Q1 2023 Texas Capital Bancshares Inc Earnings Call

April 20, 2023

To ask a question at the end of the presentation. Please press star followed by one on your telephone keypad I will now hand over to your host just let them pick OCA head of Investor Relations to begin Joe Flynn. Please go ahead.

Good morning, and thank you for joining us for T. C. B S. First quarter 2023 earnings conference call I'm draw circa Kolka head of Investor Relations before we begin please be aware that this call will include forward looking statements that are based on our current expectation of future results or events.

Forward looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from these statements.

Our forward looking statements are as of the date of this call and we do not assume any obligation to update or revise them.

<unk> made on this call should be considered together with the cautionary statements and other information contained in today's earnings release. Our most recent annual report on Form 10-K, and subsequent filings with the SEC, we will refer to slides during today's presentation, which can be found along with the press release and the Investor Relations section of our website are.

<unk> for the call today are Rob <unk>, President and CEO and Matt Scurlock CFO at the conclusion of our prepared remarks, our operator will open up a Q&A session and now I'll turn the call over to Rob for opening remarks.

Thank you for joining us today.

The collective actions taken over the last several years enabled the firm to enter 2023 operating from an unprecedented position of strength with sector, leading capital and liquidity.

Our goal since our rivals was to build a firm characterized by the strength of its balance sheet and the breadth of its platform.

Firm quote that is resilient through market and interest rate cycles and quote or.

Our closely held belief that doing so would enable us to confidently engage our clients when they needed us most bringing forward a suite of solutions centered on their needs not ours.

Client and prospect engagement since the events of March 10th had been significantly and constructively heightened with the agenda focused on their needs and what is in their best interest we believe being in market during times of volatility is paramount.

Our ability to be front footed during this period of industry instability is in no small part grounded in a completely rebuilt liquidity risk framework installed during 2022.

Our structure includes daily liquidity <unk> monitoring in normal times than in times of changing market conditions relies on a defined and well rehearsed set of governance and operating procedures to ensure we can react quickly if needed.

As events began to unfold on March 9th we were confident that our multiyear operational derisking would ensure that we have the right data and a full real time view into our deposit and liquidity positions.

By Monday morning, our bankers were also equipped with the information necessary to proactively reach out to clients and prospects with a set of solutions to ensure their business operations continued seamlessly despite financial industry turmoil.

I'm incredibly proud of the response of our people and of our ability to be there for our clients at a time of great uncertainty and elevated apprehension.

As I was in our markets visiting clients during the following weeks they expressed appreciation for our proactive outreach and in many instances we were the first and sometimes only call. They received that Monday morning.

And they thanked us for the education, we provided on what was transpiring in the market real time.

Initial deposit flows following the weekend of March 10th were highly consistent with the assumptions in our liquidity stress testing framework as.

As the firm's focus has shifted over the last two years to emphasize businesses where clients find benefit from our broad set of solutions, we have aggressively reduced our reliance on disconnected deposit sources, there are highly credit or rate sensitive and hold highly liquid assets for what little.

Portion remains.

This effort has been well highlighted for the past eight quarters.

Overall for the quarter.

Deposits excluding areas previously disclose is targeted for reduction increased 3%.

An indication of the strength of our platform and the depth of our client relationships.

Noninterest bearing deposits were down only 1%.

The majority of which related to normal business activity, such as quarterly tax payments capital expenditures acquisitions and quarterly distributions we.

We did see some activity whereby clients shifted excess operating account balances to treasuries on our platform. Additionally, noninterest bearing operating account balances associated with the previously divested insurance premium finance entity were transitioned to their new owner.

As expected on the heels of a seasonally weak deposit quarter in Q4 due to larger balances of escrow tax payments mortgage finance noninterest bearing deposit balances increased meaningfully as we remain focused on deepening relationships with top tier clients in this space.

In total deposit balances were down just 3% for the quarter, a testament to both our proactive business model and the hard work of our employees, who are actively calling on their clients to provide best in class Treasury Advisory services.

The deposit flows we experienced in March did not require us to access brokerage CD markets or to utilize any of our other available sources of contingent liquidity.

We exited the quarter and the same strong position in which we entered 2023 with a balance sheet necessary to continue executing against our strategy and supporting our clients.

Our proprietary account opening and Onboarding solution called initio has been fully implemented and delivered to the market with over 70% of all treasury onboarding processes now occurring digitally.

I'm incredibly proud of the response of our people and of our ability to be there for our clients at a time of great uncertainty and elevated apprehension.

Texas Capital's commercial clients can self serve account openings and fund them within 24 hours.

Unique advantage, we utilized during the middle of March as clients and pipeline as well as others were looking for a new banking partner with capital and liquidity.

And thanked us for the education, we provided on what was transpiring in the market real time.

In total we doubled the number of accounts opened in March compared to February on the initial solution.

Initial deposit flows following the weekend of March 10th were highly consistent with the assumptions in our liquidity stress testing framework as.

And account openings have improved 60% compared to January the.

I previously detailed technology enabled solution is making a safer.

More efficient and easier to do business with while improving the client journey.

Investment banking and trading income had a second consecutive record quarter with revenue up $6 8 million or 57% quarter over quarter to $18 $8 million with contributions from multiple components of our newly built platform.

Portion remains.

This effort has been well highlighted for the past eight quarters.

Overall for the quarter.

We continue to achieve milestones along our product roadmap with the successful execution of the first securitization and a first mortgage finance whole loan trade from the sales and trading desk.

Deposits excluding areas previously disclosed is targeted for reduction increased 3%.

An indication of the strength of our platform and the depth of our client relationships.

Sales and trading has now completed over $17 billion in notional riskless.

Non interest bearing deposits were down only 1%.

The majority of which related to normal business activity, such as quarterly tax payments capital expenditures acquisitions and quarterly distributions we.

Flat trades since the first trade last may.

<unk> everyday flat as we said we would additionally in April the first gestation transactions were completed and we expect gestation activity to be a consistent part of our mortgage finance business going forward.

We are very proud of the business, we built in a short period and believe the diversified revenue stream will be an important contributor to earnings going forward.

With the substantial and transformative investments made over the last two years to deliver a higher quality operating model supporting a defined set of scalable businesses.

We are now generating expected efficiencies.

Last quarter, we noted that the pace of noninterest expense growth would moderate in 2023.

And with additional selected actions recently completed we will begin realizing these efficiencies in Q2, allowing us to confidently pull in our expense guidance again, which Matt will detail in his comments.

The deposit flows we experienced in March did not require us to access brokerage CD markets or to utilize any of our other available sources of contingent liquidity.

Year over year quarterly PNR grew 55% in Q1 and acceleration of over 20% growth.

We exited the quarter and the same strong position in which we entered 2023 with a balance sheet necessary to continue executing against our strategy and supporting our clients.

Excluding nonrecurring items experienced in Q4.

As a foundational tenant for the financial resiliency, we have established and we will continue to preserve along with the value creation for our shareholders.

<unk> book value per share grew 3% quarter over quarter.

Texas Capital's commercial clients can self serve account openings and fund them within 24 hours.

And 6% year over year.

Ending at $58 six sets a record level for our firm.

Unique advantage, we utilized during the middle of March as clients and pipeline as well as others were looking for a new banking partner with capital and liquidity.

As you have heard me say in the past, while fully committed to improving financial performance over time maximizing near term results is not the primary goal.

In total we doubled the number of accounts opened in March compared to February on the initial exclusion.

We are instead focused on responsibly scaling high value businesses through improved client adoption and realized operational efficiencies.

And account openings have improved 60% compared to January the.

I previously detailed technology enabled solution is making a safer.

More efficient and easier to do business with while improving the client journey.

The thoughtfully and deliberately rebuilt client focused business model is designed to earn above our cost of capital through cycle and drive structurally higher more sustainable earnings.

Importantly, as a reminder, our strategic planning process acknowledged that we would go through an economic slowdown during our planning horizon.

As such we are prepared and positioned to continue investing against the strategy to bank, the best clients and support them through cycles.

We continue to achieve milestones along our product roadmap with the successful execution of the first securitization and the first mortgage finance whole loan trade from the sales and trading desk.

We do not manage the bank in a risk on or risk off posture, but instead based on the belief that client selection is always paramount.

Sales and trading has now completed over $17 billion in notional riskless.

This remains our focus as we help our clients continue navigating a challenging operating environment in 2023.

Flat trades since the first trade last may.

For your continued interest and support of our firm alter.

Closing everyday flat as we said we would additionally in April the first gestation transactions were completed and we expect gestation activity to be a consistent part of our mortgage finance business going forward.

I'll turn it over to Matt to discuss the quarter's results.

Thanks, Rob and good morning, starting on slide four as Rob described we are proud of the deliberate steps taken over the last two years to solidify our competitive positioning.

We are very proud of the business, we built in a short period and believe the diversified revenue stream will be an important contributor to earnings going forward.

The firm continues to maintain substantially more liquidity and capital than required to sustainably deliver against our strategic objectives.

With a substantial and transformative investments made over the last two years to deliver a higher quality operating model supporting a defined set of scalable businesses.

At quarter end on hand, cash liquidity totaled $3 6 billion or.

Or 13% of total assets compared to 3% median and our peer group.

Total shareholders' equity is six seven times that of total unrealized loss compared to three six times for large U S financial services firms uninsured deposits as a percentage of total deposits decreased to 45% in the quarter.

We are now generating expected efficiencies.

Last quarter, we noted that the pace of noninterest expense growth would moderate in 2023.

Deposit coverage ratios were strong at quarter end and compare favorably to peers with the ratio of cash and contingent funding to uninsured deposits of 153% in cash and contingent funding to total deposits of 69% moving.

Moving to slide five capital levels remain near the top of the industry <unk> finished the year at 12, 4% with tangible common equity to tangible assets, increasing slightly to 972% a record since the year of the firm's founding and reflective of our stated objective to manage the balance sheet in a manner supportive of tangible book value with a lower than peer.

Year over year quarterly PNR grew 55% in Q1 and acceleration of over 20% growth.

Excluding nonrecurring items experienced in Q4.

As a foundational tenant of our financial resiliency, we have established and we will continue to preserve along with a value creation for our shareholders.

<unk> of unrealized losses.

The allowance for credit losses continues to increase and is now at 55 basis points since day, one seasonal this alongside a multi year transition to a more balanced loan portfolio positions us well as the industry prepares for credit migration.

Tangible book value per share grew 3% quarter over quarter.

And 6% year over year.

Ending at $58 six ships.

Turning to slide six we delivered notable progress in our fee generating businesses in the quarter, which continue to grow in contribution as we improve our relevance with they now consistently expanding client base quarterly.

A record level for our firm.

As you have heard me say in the past, while fully committed to improving financial performance over time maximizing near term results is not the primary goal.

Quarterly investment banking and trading income was $18 8 million up more than 300% from the first quarter of last year at 57% linked quarter.

We are instead focused on responsibly scaling high value businesses through improved client adoption and realized operational efficiencies.

Notably this was our second consecutive record quarter since launching the business last year.

The thoughtfully and deliberately rebuilt client focused business model is designed to earn above our cost of capital through cycle and drive structurally higher more sustainable earnings.

Treasury product fees increased 4% quarter over quarter, as our advisory centered offering and newly built cash management and payment capabilities are enabling clients to more effectively manage liquidity based on their individual business objectives. This is in part reflected in linked quarter AUM growth of 10% at <unk>.

Importantly, as a reminder, our strategic planning process acknowledged that we would go through an economic slowdown during our planning horizon.

Clients decided to augment their liquidity strategies by purchasing U S treasuries, leveraging a broad platform to satisfy their changing needs taken together fee income from our areas of focus increased by approximately $14 million or 91% year over year.

As such we are prepared and positioned to continue investing against the strategy to bank, the best clients and support them through cycles.

We do not manage the bank in a risk on or risk off posture, but instead based on the belief that client selection is always paramount.

Representing steadily improving client receptivity to the completely refreshed operating model and capability set.

Turning to slide seven.

This remains our focus as we help our clients continue navigating a challenging operating environment in 2023.

As expected adjusted total revenue decreased $4 million linked quarter seasonality associated with the mortgage business and increases in deposit costs offset continued structural improvements across the franchise.

For your continued interest and support of our firm alter.

I will turn it over to Matt to discuss the quarter's results.

It is precisely this seasonality that causes us to anchor operating leverage guidance for the same quarter in the previous year revenue.

Thanks, Rob and good morning, starting on slide four as Rob described we are proud of the deliberate steps taken over the last two years to solidify our competitive positioning.

Increased $68 9 million or 34% when compared to Q1 2022.

The firm continues to maintain substantially more liquidity and capital and required to sustainably deliver against our strategic objectives.

Year over year results benefited from an 84% increase in noninterest income coupled with disciplined balance sheet repositioning into higher earning assets, including loans. Following the sale of our insurance premium finance business last quarter.

At quarter end on hand, cash liquidity totaled $3 6 billion or.

13% of total assets compared to 3% median and our peer group.

We stated that while our long term plans do account for continued investment much of the initial lift to deliver the foundational talent technology and capabilities to support our 2025 objectives was incurred over the past several years and that is our target operating model begins to mature expense growth will slow in 2023.

Total adjusted noninterest expenses increased 6% linked quarter as Q1 salaries and benefits reflected increases of approximately $9 million in seasonal payroll and compensation expenses. The peak annually in Q1 and $12 million in annual incentive and insurance accruals that reset annually.

Moving to slide five capital levels remain near the top of the industry <unk> finished the year at 12, 4% with tangible common equity to tangible assets, increasing slightly to $9, 72% a record since the year of the firm's founding and reflective of our stated objective to manage the balance sheet in a manner supportive of tangible book value with a lower than peer.

Taken together quarterly PNR increased 55% year over year to $78 7 million.

As Rob mentioned after achieving this important milestone in the third quarter of last year, we do expect to maintain year over year quarterly PPR growth moving forward.

<unk> of unrealized losses.

Net income to common was $34 3 million for the quarter down $1 million year over year, while earnings per share increased one set.

The allowance for credit losses continues to increase and is now at 55 basis points since day, one seasonal this alongside a multiyear transition to a more balanced loan portfolio positions us well as the industry prepares for credit migration.

Overall credit quality remained stable, although we are seeing the early signs of inevitable normalization, we expect and are prepared for it.

We recognized $19 9 million in net charge offs during the quarter compared to net charge offs of $15 million in Q4.

Criticized loans increased $48 million quarter over quarter to two 8% of <unk>.

Quarterly investment banking and trading income was $18 8 million up more than 300% from the first quarter of last year at 57% linked quarter.

Primarily as a result of continued migration in a small number of consumer dependent C&I credits.

This quarter's provision expense was impacted by both realized charge offs and observed and anticipated portfolio trends.

Notably this was our second consecutive record quarter since launching the business last year.

Turning to the balance sheet on page eight.

<unk> metrics remains strong.

With end of period positioning reflective of continued execution on our previously defined set of core objectives.

<unk> in the securities portfolio of 850 million, coupled with approximately $750 million of largely Texas based C&I related loan growth reduced fed cash balances by $1 4 billion and intended result of the repositioning of proceeds related to the insurance premium finance divestiture.

Clients decided to augment their liquidity strategies by purchasing U S treasuries, leveraging our broad platform to satisfy their changing needs.

Taken together fee income from our areas of focus to increase by approximately $14 million or 91% year over year.

The loan to deposit ratio rose during the quarter to 91% from 84% in the prior quarter.

Representing steadily improving client receptivity to the completely refreshed operating model and capability set.

This is within a range we are generally comfortable with although we would expect loan and deposit growth to be more evenly matched moving forward as we continue our now multiyear process of aggressively recycling capital into relationships consistent with our defined strategy.

Turning to slide seven.

As evidenced by this quarter's results, we continue to bias capital use towards supporting franchise accretive client segments, where we are delivering our entire platform.

It is precisely this seasonality that causes us to anchor operating leverage guidance for the same quarter in the previous year Rev.

Share repurchases remain a secondary tool for creating longer term shareholder value.

Revenue increased $68 9 million or 34% when compared to Q1 2022.

Although the March market dislocation did provide opportunities to selectively repurchased $25 million at prices below tangible book.

When paired with shares repurchased in January as part of the completion of our inaugural program, we repurchased 1 million shares or $59 7 million of common stock in the quarter.

We stated that while our long term plans do account for continued investment most of the initial lift to deliver the foundational talent technology and capabilities to support our 2025 objectives was incurred over the past several years and that is our target operating model begins to mature expense growth will slow in 2023.

Finally, the decline in interest rates across three to five year points of the curve resulted in modest OCI improvement of $44 million, which contributed to record tangible book value per share of $58 six at quarter end.

Turning to slide nine C&I loans grew $747 million or 7% quarter over quarter. As a result of continued disciplined calling from our still new coverage teams equipped with a recently developed but highly competitive product suite.

Total adjusted noninterest expenses increased 6% linked quarter as Q1 salaries and benefits reflected increases of approximately $9 million in seasonal payroll and compensation expenses that peak annually in Q1 and $12 million in annual incentive and insurance accruals that reset annually.

While aggregate C&I loan balances are essentially flat year over year at $10 8 billion, when including historical insurance premium finance loans. This now sustained loan growth over the past five quarters is that a $2 8 billion of C&I client balances consistent with our strategy.

Taken together quarterly P PNR increased 55% year over year to $78 7 million.

As Rob mentioned after achieving this important milestone in the third quarter of last year, we do expect to maintain year over year quarterly PNR growth moving forward.

A 34% year over year increase when adjusting for divested loans.

This represents a nearly 100% recycling of capital previously attributed to loan only relationships in the insurance premium finance business into.

Net income to common was $34 3 million for the quarter down $1 million year over year, while earnings per share increased one set.

Overall credit quality remained stable, although we are seeing the early signs of inevitable normalization, we expect and are prepared for it.

And to a client base that benefits from our broadening platform of available product solutions.

Within a rebuilt and enhanced client journey.

We recognized $19 9 million in net charge offs during the quarter compared to net charge offs of $15 million in Q4.

Growth in the quarter centered in our middle market and corporate verticals continues to come primarily from new and expanded relationships as utilization rates were constant quarter over quarter at 51%.

Criticized loans increased $48 million quarter over quarter to two 8% of <unk>.

Period end real estate balances increased $74 million or 1% in the quarter, we continue to experience the expected, but still material slowdown in payoff rates.

Primarily as a result of continued migration in a small number of consumer dependent C&I credits.

This quarter's provision expense was impacted by both realized charge offs and observed and anticipated portfolio trends.

From record highs over the last few years.

This is one of the most mature businesses at the firm and we take it through cycle view grounded in client selection managing portfolio, using well established and tested concentration limits.

Turning to the balance sheet on page eight.

<unk> metrics remained strong.

With end of period positioning reflective of continued execution on our previously defined set of core objectives.

New origination volumes slowed in recent quarters and remains focused on multifamily, reflecting both our deep experience in the space and observed performance through credit and interest rate cycles.

<unk> in the securities portfolio of $850 million, coupled with approximately $750 million of largely Texas based C&I related loan growth reduced fed cash balances by $1 4 billion.

Only 16% of our real estate portfolio has a maturity date in 2023, well over 50% of the portfolio matures and 25 or later.

And intended result of the repositioning of proceeds related to the insurance premium finance divestiture.

Our exposure to at risk asset classes is limited with office exposure of $466 million approximately 9% of the total commercial real estate portfolio.

The loan to deposit ratio rose during the quarter to 91% from 84% in the prior quarter.

This is within our range, we're generally comfortable with although we would expect loan and deposit growth to be more evenly matched moving forward as we continue our now multiyear process of aggressively recycling capital into relationships consistent with our defined strategy.

The office portfolio has strong underwriting characteristics with a current average LTV of 58%.

90% recourse as well as strong market characteristics as over 75% of class a properties and over 60% is located in Texas.

As evidenced by this quarter's results, we continue to bias capital use towards supporting franchise accretive client segments, where we are delivering our entire platform.

Average mortgage finance loans declined by 23% in the quarter as broad market contraction outpaced year and estimates from professional forecasters as.

Share repurchases remain a secondary tool for creating longer term shareholder value.

As a reminder, outstanding balances in this business reflect the typical seasonality associated with home buying activity rising in the second and third quarter and falling in the fourth and the first.

Although the March market dislocation did provide opportunities to selectively repurchased $25 million at prices below tangible book.

Assuming the current rate outlook remains intact expectations are for total market originations increased by 35% to 40% in the second quarter.

When paired with shares repurchased in January as part of the completion of our inaugural program, we repurchased 1 million shares or $59 7 million of common stock in the quarter.

Full year expectation still showing a decline of 25% to 30% in origination volume.

Finally, the decline in interest rates across three to five year point of the curve resulted in modest OCI improvement of $44 million, which contributed to record tangible book value per share of $58 six at quarter end.

Moving to slide 10.

It'll ending period deposits declined 3% quarter over quarter with changes in the underlying mix reflective of both the continued funding transition in a tightening rate environment, coupled with market driven trends and predictable seasonality.

As Rob discussed, our well known strategy to proactively reposition away from our highest cost shorter duration index deposit sources has now been underway for over two years with.

With guidance last quarter that continued intentional reduction would persist is improving the quality of our liquidity as a prerequisite to establishing a more efficient balance sheet.

Including the $842 million or 34% reduction experienced this quarter. We have now exited over $8 2 billion of these deposits since year end 2020.

34% year over year increase when adjusting for divested loans.

With the period end balances now 7% of the total deposit base down from 32% at year end 2020.

This represents a nearly 100% recycling of capital previously attributed to loan only relationships in the insurance premium finance business.

The current client composition is now more consistent with our go forward strategy, we would expect near term quarterly fluctuations to moderate.

And to our client base the benefits from our broadening platform of available product solutions.

Delivered within a rebuilt and enhanced client journey.

As a result of our sound current and prospective liquidity position. We also had $225 million of brokered Cds mature in the quarter without need for replacement.

We maintained ample brokered capacity and we'll always evaluate future liquidity composition consistent with established balance sheet management priorities.

Period end real estate balances increased $74 million or 1% in the quarter, we continue to experience the expected, but still material slowdown in payoff rates.

Core to our strategy remains an intense focus on thoughtfully shifting our balance sheet to businesses, where we believe multiple client touch points will over time result in higher quality funding dates increasingly comprised of our clients' primary operating accounts.

From record highs over the last few years.

This is one of the most mature businesses at the firm and we take it through cycle view grounded in client selection managing portfolio, using well established and tested concentration limits.

Noninterest bearing deposits remained stable quarter over quarter and proportion to total deposits increased modestly to 43% from 42% at year end.

New origination volume slowed in recent quarters and remains focused on multifamily, reflecting both our deep experience in the space and observed performance through credit and interest rate cycles.

The underlying composition did shift however, as noninterest bearing deposits associated with mortgage finance grew $853 million or 24%.

Only 16% of our real estate portfolio has a maturity date in 2023, well over 50% of the portfolio matures in 'twenty fiber later.

Benefiting both from Q1 seasonal inflows and a continued enhancement of available services to this important client base, we expect average quarterly mortgage finance deposits to remain between 100% to 120% of average total mortgage finance loans through the year.

Our exposure to at risk asset classes is limited with office exposure of $466 million approximately 9% of the total commercial real estate portfolio.

The office portfolio has strong underwriting characteristics with our current average LTV of 58%, 90% recourse as well as strong market characteristics as over 75% is class a properties and over 60% is located in Texas.

These inflows were partially offset as commercial noninterest bearing deposits decline.

Mainly impacted by normal business and a predictable shift into other cash management products on our platform overall.

Overall non interest bearing deposits were down only 1% as we experienced little to no relationship movement to larger banks.

Average mortgage finance loans declined by 23% in the quarter as broad market contraction outpaced year and estimates from professional forecasters.

Our expectation is that we will be able to grow deposits, but at a marginal cost in excess of previous expectations given the material change in market conditions experienced over the last 45 days.

This increased cost of liquidity is reflected in our NII sensitivity modeling on page 11 as expected after increasing modestly from the cash proceeds related to the insurance premium finance sale in Q4, our earnings at risk decreased this quarter to three 4% or $34 million and a plus 100 basis point shock scenario in my.

Assuming the current rate outlook remains intact expectations are for total market originations increased by 35% to 40% in the second quarter.

Full year expectation still showing a decline of 25% to 30% in origination volume.

Moving to slide 10.

Four 6% or $46 million in a down 100 basis point shock scenario.

We described last quarter, our intent to reduce the firm's interest rate risk sensitivity from 8% in an up 100 scenario down to the mid single digits by the middle of the year. The goal that was accelerated and achieved this quarter given the market backdrop.

As Rob discussed, our well known strategy to proactively reposition away from our highest cost shortest duration index deposit sources has now been underway for over two years with.

This was primarily accomplished through growth in the investment portfolio as we continued the multi quarter process of remixing excess cash into primarily capital efficient agency MBS, we added $850 million to the portfolio in the quarter with new purchases coming on at a four 9% yield versus those rolling off around one 5%.

With guidance last quarter that continued intentional reduction would persist as improving the quality of our liquidity as a prerequisite to establishing a more efficient balance sheet.

Including the $842 million or 34% reduction experienced this quarter. We have now exited over $8 2 billion of these deposits since year end 2020.

The duration of the entire portfolio is now approximately four five years.

With the period end balances now 7% of the total deposit base down from 32% at year end 2020.

We exited the quarter with 15% of total assets and securities, which is aligned with our target and we believe an efficient and prudent portion of our liquid asset composition at this time.

The current client composition is now more consistent with our go forward strategy, we would expect near term quarterly fluctuations to moderate.

The actions taken in the quarter increased our anticipated base net interest income, while reducing the amount of future income exposed to rate changes not currently contemplated in the forward curve.

As a result of our sound current and prospective liquidity position. We also had $225 million of brokerage Cds mature in the quarter without need for replacement.

The core component of our naturally asset sensitive profile as the large portion of earning asset mix that re prices with changes in short term rates, 94% of the total lagi portfolio. Excluding NFL is now variable rate up slightly from 93% at year end with 88% of these loans tied to either prime or a one.

We maintain ample brokered capacity and we'll always evaluate future liquidity composition consistent with established balance sheet management priorities.

<unk> index.

Notably this quarter, we increased our model deposit beta assumptions to account for a recently observed and expected continued industry wide increases in funding costs.

Noninterest bearing deposits remained stable quarter over quarter and proportion to total deposits increased modestly to 43% from 42% at year end.

The increased beta assumptions also contributed to contracting expectations for additional future rate driven impacts to net interest income.

The underlying composition did shift however, as noninterest bearing deposits associated with mortgage finance grew $853 million or 24%.

Moving to slide 12.

Net interest margin increased by seven basis points. This quarter, while net interest income declined $12 3 million predominantly as a function of higher loan yields and increased income from cash and investments partially offset by an expected increase in funding costs and decreased quarterly average loan balances.

Fitting both from Q1 seasonal inflows and a continued enhancement of available services to this important client base, we expect average quarterly mortgage finance deposits to remain between 100% to 120% of average total mortgage finance loans through the year.

<unk> pullback in net interest income is entirely consistent both disclosed expectations and historical precedent for the first quarter of each year.

These inflows were partially offset as commercial noninterest bearing deposits decline mainly.

Mainly impacted by normal business and a predictable shift into other cash management products on our platform.

The systematic realignment of our expense base with public strategic priorities is beginning to deliver the expected efficiencies associated with a rebuilt and more scalable operating model.

Overall non interest bearing deposits were down only 1% as we experienced a little to no relationship movement to larger banks.

Our expectation is that we will be able to grow deposits, but at a marginal cost in excess of previous expectations given the material change in market conditions experienced over the last 45 days.

The improvements noted in our fourth quarter call, we expect to see contraction in quarterly noninterest expense over the remainder of the year, which when coupled with continued revenue expansion, resulting from strong execution on behalf of our clients will enable core earnings expansion. Despite the market backdrop.

Moving to page 13 criticized loans increased $48 million or 9% in the quarter to $561 1 million or two 8% of total HIV is.

As grade migration in these categories continues to be driven by commercial clients reliant specifically on consumer discretionary income as we've identified in the past.

It is four 6% or $46 million in a down 100 basis point shock scenario.

We described last quarter, our intent to reduce the firm's interest rate risk sensitivity from 8% in an up 100 scenario down to the mid single digits by the middle of the year goal that was accelerated and achieved this quarter given the market backdrop.

During the quarter, we recognized net charge offs of $19 9 million primarily related to one C&I loan.

The loan was to a Texas based public company with a management team well known in this market as part of a widely syndicated credit facility.

The allowance for credit loss was $283 million or 141% of total <unk> at quarter end up almost $56 million or <unk> 36 basis points year over year in anticipation of slowing economic conditions.

System wide credit availability contracts, we are prepared for the breadth of industries and client types experiencing grade migration to expand in coming quarters across the banking sector.

Tire portfolio is now approximately four five years.

We exited the quarter with 15% of total assets and securities, which is aligned with our target and we believe an efficient and prudent portion of our liquid asset composition at this time.

Moving briefly to capital on page 14, tangible book value per share and tangible common equity to tangible assets finished the quarter at record levels.

Evidence of our commitment to managing the harder and capital base in a disciplined manner focused on driving long term shareholder value.

Finally, we include updated guidance on page 15, our <unk>.

<unk> accounts for the market based forward curve and assumes a peak fed funds rate of 5% in mid 2023, the year end exit rate of 425.

The core component of our naturally asset sensitive profile as the large portion of earning asset mix that re prices with changes in short term rates, 94% of the total <unk> portfolio. Excluding NFL is now variable rate up slightly from 93% at year end with 88% of these loans tied to either prime or a one.

While we are confident in our ability to continue delivering in areas of defined focus.

Index.

Notably this quarter, we increased our model deposit beta assumptions to account for a recently observed and expected continued industry wide increases in funding costs.

Rob and I, both indicated earlier the significant investments made over the last two years are yielding expected operating efficiencies that will began positively contributing to financials in Q2.

The increased beta assumptions also contributed to contracting expectations for additional future rate driven impacts to net interest income.

We are lowering guidance on full year expense growth from low double digits to mid single digits.

Moving to slide 12.

Whether these expectations should result in the maintenance of operating leverage is defined as year over year quarterly PNR growth.

We remain committed to maintaining our strong liquidity and capital positions and our intent remains the whole greater than 20% of our total assets in cash and securities and to exit the year with CET one of at least 12%.

<unk> pullback in net interest income is entirely consistent both disclosed expectations and historical precedent for the first quarter of each year.

Lastly, as previously communicated our strategic plan accounted for an economic decline during the planning horizon.

The systematic realignment of our expense base with public strategic priorities is beginning to deliver the expected efficiencies associated with a rebuilt and more scalable operating model.

And our long term financial targets are achievable with more normalized levels of credit costs and under a variety of different interest rate scenarios. Despite.

Despite the economic backdrop, we are firmly committed to delivering the 2025 financial targets set forth as part of our strategic plan.

I'll hand, the call back over to Rob for closing remarks.

Thanks, Matt operator, well go straight to questions.

Of course, if you would like to ask a question today. Please press star followed by one or no traffic keypad. If you takeaway Hello. A question. Please press star followed by pairing to ask a question. Please ensure you have given me to lately.

Moving to page 13 criticized loans increased $48 million or 9% in the quarter to $561 1 million or two 8% of total HIV is.

And our first question today go to Michael Rose of Raymond James Michael. Please go ahead. Your line is open.

As grade migration in these categories continues to be driven by commercial clients rely specifically on consumer discretionary income as we've identified in the past.

Hey, good morning, guys. Thanks for.

During the quarter, we recognized net charge offs of $19 9 million primarily related to one C&I loan.

Taking my questions just wanted to kind of address what.

It was kind of out there in the news the other day around.

The loan was due a Texas based public company with a management team well known in this market as part of a widely syndicated credit facility.

Some head count reduction.

Just given that you guys have.

<unk> been pretty aggressive on the hiring front.

The allowance for credit loss was $283 million or 141% of total <unk> at quarter end up almost $56 million or <unk> 36 basis points year over year in anticipation of slowing economic conditions.

You came in.

Rob.

Just wanted to get a sense.

And that plays into the reduction in non interest expenses, but just wanted to get some color there. Thanks.

Yes. Thanks for the question look we were led by discipline process Reengineering and review all of our investments over the past two years and dramatically improved operating data.

System wide credit availability contracts, we are prepared for the breadth of industries and client types experiencing grade migration to expand in coming quarters across the banking sector.

Moving briefly to capital on page 14, tangible book value per share and tangible common equity to tangible assets finished the quarter at record levels.

And the ultimate impact was an outcome not a predetermined.

We adoption target this part of the transformation is meaningfully complete now.

We have a permanently improved operating discipline I think it's really important to point out.

Evidence of our commitment to managing the harder and capital base in a disciplined manner focused on driving long term shareholder value.

When we started this journey, we said that by 2025, we'd have two three times.

Finally, we include updated guidance on page 15, our guidance accounts for the market based forward curve and assumes a peak fed funds rate of 5% in mid 2023, the year end exit rate of $1 25.

Top line.

Client facing professionals.

Yes.

In 2025 and today.

While we are confident in our ability to continue delivering in areas of defined focus.

Two times.

So the strategy is intact or front footed with clients where end market and this has to do with becoming more efficient and breaking the cost curve it will make us a more.

Given the changes in anticipated system wide funding costs, we do expect net interest income expansion to be slower than contemplated in previous quarters guidance and a lower outlook for full year revenue growth to low double digits as Rob and I. Both indicated earlier the significant investments made over the last two years are yielding expected operating efficiencies that will began positively contributing.

Structurally.

Profitable.

Going forward, we don't capture.

You mentioned the prop.

Financials in Q2.

<unk>.

Understandable based on Wilmar and.

We are lowering guidance on full year expense growth from low double digits to mid single digits.

And our assumptions, but we don't talk about it in terms of the percent reduction in head count because that.

Together these expectations should result in the maintenance of operating leverage is defined as year over year quarterly P PNR growth.

The onetime safe and our transformation is permanent improvement in the operating efficiency.

We're really excited to bring down guidance on expense.

And one more thing.

Got it.

Really I think one more thing thats important.

Lastly, as previously communicated our strategic plan accounted for an economic decline during the planning horizon.

Is it makes it firms safer.

For a more automated and then improve the client journey.

And our long term financial targets are achievable with more normalized levels of credit costs and under a variety of different interest rate scenarios. Despite.

So anyway sorry.

No.

Despite the economic backdrop, we are firmly committed to delivering the 2025 financial targets set forth as part of our strategic plan.

Got it.

Maybe just go into this quarter's loan growth when I hopped on a little bit late so sorry, if I missed it but look to be again kind of a very strong ex warehouse next held for sale.

I'll hand, the call back over to Rob for closing remarks.

Thanks, Matt operator, well go straight to <unk>.

Can you just give us an update on pipelines.

<unk>.

Migration trends just given the lenders you hired if you have assembled for what the what the puts or takes could be the growth outlook for the rest of the year. Thanks.

Of course, if you would like to ask a question today. Please press star followed by one on <unk>.

Pat Thank you. Thank you.

Hello, a question. Please press star followed by <unk> when the person to ask a question. Please ensure you have lately.

Sure look I think it's.

Matt mentioned in his comments I think it's important to point out that we expect loan to deposit.

And our first question today goes to you Michael Rose of Raymond James Michael. Please go ahead. Your line is open.

Activity to mirror more consistently one another.

Hey, good morning, guys. Thanks for.

In the future I think this is.

Taking my questions just wanted to kind of address what.

Our pipelines are really really strong with new client onboarding, we on boarded new clients more new clients for the first quarter than in the history of the firm we on boarded more new clients in March.

It was kind of out there in the news the other day around.

Some head count reduction.

Just given that you guys have.

<unk> been pretty aggressive on the hiring front.

You came in.

Rob.

And then any other mark.

Just wanted to get a sense.

But I think it's also important to note that we have not deviated from loan growth not being Nicole it is not our goal. Our goal is client acquisition and I think the best clients in our markets.

And that plays into the reduction in non interest expenses, but just wanted to get some color there. Thanks.

Yes. Thanks for the question look we were led by discipline process Reengineering and review on our bond investments over the past few years and dramatically improved operating data.

You look at what's come through our balance sheet Committee, which is remember we have two approvals too.

To extend credit risk and the other is the use of the capital balance sheet Committee approved the use of capital after the risk has been approved.

And the ultimate impact was an outcome not a predetermined.

Reduction target this part of the transformation is meaningfully complete now.

And.

We have a permanently improved operating discipline I think it's really important to point out.

95%.

The submission by our bankers and balance sheet Committee.

When we started this journey, we said that by 2025, we'd have two three times.

More than one only so our clients have taken advantage of the broader platform, which is an imperative for us.

Top line.

Client facing professionals.

Then.

In 2025 and today.

To earn more than our cost of capital.

Two times.

The strategy is intact or front footed with clients, where end market and this has to do with becoming more efficient and breaking the cost curve it will make us a more.

Helpful.

Appreciate the color and maybe just one final one for me so the <unk>.

Interest bearing deposit costs continue to kind of move higher do you think we're getting to a point, though where we're going to start to see that kick off and sorry, if I missed any sort of commentary, but any sense for kind of what you would expect for <unk>.

Structurally.

Profitable for.

Going forward, we don't capture.

You mentioned the prop.

Database.

<unk>.

No understandable based on Wilmar and.

As we move through the rest of the year, assuming the forward curve. Thanks.

Yes, Michael I think terminal beta on slides, we know where that's going to stop at this point I don't think that we do I think the broad deposit shifts certainly in our base have occurred we wouldn't expect a continuation of that trend, but I would expect interest bearing deposits to generally stay on the same trajectory in terms of data until the fed until.

And our assumptions, but we don't talk about it in terms of the percent reduction in head count because that implies a onetime safe in our transformation as a permanent improvement in the operating efficiency.

We're really excited to bring down guidance on expense.

And then one more thing.

The fed ultimately slows their trajectory.

Got it.

Really I think one more thing thats important.

Is it makes the firm's safer.

Great. Thanks for taking my questions.

More automated and then improve the client journey.

You bet.

Thank you the next question Rob.

So anyway sorry.

Robertson of Hived, Great. Brett. Please go ahead your line is a portal.

No.

Adam.

I appreciate it.

Hey, good morning, guys. Thanks for the questions.

Maybe just go into this quarters loan growth and I hopped on a little bit late so sorry, if I missed it but look to be again very strong ex warehouse that's held for sale.

Wanted to start off on just provisioning and looking at the commercial criticize change it didn't seem like you had significant changes in your criticized assets I was a little surprised that the.

Can you just give us an update on pipelines.

Migration trends just given the lenders that you hired.

Provisioning level was was there any.

<unk> assembled for what the what the puts or takes could be the growth outlook for the rest of the year. Thanks.

Change in terms of what's you're waiting maybe on the seasonal Moody's model or can you walk us through a little bit more.

Sure look I think it's.

Changes in the dynamic of a model for the provision thanks.

Matt. This is Tom I think it is important to point out we expect loan and deposit.

Hey, Brett this is Matt we continue to experience pretty substantial new client acquisition, that's showing up as loan growth.

Activity to mirror more consistently one another.

In the future I think this is.

Then committed since Rob's arrival.

Our pipelines are really really strong with new client onboarding, we on boarded new clients or new clients for the first quarter than in the history of the firm we on boarded more new clients in March.

Words aggressively conservative and establishing a reserve so over the last four quarters, we've increased our ACL by 56 million.

436 bps, so that aggregate level as a percentage of total loans leveled off this quarter and I think at this point, we're pretty comfortable with positioning there wasn't modest increase in NPA that's worth describing.

And then any other mark.

But I think it's also really important to note that we have not deviated from loan growth not being Nicole it is not our goal. Our goal is client acquisition and I think the best clients in our markets.

The incremental NPA. This quarter is really just concentrated in a small number of lower LGD credits that at this point, we think we're pretty well reserved for.

You look at what's come through our balance sheet Committee, which is remember we have two approvals too.

To extend credit.

Okay.

And the other is to use the capital balance sheet Committee approved the use of capital after the risk has been approved.

That's helpful and then the strength of the investment banking this quarter.

Think thats sustainable or was that a couple of transactions that maybe it won't be quite as meaningful going forward as you see the pipeline.

Yes.

95%.

Of the submission by our bankers and balance sheet committee has been more than well only.

No we need a sustainable in my comments I think I mentioned that.

So our clients have taken advantage of the broader platform, which is an imperative for us.

It was it was it was broad based so there's multiple products and services that our clients are using.

To earn more than our cost of capital.

Some new for the first time others.

Much improved.

Helpful.

Do you have capital solutions, which as you know ray She's got syndications, M&A, you've got sales and trading.

The color maybe just one final one for me so the interest bearing deposit costs continue to kind of move higher do you think we're getting to a point, though where we're going to start to see that kick off and then sorry, if I missed any sort of commentary, but any sense for kind of what you would expect for.

Capital markets and there is a there is a broad.

Acceptance in the market across the entirety of the platform that frankly, I'm surprised has matured as quick as it has and so we are we're probably we're highly confident.

Updated betas.

As we move through the rest of the year, assuming the forward curve. Thanks.

Yes, Michael I think terminal beta on slides, we know where that's going to stop in at this point I don't think that we do I think the broad deposit shifts certainly in our base have occurred we wouldn't expect a continuation of that trend, but I would expect interest bearing deposits to generally stay on the same trajectory in terms of data until the fed until then.

The other thing is really.

Encouraging is the model itself is working the way it should so a lot of these referrals.

We didn't build the investment bank for a different set of clients. We built the investment bank for our current clients and new clients in our target markets. So it's not a disparate.

The settled at least slowed their trajectory.

Okay.

Great. Thanks for taking my questions.

Line of business.

You bet.

It's only one.

Thank you. The next question go see Brett Robertson of Hived, Great Kratz. Please go ahead. Your line is a portal.

As they they are being referred to the investment bank through private wealth advisor, so middle market bankers corporate bankers.

Hey, good morning, guys. Thanks for the questions.

If the model is working and the platform is working.

Wanted to start off on just provisioning and looking at the commercial criticize change it didn't seem like you had significant changes in your criticized assets I was a little surprised that the.

Tim.

Bryan as you go exactly exactly we believe youre going to start to see it.

Expansion in returns over time.

Professional <unk> level was was there any.

$3 billion C&I loan growth over the last year to Rob's point that balance sheet that we're getting to clients who are going to benefit from the rest of the platform.

Change in terms of what's you're waiting maybe on the seasonal Moody's model or can you walk us through a little bit more.

Changes move dynamic of a model for the provision thanks.

Okay. That's helpful and if I could sneak one last one in on follow up on the expense guidance.

Hey, Brett this is Matt we continue to experience pretty substantial new client acquisition, that's showing up as loan growth.

As the pivot to lower expense guide.

Is that do you think totally a function of just a lower revenue environment can you talk maybe about there could be a thesis of hey.

Then committed since Rob's arrival.

Our words to be aggressively conservative and establishing a reserve so over the last four quarters, we've increased our ACL by $56 million.

You take market share more proactively while others pull back from a credit.

436 bps.

Availability for us.

Aggregate level as a percentage of total loans leveled off this quarter and I think at this point, we're pretty comfortable with positioning there wasn't a modest increase in NPA that's worth describing.

Yeah.

I'll comment.

Go ahead Rob.

I'll comment.

Numbers. This is the expense guidance.

Is due to a structurally improved operating platform.

The incremental NPA. This quarter is really just concentrated in a small number of lower LGD credits that at this point, we think we're pretty well reserved for.

Which has been not only processes being re engineered.

Okay.

And automation, but the entirety of the platform working together it is totally rebuilt.

That's helpful and then the strength of the investment banking. This quarter do you think thats sustainable or was that a couple of transactions that maybe it won't be quite as meaningful going forward as you see the pipeline.

And fit for purpose and so the guidance does not like a one time to say, we think our efficiency will scale as revenue grows.

No.

How sustainable in my comments, I think I mentioned that.

It was it was it was broad based so there's multiple products and services that our clients are using.

Correct, Brett the only thing I.

I would add to that is that it's easier enhancements that we've been working on for a long time, Rob spent a good portion of the fourth quarter call discussing that discipline and pretty significant reengineering.

Some new for the first time others much.

Much improved and so you have capital solutions, which is re she's got syndications M&A, you've got sales and trading.

So as those enhancements matured, we were able to actually get the efficiency at the end of this quarter and an important point of Rob's earlier comments is that this is these are largely operational reductions. So frontline employees are still up two times since routes arrival first quarter of 'twenty one.

Capital markets and there is a there is a broad.

Acceptance in the market across the entirety of the platform that frankly, I'm surprised has matured as quick as it has and so we are we're probably we're highly confident.

Proactively end market this quarter on March 13th Monday, after the SVP issues proactively calling on clients availing to then the entirety of our platform and trying to go back the best clients in our markets.

The other thing is really.

Encouraging is the model itself is working the way it should so a lot of these referrals remember we didn't build the investment bank for a different set of clients. We built the investment bank for our current clients and new clients in our target markets. So it's not a disparate.

Yes, one more comment just okay.

Not to pile on but.

In the proxy you may see the CEO roles.

Last year, one of them was it seems high.

Line of business.

It's only one.

That's right.

There are a lot of companies, but for US. It was one of my one of my goals that we had as a firm.

No.

They are being referred to the investment bank private wealth advisor, so middle market bankers corporate bankers.

Does cost allocation and to understand that much better through the entirety of the platform.

The model is working and the platform is working.

And that was.

That was leading to our ability to be able to have the structural operating in fintech improvements. So it's all tied together.

Bryan as you go exactly exactly how we believe youre going to start to see it.

Expansion in returns over time.

$3 billion of C&I loan growth over the last year to Rob's point that balance sheet that we're getting to clients who are going to benefit from the rest of the platform.

Okay. That's very helpful. Thanks, so much for the color.

Thank you. The next question does he Brody Preston of UBS. Please go ahead. Your line is open.

Okay. That's helpful and if I could sneak one last one in on follow up on the expense guidance is the pivot to lower expense guide.

Hey, good morning, everyone. Thanks for taking my questions.

I wanted to just I guess, maybe put a finer point on the on the expense front here.

Is that do you think totally a function of just a lower revenue environment can you talk maybe about there could be a thesis how're.

Hear everything you're saying from an operational perspective, but maybe Matt if I could if I could try to dive into the numbers right I guess.

Hey, you take market share more proactively while others pull back from a credit.

Mid single digits kind of assuming 5% assumes that like the average quarterly run rate for the remainder of the year would step down.

Availability of persons.

Yeah.

Go ahead Rob.

Comment.

By about $20 million or so.

Those numbers.

Is the expense guidance.

I guess could you.

I guess, maybe could you help us think about the glide path.

Is due to a structurally improved operating platform.

The quarterly run rate is going to look throughout the remainder of the year.

Which has been on <unk>.

Yes happy to start on all expenses not called salaries and benefits.

Not only processes being re engineered.

In automation, but the entirety of the platform working together it is totally rebuilt.

Coming off the fourth quarter call, where we had some non.

Nonrecurring items, you said when that 81 down to about $65 million to $70 million a quarter through 2023 already I think that's still the right assumption and moves towards 70, that's an indication that rates are elevated that blends down to 65.

And fit for purpose and so.

Guidance does not like a one time say, we think our efficiency will scale as revenue grows.

Brett the only thing I would add to that is that these are enhancements that we've been working on for a long time, Rob spent a good portion of the fourth quarter call discussing that discipline and pretty significant reengineering.

The forward curve has been realized in the stat is tightening.

So then on the 128, seven which is salaries and benefits expense for the first quarter as I mentioned in my comments about seven $5 million of that is seasonal.

Which takes you to $1 21.

So as those enhancements matured, we were able to actually get the efficiency at the end of this quarter.

And then about 12 of that 121 is that annual reset on healthcare and incentive accruals. So at 121, the right starting number as you look out for the duration of the year.

Point of Rob's earlier comments is that this is these are largely operational reductions. So frontline employees are still up two times since Ralph arrival first quarter of 'twenty one.

We would expect the majority of the reduction in noninterest expense guide to occur from previously implemented actions to reduce salaries and benefits.

So proactively end market this quarter.

On March 13th Monday, after that SVP issues proactively calling on clients availing to then the entirety of our platform and trying to go back the best clients in our markets.

And you should see it start to show up this quarter got it.

Okay.

Got it so it seems like it's a little bit more immediate than is how I should interpret that.

Yes, one more comment just okay.

Yes.

<unk>.

Pile on but.

Alrighty.

And the proxy you may have seen the CEO roles.

Got it okay.

And then on the mortgage on the mortgage warehouse.

Last year, one of them was it seems.

Front I think.

That's right.

For a lot of companies, but for US. It was one of my one of my goals that we had as a firm.

It seems like.

At least from my perspective that was an area of strength for you all.

Was cost allocation and to understand that much better through the entirety of the platform.

This quarter with the balances being relatively flat and we should have seasonally stronger.

And that was.

That was leading to our ability to be able to have the structural operating in fintech improvements. So it's all tied together.

Warehouse going forward and so could you could.

Could you talk maybe about how youre expecting warehouse balances to flow.

In the second quarter, and then importantly.

Okay. That's very helpful. Thanks, so much for the color.

How that should positively impact deposit flows.

Particularly here in the short term.

Thank you. The next question does he Brody Preston of UBS. Please go ahead. Your line is open.

I'll comment and then Matt can answer your question.

Okay.

Hey, good morning, everyone. Thanks for taking my questions.

I would say.

The strong performance of mortgage is the continuation of our ability to do more business with about clients in that space.

I wanted to just I guess, maybe put a finer point on the expense front here.

Hear everything you're saying from an operational perspective, but maybe Matt if I could if I could try to dive into the numbers right I guess.

As a direct result of having created.

Very broad product offering.

Mid single digits kind of assuming 5% assumes that like the average quarterly run rate for the remainder of the year would step down.

Really good.

Operating capabilities and.

Great professionals. So we see we CFO turning to do more business with the best clients with deeper relationships, which says.

Like by about $20 million or so.

I guess could you.

I guess, maybe could you help us think about the glide path of how of how the quarterly run rate is going to look throughout the remainder of the year.

And as such they said.

More deposits and loan balances to us.

Yes happy to start on all expenses not called salaries and benefits.

Do you have anything else, yes, I'd say, the ending period balances birdie or 24% higher than average, which does indicate strong momentum going into Q2, ending balances were about 2% higher than average in the first quarter of last year.

Coming off the fourth quarter call, where we had some non.

Nonrecurring items, you said when that 81 down to about $65 million to $70 million a quarter through 2023 already I think that's still the right assumption if it moves towards 70, that's an indication that rates are elevated that blends down to 65.

We still believe that warehouse balances are likely to be a.

The reduction in warehouse balances through the year likely to be about 75% of aggregate one to four family mortgage origination with Moody's is now forecasting that to be down by about 30%.

The forward curve has been realized in the stat is tightening.

So then on the $128 seven which is salaries and benefits expense for the first quarter as I mentioned in my comments about $75 million of that is seasonal.

Then the previously established guidance on deposits average deposits relative to mortgage finance loan balances of 100% to 120%.

Which takes you to $1 21.

I think we're likely to land toward the higher end of that range as to Rob's point, we're able to do more with the clients that we have on platform.

And then about 12 of that 121 is that annual reset on healthcare and incentive accruals. So 121, the right starting number as you look out for the duration of the year and then we would expect the majority of the reduction in noninterest expense guide to occur from previously implemented actions.

Okay.

Got it that's helpful and then if I could just switch over to credit.

<unk>.

I guess on the on the <unk>.

Reduced salaries and benefits.

One off charge offs that you called out.

Sure.

And you should see it start to show up this quarter got it.

Could you give us a sense for for what industry that was in and then I think you had previously mentioned last quarter that there.

Okay.

Got it so it seems like it's a little bit more immediate than is how I should interpret that.

There was some of the charge offs some from last quarter related to some older vintages.

Yes.

<unk>.

Alrighty.

Does this kind of fall into that same category.

Got it okay.

So.

And then on the mortgage on the mortgage warehouse.

I'll comment then let Matt look this is a I think back on the comments of C&I client, Texas Public company.

Front I think.

It seems like.

A lot of high quality banks were in this credit in it and it's still from a seemingly unforeseeable risk there was a consumer rewards nature to this business.

At least from my perspective that was an area of strength for you all.

This quarter with the balances as being relatively flat and we should have seasonally stronger.

<unk>, which had a large exposure to eastern Europe, and the war in Ukraine actually really negatively impacted.

Warehouse going forward and so could you could.

Could you talk maybe about how youre expecting warehouse balances to flow.

The consumer behavior and confidence and it lead over to the Americas businesses. So.

In the second quarter, and then importantly.

How that should positively impact deposit flows.

I'd say it was a unique.

Credit because we don't have a lot with.

Particularly niv here in the short term.

International exposure like that.

I'll comment and then back to your question.

Did like this management team the company withdraws.

And had a great base, following but that risk is hard to foresee and it.

I would say.

The strong performance of mortgage is the continuation of our ability to do more business with about clients in that space.

Migrated very very fast.

Obviously, but no that is that was a new vintage non legacy.

As a direct result of having created.

It's very broad product offering.

Risk exposure that was highly correlated and consistent with our strategy. Unfortunately.

Really good.

Operating capabilities and.

Matt.

Great professionals. So we see we CFO JV to do more business with the best clients with deeper relationships, which says.

No.

Did that answer your question.

Yes, no that's very helpful. And then just lastly.

And as such.

On the.

More deposits and loan balances to us.

On the non the non accrual balances.

Notice that the non accruals, it's off a very low level.

Yes, I would say the ending period balances birdie or 24% higher than average, which does indicate strong momentum going into Q2, ending balances were about 2% higher than average in the first quarter of last year.

Obviously, but I noticed the non accruals ticked up from $48 million it looks like about $94 million. So wanted to get a sense for what drove that if it was if it was related to this credit.

Charged off or if it was more related to some of the other credits that you talked about with the criticized and classified moving higher.

We still believe that warehouse balances are likely to be a.

The reduction in warehouse balances through the year likely to be about 75% of aggregate one to four family mortgage origination, which Moody's is now forecasting that to be down by about 30%.

Yes, it's already not related to the credit that was charged off.

It's Conor.

Concentrated to a small number of lower LGD credits.

And then the previously established guidance on deposits average deposits relative to mortgage finance loan balances of 100% to 120% I think we.

At this point believe are appropriately reserved for.

Likely to land towards the higher end of that range as to Rob's point, we're able to do more with the clients that we have on platform.

Got it.

And then just just one last one.

C&I credit that you did charge off did you charge offs, the bulk of that loan or just wanted to get a sense.

Okay.

The charge offs should be fully behind you there.

Got it that's helpful and then if I could just switch over to credit.

Yes, it's Bob Thank you very much for taking my questions everyone.

Of course, thank you awesome. Thank you very much.

I guess on the.

And the one off charge offs that you called out.

Thank you. The next question guys you, Matt Olney of Stephens. Please go ahead. Your line is open.

Could you give us a sense for for what industry that was in and then I think you had previously mentioned last quarter.

Hey, Thanks, Good morning, everybody wanted.

But there was some of the charge offs from from last quarter related to some older vintages.

I wanted to dig into the revenue guidance that you guys provided.

Does this kind of fall into that same category.

I'm trying to separate the fees from the NII.

So.

Color you can provide us as far as what that implies for the NII growth in 2023.

I'll comment then let Matt look this is a I think back on the comments of C&I client, Texas Public company a lot of high quality banks. We are in this credit in it and it's still from a seemingly unforeseeable risk there was a consumer rewards nature of this business.

Yes, no I'm happy to take that so I think Rob articulate really well in his comments that we are we are focused exclusively on banking really strong clients with a solution set that we believe increasingly enables them to.

Which had a large exposure to eastern Europe , and the warranty Ukraine actually really negatively impacted.

Yes their needs while over time enables us to earn the right return on allocated capital and this is the exact same playbook that we've been operating from since we rolled out the strategy in September of 'twenty one.

The consumer behavior and confidence and it lead over to the Americas businesses. So I.

But while that playbook hasnt changed the marginal at the math on the marginal transaction has changed a little bit as the cost of capital and liquidity has increased for everybody in the industry, including us.

I would say it was a unique.

Credit because we don't have a lot with.

So exposure like that.

So our view as it relates to the guidance that is going to slow resulting in slower than previously expected loan growth and likely result in higher funding costs, which is going to drag on industry NII.

Did like this management team the company withdrawal.

And had a great bank following but.

That risk is hard to foresee and it.

So adjusting for that reality is what's caused the move down from mid double digits year over year to low double digits.

It migrated very very fast.

Obviously, but no that is that was a new vintage non legacy.

And then I'd also point out that in our guidance we of course assume not the PCB I curve, but the market curve in that market curve has moved down 25% to 50 basis points relative to when we announced full year guidance on our last call and that certainly has an impact on the NII outlook.

Our risk exposure that was highly correlated and consistent with our strategy. Unfortunately.

Yeah.

Matt.

Did that answer your question.

Yes, no that's very helpful. And then just lastly on.

So it sounds like incrementally Matt from I guess, the guide down from last quarter, it's gonna be substantially on NII relative.

On the on.

On the non the non accrual balances.

Not as much on fees is that is that fair exactly exactly.

Noticed that the non accruals, it's off a very low level.

Obviously, but I noticed the non accruals ticked up from $48 million it looks like about $94 million. So wanted to get a sense for what drove that if it was if it was related to this credit.

Struck by structural changes across the industry as well as reduction in forward rate outlook.

Got it Okay. That's helpful and then I guess on the interest rate sensitivity discussion.

Charged off or if it was more related to some of the other credits that you talked about with the criticized and classified moving higher.

It sounds like you guys have made some good progress moving that a little bit lower this quarter with the securities purchases and some more swaps.

Yes, it's already not related to the credit that was charged off.

It's.

Are we know where the bank wants to be or is there still more work can be done here in the future.

Concentrated to a small number of lower LGD credits.

At this point believe are appropriately reserved for.

Yes as of now, we're where we want to be not so we've laid out a target to get to mid single digits by the middle of the year. The market backdrop was conducive for us to move their bit quicker.

Got it.

And then just just one last one.

C&I credit that you did charge off did you charge offs, the bulk of that loan or just wanted to get a sense.

As an example, the receive fixed swaps we put on this quarter, how do receive rate of four four same swap as of yesterday would have a receive rate of 389.

The charge offs should be fully behind you there.

Yes, it's Bob Thank you very much for taking my questions everyone.

We took advantage of what we thought was a pretty good market opportunity and are comfortable with where we reside now in terms of earnings at risk both in up and down scenario.

Of course, thank you awesome. Thank you very much.

Thank you. The next question guys you, Matt Olney of Stephens. Please go ahead. Your line is open.

Okay. Thanks for taking my question.

Hey, Thanks, good morning, everybody.

You bet.

Wanted to dig into the revenue guidance that you guys provided.

Yeah.

Thank you. The next question does he Brad Millsaps of Piper Sandler. Please go ahead. Your line is open.

I'm trying to separate the fees from the NII.

Color you can provide us as far as what that implies for the NII growth in 2023.

Hey, good morning.

Hey, Brad.

Thanks for taking thanks for taking my questions Matt.

Yes, no I'm happy to take that.

I was curious if you could offer maybe a little color on the decline in the yield on mortgage warehouse loans. This quarter I apologize if you addressed it earlier I joined a little late but.

Rob articulate really well in his comments that we are we are focused exclusively on making really strong clients with a solution set that we believe increasingly enables them to address their needs. While over time enables us to earn the right return on allocated capital and this is the exact same playbook that we've been operating from since we rolled out the strat.

I know that can bounce around based on the deposit relationship as well, but it looked like it was down a little more than 50 basis points linked quarter. So just curious if you had any additional color there on maybe the reasons and maybe it's your trajectory going forward.

September of 'twenty one.

That playbook hasnt changed the marginal at the math on the marginal transaction has changed a little bit as the cost of capital and liquidity has increased for everybody in the industry, including us.

No I appreciate the question Brad.

As you know.

Mortgage loans do have similar repricing in beta characteristics of the rest of the BLA type portfolio, but there is a relatively static portion of the mortgage finance deposit received payment through yield.

So our view of the rest of the guidance that is going to slow resulting in slower than previously expected loan growth and likely result in higher funding costs, which is going to drag on industry NII.

So as the warehouse balances come down and the deposit level stays stagnant youll see a compression on the printed mortgage warehouse yields as you move into the second quarter and those loan balances expand seasonally youll see some of that pressure abate it would be a more logical representation for ya.

So adjusting for that reality is what's caused the move down from mid double digits year over year to low double digits.

Okay, Great that's helpful.

And then just maybe a bigger picture question to follow up on Matt's question.

Yeah.

You guys have made made a lot of moves to reduce your asset sensitivity, Texas capitals history is unfortunately, I'm, having a bit of a volatile margin.

So it sounds like incrementally Matt from I guess, the guide down from last quarter, it's gonna be substantially on NII relative.

You'll never get rid of all of your asset sensitivity, but just curious if the fed does stop and does at some point begin to go the other way.

Not as much on fees is that exactly.

<unk>.

Struck by structural changes across the industry as well as reduction in forward rate outlook.

Do you feel like Youre, better locked into a certain margin floor or number.

Got it Okay. That's helpful and then I guess on the interest rate sensitivity discussion at.

You'd be willing to share that.

With stabilized maybe earning power a little bit more just kind of curious kind of how you think about that bigger.

It sounds like you guys made some good progress moving that a little bit lower this quarter with the securities purchases and some more swaps.

Bigger picture.

Just just given the past and kind of the steps that you've made to kind of remove.

Maybe maybe some of that downside going forward.

Are we know where the bank wants to be or is there still more work can be done here in the future.

Yes, Brad I think we often talk about that both in terms of structural changes to the business model and the balance sheet. So the business model itself is less interest rate sensitive, meaning these fee generation categories continued.

Yes as of now, we're where we want to be not so we've laid out a target to get to mid single digits by the middle of the year. The market backdrop was conducive for us to move their bit quicker.

As an example, the receive fixed swaps, we put on this quarter, how do receive rate of four four.

We see real receptivity from the client base and expectation is that those will continue to increase in contribution.

Same swap as of yesterday, we have a receive rate of 38, 9%.

<unk> revenue as well as present different opportunities for client facing bankers to provide value to their clients and our rates fall scenario.

We took advantage of that we thought was a pretty good market opportunity and are comfortable with where we reside now in terms of starting to risk both in up and down scenario.

And then just structurally on the balance sheet.

So down 100 scenario is now inside of 5%, obviously thats a shock scenario with a lot of assumptions.

Okay. Thanks for taking my question.

You bet.

Yeah.

Thank you. The next question does he Brad Millsaps of Piper Sandler. Please go ahead. Your line is open.

But that excludes any of the real benefit that we would realize two expansion across the mortgage finance businesses should rates fall to appoint sufficient to generate new refi volume so.

Hey, good morning.

Hey, Brad.

We're really proud to be honest that the progress made to generate an offering thats going to sustain a bit more stable revenue and earnings generation.

Thanks for taking thanks for taking my questions Matt.

I was curious if you could offer maybe a little color on the decline in the yield on mortgage warehouse loans. This quarter I apologize if you addressed it earlier I joined a little late but.

Regardless of what rate environment, we're in.

Okay.

So the 5% does it doesn't include a big pickup in mortgage warehouse volume.

Zero the loan balances are static in that view.

Okay, Great Alright, Thank you guys very much I appreciate it.

No I appreciate the question Brad.

Yeah.

As you know the mortgage loans do have similar repricing in beta characteristics of the rest of the BLA type portfolio, but there is a relatively static portion of the mortgage finance deposit received payment through yield.

Thank you. The next question guys, Hey, Brady Gailey of <unk>. Please go ahead. Your line is a panel.

Yes. Thank you good morning, guys.

Hey, Brian I wanted to start on the midstream.

Want to start on the mid single digit expense growth guidance for this year is that that feels like a level that could be.

Kind of the longer term expense growth trajectory. So although your guidance is only for <unk>.

This year, but you know beyond this year does it feel like Youre kind of shuttle them to see expenses grow at a mid single digit pace.

Yes.

Okay, Great that's helpful.

And then just maybe a bigger picture question to follow up on Matt's question.

I think Brady, it's too early to talk about 'twenty, four but I would reemphasize all of our ops comments.

You guys have made made a lot of moves to reduce your asset sensitivity, Texas capitals history is unfortunately, having a bit of a volatile margin.

We've spent a significant amount of time energy and resource getting a better understanding for the very granular cost structure of this firm.

You'll never get rid of all of your asset sensitivity, but just curious if the fed does stop and does at some point begin to go the other way.

And I've taken material steps implement permanent solutions to ensure we can scale. This for a long time.

Do you feel like Youre, better locked into a certain margin floor or number.

So I don't anticipate similar to what we said in the third and fourth quarter of last year. Once we cross this PNR Rubicon, we would never go back we're never going to see expense growth faster than revenue, we are going to expand operating leverage defined as quarterly year over year PPA for a long time and this is an important step in realizing.

You'd be willing to share that.

With stabilized maybe earning power a little bit more just kind of curious kind of how you think about that bigger.

Bigger picture.

Just just given the past and kind of the steps that you've made to kind of remove.

Maybe maybe some of that downside going forward.

<unk>.

Lots of Tech enabled process reengineering benefit that we think is key to that long term growth trajectory.

Yes, Brian I would just say that this was.

This was holistic.

Sure.

Yeah.

There may have been frustration for the time it took to do that for two years, we've been really really focused on.

Received real receptivity from the client base and expectation is that those will continue to increase in contribution.

Cost allocation data.

<unk> revenue as well as present different opportunities for client facing bankers to provide value to their clients and our rates fall scenario.

<unk>.

Jack.

The higher <unk> of <unk>.

Our structure thus far.

And then just structurally on the balance sheet.

We're just getting to a place where we feel really really good about it.

So down 100 scenario is now inside of 5%, obviously thats a shock scenario with a lot of assumptions.

We're excited about the go forward.

This was not this was not changed at all.

But that excludes any of the real benefit that we would realize two expansion across the mortgage finance businesses should rates fall to appoint sufficient to generate new refi volume so.

These are hard deep structural changes.

Yes.

<unk>.

And then I know you guys are sticking with the one one ROA guidance for 2025.

We're really proud to be honest that the progress made to generate an offering that's going to sustain a bit more stable revenue and earnings generation.

That's a long way from here you did 50 basis points last year, Youre, roughly a 50 basis points.

Regardless of what rate environment, we're in.

In the first quarter.

So the 5% does it doesn't include a big pickup in mortgage warehouse volume.

Is it just as simple as you expect revenue growth to be.

Zero the loan balances are static in that view.

Off the chart.

Just the revenue growth that allows you to hit the one one ROA.

Okay, Great Alright, Thank you guys very much I appreciate it.

55% increase in quarterly year over year, PNR Brady is our path to the ROE.

Thank you. The next question guys, Hey, Brady Gailey of <unk>. Please go ahead. Your line is a panel.

Target.

And youre not going to see 55% every single quarter, but as you know Q1 is seasonally the lowest quarter for us in terms of earnings performance.

Yes. Thank you good morning, guys.

Hey, Brian I wanted to start on the midstream I.

I wanted to start on the mid single digit expense growth guidance for this year is that correct.

So the structural expense infrastructure that we just described coupled with now a very defined set of businesses, where we're able to deliver the entire platform to a single client.

Feels like a level that could be.

Kind of the longer term expense growth trajectory.

Your guidance is only for <unk>.

This year, but you know beyond this year does it feel like youre kind of settling in to see expenses grow at a mid single digit pace.

I think we described it in the past as other in our view sort of the foundational tenants for future scale and we'd expect to start to see that materialize. This year.

I think Brady, it's too early to talk about 'twenty, four but I would reemphasize all our ops comments.

Alright, and then finally for me just bigger picture on credit quality.

We've spent a significant amount of time energy and resource getting a better understanding for very granular cost structure of this firm.

Yes.

The second quarter that we've seen in <unk>.

Chris I know, although they are still at a relatively low level in the second quarter that net charge offs have been a little higher you just hired a new chief credit officer.

And I've taken material steps implement permanent solutions to ensure we can scale. This for a long time.

I don't anticipate similar to what we said in the third and fourth quarter of last year and once we cross. This PNR Rubicon, we would never go back we're never going to see expense growth faster than revenue, we're going to expand operating leverage defined as quarterly year over year PPA for a long time and this is an important step in realizing.

Should we are there.

Just two quarters that are kind of one offs or should we expect to continue to see a little bit of.

Credit noise this year.

I would say.

We affirm our guidance on credit costs through cycle.

And we feel really really good.

A lot of tech enabled process reengineering benefit that we think is key to that long term growth trajectory.

<unk>.

The portfolio.

From real estate, all the way through C&I.

Yes, Brian I would just say that this was.

No doubt there with think about Brady, Andy we've talked before that.

This was holistic.

Sure.

Yeah.

There may have been frustration for the time it took to do that for two years, we've been really really focused on.

Good range for 'twenty, three provision expenses likely 45 to 50 basis points of average IHI, Inc.

Still a good way to view it.

Cost allocation data.

Importantly, we have not been chasing loan growth expand the balance sheet, we've been a recipient of high quality, Texas base loan growth, primarily because we have a lot of highly qualified bankers presenting a great platform that we think is differentiated into the market so new client.

Yes.

<unk>.

The higher <unk> of infrastructure.

We're just getting to a place where.

We feel really really good about it.

We're excited about the go forward.

This was not this was not changed at all Mark.

<unk> for US has been on target and we expect it to match up with our long term views on credit performance.

These are hard deep structural changes.

And lastly, there is one dynamic that.

Yes.

<unk>.

And then I know you guys are sticking with the one one ROA guidance for 2025.

Is that work remember we have the premium finance business.

Very very very little loss history, and as you rotate and recycle all of that capital in the C&I, which is much better higher returning structurally.

That's a long way from here you did 50 basis points last year, Youre, roughly a 50 basis points.

In the first quarter.

I mean is it just as simple as you expect revenue growth to be.

Better business.

Youre going to have increased provision that doesn't mean.

Off the chart.

Watson's, but youre going to have provision increase.

Just the revenue growth that allows you to hit the one ROA.

Yes, that's a good point Greg.

Thanks, guys.

55% increase in quarterly year over year P. PNR Brady is our path to the ROE.

Yeah.

Thank you and our final question today, because he Brandon King of Chili's Securities. Brandon. Please go ahead. Your line is open.

Target.

And youre not going to see 55% every single quarter, but as you know Q1 is seasonally the lowest quarter for us in terms of earnings performance.

Hey, good morning.

Hey, Brendan so I just had.

So the structural expense infrastructure that we just described coupled with now a very defined set of businesses, where we're able to deliver the entire platform to a single client.

Hey, I just had a question on the non mortgage DBA and understanding the corner with clients still mix shifting to higher interest bearing accounts.

But I'm curious kind of what's your outlook. There do you think we see more stabilization going forward and those balances.

I think we described it in the past as other in our view sort of the foundational tenants for future scale and we'd expect to start to see that materialize. This year.

Yes.

I think that the operating deposits held up pretty well to select instances access noninterest bearing not being used to meet seasonal payments moving elsewhere on the platform, which is fine take Rob described in his commentary that.

Alright, and then finally for me just bigger picture on credit quality.

Yes.

The second quarter that we've seen in <unk>.

So we approached the market with a set of solutions is there for them not based on a list of requests based on our own priority. So we're happy to avail, our clients of different solutions on the platform.

Chris I know, although they are still at a relatively low level in the second quarter that net charge offs have been a little higher you just hired a new chief credit officer.

Should we or are these just two quarters that are kind of one offs or should we expect to continue to see a little bit.

I think that the moves that we're going to be made in Q1, if any that resulted from.

Credit noise this year.

Just banking industry turmoil likely occurred and as Rob mentioned in his comments.

I would say we.

We affirm our guidance on credit costs through cycle.

We added a record number of new clients on the Treasury platform in March and our near term nearer term pipelines are up so feel good about the prospects there longer term Brandon.

And we feel really really good about.

Portfolio.

From real estate, all the way through C&I does not have anything else.

Okay.

Exactly I would think about Brady, Andy we've talked before that.

And just intra quarter.

As far as the outflows were they a mix shift was.

Good range for 'twenty, three provision expenses likely 45 to 50 basis points of average IHI, Inc.

It kind of consistent through the quarter or did it accelerate kind of towards the end of the quarter given all the turmoil.

It's still a good way to view it.

We saw no acceleration.

That said the behavior was generally consistent with our expectation.

<unk>.

I think you are aware our liquidity framework is pretty similar to what you would find it a money center bank as you think about process modeling or procedures. So we describe deposit values based off stress 30 day or 12 month outflow rates similar to what you would find in LCR like framework and then we manage the balance sheet every day and compliance of those thresholds.

The market.

New client acquisition for US has been on target and we expect it to match up with our long term views on credit performance.

And lastly, there is one dynamic.

Is that work remember we have the premium finance business.

Due to the fact that we like the brokerage Cds rolled off we maintained normal levels of wholesale borrowing so I want to come back to in a second and then perhaps most importantly, we are actively calling on clients and prospects I think helps reinforce the view that things behaved as anticipated.

Very very very little loss history, and as you rotate and recycle all of that capital in the C&I, which is much better higher returning structurally.

Better business.

Youre going to have increased provision that doesn't mean.

<unk> is <unk>.

Losses, but jorgen have provision decrease.

<unk> constituent for us.

We have a long history.

Yes, that's a good point Greg.

Having outstanding <unk>, our short term borrowing levels equal to about a third of end of period warehouse balances.

Thanks, guys.

Yeah.

Thank you and our final question today, I guess, he Brandon King of Chile Securities. Brandon. Please go ahead. Your line is open.

This quarter, we added $750 million in the last few days of the quarter. We had no idea about the health of other banks and wanted to ensure we had adequate on hand liquidity to meet what could have been exceptionally high levels of mortgage finance period end mortgage finance inflows, we had a bit of a P.

Hey, good morning.

Hey, Brian So I just had.

Hey, I just had a question on the non mortgage DBA and understanding the Congress clients still mix shifting to higher interest bearing accounts.

Certainly wasn't as large as it could happen in that $750 million was out the door at five Monday. So you can see that in our average short term borrowing levels and the earnings release Theres really no movement, just that period at about 750 to absorb potential pickup in warehouse volumes.

But I'm curious kind of what's your outlook. There do you think we see more stabilization going forward and those balances.

Yes.

I think that the operating deposits held up pretty well. So there was select instances access noninterest bearing not being used to meet seasonal payments moving elsewhere on the platform, which is fine I think Rob described in his commentary that.

Yeah.

Got it.

So all of the color and taking my questions you bet.

Thank you that's all the questions. We have time for today I'll now hand back to Rob for any closing comments.

We approached the market with a set of solutions. It's there for them not based on a list of requests based.

Thanks, everybody for your interest.

And the thoughtful questions, we're really really excited about the platform that we've built.

Based on our own priority. So we're happy to avail, our clients of different solutions on the platform.

And the prospects going forward and look forward to continued conversations. Thank you for your time.

I think that the moves that we're going to be made in Q1, if any that resulted from.

Ed.

Banking industry turmoil likely occurred.

Thank you. This now concludes today's call. Thank you so much for joining you may now disconnect your lines.

And as Rob mentioned in his comments, we added a record number of new clients on the Treasury platform in March and our near term nearer term pipelines are up so feel good about the prospects there longer term Brandon.

Okay.

And just intra quarter.

As far as the outflows were they a mix shift was.

It kind of consistent through the quarter or did it accelerate kind of towards the end of the quarter given all the turmoil.

We saw no acceleration.

So the behavior was generally consistent with our expectation.

<unk>.

I think you are aware there are liquidity framework is pretty similar to what you would find it a money center bank as you think about process modeling or procedures. So we Scott deposit values based off stressed 30 day or 12 month outflow rates similar to what you would find in LCR like framework and then we manage the balance sheet every day and compliance of those thresholds.

<unk> B is important constituent for us.

We have a long history of.

Having outstanding <unk>, our short term borrowing levels equal to about a third of end of period warehouse balances.

Certainly wasn't as large as it could happen and that's $750 million was out the door at five Monday. So you can see that in our average short term borrowing levels and the earnings release Theres really no movement, just that period at about 750 to absorb potential pick up in warehouse volumes.

Yeah.

Got it.

So all of the color. Thanks, taking my questions you bet.

Thank you that's all the questions. We have time for today I'll now hand back to Rob for any closing comments.

Yeah.

Thanks, everybody for your interest.

And the thoughtful questions, we're really really excited about the platform that we've built.

And the prospects going forward and look forward to continued conversations. Thank you for your time.

Thank you. This now concludes today's call. Thank you so much for joining you may now disconnect your lines.

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Q1 2023 Texas Capital Bancshares Inc Earnings Call

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