Q1 2024 First Bank Earnings Call
Yeah.
Operator: Ladies and gentlemen, thank you for standing by. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the First Bnk FRBA First Quarter 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise.
Ladies and gentlemen, thank you for standing by.
Abby: My name is Abby and I will be your conference operator today.
Abby: At this time I would like to welcome everyone to the first bank F or be a first quarter 'twenty 'twenty four earnings conference call.
Abby: All lines have been placed on mute to prevent any background noise.
Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press the star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star 1 a second time. Thank you, and I would now like to turn the conference over to Mr. Patrick Ryan, President and CEO. You may begin.
Abby: After the Speakers' remarks, there will be a question and answer session. If you would like to ask a question during that time simply prestige star followed by the number one on your telephone keypad.
Abby: If you would like to withdraw your question Press Star one a second time.
Abby: Thank you and I would now like to turn the conference over to Mr. Patrick Ryan President and CEO you may begin.
Patrick L. Ryan: Thank you, Abby. I'd like to welcome everyone today to First Bank's first quarter 2024 earnings call. I'm joined by Andrew Hibshman, our CFO, Darlene Gillespie, our Chief Retail Banking Officer, and Peter Cahill, our Chief Lending Officer. Before we begin, however, Andrew will read the Safe Harbor.
Abby: Yeah.
Patrick L. Ryan: Thank you Abbie I'd like to welcome everyone today to first bank's first quarter 2024 earnings call.
Patrick L. Ryan: I'm joined by Andrew Hibshman, our CFO Darlene Gillespie, our chief retail banking officer.
Patrick L. Ryan: Peter Cahill, our chief lending officer before we begin however, Andrew will read the Safe Harbor statement.
Patrick L. Ryan: Okay.
Andrew L. Hibshman: The following discussion may contain forward-looking statements concerning the financial condition, results of operations, and business of First Bnk NJ. We caution that such statements are subject to a number of uncertainties, and actual results could differ materially, and therefore, you should not place undue reliance on any forward-looking statements we make. We may not update any forward-looking statements we make today for future events or developments. Information about risks and uncertainties is described under item 1a risk factors in our annual report on form 10k for the year ended December 31st, 2023 filed with the FDIC.
Andrew L. Hibshman: The following discussion may contain forward looking statements concerning the financial condition results of operations and business of first bank. We caution that such statements are subject to a number of uncertainties and actual results could differ materially and therefore, you should not place undue reliance on any forward looking statements. We make we may not update any.
Andrew L. Hibshman: Forward looking statements, we make today for future events or developments information about risks and uncertainties are described under item one a risk factors in our annual report on Form 10-K for the year ended December 31, 2023 filed with the FDIC Pat back to you.
Patrick L. Ryan: Thank you Andrew. I'd like to start with a quick overall view. I think the first quarter was an excellent quarter in terms of earnings produced. We did see the benefits of Project Sculpt, which, as we've referenced in the past, is our effort to create a leaner, more capital-efficient balance sheet. We also saw continued strong asset quality performance and good cost controls during the quarter, all of which helped to lead to strong earnings results during the period.
Pat: Thank you Andrew I'd like to start with a quick overall.
Speaker Change: Do you I think first quarter was an excellent quarter in terms of the earnings produce.
Speaker Change: We did see the benefits of project scope, which as we've referenced in the past is our effort to create a leaner more capital efficient balance sheet.
We also saw continued strong asset quality performance.
Speaker Change: Good cost control during the quarter, all of which helped to lead to strong earnings results during the period.
Patrick L. Ryan: We did see a modest decline in loans outstanding by the end of the quarter, but that reduction came from declines in non-core investor real estate or acquired loans. We actually enjoyed nice growth in the quarter in our C&I category. Deposits were flat, and the environment for attracting and retaining core deposits remains challenging.
Speaker Change: We did see a modest decline in loans outstanding by the end of the quarter, but that reduction came from declines in non core investor real estate or acquired loans.
Speaker Change: We actually enjoyed nice nice growth in the quarter and our C&I categories.
Speaker Change: Deposits were flat in the environment for attracting and retaining core deposits remains challenging while we were successful in adding net new accounts during the quarter movement of funds out of existing accounts and shifting of funds out of noninterest bearing continued to push deposit costs higher.
Patrick L. Ryan: While we were successful in adding net new accounts during the quarter, movement of funds out of existing accounts and shifting of funds out of non-interest bearing accounts continued to push deposit costs higher. Our loan pipeline remains very healthy, and we expect we'll be able to meet our lending goals for the year. With the sizable decline in CRE balances during the quarter, it's unclear where those balances will finish, but with the healthy pipeline we have, we think our overall lending goals will be met.
Speaker Change: Our loan pipeline remains very healthy and we expect we'll be able to meet our lending goals for the year with a sizable decline in CRE balances during the quarter, it's unclear where those balances will finish but with the healthy pipeline. We have we think our overall lending goals will be met.
Patrick L. Ryan: During the quarter, we had a few non-core items that are worth mentioning. The after-tax impact of these various items was just under $300,000. We had a bully debt benefit of $187,000. We also had a purchase accounting adjustment from the retired sub-debt, which produced about a $400,000 earnings benefit, and then offsetting that was about $200,000 in abnormal additional payroll taxes during the quarter. In addition to these items, we also had some other unusual items, which I'm sure if you read the release, you noticed.
During the quarter, we had a few noncore items that are worth mentioning.
Speaker Change: The after tax impact of these various items was just under $300000. We had a boldly death benefit of 187000.
Speaker Change: We also had a purchase accounting adjustment from the retired sub debt, which produced about 400000 dollar earnings benefit and then offsetting that was about 200000 in abnormal additional payroll taxes during the quarter.
Speaker Change: In addition to these items. We also had some other unusual items, which I am sure. If you read the release you notice the first of which was the negative credit provision largely driven by the overall reduction in loan balances during the quarter and as Youll see in the report our overall allowance to loans basically.
Patrick L. Ryan: The first of these was the negative credit provision, largely driven by the overall reduction in loan balances during the quarter. And as you'll see in the report, our overall allowance for loans basically stayed about where it was in the prior quarter. And we also had a tax adjustment, which led to a lower effective tax rate and that added about $837,000 to earnings during the period. Going forward, we expect the tax rate should return to historical levels.
Speaker Change: Stayed about where it was in the prior quarter and we also had a tax adjustment, which led to a lower effective tax rate and that added about 837000 to earnings during the period going forward. We expect the tax rate tax rate should return to historical levels.
Patrick L. Ryan: So to hit a few highlights, our adjusted return on assets was 1.39%, which is basically in line with where we were last quarter at 1.38% and obviously at very healthy levels. Our adjusted diluted earnings per share was $0.49, which is right in line with the prior quarter. Our tangible book value per share increased 3.2% during the period, and our efficiency ratio remained below 60% for the past 19 quarters. In summary, as we hoped, our scaled-down balance sheet is driving capital efficiency, improved interest rate risk management, and continued strong earnings.
Speaker Change: So to hit a few highlights our adjusted return on assets was $1 three 9%.
Speaker Change: Was basically in line with where we were last quarter at 1.38% and obviously at very healthy levels. Our adjusted diluted earnings per share was <unk> 49, which is right in line with the prior quarter, our tangible book value per share increased three 2% during the period and our efficiency.
Speaker Change: <unk> remained below 60% for the past 19 quarters now so in summary, as we hoped our scaled down balance sheet is driving capital efficiency improved interest rate risk management and continued strong earnings.
Patrick L. Ryan: While many banks remain stuck with large mark-to-market positions that constrain business, profitability, and strategic alternatives, our balance sheet is getting leaner, and we have maximum flexibility to thrive as we move forward, even in a higher-for-longer interest rate world. At this point, I'd like to turn it over to Andrew to discuss some of the results in more detail.
Speaker Change: Many banks remain stuck with large mark to market decisions that constrained business profitability and strategic alternatives. Our balance sheet is getting leaner and we have maximum flexibility to thrive as we move forward even in a higher for longer interest rate world.
Speaker Change: At this point I'd like to turn it over to Andrew to discuss some of the results in more detail Andrew.
Andrew L. Hibshman: Thank you, Pat. For the three months ended March 31st, 2024, we recorded net income of $12.5 million, or $0.50 per diluted share, and a 1.41% return on average assets. Our strong quarterly earnings metrics were driven by stable margin, stable asset quality metrics, and continued strong efficiency metrics. Additionally, our net income was positively impacted by the credit loss benefit recorded during the first quarter. The benefit was primarily due to the decline in loans, coupled with strong credit metrics, with non-performing loans declining by $7.9 million and net recoveries during the quarter when excluding a PCD loan charge-off of $5.5 million, which was reserved for through purchase accounting marks at the time of Malvern's acquisition.
Andrew L. Hibshman: Thank you Pat for the three months ended March 31, 2024, we recorded net income of $12 5 million or <unk> 50 per diluted share and a 141% return on average assets are strong quarterly earnings metrics were driven by stable margin stable asset quality metrics and continued strong efficiency metrics. Our net income was.
Andrew L. Hibshman: Positively impacted by a credit loss benefit recorded during the first quarter. The benefit was primarily due to the decline in loans, coupled with strong credit metrics with nonperforming loans declining by $7 9 million and net recoveries during the quarter when excluding a <unk> loan charge off of $5 5 million, which was a <unk>.
Andrew L. Hibshman: Therefore, it through purchase accounting marks at the time of Malvern acquisition. This led to our overall allowance for credit losses to total loans to decline to one 2% at March 31 from $1 four zero percent at December 2023, including General acquisition accounting credit marks that are not included in the allowance ratio.
Andrew L. Hibshman: This led to our overall allowance for credit losses to total loans declined to 1.22% at March 31st from 1.40% at December 2023, including general acquisition accounting credit marks that are not included in the allowance. Our ratio increased to 1.56%. During the first quarter, we did not execute any additional loan or investment sales.
Andrew L. Hibshman: Increases to 156%.
Andrew L. Hibshman: During the first quarter, we did not execute any additional loan or investment sales. However, we did continue to reduce our investor commercial real estate concentration traditional payoffs and paydowns offset somewhat by selective new originations during Q1 2024, investor commercial real estate loans declined by $42 8 million.
Andrew L. Hibshman: However, we did continue to reduce our investor commercial real estate concentration, with the additional payoffs and paydowns offset somewhat by selective new origination. During Q1 2024, investor commercial real estate loans declined by $42.8 million when including multifamily and construction and development, while owner occupied commercial real estate and CNI loans increased by a combined $15.4 million. Overall loans were down $29.1 million during the first quarter of 2020.
Andrew L. Hibshman: When including multifamily and construction and development, while owner occupied commercial real estate and C&I loans increased by a combined $15 4 million overall loans were down $29 1 million during the first quarter of 2024.
Andrew L. Hibshman: Total deposits were up slightly during the quarter, but non-interest-bearing balances declined as we saw a continued shift of deposits into interest-bearing products. This contributed to a 20 basis point rise in the total cost of deposits during the quarter. The cost of deposits for the quarter was also impacted by some liquidity enhancement that we did at the end of 2023 and into the early part of 2024 by adding some additional broker deposits.
Andrew L. Hibshman: Total deposits were up slightly during the quarter. However, noninterest bearing balances declined as we saw a continued shift of deposits into interest bearing products. This contributed to a 20 basis point rise in the total cost of deposits during the quarter.
Andrew L. Hibshman: Cost of deposits for the quarter was also impacted by some liquidity enhancement that we did at the end of 2023 and into the early part of 2024 by adding some additional broker deposits in market deposit pressure also impacted deposit pricing in the first quarter.
Andrew L. Hibshman: In-market deposit pressure also impacted deposit pricing in the first quarter. We are pleased to maintain the overall level of deposit balances while market conditions continue to be challenged. While deposit costs increased, we believe that maintaining deposit levels to assist in paying off higher-cost sub-debt and borrowings, while maintaining strong liquidity, was a net positive during the quarter. In addition, we had significant unused borrowing capacity at March 31st, 2024, and we pledged additional commercial loans to the FHLB subsequent to quarter end, which increased our capacity.
Andrew L. Hibshman: We were pleased to maintain the overall level of deposit balances while market conditions conditions continued to be challenging while deposit costs increased we believe that maintaining deposit level to assist in paying off higher costs sub debt and borrowings while maintaining strong liquidity.
Andrew L. Hibshman: As a net positive during the quarter.
Andrew L. Hibshman: In addition, we had significant unused borrowing capacity at March 31, 2024, and we pledged additional commercial loans to the FHA <unk> subsequent to quarter end, which increased our capacity.
Andrew L. Hibshman: Our net interest margin declined slightly to 3.64% in the first quarter of 2024, compared to 3.68% in the fourth quarter of 2023. However, we continue to benefit from acquisition accounting accretion. In Q1 2024, we recorded an acceleration of accretion on the mark on the acquired Malvern subdebt, which was redeemed during this quarter.
Andrew L. Hibshman: Our net interest margin declined slightly to $3 64 in the first quarter of 2024 compared to 368% in the fourth quarter of 2023, we continue to benefit from acquisition accounting accretion in Q1 2024, we recorded an acceleration of accretion on the Mark on the acquired Malvern sub debt, which was redeemed during this.
Andrew L. Hibshman: This acceleration reduced interest expense on subordinated debt. This led to an increase in the net positive impact on net interest income from acquisition accounting accretion to approximately $4.2 million in the first quarter of 2024, compared to an approximately $3.9 million positive impact on net interest income in the fourth quarter of 2023. Excluding the acquisition accounting income impact, we estimated that the margin declined by approximately 9 basis points compared to the linked- Throughout the rest of 2024, our margin will benefit from the $25 million subordinated debt redemption, which was carrying a 9.79% rate. However, we expect continued margin compression from persistent deposit pricing pressure with a higher for longer rate set amount.
Andrew L. Hibshman: <unk>.
Andrew L. Hibshman: This acceleration reduced interest expense on subordinated debt, which led to an increase in the net positive impact on net interest income from acquisition accounting accretion to approximately $4 2 million in the first quarter of 2024 compared to an approximately $3 9 million positive impact on net interest income in the fourth quarter of 2023.
Andrew L. Hibshman: Excluding the acquisition accounting income impact, we estimated that the margin declined by approximately nine basis points compared to the linked fourth quarter.
Andrew L. Hibshman: Throughout the rest of 2024, our margin will benefit from the $25 million subordinated debt redemption, which was carrying a $9 seven 9% rate. However, we expect continued margin compression from partition persistent deposit pricing pressure with a higher for a longer rate settlement.
Andrew L. Hibshman: The subdebt redemption did lead to a reduced total risk-based capital ratio, but our ratio remained well above minimum capital ratios at 11.41% at March 31st. In the first quarter of 2024, total non-interest income increased significantly compared to the fourth quarter of 2023, primarily due to losses on loan and investment sales in the fourth quarter, which were net against non-interest income. In addition, included in our Q1 2024 non-interest income was Banco and Life Insurance income from a death benefit of approximately $186,000.
Andrew L. Hibshman: The sub debt redemption did lead to a reduced total risk based capital ratio, but our ratio remained well above minimum capital ratios at 11, four 1% at March 31.
Andrew L. Hibshman: In the first quarter of 2024 total noninterest income increased significantly compared to the fourth quarter of 2023, primarily due to losses on loan and investment sales in the fourth quarter, which were net against noninterest income. In addition included in our Q1 2024.
Andrew L. Hibshman: Noninterest income was bank owned life insurance income from a death benefit of approximately 187000.
Andrew L. Hibshman: Nonissue's expenses were $17.8 million in the first quarter of 2024, compared to $17.6 million, excluding merger-related expenses, in the fourth quarter of 2023. The slight increase was primarily due to an increase in salary and employee benefits, which was partially offset by decreases in professional fees, regulatory fees, marketing, and other expenses. The increase in salary and benefits was primarily due to standard salary increases, which typically take place in the first quarter of the year, an approximately $214,000 increase in payroll tax expense due to year-end bonuses being paid during the first quarter, and some slight increases in benefit costs.
Andrew L. Hibshman: Noninterest expenses were $17 8 million in the first quarter of 2024 compared to $17 6 million excluding merger related expenses in the fourth quarter of 2023. The slight increase was primarily due to an increase in salary and employee benefits, which was partially offset by decreases in professional fees regulatory fees marketing.
Andrew L. Hibshman: Other expenses the increase in salary and benefits was primarily due to standard salary increases, which typically take place in the first quarter of the year and.
Andrew L. Hibshman: And approximately $214000 increase in payroll tax expense due to the yearend bonuses being paid during the first quarter and some slight increases in benefit costs. The decline in the other expense categories from the prior quarter were related to certain elevated expenses in the fourth quarter, primarily related to certain residual malware and related expenses.
Andrew L. Hibshman: The decline in the other expense categories from the prior quarter was related to certain elevated expenses in the fourth quarter, primarily related to certain residual mal-related expenses. We have now realized all of the expected cost savings from the acquisition. We continue to focus on operating efficiency, and even as we have seen pressure on our margin and the continued impact of inflation on our expense base, our efficiency ratio remained relatively stable at 55.6% for the quarter-ended Q1 2024, compared to 53.8% during the fourth quarter of 2023, and we continue to track well below the peer average.
Andrew L. Hibshman: We have now realized all of the expected cost savings from the acquisition, we continue to focus on operating efficiency and efficiency and even as we have seen pressure on our margin and the continued impact of inflation on our expense base. Our efficiency ratio remained relatively stable at 55, 6% for the quarter ended Q1, 'twenty 'twenty four.
Andrew L. Hibshman: Compared to 53, 8% during the fourth quarter of 2023, and we continue to track well below peer averages.
Andrew L. Hibshman: Our Q1 2024 tax rate was positively impacted by certain discrete or one time tax adjustments that were primarily related to the finalization and filing of the final Malvern taxes turns during the first quarter of 2024, and we anticipate our effective tax rate going forward will be between 23% to 25%.
Andrew L. Hibshman: Our Q1 2024 tax rate was positively impacted by certain discrete or one-time tax adjustments that were primarily related to the finalization and filing of the final Malvern tax returns during the first quarter of 2024, and we anticipate our effective tax rate going forward will be between 23 to 25%. Although we continue to operate in a difficult rate environment, the efficiencies we gained from the Malvern acquisition and the balance sheet repositioning we executed during the second half of 2023 have already paid dividends and positioned us for strong core profitability in 2024. At this time, I'll turn it over to Darlene Gillespie, our Chief Retail Officer, for her remarks. Darlene Thanks, Andrew.
Andrew L. Hibshman: Although we continue to operate in a difficult rate environment. The efficiencies, we gain from the Malvern acquisition and the balance sheet repositioning we executed during the second half of 2023 has already paid dividends and position us for a strong core profitability in 2024 at this time I will turn it over to Darlene Gillespie, our chief retail officer for her remarks.
Darleen Gillespie: Thanks, Andrew Good morning, everyone I'm happy to share some of the deposit activity that took place throughout the quarter that has prepared us for what we expect to be a very successful 2024. Despite the continued challenging deposit environment in this higher for longer rates tend to lag.
Darleen Gillespie: While total deposits were up slightly from the end of 2023, we are still experiencing shifts within our deposit mix as customers and prospects continue to seek the highest return for their funds.
Darleen Gillespie: Thanks, Andrew. Good morning, everyone.
Darleen Gillespie: I'm happy to share some of the deposit activity that took place throughout the quarter that has prepared us for what we expect to be a very successful 2024 despite the continued challenging deposit environment and this higher for longer rates. While total deposits were up slightly from the end of 2023, we are still experiencing shifts within our deposit mix as customers and prospects continue to seek the highest return for their funds. Our non-interest-bearing portfolio decreased 1.1%, while our money market and savings increased 1.6%, and time deposits increased 1.1% from Q4 2023.
Darleen Gillespie: Our non interest bearing portfolio decreased one 1%, while our money market and savings increased one 6% and time deposits increased one 1%.
Darleen Gillespie: Q4 2023.
Darleen Gillespie: Market consistent consensus on fed rate hikes has changed considerably from the beginning of the year in January we were expecting six cuts now we're left wondering if there will be any with the recent strong job report and CPI exceeding market expectations. This has caused us to pivot.
Darleen Gillespie: Throughout the quarter, we began to lower rates on some of our promotional products and took some selective cost cutting initiatives without losing sight of the need to stay competitive amidst ongoing pricing competition in the market. While we have made to their laser focus on reducing our cost of deposits.
Darleen Gillespie: The market consensus on Fed rate hikes has changed considerably from the beginning of the year. In January, we were expecting six cuts. Now we're left wondering if there will be any with the recent strong job report and CPI exceeding market expectations.
Darleen Gillespie: This mix shift and pricing pressure has contributed to the increase of 20 basis points from the end of Q4 2023 as mentioned earlier.
Darleen Gillespie: This has caused us to pivot. Throughout the quarter, we began to lower rates on some of our promotional products and took some selective cost-cutting initiatives without losing sight of the need to stay competitive amidst ongoing pricing competition in the market. While we are laser focused on reducing our cost of deposits, this mixed shift in pricing pressure has contributed to the increase of 20 basis points from the end of Q4 2023, as mentioned earlier.
Darleen Gillespie: However, this has not changed our strategic focus and which we will continue to seek opportunities to onboard noninterest bearing and low cost deposits as well as determine ways to lower our costs, while still meeting the needs of our clients.
Darleen Gillespie: Changes, we are making today may not have an immediate significant impact, but it allows us to position ourselves for the months ahead.
Darleen Gillespie: However, this has not changed our strategic focus, which will continue to seek opportunities to onboard nine-inch bearing and low-cost deposits, as well as determine ways to lower our costs while still meeting the needs of our clients. The changes we are making today may not have an immediate significant impact, but they allow us to position ourselves for the months ahead. We continue to grow our deposit base by expanding existing relationships and developing new relationships through organic growth. We onboarded over $40 million in new court deposits in Q1.
Darleen Gillespie: We continue to grow our deposit base by expanding existing and developing new relationships through organic growth.
Darleen Gillespie: Onboard at over $40 million in new core deposits in Q1.
Darleen Gillespie: Well offset by some of the attrition we're experiencing in the form of malware footprint as we continue to reshape our balance sheet.
Darleen Gillespie: For optimal efficiency.
Darleen Gillespie: Okay with letting some of these higher priced deposits and single service relationships go and replacing them with lower cost full relationships.
Darleen Gillespie: Although offset by some of the attrition we're experiencing in the former Malvern footprint as we continue to reshape our balance sheet for optimum efficiency, we're okay with letting some of these higher price deposits and single service relationships go and replacing them with lower cost full relationships. We have some great initiatives we kicked off this past quarter that will assist us in our growth efforts as we continue to build and expand relationships throughout the remainder of the year and beyond. We onboarded a new escrow product, making it easier for our clients with the need to conduct their business on our platform. Our online account opening service will be kicked off at the end of this month.
Darleen Gillespie: We have some great initiatives, we kicked off this patent that.
That will assist us in our growth efforts as we continue to build and expand relationships throughout the remainder of the year and beyond.
Darleen Gillespie: We on boarded our new escrow product, making it easier for our clients with the need to conduct their business on our platform.
Darleen Gillespie: Our online account opening service will be kicked off at the end of this month.
Darleen Gillespie: And we continue to evaluate our deposit products and determine ways to make them more attractive for our clients and stickier for the bank.
Darleen Gillespie: We continue to provide training to our frontline sales teams to have effective conversations and improve the customer experience.
Peter J. Cahill: And we continue to evaluate our deposit products and determine ways to make them more attractive for our clients and stickier for the bank. We continue to provide training to our frontline sales teams to have effective conversations and improve the customer experience. We have two new branches in our pipeline for 2024, one being a de novo in New Jersey and the other a relocation out in our PA market. Overall, our deposit pipeline remains healthy.
Darleen Gillespie: We have two new branches in our pipeline for 2024 1 billion of de Novo in New Jersey, and the other a relocation and RPI market.
Darleen Gillespie: Overall, our deposit pipeline remains healthy opportunities in the commercial and government space as we continue to develop new full service relationships.
Darleen Gillespie: At the end of the fourth quarter 2023, I talked a little bit about <unk>.
Peter J. Cahill: Opportunities in the commercial and government space as we continue to develop new full service relationships. At the end of the fourth quarter of 2023, I talked a little bit about non-interest bearing funding, managing our cost of deposits, and organic growth. And these will continue to be key drivers of deposit activity in 2024. So that has not changed, and it will remain so throughout the rest of this year. Lastly, we know that the deposit and rate environment will continue to be challenging. However, we're extremely optimistic given what we've accomplished so far this year. At this time, I'll turn it over to Peter Cahill, our Chief Lending Officer, for his remarks. Peter?
Darleen Gillespie: Non interest bearing funding managing our cost of deposits.
Darleen Gillespie: Growth and these will continue to be key drivers to deposit activity in 2024.
Darleen Gillespie: So that has not changed and it will remain throughout.
Darleen Gillespie: The rest of this year.
Darleen Gillespie: Lastly, we know that deposits and rate environment will continue to be challenging. However, we're extremely optimistic given what we've accomplished so far this year.
Darleen Gillespie: At this time I will turn it over to Peter Cahill, our chief lending officer for his remarks Peter.
Thanks Sterling.
Peter J. Cahill: I'll try to provide some color now on how things are going in lending. As you read and heard previously, and again today, our goals are to prioritize relationships while reducing concentrations in investor real estate. And in the first quarter, as you heard, loans were down $29 million from the end of December. We've talked for a while about our disciplined approach to new business and our focus on what we think will be profitable relationships.
Peter J. Cahill: Try to provide some color on how on how things are going in lending.
Peter J. Cahill: As you read and heard previously and again today, our goals are to prioritize relationships, while reducing concentrations in investor real estate loans.
Peter J. Cahill: And in the first quarter as you have heard loans were down $29 million from the end of December.
Peter J. Cahill: We've talked for a while about our disciplined approach to new business and our focus on what we think will be profitable relationships.
Peter J. Cahill: This means relationships that bring deposits as well as adequate pricing on loans. This also means a greater focus on C&I loans, which for us includes owner-occupied real estate. And you can see in the schedules in the earnings release, and as Andrew recently mentioned, those segments continue to head in the right direction. This strategy for us is not new.
Peter J. Cahill: This means relationships that bring deposits as well as have adequate pricing on loans.
Peter J. Cahill: This also means a greater focus on C&I loans, which for US includes owner occupied real estate.
Peter J. Cahill: And you can see in the schedules in the earnings release and as Andrew.
Peter J. Cahill: Recently mentioned those segments continue to head in the right direction.
Peter J. Cahill: The strategy for us is not new.
Peter J. Cahill: And you'll hear when I talk about our pipeline that the volume of business we're looking at is as robust as ever. What we unfortunately encountered in the first quarter was a large number of asset sales on the part of our clients, and not all were in investor real estate. New loans closed and funded in Q1 totaled $78 million. In comparison, $78 million exceeded the quarterly average for all of last year.
Peter J. Cahill: And Youll hear when I talk about our pipeline that the volume of business. We're looking at is as robust as ever.
Peter J. Cahill: Well, we unfortunately encountered in the first quarter was a large number of asset sales on the part of our clients and not all were in the Investor Real estate segment.
Peter J. Cahill: New loans closed and funded in Q1 totaled $78 million in comparison to $78 million exceeded the quarterly average for all of last year.
Peter J. Cahill: It's important to note that these funded loans in Q1 consisted of 71% C&I loans and only 22% investor real estate, remaining primarily consumer. The issue in Q1 was that we experienced $74 million in payoffs, basically offsetting the new loan growth. When we get payoffs, we track the reason for them, determining whether they were caused by refinances out of the bank, you know, where we have a chance to retain a loan but maybe choose not to, asset sales resulting in the payoff of our loans, and loans that have undesirable credit quality, so we let them grow. Or sometimes the borrower has excess cash and chooses just to pay it off.
Speaker Change: It's important to note that.
Speaker Change: These funded loans in Q1 consisted of 71% C&I loans, and only 22% investor real estate, the remaining being primarily consumer.
Speaker Change: The issue in Q1 was that we experienced $74 million in pay offs basically offsetting the new loan growth when we get payoffs we track the reasons for them determining whether they were caused by refinances out of the bank, where we have a chance to.
Speaker Change: Retain alone, but maybe choose not to.
Speaker Change: Asset sales, resulting in the payoff of our loans.
Speaker Change: And loans that have undesirable credit quality, so we let them grow.
Speaker Change: Or sometimes the borrower has excess cash and chooses just to pass off.
Peter J. Cahill: In Q1, asset sales made up 55% of the payoffs, and the largest individual loan getting paid off from an asset sale was a C&I borrower where the business was sold. This large number of payouts coming from asset sales and the largest one being a C&I customer are both a little out of the ordinary for us. I can now comment on our loan pipeline. Our pipeline at March 31st stood at $300 million of probable funding, up from the December 31st level of $212 million.
In Q1 asset sales made up 55% of the pay offs elsewhere.
The largest individual loan getting paid off from a asset sale was a C&I borrower where the business was sold.
Speaker Change: These large number of payoffs coming from asset sales and the largest one being the C&I customer both a little out of the ordinary for us.
Speaker Change: I can now comment on our loan pipeline our pipeline at March 31 stood at $300 million of probable funding.
Speaker Change: Up from December 31st level of $212 million.
Peter J. Cahill: I'm very pleased with these results; I especially like that the $300 million is from 266 different loans, certainly the highest number of loans in a couple of years and an indicator of active calling efforts and good loan diversification. Our sales teams are out looking for the type of good relationship business that we've described, and the pipeline reflects the results of their activity. I should also mention that if we break down the pipeline, the various components, C&I loans make up 55% of the pipeline, investor real estate 40%, and consumer loans about 5% of the overall pipeline.
Speaker Change: I am very pleased with these results, especially like the $300 million from 266 different loans certainly the highest number of loans in a couple of years and an indicator of active calling efforts and good loan diversification.
Speaker Change: Our sales teams are out looking for the types of good relationship business that we've described and the pipeline reflects the results of their activities I should also mentioned if we break down the pipeline.
Speaker Change: The various components C&I loans make up 55% of the pipeline investor real estate, 40% and consumer loans about 5% of the overall pipeline.
Speaker Change: We're seeing every day the results of our active sales efforts and solid pipeline moving past the negative loan growth numbers in the first quarter loan fundings in April so far have been excellent and have outpaced the first quarter loan runoff and the surprise reduction in loans.
Peter J. Cahill: We're seeing every day the results of our active sales efforts at Solid Pipeline. Moving past the negative loan growth numbers in the first quarter, loan fundings in April so far have been excellent and have outpaced the first quarter loan runoff and the surprise reduction in loans. I expect we'll have good quarters in Q2 and beyond and meet our loan growth goals for the year. On the topic of asset quality, a hot one these days, particularly when it comes to real estate, I don't have much to add to what the earnings release and the earnings release supplement show. The information provided describes what I think is a stable and sound condition.
Speaker Change: Expect we'll have good quarters in Q2 and beyond and meet our loan growth goals for the year.
Speaker Change: On the topic of asset quality outline these days, particularly when it comes to real estate.
Speaker Change: I have much to add to the earnings release and the earnings release supplement shell.
Speaker Change: The information provided described so I think as a stable and sound condition.
Peter J. Cahill: We did see a modest uptick in delinquencies at quarter end. You won't see this in the release that we made yesterday, but it will show up in the call report 10-Q, which will be released shortly. This uptick was due to one large loan we acquired from Malvern that went 31 days past due before making its payment. All of our numbers are now back in line.
Speaker Change: You did see a modest uptick in delinquencies at quarter end you won't see this in the release.
Speaker Change: We made yesterday, but it will show up in the call report 10-Q, which will be released shortly this uptick was due to one large loan when we acquired from Malvern <unk> 31 days past due before making its payment all of our numbers are now back in line.
Peter J. Cahill: The asset quality table in the quarterly financial highlights section of the release shows positive trends in all areas. The earnings release supplement has some good slides covering geographic diversification and, importantly, the diversification of the investor's real estate portfolio. That one slide, I believe it's number 14, further breaks down our fairly modest office portfolio, virtually all of which is in our core market, but none located in major cities such as New York or Philadelphia, where a lot of the stress in the office market has been felt.
Speaker Change: Yes, it's a quality table in the quarterly financial highlights section of the release shows positive trends in all areas. The earnings release supplement has some good slides cover and geographic diversification and importantly, the diversification of the investor real estate portfolio.
Speaker Change: That one slide I believe it's a number of 14 further breaks down are fairly modest office portfolio virtually all of which is in our core market. The non located in major cities, such as New York or Philadelphia, where a lot of the stress in the office market has been felt.
Peter J. Cahill: I think overall, credit quality continues to be good, and there continue to have been no surprises from the former Malvern portfolio. So to kind of wrap things up, our regional teams, including a small team in Palm Beach County, Florida, acquired with the Malvern merger, are actively in the market seeking to drive deposit and loan business. Our specialty areas, asset-based lending, private equity banking, and small business banking, are all showing good signs of success.
Speaker Change: I think overall credit quality continues to be good.
Speaker Change: Continues to be no surprises from the former Malvern portfolio.
Speaker Change: So we tend to wrap things up our regional teams, including a small team in Palm Beach County, Florida acquired with the Malvern merger are actively in the market seeking to drive deposit and loan business, our specialty areas asset based lending private equity banking and small business banking are all showing good signs of success.
Peter J. Cahill: And along with this, we continue to explore new ways to expand our business in all of our markets. Those are the highlights for lending and conclude my comments related to Q1. I'll turn things over now to Pat for any final comments you might have.
Speaker Change: And along with this we continue to explore new ways to expand our business and all of our markets.
Speaker Change: Those are the highlights for lending and conclude my comments related to Q1, I will turn things back over now to Pat for any final comments you might have.
Patrick L. Ryan: Thank you, Peter. I appreciate the comments. And at this point, I'd like to turn it back to the operator to open things up for the Q&A.
Pat: Thank you Peter I appreciate the comments and at this point I'd like to turn it back to the operator to open things up for the Q&A.
Operator: Thank you. We'll now begin the question and answer session. If you've dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 a second time. If you are called upon to ask your question and are listening via speakerphone on your device, please pick up your handset to ensure that your phone is not on mute when asking your question. Again, press star one to join the queue. And your first question comes from Justin Crowley with Piper Sandler. Your line is open.
Speaker Change: Thank you we will now begin the question and answer session.
Speaker Change: You've dialed in and we would like to ask a question. Please press star one on your telephone keypad to raise your hand and joined the queue.
Speaker Change: If you would like to withdraw your question simply press Star one a second time.
Speaker Change: If you are called upon to ask your question and our listening via speaker phone on your device. Please pickup your handset to ensure that your phone is not on mute when asking your question.
Speaker Change: Again, crestar one to join the queue.
Speaker Change: And your first question comes from Justin <unk> with Piper Sandler Your line is open.
Justin Frank Crowley: Hey, good morning, guys. I just wanted to start with some discussion on the margins here. You know, obviously, not quite out of the woods yet in terms of lingering pressure on the funding side. So just curious, you're thinking on if and when that starts to level off, and you start to see continued pickup on the asset yield side, when you start to see that benefit the margin, is it something that might not take shape? And you know, until we start to see rate cuts? Or how are you thinking about that heading? You know, if you look to the end of the year?
Justin: Hey, good morning, guys.
Justin: Just wanted to start with some discussion on the margin here.
Justin: Obviously, not quite out of the woods, yet in terms of lingering pressure on the funding side. So just curious your thinking on if and when that starts to level off and you start to see continued pickup on the asset yield side. When you start to see that benefit the margin is it something that might not take shape until we start to see rate cuts or how are you thinking about that.
Speaker Change: Thank you.
Speaker Change: Till the end of the year.
Patrick L. Ryan: Yeah, it's a great question, Justin. I wish I had perfect visibility into that, but I can give you a few thoughts. At this point, you know, 90 days ago when we had our call, we were envisioning a flattish margin as a result of the market rates moving lower, which was starting to take a little bit of pressure off the deposit funding, partially because the wholesale options were getting cheaper Being a little less aggressive on pricing as a result of those alternatives, well, obviously, when the market rates moved higher, the wholesale rates followed along, and that alternative cheaper funding sort of went away.
Speaker Change: Yes, it's a great question, Jeff and I wish I had perfect visibility into that but I can give you a few thoughts.
Speaker Change: At this point.
Speaker Change: 90 days ago, when we had our call we are envisioning a flattish margin.
Speaker Change: As a result of the market rates moving lower which.
Speaker Change: Was starting to take a little bit of pressure off of deposit funding.
Speaker Change: Partially because of the wholesale options are getting cheaper and everybody was.
Speaker Change: Being a little less aggressive on pricing as a result of those alternatives will obviously when the market's right rates moved higher the wholesale rates, followed along and that.
Speaker Change: That alternative cheaper funding sort of went away. So long story short I think we expect that we will see some continued pressure on the margin if the current rate environment really remains in place.
Patrick L. Ryan: So, long story short, I think we expect that we'll see some continued pressure on the margin if the current rate environment remains in place over the next quarter or two. And I don't think the Fed has to move in order for things to stabilize or improve, but I do think the market needs to start anticipating rates coming down, alleviating or reducing the cost on the wholesale side, and I think that ends up driving rates and liability costs overall down a bit.
Speaker Change: Over the next quarter or two and I don't think the fed has to move in order for.
Speaker Change: Things to stabilize or improve but I do think the market needs to start anticipating rates coming down alleviating are reducing the cost on the wholesale side and I think that ends up.
Speaker Change: Driving rates in liability costs overall down a bit so.
Patrick L. Ryan: So, I know I'm not giving you an exact answer to when that changes, but I don't think it has to be the Fed actually lowers interest rates, but I do think the market needs to go back to thinking the Fed is going to lower interest rates, and at this point, I'm not sure we know when that's going to happen.
Speaker Change: I know I'm, not giving you an exact answer to when that changes, but I don't think it has to be the fed actually lowers but I do think the market needs to go back to thinking the fed is going to lower and at this point I'm not sure we know when thats going to happen.
Justin Frank Crowley: Okay, got it. And then just like thinking about the hire for longer, you know, just like looking at, I guess, the loan side. Of course, it's got its impacts on funding costs. But with the focus on CNI, is there any, you know, signs of maybe borrowers pulling back at all, just given the idea of hire for longer and the just variable rate nature of that book or, so far, your growth targets? Are they unchanged in terms of building out that loan bucket?
Speaker Change: Okay got it.
Speaker Change: Then just thinking about the higher for longer.
Speaker Change: So I guess the loan side of course, it's got it has impacts on funding costs, but.
Speaker Change: With the focus on C&I is there any.
Speaker Change: No signs of maybe borrowers pulling back at all just given the idea of higher for longer than just the variable rate nature of that or so far your growth targets are they unchanged in terms of building out that loan bucket.
Patrick L. Ryan: Yeah, listen, I think our growth targets are unchanged, and we went into the year with reasonable but modest compared to prior years' targets in the plus or minus 5% range.
Speaker Change: Yes, listen I think our growth targets are unchanged, we went into the year with <unk>.
Speaker Change: The reason of all but modest compared to prior year's targets.
Speaker Change: Plus or minus 5% range.
Patrick L. Ryan: Given the volume of activity and the probability adjusted pipeline being higher than we've seen it in the last couple years, I don't think we're seeing a slowdown in activity. Now, that being said, it takes a while for loans to get from the idea phase to closing. A lot of the activity now was getting pushed forward when folks started to anticipate rates coming down. But I think once you get the engine started, if it's an important project, you're not going to pull the plug if rates move higher by 25 basis points or whatever it is.
Speaker Change: Given the volume of activity and the probability adjusted pipeline being.
Speaker Change: Higher than we've seen it in the last couple of years I don't think were seeing a slowdown in activity now that being said it takes a while for.
Speaker Change: Loans to get from idea phase to closing and a lot of the activity now probably was getting pushed forward when folks starting to anticipate rates coming down, but I think once you get the engine started if it's an important project youre not going to you're not going to.
Speaker Change: Pull the plug if rates moved higher by 25 basis points or whatever it is so.
Patrick L. Ryan: So I think there's plenty of good loan demand out there. We're seeing really nice activity throughout our community banking, CNI segment, and throughout our new niche commercial segments. And there are plenty of opportunities on the real estate side too. We're just being a little more selective there. So I don't think there's going to be an issue with loan demand. The challenge is going to be the cost of funding that loan growth as we move forward.
Speaker Change: I think there's plenty of good loan demand out there, we're seeing really nice activity throughout our community banking C&I segments throughout our new niche commercial segments and.
Speaker Change: So there's plenty of opportunities on the real estate side too, we're just being a little more selective there so.
Speaker Change: I don't think theres going to be an issue with loan demand.
Speaker Change: The challenge is going to be the cost of funding that loan growth as we move forward.
Patrick L. Ryan: Right, okay, I appreciate that. And then, just, I mean, just thinking about that loan mix over the longer term, as far as Investor Cree is sitting today at 40% of the book, and you know, maybe it's tough to quantify, but is there a level that you target or would like to see that get to over time? And then maybe just some commentary on, you know, how long I guess that could be a governor on overall balance sheet growth.
Speaker Change: Right. Okay. I appreciate that and then just I mean, just thinking about that loan mix over the longer term.
Speaker Change: As far as Investor Cree sitting today at 40% of the book.
Speaker Change: Maybe it's tough to quantify but is there a level that you target or would like to see that get to over time.
Speaker Change: And then maybe just some commentary on how long I guess that could be a governor on overall balance sheet growth.
Patrick L. Ryan: Listen, I think, um... Our goal on the investor real estate side is to continue to be selective, obviously, with the heightened regulatory focus and, you know, areas of added concentration risk. We, you know, we want to be selective. We want to do the right deals that are low risk with relationship-based borrowers that bring some deposits along with them. And I think, as you get selective, that creates kind of a natural constraint on how much growth we're going to see there.
Speaker Change: Yes.
Speaker Change: Listen I think.
Speaker Change: Our goal on the Investor Real estate side is to continue to be selective obviously with the heightened regulatory focus and.
Speaker Change: Areas of.
Speaker Change: That had concentration risk.
Speaker Change: We want to be selective we want to do the right deals that are low risk with relationship based borrowers that brings some deposits along with them and I think as you get selective that creates kind of a natural constraint on how much growth, we're going to see the air in the summer at a point now where we're seeing close to $9 million.
Patrick L. Ryan: And so we're at a point now where we're seeing close to $9 million in, you know, monthly amortization on the portfolio. So there's a certain amount of work we need to do every month just to replace the $9 million that's paying off and paying down. So I think, you know, we're going to look to hit our 5% growth goal with largely C&I and owner-occupied. And I think the target on the investor side will be, will be to stay, you know, plus or minus flat, but it'll depend Peter, anything you'd add to that?
Speaker Change: Monthly amortization on the portfolio. So there is a certain amount of running we need to do every month just to replace the $9 million.
Speaker Change: Paying off and paying down so.
Speaker Change: We're going to look to hit our 5% growth goal with largely C&I and owner occupied and.
Speaker Change: I think the target on the Investor side will be will be to say plus or minus flat, but it will depend on the opportunities we get to take a look at so Peter anything you'd add to that.
Peter J. Cahill: No, I mean, I think you covered it. There's a heavy volume of investor deals that are running off every month. Aside from amortization, deals just get refinanced or sold or whatever. So there's a lot of work going on with that team just to keep things flat. I think that's basically what you said, but I don't have much to add there.
Peter J. Cahill: No I mean, I think you've covered it there is a heavy volume of investor deals that are running off every month.
Peter J. Cahill: <unk> from amortization, I mean deals that just yet.
Peter J. Cahill: We financed out or sold or whatever soldiers.
Speaker Change: A lot of work going on with that team just to keep things.
Speaker Change: Flat.
Speaker Change: I think thats basically what you said, but I don't have much to add there, but yes.
Patrick L. Ryan: Yeah, and I think Justin, it's also interesting when you look at the market. There was some concern on my end as banks face increasing regulatory pressure around commercial real estate lending. What would that mean in terms of capital availability for good projects and for existing projects that are performing well that need to basically renew when they mature? And it's interesting; we're seeing a lot of non-bank players filling that void. The insurance companies have gotten more aggressive in terms of pricing and long-term fix rates, given their business model and their ability to take on those longer-term fix rates.
Speaker Change: Yeah, and I think Jeff and it's also interesting when you look at the market. There was some concern on my end as.
Speaker Change: Banks face, increasing regulatory pressure around commercial real estate lending.
Speaker Change: Would that mean in terms of capital availability for for good projects and for existing projects are performing well they need to.
Speaker Change: Basically renew when they mature and it's interesting we're seeing a lot of non bank players.
Speaker Change: Filling that void the insurance companies have gotten more aggressive in terms of.
Speaker Change: Pricing in long term fixed rates given their business model and their ability to take on those longer term fixed rates and.
Patrick L. Ryan: And obviously, private credit has been very active and continues to be active, and hedge funds as well. So it's bad news in one sense because it's a more competitive market for investor deals than I would have expected. But in terms of the overall health of the landscape, I think it's good news that there is plenty of capital available for performing assets, and that is ultimately important for everybody that plays in this space. So yeah, there's money available, and deals are getting done. It's just that it's not all getting done through the banks.
Speaker Change: Obviously private credit has been very active and continue to be active in hedge funds as well so it's.
Speaker Change: It's bad news in one sense, because it's a more competitive market for investor deals than I would've expected, but in terms of the overall health of the of the landscape I think it's good news that there is plenty of capital available for performing assets.
Speaker Change: And that ultimately is important for everybody that plays in the space. So.
Speaker Change: Yes, there is money available and deals are getting done if not all getting done through the banks right now.
Patrick L. Ryan: Okay, appreciate the color there. And then, you know, I know a lot of the focus coming out of the Malvern acquisition has been integrating the deal and replenishing capital. But thinking more maybe medium term, and it almost feels silly to ask right now, just given the environment, but where do acquisitions fit in terms of prioritizing capital deployment? You know, again, of course, recognizing that, you know, it continues to be slow there as far as transaction activity is concerned.
Speaker Change: Okay I appreciate the color there.
And then I know a lot of the focus coming out of the Malvern acquisition has been integrating the deal and replenishing capital, but thinking more maybe medium term and it almost feels silly to ask right now just given the environment, but where do acquisitions fit in terms of prioritizing capital deployment.
Speaker Change: Again of course, recognizing that continues to be slow at there as far as transaction activity.
Patrick L. Ryan: Yeah, listen. We try to be consistent with our M&A philosophy, right? We think the right deals at the right price can create value and add scale, and certain situations add attractive lines of business, but at the end of the day, the first part of the sentence is the most important, right? The right deals at the right price, and if there are sellers out there that are interested in strategic, long-term value creation deals that are more partnership-type deals, I think those are the deals that might get done over the next six to 12 months, but anybody who's looking to just sell, cash out, get a premium, and go away, I don't think there are a lot of players out there that are going to be offering those types of exit
Speaker Change: Yes, listen we try to be consistent with our M&A philosophy right.
Speaker Change: We think the right deals at the right price can create value and add scale in certain situations ad.
Speaker Change: Attractive lines of business, but at.
Speaker Change: At the end of the day the first part of the sentence is the most important right. The right deals at the right price and if there are if there are sellers out there that are interested in strategic long term value creation deals that are more partnership type deals.
Speaker Change: I think those are the deals that might get done over the next six to 12 months, but anybody who is looking to just sell cash out get a premium and go away I don't think theres a lot of players out there that are going to be offering those exit right now so.
Patrick L. Ryan: So I think it's important that you stay in the game, that you keep having conversations, but it's equally important that you don't lose your discipline in terms of your criterion for attractive transactions. So we're going to continue to look, but I don't have any real sense of probability.
Speaker Change: I think it's an important that you stay in the game that you keep having conversations but it's equally important that you don't lose your discipline in terms of.
Speaker Change: <unk> criterion for attractive transaction. So we're going to continue to look but I don't have any real sense for probabilities right now.
Patrick L. Ryan: Okay, I appreciate it. All right. Great. Thank you. I appreciate you taking the question. Yeah, our pleasure.
Speaker Change: Okay I appreciate it.
Speaker Change: Alright, great. Thank you I appreciate you taking the question yes.
Patrick L. Ryan: Yeah, our pleasure. Thank you, Justin.
Speaker Change: Yes, my pleasure. Thank you Jeff.
Operator: And as a reminder, it is star number one. If you would like to ask a question, and we will take our next question from Manuel Navas with D.A. Davidson, your line is open.
Speaker Change: As a reminder, it is star one if you would like to ask a question.
Speaker Change: And we will take our next question from Manuel Nava with D. A Davidson your line is open.
Sharon G: Hi, this is Sharon G on for Monroe. Thank you so much for taking my question.
Manuel Antonio Navas: Hi, <unk>.
Manuel Antonio Navas: On from Manuel Thank you so much for taking my question.
I'm sorry.
Operator: I'm sorry. Who's this calling in? Sharon G on behalf of my mom.
Manuel Antonio Navas: Good.
Manuel Antonio Navas: This calling it.
Manuel Antonio Navas: Sure Angie answer and then Oh.
Sharon G: Oh, OK. Good morning. Morning. So the press release mentions investments in business units and information technology. What do those investments include, and do you have any OPEX run rate targets?
Speaker Change: Okay. Good morning.
Angie: Good morning.
So I want to talk a little bit about sort of press release mentioned investments and business units and information technology. What do those investments include and do you have any opex run rate target.
Patrick L. Ryan: Well, we haven't given any specific guidance on OPEX, but as we've looked at the analyst models that are out there, we didn't see any projections on the expense side that seemed way off the mark from what we anticipate. And a lot of the tech investments that we've been looking at over the last 12 to 18 months are sort of in implementation mode right now, so we don't see large additional expenses built in beyond the current run rate.
Angie: Well, we haven't given any specific guidance on opex, but as we've looked at the.
Angie: The analyst models that are out there we didn't see any.
Angie: Projections on the expense side that seemed.
Angie: Way off the Mark from from what we anticipate and are.
Angie: A lot of the a lot of the tech investments that we've been looking at over the last 12 to 18 months are sort of in implementation mode right now so we don't see.
Angie: Large additional expenses built in beyond.
Patrick L. Ryan: And we're looking forward to some of the benefits of those new technologies as they roll out. For example, online deposit account opening should be up and running for us both on the commercial and the consumer side over the next couple of months. And, you know, we're also implementing some middleware technology, which is going to give us some additional flexibility to tie in best-of-breed technologies and not be so beholden to our core.
Angie: The current run rate and.
Angie: We're looking forward to some of the benefits of those.
Angie: New technologies as they rollout for example.
Angie: Online deposit account opening should be up and running for us both on the commercial and the consumer side over the next couple of months.
Angie: And.
Angie: We're also.
Angie: Implementing some middleware technology, which is going to give us some additional flexibility too.
Angie: Tie in best in breed technologies, and not be so beholden to our core and so we're continuing to look.
Patrick L. Ryan: And so we're continuing to look for opportunities there. And some of it may even create opportunities for us, either on the deposit or the fee income side, if we can find interesting partnerships in terms of, you know, fintech or banking as a service that meets our risk profile parameters. So we think we've got some interesting things going on, and we're looking forward to sharing the results of those initiatives as we move through the end of this year.
Angie: For opportunities there and.
Angie: Some of it may even create opportunities for us either on the deposit of the fee income side. If we can find interesting partnerships in terms of.
Angie: Fintech or banking as a service that meets our risk profile parameters. So we think we've got some interesting things happening and we're looking forward to sharing the results of those initiatives as we move through the end of this year.
Sharon G: Yeah, that sounds great. I think that's it for me. Thank you. All right, thank you.
Speaker Change: Yes that sounds great.
Speaker Change: That's it for me thank you.
Speaker Change: Alright, thank you.
Operator: And as a reminder, it is star number one if you would like to ask a question. And with no further questions at this time, I will now turn the call back to Mr. Patrick Ryan for closing remarks.
Speaker Change: And as a reminder, the star one if you would like to ask a question.
Speaker Change: And with no further questions at this time I will now turn the call back to Mr. Patrick Ryan for closing remarks.
Patrick L. Ryan: Beautiful. Thank you, Abby. Well, at this point, I would just like to thank everyone for tuning in, and we'll look forward to catching up with everybody when we release earnings at the end of the second quarter. Thanks, everyone.
Patrick L. Ryan: Wonderful. Thank you Abbie well at this point I would just like to thank everyone for tuning in and we'll look forward to catching up with everybody.
Patrick L. Ryan: When we released earnings at the end of the second quarter. Thanks, everyone.
Operator: And ladies and gentlemen, this concludes today's call, and we thank you for your participation. You may now disconnect.
Speaker Change: And ladies and gentlemen, this concludes today's call and we thank you for your participation you may now disconnect.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Sure.
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Speaker Change: Okay.