Q1 2024 WSFS Financial Corp Earnings Call

Operator: Thank you for standing by, and welcome to the WSFS Financial Corporation first quarter earnings conference call. All lines have been placed on mute to prevent any background noise.

Thank you for standing by and welcome to the W. S. S. S Financial Corporation first quarter earnings Conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you'd like to ask a question. During this time simply press star followed by the number.

Operator: After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press the star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press the star one. Thank you. I'd now like to turn the call over to your host for today, Mr. Art Bacci, Chief Wealth Officer and Interim Chief Financial Officer. Sir, you may begin.

One on your telephone keypad, if you would like to withdraw your question again prestige Star one. Thank you I'd now like to turn the call over to your host for today, Mr. Art Bacci, Chief Wealth Officer interim Chief Financial Officer, Sir you may begin.

Arthur J. Bacci: Good afternoon, and thank you for joining our first quarter 2024 earnings call. Our earnings release and earnings release supplement, which we will refer to on today's call, can be found in the investor relations section of our company website. With me on this call today are Rodger Levenson, Chairman, President, and Chief Executive Officer; Steve Clark, Chief Commercial Banking Officer, and Shari Kruzinski, Chief Consumer Banking Officer.

Arthur J. Bacci: Thank you Rob.

Arthur J. Bacci: Good afternoon, and thank you for joining our first quarter 2024 earnings call.

Arthur J. Bacci: Our earnings release and earnings release supplement, which we will refer to on today's call can be found in the Investor Relations section of our company website.

Arthur J. Bacci: With me on this call today are Rodger Levenson, Chairman, President and Chief Executive Officer, Steve Clark, Chief Commercial banking officer, and Sherry Krzyzanowski, Chief Consumer banking officer.

Arthur J. Bacci: Before I turn the call over to Rodger for his remarks on the quarter, I would like to read our Safe Harbor Statement. Our discussion today will include information about our management's view of our future expectations, plans, and prospects, which constitute forward-looking statements. Actual results may differ materially from historical results or those indicated by forward-looking statements due to risks and uncertainties, including, but not limited to, the risk factors included in our annual report on Form 10-K and our most recent quarterly reports on Form 10-Q, as well as other documents we may periodically file with the Securities and Exchange Commission. All comments made during today's call are subject to the Safe Harbor Statement. I will now turn the call over to Rodger.

Arthur J. Bacci: Before I turn the call over to Roger for his remarks on the quarter I would like to read our safe Harbor statement. Our discussion today will include information about our managements view of our future expectations plans and prospects that constitute forward looking statements.

Arthur J. Bacci: Actual results may differ materially from historical results or those indicated by the forward looking statements due to risks and uncertainties, including but not limited to the risk factors included in our annual report on Form 10-K, and our most recent quarterly reports on Form 10-Q, as well as other daas.

Arthur J. Bacci: Humans, we may periodically file with the Securities and Exchange Commission.

Arthur J. Bacci: All comments made during today's call are subject to the Safe Harbor statement I will now turn the call over to Roger.

Rodger Levenson: Thank you, Art, and everyone else for joining us on the call. WSFS had a good start to 2024, continuing to demonstrate the strength of our franchise and diverse business. Our first quarter results included a core earnings per share of $1.11, a core return on tangible common equity of 19.2%, and a core return on assets of 1.31%. Our results continue to reflect the benefits of the investments we are making in our company and our unique competitive market.

Roger: Thank you art and everyone else for joining us on the call today.

Roger: With this had a good start to 2024 continuing to demonstrate the strength of our franchise and diverse business model.

Roger: Our first quarter results included a core earnings per share of $1 11.

Roger: Core return on tangible common equity of 19, 2% and a core return on assets of 131%.

Roger: Our results continue to reflect the benefits of the investments we are making in our company and our unique competitive market position.

Rodger Levenson: Highlights for the quarter included gross loan growth of 2% linked quarter or 7% annually. This growth was spread across our commercial mortgage, consumer, and C&I businesses. Quarter-end customer deposits were up 3% linked quarter after excluding expected trust activity and a short-term commercial deposit withdrawal. Average deposit balances increased 4.9% annualized late quarter. Deposits remain well-diversified across our commercial, consumer, wealth, and trust businesses with 30% of average deposits in non-

Roger: Highlights for the quarter included gross loan growth of 2% linked quarter or 7% annualized.

Roger: This growth was spread across our commercial mortgage consumer and C&I books.

Roger: Quarter end customer deposits were up 3% linked quarter after excluding expected trust activity and a short term commercial deposit withdrawal.

Roger: Average deposit balances increased four 9% annualized linked quarter.

Roger: <unk> remained well diversified across our commercial consumer wealth and trust businesses with 30% of average deposits in noninterest bearing demand accounts.

Rodger Levenson: The Core Net Interest Margin was 3.84% for the quarter, with interest-bearing deposit data of 47%. While our average cost of funds increased 17 basis points during the quarter, the increase mostly occurred early in the quarter, and the rate of increase in cost of funds declined meaningfully in March. Excluding the income from our equity position in spring EQ of $3.5 million in the fourth quarter of 2023, core fee revenue increased 2.7% link quarter.

Roger: The core net interest margin was 384% for the quarter with interest bearing deposit beta of 47%.

Roger: While our average cost of funds increased 17 basis points during the quarter. The increase mostly occur early in the quarter and the rate of increase in cost of funds declined meaningfully in March.

Roger: Excluding the income from our equity position in spring EQ of $3 $5 million in the fourth quarter of 2023 core fee revenue increased two 7% linked quarter.

Rodger Levenson: As a reminder, Spring EQ was acquired effective year-end 2023, and we will therefore no longer recognize income from this investment. Our core fee revenue ratio was 30.3% in the first quarter. The core efficiency ratio stood at 58.6% for the quarter. Non-interest expenses in both the fourth quarter of 2023 and the first quarter of this year included a number of non-recurring adjustments. Normalizing for these items, expenses increased $7.2 million, or 5% of the previous quarter, with Cash Connect external funding costs representing $5.2 million of the revenue.

Roger: As a reminder, spring EQ was acquired effective year end 2023, and we will therefore no longer recognize income from this investment.

Roger: Our core fee revenue ratio was 33% in the first quarter.

Roger: The core efficiency ratio stood at 58, 6% for the quarter.

Roger: Noninterest expenses in both the fourth quarter of 2023, and the first quarter of this year included a number of nonrecurring adjustments nor.

Roger: Normalizing for these items expenses increased $7 2 million or 5% linked quarter with cash connect external funding cost cost representing $5 2 million of the increase.

Rodger Levenson: Cash Connect added 4,336 service non-bank ATMs during the quarter due to the previously discussed exit of a large industry partner. We anticipate opportunities for additional unit growth during the second quarter. Expenses were higher in the quarter due to one-time onboarding costs and increased use of external funding.

Roger: Cash connect added 4336 service non bank Atms during the quarter due to the previously discussed exit of a large industry participant.

We anticipate opportunities for additional unit growth during the second quarter.

Roger: Expenses were higher in the quarter due to onetime onboarding costs and increased use of external funding.

Rodger Levenson: Asset quality remained stable. Problem loans and delinquencies were flat at 4.41% and 81 basis points of gross loans, respectively. NPAs declined to 33 basis points of total assets, primarily due to the resolution of two non-performing C&I credits. Net charge-offs decreased to 27 basis points of average gross loans, including a net recovery excluding the upstart and leasing portfolio.

Roger: Asset quality remains stable problem loans, and delinquent delinquencies were flat at 441% and 81 basis points of gross loans respectively.

Roger: NPA has declined to 33 basis points of total assets, primarily due to the resolution of two nonperforming C&I credits.

Roger: Net charge offs decreased to 27 basis points of average gross loans, including a net recovery, excluding the upstart and leasing portfolios.

Rodger Levenson: The ACL coverage was 1.48% as we continue to build reserves for potential future credit losses. In summary, we remain well positioned to deliver top quintile financial performance in 2024. We are tracking well to the full year outlook communicated in January. Thank you. I will now have Art facilitate the Q&A.

Roger: The ACL coverage was 148% as we continued to build reserves for potential future credit losses.

Roger: In summary, we remain well positioned to deliver top quintile financial perform performance in 2024, we are tracking well to the full year outlook communicated in January.

Speaker Change: Thank you I will now have art facilitate Q&A.

Speaker Change: Okay.

Operator: At this time, I would like to remind everyone in order to ask a question, press star, then the number one on your telephone keypad. Your first question comes from the line of Russell Gunther from Stevens. Your line is open.

Arthur J. Bacci: At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.

Arthur J. Bacci: Your first question comes from the line of Russell Gunther from Stephens. Your line is open.

Russell Elliott Teasdale Gunther: Hey, good afternoon, guys. Hey, Russell. Good afternoon. I wanted to circle back on Cash Connect, and I appreciate some of the points and takes you just discussed, Rodger, but can you guys share, you know, where the market share is mostly coming from, who the competitor is that left the space, how you kind of quantify for us what the market share gain opportunity can be, and then you touched on this just a bit a moment ago, but how we should think about the modeling dynamics around related expenses. Yeah, Russell. This is Art.

Russell Elliott Teasdale Gunther: Hey, good afternoon, guys, Hey, Russell afternoon.

Russell Elliott Teasdale Gunther: I wanted to.

Russell Elliott Teasdale Gunther: Circle up on cash connect and I appreciate some of the puts and takes you just discussed Roger but can you guys share.

Russell Elliott Teasdale Gunther: We're the market share is mostly coming from who the competitor is that got left the space. How you kind of quantify for us what the market share gain opportunity can be and then you touched on this just a bit a moment ago about how we should think about the modeling dynamics around related expenses.

Arthur J. Bacci: Russell This is art.

Arthur J. Bacci: I think we've communicated previously that the participant that exited was U.S. Bancorp in the fourth quarter of last year, and in aggregate, we've added somewhere close to 12,000 units between the first quarter and the fourth quarter of last year. That's probably, I'd say, three quarters to 80% of what we think we will onboard.

Arthur J. Bacci: We've communicated.

Arthur J. Bacci: Previously that the participant that exited was U S Bancorp.

Arthur J. Bacci: In the fourth quarter of last year and in aggregate, we've added somewhere close to 12000 units between the first quarter and fourth quarter of last year.

Arthur J. Bacci: Probably I'd say three quarters to 80% of what we think we will onboard we've got a few more cash purchases in the process here.

Arthur J. Bacci: In Q2.

Arthur J. Bacci: We've got a few more cash purchases in the process here in Q2. I think when you kind of look at some of the expenses and the fact that we sat on some additional non-earning cash in the vaults as well as the fact that in order to make the Transition Smoother. Rather than optimize where we source cash, we wound up just using our external funding source exclusively so that the carriers there was no confusion of where the carriers would go to get cash.

Arthur J. Bacci: I think when you kind of look at some of the expenses and the.

Arthur J. Bacci: The lower profitability I'd say in the first quarter. It was just because of some of the transition that has to go on and we sat on some additional non earning cash in defaults as well as the fact that in order to make the.

The transition smoother, rather than optimize where we source cash we wound up just using our external funding source exclusively so that the carriers. There was no confusion of where the carriers would go to get cash as we move along here with these cash purchases will start to kind of optimize the usage of cash which involves.

Arthur J. Bacci: As we move along here with these cash purchases, we'll start to kind of optimize the usage of cash, which involves looking at distances between various vaults and the ATMs. So that will kind of bring us back down to a more normalized mix of funding between WSFS and our external funding sources.

Looking at distances between various volts and the Atms.

Arthur J. Bacci: So that that will kind of bring us back down into more normalized mix of funding between <unk> and our external funding sources.

Arthur J. Bacci: Yeah, Russell, I would just add to that, as we've said historically, if you think about the profitability of the business, it should be accreted to the overall bank over time. And so we feel like, as we move through this transition, we should return to those levels of profitability over the course of this year.

Speaker Change: Yes, Russell I would just add to that as we've said historically as you think about the profitability of the business it should be accretive to the overall bank overtime and so we feel like as we move through this transition we should return to those levels of profitability over the course of this year.

Russell Elliott Teasdale Gunther: Okay, guys, thank you. That's very helpful. And then if I could just switch gears a bit with regard to WSF getting out of customer originations, being on pause with upstart expectations for that portfolio to start to decline. Can I just talk a bit about the strategic shift there? And then what, if any, impact would you expect this to have on your net charge-off guidance over time?

Speaker Change: Okay guys. Thank you.

Speaker Change: Very helpful.

Speaker Change: And then if I could just switch gears a bit.

Speaker Change: With regard to.

Speaker Change: With us getting out of the customer originations being on pause with upstart expectations for that portfolio to start to decline.

Speaker Change: Can you just talk a bit about the strategic shift there and then what if any impact you would expect us to have on your net charge off guidance over time.

Speaker Change: Okay.

Arthur J. Bacci: Russell, this is Art. We really think that we're well-reserved for the losses that we will incur in the portfolio. And without further originations of any meaningful amounts, clearly, the provision under the CECL methodology will decline. But we do think we have a good handle on the charge-offs and that they will, you know, we'll probably see another couple of quarters of level charge-offs with declines as the portfolio continues to shrink. Yeah, Russell.

Speaker Change: Russell. This is are we really think that we're well reserved for the losses that we will incur in the portfolio and without further originations any meaningful mountains clearly a provision under the <unk> methodology will decline, but we do think we have a good handle on the charge offs in that.

Speaker Change: They will.

Speaker Change: We see another couple of quarters of level charge offs with declining as the portfolio continues to shrink.

Rodger Levenson: Yeah, Russell, just as a reminder on the first part of your question, the strategy, you know, that was the upstart partnership was a strategy that was really driven by two dynamics. One, it did plug a gap in our consumer credit product offering. And it also was an opportunity for us to experiment somewhat with digitally originated customers to see if we could cross-sell into. So the combination, I would say, of getting to the size that we wanted to get to, seeing the credit performance, and candidly, it did not give us the kinds of returns on the cost cell that we saw or expected. That's really the reason for the pause.

Speaker Change: Yes, Russell just as a reminder, on the first part of your question the strategy.

Speaker Change: That was the upstart partnership.

Speaker Change: Was a strategy that was really driven by two Dana two dynamics one it did plug a gap in our consumer credit product offering.

Speaker Change: And it also was an opportunity for us to experiment somewhat with digitally originated customers to see if we could cross sell into those so the combination I would say of.

Speaker Change: Getting to the size that we wanted to get to seeing the credit performance and candidly. It did not give us the kinds of returns on the cross sell that we saw that we expected and Thats really the reason for the pause I will just clarify that we still have the channel available to our customers, but we expect.

Rodger Levenson: I will just clarify that we still have the channel available to our customers, but we expect fairly modest origination. And overall, with the size of that portfolio and the total loan book, it obviously does not have a material impact on our earnings.

Speaker Change: It's fairly modest.

Speaker Change: Originations and overall with the size of that portfolio on the total loan book, obviously does not have a material impact on our earnings.

Russell Elliott Teasdale Gunther: Great. Rodger, thank you for that. And then just last one for me, and I'll step back again, switching gears. Could you guys just talk a bit about your M&A appetite here on the depository side, the overall level of discussions or activity, and then the ideal profile of any potential partners?

Okay.

Great.

Speaker Change: Roger Thank you for that and then just last one for me and I'll step back.

And then switching gears could you guys just talk a bit about your M&A appetite here.

Speaker Change: On the depository side.

Speaker Change: The overall level of discussions or activity and then an ideal profile of any potential partner.

Rodger Levenson: Yeah, Russell, really that has not changed for us. As we've talked about for the last couple of years, you know, after the significant investments we made in the Beneficial and Bryn Mawr franchises, we feel we're very uniquely positioned in a great market for significant organic growth over time and for an extended period. And so we're really not focusing on or contemplating any traditional bank M&A that would revolve around, you know

Speaker Change: Yeah.

Speaker Change: So Russell really isn't that has not changed for us.

Speaker Change: As we've talked about for the last couple of years.

Speaker Change: After the <unk>.

Speaker Change: Significant investments, we made with the beneficial and bring more franchises. We feel we're very uniquely positioned in a great market for significant organic growth.

Speaker Change: Over time, an extended time, and so we're really not focusing on or contemplating any traditional bank M&A that would revolve around additional deposits.

Rodger Levenson: In addition, though, I would say we continue to invest in the business, and we are seeing opportunities in both the wealth and the commercial areas to add talent, as well as what you see happening in Cash Connect. So we will continue to invest in the business if we see the opportunity for returns consistent with our business model. But traditional bank M&A at this point is not in our line of sight.

Speaker Change: In addition, though I would say we continue to invest in the business and we are seeing opportunities in both the wealth and the commercial areas to add talent as well as what you see happening in cash connect so we will continue to invest in the business.

Speaker Change: If we see the opportunity for returns consistent with our business model, but traditional bank M&A at this point is not in our line of sight.

Russell Elliott Teasdale Gunther: Thank you, guys. I'll step back. I appreciate you taking the time to answer my question.

Speaker Change: Okay.

Speaker Change: You guys all step back I appreciate you taking my question.

Operator: Your next question comes from a line from Frank Schiraldi on Piper Sandler. Your line is open.

Speaker Change: Your next question comes from the line of Frank Schiraldi from Piper Sandler Your line is open.

Frank Joseph Schiraldi: Hey, good afternoon, guys. Just wanted to start with wealth management and commentary around the adjustment in deferred revenue driving a part of the decline. And, you know, just curious if you could talk through that in terms of, is this quarter a better run rate? Does that come back out?

Frank Joseph Schiraldi: Good afternoon Frank.

Frank Joseph Schiraldi: Hi, good afternoon guys.

Frank Joseph Schiraldi: Just wanted to start with.

Frank Joseph Schiraldi: Wealth management and commentary around the.

Frank Joseph Schiraldi: The adjustment in deferred revenue.

Frank Joseph Schiraldi: Driving a part of the decline.

Frank Joseph Schiraldi: And I was just curious if you could talk through that in terms of.

This quarter, a better run rate does that come back out or how to think about run rate here with that.

unknown: Or, you know, how to think about run rate here with that commentary about deferred revenue.

Frank Joseph Schiraldi: With that commentary around deferred revenue.

Arthur J. Bacci: Russell, this is Art. That was really a one-time item. We had moved some accounts to a different billing platform, and in doing so, realized that we had about $1.3 million in overstated or deferred revenue. So that was the impact of this quarter's revenue, that $1.3 million.

Arthur J. Bacci: Russell. This is art that was there was really a onetime item. We had moved some accounts to a different billing platform and in doing so realized that we had about $1 million III overstated deferred revenue. So that was the impact of this quarter's revenue was the 1 million three that's really.

Arthur J. Bacci: A one time item in addition to that there's just some seasonality both in the trust company of Delaware activity.

Arthur J. Bacci: In addition to that, there's just some seasonality, both in the Trust Company of Delaware activity and in the institutional trust business. There's usually a rush to get trusts and securitizations done at year-end. So, when you compare it to a linked quarter, it's definitely going to be down somewhat. But if you compare our institutional trust business to a year-ago quarter, we're actually up year over year. I think the pipeline is still very robust, and we continue to feel comfortable in the outlook we provided in terms of the growth of our fee businesses.

Arthur J. Bacci: In the institutional trust business is usually a rush.

Arthur J. Bacci: Get trust and securitization has done at year end, so that when you compare it to the linked quarter is definitely going to be down somewhat.

Arthur J. Bacci: But if you compare like our institutional trust business to a year ago quarter were actually up year over year. So I think the pipeline is still very robust and we continue to still feel comfortable in the outlook. We provided in terms of the growth of our fee businesses.

unknown: Okay, so that $1.3 million is a hit on revenues this quarter, and we'll come back out.

Speaker Change: Okay. So it's about $1 3 million.

Speaker Change: A hit too.

Speaker Change: Revenues this quarter and we'll come back out.

Arthur J. Bacci: Yes, we'll earn it back because it was deferred revenue.

So we will earn it back because it was deferred revenue right.

Frank Joseph Schiraldi: Okay, and I wonder if you could give a little more detail or a little more color on NIM. Obviously, you have the guidance out there from the beginning of the year, and you've mentioned you guys are kind of on track there. Just looked like there was some, maybe excess liquidity in the quarter that helped drive NIM lower. And I don't know if that's in part an arbitrage opportunity, and I was just wondering how that kind of fits in with your NIM outlook and any kind of color on NIM moving forward from 1Q.

Speaker Change: Okay and then just.

Speaker Change: Wondering if you could give a little more detail a little more color on NIM, obviously, you have the guidance out there.

Speaker Change: From the beginning of the year you had mentioned you guys are kind of on track there.

Speaker Change: It just looked like there was some maybe excess liquidity in the quarter that helped drive NIM lower.

Speaker Change: And I don't know if thats.

Speaker Change: In part an arbitrage opportunity and just wondering how that kind of fits in with your NIM outlook.

Speaker Change: Kind of colors.

Speaker Change: And then.

Speaker Change: Moving forward from that from <unk>.

Arthur J. Bacci: Yeah, you know, Frank, the NIM really was, let's say the first thing that really impacted the most was just an increase in the cost of deposits and funding. It went up 17 bps.

Speaker Change: Frank the NIM really was let's say the first thing that really impacted mostly just an increase in cost of deposits and funding went up 17, Bips and just to give you. Some color in March cost of funds only increased two basis points. So as Roger mentioned in his opening comments most of that increase.

Arthur J. Bacci: And just to give you some color, in March, the cost of funds only increased by two basis points. So, as Rodger mentioned in his opening comments, most of that increase was early in the quarter, and it was because of the lag in repricing deposits. We still see kind of a plateauing of our NIM in the second quarter. The other contributing factor, a little to some degree, was, ironically, as the AOCI or the mark on the investment securities portfolio declined, the yield actually went down because you had a higher balance.

Speaker Change: Was early in the quarter and it was because of the lag in repricing deposits, we still see kind of a plateauing of our NIM in the second quarter. The other contributing factor little to some degree was ironically.

Speaker Change: Ironically as the OCI or the Mark on the investment Securities portfolio declined the yield actually goes down because you have a higher balance so that was another roughly nine basis point decline in the mortgage back.

Arthur J. Bacci: So that was another roughly nine basis point decline on the mortgage-backed securities. But so, you know, the short, short answer is we continue to believe very confidently that the second quarter will see the low point and that NIM starts to kind of creep back up in the second half of the year, namely because of the paydown in the mortgage-backed securities portfolio and redeploying that cash flow into the loans, or even if we put it into Fed funds, there'll be a 300 basis point pickup in the yield.

Speaker Change: Securities, but so short short answer is we continue to believe very confidently that second quarter will see the lowest point in that the NIM starts to kind of creep back up in the second half of the year, namely because of the.

Speaker Change: Pay down in.

Speaker Change: The mortgage backed securities portfolio and redeploying that cash.

Speaker Change: Cash flow into either loans or even if we put into fed funds there'll be a 300 basis point pickup in yield there.

Frank Joseph Schiraldi: And I'm sorry, just to clarify, you said deposit costs were down two basis points in March? The deposit costs only increased two basis points in March. So, like I said, that 17 was mostly a 17 basis point increase in the cost of funds for the first half. Okay, great. Thank you.

Okay, and I'm sorry, just to clarify are you said.

Speaker Change: Down I think you said deposit costs were down two basis points in March.

Speaker Change: The deposit costs only increased two basis points.

Speaker Change: Relative to February yeah. So like I said that 17 was mostly 17 basis point increase in cost of funds.

Speaker Change: For the first half.

Speaker Change: Okay, great. Thank you.

Speaker Change: Welcome.

Operator: Your next question comes from the line of Feddie Strickland from JANI. Your line is open.

Your next question comes from the line of Eddie Stricklin from Janney. Your line is open.

Feddie Justin Strickland: Thanks, Feddie. Hey, good afternoon, everybody. Just wanted to ask, how much repricing opportunity do you see on fixed-rate loans in the near term that could potentially move the needle on loan yield? Or do you think yield stays kind of where it is at this point, just given the floating portion of the portfolio?

Feddie Justin Strickland: Thanks, Larry Hey, good afternoon, everybody.

Feddie Justin Strickland: Just wanted to ask how much repricing opportunity do you see on fixed rate loans in the near term that could potentially move the needle on loan yield or do you think yield stays kind of where it is at this point just given the floating portion of the portfolio.

Stephen P. Clark: Hey Feddie, Steve Clark here. Really, there's no significant repricing opportunity in our fixed-rate commercial loan book. I think yield will be fairly consistent throughout the rest of the year unless the Fed increases rates, given our variable-rate loan book. So all things being equal, yield should still be in that 7%, low 7% range going forward.

Stephen P. Clark: Hey, Steve Clark here.

Stephen P. Clark: Really there is no significant repricing opportunity and our fixed rate commercial loan book I think yields will be fairly consistent throughout the rest of the year and less.

Stephen P. Clark: Fed increases rates, given our variable rate.

Stephen P. Clark: Our loan book.

Stephen P. Clark: So all things being equal yield should still be in that 7% low 7%.

Feddie Justin Strickland: Got it, that's helpful. And then just wanted to switch back to I was surprised at the level of asset growth this quarter and earnings assets. I know you talked about having a little bit of extra liquidity there. Can you talk through what drove some of that and what we might see next quarter in terms of asset growth?

Stephen P. Clark: Range going forward.

Speaker Change: Got it that's helpful and then just.

Speaker Change: Wanted to switch back to I was surprised at the level of asset growth this quarter in earning assets.

Speaker Change: I know you talked about having a little extra liquidity. There can you talk through what drove some of that and what we might see next quarter in terms of asset growth.

Arthur J. Bacci: Yeah, Feddie, this is Art. I think really, when you look at the earning asset growth, there was probably about $300 or $400 million there of excess liquidity above the prior quarter. And that's because in the first quarter, we did take down about $800 million of bank term funding. We refinanced some we had, and we actually took advantage of the lower rate and the fact that we could borrow at the face value of the securities.

Speaker Change: If any this is art.

Speaker Change: Really when you look at the earning asset growth is probably a three or $400 million there of excess liquidity above the prior quarter and thats because in the first quarter.

Speaker Change: We did take down about $800 million of bank term funding.

Speaker Change: <unk>.

Speaker Change: Refinance some we had and we actually took advantage of the lower rate and the fact that we can borrow at face value of the securities.

Arthur J. Bacci: Going forward, I'd still say that it's probably flat generally for this quarter. I think usually in the second quarter, we'll see some more significant cash flows coming in and out because of tax payments, so the tax receipts and the tax payments going out will elevate some of the, keep the cash a little bit more elevated for the quarter.

Speaker Change: Going forward I'd still say Thats, probably flat generally this quarter I think usually in the second quarter, we will see some.

Speaker Change: More significant cash flows coming in and out because of tax payments. So the tax receipts and the tax payments going out.

Speaker Change: <unk> some of the keep the cash a little bit more elevated for the quarter.

Speaker Change: Yes.

Feddie Justin Strickland: Thanks, Art. That's very helpful. And then just one last question, going back to charge-offs, you know, I know the guidance is 50 to 60 basis points this year, and you came in well below that. Is the variance versus guidance just effectively driven by what you're expecting, or what we should expect in the consumer book over time to be laying an upstart? Is that pretty much the delta between, you know, what we saw in the first quarter and what we potentially will see in future quarters versus the guidance?

Speaker Change: Thanks, Alright, that's helpful. And then just one last question going back to charge offs.

Speaker Change: I know the guidance is 50 to 60 basis points. This year and we came in well below that.

Speaker Change: Is the variance versus guidance, just effectively driven by what youre expecting.

Speaker Change: What we should expect in the consumer book over time to be laying up started is that pretty much the delta.

Speaker Change: Between what we saw in the first quarter, what we could potentially see in future quarters versus the guidance.

unknown: Yeah, so, Feddie, I'll just jump in here. So, as Art mentioned, we think for both New Lane and Upstart, we see the level of charge-offs, you know, having plateaued, and we'll start to drift down here just a little bit, especially with Upstart.

Speaker Change: So sorry.

Speaker Change: Just jump in here so as art mentioned, we think for both new lanes and for up store, we see the level of charge offs.

Having plateaued and we will start to drift down here, just a little bit, especially with the upstart portfolio.

unknown: https://www.sharikruzinski.com

Speaker Change: Probably it takes a little bit more quickly I think the delta really for us on charge offs will be what how the commercial portfolio performance.

Rodger Levenson: I think that the Delta, really, for us on charge-offs will be how the commercial portfolio performs. Obviously, we're pleased with the net recovery this quarter, but we're still coming off of historically low levels, and credit in the C&I book tends to be a little bit lumpy. So you can see a spike or two, depending upon one or two credits and the size of those credits, and it's those averaging all of what we have seen as historical charge-off rates that got us to that range that we provided in the outlook. And we continue to assume that some of that will occur during the remainder of the year.

Speaker Change: Obviously, we're pleased with the net recovery this quarter.

But we are still coming.

Speaker Change: Coming off of historically low levels.

Credit in the C&I book tends to be.

A little bit lumpy.

Speaker Change: So you can see a spike or two depending upon one or two credits and the size of those credits and so it was kind of averaging all of what we have seen is historical.

Speaker Change: Charge off rate that got us to that range that we provided.

Speaker Change: In the outlook and we continue to.

Speaker Change: Assuming some of that will occur during the remainder of the year.

Feddie Justin Strickland: Understood. Thanks for the color there, Rodger.

Speaker Change: Understood. Thanks for the color there Roger and that's it for me I'll step back in the queue. Thanks for taking my questions. Thank.

Operator: And that's it for me. I'll step back on the key. Thanks for taking my question.

Speaker Change: Thank you.

Manuel Antonio Navas: Your next question comes from the line of Manuel Navas from DA Davidson.

Speaker Change: Your next question comes from the line of mineral novice from D. A Davidson your line.

Stephen P. Clark: Hey, great start to the year in terms of loan growth. How are pipelines, and are they impacted at all with rates staying high? Any issue with demand due to rates?

Mineral Novice: Hey, guys, great start to the year in terms of loan growth.

Mineral Novice: Any any.

Mineral Novice: Pipelines and are they impacted at all with rates staying high and any issue with demand.

Mineral Novice: From rates.

Manuel Antonio Navas: Manuel, Steve, and Clark again. Pipeline in the commercial bank and the small business group remains fairly strong. So our 90-day weighted average is just a little over $300 million. So activity and opportunities continue to present themselves. I think a significant portion of that is from the disruption that's occurring at some of the bigger players in our market. And that is generating opportunities, as Rodger said earlier, for both customer acquisition and talent acquisition.

Mineral Novice: Manual, Steve Clark again pipeline in the commercial bank and the small business group remain fairly strong. So our 90 day weighted average is.

Just a little over $300 million.

Mineral Novice: So activity.

Mineral Novice: Opportunities continue to present themselves.

Thank you.

Mineral Novice: A significant portion of that is from the disruption that's occurring at some of the bigger players in our market and that is generating opportunity as Roger said earlier for both customer acquisition and talent acquisition. So.

Manuel Antonio Navas: So the interest rate environment on the CNI side has not impacted our pipeline. And certainly on the CRE side, we remain very, very selective in terms of new customer acquisition, new sponsor acquisition, and continue to focus on supporting our existing customer base.

Mineral Novice: Interest rate environment on the C&I side has not impacted our pipeline and certainly on the CRE side.

Mineral Novice: We remain very very selective in terms of new customer acquisition, new sponsor acquisition and continue to focus on supporting our existing customer base.

Arthur J. Bacci: That's great. In terms of shifting over to deposits a bit, any early thoughts on movements in trust deposits and other flows that you're looking out for?

Speaker Change: Okay, that's great.

Speaker Change: In terms of shifting over to deposits a bit.

Speaker Change: Any early take on on movements in trust deposits.

Speaker Change: Other flows that you are looking out for.

Arthur J. Bacci: Well, this is Art. You know, I think things right now are pretty steady. We continue to have a very strong pipeline of securitization deals. Remember, some of those deposits, as I've mentioned in the past, are really cash pre-funding trusts that's going to go out and acquire assets for mortgages for the trust, and we can't really forecast this easily. It's really up to the securitization markets and different clients' types of deals. They bring us in, but the team's active. They've got a very active pipeline, and there could be some nice opportunities here, if not in the second quarter, certainly in the second half of the year.

Speaker Change: And while this is art.

Speaker Change: I think things right now pretty steady we continue to have a very strong pipeline.

And securitization deals remember with some of those deposits as I've mentioned, the past are really cash pre funding.

Speaker Change: Trust Thats going to go out and acquire.

Assets for mortgages for the.

Speaker Change: Trust and that we can't really forecast is easily thats really up to securitization markets and different clients. The type of deals they bring us but the team is actively.

Speaker Change: Data <unk> got a very active pipeline and there could be some nice opportunities here if not in the second quarter certainly in the second half of the year.

Shari A. Kruzinski: In the past, you talked about having a little bit of a budget in your deposit beta assumptions to defend deposits more. How has that progressed, and what are your updated thoughts on that ability to defend your deposits even more if necessary?

In the past you've talked about having a little bit of a budget.

Speaker Change: And your deposit beta.

Speaker Change: Assumptions to defend deposits more.

Speaker Change: How has that progressed and what are your updated thoughts on.

Speaker Change: And that ability.

Speaker Change: Defend your deposits even more if necessary.

Arthur J. Bacci: Yeah, I'll turn it over to Shari, but I'll tell you, we're still tracking, you know, we have a beta of about 47 on interest-bearing, we said 50, and we kind of think we'll be close to that. But the pressure seems to have declined in terms of having to really use excess budget, if you will, to defend our deposit price. And Shari can talk more about what she's seeing in the market. Sure, I would say.

Speaker Change: Yes.

Speaker Change: I'll turn it over to Sherry, but I'll tell you we're still tracking.

Beta was about 47 noninterest bearing we said 50, we kind of.

Speaker Change: Close to that but there's pressure seems to have declined in terms of having to really use excess budget. If you will to defend our deposit pricing and Sherry can talk more about what you're seeing in the market.

Shari A. Kruzinski: Sure, I would say that, as Art mentioned, the competitive pressure, although it still exists, has subsided somewhat. And, you know, we are still seeing customers interested in certificates of deposit, the money market. We've been successful in attracting new customers to those products, but really pleased and feeling very comfortable. In fact, our CD retention rates are actually running a lot higher than we had expected. Really proactive management on the exception pricing front as well.

Sherry Krzyzanowski: Sure I would say that as art mentioned the competitive pressure, although it is still a desk has subsided somewhat.

Sherry Krzyzanowski: And we are still seeing customers interested in there.

Sherry Krzyzanowski: Certificates of deposit the money market, we've been successful attracting new customers to those products.

Speaker Change: But really.

Sherry Krzyzanowski: We're really pleased and feeling very comfortable in fact, our CD retention rates are actually.

Sherry Krzyzanowski: Running a lot higher than we had expected.

Proactive management on the exception pricing front as well.

unknown: That's really helpful. I guess my last question shifts to the buyback and capital return. You kind of went above the 35% threshold? Any, just any updated comments on that?

Sherry Krzyzanowski: Okay.

Sherry Krzyzanowski: Thanks.

Speaker Change: That's really helpful.

Speaker Change: My last question is shift too.

Speaker Change: The buyback and capital return you've kind of gone.

Speaker Change: Got above 35% threshold.

Speaker Change: Just any updated comments on that.

Arthur J. Bacci: Now we continue to stick to the 35% long-term. We had some makeup to do from Q4 where we were a little bit under 35. We made up for it in Q1, but No, generally, we're going to stick to the 35% for the year. So there may be some timing differences between quarters, but there's no real change.

Speaker Change: We continue to stick to the 35% long term we had some makeup to do from Q4, where we were a little bit under 35, we made up for it in Q1, but.

No generally we're going to we're going to stick to the 35% for the year. So there may be some timing differences between quarters, but.

Speaker Change: No real change.

unknown: It's an ongoing, you've articulated it well, but it is an ongoing evaluation, Manuel. And so as we go through our capital stress testing and we see opportunities to go above what we call the, you know, routine buybacks, we will evaluate that. It's just not in our current near term.

Speaker Change: It's an ongoing.

Speaker Change: <unk> articulated it well, but it is an ongoing evaluation manwell and so as we go through our capital stress testing and we see opportunities to go above the what we call. The routine buybacks, we will evaluate that it's just not in our current.

Manuel Antonio Navas: I appreciate that. Thank you very much.

Speaker Change: Near term thing.

Speaker Change: I appreciate that thank you very much.

Operator: Your next question comes from a line of Kelly Motta from KBW. Your line is open.

Your next question comes from the line of Kelly Motta from K B W. Your line is open.

Kelly Ann Motta: Hi, thank you so much for the question. Most of mine have already been asked and answered. But maybe looking at slide 10, it says you've continually been reviewing all 2.5 million plus loans for during the next 24 months. Just given the investor focus on CRE and office, if you could provide, you know, what your findings have been, any conversations you have had with borrower borrowers whose loans are coming due or up for repricing and how you are managing with those. Thanks.

Kelly Motta: Hi, Thank you so much for the question.

Kelly Motta: Most of mine have been asked and answered, but maybe looking at slide 10. It says he needs.

Kelly Motta: <unk> really been reviewing.

Kelly Motta: All $2 5 million plus loans maturing in the next 24 months.

Kelly Motta: Just given the investor focus on CRE and also if you could provide.

Kelly Motta: What your findings have been in the comp.

Kelly Motta: Conversations with borrowing borrowers.

Kelly Motta: Loans are coming due are up for repricing and how you are managing.

Stephen P. Clark: Kelly, Steve Clark again. So yes, as we've noted, we've had for several quarters now an ongoing project or protocol to look two years out and roll quarters forward as the year progresses on all loans that are scheduled to mature during this time period. And we just want to be proactive and get in front of our customers well in advance of any maturity dates. And so far, we've been quite successful in working with our customers for loans that matured during the first quarter of this year and the end of last year with really minor challenges.

Thanks.

Kelly Motta: Kelli, Steve Clark again, so yes, as we've noted we've had for several quarters now and ongoing.

Project, our protocol to look two years out and roll quarters forward as the year progresses at all loans that are <unk>.

Kelly Motta: Scheduled to mature during this time period, and we just want to be proactive and get in front of our customers well in advance of any maturity dates and so far.

Kelly Motta: We've been quite successful in working with our customers for loans that have matured during the first quarter of this year and the end of last year with really minor minor challenges so that'll be ongoing each quarter.

Stephen P. Clark: So that'll be ongoing each quarter, and we'll continue to work with all of our customers as it relates to their maturities. There could be and likely will be some discussions with certain borrowers with certain loans as we move forward, but we really view it as really episodic on a loan-by-loan basis versus a broad concern.

We'll continue to work with all of our customers.

Kelly Motta: As it relates to their maturities there could be and likely will be some discussions.

Kelly Motta: With certain borrowers with certain loans as we move forward, but we really view it as really episodic and a loan by loan basis versus a broad concern.

Kelly Ann Motta: Got it. Thank you so much.

Arthur J. Bacci: Thank you. And, with no further questions in queue, I would like to turn the conference back over to Mr. Bacci.

Speaker Change: Got it thank you so much.

Speaker Change: Thank you and with no further questions in queue I would like to turn the conference back over to Mr. Bacci.

Arthur J. Bacci: Thank you for joining the call today. If you have any specific follow-up questions, please feel free to reach out to me directly. This concludes today's conference call. Thank you for your participation.

Bacci: Thank you for joining the call today, if you have any specific follow up questions. Please feel free to reach out to me directly.

Arthur J. Bacci: Andrew Brazil, Rodger, and I will be attending conferences and investor meetings throughout the quarter and we look forward to meeting with many of you have a great day.

Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.

Speaker Change: This concludes today's conference call. Thank you for your participation you may now disconnect.

Speaker Change: Okay.

Speaker Change: Yeah.

Operator: Many of you have a great day.

Speaker Change: As many of you have a great day.

This concludes.