Q1 2025 Peoples Bancorp Inc Earnings Call
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Sagar: Good morning and welcome to Peoples Bancorp Inc's conference call. My name is Sagar and I will be your conference facilitator.
Sagar: Today's call will cover a discussion of results of operations for the quarter-ended March 31st, 2025.
Sagar: Please be advised that all lines have been placed on mute to prevent any background noise.
Sagar: After the speaker's remarks, there will be a question and answer period.
Sagar: If you would like to withdraw your question, please press star, then two.
Sagar: This call is also being recorded. If you object to the recording, please disconnect at this time.
Sagar: Please be advised that the commentary in this call will contain projections or other forward-looking statements regarding people's future financial performance or future events.
These statements are based on management's current expectations [inaudible]
Sagar: The statements in this call, which are not historical facts, are forward-looking statements and involve a number of risks and uncertainties detailed in people, securities, and exchange commission filings.
Sagar: Management beliefs, the forward-looking statements made during this call are based on reasonable assumptions within the bounds of their knowledge of people's business and operations.
Sagar: However, it is possible actual results matter for materially from the Swarov-looking statements
Sagar: People's disclaims any responsibility to update these power-looking statements after this call, except as may be required by applicable legal requirements.
Sagar: People's first quarter, 2025 earnings, release, and earnings conference call presentation were issued this morning and are available at peoplespancorp.com and their investor relations.
Sagar: A reconciliation of the non-generally accepted accounting principles or GAAP financial measures discussed during this call to the most directly comparable GAAP financial measures is included at the end of earnings release.
Sagar: The call will include about 15 to 20 minutes of prepared commentary, followed by a question in answer period, which I will facilitate. An archived webcast of the call will be available on PeoplesPancorp.com in the investor relation section for one year.
Speaker Change: Participants in today's call will be Tyler Wilcox, President and Chief Executive Officer and Katie Bailey, Chief Financial Officer and Pressurer, and each will be available for questions following opening statements.
Mr Wilcox, you may begin your conference.
Speaker Change: Thank you, Sagar. Good morning, everyone. Thank you for joining our call today. For the first quarter, our diluted earnings per share were 68 cents. We had many positives for the first quarter, compared to the length quarter.
Speaker Change: Our annualized loan growth was over 4%. We had improvements in asset quality metrics, including reductions in our annualized net charge operate, non-performing assets, and criticized and classified loans.
Speaker Change: Deposit Bounce has grew 2%, which was driven by higher money market and governmental deposit account balances, while we reduced our brokerage CDs by $96 million, resulting in core deposit growth of over 3%.
Speaker Change: Our book value per share grew 2% to $31.90 a quarter end, while our tangible book value per share improved 4% to $20.68.
Speaker Change: Our tangible equity to tangible assets ratio improved to 8.34% at March 31st compared to 8.01% at year end.
Speaker Change: We announce an increase to our quarterly dividend for the 10th consecutive year.
Speaker Change: Our reported net interest income was down 1% compared to the linked quarter, and our net interest margin was down 3 basis points.
Speaker Change: However, on a core basis, which excludes accretion income, that interest income grew on that interest margin expanded three basis points.
V-Based income grew over 2%
Speaker Change: And total non-interest expense increased slightly, but was impacted by annual first quarter one-time expenses, including
Speaker Change: Stock-based compensation expense related to the annual 4-picture rate true-up on stock vested during the first quarter, along with upfront expense on stock grants to certain retirement eligible employees, totaling $1.3 million.
Speaker Change: which reduced deluded EPS by three cents per share, and employer health savings account contributions totaling $724,000, which negatively impacted deluded EPS by two cents.
Speaker Change: At March 31st, our key credit quality metrics improved compared to year-end. As we had anticipated, our annualized net charge operate declined compared to the link quarter and was 52 basis points for the first quarter compared to 61 basis points for the fourth quarter.
Speaker Change: While we experienced a meaningful decline, per our previous guidance, Net Chargers continued to be driven by our small ticket leasing business, which comprised 31 basis points of the first quarter rate, and was 49 basis points of the fourth quarter rate.
Speaker Change: As we noted last quarter, we've expected the fourth quarter to be our peak quarter of charge-offs for the leasing portfolio, and in turn, those these net charge-offs declined by over $2 million during the first quarter as compared to the elite quarter.
Speaker Change: Our non-performing assets decreased over $3 million, and were 50 basis points of total assets compared to 53 basis points at year end.
Speaker Change: These improvements were driven by lower balances of loans that were 90 days, 90 or more days past due and accruing, which was largely due to administrative delinquencies in our leasing and premium finance portfolios at your end.
Speaker Change: Criticize and classify loans both declined compared to your end, and we're down 14 million and $5 million
Speaker Change: Our delinquency rates were stable, as was the portion of our own portfolio considered current at quarter end, was 98.5% compared to 98.7% at your end.
Speaker Change: Overall allowance for credit losses grew nearly $2 million to 1.01% of total loans.
Speaker Change: Our provision for credit losses increased nearly $4 million compared to the link to quarter and was primarily driven by net charge-offs during the first quarter.
Speaker Change: The growth in our allowance for credit losses was attributable to a deterioration in the macroeconomic conditions used within our models.
Speaker Change: An increase in reserves on individually analyzed loans, and loan growth during the quarter.
Speaker Change: While there is much uncertainty around terrorists and the market, current actual impacts to our clients and our business has so far been nominal.
Speaker Change: As far as business sentiment in our markets and from our clients, we see continued optimism around the regulatory and tax outlook.
Speaker Change: Recent headwinds of uncertainty with Terence have led to declines in confidence nationally reflected in various small business indexes.
Speaker Change: Notwithstanding national declines in consumer competence in the past couple of months, those declines have not materialized as reductions in consumer demand in our lines of business during that same time period.
Speaker Change: We have undertaken extensive reviews of our various portfolios in order to better understand the potential impacts of tariffs and executive orders on our loan demand or credit.
Thus far, no material effect has been observed.
Speaker Change: Our portfolio assessment has focused on commercial relationships with credit exposure over $3 million million dollars.
Speaker Change: Automotive dealer, exposure, and our continued focus on our small ticket leasing business.
Speaker Change: The recent pause in tariffs will allow any infected clients some additional time to address any concerns they may have and allow us to continue to refine our assessments.
Speaker Change: We will continue with our heightened monitoring and analysis while uncertainty remains.
Speaker Change: On a positive note, we could see some long-term benefit for reshoring in our markets.
Speaker Change: Moving on to loan balances for the first quarter, we had 4% annualized loan growth, which was in the range of our 2025 guidance.
Speaker Change: Commercial real estate loans led the increase, contributing $75 million of growth.
Speaker Change: While our residential real estate loans were up 13 million and consumer indirect loans grew $10 million Some of this production was offset by declines in commercial and industrial loans, leases and construction loans.
[inaudible]
Speaker Change: The decline in these balances was driven by net charge-offs in the small ticket leasing portfolio during the quarter. The reduction in our construction loans would do to movement.
Two commercial real estate loan balances as projects were completed.
Speaker Change: At quarter end, our commercial real estate loans comprise 35% of total loans.
Speaker Change: About 35% of which were owner occupied while the remainder were investment real estate.
Speaker Change: At quarter end, 47% of our total loans were fixed rate, with the remaining 53% at a variable rate.
Speaker Change: I will now turn the call over to Katie for a discussion of our financial performance.
Katie Bailey: Thanks, Tyler. Our net interest income declined 1% this quarter compared to the linked quarter end and was attributable to lower accretion income during the first quarter.
Katie Bailey: Net Interest margin was 4.12% compared to 4.15% for the fourth quarter, and on a core basis, which excludes the creation income, our margin expanded 3 basis point.
Speaker Change: Ladies and gentlemen, the Lion for the Chairperson has been dropped. Please stay connected, while we reconnect the Lion for the management.
Joey
Speaker Change: Kent, Michael, Bryan, Danny, Antonella, Ralph, Phil redemption never stop love etiquette Nobody says you're blind Just stay focused
Speaker Change: Ladies and gentlemen, we have the line for the Management Reconnected. Please go ahead.
Speaker Change: During the quarter, we were able to reduce our deposit and borrowing costs, which more than offset the decline in interest income from loans and investments, excluding accretion income.
Speaker Change: Our interest bearing deposit costs declined 12 basis points for the first quarter, compared to the fourth quarter.
Speaker Change: This growth was partially offset by lower commercial loan swap fees, deposit account service charges, and electronic banking income.
Speaker Change: As it relates to our non-interest incentives, we have a slight increase compared to the linked quarter.
Speaker Change: The key drivers of the increase was one time costs that Tyler mentioned earlier that we typically record in the first quarter of each year related to the stock-based compensation expense and employer health savings account contributions.
These expenses totaled $2 million for the first quarter.
Speaker Change: We experience declines in many of our expense categories, which nearly offset the increase expense for the first quarter.
Speaker Change: As we have indicated, outside of the first quarter items and potential non-core expenses, our quarterly expense run rate is expected to be between $69.71 million for the remainder of 2025.
Speaker Change: Our reported efficiency ratio was 60.7% and was up compared to 59.6% for the linked quarter.
Speaker Change: Looking at our balance sheet at March 31st, our loan to the deposit ratio stood at 83% and was relatively consistent with your end.
Speaker Change: Our investment portfolio declined $40 million and was 20.3% of total assets compared to 20.7% at year-end as we were able to reinvest proceeds into loan growth during the quarter.
Speaker Change: Our target range for investments as a percent of assets is between 18 and 20 percent.
Speaker Change: Compared to your end, our deposit balances grew 2% or $145 million.
Speaker Change: The most significant growth within our money market, governmental deposits, and retail CDs.
Speaker Change: We had seasonal growth in our governmental deposits, which contributed to the quarterly increase.
Speaker Change: During the first quarter, our average new retail CDs and renewals were originated at a rate of about 20 basis points lower than our fourth quarter average rate.
Speaker Change: We also had nearly $19 million of balance increase in our non-interest bearing deposits, which while we reduced our brokerage CDs by over $96 million compared to your end.
Speaker Change: While the Fed funds rates increased 4.25% from the fourth quarter of 2021 through March 31st, our deposit rates have only increased 1.7% over the same period.
Speaker Change: Our demand deposits as a percent of total deposits were flat at 34% for both quarter-end and year-end.
Speaker Change: Our non-intersparing deposits to total deposits were 20% for both periods as well.
Speaker Change: Our deposit composition was 76% in retail deposits, which included small businesses, and 24% in commercial deposit balances.
Speaker Change: Our average retail client deposit relationship was $26,000 at quarter end, while our median was around $2,900.
Speaker Change: Moving on to our capital position, we are proud to announce another increase to our quarterly dividend, which is now at 41 cents per share.
This is our 10th consecutive year of increasing our dividend.
Speaker Change: We continually evaluate our ability to provide a solid return for our shareholders and this new dividend rate results in an annualized yield of 5.95%.
Speaker Change: We continue to have strong regulatory capital ratios which improved compared to your end.
Speaker Change: Our tangible equity to tangible assets ratio improved to 8.3% compared to 8% at your end.
Speaker Change: This gross was due to earnings outpacing dividends, as well as reductions in our accumulated other comprehensive losses related to our available for sale investment security.
Speaker Change: Our book value and tangible book value both grew compared to your end, and we're up 2% and 4% respectively.
Speaker Change: Finally, I will turn the call over to Tyler for his closing comment.
Tyler Wilcox: Thank you Katie and our apologies for the call dropping. We're not sure what happened there. Hopefully we're coming in loud and clear.
Tyler Wilcox: As I think about how much our business has changed over the last few years, one thing remains the same, our dedication to being the best of what we do. We have very high standards for our associates, both those who serve our customers and those who serve internally.
Tyler Wilcox: Our culture makes us a place where great people want to work, which is evident in our track record of being a top employer We recently received recognition from USA today for a top workplace for the fourth year in a row [inaudible]
Tyler Wilcox: We have the ability to partner with other institutions during mergers with proven success integrating them into our processes and systems.
Tyler Wilcox: We are committed to service within our communities, ensuring that all of our associates have the opportunity to make a difference in causes that matter to us and our clients.
Tyler Wilcox: These are the characteristics that define people's and in turn drive solid results and shareholder value. We were also recognized by Forbes for the second year in a row as one of America's best banks 2025.
Speaker Change: In the past 12 months that I've been president, I've been in awe of how our associates take care of our clients, each other, shareholders and our communities. We intend to keep this momentum going and keep our focus on these core strengths.
Tyler Wilcox: As we move through the remainder of 2025, here are some of our expectations for the full year of 2025, which exclude non-core expenses.
Tyler Wilcox: We expect to achieve positive operating leverage for 2025 compared to 2024.
Tyler Wilcox: Assuming a 25 basis point reduction in rates from the Federal Reserve during mid 2025 and another 25 basis point reduction in the fourth quarter, we anticipate a full-year net interest margin of between 4 and 4.2%.
Tyler Wilcox: We are positioned so that declines in interest rates have a minor impact to our net interest margin and timing of the rate reductions has little impact to our projections for 2025, as we have meaningfully reduced our assets and
Tyler Wilcox: We believe our fee-based income growth will be in the mid-single digit percentages compared to 2024 We expect quarterly total non-interest expense to be between $69 million and $71 million for the second, third, and fourth quarters of 2025
Tyler Wilcox: We believe our loan growth will be between 4% and 6% compared to 2024.
Tyler Wilcox: While our first quarter provision for credit losses was higher, we anticipated the quarterly run rate for provision for credit losses to normalize during the second half of 2025 and be similar to our 2024 quarterly rate, excluding any potential negative impacts to our forecasts.
Tyler Wilcox: While we cannot control the macro-environment or predict the uncertainty of policy makers
We remain committed to our core operating performance and principles.
Tyler Wilcox: which are collecting and deploying high-value deposits into quality lending businesses, managing our credit risk responsibly, and ensuring that our quality mix of businesses work together, bringing to bear every financial tool we have for the benefit of our clients.
Tyler Wilcox: We will continue to evaluate our risks while sticking to our strengths and executing our strategic plans [inaudible]
Tyler Wilcox: This concludes our commentary and we will open the call for questions.
Speaker Change: Once again, this is Tyler Wilcox, and joining me for the Q&A session is Katie Bailey, Archive Financial Officer. I will now turn the call back into the hands of our call facilitator. Thank you.
Thank you. We will now begin the question and answer session.
Speaker Change: If you wish to ask a question, please press star and one on your telephone keypad.
Speaker Change: If you would like to withdraw your question, please press star, thank you.
Speaker Change: At this time, we will wait momentarily to assemble our roster.
Speaker Change: Our first question comes from Brendan Nosal from Hoved Group. Please go ahead.
Good morning, Tyler and Katie. Hope you're doing well.
Brendan Nozal: Maybe just starting off here on Longrose, I mean, for the quarter, you hit the 4%, 4% to 6% guide that you laid out earlier in the year, and it seems like you've stuck to that outlook for the rest of the year. I would just love some color on how you view the bounds of risks to the longrose outlook, just given all the tariff crosstalk, and then what you're seeing from an actual activity standpoint after tariffs were announced earlier this month. Thanks.
Speaker Change: Thanks, Brendan. A couple of thoughts. Go in a few different directions. Traditionally, the first quarter is one of our softer quarters.
Speaker Change: So if we were in a normalized year, I'd be maybe a little bit more optimistic. I will say our visibility into the second quarter pipeline is strong.
Speaker Change: And that pipeline looks strong. I expect we'll have good production. We'll also probably see a little bit higher payoff activity in the second quarter than we saw in the first quarter.
Speaker Change: And so, you know, our reiteration of our guide is really based on what we're seeing today, I think.
Speaker Change: All of us are asking the questions of, you know, what impact will the tariffs have or not have, but that's one of the reasons why we mentioned the kind of confidence in our markets.
Speaker Change: I think there is a lot of optimism. There continues to be optimism in the small business space which is where we play. And so, and we've seen some surprises, you know, despite, as I mentioned, despite consumer confidence, being at a all-time low, you know, since the pandemic.
Speaker Change: We still saw record production and had the highest production march that we've ever had in indirect, you know, if that's maybe a temporary bounce that's possible.
Speaker Change: But I think there's some reasons for optimism in all those portfolios, but like we said, we can't control the macro environment so that's our best estimate as of today from what we're hearing from our sales.
Speaker Change: Highpline and from our sales people. And the last thing I would add is that we continue and have continued to add talent throughout all those markets where we want to to play our loan balances, both in specialty finance and in the core bank. And so that addition of talent is also a tailwind.
Speaker Change: Okay, great. That's helpful, Colorado, I appreciate it. Maybe then pivoting to North Star and Lisa over all of them.
Speaker Change: and if there are any knock on a sex to the yields in that portfolio as you kind of work the with the credit quality side of the business. Thanks.
Speaker Change: First Quarter, and actually a hair under. So when do we normalize? I think that continues to decline throughout the remainder of the year. One of the key drivers that we've talked about is this kind of those high balance accounts.
Speaker Change: and the high balance accounts comprise a significantly higher portion of that portfolio in 2024. By the end of this year, we believe that
Speaker Change: So, portion of the portfolio will be between $8 and $10 million.
Down from over 50 million
last year, so the high correlation there between...
Speaker Change: That's why we have that high degree of confidence that it will ramp down, and if we think of it like a bell curve, we kind of hit the top of that curve and we are on our way down. So, it won't be in the second quarter that we return to that historical norm. So, we are on our way down, and we are on our way down.
Speaker Change: I just remind everybody that we were historically low at 1.5% charge-offs for a couple of years.
Speaker Change: that I don't think was ever going to be sustainable. And we haven't originated any high balance accounts for a number of quarters now. So what you're seeing is kind of the
Speaker Change: Cleaning out of the portfolio and the go forward even though the portfolio size is declined overall we're okay with that because we're making that compromise for credit quality and yields have have held up.
Speaker Change: Okay. Great. Great. Thanks for taking the questions. Thank you. Thank you. Thanks, Brendan.
Speaker Change: Thank you. Our next question comes from Daniel Tamayo from Raymond James, please go ahead.
Thank you. Bye.
Thank you, good morning, everybody.
Speaker Change: Yeah, maybe starting just on the fiend come guidance looks like it was reduced a bit here.
Speaker Change: Wanted to get some color if that's kind of the drivers of that reduction if it's more around the Well, I'll leave it in your answer
Speaker Change: Sure, so I think what you saw in the first quarter is an insurance income, came in a little softer from a performance commission base.
Income then the prior year.
Speaker Change: or expected to see some gains that we previously might have seen in our prior guide. And then I would just put out there, there's a variable out there that relates to our wealth management or trust and investment income as it is.
Speaker Change: somewhat dependent on the market and the performance thereof. And so just given the volatility, there's some hedge in the numbers there.
Okay, terrific Perfect
and then maybe moving over to the margin.
Speaker Change: So, I guess just curious, you laid out the sensitivity of the balance sheet should be relatively kind of neutral, so mitigating impacts from rate cuts, but
Speaker Change: Just your thoughts on, or I guess if you have some color on repricing of remaining CDs, what that looks like for the rest of the year, and then if you could touch on, you know, given the volatility and the accretion number, where you think that might shake out.
Speaker Change: I'll go and reverse order. So on the accretion side, we printed, I added 17 basis points to the first quarter, which was in the line with the 15 to 20, I said in the first half. So I think you can expect it to stay at that. And that means or a little lower as we proceed through the year. So I would say . . . . . . .
Speaker Change: between 15 and 17, probably for Q2 and maybe falling slightly below 15 for the back half of 25.
Speaker Change: on the last two quarters. On a margin side, as it relates to retail CDs, so those CDs, again, we're keeping relatively short kind of our highest rate we're paying is on a five months right now.
Speaker Change: We continue to bring that right down in the first quarter, even without a fed moving, and we'll continue to follow suit with the fed repricing.
Speaker Change: as I think we expect him to do in some time in 25. So I think there's plenty of opportunity to reprise the deposit book, specifically the retail CDs downward as we have been ever since August and before last year.
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Speaker Change: Okay, great. And then just lastly, on loan yields, if you have some color on where you were seeing new loan yields in the quarter relative to what was rolling off.
Um...
Speaker Change: I'm just pulling up so I think there you know as we quoted in the script about 53% of our portfolio is variable right so we did see some compression and monos during the quarter offset.
Speaker Change: More than offset by reduced funding costs, of course, but I think they're holding up relatively well as we articulated previously for North Star leasing specifically those yields are holding pretty strong for us in the 18-20%
Speaker Change: And then the commercial came down a little bit more from the variable rate side, but still holding strong and we still like the spreads of all the businesses.
Speaker Change: Okay, that's Derby Collar. Thank you so much. That's it for me. Thank you, Daniel.
Thank you very much.
Thank you.
Speaker Change: The next question comes from Tim Switzer from KBW, please go ahead.
Hey, good morning, guys. Thanks for taking the question. Morning, Tim.
Speaker Change: I really appreciate the color you guys have given on the potential impact terrors and how you haven't really seen anything.
Speaker Change: Just given your exposure to retail deposits, I thought you guys might have a good sense of how consumers have reacted if at all to the tariffs and economic uncertainty if you see any notable changes to consumer behavior spending.
Thank you. Bye-bye.
Speaker Change: Yeah, Tim, I think a couple of thoughts. One, as I mentioned, a little bit counter-intuitively. Yeah, we've seen significant increases in our indirect lending business.
Speaker Change: I think part of that is due to, you know, the reaction of some of the manufacturers and the dealers to put incentives on vehicles. I think there's also a, you know, kind of a mental rush to go secure a vehicle before expected prices increase.
Speaker Change: I think there's also a flight to use vehicles as being in value there, deposits increasing certainly as well as people are consumers a little bit more inclined to put their money in the bank than into the equity markets.
And the other thing I would say is
I think that all that activity is...
Speaker Change: Oh, the other thing I would say, excuse me, is the mortgage pipeline is incredibly strong and, you know, despite the fact that there's been no movement on rates, so all of those things I think are very well for the consumer businesses.
Speaker Change: and then HELOC balances and new originations are significant, so we see a lot of consumers tapping into significant increases in the equity in their homes so that they've developed over the past few years.
Speaker Change: Interesting. Yeah, thank you. The other question I have is any updates that you have on M&A and crossing the 10 billion dollar threshold? How do you guys like to approach that? And I know it's early, but has the capital one discover approval accelerated discussions at all across the industry?
Speaker Change: You know, I think we tend to look from an approval perspective, we tend to look at the deals that are closer inside to us.
Speaker Change: I think about the German-American deal or the West Banko deal that seem to have gotten in nice, approval processes.
Speaker Change: And so we think the ability to do a deal is there. We're actively engaged in conversations.
Speaker Change: We've been able to evaluate a few opportunities over the last two quarters and I would say we are standing on our strategic patients outlook.
Speaker Change: We have a strong desire to cross ten and to continue to grow the bank because that's been a core strength, but feel no particular compulsion to do that quickly, we want to do it correctly [inaudible]
Speaker Change: And so, given that we have called it two years of headroom on organic growth.
Speaker Change: We're going to be thoughtful and patient around finding the right partner or the right size and strategy and geography that makes the most sense. So that could happen next quarter and it could happen in a year and a half and I would be finding either way because that would mean we're kind of executing on that strategic patience. [inaudible]
Thank you for your time, and I'll see you in the next video.
Great. Thanks, you guys.
Thank you. Thank you.
Speaker Change: Thank you. Your next question comes from Terry McEvoy from Stevens, please go ahead.
Hi, good morning. Good morning, Terry. Good morning, Terry.
Um, maybe just-
Speaker Change: Just keeping up with the news this morning. How are you thinking about consumer lending given the student loan borrowers kind of facing mandatory collections? I think next month and does that present any risk to your consumer loan portfolio or how you underwrite consumer credit?
Speaker Change: You know, it'll certainly play into consideration in the initial credit evaluations when we're doing our underwriting on consumer type loans.
Speaker Change: You know, and I think there was, we already crossed our hurdle with that when the, you know, the,
Speaker Change: The previous loan for forgiveness or loan freezes went out of effect and I realized that's another hurdle today, but we'll always just evaluate the debt income and
Speaker Change: I think that that may be somewhat of a driver of again people tapping their their equity in their homes.
Speaker Change: But I don't think it will make a meaningful difference for us and we'll continue to stick to our knitting with respect to our underwriting standards on all the consumer as well as businesses, so I don't expect a meaningful change as a result of that.
Speaker Change: Thank you for a slide. My question is, when you look at the charge-offs in 4Q and 1Q,
Speaker Change: Related to the industry breakdown, any observations in terms of industries or sectors either last quarter or this quarter that contributed to those charge-offs.
Speaker Change: You, Terence, I think the mix within the small ticket leasing is heavily weighted towards restaurant, but we've curtailed the title trucking, the trailer fleece, a little bit of the brooding equipment, and you know, but as you can see in that mix it is a fairly varied
Speaker Change: and it's always going to be heavily...
Speaker Change: centered around hospitality because that's the outlet and that's why we get the yields that we get and I think the combination of that plus taking smaller bites as we are as we're avoiding those high balance accounts for multiple quarters now, you know, should keep it within our appetite.
[inaudible]
Great. Thanks for taking my questions. Appreciate it. Thank you, Jerry.
Thank you.
Speaker Change: The next question comes from Nathan Race, from Piper Sandler, please go ahead.
Hey everyone, thanks for today and more than 8.
Nathan Grace: Going back to the margin front, you know, just curious, you know, as you look at some of the opportunities to reduce non-matured deposit pricing going forward, you can't just speak to what those opportunities look like, you know, just following the Fed cuts in the back half a last year, and just assuming the Fed remains on pause at least through the second quarter.
Yeah, so we...
Nathan Grace: For many months last year, we were running a five month special towards the end of the year and early this year. We had a closer to an 11 month special.
Nathan Grace: Um, so I think it's a little varied, but I think there's meaningful opportunity in each month as we look at at maturities each month as we proceed through.
Nathan Grace: 2025, given that special rate that we had out there and the production we had in the month. So even with no rate cuts, I think there's still meaningful opportunity for us on the CD deposit repricing.
Nathan Grace: some of the upward reprise you can see as well on the low inside of things.
Nathan Grace: Yeah, so on the bonds on the investment security portfolio, that's roughly 15 to 20 million a month we see and pay down on that portfolio and I would just note too, we've been, we've fought at times where they are available, discounted bonds that are callable and we expect in a, you know, a meaningful rate reduction, those would be called and that, therefore, that 15 to 20 million a month, obviously, would,
Nathan Grace: The significantly higher if that situation presents itself. But 15 to 20 a month is kind of the run rate we think about from the investment portfolio.
Nathan Grace: Is it related to kind of moving into the Lone Portfolio?
Nathan Grace: and then Katie just in terms of kind of the non-floating rape book in terms of that repricing. Katie ends up at the back after the air.
Nathan Grace: Yeah, so I mean, one piece of that is the premium finance portfolio. Those are roughly ten months, so there's meaningful opportunity there.
Nathan Grace: and then the leasing book is largely three to five-month, three to five-year money.
Nathan Grace: So that is, and as Tyler noted earlier, some of the high-balance leases.
Nathan Grace: We expect much roll off of that in the back half of the year and put it in the kind of more of the small ticket kind of 18 to 20 percent yield.
Speaker Change: Okay, great. And then just any colleague who provided us in terms of kind of how the cadence and equipment leasing to our golfs turned in so far this year, are you seeing that continue to come down or as they think on a chop over the last several months?
Speaker Change: I do expect it to come down. I think we charged off $7.5 million in the small ticket leasing in Q4, about 5.4 in this quarter, and again, which is directly on target with where we expected it to be.
Speaker Change: So, barring any unforeseen circumstances, I see the remainder of the year kind of proceeding as expected and ramping down through the remainder of the year. We really feel front loaded in the first two quarters, I guess, is there to say?
Speaker Change: Okay, got it. One last one for me. You know, it sounds like you guys are still having some encouraging discussions on the acquisition front, but you know, just curious, just giving more of the stock trade skills to peers on board earnings, and just giving the down draft and industry-wide valuations recently, higher thing about maybe getting back in the market on share-by-backs.
For more information, visit www.FEMA.gov
Speaker Change: Yeah, so we, as we've said before, we have a plan in place and we have executed under that plan in April , obviously you didn't see that in disclosure as of Q1 because it happened in April when things started to go a little more volatile from a stock price perspective. So we're in the market for our stock and we'll continue to monitor that.
through the 2nd quarter as well.
Speaker Change: Okay, got it. That's helpful. I appreciate the color. Thank you. Next day. Thank you.
Thank you.
Speaker Change: The next question comes from Manuel Navas, from D.A. Davidson, please go ahead
Hey, good morning. Good morning. Good morning.
Unfortunately, thanks. I just want to clarify on the provision. So, as...
Speaker Change: It would likely to normalize to 2024 quarterly rate in the back half of the year, so you kind of expect one more quarter
Speaker Change: of a little bit elevated as that net charge off the climb for the leasing business. Is that the right way to think about it in the second quarter?
Speaker Change: Yes, that's right. I think as we had articulated, I think there's some expectation that North Star will remain elevated. We expect it to continue to come down to 5.4 million in Q1. We expect a slight reduction in Q2, but still elevated and therefore a provision.
Speaker Change: We'll be a function of that. And then I just caveat that we as many to use a forward economic forecast.
Speaker Change: And this is assuming kind of steady state there, no meaningful movements, but as we might all project that could change as we proceed through 25.
Okay, that's a good color.
[inaudible]
Speaker Change: You talked a little bit about from mortgage strength and the pipeline's being pretty strong and a little more on balance sheet of some of that of what you're seeing from customers. Is that a choice in product? Is that a choice on your end? How is that
Speaker Change: Lending Decision versus Umbalistic Decision versus Fee Decision going and just kind of have a little more color on that.
Speaker Change: Yeah, I would say it's not product-driven. That is a choice on our end as we've over time made choices where we want loom growth to be and how we wanted to play our...
You know, our capital and so, and we've been-
Speaker Change: You know, slightly weighted towards putting more on balance sheet recently, but we'll evaluate that based on the fee income tradeoff as we go forward and what the demand is.
Speaker Change: If we do see a bit of a downturn, would you be toward the lower end of the op-ex guide? If these don't grow?
Speaker Change: Maybe at the low end of the mid-single digits, you can just talk about that, give on the off-ex guide, or different revenue scenarios.
Speaker Change: Yeah, I mean, I think so, a large portion of our operating expenses of salaries and benefits.
Speaker Change: in there is incentive and production payouts and so to the extent, as you know, to any of the fiend-come businesses or loan production falls on the shorter end, I think you would expect that component of the salaries and benefits to be on the lower side as well.
Speaker Change: We're committed to using the levers that we have in the scenarios that are necessary to ensure that we control our expenses.
So, I think we have flexibility in there.
That's great. I appreciate the commentary. Thank you. Thank you. Thanks very much.
Thank you.
Speaker Change: Your next question comes from Daniel Cardenas, from Janie Montgomery Scott. Please go ahead.
Good morning guys. Hi Dan.
Speaker Change: What's my question for the NASA and answer just a couple of housekeeping questions in terms of tax rate for you guys on a go-forward basis is that 21 and a half percent number is still kind of a bit revered for the remainder of the year. I think it's closer to 22, 22 and a half.
Speaker Change: And then on the improvements that we saw on the criticized and classified loan, I think in the press release you mentioned that.
Speaker Change: that was due to upgrades and pay-downs. Can you maybe break that down a little bit and tell us, you know,
Speaker Change: Percentage-wise, you know, how much of those improvements were paid-downs and how much were upgrades.
Speaker Change: There's quite a few puts and takes as those are always moving, but I would say it's mostly upgrades.
Speaker Change: We had a, you know, one or two, you know, pay downs in the, you know, 5 to 10 million range and a decent amount of upgrades.
Thank you.
Thank you.
It was mostly technical. They wanted to...
Classified, or criticized because of technical exceptions, or
Speaker Change: Yeah, I mean, think about first quarter timing as well. We're getting updated financials from the clients and some of those are specific cases where the client had a...
Speaker Change: One report in the fourth quarter and we were able to get full year financials and be able to feel confidence in upgrading them. That's about 28 million more or less was the upgrade amount.
and about 22 million in paydowns, if that helps.
Thank you.
And then last question for me in terms of...
Speaker Change: Acquisitions, Geographically, what direction would you guys like to go, or would you like to go that you're not, or where you see holes in the franchise that you'd like to fill?
Speaker Change: As always, my number one preference would be filling in our markets, some more Ohio, more Kentucky, and more West Virginia.
Speaker Change: We are in Virginia to a small degree and I would love to be in Virginia more meaningfully.
A lot of those Virginia markets are continuous and share
A lot of characteristics with our-
existing.
Speaker Change: You know, gives us a adjacency in access, and then, you know, potentially southern Indiana with our presence in Louisville, Kentucky, and Cincinnati, Ohio.
Speaker Change: So those are kind of my broad view. And then we continue to evaluate national specially finance business opportunities as well, both that would be additive to our existing capabilities and and potentially new.
Speaker Change: All right, that's all I have for right now. Thank you guys.
Thank you.
Speaker Change: At this time, there are no further questions, so do you have any closing remarks?
Speaker Change: Yes, so I want to thank everyone for joining our call this morning. Please remember that our earnings release in a webcast of this call, including our earnings conference call presentation, will be archived at PeopleBancorp.com under the Investor Relations section. Thank you for your time and have a great day.