Q1 2025 First Financial Bancorp Earnings Call
Yeah.
Calvin: Good morning, ladies and gentlemen, and thank you for standing by my name is Calvin and I will be your conference operator today.
Calvin: This time I would like to welcome everyone to the first financial Bancorp first quarter 2025 earnings conference call and webcast. All lines have been placed on mute to prevent any background noise. So.
Calvin: The speaker's remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad.
Speaker Change: To withdraw your question Press Star one again, thank you I would now like to turn the call over to Scott Crawley. Please go ahead.
Scott Crawley: Yeah. Thank you Kevin Good morning, everyone and thank you for joining us on today's conference call to discuss first financial Bancorp's first quarter financial results.
Archie Brown: Participating on today's call will be Archie Brown President and.
Archie Brown: <unk>, Chief Executive Officer, Jamie Anderson, Chief Financial Officer, and Bill Harrod, Chief Credit Officer.
Archie Brown: Both the press release, we issued yesterday and the accompanying slide presentation are available on our website at www Dot banking first dot com under the Investor Relations section we.
Archie Brown: We will make reference to the slides containing the accompanying presentation during today's call.
Archie Brown: Additionally, please refer to the forward looking statement disclosure contained in the first quarter 2025 earnings release as well as our SEC filings for a full discussion of the Companys risk factors.
Archie Brown: The information we will provide today is accurate as of March 31, 2025, and we will not be updating any forward looking statements to reflect facts or circumstances. After this call.
Archie Brown: I will turn the call over to Archie Brown.
Archie Brown: Thanks, Scott Good morning, everyone and thank you for joining us on today's call yesterday afternoon, we announced our financial results for the first quarter before I turn the call over to Jamie I'd like to provide a few comments on our recent performance we.
Speaker Change: We had another solid quarter and I'm pleased with our performance overall adjusted earnings per share was <unk> 63.
Speaker Change: With a return on assets of 133% and return on tangible common equity of 17, 8% our.
Speaker Change: Our net interest margin remained strong but declined slightly for the quarter as the decline in loan yields outpaced a decrease in deposit costs.
Speaker Change: Current short term interest rates, we expect the margin to expand in the near term.
Speaker Change: Loan balances were stable during the quarter.
Speaker Change: First quarter loan production was seasonally lower this along with the work out of several C&I credits and accelerated payoff pressure in the ICA portfolio impacted loan growth for the period, we expect a modest level of growth in the second quarter as loan pipelines and our consumer C&I and CRE lines of business are very healthy.
Speaker Change: However, elevated prepayments at ICR, we are expected to continue.
Speaker Change: The income was in line with our expectations at $61 million, representing a decline from the linked quarter due to seasonal fluctuations.
Speaker Change: And less foreign exchange income, which I'll set another record revenue quarter for our wealth management business.
Speaker Change: Seasonal rebound in the second quarter at a healthy increase in fee income overall.
Speaker Change: We're very pleased with our expense management during the quarter as noninterest expenses declined by three 3% due to a decrease in incentive compensation and lower fraud losses.
Speaker Change: Our efficiency efforts are ongoing and excluding the acquisition of agile in the first quarter of last year have resulted in a 7% reduction in FTE, we remain diligent in managing our expenses and expect additional benefits from our optimization efforts in coming periods.
Speaker Change: We were pleased with improvements in our asset quality metrics for the quarter.
Speaker Change: Net charge offs declined four basis points from the linked quarter, while nonperforming assets declined by nine 5%.
Speaker Change: In the near term, we expect asset quality has continued to improve.
Speaker Change: With respect to tariffs, we do not yet know their impact and we remain in close contact with our clients to assist them through any uncertainty.
Speaker Change: Capital ratios are strong and continue to grow in the first quarter, all regulatory ratios were well in excess of regulatory minimums and our tangible common equity ratio increased to eight 2%.
Speaker Change: Tangible book value per share increased to $14 80, representing a 5% increase from the linked quarter and 18% over the last year.
Speaker Change: We're focused on growing our tangible book value and are pleased that in the last three years tangible.
Speaker Change: Tangible book value per share has increased by 35%.
Speaker Change: Lastly, I want to mentioned, how probably enough to other first quarter events first financial has been selected for the Gallup exceptional exceptional workplace award for associate engagement.
Speaker Change: This distinction is earned by less than 3% of the thousands of companies that Gallup partnered with worldwide.
Speaker Change: Engagement is a core part of our strategy and I want to acknowledge and thank our associates, who work tirelessly to drive associate engagement, which directly leads to highly satisfied clients and increase shareholder value.
Speaker Change: Additionally, we have received another outstanding community investment Act rating from the Federal Reserve.
Speaker Change: This range reflects our commitment to our communities, which is the foundation of our strategic plan.
Speaker Change: Our strength in service investments and lending, particularly to low and moderate income areas, where our footprint.
Speaker Change: With that I'll now turn the call over to Jamie to discuss these results in greater detail.
Speaker Change: Jamie's discussion I'll wrap up with some additional forward looking commentary and closing remarks.
Jamie: Thank you Archie and good morning, everyone slides four five and six provide a summary of our most recent financial results. The first quarter was highlighted by strong earnings and a robust net interest margin.
Jamie: Our net interest margin remains very strong at 388%. This represented a decline of six six basis points from the linked quarter.
Jamie: Deposit costs declined 12 basis points during the period, while asset yields decreased 18 basis points.
Loan balances were relatively stable during the quarter as payoffs in C&I and CRE offset modest growth in our other portfolios.
Jamie: Average deposit balances decreased $99 million due primarily to a seasonal decline in public funds and lower broker deposit balances.
Jamie: We maintained 21% of our total balances and noninterest bearing accounts and remain focused on growing lower cost deposit balances.
Jamie: Turning to the income statement first quarter fee income was solid led by leasing and record wealth management income. These.
Jamie: These results were partially offset by losses on the sale of securities as we restructured a portion of our investment portfolio.
Jamie: Noninterest expenses declined from the linked quarter due to lower incentive compensation and fewer fraud losses.
Additionally, the quarter was positively impacted by our efficiency initiatives in 2024, and we expect to see further benefits in the coming periods.
Jamie: Our ACL coverage was unchanged during the quarter at 133% of total loans.
Jamie: This resulted in $8 $7 million of provision expense during the period, which was driven by net charge offs.
Jamie: Overall asset quality trends were stable.
Jamie: NPA is as a percentage of assets declined slightly while first quarter net charge offs were 36 basis points on an annualized basis.
Jamie: <unk> assets decreased five basis points to 116% of total assets during the period.
Jamie: From a capital standpoint, our ratios are in excess of both internal and regulatory targets tangible book.
Jamie: Value was $14 80, while.
Jamie: While our tangible common equity ratio increased 43 basis points to eight 2%.
Jamie: Slide seven reconciles our GAAP earnings to adjusted earnings highlighting items that we believe are important to understanding our quarterly performance.
Jamie: Adjusted net income was $16 $2 million or <unk> 63 per share for the quarter.
Jamie: Noninterest income was adjusted for $9 $9 million of losses on the sales of investment securities, while noninterest expense adjustments exclude the impact of efficiency cost tax tax credit investment write downs and other expense is not expected to recur.
Jamie: As depicted on slide eight these adjusted earnings equate to a return on average assets of 133% our return on average tangible common equity of 18% and our pretax pre provision ROA of 185%.
Jamie: Turning to slides nine and 10 net interest margin declined six basis points from the linked quarter to 388%.
Jamie: Asset yields declined 18 basis points compared to the prior quarter as loan yields declined 22 basis points and the yield on the investment portfolio increased seven basis points.
Jamie: Total deposit cost declined 12 basis points from the linked quarter, partially offsetting the impact of lower loan yields.
Jamie: Slide 11 outlines our various sources of liquidity and borrowing capacity.
Jamie: We continue to believe we have the flexibility required to manage the balance sheet due to the expected economic environment.
Jamie: Slide 12 illustrates our current loan mix and balance changes compared to the linked quarter.
Jamie: Loan balances decreased 1% on an annualized basis with payoffs in C&I and CRE outpacing modest growth in other portfolios.
Jamie: Slide 13 provides detail on our loan concentration by industry.
We believe our loan portfolio remains sufficiently diversified to protect us from deterioration in any particular industry.
Jamie: Slide 14 provides detail on our office portfolio.
Jamie: Similar to last quarter about 4% of our total loan book is secured by office space and the overall portfolio metrics remained strong.
Jamie: No office relationships were downgraded to nonaccrual during the quarter and our total non accrual balances for this portfolio is approximately $17 million.
Jamie: Slide 15 shows our deposit mix as well as a progression of average deposits from the linked quarter.
Jamie: Total average deposit balances declined $99 million during the quarter.
Jamie: Excluding broker deposits total average deposits increased $63 million from the linked quarter. There was a seasonal decline in public funds, while on the consumer side growth was concentrated in retail Cds money market accounts and interest bearing demand accounts.
Jamie: Slide 16 illustrates trends in our average personal business and public fund deposits as well as a comparison of our borrowing capacity to our uninsured deposits.
Jamie: On the bottom right of the slide you can see our adjusted uninsured deposits were $3 $7 billion. This equates to 26% of our total deposits we remain comfortable.
Jamie: Comfortable with this concentration and we believe our borrowing capacity provide sufficient flexibility to respond to any event that would stress our larger deposit balances.
Jamie: Slide 17 highlights our noninterest income for the quarter.
Jamie: Total adjusted fee income was $61 million with leasing having another strong quarter and wealth management posting record results.
Jamie: Additionally, we rebalanced a portion of the investment portfolio selling $165 million of investments.
Jamie: This negatively impacted noninterest income by $10 million. However, we expect the earn back on these sales stay a little over two years.
Jamie: Noninterest expense for the quarter as outlined on slide 18.
Jamie: Core expenses decreased $4 million or 3% during the period.
Jamie: This was driven by lower incentive compensation and fewer fraud losses.
Jamie: As I mentioned earlier, we continue to recognize the impact from our ongoing efficiency initiatives and expect to complete this work in 2025.
Jamie: Turning now to slides 19, and 20 are ACL model resulted in a total allowance, which includes both funded and unfunded reserves of.
Jamie: Of $172 million and $8 $7 million of total provision expense during the period.
Jamie: This resulted in an ACL that was 133% of total loans, which was unchanged from the fourth quarter.
Provision expense was primarily driven by net charge offs, which were 36 basis points during the for the period and were primarily related to a single C&I relationship.
Jamie: Additionally, our NPA to total assets declined slightly to 32 basis points and classified assets declined five basis points as a percentage of total total assets from the linked quarter.
Jamie: While our ACL coverage was flat compared to the linked quarter. We continue to believe we have model we have modeled conservatively to build a reserve that reflects the losses, we expect from our portfolio.
Jamie: We anticipate our ACL coverage will remain relatively flat or increase slightly in future periods as our motto responds to changes in the macroeconomic environment.
Jamie: Finally, as shown on slides 21, and 'twenty two capital ratios remain in excess of regulatory minimums and internal targets.
Jamie: The TCE ratio increased 43 basis points to eight 2% and our tangible book value increased 5% to $14 80.
Jamie: Our total shareholder return remained strong with 45% of our earnings returned to our shareholders during the period through the common dividend.
Jamie: We maintain our commitment to provide an attractive return to our shareholders and we continue to evaluate capital actions that support that commitment.
Jamie: I'll now turn it back over to Archie for some comments on our outlook Archie Thank you Jamie.
Archie Brown: Before we end our prepared remarks, I want to comment on our forward looking guidance for the second quarter.
Jamie: Which can be found on slide 23.
Jamie: Loan pipelines remain healthy and we expect production to rebound from prior quarter seasonal lows that we expect some continued pressure on prepayments and ICR you to keep the growth in the low single digits on an annualized basis for the near term.
Jamie: For Securities, we expect the portfolio remain relatively stable and grow with earning assets.
Jamie: Court about core deposit balances were up in the first quarter and we expect to see continued modest growth over the next quarter.
Jamie: We continue to make progress on reducing deposit costs simply reductions will accelerate in the near term as a result, we expect our net interest margin to remain very strong and expand to a range between 395% and four 5% over the next quarter.
Jamie: Assuming a 25 basis point rate cut in June.
Jamie: We expect our credit cost to be stable over the next quarter with net charge offs declining further.
Jamie: UCL coverage as a percentage of loans is expected to be stable to slightly increasing.
Jamie: We expect fee income to be between 64 and $66 million.
Jamie: Which includes $13 to $15 million for foreign exchange in $18 million to $20 million for leasing business revenue.
Jamie: Noninterest expense is expected to be between 126 and $128 million and remains stable, excluding the leasing business and fee based incentive expenses.
Jamie: Specific to capital our ratios remain strong and we expect to maintain our dividend at the current level.
Jamie: In closing while there is much uncertainty regarding the outlook for the economy I believe we are well positioned to manage through any turbulence.
Jamie: We have a very robust capital levels strong and improving asset quality diverse revenue streams and well managed expenses strong liquidity.
And industry, leading profitability I'm very pleased with our start to the year and I look forward to growing of serving clients in this challenging environment.
Kevin: We will now open up the call for questions Kevin.
Speaker Change: Thank you ladies and gentlemen, we will now begin the question and answer session.
Speaker Change: At this time I would like to remind everyone to ask a question. Please press the star button, followed by the number one on your telephone keypad. He would like to withdraw your question. Please press star one again one moment. Please for your first question.
Speaker Change: Your first question comes from the line of Chris Mcgratty of <unk>. Please go ahead.
Speaker Change: Okay.
Hey, How's it going this is Angela answer on for Chris Mcgratty.
Speaker Change: Hello.
Speaker Change: Yes.
Speaker Change: I guess, just given where we are today with rates.
Speaker Change: Yes.
Speaker Change: Or have you taken any steps to reduce the asset sensitivity on the balance sheet and then can you just remind us what the sensitivity is CAD NII and margin for each additional 25 basis point rate cut.
Speaker Change: Yeah, I think I missed the first part of your question on the second part in terms of our our balance sheet.
Speaker Change: So I mean as you know I mean, you saw during the cycle our balance sheet.
Speaker Change: As asset sensitive however, kind of where we are in terms of the rate cycle and how we saw the rates move down in the fourth quarter, that's still that's still bleeding through.
Speaker Change: Those rate cuts are still bleeding through our deposit costs, so youre going to see the tail of those.
Speaker Change: Of those rate cuts still rolling through the deposit cost and so.
Speaker Change: Absent any rate cuts or so in our in our guidance we have rate cuts.
Speaker Change: Into the forecast and three rate cuts one in June one and September one in December and so when you look at our outlook that $3 95 to 405 guidance for the second quarter includes a June or June rate cuts. So it wouldnt have a whole lot of impact, but what we're seeing in the.
Speaker Change: Quarter is that tail on the deposit costs still winding down and so we're going to see a 10 to 15 basis point drop in our deposit costs.
Speaker Change: In the second quarter, which is going to benefit the margin going forward when you see.
Speaker Change: When you have the rate cuts coming through.
Speaker Change: A 25 basis point cut will will.
Speaker Change: We will typically have about a five to six basis point drop in our debt our net interest margin absent anything else going on now and so the one thing, though when you look at our deposit costs, we've held them up a little bit higher here through the cycle focusing.
Speaker Change: Bit more on liquidity and so we think we still have a little bit of room to ratchet those deposit costs down and pick up and really mitigate some of that asset sensitivity.
Speaker Change: From future rate cuts. So we think we can we can.
Speaker Change: Take that five to six basis points typical drop in our margin with a 25 basis point cut we think we can mitigate that till about half and so youre going to see it.
Speaker Change: Methodical, a 25 basis point rate cuts youre going to see our margins still in that $3 90 to $3 95 range.
Speaker Change: Okay, great. Thank you that was a great color and then drive switching switching gears a little bit.
Speaker Change: Yeah.
Speaker Change: I guess given the terrain.
Speaker Change: You know the environment with the tariff uncertainty is there any change in your view towards capital deployment I know you I know you said.
Speaker Change: These arent expecting the near term, but I guess, our M&A deals being considered at this time.
Speaker Change: Yeah.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: This is Archie I think our view is probably just a little more longer term and thinking so there is more.
Speaker Change: There has been more M&A discussions that we've had in the.
Speaker Change: Last quarter than probably a long time.
Speaker Change: And so some of those discussions are ongoing I don't know.
Speaker Change: How some of that will play out and when but certainly the some.
Speaker Change: Some of the current uncertainty and noise.
Speaker Change: Probably slowed down some of those discussions and maybe prolongs or puts it all further into the year, we'll just see where things are how things unfold, but.
Speaker Change: Clearly there is interest in activity I just think.
Speaker Change: We're all waiting to see.
Speaker Change: Just what happens in the environment for the next few months.
Speaker Change: Yeah.
Speaker Change: Okay. Thank you I'll step back.
Speaker Change: Your next question comes from the line of Terry Mcevoy of Stephens, Inc. Please go ahead.
Terry Mcevoy: Thanks, Good morning, <unk> good morning, Jamie.
Speaker Change: Sure.
Terry Mcevoy: Maybe in the press release, you talked about the work out of several C&I credits and I did see the C&I charge offs increased to 85 basis points I think Jamie you mentioned, maybe one loan in particular, but could you just go through the review process.
Speaker Change: Any kind of specific trends or industries that you.
Speaker Change: Worked through this last quarter.
Terry Mcevoy: Yes, Terry I'll say, one quick comment and then I'll turn it to bill to maybe give more color. So we did see with regard to commercial we did see some pay offs of of some classified loans during the quarter we were.
Speaker Change: We would consider healthy workouts.
Terry Mcevoy: And then we did have one large C&I.
Speaker Change: C&I credit that probably made up I don't know if 70% of the charge offs.
Speaker Change: And it was in a specific industry. So bill can talk about that one in particular, yes.
Speaker Change: The one in particular it was.
Speaker Change: And in the industry that had some bankruptcies in the upstream for their supply.
Speaker Change: And.
Speaker Change: Really just died under the weight of that.
Speaker Change: And a new market that they were trying to get into and there is nothing systemic across it. It was just a deal that didn't really work out as is anyone add plant manufacturing areas of flooring manufacturer.
Speaker Change: Steps in particular.
Speaker Change: And.
Speaker Change: It just didn't get the volume through their change and they were affected by lumber liquidators bankruptcy.
Speaker Change: Great. Thanks Bill.
Speaker Change: And then as a follow up.
Speaker Change: What's the I guess the outlook for summit Oak Hill, agile and manage those businesses any differently than in a softer economy.
Speaker Change: Yes.
Speaker Change: Terry.
Speaker Change: You know agile.
Speaker Change: Well seasonally ramp up here in the middle part of the year and that business. We believe is.
Speaker Change: Just because of the short term nature of the loans and the way. They are structured we think the asset quality will continue to be very good there. So no concerns there Oak Street.
Speaker Change: Same thing I feel like if you look at our asset quality over over the longer term it has been really solid.
Speaker Change: I think it could present some good opportunities for us in the near term or intermediate term, but no no change in our look Theyre summit.
Speaker Change: Yes, we continue to work and <unk> had some continue to have great originations, we continue to learn and grow with them in the portfolio, but.
Speaker Change: The only pressure we've seen there is probably on the smaller.
Speaker Change: Ticket items. So if you think of sort of the vendor managed small ticket programs theres been a little bit of.
Speaker Change: I would say deterioration in a small business set but if you look in the middle market and larger clients sure Theyre, performing really well and it's within a band of expectations. So.
Speaker Change: We feel pretty good about where theyre going.
Speaker Change: I think if anything that that business could soften in the back half of the year, if the economy softens in terms of demand.
Speaker Change: But in terms of asset quality, we feel pretty good about it.
Speaker Change: Yes.
Speaker Change: Great. Thanks for taking my questions and enjoy the weekend. Thanks.
Terry Mcevoy: Thanks Terry.
Speaker Change: Your next question comes from the line of Daniel Tamayo of framework James. Please go ahead.
Daniel Tamayo: Hey, good morning, Jamie.
Terry Mcevoy: Morning.
Terry Mcevoy: So I guess, maybe first on loan growth.
Terry Mcevoy: You know I saw the guidance and your comments this morning that.
Terry Mcevoy: Second quarter is going to be able to pressure it sounds like it's mostly from.
Terry Mcevoy: Elevated payoffs continuing.
Terry Mcevoy: He is the right way to think about.
Terry Mcevoy: The back half of the year and kind of be a more normalized growth still what you were thinking before.
Terry Mcevoy: And maybe the mid to high single digit range.
Terry Mcevoy: Yes, Danny I'd say, we're if you look back to the beginning of the year, we were probably thinking 6% to 7% for the full year, we're probably thinking 4% to 5% for the full year now now given first quarter, which was a little softer in the payoffs.
Terry Mcevoy: As we look at near term.
Terry Mcevoy: <unk> pipeline.
Terry Mcevoy: Pipelines are strong healthy activity remains remains good now the back half of the year is little harder to see.
Terry Mcevoy: Especially with some of the noise out in the economy, the payoff pressures really happening as we see in the second quarter coming.
Terry Mcevoy: And our CRE book, there's probably three things going on one.
Terry Mcevoy: We're we're exiting some some of these may be office credits that are maturing or some multifamily that were were on purpose, maybe exiting that maybe a third of the payoff expectations.
Terry Mcevoy: Third is really related to kind of the private credit markets.
Terry Mcevoy: We've seen them enter more in this space.
Terry Mcevoy: Our multifamily deal.
Terry Mcevoy: Coming out with a maturity and we may want to get a curtailment on the on the loan and then the extended for a period, while they can go into the private credit markets and get more flexibility in terms of those kind of terms. So we're seeing a little bit more payoffs come from from that source that we probably haven't seen in prior periods.
Terry Mcevoy: Then depending where rates go if rates fall, especially the tenure that falls into the very low fours or are more we could see more pressure just getting refinanced from the Fannie Freddie Fannie Freddie side. So.
Terry Mcevoy: Areas, creating that but on the other hand, the activity of the origination side CRE is pretty strong so.
Terry Mcevoy: All in all we still feel pretty good that we're going to have loan growth.
Terry Mcevoy: Just a little bit maybe a tick or two lower than we were thinking at the beginning of the year.
Speaker Change: Okay. That's helpful. Archie Thanks chip.
Terry Mcevoy: Yes.
Terry Mcevoy: Maybe maybe on Virginia on on credit.
Terry Mcevoy: So.
Terry Mcevoy: You talked about the net charge offs expected to come down in the second quarter, maybe a little bit higher than than you expected here in the first quarter just curious.
Terry Mcevoy: Last quarter, you talked about 25 to 30 basis points being a normalized number.
Terry Mcevoy: Yes.
Terry Mcevoy: I guess, it's couched around assuming we're not going into a recession here is that still feel like a fair number and are we still kind of on a glide path down to that.
Terry Mcevoy: That range by the back half of the year, So we might be a little bit above that near term is that kind of the most current thoughts.
Archie Brown: Yes, Dave this Archie I'll I'll, maybe start with this.
Archie Brown: Jamie can jump in if he wants for bill.
Archie Brown: So 36 basis point, if you go back 2023, 33 basis points of charge offs 'twenty 'twenty 430 basis points of charge offs. We would say this year, 25% to 30 would kind of be our expectation a little higher in Q1 that one credit that we've already talked about was the driver, but if you look at the other parts of the book.
Archie Brown: Very healthy and improving trends.
Archie Brown: <unk>.
Archie Brown: Reductions in classified reductions in nonperforming.
Archie Brown: We just we feel like it's going to continue to get better our expectations for Q2 would be probably.
Archie Brown: Charge offs that are even lower than our annual expectation. So that starts to bring the first half of the year of kind of back into that 25 to 30 basis point balance with.
Archie Brown: Right now expectation is probably in that range or maybe slightly better in the back half.
Archie Brown: Okay, great. So yeah, so really looking for for a pretty positively.
Archie Brown: It was it would be clean rest of the year.
Archie Brown: Assuming nothing gets worse from a macro perspective.
Archie Brown: Yes.
Archie Brown: I guess lastly, just you talked about <unk> too early to tell on tariffs any specific exposure, but just curious kind of in the work you've done looking at your portfolio.
Speaker Change: What you are.
Speaker Change: China zoomed in on or or thinking we need to keep an eye on this because there might be exposure.
Speaker Change: Obviously, we go into a recession everything's at risk but is.
Speaker Change: Is there a is there a part of the book that you think might be.
Speaker Change: Worth watching a little bit closer is this whole thing plays out.
Speaker Change: Yes, Danny first I mean, our number one job bill.
Speaker Change: Bill has been leading that effort with our arc.
Speaker Change: Clients with our bankers to just make sure we're staying close to our clients and understand.
Speaker Change: For each one how tariffs impact.
Speaker Change: Their cost structure their demand demand side of their business. So all of our bankers in the middle of just spending time with our clients and doing that in all will surface out do we see anything specific I don't think we've got one business thats more susceptible to.
Speaker Change: Tariffs as you know there are some.
Speaker Change: Some that may have more direct supply coming right from China could see.
Speaker Change: More disruption in their business and I'm sure, we will have a client or two during the year that that will surface, but for.
Speaker Change: For the most part.
Speaker Change: There is some concern and we will see a little bit of increase in cost and they've got to manage that in various ways either by <unk>.
Speaker Change: <unk> their costs, passing the cost onto consumers et cetera. So we will see some of that.
Speaker Change: The bigger concern is maybe in the back half does this affect this does create some sort of demand slowdown.
Speaker Change: And then also and everything just gets softened up in terms of the revenue. So those are that's kind of a general high level concerns I'm always impressed by our business clients knowing that.
Their focus more than anybody else on being successful and they continue to navigate the kind of things we've seen over the last five or six years. They continue to navigate it really well and I know, they're working hard to do it now I've got a lot of confidence in them.
Scott Crawley: Alright, great I appreciate that color Archie.
Speaker Change: Thanks for taking my questions.
Archie Brown: Sure have a good weekend.
Speaker Change: Once again, if you would like to ask a question. Please press star one on your telephone keypad.
Speaker Change: Next question comes from the line of Carl Shapiro with RBC capital markets. Please go ahead.
Carl Shapiro: Hey, good morning, guys.
Speaker Change: Hi, Craig.
Speaker Change: Just to pick up on the tariff conversation for one second I understand the concerns and demand and cost structures in that plus themes.
Speaker Change: Anything from these conversations surprising you.
Speaker Change: You want to have more optimistic.
Speaker Change: I'm here with our client base anything.
Speaker Change: Yes, yes.
Speaker Change: Yes.
Speaker Change: We continue to talk to our our bankers that are working with their clients and I guess.
Speaker Change: Much noise as we've all been reading about and hearing about it.
Speaker Change: Essentially to me that the pipelines are continue to be pretty strong in the near term.
Speaker Change: With really good activity.
Speaker Change: I think theyre all have some concern about where this is going but I think there's also a view of all this is going to play out a little bit let's see what happens so probably if anything it's just that things are a little stronger and healthier in the near term.
With a little more uncertainty maybe in the back half.
Speaker Change: Okay.
Speaker Change: And then on the foreign exchange business I know, it's kind of normal course for it to move around quarter to quarter, but does the macro uncertainty does that drive a little bit more volatility or more demand for products.
Speaker Change: They are generally volatility is good for the business.
Speaker Change: So I've spent time with our team over the last few weeks listening to whats happening there.
Speaker Change: I think we've put we've put in our outlook, what we expect the quarter to be which is kind of on par with where we are maybe a little stronger but.
Speaker Change: They think of the volatility will continue to drive good activity for them.
Speaker Change: Okay. Thanks for the help.
Rob: Thanks, Rob.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: There are no further questions at this time with that I will now turn the call back to Archie Brown for final closing remarks. Please go ahead. Thank you Kelly. Thank you Kelvin well we are glad that you are joined our call. This morning to hear about our story for the first quarter and.
Speaker Change: Our outlook for Q2, we remain optimistic about.
Speaker Change: The year overall, and we look forward to telling you more.
Speaker Change: At the end of next quarter, Thanks, and have a great weekend.
Speaker Change: Ladies and gentlemen. This concludes today's conference call. We thank you for participating and ask that you. Please disconnect your lines.
Speaker Change: Yes.