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spk04: Hello and welcome to today's first Financial Bancorp first quarter 2023 earnings conference call and webcast. My name is Bailey and I'll be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star followed by one on your telephone keypad. I would now like to pass the conference over to Scott Crawley, Corporate Controller. Please go ahead when you're ready.
spk10: Yep. Thank you, Bailey. Good morning, everybody, and apologies for any technical difficulties you might have had logging on this morning. Thanks for joining us on today's conference call to discuss First Financial Bank Court's first quarter 2023 financial results. Participating on today's call will be Archie Brown, President and Chief Executive Officer, Jamie Anderson, Chief Financial Officer, and Bill Herrod, Chief Credit Officer.
spk11: Both the press release we issued yesterday and the accompanying slide presentation are available on our website at www.bankatfirst.com.
spk10: under the Investor Relations section. We'll make reference to the slides contained in the accompanying presentation during today's call. Additionally, please refer to the forward-looking statement disclosure contained in the first quarter of 2023 earnings release, as well as our SEC filings, for a full discussion of the company's risk factors. The information we will provide today is accurate as of March 31st, 2023, and we will not be updating any forward-looking statements to reflect facts or circumstances after this call. And I'll turn the call over to Archie Brown. Thank you, Scott. Good morning, everyone, and thank you for joining us on our call. Yesterday afternoon we announced our financial results for the first quarter. I'll provide a few high-level thoughts on our recent performance and then turn the call over to Jamie to provide further details. The first quarter was a strong quarter for First Financial, and I'm very pleased with our operating performance. The company achieved record revenue of $215 million Net income and total revenue increased 70% and 46% respectively from the same quarter last year, with both increasing slightly compared to the linked quarter. Our quarterly results were driven by strong net interest income, moderate loan growth, an eight basis point increase in our net interest margin, record leasing business income, and another great quarter from Bannockburn, and strong performance from our Yellow Cardinal Wealth Division. We continue to effectively manage the significant increase in short-term rates, and during the first quarter, the increase in our asset yields exceeded the increase in total funding costs by four basis points. Average deposit balances increased slightly from the late quarter, as an increase in retail and brokerage CDs offset outflows in public funds and business deposits, which were primarily seasonal. The majority of these outflows occurred in the first two months of the quarter, deposit beta from the first quarter of 2022 through the first quarter of 2023 was 21 percent from a liquidity standpoint our loan to deposit ratio was 82 percent and we also maintained flexibility through our investment portfolio which was classified as 98 percent available for sale as of march 31st credit quality remained stable in the first quarter net charge-offs were minimal and non-performing assets declined slightly as a percent of total assets from the linked quarter. Additionally, the ACL increased $8.6 million during the quarter, driven by loan growth, slower prepayments, and changes in economic forecasts. As a result, the ACL was 1.36% as a percentage of total loan balances, which was a seven basis point increase from the coverage ratio at year end. We're very pleased with the strengthening of our capital ratios this quarter. Our strong profitability and the recent decline in market rates led to a 52 basis point increase in our tangible common equity ratio. In addition, tangible book value per share increased 8% to $10.76. With that, I'll now turn the call over to Jamie to discuss these results in more detail. After Jamie's discussion, I'll wrap up with some additional forward-looking commentary. Jamie.
spk11: Thank you, Archie. Good morning, everyone. Slides four, five, and six provide a summary of our financial results. As Archie stated, first quarter performance was excellent, driven by an expanding net interest margin, solid loan growth, elevated fee income, and stable asset quality. Our balance sheet continued to react positively to the current interest rate environment, with our net interest margin increasing eight basis points during the period. We anticipate modest margin contraction in the near term due to fewer rate hikes and expected deposit pricing pressures. We were once again pleased with loan growth during the quarter. Total loans grew 5% on an annualized basis, with the growth in the C&I, leasing, and residential mortgage books, and stable balances in the other portfolios. Fee income remained strong in the first quarter, with record results on an adjusted basis. Wealth Management and Summit both posted record quarters, and Bannockburn had another strong quarter. Higher rates have resulted in sustained headwinds for mortgage banking, with first quarter income relatively flat compared to the fourth quarter. Non-interest expenses declined from the linked quarter due to lower professional fees, tax credit investment write-downs, charitable contributions, and incentive costs. While expenses were slightly higher than we anticipated at year-end, this was due to elevated incentive compensation related to fee income. Asset quality was stable during the quarter, with de minimis net charge-offs during the period. Classified assets increased during the quarter, primarily due to the downgrades of three relationships. Additionally, we recorded $10.5 million of provision expense during the period, which was driven by loan growth, slower prepayment speeds, and economic forecasts in the model. As a result, our ACL coverage ratio increased by seven basis points. From a capital standpoint, our regulatory ratios remain in excess of both internal and regulatory targets. Accumulated other comprehensive income improved during the period. As a result, tangible book value increased 79 cents, or 8%, and our tangible common equity ratio improved by 52 basis points. Slide seven reconciles our GAAP earnings to adjusted earnings, highlighting items that we believe are important to understanding our quarterly performance. Adjusted net income was $71.9 million or 76 cents per share for the quarter. Adjusted earnings exclude the impact of $500,000 of contract termination costs and $1.6 million of other costs not expected to recur. As depicted on slide eight, These adjusted earnings equate to return on average assets of 1.72%, a return on tangible common equity of 30%, and an efficiency ratio of 53%. Turning to slides 9 and 10, net interest margin increased eight basis points from the linked quarter to 4.55%. This increase was driven by an increase in asset yields due to elevated interest rates and a more profitable mix of earning asset balances during the period. The increase in asset yields was partially offset by higher funding costs. As a result of rising rates, asset yields surged during the period, with loan yields increasing 62 basis points. In addition, investment yields increased 26 basis points due to the repricing of floating rate securities and slower prepayments on mortgage-backed securities. Our cost of deposits increased 49 basis points compared to the fourth quarter, and we expect these costs to increase further in reaction to sustained competitive pressures in the coming quarters. Slide 11 details the asset sensitivity of our balance sheet. We believe we are well positioned in the near term as approximately two-thirds of our loan portfolio reprices fairly quickly. Slide 12 details the betas utilized in our net interest income modeling. Deposit costs increased with greater velocity in the first quarter, moving our current data to 21%, with our through-the-cycle data expected to be approximately 35%. Slide 13 outlines our various sources of liquidity and borrowing capacity. We continue to believe we have the flexibility required to manage the balance sheet through the expected economic environment. Slide 14 illustrates our current loan mix and balance changes compared to the linked quarter. As I mentioned before, loan balances increased 5% on an annualized basis with growth driven by C&I, equipment leases, and mortgage loans. The other loan portfolios were relatively flat when compared to period imbalances. Slide 15 provides details on our loan concentration by industry. We believe our loan portfolio is sufficiently diversified to provide protection from deterioration in a particular industry. Slide 16 provides some detail on our office space loans. As you can see, less than 5% of our total loan book is concentrated in office space, and the overall LTV of the portfolio is strong. We believe that lending to borrowers with Class A and Class B assets in primarily suburban markets within our footprint mitigates our risk against the general stress expected across the broader industry sector. Slide 17 shows our deposit mix, as well as the progression of average deposits from the linked quarter. In total, average deposit balances increased $180 million during the quarter, driven primarily by a $662 million increase in brokered CDs. This increase offset mostly seasonal declines in public funds and business deposits. Slide 18 depicts trends in our average personal, business, and public fund deposits, as well as a comparison of our borrowing capacity to our uninsured deposits. While personal deposit balances were relatively stable in the first quarter, business deposits continued to decline. This decline is primarily related to a post-COVID decline from record high balances, as well as seasonal declines typically experienced in the first quarter. While we saw some runoff in reaction to the recent bank failures, this was not a major driver of the business deposit decline. Our decline in public fund balances has been driven by customers moving excess investable balances to funds managed by states in addition to some seasonal outflows. On the bottom right of the slide, you can see our adjusted uninsured deposits for $2.9 billion at March 31. This equates to 23% of our total deposits. We are comfortable with this concentration and believe our borrowing capacity provides sufficient flexibility to respond to any event that would stress our larger deposit balance. Slide 19 highlights our non-interest income for the quarter, which was another record quarter. Both Summit and Wealth Management had the best quarter in the history of those businesses, and Bannockburn posted another strong quarter. Consistent with the fourth quarter, mortgage demand remained soft due to higher rates. Non-interest expense for the quarter is outlined on slide 20. On an operating basis and excluding summit, expenses declined $4.9 million compared to the linked quarter due primarily to lower professional fees, incentive compensation, and charitable donations in the current period. Turning now to slide 21, our ACL model resulted in a total allowance which includes both funded and unfunded reserves of $162 million and $10.5 million in total provision expense during the period. This resulted in an ACL that was 1.36% of total loans, which was a seven basis point increase from the fourth quarter. First quarter provision expense was driven by loan growth, economic forecasts, and slower prepayment speeds, which increased the duration of the portfolio. Despite the increase in provision expense, credit quality remains stable. Net charge-offs were de minimis during the quarter. However, classified assets increased to $159 million due to the downgrades of three relationships. We continue to expect our ACL coverage to increase slightly in the coming periods as our model responds to changes in the macroeconomic environment. Finally, as shown on slides 23, 24, and 25, regulatory capital ratios remain in excess of regulatory minimums and internal targets. During the first quarter, tangible book value increased 79 cents, or 8%, and the TCE ratio increased 52 basis points due to our strong earnings. Accumulated other comprehensive income improved slightly compared to the linked quarter, but remains a drag on our capital ratios. Absent the impact from AOCI, the TCE ratio would have been 8.54% at March 31, compared to 6.47% as reported. We also included slide 24 this quarter to demonstrate that our capital ratios would remain in excess of regulatory targets, including the unrealized losses in the securities portfolio. Our total shareholder return remains robust, with 31% of our earnings returned to our shareholders during the period through the common dividend. We believe our dividend provides an attractive return to our shareholders and do not anticipate any near-term changes. However, we will continue to evaluate various capital actions as the year progresses. I'll now turn it back over to Archie for some comments on our outlook going forward. Archie?
spk10: Thank you, Jamie. Before we end our prepared remarks, I want to comment on our forward-looking guidance, which can be found on slide 26. Loan demand remains solid, and we continue to expect Summit to be a significant contributor to loan growth early this year. However, we're being more selective in certain segments and expect overall growth in the mid-single digits in the near term. Regarding securities, we will continue to utilize the portfolio cash flows to support loan growth. We expect deposit balances to stabilize in the near term as seasonality subsides and our pricing strategies gain additional traction. There's still uncertainty around Fed rate management, loan demand, and deposit pricing competition. Our asset-sensitive balance sheet has driven substantial margin expansion thus far in the cycle. We expect modest contraction moving forward with the second quarter in a range between 4.35% to 4.45%. based on one additional anticipated interest rate increase. Specific to credit, much uncertainty remains regarding inflation and the impact of higher rates to the economy and our customers. Over the second quarter, we expect continued stability in our credit quality trends and ACO coverage to be slightly higher. We expect fee income to be between $57 and $59 million in the second quarter, with growth in the leasing business being the primary driver. Specific to expenses, We expect to be between $118 and $120 million, which includes the depreciation expense from the leasing portfolio. Excluding the leasing expense, we expect expenses to be slightly lower in the second quarter. Lastly, our capital ratios remain strong, and we expect to maintain our dividend at the current level. The quarter's had its challenges for the industry, and they're still near-term uncertainty regarding the economy. We're extremely pleased with our results and how we have managed the challenges to date. Overall, our first quarter performance was outstanding and record-breaking on many levels, and we believe we remain well positioned to manage future uncertainty due to our profitability, net interest margin, ample liquidity, and strong levels of capital. We've made the strategic efforts to diversify our business lines in recent years, and we believe those efforts continue to position us to deliver industry-leading services to our clients and consistent, sustained, industry-leading returns to our shareholders. We'll now open up the call for questions.
spk04: Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you would like to remove that question, please press star followed by two. Again, to ask a question, please press star followed by one. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question, and please ensure that you have unmuted locally. Our first question today comes from the line of Daniel Tomeo from Raymond James. Daniel, please go ahead. Your line is now open.
spk06: Thank you. Good morning, everybody. Good morning. Maybe we start first on just the NINM expectations. Appreciate the near-term guidance. But just curious your thought on how you see that playing out in the back half of the year with –
spk11: kind of work you mentioned the 35 deposit data if you give us a little idea of how you're thinking that that cadence plays out throughout the year yeah dan this is jamie so um so yeah we gave the outlook on a near term in the uh in the earnings deck on our margins um you know i mean we think our our still are uh we've moved up a little bit i would say our overall um outlook on the on the deposit data just from what's been going on here over the last 30, 45 days or so. Before that, we were saying we thought that the overall deposit data, and when we say deposit data, I just want to make sure for everybody, we're talking about our total deposit data, not just our interest-bearing deposit data. So our total deposit data before 60 days ago, we were we were talking about a total deposit data somewhere in the in the low 30s so 30 32 percent you know with everything going on in the last you know 30 45 days we think that has moved up a little bit and in that in the mid 30s so call it 35 to 37 percent range um and so i think you know we so you know moved up a little bit but um and and our margin will obviously be impacted that i think it what it did is it accelerated some of that um movement that we were expecting to see anyway from a deposit pricing standpoint it just moved some of that forward into into the next couple of quarters so i think it's just i think we get you know close to the same spot maybe a little bit higher from a from a um from a cost of deposits and total cost of funds standpoint, but not significantly different.
spk09: It just kind of moved everything forward. Okay.
spk06: And then on the deposit mix itself, you access the broker deposit market in the quarter. Loan deposit ratio is still relatively low, at least when you look at that compared to other banks in the low 80s, is that something that was kind of driven by what happened in March with the environment, or do you expect to continue to access the broker market going forward? And just overall thoughts on how you think the deposit mix shakes out from a non-sparing perspective and the rest of that portfolio. Thanks.
spk10: Yeah, Dane, this is Archie. Maybe Jamie and I will tag team this a little bit. But I think our view was we've been, if you were to go back, we've been layering in some broker deposits for probably a couple of quarters now. And we just continued that in the fourth quarter and into the first quarter. And most of that that occurred in the first quarter occurred actually before March 1st. And it was primarily to support kind of the loan demand that we were anticipating along with we knew there were some seasonal outflows coming We've left, if you can tell, we've left some of our other sources. FHLD, we've left those kind of flat this quarter, but we like that source of funding. We think it's part of our primary source, and we hold that for later when needed. But I think low 80s is kind of just gradually moving up, and as deposits stabilize with moderate loan growth, it's going to continue to move some. I guess in that order, that's how we see the picture.
spk11: Danny, when we looked at the deposit flows during the quarter, about two-thirds of the... We were expecting some seasonal drop in the deposit base coming into the first part of the year. We were expecting that anyway. That was in our internal forecast. Obviously, what happened in in march um you know it maybe exacerbated that but when we looked at the at the deposit trends coming into the year we were expecting some seasonal outflows both from us on the business side and the public fund side and um and about you know if you look at our month-to-month deposit uh trends about about two-thirds of the drop in and really in those two categories, public funds and business side on the NID side, about two-thirds of that drop occurred in January and February. And the other third, obviously, occurred in March. But a lot of it is really those accounts. So we didn't lose accounts. It was just customers and public funds kind of, you know, lopping off that top, you know, they call it the investable balance, not their operating balance, and moving it out of the bank to potentially get some more yield, you know, diversifying and or, you know, we also saw some movement over into our wealth management side.
spk10: there's slide 18 that jamie covered that was a good slide because it shows you i think you recall in the uh in the last quarter we we always have a seasonal uptick in public funds in the in the fourth quarter so there were some of that in the uh balances that rolled off in in the first quarter and then we we had a seasonal uptick in business deposits in the fourth quarter and you can see that it just looks like it's about 80 80 90 million dollars in q4 that rolled out along with just as james said the general outflows that you know, from what we call the COVID surge. So, again, these are things that we mostly anticipated. There was a little bit, and certainly after the news on the two bank failures, there was a little bit of money that moved out of some of our deposits, and primarily into our yellow cardinal wealth unit, where they laddered in, you know, typically treasuries. But it was a little, I'd say, less than 1% of our overall deposit base.
spk09: color. I appreciate all that.
spk04: Thank you. The next question today comes from the line of Chris McGrathy from KBW. Chris, please go ahead. Your line is now open.
spk07: Oh, great. Good morning. Jamie or Archie, a little bit of... Hey, good morning. Can I get a little bit more color on the three credits you were talking about in your prepared remarks?
spk09: Yeah, Chris, I'll have Phil here and you just put color. Yeah.
spk02: When we take a look at what was downgraded through the quarter, what we're really seeing is some businesses that are really tied to some COVID hangover, mostly in the over inventory due to fear of missing out during supply chain issues, as well as some hospitality assets. that haven't rebounded as some of the other hotel properties. And there was one small office in that, in the three, that really launched, you know, right in the midst of COVID that has struggled to lease up during this period. But most of it is, like I said, very much tied to the remnants of COVID.
spk08: In terms of you guys have been building the reserve, I mean, how much of this quarter, the last couple quarters, have been, I guess, specific to these three? Or how should I think about just the incremental potential loss on these credits?
spk11: Yeah, maybe I'll cover the first part, Chris, in terms of the reserve. I would say the incremental amount due to the downgrade of these credits is relatively insignificant. I mean, there's a small piece of it as things get downgraded to substandard. But the more significant piece really over the last couple of quarters in terms of the reserve bill is due to really, I would say, two factors. Just the overall macroeconomic environment and the forecasts that are coming through, you know, impacted the model a little bit. And then the bigger thing, though, is what we're seeing is as rates have moved up and prepayment speeds have slowed, you get a longer duration on the loan portfolio, which then, you know, under CECL, you're looking at the life of loan. it obviously then spits out a higher required reserve. So those have really been the two bigger factors in terms of how the model is reacting to the environment and why you're seeing that reserve bill. So maybe, Bill, you can address the like any potential losses or whatever. Like Chris was asking about potential losses in those three credits at this point.
spk02: Yeah, I mean, at this point, you know, we have various treatment strategies on each of them. We don't anticipate any material charges at this point on the assets.
spk09: Yeah, we're still early to work out the assets. Yep. Great, thanks.
spk04: Thank you. The next question today comes from the line of Scott Cephas from Piper Sandler. Please go ahead, Scott. Your line is now open.
spk05: Morning, guys. Thank you. Tim, we wanted to revisit the deposit mix question again. So non-interest-bearing levels have come down, but are still around 30% of the total. I think it was like 25% prior to the pandemic. Are we going to go back to that level, or do we blow through it a little, just sort of in this new regime for bank deposits? How do you think about that?
spk11: Yeah, I think we slowly get close to those levels. I mean, when you look at where our deposit acquisition strategy at this point, I mean, we are, we have money market specials out and CD specials. So, you know, you're going to see that shift over to, you know, a higher percentage of interest bearing, you know, maybe, you know, back to those levels and that 30, 31% starts to migrate down. I mean, where it ends, you know, two or three years from now, I'm not 100% sure, but I think it does start to bleed down to those in those general levels.
spk05: Okay. Perfect. Thank you. And then I want to make sure I understood your response to a couple of questions ago just regarding where the margin ends up drifting. I think previously you had sort of suggested kind of 410 to 420 would be sort of a good floor for the margin eventually. Did we just – are we going to maybe get back down there a little faster, or just given the higher betas, is it – do we maybe lower the floor a bit of where the margin could go?
spk11: Yeah, I think the floor – I think the floor comes down into the – more into the high threes and that. So the 410 to 420 was really a – where the margin – when we were talking about that we're kind of migrated to before that would have been you know maybe in that in the fourth quarter of this year and so i think just given the i think the higher data that we're going to see that floor comes down a little bit more into that you know it eventually settles and this could be even out into you know the the first quarter of uh of 24 and maybe you know the second quarter 24 but down into that 390 to 4 range.
spk05: All right. Wonderful. That's good color. And if I could sneak a final one in. Archie, so you guys will sort of fall outside the purview of sort of the size banks that regulators might target for explicitly tighter regulation. And then I guess aside from what's going on with rate expectations and industry deposit mix issues, you guys haven't really been impacted by last month's events. Even so, do you feel that there are changes that you or more broadly other banks your size might make to become just sort of more conservative or bulletproof just generally speaking going forward even if you're not required to?
spk09: Scott, I don't know that we would contemplate anything there.
spk10: my sense is you know we we already uh are a little bit different how we manage the securities book and how it you know in terms of making it available for sale and um you know i i would tell you even before what happened in mid-march we were already i think just taking a more conservative view of where the economy was going and how we thought about credit i think we alluded to there probably some segments in particular in our commercial real estate book that we uh Even during COVID and before COVID, we were slowing. So there's probably more conservatism there. I don't know that it changes really our view of how we manage liquidity specifically. We'll see how this unfolds for the industry, but we'll continue to take a measured conservative approach to how we manage the balance sheet in general.
spk09: Okay. All right. Perfect. Thank you very much. Yep.
spk04: Thank you. The next question today comes from the line of Terry McEvoy from Stevens. Please go ahead, Terry. Your line is now open.
spk03: Hi, everyone. Hey, Terry. Hey, Terry. Maybe a first call. Could you maybe provide a refresher on the lease business revenue accounting? as it'll kind of be the growth of fee income and also drive some expenses. I had it from when you made the acquisition, about a third of the yield went through the residual realization. So maybe a discussion of what current yields are and how essentially those fees are generated. And then on the expense side too, is there an efficiency ratio you target just so we can build that out accordingly?
spk11: Yeah. So maybe I'll touch on that, James. they are obviously generating both finance leases and operating leases. And, you know, currently they're doing roughly 75% or so, um, finance leases and then the rest operating leases. So the operating leases, you know, you have, you, we put that in that runs through other assets. Um, they typically have a, about a four year, life those get those get depreciated and then we then we run the rental income through the uh through fee income um and then i guess overall to answer your question about yields when we look at the yield kind of all in well i guess maybe in two parts when we look at kind of the the quote coupon yield of our leasing business right now it's somewhere in the sevens so depending on the month but in that seven to seven and a half range. And then on the back side, they will get residual income that will bump that yield up, call it around, maybe around nine. And then that residual income obviously then also runs through the fee income section. When I look at that kind of the relative ratio in the fee income and the expense side, I mean, you kind of look at generally a kind of a one and a half to one ratio of fee income to expenses down there. Great.
spk10: on efficiency i don't know that we're we're there yet to probably give you the right uh with what that looks like if they're still building we went from a company that when we bought it was primarily originating and selling to building the balance sheet so it's going to be a couple more years to get that balance sheet built to get to kind of a a more stabilized you know look at what the efficiency ratio will be it's going to be a lot more efficient than what you're seeing today, though, is that balance sheet bills.
spk03: Thanks for that. Very helpful. And maybe just as a quick follow-up, I appreciate the details on the office portfolio. That office, I'm sorry, average LTV of 64%. Was that at origination or has that been updated or refreshed since then?
spk02: Yeah, that's been updated as loans matured. We're pretty early in that process you know over the next you know several months you know we have very few maturing but they get updated as they go so it's probably weighted more towards origination at this point that's great thank you very much thank you thank you as a reminder if you would like to ask a question please press star followed by one on your telephone keypad
spk04: The next question today comes from the line of John Armstrong from RBC Capital Markets. Please go ahead, John. Your line is now open.
spk01: Thanks. Good morning, guys. John. I just want to say this is a good quarter. We've struggled through a lot of releases, and yours looks good. I want to go back to the margin. You've had a couple of monster increases in the margin sequentially. and um and then you've got a in slide 11 you've got the rate cut margin impact of of down 100 and 6.3 percent you guys do anything to protect the downside if the fed starts to cut rates later um you know or do you just is it just let it ride or how do you think about that jamie well yeah so um i really i would say it's two things i mean there's there's um
spk11: a little bit of the let it ride philosophy there. I mean, there's also some work that we are doing in terms of providing what I would call significant down rate protection. So to buy protection for down 100 just isn't really feasible. But for what I would call severe down rate protection, and putting in some floors, we can do that. If you look back to where our margin really had some significant pressure back in the beginning of COVID when rates plummeted, we're trying to protect against that and putting in some floors where our margin went down in that in that 315 range during that period of low rates. And so we're looking at providing some protection for what I would call the extreme rate cuts, not just buying protection for marginal Fed movements.
spk01: Okay. Good. Just to clarify this, it's probably annoying to get asked this every quarter, but that 435 to 445 margin range you're talking about, that's Q2, and that compares to the 439 core that you did last quarter. Is that right?
spk11: Well, that would be 455 all-in margin compared to the range that we gave in the outlook.
spk01: Yep. Okay, so that guidance is fully loaded, the 435 to 445?
spk11: All in, yeah. Yeah, all in.
spk01: Okay, good.
spk11: Yeah, because at this point now, I mean, John, the variability of the other things are, you know, we don't have a ton of accretion income anymore.
spk01: Yeah, 15 basis points.
spk11: The variation we have is really in loan fees, which are fairly steady at this point.
spk01: Okay. Archie, any changes in corporate behavior and kind of the mood of the borrowers over the last, you know, you could say six weeks, but over the last couple of months?
spk10: John, I think you mean in terms of just their outlook and how they're doing?
spk01: Yep. Yeah, and I'm thinking more about like that, you know, kind of 40% of the book that's like commercial, small business, franchised. That kind of stuff.
spk10: Yeah. I can tell you we're showing kind of moderate loan growth expectations in the near term, and it's going to come primarily from commercial equipment leasing group, Oak Street, a little bit of mortgage as well. But they're still doing well. They still have good current demand. I think the outlook when we talk with them is a little more negative the further you go out. But when you look at where they are over the next few months, there's still some really nice, you know, we think some decent loan demand coming from those types of companies in the next few months.
spk01: Okay, good. They're probably like us, waiting for the big one. I don't know when it's going to hit, I guess, but yeah. Yeah. Okay. Okay. And then just kind of following up on Terry's question on, take out leasing on non-interest income. You guys have a lot of records, and I think Bannockburn was a record last year as well. If you take out leasing, what do you expect from some of the bigger line items in non-interest income, maybe kind of near to medium term? Thanks.
spk10: Sure. Well, I'll start with Bannockburn then. And, you know, I think we're probably in that $14 million to $16 million range of quarter kind of just generally as you go out, I think, you know, we're probably thinking 14, 15 million coming up in the near term, but they're hitting a level that's a little, seems a little more sustainable at this high level. Added a couple more salespeople here, one recently, another one coming on. So, you know, we think that they can kind of run at that level more consistently. You know, wealth is doing well. It's not as large of a line for us doing well. and will continue to do uh i think do do well as long as the market is holding up uh service charge income is uh i think fairly stable for us it may have some slight movement up it's not going to be a big grower but but it's um it seems pretty stable as well mortgage as you know has been soft we we do expect to see some seasonal improvement in mortgage as we get into the middle part of the year but there's a lot of uncertainty about where that's going to go you know some of that's Availability of inventory, some of that's interest rates. But I do think we'll see a little bit better mortgage performance than we've seen in the last couple of quarters. I think those are probably the bigger line items.
spk01: Okay. All right. That helps. I appreciate it, guys.
spk11: Yep. Thanks, John.
spk04: Thank you. As a reminder, if you would like to ask a question, please press star followed by one on your telephone keypad.
spk10: are no additional questions waiting at this time so we'd like to pass the call back over to archie brown for any closing remarks please go ahead thank you bailey thank you bailey i want to thank everybody for joining the call today and uh hearing more about our quarter we're really pleased with the quarter overall and uh look forward to reporting to you uh again next uh next quarter have a great day bye now this concludes today's conference call thank you all for your participation you may now disconnect
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