Q1 2023 Fulton Financial Corporation Earnings Call
Speaker 1: Announcement released yesterday in slides 15 through 19 of today's presentation for reconciliation of those non-GAAP financial measures to the most comparable GAAP measures .
Speaker 1: Now I'd like to turn the call over to your host, Kurt Meyers.
Speaker 1: Well thanks Matt and good morning everyone. Today I'll provide some high level thoughts on the banking industry and our business strategy. I'll also give you some perspectives on our balance sheet, liquidity, credit quality, and the impact of these items on our first quarter earnings.
Speaker 1: Then Mark will share more details on our financial results and step through our revised outlook for the remainder of 2023.
Speaker 1: After our prepared remarks, we'll be happy to take any questions you may have.
Speaker 1: Fulton's business strategy is built upon a community banking model, which focuses on taking local deposits, lending locally, and banking all segments of our community. The events of the past few weeks have brought into sharp focus the benefits of our model and the value that can be created through cultivating our business strategy.
Speaker 1: lasting customer relationships.
Speaker 1: On that point, I want to thank our team for the remarkable way that they've performed this past quarter. The team went above and beyond to truly make banking personal.
Speaker 1: These past few weeks we reached out to and talked with many of our customers. We talked to them about our financial position and our stability and our customer base continued to expand. We now serve more than 507,000 households.
Speaker 1: Our industry is built on trust, and the Fulton Bank team has been earning the trust of our customers for 141 years.
Speaker 1: With a long-term strategy, at times it is necessary to make decisions which may impact near-term results in order to strengthen the balance sheet, improve our liquidity, support our customers, and position our company for future success.
Speaker 1: So let me talk first about our funding and the balance sheet. You can see on slide 13 that we expanded the disclosures on our deposit base.
Speaker 1: We have approximately 734,000 accounts with an average life of 12 years on a balanced weighted basis.
Speaker 1: This highlights the loyalty, longevity, and value created by our stable customer base.
Speaker 1: You will also notice on this slide that we bolster our deposit funding by approving the utilization of broker deposits in the quarter. This was done prior to the market disruption as we focused on slowing the increase in our loan to deposit ratio to maintain our internal target of 95 to 105 percent.
Speaker 1: and to make sure we can continue to meet our customers' borrowing needs.
Speaker 1: Our balance sheet was also strengthened during the quarter as our tangible common equity ratio improved and our liquidity position increased to over 8.4 billion in committed funds.
Speaker 1: Early in the quarter, we were buying back shares and utilized 40 million of our 100 million repurchase authorization.
Speaker 1: In total, we repurchased about 2.4 million shares during the quarter. We paused that program in early March.
Speaker 1: Turning to credit, we have provided more detail on our loan portfolio, and specifically on our office portfolio on Slides 6 and 7. As noted last quarter, we performed a comprehensive review of all real estate loans, casting a wide net to include any loans with an office component.
Speaker 1: Under this approach, last quarter we reported balances of $1.05 billion. On slides six and seven, we isolated our discrete office-only portfolio, which includes all loans with a primary revenue stream from office rents. As you can see, this segment is a diversified and granular portfolio.
Speaker 1: originated consistently over time, spread throughout the footprint, and with very limited large exposures.
Speaker 1: As we discussed last quarter, we have a large office loan on non-accrual status, which was charged down in the fourth quarter. Given the challenged office environment, we have further charged down this loan. Here are a few more details on this credit.
Speaker 1: The loan was originated in 2019 in the D.C. suburbs.
Speaker 1: The original loan balance was $42 million with a loan to value at origination of 72%.
Speaker 1: COVID impacted the rent roll and an underlying ground lease further impacts the marketability of this property.
Speaker 1: We have decided to further charge down this loan to enable a flexible workout strategy to maximize value. The remaining book balance of this loan is $8 million.
Speaker 1: Looking at our overall credit, net charge-offs of $14 million were driven by the $13.3 million right down on the loan that I just discussed.
Speaker 1: Our remaining loan portfolio credit performance has been in line with our expectations.
Speaker 1: NPAs, NPLs, and loan delinquency have all declined for the past two quarters.
Speaker 1: Our higher provision for credit losses this quarter is due to changes in macroeconomic factors.
Speaker 1: our loan growth. Moving to our quarterly results, our first quarter earnings were $0.39 per share.
Speaker 1: Pre-provision net revenue or PPR for the first quarter was approximately $108 million, an increase of 51% year-over-year. This was a result of asset growth and net interest margin expansion.
Speaker 1: During the first quarter, we saw deposit growth of $667 million and loan growth of $391 million.
Speaker 1: The income declined quarter length quarter and year over year as interest rates and seasonal decline impacted several of our business units.
Speaker 1: We managed expenses prudently during the period as expenses declined $9 million from the fourth quarter. While our first quarter earnings did not meet our overall expectations, we took the necessary steps to strengthen the balance sheet, improve our liquidity, support our customers, and position the company for future success.
Speaker 1: Now I'll turn the call over to Mark to discuss our first quarter financial performance and our 2023 outlook in more detail.
Speaker 1: first quarter financial performance and our 2023 outlook in more detail.
Speaker 2: Thank you, Kurt, and good morning to everyone on the call. Unless I know it otherwise, the quarterly comparisons I will discuss are with the fourth quarter of 2022.
Speaker 2: And the loan and deposit growth numbers I will be referencing are annualized percentages on a link quarter basis.
Speaker 2: Starting on slide three, operating earnings per diluted share this quarter were $0.39 on operating net income available to common shareholders of $65.8 million.
Speaker 2: This compares the 48 cents of operating EVPS in the fourth quarter of 2022.
Speaker 2: Those operating results in the fourth quarter excluded 2.4 million of merger-related charges and intangible amortization recorded during that quarter for our acquisition of Prudential Bancorp.
Speaker 2: Moving to the balance sheet, loan growth for the quarter was $391 million, or 8% annualized.
Speaker 2: This is down from 584 million, or a 12% annualized growth rate that we saw in the fourth quarter of 2022, and this percentage decline is in line with what we typically see moving from the fourth quarter to the first quarter.
Speaker 2: Commercial loans were 238 million of this increase, or about 60% of our overall growth.
Speaker 2: across a diversified customer base.
Speaker 2: Commercial real estate lending grew 53 million or 3% annualized.
Speaker 2: Consumer lending produced growth of $153 million, or 9%, during the quarter.
Speaker 2: Total deposits increased $667 million during the quarter, or 13% annualized.
Speaker 2: We did see a meaningful shift in our deposit mix during the quarter as our non-interest-bearing DDA balance has declined approximately 600 million during the period.
Speaker 2: Almost all of the shift in deposit mix occurred earlier in the quarter, as our non-interest-bearing deposit balances were essentially flat from the end of February to the end of March.
Speaker 2: We increased our deposit pricing across several products throughout the quarter.
Speaker 2: we also acquired broker deposits early in the quarter, well ahead of the sector-wide concerns over liquidity.
Speaker 2: Our loan-to-deposit ratio ended the quarter at 97%, down from 98.2% at year-end.
Speaker 2: Our investment portfolio declined modestly during the quarter, closing at $3.95 billion.
Speaker 2: Putting together those balance sheet trends on slide 4, net interest income was $216 million, a $10 million decrease linked quarter.
Speaker 2: Our net interest margin for the quarter was 353 versus 369 in the fourth quarter. Loan yields expanded 41 basis points during the period, increasing to 5.21% versus 4.8% last quarter.
Speaker 2: Our total cost of deposits increased 40 basis points to 82 basis points during the quarter.
Speaker 2: Cycle to date, our total deposit beta is 16% cumulatively.
Speaker 2: We've previously communicated to you that our deposit data would accelerate in 2023.
Speaker 2: With a first quarter beta higher than we anticipated due to a mix shift away from DDAs, we now believe that through the cycle deposit beta of approximately 35% is more likely.
Speaker 2: Turning to credit quality on slide 5, our NPLs declined 7 million during the quarter, which led to our NPL-to-loans ratio improving from 85 basis points at year-end to 80 basis points at March 31st. Our loan delinquency was lower.
Speaker 2: to 1.27% at March 31st versus 1.39% at year end.
Speaker 2: Despite these positive trends, changes to our macroeconomic outlook and loan growth during the period led to the increase in our provision for credit losses this quarter.
Speaker 2: Our allowance for credit loss as percentage of loans increased from 1.33 percent of loans at year end to 1.35 percent at March 31st. Turning to slide 8, wealth management revenues were up modestly from the prior quarter at 18.1 million.
Speaker 2: We continue to build out this business line with new hires. New business activity continued and the market value of assets under management and administration increased to 14.2 billion at March 31st compared to 13.5 billion at year end.
Speaker 2: Commercial banking fees declined 1.1 million to 17.5 million, with seasonal declines in most categories.
Speaker 2: Year over year, commercial banking fees increase 1.5 million, or 9%.
Speaker 2: Consumer banking fees declined $0.9 million to $11.2 million, led by decreases in overdraft fees as a result of changes to our overdraft programs.
Speaker 2: Mortgage banking revenues declined as expected and were driven by a decline in both mortgage loan sales as well as a decrease in gain on sales spreads.
Speaker 2: Moving to slide nine, non-interest expenses were approximately $160 million in the first quarter, a $9 million decline linked quarter. As we noted last quarter, several items contributed to the link quarter decline. Those included higher incentive compensation accruals in the fourth quarter of 22.
Speaker 2: Merge related charges in the fourth quarter of 2022, which did not repeat in the first quarter.
Speaker 2: Branch closure costs in the 4th quarter of 2022 for the closure of 5 branches this year, one of which occurred in March with the remaining 4 occurring later this month.
Speaker 2: Lower legal and contingent liability accruals in the first quarter of 2023. And lastly, run rate expenses from the 2022 acquisition of Prudential Bancorp now being fully recognized.
Speaker 2: Turning to slides 10 through 12, given recent industry events, we're providing you with expanded metrics and a discussion on capital and liquidity this quarter. First, on slide 10, as of March 31st, we maintained solid cushions over the regulatory minimums and we're providing you with expanded metrics and a discussion on capital and liquidity.
Speaker 2: for all of our regulatory capital ratios. Our tangible common equity ratio was 7% at year end, up from 6.9%, sorry, at quarter end, up from 6.9% last quarter.
Speaker 2: Included in tangible common equity is the accumulated other comprehensive loss on the available for sale portion of our investment portfolio and derivatives.
Speaker 2: This totaled $282 million after tax on a total AFS portfolio of $2.6 billion.
Speaker 2: including the loss on our held to maturity investments, which was 94 million after tax on a held to maturity portfolio of 1.3 billion, our tangible common equity ratio would still be 6.7% at March 31st, which represents over 1.7 billion in tangible capital.
Speaker 2: Despite share repurchases during the quarter, a combination of net income and an improvement in accumulated other comprehensive loss during the period combine to produce linked quarter growth of 3.3% and our tangible book value per share. Slide 12 provides you with an expanded...
Speaker 2: is $8.4 billion at March 31st.
Speaker 2: In addition, we maintain over $2.5 billion in Fed funds lines with other institutions.
Speaker 2: Our uninsured deposits totaled $6.7 billion at March 31st, or 31.3% of total deposits.
Speaker 2: Excluding municipal deposits for which we hold collateral, this balance drops to 4.6 billion or 21.4% of total deposits.
Speaker 2: Some investors have started to focus on a liquidity coverage ratio, which takes committed, available sources of liquidity divided by uninsured deposits less collateral help.
Speaker 2: Our calculation of this non-GAAP metric at March 31st shows coverage of 185%.
Speaker 2: We have also provided you with details of our deposit portfolio shown in slide 13.
Speaker 2: As Kurt noted, our deposits are granular with an average balance per account of $29,000 and have an average life of 12 years. On slide 14, we are providing our updated guidance for 2023.
Speaker 2: Our guidance now assumes a total of one additional 25 basis point increase to Fed funds occurring in May.
Speaker 2: We expect our net interest income on a non-FTE basis to be in the range of $850 to $870 million.
Speaker 2: We expect our provision for credit losses to be in the range of $55 to $70 million.
Speaker 2: We expect our non-interest income, excluding securities gains, to be in the range of $220 to $230 million.
Speaker 2: We expect non-interest expenses to be in the range of $645 to $660 million for the year. And lastly, we expect our effective tax rate to be in the range of 18.5% plus or minus for the year.
Speaker 2: Lastly, as Kurt noted, PP&R for the first quarter was approximately $108 million, an increase of 51% year-over-year as a result of earning asset growth and net interest expansion over the past year.
Speaker 3: With that, I'll now turn the call over to the operator for questions. Gigi? Thank you. As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced.
Speaker 3: To withdraw your question, please press star 1 1 again. Please stand by while we compile the Q&A roster.
Speaker 3: Our first question comes from the line of Daniel Tamayo from Raymond James.
Speaker 4: Hey, good morning everybody. Thanks for.
Speaker 4: Thanks for all the additional disclosures this quarter. We all appreciate that.
Speaker 4: I guess my first question just around the net interest income guidance, obviously a big decline from last quarter and I appreciate the color that you gave in your prepared remarks there Mark. But I guess if we could just get a little bit more detail on the driver there, how much of it is margin, how much of it is...
Speaker 4: is balance sheet if you're able to give any kind of
Speaker 2: period and margin or funding costs there to give us a better sense of how things are trending through the quarter. Thanks. Yeah, sure Danny. Yes, so margin for the month of March was 3.45% during the month.
Speaker 2: And, you know, in the question of whether it was more margin or balance related, you know, our outlook on NII, you know, assumes, you know, we really didn't, you know, back off at all from, you know, loan and deposit assumptions for the year. You know, so I would say it is primarily the mix shift that occurred in the first quarter.
Speaker 1: broker deposits based on the outflows that we really saw from November 15th to about February 15th that have now stabilized. So we had the effect of that and then we had the effect of re-pricing current deposits. You see the mix is going from non-interest-bearing to growing money market.
Speaker 1: and the CD portfolio. So we really look at the first quarter as having big impact because we had both of those occurrence. As we look forward, we're going to continue to have mixed changes, which should over time be more muted than the impact that we saw both things in the first quarter. Understood. I appreciate that color.
Speaker 4: And then maybe just your guidance assumes one more rate hike and then flat rates.
Speaker 4: you know, where does the sensitivity of the balance sheet stand now? And then, you know, if we do get rate cuts
Speaker 4: in the back half of the year, like the Ford curve is assuming, how does that impact your guidance?
Speaker 2: Yeah, we are, you know, modestly, you know, more asset sensitive, you know, from where we were at year end. But you know, we continue to look at ways to, you know, mute that overall asset sensitivity. You know, we have put on.
Speaker 2: you know, about a total of about 1.5 billion of either cashless corridors or floors, you know, to protect ourselves, you know, in a down rate environment. So we are thinking about that possibility while our forecast assumes no declines.
Speaker 2: we are starting, and put on some protection, should rates start to decline more quickly than what our models assume.
Speaker 4: Okay. All right. Thanks for the color, guys. I'll step back.
Speaker 3: Thank you. We have one more enrollment for our next question.
Speaker 3: Our next question comes from the line of Chris McGrady from KBW.
Speaker 5: Hey, good morning.
Speaker 1: Maybe start with a balance sheet question since that's top of mind. And Mark, we've seen some of your peers flex the balance sheet up or down based on the pressures that we're seeing on deposits. I guess number one, with your loan to deposit ratio, where it is and kind of the environmental changes to deposits. And then maybe there's a Fenty to that, but your interest on it.
Speaker 1: Is there a situation where you might consider just slowing? I think your updated NII guy was just a margin play. Would you consider slowing the balance sheet since I would presume the profitability in a margin alone is a little bit lower?
Speaker 1: Yeah, Chris, it's Kurt. As we look at future growth, we want to continue to support our customers and grow on the loan side and the deposit side. We expect those to be more in line. We really stepped in to slow the pace of increase in the loan deposit ratio.
Speaker 1: And we think we've done that effectively and we will look for balanced growth and really be mindful of that incremental margin as we evaluate loan opportunities as we move forward. We're really focused on maximizing risk adjusted return. Okay.
Speaker 1: Thanks, Greg. On capital, I totally appreciate the pause and the buyback. Seems like the right move. How do we think about the direction of capital ratios in today's environment? We're going to continue to be prudent and grow our capital base as we...
Speaker 6: And then maybe just one more if I could.
Speaker 6: Go a little bit into credit. Your provision guide, Mark.
Speaker 6: would suggest that the last two quarters run rates, given the one credit you've been talking about, would step down pretty notably. I'm just trying to get a sense of, I guess why throw out a target that, I don't wanna say aggressive, but much lower given how uncertain the environment is and investors looking for reserve builds.
Speaker 6: two quarters run rates given the one credit you've been talking about would step down pretty notably. I'm just trying to get a sense of I guess why throw out the target that I don't want to say aggressive but much lower given how uncertain the environment is and investors looking for reserve builds. Any thoughts there? That would be great.
Speaker 1: Yeah, Chris, as we look at credit, you know, the last two quarters, so the fourth quarter and first quarter, we had a combined 26 million in charge-offs and 25 million of that was this individual credit that we talked about. As we look at the credit portfolio right now and the forward look on credit.
Speaker 2: Yeah and what I would also add Chris is that you know your your provision is largely a function of growth and you know the loan growth 8% link quarter you know was was a solid first quarter for us now again stepping down from a very solid fourth quarter.
Speaker 2: But I would anticipate that our first quarter loan growth is going to be higher than what our overall loan growth would be for the full year based on just kind of where you see macroeconomic factors going.
Okay, that's helpful. Thanks a lot. Thank you. For our next question.
Our next question comes from the line of Fede Strickland from Janney Montgomery Scott. Hey, good morning. Good morning, everybody.
I was just curious, is the FHLB borrowing capacity you list on slide 12, is that what's currently pledged at the FHLB, or is that inclusive of all potential loan and securities collateral balance sheet? That is what we currently have that is committed. Got it. Okay. And then, kind of along that same line, appreciate the detail on liquidity on slide 12, but was curious if you can talk about the bank term funding program and just how you view that versus other liquidity sources. I think it does on the additional, maybe you haven't used any of it so far, but was just
order of operations, how do you view it? Yeah, yeah, correct. We view that similarly to the way we view the discount window and it's great that it's there, but we view that more as a lender of last resort for us. And we would tap FHLB.
and other things before we would consider using it. Got it. And then just one more for me would be, most of the changes to your 2023 outlook make sense.
But was curious what drove the slightly lower top end and non-interest expense. Are you seeing a little less wage pressure? Wondering what changed the guide there.
Yeah, yeah, so when you just consider the guide to NII, and that would result in lower earnings for the year, so a lot of that for us is just going to be lower incentive compensation accruals. Okay.
Got it. That makes sense. I'll step back in the queue. Thanks for taking my question. Okay.
Thank you. One moment for our next question. Our next question comes from the line of Matthew Breeze from Stevens Inc.
Good morning everybody. Good morning, Matt. I wanted to touch on the office loan.
What was the ultimate change in value from origination to now? And was there anything else more idiosyncratic to this particular credit beyond COVID impacts? And pardon my ignorance, you know, could you go into color, provide a little more color on the ground lease impacts?
Just feels like a drastic change in valuation from the rough math I have here. And I want to get a sense if it paints a board dire picture for the rest of the CRA office book. Yeah, Matt, so original value is 58 million. That gives the loan to value on the original balance. We currently have it on the books at 8 million.
contributing factor of the land lease is just a fee simple exit in a workout is just easier than somebody jumping into a land lease. So we feel we wanted to get
this credit at a book amount that gave us maximum flexibility to maximize value over time.
Okay, and then stepping back on your.
on your reserve at large, what kind of...
economic scenario does it, you know, contemplate? And could you go through some of the high points, the unemployment, GDP, interest rates, and I just want to get a sense for, you know, if that kind of scenario were to play out, what kind of charge offs are baked into there?
Yes, so we assume the Moody's base case, but then from there adjust for certain overlays for any piece of the portfolio like office where we think that there may be heightened risk. Okay. And is there an assumed charge-off amount in there that we should be contemplating? Well, ultimately, charge-offs. I mean...
balance sheet charge. I can tell you that our 10 year plus net charge offs, going back to coming right out of the great financial crisis averaged about 17 basis points.
Okay. Okay, and this is more of a nitpicky one. Mark, one thing I noticed this quarter was that overdraft fees fell down quite a bit, and a lot obviously happened this quarter, so I could make up a narrative on forgiving a lot of what went on from a consumer standpoint. Should we expect that line item to come back due to a normal kind of $4 million run rate as things get back to normal here? No, as a reminder, we had made some changes to our overdraft programs.
And, you know, we had implemented some of those in the fourth quarter and then the remainder of those changes, you know, were implemented in the first quarter. So we had highlighted, you know, for the last three quarters, I think now that we would be doing that and that it would impact, you know, that line item on a run rate basis going forward. Okay. So the 2.7 million is probably a better run rate here.
For that line, yeah, we think so. Got it. Okay. I'll leave it there. Thanks for taking my questions. Thank you.
Thank you. One moment for our next question. Our next question comes from the line of Frank Schiraldi from Piper Sandler.
One moment for our next question. Our next question comes from the line of Frank Schiraldi from Piper Sandler. Good morning.
Hey, Frank, good morning, Frank.
Just a couple of a bouncy questions just in terms of, you know, Mark, you mentioned that the, the mix shift.
Yeah, no, we still assume that there's going to be some rundown of non-interfering DDA, but at a slower pace than what we saw from Thanksgiving through the end of February . Okay. And if you could just remind, what is your long growth? You talked about the 8% this quarter and maybe slowing from there. So is that sort of still mid single digits kind of thinking for the full year?
Yeah, Frank, we're looking at a pretty typical year for us, 4 to 6 percent loan growth. Certain categories we do expect to moderate as we move forward. So that's a pretty consistent organic loan growth rate for us, and we would expect to be in that 4 to 6. Thanks for your time.
Okay. And then on the credit side of things, just on that one property, is there any, sorry if I missed it, but is there any recent appraisal on that property, the value of which you can share with us? I am sorry I guessed wrong, but I read this along with the next Coming up is the facts in the book, simplest lies and lies experience bangs.
Yeah, current appraisal on it is roughly 15 million, but it has come down over the last year and we are looking at just a couple of weeks ago.
conservative book balance to give again us maximum flexibility as we look forward. But our current appraisal on that property is $15 million.
Okay, as far as the ground lease concern, I mean, I guess that that appraisal takes that into. Uh, account and I know those leases are generally pretty long, very long term. So just wondering. You know, the timing of any sort of a lease termination there, or any. Any buyouts coming up that you can share with us as it pertains to the.
be would potentially be part of the workout plan going forward but it does create unique circumstances. Just so you all know we only have one other in the entire portfolio that's on a ground lease and we're very comfortable with the dynamics of that loan.
It is a very discreet and unique attribute given the overall portfolio. Lastly, on the LTVs, you give the office book a weighted average of 60% and you say in the deck that is as of most recent appraisal. Can you...
Talk a little at all about what percentage of these underlying buildings have been re-appraised, you know, last year or so or since the pandemic.
Well, appraisal policy and how we work through that from a, you know, we're focused on getting the risk ratings accurate. We have a very disciplined approach to that. We would get updated appraisals if there is a credit reason to get that where, you know, it's a rent change or some change within.
within the dynamics. So that would be what would lead to in a new appraisal. So the weighted average of all the appraisals is portfolios, so some of those are at origination and then we would get updated appraisals as the credit would need those. Our range in those
appraised values are 35 to 75 percent with that average then that we have on the on the investor deck on a weighted average basis.
Does that weighted average LTV change markedly at all for if I just look at the larger size, either above 10 million or above 20 million? The weighted average is pretty consistent.
Yeah, the larger the credit, the more conservative we are on loan to value and loan to cost. So if anything, they would be less. Okay. All right. Thank you.
Thanks, sir. Thank you. One moment for our next question. Our next question comes from the line of Manuel Navas from DA Davidson & Co.
Hi, good morning. Hello. Hey, so that NIM that was around 345 in March.
Does that have some stress on it or is that a good place to start going into April going forward? I know some of the movements in the makeshift happened earlier in the quarter. I was wondering.
how much of leeway on around that 345 in March we should use going forward? Yeah, I think 345 is a good place to start from. We did see our non-interest bearing DDAs stabilize a little bit in March.
As I mentioned, we still anticipate that there's going to be some runoff in that going forward, but at a slower pace than what we saw. And in the month of April , you would also then see the full effect of the 25 basis point rate increase that occurred in March.
Okay, that's helpful. Going forward as loan and deposit growth is a little bit more balanced.
And it looked like borrowings were already coming down by end of quarter versus the average. Is most incremental dollars going towards borrowings? Can you just kind of talk about that mix of borrowings versus maybe brokered CDs? Just kind of thoughts going forward there.
Yeah, we thought it was important in early March to just really have a stabilized, diversified funding base. So that led to wanting to tap the broker market, which we actually tapped largely in February . But going forward, I wouldn't anticipate.
In your disclosure that uninsured deposits kind of declined, I guess around 300 million. With that just through normal exits, loss of market share or did you use mitigation programs like the Interfi Network, ICS? Could you just talk about that for a moment?
Yeah, it was a little bit of a, you know, inter-fly deposits grew a little bit, but some of it was just, you know, kind of kind of normal seasonality of some of those larger customer bases. And we typically see, you know, some run down in the first quarter and some of our uninsured deposits.
That actually probably brings up my last question. Is most of the mix shift customers moving things around within the firm? We're not losing...
You're not seeing a customer's exit, things like that. Just talk to me. No, we saw net account and household growth in the first quarter. So I would say it is largely more some of them taking money out of either low or zero cost money and placing them with us.
you know with other products. In some cases you do have them going to other you know banks you know for higher rate products, but then in some cases you know our promotions are winning new customers. Okay that's helpful and the age of your customer base across accounts that was really good disclosure. Just kind of on a separate topic.
What would kind of drive you to restart buybacks? Yeah, as we look at capital, as things settle down, we get more clarity as we move forward. We have $60 million remaining in that authorization. We would utilize that if it's appropriate, but in this environment, we're seeing a lot
Thank you. One moment for our next question.
Our next question comes on the line of David Bishop from HOVD group. Yeah, good morning gentlemen.
The question comes on the line of David Bishop from HOVD Group. Good morning gentlemen.
A quick question on the loan side of the equation. Just curious what you're seeing in terms of new origination yields this quarter and maybe where you see those yields trending to.
Yes, so you know it's obviously going to vary David, this is Mark, you know between you know between product class you know on the on the commercial side you know our C&I in the first quarter you know so we're kind of hovering right around 7% you know for new originations there you know you know a little bit off that number you know maybe 25 basis points or so off that number on
depending whether it's indirect versus other consumer classes are going to be higher.
In terms of a holistic question there, in terms of as you look at the loan pipeline and the ability to pass on the higher pricing, higher yields, is that impacting the pipeline or the quality of loans or the number of loans?
In cash flow, debt service coverage, loan devalue in terms of what's happening from a broader macro environment. I guess another way of questioning is it getting tougher to find quality loans that sort of pass the credit underwriting and pricing test.
Yes, Kurt, we do not change our credit standards and if anything, we're tightening credit standards, so we don't allow that to happen. From a pricing standpoint, we're really focused on risk-adjusted returns.
we need to get the appropriate pricing given the risk in each of these buckets as we move forward. So you know we will see pricing continue to move up to get our risk adjusted return and we will hold or even tighten credit standards in certain buckets.
One final question, just curious if you can disclose, the broker deposits raised, just curious if you had any sort of color you could add in terms of duration and average cost of those funds. Thanks.
Yeah, sure. We raised them in three separate tranches throughout the quarter, and we specifically went out of market. These are retail customers, but they are not in our five-state footprint at all.
And the coupons of those and duration, you know, they are going to mature in early 2023. So these are all generally between 9 and 13 months with coupons for each of the tranches between 470 and 530 for the last tranche, which was only about 200 million. So the majority of it came in.
you know, a little bit below 5%. Got it, appreciate the color. Yep.
Thank you. I would now like to turn the conference back over to Kurt Myers for closing remarks.
Well thank you again for joining us today. We hope you'll be able to be with us when we discuss second quarter results in July . Thank you all.
This concludes today's conference call. Thank you for participating. You may now disconnect.
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