is sort of.
On the back burner here.
Yes, Frank I think youre right in that observation.
Our priority has been on the first constitution merger integration, that's gone exceptionally well and we're going to stay focused on that for the time being Frank So I don't think it's likely that you'll see us.
Pursuing M&A to your point I think the macroeconomic conditions are a little uncertain right now and be difficult to rationalize something so right now the focus is entirely on organic growth and leveraging the first constitution customer base.
Gotcha, Okay, and then if I could just sneak in one last one.
Tom you mentioned that the model betas versus.
<unk>.
Likely to actually see just given liquidity in the market.
Can you remind us or I'm not sure maybe you don't disclose what those modeled betas are and if you could just I think you gave some NII guide that I might have missed.
Yeah on deposit betas.
Haven't really.
<unk> them out there, but they're very conservative.
<unk>.
For.
Money market accounts, we're looking at seven deposit betas of 70% as well as 20% on savings accounts. So.
In the current environment.
<unk>.
With all the excess liquidity right now we think that actual deposit betas in the short run will be much less than that what's being mapped into the interest the Alco models right now so I.
I hope that answers your question Frank.
Yes did you give him a little I got it.
I misheard I thought.
<unk>.
I've heard that.
Second quarter, we said that net interest margin should increase about.
Four to five basis points next quarter.
Gotcha.
Okay. Thank you thank.
Thanks Frank.
Our next.
<unk> comes from Manuel Nava from D. A Davidson. Please go ahead.
Good morning.
Hey, good morning Manuel.
Yeah.
Hey.
Mid single digit loan growth guidance include.
That amount of Covid.
That's our real estate portfolio.
Can you kind of discuss how that will go forward that particular line item.
Yes.
That's not included in the projection for growth we're going to.
Right.
In the quarter and subsequent quarters, we're seeing deals priced in the high fours and low fives, and we made cherry pick some residential mortgage portfolio production to go and portfolio, which would further increase the.
The opportunity for growth for the balance of the year, but we'll be selective about that and.
And as you know Manwell, our residential portfolio is one of our smallest portfolios that we have on our books outstanding around $400 million.
Okay.
Is that a.
Is that an avenue that is impacting some of the fee.
The feed from the fee growth from FCC, why I think youre going to be portfolio loans or is it just.
How the market and the rates rising.
The biggest impact to two mortgage secondary marketing right. Now is just the rapid increase in rates and people pulling back right now.
So salable product has.
Tried up very quickly the refis and not pull back on.
Rates on the standard 30 year fixed rate mortgages. So some people have been moving to other products that are not.
Salable in the secondary market, we've been putting those on our balance sheet right now so theyre going on at good yields and we're very very comfortable with the credit.
Okay.
<unk>.
What are you seeing in current pricing for new loans.
What was it for the last quarter and what is it kind of you've seen in April have like has pricing improved yet.
Yes, yes.
And another question about deposit rates go ahead, yes, we are definitely seeing an improvement in pricing across the board.
Kind of the current rates are in the mid four and a half on the commercial real estate side.
We would go that would have been probably in the high threes manual. So we are seeing an ability to price better.
And we think that should continue to benefit us going forward.
Are you seeing any kind of bad actors and in.
Loan competition at the moment.
Yeah, I think we keep talking about the prepayment speeds and we are still seeing believe it or not.
10 year interest only.
<unk>.
In the threes, that's mostly insurance companies Gse's.
Not necessarily pure banks manual, but there are still.
Hunger for assets out there that is slowing quite frankly with the rapid increase in rates. So we hope that that stems.
Tied a bit and it allows us to keep more in portfolio.
And I understand that it makes a lot of sensitive to think of deposit beta has been low during this.
The first step.
Hikes.
Have you seen any competitors move deposit rates yet.
That's my last question for now.
Right.
At this point things have been very calm.
And the local peer markets here and.
So we haven't seen a lot of pressure there.
There is some people some of the online banks I think is starting to inch a little bit.
But.
That's not part of our core relationship driven deposit base here.
Thank you.
Thanks Manuel.
Yes.
Our next question comes from Chris O'connell from <unk>. Please go ahead.
Good morning.
Hey, Chris.
Was hoping to get a little bit more color on the margin guide.
With the liquidity excess liquidity levels.
You said your.
Longer term kind of get down to two 3% or so I believe.
Are you expecting to do that.
Relatively near term.
In the second quarter or over the course of a few quarters here.
We can we can probably get down there during the second quarter, it's a but it's a function of.
Deposit growth, which continued to be strong in Q1.
And.
But.
It is actively managing the balance sheet and redeploying the liquidity into earning assets. So.
I think it's achievable in Q2.
Got it.
So I guess.
Based on your comments around the deposit betas and.
Where the loan pricing coming on.
Some of this excess liquidity deployment I mean should we be expecting.
Moving to NIM.
Following the second quarter and kind of <unk>.
A bit larger than that four to five basis points.
Yes, we don't want to get too far out over ourselves seeing that rate how much rates have moved over the last 90 days, but.
The trend would be to continued NIM as things reprice on a go forward basis.
On the asset side as well as you know the potential is keeping deposit betas low or near zero would help would help everyone's NIM in the financial services.
Fred lenders on a forward basis, so I know that's a long winded answer.
But it's things are just very uncertain at this point about where the government is heading with with rates.
Balance sheet reductions in the longer end of the yield curve, where does that go but Chris we do think that over the subsequent quarters, where the NIM would naturally move up.
If we get 50 basis points, maybe 50 basis points in July like they are talking about our NIM would naturally move up from there.
Got it.
Can you just remind us with pro forma balance sheet, how much of the loan portfolio is variable or floating.
Right now were just under 40% is variable.
Yes.
If you remember our constitution.
First constitution did help that that 44% of their loans.
Repriced with prime or LIBOR.
Yes, absolutely.
And as far as the deposit outlook.
Given the.
Strong growth the past couple of years here.
How are you thinking about just overall deposit flows and balances.
With the rising rates kind of on the horizon.
Chris we've never been.
CD shop or paid up for deposits are.
Positive flow through relationships and mostly on the commercial side. So we expect those to continue to come in.
8% to 10% a year, if you look back at our deposit growth.
<unk> is about 8% to 10% as far back as you want to look so it is something we continue to preach it's something that we demand as part of a lending relationship with our focus being on noninterest bearing DDA, which continues to grow double digits year after year.
Great and then just lastly on the credit.
Given the moves to close the merger in where the reserve kind of settled out this quarter.
How are you thinking about the reserve ratio going forward.
We don't like giving guidance on provisions and where we're going because it's very volatile.
But if you looked at our balance sheet and where our credit metrics are right now Chris.
It's very clean we're coming to resolution on a couple of their remaining non accrual loans that we have on the books in Q2 is likely so things are looking better on the short term and macroeconomic conditions for the seasonal model continued to.
Look strong on a go forward basis. So you put all that stuff together and you kind of say that things are getting better on the credit side on a go forward basis, when you get down to seasonal modeling so.
I hope that kind of point you in the right direction.
Got it yeah that.
It makes sense.
Thanks for taking my questions.
Our next question comes from Erik Zwick from Boenning and Scattergood. Please go ahead.
Yes.
Good morning.
Eric.
I wanted to follow up one or two questions on the margin first I know you indicated that the.
Purchase accounting accretion from FCC why in the first quarter I think it was a negative 320000 was there any impact related to highlands or any other prior acquisitions in the quarter as well.
Now those those prior accretions, just running down and not material.
Thanks, and then do you have a schedule for kind of <unk>.
Scheduled accretion related to first constitution for the remainder of 'twenty two.
We do.
But the impact on the all the whole amortization schedule that goes out over the next three and a half years, but.
But the impact on 2022 is not not a significant item.
Okay.
Okay. Thanks, and then I think you also mentioned that at this point PPP is becoming a fairly immaterial impact as well and expect that to be run off by the end of <unk> do you happen to have the remaining balances and unamortized fees.
The first quarter.
Unamortized fees yet.
At the end of March were approximately $600000.
Okay.
Hum.
It's helpful. Thanks, and then a number of banks have started to kind of reassess their non sufficient fees kind of deposit overdraft fees and strategy have you guys given any thought to that or do you feeling pretty good with your current positioning in terms of how you assess those today.
Yeah, we feel good about our overdraft programs, they've always been above board, but we are we are looking at them and considering some some minor tweaks, but.
We have never relied heavily on overdrafts and our programs are fair to the customer, but we are we're watching what's going on and we'll probably make a few tweaks in the second quarter.
I mean do you expect any of those tweaks to have a material impact on the level of fees that you're realizing today.
Not at all.
And then in terms of the loans curious if you could provide us an update on kind of commercial pipeline the balance at the end of the first quarter relative to the end of the year and just you know what that mix might look like in terms of.
Kind of maybe product type or C&I versus CRE.
Yeah, the pipeline as I mentioned is at record levels.
And then that pipeline that I talk about really is exclusively commercial and it's skewing more heavily to Cree Vince C&I, although we're starting to see some C&I business as a result of.
The healthcare lending teams, which I mentioned previously.
So we're we're seeing a mix I'd say, 75% of the pipeline would be Cree.
25% would be C&I, but pretty good traction in both cases.
Okay. That's helpful and do you have the dollar balance of the pipeline today.
At the end of the film.
We don't generally disclose that but it is as I said earlier, the originations were up 34% for the quarter and they've gotten even better in April so we're pretty bullish on loan growth going forward into <unk>.
Just to clarify that there really doesn't include much if any contribution for first constitution, we really been working on customer retention and making sure everything has gone well there so they'll start to come now onboard and start pushing the pipeline even further forward.
And then just last one for me curious if you could provide an update on your current kind of ESG strategy and initiatives in light of recent proposals to require kind of enhanced disclosures and some of the regulatory filings.
Yes, we've been working on that for a year now we've.
We're working with NASDAQ.
In terms of best practices, So we're pretty far along in some of the initiatives and we feel like we're in good shape.
Started to disclose those on our website.
Youll see in our annual meeting will mention more about.
ESG initiatives, but we're on it.
Great. Thanks for taking all my questions today.
Tom.
We have a follow up from Manny I'll never your line is open.
Hey, I wanted to hop back on to clarify something on the NIM.
The four to five basis point increase in <unk> 'twenty, one does that just assume only the March hike.
None of that.
A potential hike that just like four to five basis points for just the March hike.
That's what we're forecasting right now there might be some limited impact from the from a may hike, but.
The next fed meeting after that would be June and if they they move another 50, there that's very late in the quarter to have any impact at all but.
Yes pretty much right now.
The main driver of that would be the March hike.
Do you have.
If there was a March 50 basis point hike do you have an idea of how much that would increase the NIM.
Assuming so.
Posit betas stay low.
Zero other than contractual rates any <unk>.
25 basis point movement would be accretive to net interest income by about $5 million.
A quarter.
So if the short end moves up and you don't move your deposit betas.
Positive drift there.
Got it that's helpful. Thank you.
Our next question comes from Eric <unk>, a private Investor. Please go ahead.
Hi, good morning.
A question for Tom Splaine, and maybe a bigger picture, maybe Tom Charlotte also chime in on your.
Our securities portfolio is pretty big.
Both in the HTM and the available for sale.
Have the Mark that you show on the waste of March on the HTM.
It moved about $80 million.
I was curious what was the mark on your available for sale portfolio and given that it's a fairly large size.
Have you thought about the fact that it's got all one.
<unk> hundred 60 yield I think about 90 on the on the Muni side of it versus the risk of rates moving more in that value dropping.
Yes, Eric we are we look at that.
And take that into consideration.
As you know, we probably use the investment portfolio is a.
As for liquidity purposes, and not so much to maximize yield.
Due to the all the cash flows that come off of it and it acts as a buffer against our investment ports against our loan portfolio as well so.
We're very mindful of the movement of interest rates on the portfolio.
And we think we've taken some really good steps over the last year to minimize the impact of moving rates.
A case in point the transfer of <unk> securities into HTM last year well before.
Interest rates.
We're moving so.
We take it all into consideration and we look for the best place to deploy a funding.
To get higher.
Higher yields while providing liquidity at the same time.
Where was the mark on the aircrafts that would've affected your book value like 99% of the other banks this quarter.
The we had a $31 million negative OCI Mark other comprehensive income mark related to the <unk> portfolio during the quarter.
Okay. No. That's that's blended of course for the inclusion of our first constitution its combined right.
That $31 million a OCI Mark is just for the investment securities portfolio, the TCE ratio dropping right.
The 24 basis points down to 807 is inclusive of both the <unk>.
Negative mark as well as.
First constitution as you indicated that is correct and earnings for the quarter, yes, okay.
Okay, so about $30 million on the F. S. Okay. Thanks, a lot.
Okay. Thank you.
We have no further questions I will now hand back to Tom Shaw for closing remarks.
Okay, well I want to thank everybody for joining us. This morning for the earnings call. If any of you have any follow up questions. During the course of the day, Tom and I are available.
To take those so welcome your calls thank you everybody very much everybody and have a wonderful day take care.
Today's call is now concluded we'd like to thank you for your participation you may now disconnect your lines.
Yes.
Okay.
Okay.
Sure.
Yes.
Yes.
Okay.
[music].
Sure.
Sure.
Sure.
Yeah.