First Bank

Thank you for standing by. My name is Angela and I'll be your conference operator today. At this time, I would like to welcome everyone to First Bank Earnings Conference Call, First Quarter 2025. All lines have been placed on you to prevent any background noise. After the speaker's remarks, there will be a question and answer session if you will write back the question during this time. Simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you. I would now like to turn the call over to Mr. Patrick Ryan, President and CEO. You may begin.

Thank you. I'd like to welcome everyone today to First Bank's first quarter 2025 earnings call. I'm joined by Andrew Hitchman, our Chief Financial Officer, Darlene Gillespie, our Chief Resort Banking Officer, and Peter Cahill, our Chief Lending Officer. Before we begin, however, Andrew will read the Safe Harbor Statement.

The following discussion may contain forward-looking statements concerning the financial condition, results of operations, and business of first vent. We caution that such statements are subject to a number of uncertainties, and actual results could differ materially, and therefore you should not place undue reliance on any forward-looking statements we make. We may not update any forward-looking statements we make today for future events or developments. Information about risks and uncertainty? are described under Item 1A, Risk Factors, in our annual report on Form 10-K for the year ended December 31, 2024, filed with the FDIC. Pat, back to you.

Thanks, Andrew. I'd like to hit on a few highlights before turning it over to the team to provide some detail. I think in the first quarter, we saw some really nice positive trends emerge. The cost of our deposits came down 14 basis points. which drove an improvement in our net interest margin of 11 basis points. Strong loan growth of $92 million came in the areas of our strategic focus, namely asset-based lending, private equity, and community bank T&I lending. In fact, CREI, or investor real estate loans, actually came down $12 million in the quarter, despite significant activity and some new production in that area. Deposit growth was decent, but did not match our loan growth. We hope to see a catch-up and a reversal of that trend in the back half of this year. Our non-interest-bearing deposit ratio did move up a little bit during the quarter, which was certainly nice to see. Overall profitability remained respectable with a 1% ROA. We did see higher than normal loan growth during the quarter, which led to a larger provisions for credit losses, which pushed profitability down a little bit during the quarter. A reduction in the carrying value of our New York City Oreo asset by 815,000 also cut into quarterly profitability. Excluding the Oreo write-down, earnings would have been in line or slightly better than prior quarters. Our newer middle market and small business lending units continued to gain scale. The asset-based lending portfolio increased almost $30 million to just over $90 million in outstanding. Our private equity fund banking portfolio grew to $128 million, and our small business lending group, which includes our business express and SBA loans, grew to $91 million. Overall, key metrics remained in good position despite the challenging environment. We had a return on tangible common equity that was above 10%. Our efficiency ratio remained below 60%, and our return on average assets remained above 1%. Those are the quick highlights, and at this point I'll turn it over to Andrew to discuss additional financial details for the Q1 results. Andrew?

Thanks, Pat. For the three months ended March 31, 2025, we recorded net income of $9.4 million, or $0.37 per diluted share, and a 1% return on average assets. Excluding the tax-affected impact of the Oreo write-down we took during the quarter, EPS would have been $0.40 per share or an ROA of 1.07%. We had very strong loan growth during the quarter following a strong fourth quarter. We were up nearly $92 million or 12% annualized from the end of the fourth quarter. Over the last 12 months, loans are up approximately $244 million. Growth was also solid on the deposit side with balances of $64 million during the quarter or an annualized 8.5% as we executed on adding and maintaining profitable relationships. That growth also included some broker deposits, which we added to support our significant loan growth during the quarter. Net interest income increased about $500,000 compared to the fourth quarter. Our net interest income was supported by margin expansions. Our net interest margin increased to 3.65% in the first quarter compared to 3.54% in the fourth quarter. Interest-bearing deposit costs declined down 18 basis points from Q4. We continue to be pleased with our success in moving rates lower on a significant portion of our deposit base while still retaining and growing balances. Deposit cost declines outpaced the decline in average loan yields, which fell by three basis points. The margin is also impacted by acquisition accounting accretion, which totaled 2.8 million in the first quarter of 2025, compared to 3.1 million in Q4 of 2024. Looking ahead, we continue to manage a well-balanced asset and liability position, which should result in continued strong net interest income generation and limited variability in the margin, regardless of the Fed's actions on rates. Our asset quality continues to be strong. NPAs, the total assets, declined to 0.42% compared to 0.46% at December 31st and 0.64% at the end of Q1 2024. We recorded a $1.5 million credit loss expense in the current quarter. This compared to $234,000 in the fourth quarter, and the increase was commensurate with the high level of loan growth during the first quarter. For the first quarter of 2024, we recorded a $698,000 credit loss benefit, primarily due to the lack of loan growth during that period. Our allowance for credit losses to total loans increased slightly from 1.20% at December 31, 2024, to 1.21% at March 31, 2025. Non-interest expenses were $20.4 million for the first quarter of 2025, compared to $19.1 million in Q4, 2024. Q1 expenses included an $815,000 impairment of an Oreo asset during the quarter. The remaining increased expenses came from higher salaries and employee benefits, primarily due to merit increases in Q1 coupled with higher payroll taxes. Payroll taxes were higher by approximately $300,000 in additional payroll taxes related to annual bonus payments made in Q1. Also driving the expense increase was higher occupancy and equipment costs, due to recent branch openings and relocation activity. Offsetting this was professional fees, which declined $425,000 compared to the prior quarter. Tax expense totaled $2.8 million for the first quarter, with an effective tax rate of 22.7%. This compares to taxes of $3.9 million with an effective tax rate of 27.2% for Q4 2024. which included the impact of fully restructuring completed in the second half of 2024. We anticipate our effective tax rate going forward will be in a range of 23 to 24%. We are pleased with positive performance and momentum during this quarter. Our efficiency ratio remains strong at 57.65%, remaining below 60% for 23 consecutive quarters. We are also continuing to expand our tangible book value per share, which grew $0.28 during the quarter to 14.47, or 8% annualized. Finally, we're happy to drive shareholder value through our successful continuation of our buyback program during the quarter, along with a stable cash dividend. We believe our strong core financial results, strong underwriting, and low-risk balance sheet, combined with our investments for growth, position us to continue performing well in any economic or rate environment. At this time, I'll turn it over to Darlene Gillespie, our Chief Retail Banking Officer, for her remarks. Darlene?

Thanks, Andrew. Good morning, everyone. As Pat and Andrew have mentioned, we saw solid deposit growth during the first quarter of this year, including growth of more than $16 million in non-interest-bearing customer deposits. This reflects our team's continued and outstanding ability to build and maintain deep customer relationships. This has been vital to our success in growing and retaining our core deposit funding in a hyper-competitive rate environment. Our total deposits were up 64 million, or 8%, from the fourth quarter of 2024, and they grew 150 million, or 5%, from the first quarter of 2024. Our solid growth another quieter success, and that is our ability to manage out some higher cost balances over the past few quarters. This has been a strategic focus, and it's nice to see and reach those benefits. You can also see that in the favorable mix shifts over the past year, non-interest-bearing demand deposits have steadily grown and now comprise 17.2% of deposits, up from 15.8% a year ago. Ongoing strength in interest-bearing DBA brought that bucket up over 20%, while higher costs, money market, and savings dropped to 38.4% from 41.1% a year ago. Time deposits jumped this quarter by $47 million. This includes some brokerage funding utilized to support our team's outstanding loan growth, and we also benefited from some higher-rate customer CDs that either rolled off or into lower rates. Given the ongoing interest in high-yielding products, as mentioned, we were happy to see an overall deposit cost decrease again, and this contributed to the solid expansion of our margin for the quarter. our branch strategy is aimed at supporting engagement in our current market and opportunistic expansion into adjacent markets. And we continue to be very active in this space. During the quarter, we opened our de novo branch in Trenton, New Jersey. Looking ahead, we have approvals in place to open two new de novo branches in New Jersey counties where we currently do not operate. We are also making progress with our plans to relocate and expand our Florida branch to a more convenient and accessible location in the third quarter of this year. We run promotional campaigns in our new branch markets, which are typically at a higher cost, but the relationship value is strong, and it has proven to be a successful tool in gathering core deposits. Okay. We also expect our sales teams to drive first future growth through the rollout of our Salesforce CRM tool, which aggregates customer data for both business and consumer relationships, and we're very excited about this initiative. We understand we are still operating in a challenging deposit environment. However, our customer retention and our ability to onboard new customers remain strong. Our teams are always focused on organic, core funding, and expanding existing relationships. And we are confident these efforts will continue to support a solid and growing deposit base in 2025 and beyond. At this time, I'll turn it over to Peter Cahill, our Chief Lending Officer, for his remarks. Peter?

Thanks, Jolene.

After a good fourth quarter in 2024, the lending area is at another good quarter and strong start to the year. As you've heard, loans grew $92 million in the quarter and annualized growth rate of 12%, exceeding the growth rate in Q4 of 7%. Our plan to focus on C&I lending, which would be inclusive of owner-occupied real estate, which is where we believe most of our commercial banks' deposits are, continues. Patent mentioned areas within C&I that have increased. Of the new loans closed and funded in the first quarter, 81% were C&I loans. Investor real estate loans made up less than 5% of new loans funded in the period. The regional commercial banking teams in New Jersey and Pennsylvania are our largest teams and are executing on their plans to dwell loans and deposits. The New Jersey team has another excellent quarter, and the Pennsylvania team has a good pipeline and is positioned to have a downed second quarter. We're depending upon our newer business units, private equity fund banking and asset-based lending, to be our leaders in net loan growth this year. And Pat mentioned small business banking, which includes SBA lending, which is showing very solid loan and deposit growth. We mentioned each quarter our focus on investor real estate. Late last year, we undertook a project to shift over a period of time a greater percentage of our investor real estate loans to be managed in our investor real estate team. The goal here is an increased focus on relationship development, and increased management of loan concentration levels. This helps to result in a decline in the ratios of desperate real estate loans to total capital from 420% a year ago to 390% at 331.25. The lending pipeline at the end of the first quarter stood at $326 million. of probable fundings, that's up 33% from the level of probable fundings at December 31st. We're pleased with the level of business in the pipeline, especially after the loan growth we experienced during the quarter. If one breaks down the components of the pipeline at quarter end, C&I loans made up 63% of overall pipeline, down just slightly from 66% at 12-31-24. But if you compare the level of C&I loans to the total pipeline a year ago, at 331.24, the level was 55%. That swing of 10% is an indicator that our focus on C&I business is taking hold within the sales teams. Further, within C&I, SBA and asset-based lending have good pipelines, and private equity banking is up significantly over a year ago. Those three areas now comprise 39% of total C&I, up from 25%, which is where they were a year ago. On the topic of active qualities, portfolio continues to be in good shape, as the earnings release shows. Non-performing loans were down in the last four quarters shown, and recoveries again exceeded charge-offs. And coincidences in the portfolio continue to be very low. On the topics of DOGE and tariffs, we've had our relationship managers reach out to customers two different times now to discuss potential impacts on their companies. Generally, the responses we've gotten at this point reflect concern, but only modestly anticipated impacts. DOGE is the easier one to address. We think risks of lower federal government spending will not impact us tremendously. We have no concentrations of business directly dependent upon government spending. This talks on prior calls about office space in particular. First, we have no exposure in the greater Washington, D.C. market, so that obviously helps. In the markets we do business in, we have minimal federal government leases in our investor real estate portfolio. For example, we have one property with space under lease to the Social Security Administration If that space vacates completely, which we have no indication that it will, that service coverage still exceeds 1.0 times coverage. We have that kind of analysis underway, and I can tell you that the overall exposure is going to be very small. Regarding tariffs, the feedback we've gotten is basically general uncertainty across the board. Most of our customers are not seeing anything yet that is creating a lot of concern. Certain areas are you know, produce different levels of responses. In construction lending, for example, we've had mixed responses. Most of our developers say that their prices are either fixed for the project they're in, and any impact would be small and can be covered by amounts budgeted for contingencies. In the longer term, they believe cost increases will be able to be passed on. So, again, kind of too early to tell group of responses. Private equity and fund banking, here it's also too early to tell. Most of our business here thus far has been in the financing of acquisitions made by funds. Most of the funds say that, you know, yes, there's been a slowing of activity, but at the smaller end of the spectrum, there's still plenty of action. And on a deal-by-deal basis, the topic of tariffs comes up and gets vetted at that point. In the regional teams, where we're focused on middle market companies, you know, generally finance, For us, that means those with revenues under $100 million. Some responses from customers have referenced preordering some inventory where appropriate, potential cost of Canadian lumber having an impact. We had one that's delaying an equipment purchase from China. You know, these are kind of small one-off reactions so far. We talked about line of credit utilization rates from time to time. And bank-wise, these have not changed much either. Higher rates could be tied to customers' low inventory levels, but we're just not seeing that yet. Historically, these rates have been in the low to mid-40% range, and they continue to be there. And, of course, we're following the trend in that number pretty closely. So, in summary, we're cautiously optimistic. It's become a product known. what I call to be crisis situations out there with individual clients, but we're still out talking to customers and following updates on the whole tariff situation. Pulling these first quarter results together and looking at the next quarter in the coming year, I'll just mention that we continue to have a big focus on deposit generation. It's an important part of our conversation that we have with our sales teams and then with our customers and prospects. Sales teams in all regions are in the middle of new business growing efforts that we hope will result in increased deposit balances. We're having a good start to Q2 with the lending pipeline that's in place, but insight payoffs among 15 asset scales by customers clearly impact growth, and obviously economic conditions are a bit of a wild card and can change things a bit for us as the year plays out.

That concludes my remarks about lending, so I'll turn things back to Pat for some final comments. Pat? Thank you, Peter, and thanks, Andrew and Darlene. At this point, I think we'd like to open it up for the Q&A portion.

Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 in your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and are listening by a loud speaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. And your first question comes from the line of Justin Crowley with Piper Sandler. Your line is now open.

Hey, good morning. Good morning, Jessica.

I wanted to start on the loan growth in the quarter. You know, pretty strong result, and we could see a lot of that coming outside of Investor 3. And I know you gave an update on the pipeline, but I just wanted to ask how you're thinking about the lending environment as we move forward here, given some of the uncertainty. I know Peter touched on it, but maybe some further call around, you know, more of what you're hearing from borrowers and how you think that could impact, you know, pull-through rate on the loan growth side through the balance of the year.

Yeah, I'll hit a couple points and then let Peter add to it, but, you know, the bottom line is a lot of the activity is, you know, stuff that's going to happen quite frankly, whether it's construction projects that are mid-funding, right, folks aren't going to stop things that are already in process. Now, you might see a slowdown in construction six, nine, twelve months from now if the economy is slow or going into recession, but over the next quarter or two, I don't think there's too much of an impact there. And then, you know, a lot of the activity on the real estate side, it has to do with maturities and refinancings that, you know, they need to get dealt with one way or the other. And so I don't think you'll see a real slowdown there. You might see a little bit of a slowdown in, you know, merger-related financing or large CapEx purchases. But I think net-net, there won't be at least in the next quarter or two, a huge decline in loan demand overall. But, yeah, we'll certainly keep an eye on that. Our bigger governor, if you will, in terms of loan production has always been making sure we can fund it with good core deposit funding. And so we tend to turn away more than we can do anyways just based on, you know, managing our funding constraints. I think we see lots of opportunities, and in terms of what specifically borrowers are talking about, I'll turn it over to Peter and let him share a little detail there.

Yeah, I wish I had more detail there. I mean, the perfect example I referenced, a customer that had a big equipment or machinery purchase out of China, and It was kind of a nice-to-have, we'll be a little bit more efficient with it. And it had a $10 million number on it, and they're just going to put it on hold. They don't need the equipment, and they're going to wait and see, because in that particular case, their belief was that tariffs were in place. Other cases, folks are just waiting to see how things roll out. They don't seem that tremendously concerned. I mean, again, I don't want to say they're not concerned. They're just not, you know, in panic mode by anything. you know, from what you read, we're still a couple quarters away from seeing a big impact on that. And everyone's just watching it closely, hoping that, you know, we get some agreement today with some of these other companies and it becomes more and more of a non-event.

Okay, I appreciate all that.

And then just to shift a little bit, just over on a or it's a buyback, you know, you got pretty active here in the period. So what are your thoughts moving forward with the stock trading below where activity got done in the quarter? Can we see this type of pace continue or perhaps even pick up in the event growth does come in a little bit slower through the duration of the year?

Yeah, it's certainly on our radar, Justin. I mean, given where the stock's been trading, You know, had we not been in blackout for earnings, I think you would have probably seen even more activity. So definitely something we're looking at. Obviously, we're trying to balance it with organic growth goals and other constraints. But I think it's something we'll continue to, you know, have at the forefront of our radar in terms of capital management going forward, at least. you know, while the stock is trading, you know, in the current range, so.

Yeah, Pat, I would just add, and we've disclosed this previously, but we do have an active plan right now. We purchased 350,000 shares from that plan, but the plan was a million shares, so we have plenty of run room in our current plan. That plan goes through September 30th, so we have room there for sure.

Okay, great.

And then I guess just lastly, on credit, you know, you've got pretty strong reserves here, up slightly for this quarter, and really above where you guys were back in the pandemic. You know, does it feel like the reserve is at a point where even if things got worse, you know, from an economic standpoint, that you'd probably be okay? I know to a large extent it's diesel-driven, but, you know, I'm just curious of thinking on where the allowance might have to go to if we do dip into a recession, just, you know, given the strength of balances already.

Yeah, I think we feel pretty comfortable with where the allowance is. You know, on top of the odd balance sheet allowance, we still have, you know, some considerable credit marks on some of the acquired stuff, which gives us a little bit more of an off-balance sheet cushion. And so when you look at things like our coverage ratio, meaning our allowance to our non-performers, I think in general for banks in our area, our allowance is higher than most already. And then given that our non-performers are lower than most other folks, our coverage ratio looks very, very strong relative to peers. So I think from that perspective, you know, there's room to feel like we're in a pretty good place. Andrew, I don't know if there's anything you want to add there.

Yeah, I think that's right. We feel pretty good about the coverage ratio. Obviously, it would depend on the level of any economic issues or concerns and if our data changes. But right now, we're just not seeing a lot of risk in our portfolio. We think we have a fairly conservative allowance and approach right now. So if we see something like a mild recession, I wouldn't think we need to move it significantly. But it will really depend on a lot of different factors, so it's hard to say. But we do feel good about where the level is right now.

Okay, got it. And then just one last thing, I guess, just sticking with credit.

Just on the Oreo right down in the corner, can you remind us exactly what that is? I think you mentioned it was the New York City credit or real estate property, just the mechanics of, you know, where the mark is and, you know, the timeline in terms of just getting that off the books, assuming that's the endgame.

Yeah, no, certainly that is the endgame. This is a an acquired loan from the Malvern merger that, you know, we took a pretty significant, you know, up from credit mark against and then finalized foreclosure, moved it in. And, you know, it's in a decent area. It's in the Chelsea area in New York City. It's a retail unit below some residential that – You know, I think based on prior appraisals and location, we were thinking that it was marked appropriately, even comparatively. But, you know, we've had it on the market for a little while, and based on some of the feedback we're getting and indications from the broker, we thought it was prudent to take a little bit of an additional write-down just to make sure we're fully covered, you know, as to when the asset control was

you know, our preference would be sooner than later, so. Okay, appreciate it. I'll leave it there. Thanks so much. Sure.

Your next question comes from the line of Manuel Navas with VA Davidson. Your line is now open.

Hi, good morning. It seems like a lot of the growth came late in the quarter. The NIM was nice expansion, but Where did the NIN finish in March, like a point in time NIN? And then you were adding funding as well, just kind of getting a little bit more guidance around that new term NIN given how much kind of the balance had changed at the end of the quarter.

Yeah, I mean, I'm not sure we dug into it to that level, but at the end of the day, I'm not sure, Andrew, that the loan growth all came late in the quarter. I think I think we saw nice growth in each month during the quarter, and, you know, we obviously benefited from some deposits repricing during the quarter as well. So I think, listen, I think we feel like the current level is sensible. We're not predicting it's going to necessarily move a lot higher, but I don't think we see reason for it to. come back a lot either. It obviously depends on what the Fed does and the shape of the yield curve and all that. But I think from our perspective, we think the current level, plus or minus, is a reasonable estimate moving forward. I don't know, Andrew, if there's anything you noticed more granular in terms of month-to-month or week-to-week that might have impacted the numbers that you wanted to mention.

Yeah, so I'd add that you're right. There was decent growth in all the months. March was our best month in terms of loan growth, but there was growth in January and February as well. We did add some of our higher cost funding towards the end of the quarter in terms of some of the broker deposits and some of the advances that we added. We're also going to see another decline in purchase accounting accretion as we talked about. That kind of continues to run down. There's some headwinds and some tailwinds that we think are kind of offsetting each other. With the loan growth, obviously that growth will trickle into the second quarter. We are going to see some of the higher-cost funding that got added later in the quarter have some strain on the margin and then the purchase accounting as well. But, yeah, all things kind of getting close to offsetting each other. We think a fairly stable margin is the right kind of mark, or at least in the short term.

what were your low yields in the first quarter, and then what were the brokered added at in terms of cost, and how much was added on the broker side?

Peter, you want to start with the low yields, and then I can talk about the right ones.

Yeah, I mean, I don't have the breakdown on fixed floating, but, you know, or versus floating, but... If we're fixing loans, fixing the rate on loans, it's going to be typically at something like 250 over a five-year team. So if that's around 4%, that would be six and a half. I think on a month-to-month basis, we do report through our board some of our new loans report and shows a weighted average yield. I think we've been right in that middle, 725 to 750. 50 range as far as the yields on new loans close. You know, that's going to drive you overall. You're slowly or impacted slowly. So, again, most of that hasn't changed in the past six months, six to nine months. So, again, we focus on fixed rates at 250 over, and we've been around seven and a quarter, seven and a half in total. Does that sound about right, Andrew?

Yeah, that's about right, I think, yeah. Seven and a half about is kind of the average rate of new loans. Now, remember, we did a lot of C&I during the quarter, which tends to be more of the variable rate. I don't have the exact numbers as well, but some typically a little bit shorter term. But, yeah, around seven and a half was the average yield on homes. And on the liability side, the broker side, I think we added about – broker deposits increased by about $25 million during the quarter, and those rates – Typically, we're ladder a little bit, but we're still staying on the shorter end of the curve. And typically, brokered money is falling between 4% and 4.5% in that range, depending on if you go out a little bit further, it's a little cheaper. And if you stay short, it's closer to that 4.5% range.

And what's the schedule on the purchase accretion expectations there?

Yeah, I think, as we've mentioned before, slight declines over the next several quarters, and then once you get to year two and a half, year three, it starts dropping off more and more significantly.

Okay. The color on kind of the C&I categories and how well they're growing, I feel like I'd love to get more color on that on March.

how much bigger they could get, like what are they targeting? I guess you're probably still in the experimentation phase, seeing what works is kind of how you've talked about it in the past.

Can you just add some perspective on how big each can get and how much growth you've already had?

You went through it very quickly at the very beginning, and I don't think I caught it all. So the ABL, the PE funding, just kind of love to know what each of those categories are kind of,

Yeah, so maybe the easiest way to think about it is current outstandings and then kind of where we're heading over the next couple of years. ADL is sitting at $90 million right now. I think we envision that business growing to $150 million, $200 million over the next couple of years. That's not to say we would stop it there, but just to give you a sense for... you know, the opportunities for growth. Private equity is at 128. You know, similarly, we could see that business grow into 150 to 200 in total outstanding over the next couple of years. And on the small business and SBA side, we sell a fair portion of the SBA production, so the total outstanding probably won't grow as much there. Maybe that portfolio gets to 125 or even up to 150 in the next couple years. But I think meaningful growth in each of those categories and, you know, I think, you know, given the size of the teams that we have and the infrastructure we have at those levels, each of those business units should be contributing meaningfully to the overall profitability of the organization.

Okay. That's really helpful.

And SBA getting to 125, 150, what is it at now?

Well, let's... Not just at the SBA and Business Express are the two components of our small business portfolio that we're quoting here. And that's about 91 million, right?

Collectively, that is at 91 today. And then... It seems like the pipelines are still really strong.

This quarter was a fantastic quarter in growth. Any kind of perspective? There are some uncertainties.

Any perspective on past targets for four-year growth?

Well, listen, I think we talk about organic loan growth and deposit growth goals of, you know, $175 million to $200 million net. I think one quarter of $90 million, obviously, if you analyze that, would put you well ahead of that target. But history shows that, you know, we can have a $90 million quarter, and then we can have a flat quarter, and then we can have a $50 million quarter, and things hop around a little bit. So, you know, that's yes. On the loan side, we're probably coming a little bit ahead of the – the plan based on quarter one, but I wouldn't be too much into, you know, one quarter's worth of production. And, you know, similarly on the deposit side, I think we're a little bit behind our budgeted growth plans in Q1. And so we're hoping to see some uptick in activity there.

But, you know, I'm not necessarily looking to change our overall organic goals for the year at this point. That's helpful. And then on expenses, is the core rate at the Oreo impairment and some of the seasonal items kind of where I should look at for OpEx? Is there anything that should change it from that level?

Yeah, I don't think there's anything major on the drawing board that would lead to you know, major push higher. Similarly, we don't have any, you know, big cost-cutting campaign coming, and so I think the current level is a decent level. Obviously, we're always looking for opportunities to improve efficiency and save money. That being said, you know, our goals for growth in some of these new business units require investment, and so we expect we'll continue to do that as well, and that's Yeah, we continue to opportunistically look for opportunities on the technology side, which, you know, I think will continue to be part of the program going forward. So I think, you know, overall levels of non-interest expense to assets are, you know, probably a good runway to think about moving forward.

And just adding those branches, the branch costs, that would be probably good in terms of – increases from the current one, right?

Yeah, I think that's right. Certainly new locations cost money and there's some marketing tied to them. Sometimes what we've seen in the past is we're open to new and maybe consolidate one of the existing into another location to help offset some of the costs. But the bigger we get, adding one branch doesn't move the needle quite as much in terms of the impact on expenses.

Okay, I appreciate the commentary. I'll step back and take it. All right, thanks, Colonel.

Your next question comes from the line of David Bishop of the group. Your line is now open.

Hey, good morning. Glad to get in the question to you here.

Hey, Pat, I'm curious. You know, capital is still very abundant here. I know there's obviously a lot of dislocation within the market, but prospects for M&A activities this year? I'm just curious how the phone lines have been trending here. Do you think that's an opportunity to deploy capital?

Well, you know, I think our view on M&A is the same as it's always been, which is, you know, we keep our eyes and ears open. We, you know, have lots of conversations, most of which don't go anywhere, and, you Ultimately, you know, when I look at probabilities for M&A, you either need a catalyst on the sell side or you need improved valuations on the buy side. We certainly don't have the latter right now. And so, you know, it really comes down to, you know, what's driving somebody to seek a partner. And based on that, is it enough to push them forward? at a time when nominal prices won't look that good, or do they want to wait it out until some hopeful rebound so that, you know, the announcement looks better on paper? Those are hard questions to answer, Dave. So I think, you know, you said it well, right? There's a lot of conversation, but, you know, how much of it is going to result in actual activity? I suspect until... you know, we have a clear visibility of where the economy is headed and what's actually going to happen with the tariff discussions that M&A activity is going to stay muted is my best guess.

Got it.

And then, you know, Pat, you know, she sort of, you know, wrote some of the commercial in small business, you know, segments on the C&I side, especially for private equity banking. Comfort level in terms of, I mean, just curious, you know, when you're underwriting and doing the due diligence there, just curious with the comfort level for the portfolio companies that sort of make up some of these private sponsor units, just curious how you're thinking about that, you know, limited credit exposure and credit quality efforts and so forth.

Yeah. Well, listen, I can tell you, Dave, we went into these new units with a, lower risk, lower yield mindset, right? So, private equity fund venture is a good example, right, is we're calling on folks and developing relationships. We're making it very clear where we want to live on that spectrum, and for us, that means lower leverage situations with, you know, lower yields, but from our perspective, much better, you know, credit profile, if you will, and that's Our mindset of credit has always been don't stretch for yields and take on risk, but do the lower risk yields and manage overall profitability with really strong expense management. And so that mindset didn't change as we launched, you know, some of these new units. We brought that same mindset to, you know, the thought process of the teams we wanted to bring in and, the strategies they're going to deploy. And so, you know, within ADL and private equity specifically, we've been very focused on trying to stay at the lower end of the risk curve in terms of leverage on deals and things like that. And similarly, in small business, we're constantly tweaking the model there. But within SBA, similarly, we're looking and trying to find deals that look and feel a lot closer to almost conventional in nature than, you know, our mindset of SBA has never been, hey, if the SBA will approve it, we'll do it. We just don't want to, you know, move out on the risk curve that far. And, listen, candidly, that's constrained some volume on the SBA side, but we're willing to live with that rather than take the risk. So a long-winded way of saying, you know, our model within the core community bank business in terms of risk, reward, and credit hasn't changed with these newer units, so.

That's great, Tyler.

And I guess one final question for me, you know, it's always a battle, you know, in terms of, you know, deposit rates and deposit costs. Just curious, you know, is there a decent amount of exception-based pricing left where you can sort of lean on some relation-based pricing to continue to move deposits to a funding cost lower?

Well, listen, that's It's a great question, right? I mean, to the extent that there is some assessment-based pricing, we're regularly reviewing it and moving it down where and when we think we can. And a lot of that just becomes a function of what, you know, what the other options are in the market. But I saw a chart the other day that showed, you know, the money flowing into money markets and, you know, overnight markets funding mechanisms continues to move higher, and that's obviously a direct competitor to the bank deposit business. So the dynamic between what folks can earn in low-risk money market fund assets and bond fund assets versus bank deposits changes. I think it's going to continue to be a struggle to push deposit costs out.

I appreciate it, Tyler. Yes, it's a pleasure.

There are no further questions. I will now turn the call back over to Mr. Patrick Ryan for closing remarks.

Okay. Thanks, everybody. We certainly appreciate your time, your interest, and your questions today, and we'll look forward to catching up with everybody when we do our earnings call at the end of the second quarter. Thanks, everyone.

Ladies and gentlemen, that concludes today's call. Thank you all for joining the May Now Disconnect.