Q1 2023 ConnectOne Bancorp Inc Earnings Call
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I would now like to turn the conference over to CEO , Dan <unk> Chief.
Yeah.
Chief brand and innovation Officer. Please go ahead.
Good morning, and welcome to today's conference call to review <unk> results for the first quarter of 2023 and to update you on recent developments on today's conference call will be Frank Sorrentino, Chairman and Chief Executive Officer, and Bill Burns Senior Executive Vice President and Chief Financial Officer also with US is Elizabeth Mcginnis President of <unk>.
Connect one bank and Steve Primiano, EVP and treasurer.
I'd also like to caution you that we may make forward looking statements. During todays conference call that are subject to risks and uncertainties factors that may cause actual results to differ materially from expectations are detailed in our SEC filings. The forward looking statements included in this conference call are only made as of the date of this call and the company is not obligated to public.
Publicly update or revise that in addition, certain terms used in this call are non-GAAP financial measures reconciliations of which are provided in the company's earnings release and accompanying tables or schedules, which have been filed.
Filed today on form 8-K, with the SEC and May also be accessed through the Companys website I will now turn the call over to Frank Sorrentino. Frank. Please go ahead. Thank you Sarah and good morning, everyone. We appreciate you joining our earnings call today.
Let's get started and kick it off with what you've seen in our earnings release. This morning, we are in a strong and solid position today, reflecting continued success in growing our deposits and enhancing our liquidity base with over 250% coverage of uninsured uncollateralized deposits.
So I began last earnings call by reiterating <unk> commitment to serving our clients. Despite the cyclical ups and downs in the economy and never before has our focus on client relationship banking been so important.
While the industry was surprised by the specific events of mid March we connect one anticipated the repercussions of quantitative tightening and our team began to take intentional actions as early as the fourth quarter of last year.
Those efforts have positioned us well with our relationship driven deposit base increased total availability available liquidity, a diversified loan portfolio of quality assets and sponsors solid credit metrics and strong overall balance sheet and capital position.
Looking back a few weeks to March I'm proud of the way our team responded with sense of urgency proactively reaching out to our clients to provide them with peace of mind solutions, while diligently enhancing our liquidity position and securing our deposit base even further.
In fact for the fifth quarter in a row, we've now realized net deposit.
Inflows.
That success is a credit to a few things first a relentless continuation of our ongoing efforts towards onboarding, new client relationships and expanding into deposit rich verticals, while many others have allowed their deposits to leave their balance sheets.
Part of our focus of our business development team continues in non CRE type verticals in order to further diversify our loan portfolio and provide additional sources of deposit growth. In this regard our C&I division has grown at a consistent pace over the past decade, and our expertise has continued to evolve over that time noted.
<unk> in the private school.
<unk> care and franchise segments, providing deeper and attractive market opportunities for our team.
Third our investments in technology, such as our partnership with mantle play a key role in accelerating. These efforts. We have now deployed the first phase of this omnichannel deposit origination platform, which has already led to seamlessly on boarded seamlessly.
Seamlessly onboarding of new client relationships.
Now for some color on the significant improvement in our uninsured deposit percentage.
An operating advantage for connect one was our existing knowledge and use of the <unk> reciprocal deposit product facilitating immediate availability to our existing client base and new clients connect one is one of the longest the most established banks and the <unk> network, having utilize the product for over a decade predominantly.
To meet the needs of some of our more sophisticated clients fiduciary such as in the private school business segment.
Through the efforts of our team our uninsured and uncollateralized deposits improved to just 20% of total deposits.
<unk> to our margin on our last earnings call, we laid out our strategic rationale for being more aggressive toward maintaining our client relationships. Despite deposit rate competition, resulting in increasing our unique client count and total deposits that said, we experienced an expected what I believe is temp.
<unk> net interest margin compression during the quarter, that's the near term cost of successfully achieving our goal of preserving and building our banking relationships.
That should not obscure the fact that the underlying fundamentals and returns of our business remains solid bill will talk a little bit more about the net interest margin and its impact on our reported results for the quarter and the outlook in detail in a little bit.
In regards to our commercial real estate office portfolio first off office represents today, a very small amount of our portfolio. Our total office exposure is approximately 5% of total loans, but the majority of that is represented by specialty services, such as medical or other service oriented businesses, where multi use buildings were.
Tendency is very high and leases are very secure New York City is even lower at less than 1% of total loans and in addition loans. In this segment were underwritten with Ltvs that average below 50% and our strong borrowers with 80% of them personally guaranteed a recent review of this portfolio indicates vacancy rates are near Zip.
<unk> and the stressed renewal rollover risk is low.
Turning to our multifamily portfolio as I've mentioned before our focus is predominantly on purchase money loans to large generational owners and skilled operators based in more suburban and commuter oriented areas.
Additionally, our multifamily portfolio in Manhattan is less than two 5% of total loans and five 8% in the other four borrows.
Back to the focus on purchase money mortgages.
This ensures significant equity in these projects and underwriting that includes stress <unk> and minimum cap rates with tremendous upside from better management.
We're always happy to see our clients create significant value and refinance this out to one of the life companies or Freddie or Fannie or some other institution.
And as a result of these prudent lending standards, including minimum realistic cap rates when we stress the portfolio for renewal pricing the potential for significant increase in impaired loans was very limited.
Our stress testing considered increases and debt servicing changes in property NOI and amortization of principal since since origination.
Multifamily loans repricing or renewing in 2023 total only 6% of the multifamily portfolio with only another 15% through the end of 2025.
Overall connect ones credit performance remained solid during the first quarter.
Delinquencies and non accruals remain low and as they are identified we are proactively managing through those credits.
So looking ahead, we will maintain reserve levels commensurate with our growth and aligned with the changing macroeconomic forecast.
With that we expect our loan portfolio to remain essentially flat this year with originations, mostly offset by amortization maturities and Paydowns. In addition, we could see a slight change in composition away from some CRE, including multifamily and towards C&I and construction, where we remain very opportunistic.
Stick.
Given the strength of our earnings and capital position, we have a great deal of financial flexibility and confidence in our trajectory forward to that end earlier today, we announced a nine 7% increase to our quarterly dividend to <unk> 17 per share, which is consistent with dividend increases over the past few years.
Payout.
Hey out ratio remains at a conservative level below 30%.
In summary.
We remain focused on serving our clients supporting our staff, creating long term value to our shareholders and improving and building upon a distinctive operating platform.
Further while maintaining our long standing financial discipline, we are well positioned to take advantage of possibly once in a generation market opportunities that can produce strong returns for our shareholders and be very beneficial to our franchise.
And with all that I'll now turn it over to Bill.
Thank you Frank good morning, everyone.
Like to start out with some color around our enhanced and fortify our liquidity position, which provides connect one with readily accessible liquidity that is now actually in excess of 250% of our total uninsured or non collateralized deposits in that position resulted from efforts on both sides of this equation.
On the deposit side by reaching out proactively to our clients were able to bolt restructure accounts and also facilitate the transfer of deposits to the anchor file the cyclical network and combined were able to reduce our uninsured deposits by approximately $1 billion and now uninsured schedule with uncollateralized, just 20% of total.
Deposits.
On the liquidity side, we pledged additional loans, thus, adding to our already existing capacity at the fed at the.
Federal home loan bank those actions resulted in an additional $2 billion in available liquidity and.
Just to give you a rough breakdown of our current borrowing base and overall liquidity.
We now have an approximately $3 billion secured lines in federal home loan bank.
Then we have another $1 billion secured by loans and securities in the fed discount window, including the new Bts.
And we then have an additional $1 billion in on balance sheet cash Unpledged securities that market value in various unsecured lines of credit. So we have a strong position today, which is more than adequate but still we could increase the space by another $1 billion to $2 billion if ever needed.
Utilization of the current $5 billion base today is solely from the federal home loan Bank, where we have drawn down about $1 billion.
<unk> have been successfully tested that are untapped, leaving us with available liquidity of roughly $4 billion.
Now Frank mentioned earlier, our success of that deposit inflows wanted to give you some color on that the total deposit increased point to point from year end was about $400 million.
Of that approximately to $200 million, our core client net inflows and that occurred over the course of the first quarter.
We did see approximately $100 million of $10 31, escrow deposit balances leave the bank during mid March but other than this particular decrease there were no significant outflows.
And we added about $300 million of broker deposits with a weighted average cost of a little over 5% with lack of those maturities across the year for a weighted average duration of just over six months. So these will run off fairly quickly.
Let's now turn to the margin.
So there are several factors that I believe will continue to compress margins across the industry with confidence.
First a further reduction of the money supply, which could intensify competition among banks, even further than we have today next you've got continued high short term rates, which provides a hard to pass up incentive for noninterest bearing deposit is to transfer the balance of interest bearing accounts.
Finally, and this is an increasingly important factor a continued inverted yield curve environment negatively impacts net interest margins more than most realize.
Now in terms of our net interest margin compressed more than we previously expected due to the intense competition.
Cycle to date beta is now 40% pretty high versus the industry averages and that was caused in part by the fact that our core deposit base is weighted two to one for sophisticated commercial accounts.
And in addition, as Frank mentioned earlier does not just yesterday, but towards the end of last year, we made a strategic decision to be more aggressive with deposit rates in order to both retain our existing clients and grow our core commercial client base that strategy is working well in terms of deposit growth for liquidity, but has put added pressure on that.
Gross margin.
In addition, like most of the industry, but not more than not worse than most we have experienced an accelerated decline in noninterest bearing balances looking.
Looking forward, we believe we are closer to a terminal beta than most although deposit costs will likely increase further the to some degree primarily due to CD rollovers. We have no current plans to raise rates, where we stand today. So margin compression on this point, if any is likely to be slow and our forecast is that when short term.
Rates of side and the yield curve takes a more more traditional shape on NIM and profitability will return to historical levels.
The $3 30 to $3 50 range and this is consistent with what our models say about our current liability sensitive position.
Now notwithstanding this extraordinarily challenging interest rate environment Thats created a near term pullback on our net interest margin our performance metrics for the quarter still surpass 4% return on assets of approximately one 5% <unk> ratio and an efficiency ratio below 50%.
And even with dividends and share repurchases my forecast calls for maintaining or improving capital ratios and increasing tangible book value per share.
For the quarter.
Sequential loan growth was below 1%, while deposits grew by more than 5%, resulting in an improvement in the loan to deposit ratio to less than 105.
Let me turn to noninterest income for the quarter. It was down from <unk> levels. There were a couple of nonrecurring items in there and some SBA sales had been delayed those sales are scheduled to close in the second quarter and Im hopeful in the second quarter will close on about 500000 engaged in SBA is by the fourth quarter I expect we should get close to a 4 million.
Run rate for non interest income.
Going to expenses as I anticipated expenses increase sequentially, largely resulting from normal salary increases in this inflationary environment as well as an increase in staff increased cost related technology also worrying factor for the rest of the year given the anticipated slowdown in the economy I am kind of guide you to the <unk>.
That expense growth.
Let me move on to the ACL to credit our seasonal modeling resulted in a relatively small provision in the quarter and that reflects no material changes to Moody's economic forecast.
A slight increase in our qualitative factors, but there was flat loan growth and no material changes to specific reserves.
We did have about $4 million in charge offs in the quarter that had no impact on provision expense. They had already been reserved for little more than half of that was related to the resolution of a handful of taxi medallion loans, we sold them for a little bit in excess of the carrying value. The other was a one off commercial real estate loan that was originated by an acquired bank.
That had also been reserved for previously and therefore had no impact on provisioning for this quarter.
In terms of non performing assets, we had a slight uptick in non accrual loans. It relates to one multifamily property it too as part of an acquisition that loan is 90 days past due but the current loan to value is 85% and thats expected to be worked out successfully.
I'd also like to take a moment now to remind everyone that we have only limited unrealized losses in our available for sale securities portfolio, and our tangible common equity and tangible book value per share were largely unaffected by higher rates as such it is unlikely unless the economics are overwhelmingly compelling that we would undertake a.
<unk> transaction that would dilute tangible book value by the way our tangible book value per share at quarter end was $22 seven.
Up from year end and this is the 12th consecutive quarter. It has increased.
And so before turning the call back over to Frank I want to close with these thoughts.
I believe current connect one bank Corp, shareholders will be significantly rewarded in the year ahead for the following reasons first our liquidity position is extraordinarily more than two five times coverage ratio our credit exposures to office in New York City multifamily segments of small we've stressed our portfolio for renewal rollover risk and <unk>.
Any risks we have is very limited.
Our margin is now the press, but in our view will return to historical levels and our performance metrics will get back to best in class.
Our capital remained town unaffected by the <unk> issue and the current earnings run rate is more than adequate to support our plans and finally, we are trading at just 70% of tangible book value a return of our stock price to tangible book value It would imply a greater than 40% shareholder return and at.
These levels, we will be back in the market repurchasing stock and now turn it back over to you Frank Thanks, Bill in closing, although the industry remains burdened by near term headwinds connect one continues to perform well our deep experience team continues to successfully manage through these turbulent times much as they have in <unk>.
Prior cycles.
The actions, we've taken to focus on deposits and enhance our balance sheet and capital base.
<unk> connect one for the challenges ahead and the flexibility to continue to invest in our valuable franchise.
Firmly believed that our conservative client centric model diversified balance sheet solid liquidity and our track record of profitability positions us to successfully navigate any near term challenges.
Also.
Allows connect one to fully capitalize on both the near term and long term growth opportunities that will arise.
We're excited about our future and as Bill just mentioned by focusing on our strategic priorities, we will drive shareholder value.
As we move through the rest of 2023, the temporary decline in profitability is not impacting our ability to fire on all cylinders and take advantage of the market. Thanks.
Thanks, again, and we are happy to take your questions operator.
We will now begin the question and answer session.
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Once again that with Star then one to ask a question at this time, we will pause momentarily to assemble the roster.
Okay.
Our first question will come from Daniel Tamayo of Raymond James. Please go ahead.
Hey, good morning, guys.
Good morning, Dan Thanks for taking my question.
I guess first just a follow up on your on your net interest margin.
Discussion Bill.
Yes.
What do you think happens with.
With the mix of noninterest bearing what is in your.
Kind of thoughts there are assumptions for the rest of the year and then.
I guess when you say you think you can get back to that normalized 330 to $3 50, what goes into that thought process. What does it take to get to get you there. Thanks.
While the noninterest then I think I think its slowing down we are noticing that it's slowing down the transfer of noninterest bearing deposits, but I would imagine that will still continue to drag down margins across the industry a little bit.
Hard for me to say exactly how much but I do believe it's slowing down.
As far as getting back to our margin I mean, you can just it's a pretty simple exercise, but it takes some assumptions that you have to make in terms of the speed of rate cutting which I think is now projected to take place towards the end of this year.
But.
As rates come down as the short end comes down and more deposits, our interest bearing and interest bearing.
We are more liability sensitive than ever and I think thats, a good position to be in and as you know the beta on the way down is tends to be faster than the beta on the way up.
Okay.
And I guess more near term.
You talked about.
The pressure you are at 3% just wondering if you could give us a little more detail on how youre thinking about.
The magnitude of pressure that may be evident this year.
And what the.
The rate environment does that mean, if were flat for the rest of the year kind of what youre thinking versus the.
Yes, like I said.
I think we can remain flat, but it's hard to guide that way when you know that there's pressure on liquidity out in the marketplace. We do have some Cds that are repricing, but it's not that much. We don't have plans to raise rates anymore and the asset side, we will continue to reprice higher so it really comes down to how fast or whether it's.
<unk> the outflow of noninterest bearing balances so.
I think we're going to say anything et cetera, My remarks that we're closer to the terminal multiple Tom terminal beta than most star and so I can't say for sure. We wont have a little bit more margin compression, but I would expect it to be lower than the rest.
Okay understood.
And last question, maybe for you Frank on the repurchases.
I hear you on the fact that you that you will be repurchasing.
Prices.
Just curious if you could remind us on what limits you have in place right now and how much you think you'd actually be willing to do given given the price and at what price that that starts to wane.
Well this is bill.
I'll go first.
When the when the prices below tangible book, it's actually accretive to tangible book so.
The the analysis works out very smoothly.
So certainly at these levels and above these levels.
It would be buyers.
We bought back 205000 last quarter.
We could go a little bit faster than that but that's sort of our typical run rate.
When things are when market conditions permit.
300 to 350000 per share per quarter.
Activity.
Got it well thanks for all the color guys I'll step back.
Sure. Thanks, Jeff Thank you Dan.
The next question comes from Matthew Breese with Stephens. Please go ahead.
Hey, good morning.
Alright.
Over the years, you've spent a lot of disruption in your market, but obviously with what happened with signature and then dislocation at some of the other institutions I was hoping you can give us some sense for with the increased disruption in your markets have you seen any inflow of depositors or.
Lending teams things like that that have come your way and to what extent do you think you can take advantage of further disruption.
Well I think I said in my comments, Matt that this could be a once in a generation opportunity for us.
We're used to as you said, we are used to disruption in the marketplace to never like this and never of.
Pretty highly esteemed and respected competitors that have built really tremendous teams to see those broken down the way that we've seen them.
While I do feel bad for some of those folks on the other hand it just.
Presents us with an enormous opportunity.
We've actually executed on a number of those.
We have a really nice pipeline in front of us.
Folks that have reached out to us folks that we're reaching out proactively and I think thats going to go on for quite a while so there's a real opportunity here for us notwithstanding all the negativity that's in the market people seem to forget that.
Yes, we're in the New York marketplace, but that means we're in the New York marketplace and this was ground zero for a lot of that disruption and we're going to be best suited to take advantage of it.
And then maybe I understand loan loan growth guidance is flat for the year, but there will be some.
Some new originations what is the the new role on yields blended or if you want to provide for CRE and C&I that'd be helpful versus what's rolling off.
Yes, I would say the average loans coming on the books today is around 7% and a half.
It depends on where it is.
Some of our floating rate.
Loans that are coming on are coming on and even a little bit higher than that.
So it's a really good opportunity.
Keep that pressure off the margin for the new loans that we do bring onboard.
We did guide to a flattish year. It really is hard from where we sit right now to predict where we're going to be relative to all the originations that are taken place keep in mind, we still have.
Pretty big.
Our loan portfolio, which has a lot of amortization and payoffs and Paydowns. We do a lot of construction, we have a lot of bridge loans lines of credits. So it takes an awful lot of origination just to stay flat.
And so being flat in my opinion in this economic cycle with our credit discipline I would say that that's a win.
If we were to grow a few percentage points that wouldn't shock me either.
Great and then last one for me is obviously there.
There is a lot of concern and heightened concern around all things commercial real estate, particularly office.
Pretty big.
Given your portfolio you have $5 $8 billion of CRE, obviously, youre going through valuation appraisals in deals all the time.
For stuff that is either selling from pre COVID-19 or being newly appraised.
And so being flat in my opinion in this economic cycle with all of our credit discipline I would say that's a that's a win.
Is it kind of the change in valuations for commercial real estate across your markets and does it vary within New York City versus North Jersey wed love to just some color on that.
Yes, Matt.
So interesting to me that everyone takes out this enormously broad brush and calls it all CRE and I am looking across the street at one of the assets that we've went on and it is.
Multi tenant a doctor's office.
They've got like a 110% occupancy is going to line out the door people, who want to get in that space because of where it's located and the condition of the building and everything else I mean that loan is 100% secured.
There are office towers in New York City that are near vacant. So you can't put those two things in the same bucket.
You can't look at multifamily that's in suburban markets with transit oriented locations. The same way you look at.
Rent stabilized apartments in New York City, and some of the boroughs. So when we when I like to think about our CRE exposure I like to think about all the various segments that we're in and we've been very very careful and disciplined about what we learned to look at more than just the <unk>.
There are office towers in New York City that are near vacant. So you can't put those two things in the same bucket.
Asset itself, we're looking at the sponsors were looking at track Records, we're looking at growth trends in each of the submarkets each of the categories in each of the different types of real estate had a completely different complexion.
When you look across some of the larger.
Aspects of our portfolio things like multifamily in general I would say from a peak, which that Pete got there very quickly I would say, we are probably down somewhere between 15 and 20%.
From a valuation perspective.
Okay.
Alright.
Leave it there thanks for taking my questions.
You're welcome Matt.
Once again, if you would like to ask a question. Please press Star then one.
And the next question comes from Frank Schiraldi of Piper Sandler. Please go ahead.
Good morning.
Alright, Thanks, Greg.
I just had one question left.
On my list here in terms of the <unk>.
You talked about the expense guidance pretty flat going forward.
For.
Just given the inflationary environment given some of the things Brian talked about in terms of opportunities here in the marketplace can.
Can you talk a little bit more about how do you have the opportunity to hold that back or cut elsewhere.
Think about that being flattish through year end.
Yes, no good question.
Certainly if I had a few comments, but seasonally we generally have the way we do our accounting the first quarter has more expensive because of the way compensation is paid out.
So.
Last year, we had a lot of hiring and growth throughout the year, it's possible that our staff count goes down a little bit. So the combination of those two things that were seasonally higher in the first quarter plus the potential for less staff going forward could lead.
Im just projecting approximately a half.
Flat growth and expenses.
And Frank part of that.
Flat projection I know, we said what seems to be contradictory, which is there is opportunities to hire some really great talent in the market, we're going to seize on those opportunities and at the same time, we're going to optimize our existing.
Staff Count branch count everything else that we look at utilized technology to.
Reduced.
Human capital that we have in certain areas and really be able to invest in.
High performing revenue producing people instead.
Alright flat growth and expenses.
Yes.
Okay, Great and then I guess and by the way that's and by the way that's something that's been going on here for years I. Just think there is more opportunity for it today.
Gotcha.
And then I guess.
Just a quick clarification I just want to make sure I heard correctly. During your prepared remarks, I believe you said LTV is under 50%.
But I missed what that was that an office with that on the office portfolio.
<unk> capital that we have in certain areas and really be able to invest in high.
Yes, that's correct that's the office portfolio.
And I think.
You talked about.
Some valuation contraction in different property types.
Yes.
What are you seeing in terms of.
New York City Office, I mean, either anecdotally.
Or through some updated appraisals.
Then.
And they're able to see just kind of curious what the valuation contraction you think has been on.
That property.
I don't think you can apply any sort of average contraction in the New York City office portfolio, we have very little of it so I can't really speak to it.
But I missed what that was was that an office was that on the office portfolio or.
Yes, that's correct that's the office portfolio.
And I think.
Based on appraisals I've seen I can only tell you anecdotally what I've seen.
You talked about.
Some valuation contraction in different property types.
Either because it's been presented to us or we have.
What are what are you seeing in terms of.
<unk> spoken to folks because we are in the market.
New York City Office, I mean, either anecdotally.
It's really a hit or Miss situation like I'll tell you, where our office is located at.
Or through some updated appraisals.
At 50, 50, Madison I think that building is pretty much 100% occupied.
And able to see just kind of curious what the valuation contraction you think has been.
So he doesn't have an issue there.
But across the street.
On that property.
I don't think you can apply any sort of average contraction in the New York City office portfolio, we have very little of it so I can't really speak to it.
There is a more a newer more modern building, where I don't think they are 50% occupied so those are two completely different.
The dynamics that are literally 90, I won't even say walking distance you can hold hands, if you're stuck his hands out the windows.
Based on appraisals I've seen I can only tell you anecdotally what I've seen.
Office type buildings, there are buildings in New York that are.
Either because it's been presented to us or we have.
Under 20% occupied there are buildings that are 100% occupied with waiting list. So it is asset specific and Thats one of the things I really don't love about the way CRE is being portrayed yes, there are issues strategic strategic and structural issues around back to work and everything else.
Spoken to folks because we're in the market.
It's really a hit or Miss situation like I'll tell you, where our office is located.
At 50, 50, Madison I think that building is pretty much 100% occupied.
So he doesn't have an issue there.
But across the street.
There's a.
More a newer more modern building, where I don't think they are 50% occupied so those are two completely different.
But it is very specific it is specific to locations, it's specific to building type and specific to tenants.
Dynamics that are literally not even I wanted to say walking distance you can hold hands, if you're stuck his hands out the windows.
There are tenants looking to expand their presences there are tenants looking to reduce their presences. If you have more of the latter and less of the former.
Office type buildings, there are buildings in New York that are.
Youre going to have a building that's in trouble. So and then it depends on how much that's on the building too so.
To say like.
Is there a an average decrease in the value of office portfolios in the city.
I think there would still be a lot of interest in there.
Those.
It is very specific it's specific to locations. It's specific to building type it's specific to tenants.
Those those transactions in those buildings that have long term tenants solid tenants that are looking to expand.
There are tenants looking to expand their presences there are tenants looking to reduce their presences. If you have more of the latter and less of the former youre going to have a building that's in trouble. So and then it depends on how much that's on the building too so hard to say like.
They will still be able to find capital.
Okay.
Alright.
I appreciate it thanks.
Alright, great.
The next question is a follow up from Matthew Breese of Stephens. Please go ahead.
Hey, good morning again.
Hi, Matt.
We didn't touch on this I know we've discussed deliberate of the mixed shift but wanted to get your thoughts on what you expect in terms of total deposit growth for the rest of the year.
I think there would still be a lot of interest in those.
Those those transactions in those buildings that have long term tenants solid tenants that are looking to expand.
Yes.
Well, Matt that's a hard thing to forecast.
Again, I think if we.
Okay.
And the year with a flattish type balance sheet I would say that we've done a really great job.
But I do think that we will see continued inflows of deposits over time.
The next question is a follow up from Matthew Breese of Stephens. Please go ahead.
That we and again there is some seasonality to some of the deposit. So we have to we'd have to take out some of that noise, but the efforts here are mostly around either complete organic deposit origination origination of the types of credits that bring deposits with them.
Hi, Matt.
<unk>.
The reinforcement and the expansion of verticals here that are generally deposit rich and a lot of other programs that continue to bring deposits out whether theyre digital or whether there.
But I do think that we will see continued inflows of deposits over time.
You built with human capital. So my expectation as deposits continue to grow what percentage they grow over the size of the portfolio sort of hard for me to assess at this point, but I would believe we would be in a positive mode as opposed to what I think most of the industry is either.
<unk> been saying or talking about which I find somewhat strange is that there.
Willing able and ready to let their deposits roll off their balance sheet, because they're trying to protect their NIM.
We're going to be in the opposite of that and we are looking to bring on high quality clients that bring solid depository relationships and we will do what we can about the NIM, but it's much more important that we build a great franchise here of clients, who appreciate and value the services that we provide.
You built with human capital. So my expectation as deposits continue to grow what percentage they grow over the size of the portfolio sort of hard for me to assess at this point, but I would believe we would be in a positive mode as opposed to what I think most of the industry is easy.
Great and then just one other.
Obviously.
Cash balances liquidity bolstered during the quarter.
<unk> been saying or talking about which I find somewhat strange is that there.
Do you have a timeframe for when that might normalize and then.
Willing able and ready to let their deposits roll off their balance sheet, because they're trying to protect their NIM.
How do you expect the securities portfolio to play out for the rest of the year as well.
We're going to be in the opposite of that and we are looking to bring on high quality clients that bring solid depository relationships and we will do what we can about the NIM, but it's much more important that we build a great franchise here of clients, who appreciate and value the services that we provide.
Well Matt.
It's already coming off the balance sheet, a little bit of excess cash.
And having those readily accessible line is the equivalent of having cash.
We just have to press a button to get the cash.
No.
As far as the securities portfolio. It goes as part of the whole equation parts of that part of that portfolio has been pledged.
Great and then just one other.
Obviously.
Cash balances liquidity bolstered during the quarter.
For loans part of it has been used for Collateralization of deposits, but there is also another couple of hundred million that's available for sale at market.
Do you have a timeframe for when that might normalize and then.
How do you how do you expect the securities portfolio to play out for the rest of the year as well.
So it's just part of the whole the whole liquidity Kate equation is more than just cash on the balance sheet. Although people talk for lots of press releases bolstering our liquidity, but it's not just cash on the balance sheet.
Well Matt.
It's already coming off the balance sheet, a little bit of excess cash knee, having those readily accessible line is the equivalent of having cash.
We just have to press a button to get the cash so.
Understood, Okay, I hope I'll leave it there.
And I can talk to you more about it after okay.
As far as the securities portfolio. It goes as part of the whole equation.
I appreciate it very much guys.
So that part of that portfolio has been pledged.
Okay.
For Loews part of it has been used for Collateralization of deposits, but there is also another couple of hundred million that's available for sale at market.
This concludes our question and answer session I would like to turn the conference back over to management for any closing remarks.
Well again I want to thank everyone for joining us here for our first quarter conference call and look forward to seeing you all at our next meeting in July to July and thank you.
So.
It's just part of the whole the whole liquidity Cape equation is more than just cash on the balance sheet. Although people talk for lots of press releases bolstering our liquidity, but it's not just cash on the balance sheet.
Yes.
Understood, Okay, I hope I'll leave it there.
Can talk to you more about it after okay.
Appreciate it very much guys talk to you.
This concludes our question and answer session I would like to turn the conference back over to management for any closing remarks.
Well again I want to thank everyone for joining us here for our first quarter conference call look forward to seeing you all at our next meeting in July .
And thank you.
The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.
Yes.
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Okay.
Yes.
Okay.
Yes.
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