Q1 2025 Valley National Bancorp Earnings Call
Unknown Executive: Good day and thank you for standing by.
Okay.
Speaker Change: Good day and thank you for standing by welcome to the Q1 2025 Valley National Bancorp Earnings Conference call.
Unknown Executive: Welcome to the Q1 2025 Valley National Band Corp Earnings Conference. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session.
Speaker Change: At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need a press star one on your telephone.
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Speaker Change: Then here an automated message.
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Speaker Change: Your question. Please press Star one again, please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today Ma'am. Please go ahead.
Unknown Executive: Please be advised that today's conference is being recorded.
Travis Lan: I would now like to hand the conference over to your speaker today, Travis Lan, please go ahead. Good morning and welcome to Valley's first quarter 2025 earnings conference call.
Speaker Change: Good morning, and welcome to Valley's first quarter 2025 earnings conference call I'm joined today by CEO, IRA Robbins, and Chief Credit Officer, Mark CAGR before we begin I would like to make everyone aware that our quarterly earnings release and supporting documents can be found on our company website Valley Dot com.
Travis Lan: I'm joined today by CEO Ira Robbins and Chief Credit Officer Mark Saeger. Before we begin, I would like to make everyone aware that our quarterly earnings release and supporting documents can be found on our company website at valley.com. When discussing our results, we refer to non-GAAP measures, which exclude certain items from reported results. Please refer to today's earnings release for reconciliations of these non-GAAP measures.
Speaker Change: When discussing our results we refer to non-GAAP measures, which exclude certain items from reported results. Please refer to today's earnings release for reconciliations of these non-GAAP measures. Additionally, I would like to highlight slide two of our earnings presentation and remind you that comments made during this call may contain forward looking statements relating to valley National Bancorp and the banking industry.
Travis Lan: Additionally, I would like to highlight slide two of our earnings presentation and remind you that comments made during this call may contain forward-looking statements relating to Valley National Bank Corp and the banking industry. Valley encourages all participants to refer to our SEC filings, including those found on forms 8K, 10Q, and 10K for a complete discussion of forward-looking statements and the factors that could cause actual results to differ from those statements.
Speaker Change: Valley encourages all participants to refer to our SEC filings, including those found on forms 8-K, 10-Q, and 10-K for a complete discussion of forward looking statements and the factors that could cause actual results to differ from those statements with that I'll turn the call over to IRA Robbins.
IRA Robbins: With that, I'll turn the call over to Ira Robbins. Thank you, Travis. During the first quarter of 2025, net income on both a reported and adjusted basis was approximately $106 million, or 18 cents per diluted share. This compared to $116,020,000 on a reported basis, or $76,013,000 on an adjusted basis a quarter ago. The sequential growth in adjusted earnings reflects revenue stability, lower operating expenses, and a smaller loan loss provision. Clearly, much has changed since we spoke to you three months ago. Tariff uncertainty has driven most economic growth estimates lower, while inflation expectations are rising. Volatility in the interest rate in equity markets has increased, and the market now anticipates more cuts during the year.
IRA Robbins: Thank you Travis during the first quarter of 2025 net income on both reported and adjusted basis was approximately 106 million or <unk> 18 per diluted share.
IRA Robbins: This compared to $116 million in 'twenty on a reported basis or 76 million and 13 cents on an adjusted basis a quarter ago.
IRA Robbins: The sequential growth in adjusted earnings reflects revenue stability.
IRA Robbins: Lower operating expenses and a smaller loan loss provision.
IRA Robbins: Clearly much has changed since we spoke to you three months ago tariff uncertainty has driven most economic growth estimate slower.
IRA Robbins: <unk> expectations are rising.
IRA Robbins: Volatility in the interest rate and equity markets has increased and the market now anticipates more cuts during the year.
IRA Robbins: Despite this backdrop, we feel well positioned to improve further on this quarter's results. While a commercial real estate exposure has been a focus over the last 18 months, this sizable portfolio is relatively insulated from potential tariff disruption, and our ongoing CREED credit improvement should continue. More broadly, our commercial customers remain generally resolute with little direct exposure to the import and export business expected to be impacted by changing tariff policies. From a growth perspective, our consistent C&I expansion has primarily come from small and middle market businesses where demand continues to percolate. While increased competition has resulted in incremental spread compression, we are optimistic that we have sufficient opportunity to grow profitability throughout the year.
IRA Robbins: Despite this backdrop, we feel well positioned to improve further on this quarters results.
IRA Robbins: While our commercial real estate exposure has been our focus over the last 18 months. The sizeable portfolio is relatively insulated from potential tariff disruption and our ongoing create credit improvement should continue.
IRA Robbins: More broadly our commercial customers remain Jeremy resolute with little direct exposure to the import and export business expected to be impacted by changing care policy.
IRA Robbins: From a growth perspective, our consistent C&I expansion has primarily card for small and middle market businesses, where demand continues to percolate.
IRA Robbins: While increased competition has resulted in incremental spread compression. We are optimistic that we have sufficient opportunity to grow profitability throughout the year.
IRA Robbins: As such, there are no changes to our return expectations on slide five. On slide six, we do provide a more granular directional update to the 2025 guidance items that we presented a few months ago. We anticipate that both loan growth and net interest income will be at the lower end of our expected range for 2025. However, this should be mostly offset by non-interest expenses coming in towards the low end as well. There is no meaningful adjustment to our expectations for annual fee income or our tax rate. While charges and provisions were both somewhat elevated during the quarter, there is no change to our full year expectations for a roughly 50 percent decline in each metric from 2024.
IRA Robbins: As such there are no changes to our return expectations on slide five.
IRA Robbins: On slide six we do provide a more granular directional update to the 2025 guidance items that we presented a few months ago.
IRA Robbins: We anticipate to both loan growth and net interest income will be at the lower end of our expected range for 2025.
IRA Robbins: However, this should be mostly offset by noninterest expenses coming in towards the low end as well.
IRA Robbins: There is no meaningful adjustment to our expectations for annual fee income or our tax rate.
IRA Robbins: What charges and provisions were both somewhat elevated during the quarter. There is no change to our full year expectations for a roughly 50% decline in each metric from 2024.
IRA Robbins: Slide 7 illustrates the long-term value that we continue to create for our stakeholders. Our tangible book value, inclusive of dividends, has now doubled in the last seven years, and our rate of growth continues to outpace peers. We remain focused on organic customer acquisition in both the commercial and consumer areas. These customers represent longer-term revenue opportunities and will contribute meaningfully to the future performance of our institution. As we have continually discussed, we are a much more diverse bank today than when I took over as CEO. Our evolution into new business lines and geographies has created opportunities that were previously unavailable to us.
IRA Robbins: Slide seven illustrates the long term value that we continue to create for our stakeholders.
IRA Robbins: Our tangible book value inclusive of dividends has now doubled in the last seven years.
IRA Robbins: And our rate of growth continues to outpace peers.
IRA Robbins: We remain focused on organic customer acquisition in both the commercial and consumer areas.
IRA Robbins: These customers represent longer term revenue opportunity opportunities and will contribute meaningfully to the future performance of our institution.
Speaker Change: As we have continually discussed we are a much more diverse bank today than when I took over as CEO.
Speaker Change: Our evolution into new business lines and geographies has created opportunities that were previously unavailable to us.
IRA Robbins: We continue to evolve with an internal focus on optimizing our operations, customer network, and balance sheet to become a better, more profitable bank for our employees, our clients, and our shareholders. While economic uncertainty may present incremental headwinds for the industry, I am confident the Valley is well positioned to navigate this most recent period of disruption as we continue to execute on our strategic imperative.
Speaker Change: We continue to evolve with an internal focus on optimizing our operations customer network and balance sheet to become a better more profitable bank for our employees, our clients and our shareholders.
Speaker Change: While economic uncertainty may present incremental headwinds for the industry I am confident the valley is well positioned to navigate this most recent period of disruption as we continued to execute on our strategic imperatives.
Travis Lan: With that, I will turn the call back to Travis to discuss the Corps' financial highlights. After Travis concludes his remark, Mark, Travis, and I will be available for your questions. Thank you, Ira.
With that I will turn the call back to Travis to discuss the quarters financial highlights.
Speaker Change: <unk> concludes his remark mark Travis and I will be available for your questions.
Travis Lan: Slide eight illustrates the quarter's deposit growth and rate trends. Core customer deposits increased $600 million, which enabled the repayment of $700 million of higher cost brokered balance. This is in addition to the $2 billion of brokered deposits which matured and were repaid during the fourth quarter. Non-interest deposit balances increased for the third consecutive quarter and now stand at the highest level since September of 2023. In addition to our strong growth, we continue to successfully reprice deposit costs lower. During the quarter, our average cost of deposits declined by 29 basis points. Our repricing actions have driven a total deposit beta of 53% since the Federal Reserve started reducing the Fed Fund's target rate in September of 2024.
Speaker Change: Thank you IRA slide eight illustrates the quarter's deposit growth and rate trends core customer deposits increased $600 million, which enabled the repayment of $700 million of higher cost brokered balances. This is in addition to the $2 billion of brokered deposits, which matured and were repaid during the fourth quarter.
Speaker Change: <unk> <unk>.
Speaker Change: Noninterest deposit balances increased for the third consecutive quarter and now stand at the highest level since September of 2023.
Speaker Change: In addition to our strong growth we continue to successfully repriced deposit costs lower during the quarter. Our average cost of deposits declined by 29 basis points. Our repricing actions have driven a total deposit beta of 53% since the federal reserve started reducing the fed funds target rate in September of 2024.
Travis Lan: The quarter's net interest margin improvement was largely the result of our ability to reduce deposit costs and incrementally improve our funding mix.
Speaker Change: The quarters net interest margin improvement was largely the result of our ability to reduce deposit costs and incrementally improve our funding mix.
Travis Lan: Slide 10 illustrates the components of the quarter's lending activity. We continue to manage the runoff of certain transactional investor CRE and construction loans, which contributed to a $350 million decline in regulatory CRE during the quarter. As of March 31st, 2025, our CRE concentration ratio was 353% versus 362% a quarter ago, and 474% at the end of 2023.
Speaker Change: Slide 10 illustrates the components of the quarter's lending activity, we continue to manage the runoff of certain transactional investor Cree and construction loans, which contributed to a $350 million decline in regulatory create during the quarter.
Speaker Change: As of March 31, 2025, or three concentration ratio was 353% versus 362% a quarter ago and 474% at the end of 2023.
Travis Lan: We anticipate that Cree originations will begin to pick up, which should slow the pace of runoff throughout the remainder of the year. While the first quarter tends to be seasonally slow, we are pleased with the 9% annualized C&I growth that we achieved. Similarly, we saw strong results within our prime indirect auto lending business. We expect that continued growth in these lending lines will support low single-digit loan growth for the year.
Speaker Change: We anticipate that Cree originations will begin to pick up which should slow the pace of run off throughout the remainder of the year.
Speaker Change: While the first quarter tends to be seasonally slow we are pleased with the 9% annualized C&I growth that we achieved similarly, we saw strong results within our prime indirect auto lending business.
Speaker Change: We expect the continued growth in these lending lines will support low single digit loan growth for the year.
Travis Lan: Slide 11 highlights the quarter's net interest income and net interest margin results. Net interest income declined modestly as a result of lower day count during the quarter. We estimate that the lower day count represented an approximate $9 million headwind on the quarter's net interest income. Net interest margin increased for the fourth consecutive quarter, bolstered by the positive deposit composition and cost trends described earlier.
Speaker Change: Slide 11 highlights the quarters net interest income and net interest margin results net interest income declined modestly as a result of lower day count during the quarter, we estimate that the lower day count represented an approximate $9 million headwind on the quarters net interest income.
Speaker Change: Net interest margin increased for the fourth consecutive quarter bolstered by the positive deposit composition and cost trends described earlier.
Travis Lan: As Ira mentioned, we now expect to be towards the lower end of our 9 to 12% net interest income growth range for 2025. While the interest rate environment remains generally in line with our expectations, lower loan growth and continued lending spread compression represent modest headwinds to our initial forecast. That said, we continue to expect that net interest margin will increase throughout the year as funding costs decline and the fixed rate asset repricing tailwind helps to mitigate potential asset exposure to lower interest rates.
IRA Robbins: As IRA mentioned, we now expect to be towards the lower end of our 9% to 12% net interest income growth range for 2025, while the interest rate environment remains generally in line with our expectations lower loan growth and continued lending spread compression represent modest headwinds to our initial forecast.
IRA Robbins: That said, we continue to expect the net interest margin will increase throughout the year as funding cost decline in the fixed rate asset repricing tailwind helps to mitigate potential asset exposure to lower interest rates.
Travis Lan: The next slide illustrates the quarter stability in adjusted non-interest income. Lower wealth and trust fees reflect a modest slowdown in tax credit advisory revenue. Within capital markets, swap activity moderated somewhat, while FX and syndication fees both grew sequentially.
IRA Robbins: The next slide illustrates the quarter stability in adjusted noninterest income lower wealth and trust fees reflect a modest slowdown in tax credit advisory revenue within.
IRA Robbins: Within capital markets swap activity moderated somewhat while FX and syndication fees both grew sequentially.
Travis Lan: We continue to believe that the midpoint of our 6% to 10% guided growth range remains reasonable for 2025. On slide 13, you can see that adjusted non-interest expenses of $267 million were 3% lower than the fourth quarter and virtually flat as compared to a year ago. The sequential decline was mainly driven by lower technology, consulting, and marketing expenses, which were partially offset by the seasonal uptick in payroll tax. We remain focused on managing future expense growth to ensure that incremental revenue gains generate positive operating leverage and support our profitability improvement over time.
IRA Robbins: We continue to believe that the midpoint of our 6% to 10% guided growth range remains reasonable for 2025.
IRA Robbins: On Slide 13, you can see that adjusted noninterest expenses up $267 million were 3% lower than the fourth quarter and virtually flat as compared to a year ago.
IRA Robbins: The sequential decline was mainly driven by lower technology consulting and marketing expenses, which were partially offset by the seasonal uptick in payroll taxes.
IRA Robbins: We remain focused on managing future expense growth to ensure that incremental revenue gains generate positive operating leverage and support our profitability improvement over time.
Travis Lan: As Ira mentioned, we believe that 2025 expense growth will likely fall to the lower end of our initial guidance range.
IRA Robbins: As IRA mentioned, we believe that 2025 expense growth will likely fall to the lower end of our initial guidance range.
Travis Lan: Slide 14 illustrates our asset quality and reserve trends. Non-accrual loans decreased modestly during the quarter. Accruing past due loans declined to 11 basis points as a pair of CRE loans, which had previously been delinquent for idiosyncratic reasons, became current again. There were no new material additions to accruing past-due loans during the quarter. Net loan charge-offs and loan loss provision both declined meaningfully from the fourth quarter, with the provision falling to the lowest level in the last 12 months. Given our current expectations for the credit environment, we anticipate that net charge-offs and provision will continue to compare favorably to 2024 throughout the remainder of the year.
IRA Robbins: Slide 14 illustrates our asset quality and reserve trends.
IRA Robbins: Nonaccrual loans decreased modestly during the quarter accruing past due loans declined to 11 basis points as a pair of <unk> loans, which had previously been delinquent for idiosyncratic reasons became current again.
IRA Robbins: There were no new material additions to accruing past due loans during the quarter.
IRA Robbins: Net loan charge offs and loan loss provision both declined meaningfully from the fourth quarter with the provision falling to the lowest level in the last 12 months.
IRA Robbins: Given our current expectations for the credit environment, we anticipate that net charge offs and provision will continue to compare favorably to 2024 throughout the remainder of the year.
Travis Lan: During the quarter, our allowance coverage ratio increased five basis points to 1.22% and stands at the highest level of the past five years. We anticipate general stability in our allowance coverage going forward, all else equal.
IRA Robbins: During the quarter, our allowance coverage ratio increased five basis points to 122% and stands at the highest level of the past five years, we anticipate general stability in our allowance coverage going forward all else equal.
Travis Lan: Turning to slide 15, tangible book value increased as a result of retained earnings and a favorable OCI impact associated with our available for sale portfolio. Our regulatory capital ratios at March 31st, 2025 were generally stable as compared to December 31st of 2024. As Ira mentioned, we are extremely well positioned from a capital perspective and have the financial flexibility to support our profitability goals throughout the year.
IRA Robbins: Turning to slide 15 tangible book value increased as a result of retained earnings and a favorable OCI impact associated with our available for sale portfolio.
IRA Robbins: Our regulatory capital ratios at March 31, 2025 were generally stable as compared to December 31 2024.
IRA Robbins: As IRA mentioned, we are extremely well positioned from a capital perspective and have the financial flexibility to support our profitability goals throughout the year with that I will turn the call back to the operator to begin Q&A. Thank you.
Unknown Executive: With that, I will turn the call back to the operator to begin Q&A. Thank you. As a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. One moment for our first question.
IRA Robbins: Thank you as a reminder to ask a question. Please press star one on your telephone Lake for your name to be announced to withdraw your question. Please press star one again.
IRA Robbins: One moment for our first question.
Frank Schiraldi: Our first question is going to come from the line of Frank Schiraldi with Piper Sandler. Your line is open. Please go ahead. Thanks. Good morning. Just last quarter, I think you guys were talking about, if I'm not mistaken, commercial loan originations coming on in the 7% range. I just wondered if you could maybe talk about how that's progressed, where that is, where the back books are repricing currently. Yeah, Frank, new originations this quarter were slightly lower than the 7% level. I think on average, we were about 680. I think it's a combination of obviously lower benchmark rates and some compression and spread that's pretty consistent with what we're seeing across the industry.
Speaker Change: Our first question is going to come from the line of Frank <unk> with Piper Sandler. Your line is open. Please go ahead.
Speaker Change: Thanks, Good morning.
Speaker Change: Good morning, Frank.
Speaker Change: Just last quarter I think you guys were talking about if I'm not mistaken commercial loan originations coming on in the 7% range.
Speaker Change: I was just wondering if you could maybe talk about how thats progressed, where that is where the back book repricing currently.
Speaker Change: Yeah, Frank New originations this quarter were slightly lower than the 7% level I think on average we were about 680.
Speaker Change: I think it's a combination of obviously lower benchmark rates and some compression in spreads that's pretty consistent with what we're seeing across the industry.
Frank Schiraldi: Okay, and then obviously made a lot of progress on the CRE concentration levels over the last 12 months. You know, you're basically at that 350 threshold here. I think you talked about maybe the compression or the contraction slowing over this year.
Speaker Change: Okay.
Speaker Change: And then <unk>.
Speaker Change: Obviously, you made a lot of progress on the <unk> concentration levels over the last 12 to 12 months.
Speaker Change: You're basically at that $3 50 threshold here.
Speaker Change: I think you talked about maybe the compression or the contraction slowing over this year. Just curious if you could talk about kind of longer term target and where do you think that non or when do you think that non owner occupied Cree balances sort of stabilize here and within that just just wanted if you can.
Frank Schiraldi: Just curious if we can talk about kind of longer term target and where do you think that non, or when do you think that non-owner occupied CRE balances sort of stabilize here? And within that, just wondered if you can, you know, talk about the pickup in growth to offset that, if you still think you can get close to that double digit CNI growth this year.
Speaker Change: Talk about the <unk>.
Speaker Change: Pickup in growth to offset that if you still think you can get close to that double digit C&I growth this year.
IRA Robbins: I think, let me start with just the C&I. I think we're definitely real positive about what we've seen there. The continued double-digit growth is something that we anticipate to continue throughout the organization. We laid a really strong foundation for that over the last few years based on hirings and different industries that we ventured into. So that will definitely help as we think about the moderation of the CRE concentration that sits within the entire organization. I think that said, we are getting generally pretty comfortable with where we are today and some of the significant reductions that we've seen in the CRE portfolio are probably going to begin to stabilize as we begin to see a little bit more uptake in some of the originations on that CRE book.
Speaker Change: Yes, I think let me start with just the C&I I think we're definitely real positive about what we've seen there. The continued double digit growth is something that we anticipate to continue throughout the organization. We laid a really strong foundation for that over the last few years based on hirings in different industries that we've entered into so that will definitely help as.
Speaker Change: As we think about the moderation of the Cree concentration that sits within the entire organization I think that said, we are getting generally pretty comfortable with where we are today and some of the significant reductions that we've seen in the <unk> portfolio are probably going to begin to stabilize as we begin to see a little bit more uptick in some of the originations on that Cree book So overall.
Frank Schiraldi: So over a long period of time, the CRE concentration will definitely come down, but it will be largely more attributable to growth in other areas outside of us really reducing what we're seeing in that CRE portfolio. Great. Okay. Appreciate the call. Thanks. Thank you and one moment for our next question.
Speaker Change: Long period of time, the Creek concentration will definitely come down, but it would be largely more attributable to growth in other areas outside of us really reducing what were seeing in that portfolio.
Speaker Change: Yes.
Speaker Change: Great. Okay I appreciate the color. Thanks.
Speaker Change: Thank you and one moment for our next question.
Chris McGurdy: Our next question comes from the line of Chris McGurdy with KBW. Your line is open. Please go ahead. Oh, great. Thanks for the question. Travis, on the expense guide, you did great this quarter. To get to the updated guide would imply a bit of a ramp. So I'm interested in your thoughts there. Or are you just being conservative at this point? It feels like low end or even a touch below might be in play. Thanks. Yeah, I think that's pretty reasonable.
Speaker Change: Our next question comes from the line of Chris Mcgratty with Keybank will be your line is open. Please go ahead.
Speaker Change: Oh, great. Thanks for the question.
Speaker Change: On the expense guide you did great this quarter to get to the updated guide it would imply a bit of a ramp so I'm interested in.
Speaker Change: And your thoughts there or are you just being conservative at this point it feels like low end or even a touch below Matt.
Speaker Change: Thanks.
Travis Lan: I think we've been consistently conservative with respect to our expense guide to give ourselves, you know, the flexibility to, you know, invest in revenue generating opportunities that we identify. I would say this quarter, you know, we would anticipate obviously payroll taxes will normalize about $4 million in the second quarter. But I do think that'll be offset by higher kind of marketing and business development spend as the year goes on. And then professional fees were also fairly low this quarter. And we manage that very tightly. But there's some opportunity there for that to be higher as the year goes on, too.
Speaker Change: Yes, I think thats pretty reasonable I think we've been consistently conservative with respect to our expense guide to give ourselves the flexibility to invest in revenue generating opportunities that we identify I would say this quarter.
Speaker Change: We would anticipate obviously payroll taxes will normalize about $4 million in the second quarter or do you think that'll be offset by higher kind of marketing and business development spend as the year goes on and then professional fees were also fairly low this quarter and we manage that very tightly but some opportunity there for that to be higher as the year goes on too. So I agree with your general sense.
Travis Lan: So I agree with your general sentiment. But those are some of the moving pieces. And all that said, I mean, obviously, you know, expenses remain very well controlled in general, and certainly expect further positive operating leverage as the year goes on and further efficiency gains. Awesome.
Speaker Change: But those are some of the moving pieces and all of that said I mean, obviously expenses remained very well controlled in general and certainly expect further positive operating leverages as the year goes on and further efficiency gains.
Travis Lan: And then, in terms of deposit, deposit growth, interesting kind of what your updated thoughts are for, for the rest of the year, and ultimately trying to land it, you know, what you're going to do with the bond portfolio and cash, those levels. Yeah, sure. I think, look, we had very strong core customer deposit growth this quarter. You know, anticipate the momentum there will continue throughout the year, enabling us, I think, first, our focus would be to, you know, pay off some amount of brokered, continue that positive trend that we've seen in the last two or three quarters.
Speaker Change: Awesome and then.
Speaker Change: In terms of deposit deposit growth.
Speaker Change: Interested in kind of what your updated thoughts are for.
Speaker Change: For the rest of the year and ultimately trying to land it what youre going to do with the bond portfolio and cash those levels. Thanks.
Speaker Change: Yes, sure I think look we had very strong core customer deposit growth. This quarter anticipate the momentum there will continue throughout the year.
Speaker Change: Enabling us I think first our focus would be to pay off some amount of brokered continue that positive trend that we've seen in the last two or three quarters I think the cash positions in a pretty good place here.
Travis Lan: I think the cash position's in a pretty good place here. You know, obviously, some room to put additional funds to work. But again, our priority would be, you know, improvement of the brokered deposit portfolio. And then from a securities perspective, I think still going to grow a couple hundred million dollars a quarter, likely. The portfolio is at 12 percent of the balance sheet today. Over time, that trend's higher. You know, but the toggle there will be loan growth. So if loan growth doesn't necessarily materialize, then we have more flexibility for the securities portfolio. Great. Thanks.
Speaker Change: Some room for to put to put additional funds to work, but again, our priority would be.
Speaker Change: The improvement of the brokered deposit portfolio and then from a securities perspective, I think still going to grow a couple hundred million dollars a quarter likely the portfolios at 12% of the balance sheet today over time that trend higher.
But the toggle there will be loan growth. So if loan growth doesn't necessarily materialize, then we have more flexibility for the securities portfolio.
Speaker Change: Great. Thanks.
Unknown Executive: Thank you. One moment for our next question.
Speaker Change: Thank you one moment for our next question.
Manan Gosalia: Our next question comes from the line of Manan Gosalia with Morgan Stanley. Your line is open. Please go ahead. Hi, good morning. Ira, you noted that your CRE portfolio is insulated from data disruptions.
Operator: Our next question comes from the line of Marlin Coosa Leo with Morgan Stanley. Your line is open. Please go ahead.
Speaker Change: Hi, good morning.
Speaker Change: IRA you noted that your CRE portfolio is insulated from data of disruptions.
IRA Robbins: Can you talk a little bit more about that and also how you're thinking about which industries or which sectors might be under a little bit more stress. Yeah, definitely. I think, you know, having a Cree concentration as we continue to move forward, some of the volatility, you know, might not be the worst thing in the world. Obviously, it's not a place we want to manage with a concentration by any means. But that said, I think when we think about, you know, the asset classes that are going to be impacted and rates do come down on the long end, that would be a positive for us if you think about where we sit with the criticized assets, where we sit with the reserve coverage ratios, etc.
Speaker Change: Can you talk a little bit more about that and also how youre thinking about.
Speaker Change: Which industries or which sectors might be under a little bit more stress here.
Speaker Change: Yeah, definitely I think having.
Speaker Change: Having a creek concentration as we continue to move forward some of the volatility might not be the worst thing in the world. Obviously, it's not a place we want to manage with a concentration by any means but that said I think when we think about the asset classes that are going to be impacted if rates do come down on the long end and that would be a positive for us. If you think about where we sit with the criticized asset.
Speaker Change: Where we sit with a reserve coverage ratios et cetera. So generally the commercial clients that we have are more sensitive to interest rates than where they are on tariffs as we think about building and some of the development that comes into it.
IRA Robbins: So generally, the commercial clients that we have are more sensitive to interest rates than where they are on tariffs. As we think about, you know, building in some of the development that comes into it, you know, the two factors that really impact development on the Cree side are really interest rates and labor. And both of those seem to be a little bit more controlled versus where they were before. So the tariff conversations, as we think about steel and some of the other things for the size borrowers that we do and for the projects that they have, really would have less of an impact as other ones.
Speaker Change: Two factors that really impact development on the <unk> side are really interest rates and labor and both of those seem to be a little bit more controlled versus where they were before so the tariff conversations as we think about steel in some of the other things for the sized borrowers that we do earn for the projects that they have.
Speaker Change: It really would have less of an impact as other ones, obviously theres industries that are going to be potentially more impacted.
Manan Gosalia: You know, obviously, there's industries that are going to be potentially more impacted, you know, than others based off of what we're seeing with the tariffs and some of the uncertainty. That said, we feel really strong about what our positions are. The equipment leasing business that we have on the industrial space is pretty small. The size of the clients are pretty small as well. So generally speaking, we think we're pretty insulated on an aggregate basis. That's very helpful.
Speaker Change: Then than others based off of what we're seeing with the tariffs and some of the uncertainty.
Speaker Change: That said, we feel really strong about what our positions are.
Speaker Change: Equipment leasing business that we have on the industrial space is pretty small.
Speaker Change: The size of the clients are pretty small as well. So generally speaking we think we're pretty insulated on an aggregate basis.
Travis Lan: And maybe one for you, Travis. I think you noted spread compression a couple of times. It sounds like you're seeing more competition. I guess the question there is where is that coming from? And are you expecting more spread compression? Yeah, so the guide does expect a little bit more spread compression than what we've seen. I think actually, it was fairly benign at the end of 2024. And we've seen some incremental pressure in the first quarter here. So that I think you do see competition for high quality commercial deals in particular, something that we're not, you know, unfamiliar with.
Speaker Change: Great that's very helpful.
Travis: Maybe one for you Travis.
Speaker Change: I think you'd noted spread compression a couple of times it sounds like youre seeing more competition.
Speaker Change: The question there is where's that coming from and are you expecting more spread compression in your guide.
Speaker Change: Yeah. So the guide does.
Speaker Change: A little bit more spread compression that we've seen I think actually it was fairly benign at the end of 2024, and we've seen some incremental pressure in the first quarter here.
Speaker Change: So I think you do see competition for high quality commercial deals in particular.
Travis Lan: And we do have a variety of levers to pull depending on where the competition is greatest, and we'll review the opportunity to be so whether that's, you know, the geographic diversity that we have between the Northeast and the Southeast, or some of the nationwide businesses, I mean, I mentioned equipment leasing, you know, healthcare business as well, fund financing. So we have a variety of levers to pull to make sure that we can continue to grow profitably in a more competitive world. Is that coming more from the banks or from private credit? On the commercial side, I would say it's more from the banks.
Speaker Change: Something that were not on.
Speaker Change: I'm familiar with and we do have a variety of levers to pull depending on where the competition is greatest and we'll review them the opportunity to be so whether thats. The geographic diversity that we have between the northeast and the southeast or some of the nationwide businesses Iron mentioned equipment leasing in our health care business as well fund financing and so we have a variety of levers to pull to me.
Speaker Change: Sure that we can continue to grow profitably in a more competitive world.
Speaker Change: Is that coming more from the banks or from private credit.
Speaker Change: On the commercial side I would say, it's more from the banks on Cree I think private credit has gotten more active.
Travis Lan: On CRE, I think private credit has gotten more active, you know, as noted by the transaction we put on last year. You know, there's still demand for CRE assets moving into private credit. But what we're talking about in general is more on the CNI side. Got it. Thank Thank you.
Speaker Change: As noted by the transaction, we put on last year.
Speaker Change: Still demand for Cree assets moving into private credit, but what we're talking about in general is more on the C&I side.
Speaker Change: Got it thank you.
Unknown Executive: One moment for our next question.
Speaker Change: Thank you one moment for our next question.
Anthony Elian: Our next question comes from the line of Anthony Elian with J.P. Morgan. Your line is open. Please go ahead. Hi, everyone. You reiterated the loan guide of up three to 5%, but you expect the low end now.
Speaker Change: Okay.
Speaker Change: Our next question comes from the line of Anthony <unk> with Jpmorgan. Your line is open. Please go ahead.
Anthony: Hi, everyone you reiterated the loan guide of up 3% to 5%, but you expect the low end now I'm wondering drivers can <unk> actually be a loan growth quarter or will most of that growth you expect to be in the back half of the year.
Travis Lan: I'm wondering, Travis, can 2Q actually be a loan growth quarter or will most of that growth you expect be in the back half of the year? No, I think the second quarter can absolutely be a lone growth quarter. I mean, if you look at what we did this quarter, I think the kind of headwind that we faced was Cree originations were a little bit lighter than what we had anticipated. Payoffs were generally in line. And then the growth we saw in C&I and consumer, you know, was in line with our strong expectations. So I think there's consistency and momentum in those last two areas being C&I and consumer.
Anthony: No I think the second quarter can absolutely be a loan growth quarter. I mean, if you look at what we did this quarter I think the kind of headwind that we faced was.
Anthony: Pre originations were a little bit lighter than what we had anticipated payoffs were generally in line and then the growth we saw in C&I and consumer was in line with our strong expectation. So I think there is consistency in momentum in those last two areas being C&I and consumer and then his career originations pick up which we're beginning to see and we've seen an uptick in the pipeline on both the Cree and C&I.
Travis Lan: And then as Cree originations pick up, which we're beginning to see, and we've seen an uptick in the we feel pretty good about growth here in the second and third quarter. Maybe just to give you a little bit more clarity on what that pipeline is, you know, just in the commercial space, when you look at all components of where the pipeline sits, whether it's an approved or pre approved, we were sitting around $2 billion at last quarter end. Today, we're north of $2.7 billion. Now, obviously, we don't pull through all of that, but generally a lot more activity.
Anthony: Side, we feel pretty good about about growth here in the second and third quarter, maybe just to give you a little bit more clarity on what that pipeline is just in the commercial space. When you look at all components of where the pipeline sits whether it's an approved a preapproved we were sitting around $2 billion.
Anthony: Last quarter and today, we're north of $2 $7 billion now obviously, we don't pull through all of that but generally a lot more activity and the anticipation is to have strong growth as we think about Q2 Q3 and Q4.
Anthony Elian: And the anticipation is to have strong growth as we think about Q2 Q3 and Q4. Thank you.
Mark Saeger: And then my follow up for Mark, last quarter, you called out some large loan relationships that drove the increase in fourth quarter commercial real estate and CNI non performers. I'm just wondering if you could provide us with an update on those loans. Thank you.
Speaker Change: Thank you and then my follow up for Mark last quarter, you called out some large loan relationships that drove the increase in fourth quarter commercial real estate and C&I Nonperformer I'm. Just wondering if you could provide us with an update on those loans. Thank you.
Mark Saeger: I'm sure all of those loans have been written down and taken care of, and no lingering on any of those fourth quarter issues. The charge-offs this quarter were associated with two C&I credits, predominantly making up the bulk of that portfolio. We are very comfortable with the guidance that we're giving on both provision and charge-offs for the remaining portion of the year. Thank you.
Speaker Change: I'm sure all of those wells have been written down and taken care of and no lingering on any of those fourth quarter issues. The charge offs. This quarter were associated with two C&I credits predominantly making up the bulk of that portfolio.
Speaker Change: We are very comfortable with the guidance that we're giving on both provision and charge offs for the remaining portion of the year.
Speaker Change: Thank you.
Matthew Breese: One moment for our next question. Our next question comes from the line of Matthew Breese with Stephen Zink. Your line is open. Please go ahead. Good morning. Good morning, Matt.
Speaker Change: Thank you one moment for our next question.
Speaker Change: Our next question comes from the line of Matthew Breese with Stephens, Inc. Your line is open. Please go ahead.
Matthew Breese: Hey, good morning.
Travis Lan: I was hoping you could talk a bit about funding and core deposit growth expectations for the year. I'm also curious what's left on broker deposits to run off.
Speaker Change: Sorry, Matt I was hoping you could talk a bit about funding and core deposit growth expectations for the year multi curious what's left on broker deposits to run off.
Travis Lan: Maybe just let me start. I think just how we think about funding in general, Matt, and it's great to talk about the liability side of the balance sheet, but to talk about it in isolation without what we're doing on the asset side, I think would probably be a little bit of a miss here. And one of the things we've been having to do across the entire organization is how we think about growth, right? And we've seen organic growth on the loan side around double digits on a year-over-year basis. So obviously, as we grow the loan book between the 3% to 5%, there's far less demand that's required from deposit originations.
Matthew Breese: Yes.
Matthew Breese: Maybe just let me start I think just how we think about funding in general Matt and it's great to talk about the liability side of the balance sheet, but to talk about it in isolation without what we're doing on the asset side, I think would probably be a little bit of a miss here and one of the things we've been having to do across the entire organization is how we think about growth right and we've seen organic growth on the loan side.
Matthew Breese: Double digits on a on a year over year basis. So obviously as we grow the loan book between the 3% to 5% and there is a far less demand thats required from end deposit originations. So some of the consistency that we've added deposit originations will now provide a larger funding base for what we're doing on the loan side. In addition to that obviously we saw.
Travis Lan: So some of the consistency that we've had in deposit originations will now provide a larger funding base for what we're doing on the loan side.
Travis Lan: In addition to that, obviously, we spent a lot of time thinking about some of the systems across the organization. We did a significant core conversion in October of 23, which enabled us to put on a very large treasury platform here. That's now up and running. So we think we have the strong foundation and capabilities to continue to grow the funding side of the book, which will really support more on at least a one-for-one basis what we're doing on the loan side. Matt, coming into the year, our expectation for core customer deposit growth was 6%. This quarter was 5.5% on an annualized basis, so I feel pretty good about being on track with those expectations.
Matthew Breese: Been a lot of time thinking about some of the systems across the organization. We did a significant core conversion in October of 'twenty, three which enabled us to put on a very large treasury platform here.
Matthew Breese: Now up and running so we think we have a strong foundation and capabilities to continue to grow the funding side of the book, which will really support more on at least a one for one basis, what we're doing on the loan side, but <unk>.
Matthew Breese: <unk> a bit more details on that for sure I mean, Matt coming into the year, our expectation for core customer deposit growth was 6%. This quarter was five 5% on annualized basis, so feel pretty good about being on track with those expectations.
Travis Lan: We do put in the investor deck on the page, I think it's slide 11, the bottom right, illustrates maturing CDs and FHLB borrowings. We still have a pool of $6 billion of brokered CDs, the majority of which are maturing over the next 12 months and create an opportunity to refinance lower into core customer deposits. That's benefited the funding cost of the deposit beta so far as rates have come down and anticipate that that will continue. Got it. Okay.
Matthew Breese: We do put in the investor deck on the page I think it's slide 11 in the bottom right illustrates maturing Cds and <unk> borrowings.
Matthew Breese: We still have a pool of $6 billion of brokered Cds, the majority of which are maturing over the next 12 months and create an opportunity to refinance lower into core customer deposits and that's benefited the funding cost of the deposit betas, so far as rates have come down and anticipate that that will continue.
Matthew Breese: Yeah.
Matthew Breese: Yes.
Travis Lan: And then the other one is just on loan yields. You know, the movement this quarter, relative to Fed funds just just struck me as quite a bit. So could you maybe help us out with the extent of spread compression? because without it the decline suggests there's just a really significant move lower in fixed or adjustable loan yields and just trying to suss that out. Yeah, I think part of part of the impact for the first quarter on margin and then within that asset yields and deposit costs is the fewer days. So with two fewer days, right, you're creating less interest income, which has an impact on the way the yield presents itself.
Matthew Breese: Got it Okay and then the other one is just on loan yields.
Movement this quarter relative to fed funds. Just just struck me is quite a bit so could you maybe help us out with the extent of spread compression.
Matthew Breese: Because without it the decline to just there is just a really significant move lower in fixed or adjustable loan yields just trying to sort that out.
Matthew Breese: Yes, I think part of part of the impacts for the first quarter on margin and then within that asset yields and deposit costs is the fewer days. So with two fewer days right. You are creating less interest income, which has an impact on the way the yield presents itself.
Travis Lan: You know, while we've talked about Spreads tightening somewhat here. I don't think it's sufficient enough to create a meaningful move in the low-yield this quarter. Got it. Okay.
Matthew Breese: While we've talked about.
Matthew Breese: Spreads tightening somewhat here I don't think it's sufficient enough to create a meaningful move in the loan yield this quarter.
Travis Lan: If I could sneak in one more. Do you have the end of period or most recent cost of deposits just to help us out direction? I don't in front of me, Matt, I can follow up, it's, I don't in front of me. Thank you. One moment for our next question.
Speaker Change: Got it okay, if I could sneak in one more do you have the end of period or most recent cost deposits just to help us out directionally.
Speaker Change: I don't in front of me, Matt I can follow up it's I don't in front of me.
Speaker Change: Got it thank you.
Speaker Change: Thank you one moment for our next question.
Jared Shaw: Our next question comes from the line of Jared Shaw with Barclays. Your line is open. Please go ahead. Thanks. Good morning.
Speaker Change: Okay.
Jared Shaw: Our next question comes from the line of Jared Shaw with Barclays. Your line is open. Please go ahead.
Jared Shaw: Thanks, Good morning.
Travis Lan: um You know, I guess maybe sticking with with the yield and costs, you know, as we as we look at at margin moving through the year, do you still feel that at the end of the year, we can be at or exceeding the 310 level? Yeah, Jared, we absolutely do. And I think that's reiterated in some of the guidance pages that we've provided here. I think for the full year, we're looking at a margin today of around 305, give or take. Obviously, that's dragged down by the first quarter at 296. So by the time we get to the end of the year, we do anticipate 310.
Speaker Change: Alright.
Speaker Change: I guess, maybe sticking with the yield and cost as we as we look at <unk>.
Speaker Change: Margin moving through the year.
Speaker Change: Do you still feel that the end of the year, we can be.
At or exceeding the 310.
Speaker Change: <unk>.
Speaker Change: Yes, Jerry we absolutely do and I think thats reiterated in some of the guidance pages that we provided here I think for the full year. We're looking at a margin today of around 305 give or take obviously and that's dragged down by the first quarter of 296. So by the time you get to the end of the year, we do anticipate III Tam I think the key drivers there as we've talked about is continued rotation on the.
Travis Lan: I think the key drivers there, as we've talked about, is continued rotation on the funding side out of brokered into lower cost core, the opportunity to potentially reprice deposits again, and then the fixed rate asset repricing tailwind on the loan side. So those factors kind of coming together is what support that guidance.
Speaker Change: Funding side out of brokered into lower cost core and the opportunity to potentially reprice deposits again, and then the fixed rate asset repricing tailwind on the loan side. So those factors kind of coming together is what support that guidance.
Travis Lan: Okay, thanks.
Mark Saeger: And then, you know, on the on the credit discussion, just the you know, the, the build of of the allowance this quarter. Did you is that more qualitative overlay that you added to the to the allowance? Or is that did you actually use a, a more, you know, a change from the baseline Moody's assumption? I'm more adversarial. So, predominantly, the direction there, if you saw, again, our CRE portfolio shrank slightly, C&I increased. We've mentioned in the past that our reserve coverage for C&I is higher than for CRE, and that directionally led to the build. We did keep our outlook from Moody's scenarios similar to the prior year, and that's predominantly because all of the Moody's scenarios did take into account the tariff environment and expectations of tariffs going into place.
Speaker Change: Okay. Thanks, and then.
Speaker Change: On the on the credit discussion just the.
Speaker Change: The build of the allowance this quarter.
Speaker Change: Did you is that more qualitative overlay that you added to the to the allowance or is that did you actually.
Speaker Change: Use a more change.
Speaker Change: Change from the baseline Moody's assumption.
Speaker Change: A more accurate.
Speaker Change: So predominantly the direction there if you saw again, our key portfolio shrank slightly C&I increased we've mentioned in the past that our reserve coverage for C&I is higher than for Cree and that Directionally led to the Bill we did keep.
Speaker Change: Our outlook from Moody's scenarios similar to the prior year and that's predominantly because all of the Moody's scenarios did take into account the <unk>.
Speaker Change: Tariff environment and expectations of tariffs going into place so with that we continue to keep our weightings, let's say.
Mark Saeger: So, with that, we continued to keep our weightings the same, noting that we have a higher weighting on downside scenario than upside scenario in our model.
Speaker Change: Noting that we have a higher weighting on downside scenario of an upside scenario.
Speaker Change: In our model.
Mark Saeger: Okay. All right.
Mark Saeger: Thanks.
Mark Saeger: And then just finally, I guess, what's the appetite for any additional CRE loan sales from here? You referenced sort of the strength of private equity, private capital. Is there an opportunity to do any more loan sales? Are you comfortable with? sort of normal attrition from here. I think we're pretty comfortable with where the portfolio, excuse me, stands today. There's a lot of dialogue and a lot of inbound inquiries given the strength of our portfolio, but the reality is I think we feel pretty confident about where we stand and about the path forward for us organically.
Speaker Change: Okay, Alright, Thanks, and then just finally I guess.
Speaker Change: What's the appetite for any additional CRE loan sales from here you referenced sort of the strength of private equity or private capital is there an opportunity to do any more loan sales or are you comfortable with.
Speaker Change: Certain normal attrition from here.
Speaker Change: I think we're pretty comfortable with where the portfolio excuse me stands today.
Speaker Change: Theres a lot of dialogue and a lot of inbound inquiries given the strength of our portfolio, but the reality is I think we feel pretty confident about where we stand and about the path forward for us organically and I think just adding to that when you look at sort of the guidance. We gave on that pre concentration number we feel pretty comfortable with operating around that number for a period of time. So we're pretty much right there right now.
Mark Saeger: And I think just adding to that, when you look at sort of the guidance we gave on that CRE concentration number, we feel pretty comfortable with operating around that number for a period of time. So we're pretty much right there right now, you know, and I think similarly, just going back to where the reserve coverage is, I think you'll notice we didn't adjust any of the guidance numbers or targets for the reserve for the CRE quarters this year, excuse me, this quarter versus in prior years. So we've pretty much already met what that CECL number looks like for us for the year or where we think that the ACL coverage is.
Speaker Change: And I think similarly, just going back to where the reserve coverages I think youll notice we didn't adjust any of the guidance numbers are our targets for the reserve for the quarters. This year.
Speaker Change: This quarter versus in prior years so.
Speaker Change: We pretty much already met with that seasonal number looks like for us for the year or where we think that the ACL coverages. So obviously we're expecting.
Mark Saeger: So obviously we're expecting a lot less of a build as we move into the rest of the year.
Speaker Change: A lot less of a build as we move into the rest of the year.
Mark Saeger: Great, thank you very much. Thank you.
Speaker Change: Great. Thank you very much.
Unknown Executive: One moment for our next question.
Speaker Change: Thank you gentlemen, our next question.
Steve Moss: Our next question is going to be from the line of Steve Moss with Raymond James. Your line is open. Please go ahead.
Speaker Change: Our next question is going to be from the line of Steve Moss with Raymond James Your line is open. Please go ahead.
Mark Saeger: A good morning. morning, maybe just following up on credit here. You're just kind of curious where are you're criticizing classifieds as of March 31? So as of March, we had a slight increase in migration, but still at a reduced level from what we saw in 2024. And we expect that trend of modest increase or reduction to go forward into 2025. We during the quarter, we actually got repaid on a hundred and sixty million of criticized assets. All of those transactions were done at par and paid in full. I think we've mentioned in the past that primary driver of migration in portfolio had been our treatment of guarantor and how that impacts on the risk rating.
Steve Moss: Hi, good morning.
Speaker Change: Good morning, maybe just following up on credit here can you just kind of curious where are youre criticizing classifieds as of March 31.
Speaker Change: So as of March we had a slight increase in migration, but still at a reduced level from what we saw in.
Speaker Change: <unk> 2024.
And we expect that trend.
Speaker Change: Modest increase or reduction to go forward into 2025.
Speaker Change: During the quarter, we actually got repaid on a $160 million of criticized assets all of those transactions were done at par and paid in full and I think we've mentioned in the past that.
Speaker Change: Primary driver of migration in portfolio had been our treatment.
Speaker Change: Guarantor and how that impacts on the risk grading. So in spite of the elevated level of criticized we show very strong metrics with an improvement in non accrual numbers and at 11 basis points.
Mark Saeger: So in spite of the elevated level of criticized, we show very strong metrics with an improvement in non-accrual numbers and at 11 basis points, the 30 to 90 day delinquency being one of the lowest levels that we've had in the 10 years that I've been at the bank anyway, which shows that the portfolio is in a very strong performance standpoint. Okay, and then, I guess just given the charge off guide implies lower charges going forward here. I guess I'm struck by you continue to have some commercial real estate formation, non-performing formation, you still have elevated C&I loans, kind of like, what gives you comfort just given where NPLs are that, you know, charge off still remain at this higher level versus the guy?
Speaker Change: 30 to 90 day delinquency being one of.
Speaker Change: The lowest levels that we've had in the 10 years that I've been at the bank anyway, which shows that the portfolio is.
Speaker Change: And a very strong.
Speaker Change: Performance standpoint.
Speaker Change: Okay, and then I guess, just given the charge offs guide implies lower charge offs going forward here.
Speaker Change: I guess I'm struck by Etfs, some commercial real estate.
Speaker Change: Formation nonperforming formation, you still have elevated C&I loans kind of like what gives you comfort just given where npls are that charge offs still remain at this higher level versus guidance.
Mark Saeger: Again, I think I would point to that early stage delinquency number as really an important number about the overall performance in the portfolio and the modest decline that we're seeing on the non-accrual side. In addition, just in general, in the CRE environment, as was mentioned with the spread, we're seeing much more activity in the market today with more options for real estate owners to sell properties at competitive prices, more refinance options than we saw in 2024.
Yeah, and I think I would point to that early stage delinquency for is really an important number about the overall performance in the portfolio.
Speaker Change: And the modest decline that we're seeing on the nonaccrual side. In addition, just in general and the credit environment.
Speaker Change: And with the spread we're seeing much more activity in the market today with more options for real estate owners too.
Speaker Change: Sell properties at competitive prices more refinance options than we saw in 2024.
IRA Robbins: Let me just add to that. I think, as Mark said, some of what you're seeing in those criticized and classified numbers were a function of, as Mark alluded to, the guarantee as opposed to the underlying conditions of the individual asset. Some of those do migrate into non-performing numbers, and there are some of those non-performing numbers that are current to payment.
Speaker Change: Actually I think is as Mark said some of what Youre seeing in those criticized and classified numbers were a function of as mark alluded to the guarantee as opposed to the underlying conditions of the individual asset.
Speaker Change: So some of those do migrate into nonperforming numbers.
Speaker Change: And there are some of those nonperforming numbers that are current to payment.
Mark Saeger: Break. OK. Good to hear that, especially on the activity side as well.
Speaker Change: Right Okay.
Speaker Change: Good good to hear to hear that especially on the activity side as well.
Mark Saeger: And then, I guess in terms of... Okay, and just in terms of the C&I charge offs here for the quarter, just give a little more color as to what type of C&I ones were charged up. Yeah, two unique situations. Both of them, the charge off amount was almost entirely related to events of fraud in this situations, unique situations on the two credits, not something systemic that we could point to any other softness in the portfolio. So unique to these two opportunities. Okay, great. I appreciate all the comment.
Speaker Change: Then I guess in terms of.
Speaker Change: Okay.
Speaker Change: Okay, and just in terms of the C&I charge offs here for the quarter just to give a little more color as to what type of San Islands, where charge offs.
Speaker Change: Yes, two unique situations both of them.
Speaker Change: The charge off amount was almost entirely related to events of fraud in these situations.
Speaker Change: Unique situations on the two credits.
Speaker Change: Something.
Speaker Change: Systemic that we could point to any other softness in the portfolio. So unique to these two opportunities.
Speaker Change: Okay, Great I appreciate all color there.
Unknown Executive: Thanks.
Jon Arfstrom: Thank you and one moment for our next question. Our next question comes from the line of Jon Arfstrom with RBC Capital Markets. Your line is open. Please go ahead. Thanks, good morning. Morning, Jon.
Speaker Change: Thanks.
Speaker Change: One moment for our next question.
Speaker Change: Our next question comes from the line of John Armstrong with RBC capital markets. Your line is open. Please go ahead. Thanks.
John Armstrong: Thanks, Good morning.
Jeff: Good morning, Jeff.
IRA Robbins: Ira, can you can we go back to the pipeline and can you talk a little bit about How it's changed maybe over the last four or five weeks and are you seeing any kind of I guess fading in some of the uncertainty and the pause by borrowers. No, it hasn't changed. We've actually had a lot of conversations with our borrowers based on their perspective, and I've listened to a lot of calls over the last couple of days just to hear what other CEOs are seeing from their sentiment as they talk to their clients. For us, it's been a pretty significant range.
John Armstrong:
IRA Robbins: IRA can you can we go back to the pipeline can you talk a little bit about.
Okay, how it's changed maybe over the last four or five weeks and are you seeing any kind of.
IRA Robbins: I guess fading and some of the uncertainty in the pause by borrowers.
IRA Robbins: So no it hasnt changed.
IRA Robbins: We had a lot of conversations with our borrowers based on their perspective, and I've listened to a lot of costs over the last couple of couple of days just to hear what others see as youre seeing in from from their sentiment as they talk to their clients.
IRA Robbins: For us it's been a pretty significant range.
IRA Robbins: We have almost an equal number of clients that are positive and excited about what the long-term implications are from a tariff perspective versus others that are obviously uncertain based on what's going to happen. I would say, largely speaking, I'm not quite sure that we're giving enough credit to some of these small and entrepreneurial businesses, the ones that we bank, as to their ability to be resilient towards this actual environment. I spoke to one this morning. He was talking about his ability to already have total ability to reduce any potential increase based on expense reductions, and he had a document on his desk from his team earlier in the week.
IRA Robbins: Almost an equal number of clients that are positive and excited about what the long term implications are from a tariff perspective versus others that are obviously uncertain based on what's going to happen.
IRA Robbins: I would say largely speaking I'm not quite sure that we're giving enough credit to some of these smaller entrepreneurial businesses the ones that we bank as to their ability to be resilient towards this <unk>.
IRA Robbins: Actual environment I spoke to one this morning. He was talking about his ability to already have total ability to reduce any potential increase based on expense reductions and he had a document on his desk from his team.
IRA Robbins: And other ones sat there and told me that they just put out their COVID playbook and they're ready to actually move forward. So I think we're hearing a little bit of uncertainty on an absolute basis. I would say, though, for many of our borrowers, they felt like they've had to operate in that environment since what we saw with COVID. But we aren't seeing anything from a fundamental perspective that will lead pipelines to really decline at this point. So we'll see whether perspective really comes up different than behavior this time. Fair enough.
IRA Robbins: Earlier in the week and other ones out there and tell me that they just put out their COVID-19 playbook and theyre ready to actually move forward.
IRA Robbins: So I think we're hearing a little bit of uncertainty.
IRA Robbins: On an absolute basis, I would say, though for many of our borrowers they felt like they'd had to operate in that environment since what we saw with Covid.
IRA Robbins: But we arent seeing anything from a fundamental perspective that will lead pipelines to typically decline at this point.
IRA Robbins: So we'll see whether perspective really comes up different than behavior at this time.
Travis Lan: Anything you guys would call out on non interest income, in terms of the drivers of the outlook? and then just curious how you're feeling about wealth and the outlook for growth. Yeah, Jon, thank you. I think there's a strong outlook for wealth, particularly when you factor in tax credit advisory revenue that hits that line. First quarter was a little bit softer, but the pipeline for deals there is building and should benefit us in the second and third quarter. And then on the capital markets side, I mean, FX continues to be a strong growth driver, although in aggregate, it's a relatively small contributor, but still very good trends there.
Speaker Change: Okay fair enough.
Speaker Change: Anything you guys would call out on noninterest income in terms of the drivers of the outlook.
Speaker Change: And then just curious how youre feeling about wealth and the outlook for growth there.
Speaker Change: Yes, John Thank you look I think there's a strong outlook for wealth, particularly when you factor in tax credit advisory revenue that hits that line first quarter was a little bit softer, but the pipeline for deals there is building and should benefit us in the second and third quarter and then on the capital market side I mean, FX continues to be a strong growth driver although in aggregate, it's a relatively <unk>.
Speaker Change: Small contributor, but still very good trends, there and then as Cree originations pick up.
Travis Lan: And then as CRE originations pick up, we would expect to see some additional swap activity as supporting the capital markets line. So I think there's some good trends there on the deposit service charge side. Again, increase the pricing in the middle of last year, full year benefit of that in 2025 will be another supporter of the outlook. So feel good about some of the opportunities and momentum that we have on the fee side. Okay, thank you.
Speaker Change: We would expect to see some additional swap activity as well.
Speaker Change: Reported the capital market's fine. So I think there is some good trends there on the deposit service charge side again increased the pricing in the middle of last year full year benefit of that.
Speaker Change: In 2025 will be another another support or the outlook. So feel good about some of the opportunities and momentum that we have on the fee side.
Speaker Change: Okay. Thank you.
IRA Robbins: Thank you and I would like to hand the conference back over to Ira Robbins for further remarks. I just want to thank everyone for taking the time to listen to us today and we look forward to reporting you positive results for next quarter. Thank you.
Sean: Thanks, Sean.
Speaker Change: Thank you and I would like to hand, the conference back over to IRA Robbins for further remarks.
Speaker Change: Just wanted to thank everyone for taking the time to listen to US today, and we look forward to reporting you positive results for next quarter. Thank you.
Unknown Executive: This concludes today's conference call. Thank you for participating.
Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect.
Unknown Executive: You may now disconnect.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Yes.
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