Q4 2022 Fulton Financial Corp Earnings Call

January 18, 2023

For today's call I'll be providing some high level thoughts on the year as well as some comments on our quarterly business performance and Mark will share the details of our financial results and steps through our outlook for 2023.

After our prepared remarks, we'll be happy to take any questions you may have.

Our results for the fourth quarter and year were very good and we were pleased with our overall performance operating earnings for both the quarter and the year represent all time highs for us.

Some key highlights for 2022, where that net interest income grew significantly reaching an all time high of $782 million our loan portfolio had strong growth across most categories. We grew nicely in both commercial and consumer businesses.

In the fourth quarter, we eclipsed the $20 billion Mark in total loans.

Wealth management had another record year, despite the market volatility and our commercial fee business delivered double digit revenue growth year over year.

In addition, we completed the Prudential Bancorp acquisition in the third quarter and successfully handled the conversion and full integration in the fourth quarter.

Our board of directors declared a special dividend of <unk> <unk> to supplement our quarterly common dividend returning 65 per share in dividends for the year.

These positives were offset by some of the operating headwinds that materialized throughout the year mortgage banking revenues continued to be pressured by the effects of a rising interest rate environment.

<unk> expenses continue to migrate higher due to inflationary pressure and elevated incentive compensation accruals.

Overall, we were pleased with the performance and the results that our team generated this year, we look forward to continuing to execute on our corporate strategy to grow the company by delivering effectively for customers and operating with excellence. So then we can serve all of our stakeholders.

So now let me turn to our quarterly performance overall total loan growth was strong for the quarter at $584 million or 12% annualized we experienced solid originations and uptick in line utilization and saw continued declines in pay downs in prepayments.

Turning to deposits, we saw a decline in overall balances during the quarter due to average balances per household declining.

We did see continued growth in our overall customer count and we remain committed to growing our customer base.

As always we are focused on deposit growth over the long term.

Turning to our fee income we continue to benefit from the diversity of our businesses as the macroeconomic environment challenges certain business lines and we continue to grow other business lines, Mark will share more details in a moment.

Moving to credit and the provision for credit losses of $14 5 million was an increase from $11 million last quarter when excluding the seasonal day, one charge related to the acquisition of Prudential Bancorp factor.

Factors contributing to the $3 $5 million increase were predominantly loan growth and the changes in the macroeconomic outlook as we saw credit metrics remained relatively stable.

Linked quarter, we saw improvement in Npls, npa's and criticized and classified assets.

Finally, we continue to actively manage our financial Center network, we plan to open four new locations in 2023 and have recently announced the consolidation of five existing financial centers, we continually evaluate how and where our customers choose to connect with us.

So now let me turn the call over to Mark to discuss our financial performance in 2023 outlook in little more detail.

Great. Thank you Kurt and good morning to everyone on the call unless I note otherwise quarterly comparisons I will discuss are with the third quarter of 2022.

And the loan and deposit growth numbers I will be referencing our annualized percentages on a linked quarter basis.

Starting on slide three operating earnings per diluted share this quarter were <unk> 48.

On operating net income available to common shareholders of $81 2 million.

This is consistent with 48 of operating EPS in the third quarter of 2022.

Our operating results exclude $1 9 million of merger related charges recorded during the quarter for our acquisition of Prudential Bancorp and 514000 core deposit intangible amortization.

At this point, we believe all of the costs for our acquisition of Prudential Bancorp had been incurred.

Moving to the balance sheet as Kirk noted loan growth was very strong for the quarter of $584 million or 12% annualized.

Commercial lending contributed $349 million of this growth or 10% annualized.

C&I lending grew $244 million led by automobile Floorplan increases agricultural lending and an overall increase in line utilization, which increase from 'twenty, one 'twenty, sorry, 22, 5% last quarter to 23% this quarter.

Commercial real estate lending grew $139 million or 7% annualized.

Consumer lending produced organic growth of $240 million or 15% during the quarter more.

Mortgage lending was still the largest component of our consumer loan growth and increased $163 million with the majority of this growth coming from adjustable rate products.

Total deposits, excluding customer repo accounts declined $727 million during the quarter.

Approximately one third of this decline was attributable to anticipated outflows within our municipal deposit portfolio consistent with prior year trends.

Our investment portfolio was relatively flat for the quarter closing at $4 billion.

Putting together all of these balance sheet trends on slide four net interest income was $226 million or $10 million increased linked quarter.

Loan yields expanded 59 basis points during the period, increasing to four 8% versus 421% last quarter.

Our total cost of deposits increased 24 basis points to 42 basis points during the quarter.

Cycle to date, our total deposit beta is only 9% cumulatively.

Our increase this quarter puts us where we expect it to be at year end and we continue to believe accumulative through the cycle total deposit beta of approximately 30% is achievable.

Our net interest margin for the third quarter was $3 six 9% versus 354% last quarter.

The 15 basis points of improvement resulted primarily from loan betas being higher than deposit betas during the period.

Going forward I would expect our net interest margin expansion to be more modest with additional rate increases.

Due to higher deposit betas and changes in our funding mix.

Our loan to deposit ratio increased from 92, 1% at September 30 to 98, 2% currently.

Turning to credit quality, our npa's declined $21 million during the quarter, which led to our NPA to assets ratio improving from 76 basis points at September 30 to 66 basis points at year end.

Net charge offs of $12 million were driven by a $12 million write down on one commercial office loan due to credit related concerns.

Overall criticized and classified loans continued trending lower with a decline of $26 million or 3% during the quarter following a $251 million or a 24% decline from the second to third quarters of 2022.

Despite these positive trends changes to our macroeconomic outlook and strong portfolio growth led to the increase in our provision for credit losses this quarter.

Turning to slide six commercial banking fees declined $2 2 million to $18 $6 million with decreases in cash management revenues, driven by higher interest rates and capital markets declines driven by reduced interest rate swap activity.

Consumer banking fees declined $1 2 million linked quarter to $12 1 million led by decreases in overdraft fees.

As a reminder, during the prior quarter, we implemented changes to our overdraft products and services to improve our customers' experience.

Wealth management revenues were effectively flat with the prior quarter up $17 5 million.

New business activity continued and the market value of assets under management and administration increased to $13 5 billion at year end compared to $12 7 billion for the prior quarter.

Mortgage banking revenues declined and were driven by a decline in mortgage loan sales as well as a decrease in gain on sales spreads to a 166 basis points this quarter versus 202 basis points last quarter.

Moving to slide seven now.

Noninterest expenses, excluding merger related charges were approximately $167 million in the fourth quarter up $4 million linked quarter.

As a reminder, many of the cost savings from the financial Bancorp acquisition will not be recognized until the first quarter of 'twenty three as many impacted employees of Prudential Bank had worked through dates of mid December .

We also had certain expenses occurring in the fourth quarter of 'twenty, two that we expect to reset to lower levels in the first quarter of 2003 <unk>.

Included in this list, our incentive compensation related accruals of $3 million due to strong earnings <unk>.

Expense accruals of $800000 for branch consolidations planned for 2023.

And lastly, $1 9 million of legal expenses and related reserves for contingent liabilities.

Turning to slide eight as of December 31, we maintained solid cushions over our regulatory capital minimums in our bank and parent company liquidity remains strong.

Accumulated other comprehensive losses improved $57 million during the quarter.

Along with strong earnings this improved our tangible common equity ratio and drove linked quarter growth of 6% and our tangible book value per share.

Our tangible common equity ratio was six 9% at quarter end up from six 7% last quarter.

Excluding the impact of <unk>, our tangible common equity ratio was eight 2% at December 31.

During the quarter, we did not repurchase any common shares. However, our board has approved a new $100 million share repurchase authorization, which is available and in place until the end of 2023.

On slide nine were providing our first iteration of guidance for 2023.

Our guidance assumes a total of 75 basis points of future fed funds increases occurring in 2023 as follows 50 basis points in February and 25 basis points in March.

With that our 2023 guidance is as follows we expect our net interest income on a non FTE basis to be in the range of $895 million to $915 million.

We expect our noninterest income excluding securities gains to be in the range of $220 million to $235 million.

We expect noninterest expenses to be in the range of $645 million to $665 million for the year.

And lastly, we expect our effective tax rate to be in the range of 19% plus or minus for the year.

Many of you also look at pre provision net revenue or <unk> as a key metric to assess the profitability of our core operations. Our version of this metric is included in the financial tables of our press release.

<unk> has increased 48% year over year as a result of earning asset growth over the past year as well as net interest margin expansion from our asset sensitive balance sheet.

With that I will now turn the call over to the operator for questions. Chris Please help us.

Thank you Sir.

As a reminder to ask a question you will need to press star one on your phone.

And please standby as we compile the Q&A roster.

One moment, please while first question.

Our first question will come from Frank Schiraldi of Piper Sandler Your line is open.

Good morning.

Frank when it Greg.

Just.

Just wanted to see if I get a little more to get a little more color on.

Components of outlook.

How much you can you can share in terms of your expectation.

Deposit flows from here.

And.

And loan growth in 2023.

Yes, Frank I would say for a for loan growth in there.

As you know our long term average for loan growth has been kind of in that 4% to 6% range on an organic basis.

So I think you can assume we're kind of kind of in that range for.

For 2023 and on the deposit side clearly it will be lower than what our long term averages has been with <unk>.

Some of the industry wide challenges right now on deposit growth.

I guess when you think about the loan to deposit ratio. If you could just remind us where you.

If you would allow that sort of two or where you expect that.

Our target that to get to.

I assume given your commentary you assume that will continue to tick up from here.

Frankly, as you look at the long term, we've really operated into 95% to 105%.

Over the long term so we're comfortable with where we're at we are focused on growing deposits and funding. We think it can comfortably drift a little higher but we are very focused on growing the balance sheet equally.

As we move forward really as we have done in the past this year was.

Definitely a different year with the excess liquidity and deposits coming off the balance sheet that had been built up throughout the pandemic and strong loan growth. So it was a.

A different dynamic this past year, we see next year returning to more of a normal trend, where we focused on balanced growth.

Between loans and deposits.

Okay, and then just wondering I know Mark you mentioned, the new buyback program that was announced you guys tend to have a program out there.

To be opportunistic just wondering maybe your general thoughts.

Given the macro picture.

Given outlook for 2023 of your general thoughts.

Buybacks.

As we sit here today.

Yes, yes, we're going to we do think it's just.

Good corporate practice to have that optionality in place.

And we're going to continue to way.

Earnings.

Gross.

<unk> and <unk>.

Interest rates and credit.

And evaluate all of that.

<unk>.

Theres a possibility we could we could tap that line throughout 2023, and there is possibility we could not depending on how those factors play out.

Okay.

And then just lastly, if I could just on credit it seems like generally youre seeing continuing to see good trends.

Any concerns in the Cree book outside of office here today.

Do you see more challenges in the near term in terms of that office portfolio.

And any additional color.

Arms of.

The loan that you charged off in the quarter.

Yes, Brian from an overall CRE standpoint, I think the portfolio has been pretty stable underlying metrics are stable we're monitoring it.

Very closely from an overall <unk> standpoint.

Specifically on the office portfolio.

We can continue to work hard to understand our portfolio.

And just to confirm a couple of balances in that portfolio, we've talked about it over the last couple of quarters. Originally we talked publicly about our office over $5 million.

And that balance.

Is roughly about $550 million.

With the acquisition of Prudential It added a little bit to that so the office over $5 million is about $590 million and then we referenced a little higher number later when we had time to go through the entire portfolio.

And the entire portfolio is about $1 billion 50 on.

And it is geographically diversified.

Tenant diversified.

And very granular the average.

In that portfolio is $1 8 million.

We have about 580 85 notes, so we monitor that and Ken monitor that portfolio really closely so.

So we do have this credit that was <unk>.

Previously identified we allocated for it last quarter and as we.

A review that credit, we decided to charge a charge that allocation down this past quarter.

We are monitoring office very closely.

<unk>.

And we see stable trends there right now.

But we're monitoring it very closely.

Okay, Great and just just for clarification, you mentioned a couple of numbers there in terms of a $1 billion.

I think $1 billion 50 and.

$550 million the differences.

The $550 million as office over office loans over $5 million is that what you said.

And then the $1 billion 50 is all office. So the difference between those is really the smaller credits.

Through our footprint.

Gotcha. Thank you.

Thank you Frank.

Thank you.

One moment please for our next question.

And again, one moment our next question.

Our next question will come from Daniel Tamayo of Raymond James Your line is open.

Thank you good morning, everybody.

Good morning.

Maybe first just a clarification.

In the slide deck I think it says.

The NII guidance to 895 2015 is fully tax equivalent I thought I heard you say it was non not fully tax equivalent in your comments Mark I wanted to make sure. We're on the same page there.

Yes to clarify the <unk>, we'd actually filed an amended 8-K. This morning correcting a footnote Danny it should say did you say non.

Got it okay. Thanks apologize for that clarification.

Not a problem.

Ben.

I guess just.

On the fee income guidance.

If we take the midpoint of that guidance it seems to be about stable from 2022.

Considering the headwinds in mortgage banking and in overdrafts with your recent policy.

What are the items that youre kind of expecting to see offsets to those to those headwinds in 2023.

Yes, Danny if we see wealth management.

As we look forward, it's somewhat market dependent but that business continues to grow and I think will be will be positive.

And the.

The underlying treasury management and commercial and the payments.

Overall boost activity based fees and commercial and consumer we see.

Positive.

Mentum there. So those are the we see mortgage stabilizing year over year, and we see those positives.

Potentially giving us growth opportunity, but overall pretty stable year to year, we have pluses and minuses as I referenced in my comments.

We really see the diversification of all of our different fee income business lines.

Helping us add says youre always going to have things gone up things going down.

Great. Thank you.

And then.

Switching gears to credit here I know that.

Things seem to be really strong still overall, but.

Just curious on reserves.

They came down a bit from that.

Not mistaken this quarter.

And thinking about through the rest of the year with the potential for a recession coming.

How youre thinking about.

Where that number could go.

If things do worsen a bit from a macro standpoint, putting aside what happens with the charge offs.

Well, I mean, well Danny I would say that again unrated unknown expected loss model, we've already assumed that things are going to get a little bit worse, which is the basis.

For a lot of the provision that we took this quarter. When you look at the total allowance in basis points. It went down just a couple of basis points, but that's a function of I mean, we did have.

A charge off of it.

$12 million of loan that was on non accrual that we charge down.

So that's going to then have our portfolio did get better.

So underlying credit trends are better.

Maybe allow the total allowance to go down a couple of basis points, but that was offset by changes to our macroeconomic outlook, which does assume that things are going to get a little bit worse over time.

Hence with the allowance being relatively stable linked quarter.

Understood Yes.

There's a lot going on there for sure.

And just a clarification finally.

The expense numbers that you gave.

That are going to be coming down in the from the fourth quarter with the $3 million in the 0.819.

Are those annual or quarterly and what's the.

Timing, we would we would expect on that yes.

Those are all quarterly numbers.

And all of those quarterly numbers I would expect to see reset immediately in the first quarter.

Okay terrific Alright, that's all for me thanks for the color.

Thanks, Nick.

Thank you.

One moment. Please our next question.

Our next question will come from Chris Mcgratty of K B W.

Line is open.

Okay, great. Thanks.

I just want to go back to the office portfolio Hey, Good morning, everybody I just wanted to go back to the office book for just a moment.

In the release you talked about this this one credit driving the majority of the $10 million to $11 million.

Do you have a size of the largest exposures you referenced the $5 million how big do you guys go in office for a particular relationship.

Yes.

Yes, Chris.

We have five the stratification is we have five credits over $20 million.

We have 23 credit exposures between 10 and 20.

And then we have 23 between five and 10. So we have 48 credits over $5 million. So it's a pretty small book.

And we monitor it very closely.

Okay. So this would be in the.

10 to 20.

Bucket okay.

In terms of.

I guess, what change you talked about reserve in the last quarter I.

I guess, what number one what market is this in and then I guess what changed because I think most of the banks of your peers talk about how these credits were underwritten with 50% to 80% Ltvs good debt service like what changed to drive the loss.

Yes, that's correct it was underwritten and consistent with our overall portfolio, it's in the Washington MSA.

It's a large.

Single tenant there's a few other tenants in the building and you have a lease.

Termination.

We're trying to understand current values of that that property as is re leased.

Is really the details behind that.

We have identified that allocate it try to understand what we think is current value.

Of that underlying property with that event and and decided to take the charge down versus just the allocation.

But I guess based on that math it would imply that the value of the building dropped fairly dramatically from where you underwrote it.

Correct, we would think that the re lease of office space in that metro would be at a much lower.

Cash flow.

Lease amount then wasn't.

It was in place.

Okay great.

And then just taking a step back I mean, aside from office, which is getting a ton of attention I guess, where else is the wall of worry if there is one in terms of particular portfolios.

Going into there.

Yeah, well, we're monitoring all of our portfolios on the consumer side and commercial side. So we are looking diligently at the consumer portfolio.

<unk> rate resets on.

One adjustable rates and just the overall performance.

The commercial commercial mortgage and consumer debt.

Residential mortgage and consumer portfolio.

And again underlying credit metrics don't see any emerging trends, but diligently monitoring that specifically on commercial office is what we are really really focused on.

And the map the overall trends.

Still pretty stable when you look at delinquency and underlying credit metrics, but.

Moving into a credit environment, we are being very diligent on all portfolios.

Perfect.

If I could just.

Getting back to.

The NII guide.

Mark I think in your prepared remarks, you said the rate of change with slow which is fairly consistent with most banks given the catch up on the on our liabilities.

But it would imply that the margin begins to rollover.

Call It second quarter until the end of the year.

If I take the balance sheet comments that face value I guess number one is that a fair assessment and then maybe two could you.

Just talk about opportunities to pursue.

<unk> offset that through security shrinkage.

Moderating loan growth that'd be great. Thanks.

Yes, so that is.

Correct Chris.

Same for the last six months when people ask that question. When do you think your margin is going to peak out in this cycle and my answer is.

One month or one quarter after the fed stops raising interest rates rates, so depending on what your bias is on that.

I think that's going to drive when we Max out on our margin.

In terms of opportunities going forward.

We are.

We have.

To date.

A lot of dry powder from a liquidity perspective, when certain wholesale channels, which could potentially be be lower.

Some of our current overnight borrowings cost.

So we've looked there is some.

Dips in the intermediate part of the curve right now where I think there are some opportunities to go out a little bit in duration.

Pending if you believe in the forward curve.

I think there are some opportunities to extend that liabilities a little bit as well.

And then lastly, I mean, we decided a year with <unk>.

11% year.

Year over year loan growth.

Would expect that to moderate.

<unk>.

Okay, Great and just.

The monthly cash flows or the quarterly cash flows off the bond book, if you have it in that 30% beta that was total just to make sure that's not interested as tobi right.

Correct, yes.

That's our estimate for total deposit beta.

And roughly for us.

Our interest bearing deposit beta would be about 50% higher than that.

So.

Just because we have roughly.

About one third of our deposits are noninterest bearing.

And.

I'm sorry.

The second half I would just say, what's coming off the bond portfolio, yes on the bond portfolio.

It's obviously slowed but it's around $20 million a month.

Okay, great. Thank you.

Thank you.

One moment. Please next question.

Again, one moment please.

Our next question will come from <unk> Strickland of Janney Montgomery, Scott Research Division. Your line is open.

Hey, good morning.

Thanks, Ed and good morning.

So I think youll be advances rose by about 1 billion linked quarter I'm, assuming that is currently at the end of the quarter just get more average balances were.

Mark I know you said before that we should expect some level of ethics LTE.

Just given that kind of where you guys were before we had all this liquidity, but is that kind of at the level you want to be yet.

Or do you have a target level or is it just kind of caught follow.

Different loan opportunities Youll, just augment the product base with that I was just curious what your strategy was with the outage will be funded.

Yes, I think it's really more and more of the latter steady than the former.

You saw <unk> grew.

Row more than say fed funds would because there was opportunities you to just maybe do some one month two months three year kind of ladder in very short term <unk> advances and <unk>.

Pick up some some funding advantage over overnight.

But.

Sure.

But thats, we are going to be opportunistic on all of those wholesale funding sources.

And.

But I would anticipate in the near term certainly for that number to be higher than what it was certainly as an average for 2022.

Got it along those same lines I was just curious how do you view I.

I think there'll be advances versus broker deposits just in terms of how you look at what types of wholesale funding to us.

Yes.

Generally we are looking at both right.

But also then.

Depending on the.

What we have in terms of collateral.

For those advances as well.

Okay.

Got it.

One sorry go ahead.

No sorry, but I mean, I was just going to add as of right now our immediate overnight.

Available liquidity as well in excess of $7 billion to $8 billion.

Got it.

And then just just one last modeling question.

Like wealth management held up pretty well do you happen to add the market value of Sandy.

Our modeling purposes.

The market value of our.

Assets under management.

Yes, yes. It was it was $13 5 billion at year end.

Got it.

Perfect. Thanks for taking my questions.

You bet Thanks, Dave.

Thank you.

One more on <unk> next question.

And one moment please.

Our next question will come from David Bishop of the Hovde Group. Your line is open.

Yes, good morning, gentlemen.

And David Accordingly.

Most of my questions have been asked but curious mark in terms of the operating expense guide.

Looks like at the high end basically annualize the fourth quarter run rate, maybe what are the opportunities to hit the lower end or maybe where you can.

More easily or more achievable carve out expenses to hit the lower end of guidance.

Yes, so so if you take the.

If you take a 168 five in the fourth quarter subtract out 1 million nine for one time merger charges on Prudential takeout.

Take out $3 million for incentive compensation and other accruals take out 800000 for the branch closures that are planned in 2023 and $1 nine between legal and reserves that we set aside for a contingent liability during the fourth quarter you take those numbers out you're getting just below a 161 million.

Which then that times four tenant does gets you to that low end of the guide now I would say that you've got offsets to that you've got wage pressure and you've got annual merit increases and things like that which are which is why we have a range.

And then additional things to then gets you back down to the lower end of that guide are going to be we've been investing a lot in technology over the past five years and to start to see some of that technology pay off to allow us to leverage and grow.

Without them, having to add the expense base is willing to maybe we've added in the past.

And then lastly, I would also comment that while this is maybe more of a 2024 event. We like everybody else are taking a hard look at it on a corporate real estate.

And we think theres going to be some opportunities there over a multiyear period of time too.

<unk> our spend there as well.

Got it and then from a macro perspective, obviously remains.

And a healthy capital position, you've got the Prudential cost saves loading from an M&A appetite just curious.

Taking your pulse there, what's the appetite for additional M&A from here.

Yes, our M&A strategy would be the same we do think we will have M&A opportunities as we move forward, we'll see if we would pursue.

Any of those but we do think it's an opportunity for us and our consists our strategy.

Is consistent.

From a size perspective is there is there a minimum target size these days not mature.

Well about $20 billion to $3 billion, just curious how you think about the size and maybe what markets have the best opportunities obviously some.

Some exposure in Maryland, and Virginia Delmarva is that it.

A key in fill opportunity.

Yes, we definitely want to focus on infill in our existing footprint, we feel we have opportunities in all five of our states.

They could be market increases or or cost and synergy opportunities, depending on where where they are at.

Acquisitions in that 1% to $3 billion.

Really add to our organization to add talent they add scale.

And they are acquisitions that we can easily integrate just like we did this past year with with Prudential. So net 1% to $3 billion is the primary focus.

But as we get opportunities above that we would certainly consider it.

Great. Thank you for the color.

Thank you.

And again to ask a question. Please press star one on your phone standby as we compile the Q&A roster.

One moment please for our next question.

Our next question will come from Manwell Novack of D. A Davidson and company. Your line is open.

Hey, good morning, good morning.

Good morning.

Yes.

A lot of my questions have been answered, but just didn't contemplating.

The.

<unk> outlook.

And your growth.

Is that is there is it more front end loaded when we look at 2023.

And for loan growth is that is there any real difference between the front half of the year in the back half of the year with how you are.

We're looking at it beyond just the ranges.

You kind of have a little bit more uncertainty for the back half of the year any kind of.

Color on that thought process with your guidance.

Yes couple of things one is we did have a strong fourth quarter in terms of earning asset growth, which did set up a table nicely.

For first quarter NII.

And then also with.

Our loan betas have consistently been in.

<unk>.

Low to mid forties versus deposit betas, which have been cumulatively getting sort of more like 9% on a total deposit cycle to date.

Do expect deposit betas to increase we're going to get to a 30% through the cycle beta you could expect in the back half of the year, then that would imply that we would probably have sequential deposit betas that are in excess of 30% to get back to that cumulative number.

So that would.

Like there was an earlier question about margin you again, we would expect to see our margin.

Right.

And the fed stopped <unk> rates after the first quarter, we would expect to see our margin peak soon after that and then as deposit betas catch up you.

You would expect to see.

NII.

Come.

Moderate a little bit more in the back half of the year.

I think that the deposit beta.

Analysis makes a lot of sense to me.

Do you.

How do you see that progress in the fourth quarter.

I've heard some some of the increased deposit costs were a little bit stronger maybe in October versus December .

Obviously, youre still keeping the same type of through the cycle deposit beta assumption, but.

Has there been any shift during the quarter.

And the aggressiveness of competitors.

Yes.

Yes, and what I would say for us as well as and when we had for.

For the third quarter.

Our total deposit beta was around 5%.

Our interest bearing deposit beta in the third quarter was 8% and again I know each of you calculated a little bit differently, we actually use kind of a weighted average fed funds rate for the quarter.

And then but then for the fourth quarter, our interest bearing deposit beta went from 8% in the third quarter up to almost 25% in the fourth quarter for us. So I mean, we did see.

Our interest bearing deposit costs went up 37 basis points.

<unk>.

Kind of spot to spot.

But we saw more of that in the back half of the fourth quarter and we would expect again that to continue here into the first half of the year.

Okay.

That's great on the loan side have you seen much.

Much pushback yet on pricing.

Higher loan yields.

Although the markets remain competitive for good.

Loan opportunities.

But it.

It is not a more aggressive from a margin standpoint than it has been I think it is.

A more conservative stance in the marketplace.

As we kind of pick and choose the right growth opportunities for us.

That's helpful and I think my last question is I think last quarter.

You brought up the loan to value ratio.

Some of that office exposure I think it was more on the small on the.

Our $500 million bucket was about 65% what is it on the full $1 billion.

Bucket.

That type of problem.

Data.

Yes, what.

What we had referenced before is on the larger deals.

It is that 65% that was referenced before the overall portfolio is a lot of small deals in there are granular in the loan to value we referenced at that point of origination.

Sure.

Yes.

A appraisal or update so it's a moving target underwriting criteria has been conservative and the same.

Overtime and then.

Without the reduction in asset value would reduce from that point, but the 65% specifically.

Is for those larger credits I referenced before.

So you don't have a number for the $1 billion.

Correct. The overall 1 billion, we do not have.

Andy Gary.

Okay I appreciate it. Thank you. Thank you so much.

Thank you.

Once again to ask a question. Please press star one on your phone standby as we compile the Q&A roster.

And speakers I do not see any further questions in the queue I would now like to turn the call back over to Mr. Myers for closing remarks.

Well. Thank you again for joining US today, we hope you will be able to join us when we discuss the first quarter results in April have great day.

This will conclude today's conference call. Thank you all for participating you may now disconnect and have a pleasant day.

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