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spk01: Good day, and thank you for standing by. Welcome to the Bank United 2022 Second Quarter Earnings Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Susan Greenfield, Corporate Secretary. You may begin.
spk03: Thank you, LaTanya. Good morning and thank you for joining us today on our second quarter 2022 results conference call. On the call this morning are Raj Singh, our Chairman, President, and CEO, Leslie Lunak, our Chief Financial Officer, and Tom Cornish, our Chief Operating Officer. Before we start, I'd like to remind everyone that this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that reflects the company's current views with respect to, among other things, future events and financial performance. Any forward-looking statements made during this call are based on the historical performance of the company and its subsidiaries or on the company's current plans, estimates, and expectations. The inclusion of this forward-looking information should not be regarded as a representation by the company that the future plans, estimates, or expectations contemplated by the company will be achieved. Such forward-looking statements are subject to various risks and uncertainties and assumptions, including, without limitations, those relating to the company's operations, financial results, financial condition, business prospects, growth strategy and liquidity, including as impacted by external circumstances outside the company's direct control. The company does not undertake any obligation to publicly update or review any forward-looking statements, whether as a result of new information, future developments, or otherwise. A number of important factors could cause actual results to differ materially from those indicated by the forward-looking statements. Information on these factors can be found in the company's annual report on Form 10-K for the year ended December 31, 2021, and any subsequent quarterly report on Form 10-Q or current report on Form 8-K, which are available at the SEC's website, www.sec.gov. With that, I'd like to turn the call over to Raj.
spk05: Thank you, Susan. Welcome, everyone. Thanks for joining us. You've seen the earnings release. We announced $65.8 million of net income this morning for the quarter, 82 cents a share. That compares to 79 cents a share for the previous quarter, so happy about the numbers. Really excited about loan growth, which came in very strong at $780 million. That's excluding, of course, the PPP runoff, which is a little bit. More importantly, of that $780 million, $553 million of that was in the commercial segment, so very healthy and broad-based growth. On the other side of the balance sheet, average non-interest DDA grew $370 million, though period end, there was a decline of $80 million. If you remember, at period end, there was always noise in our numbers. Last quarter, we had mentioned to you there was a couple of hundred million dollars that came in on the last day of the quarter and left on the first day of this quarter. So if you adjust for that, we still had DDA growth, which I'm happy about because we In this environment, to grow DDA gets harder than it was a year ago or two years ago. But we're happy with the way the teams have performed, and it's very much in line with our expectations and with the guidance that we've given you. Margin expanded even better than we had thought. It is at 263 basis points, up from 250 basis points last quarter. And just to remind you, the second quarter of last year, I think we were at 237 basis points. So, very nice trajectory. NII, net interest income, grew 16.8 million, which, again, we're happy about. The rate environment, obviously, is changing rapidly. Deposit pricing, as I said in the last call, bottomed out in the first quarter, and now will keep increasing, at least until the Fed stops our deposit price price. Average is at 30 basis points for the quarter. It was 17 last quarter. But overall, like I said, margin expanded because, of course, we're benefiting on the other side of the balance sheet from the Fed moves. Credit, again, nothing but good news. Criticized classifieds, again, declined by $181 million this quarter. I believe last quarter it was roughly $150 million. NPLs also declined, excluding the guaranteed portion of non-accrual SBA loans. Our NPL ratio now stands at 42 basis points. Charge-offs came in at 23 basis points. Again, to put it in perspective, last year, full year, we ran at about 29 basis points. Capital, as we have said to you many times in the past, we will be opportunistic. When we see weakness in our stock price, we will lean in and be more aggressive with our buybacks, which is exactly what we did last quarter. We announced and largely completed $150 million authorization. And I think for the year, we have now bought back $326 million of stock, which roughly is like 10% of our market cap. So We think this is a good opportunity to step in and be aggressive, and we were. In terms of guidance, I think we're going to stick with all the guidance we gave you. In terms of loan growth, we're seeing pretty decent pipelines, like what we just saw this quarter happen. I fully expect next quarter and the quarter after that, that trend to continue in terms of Guidance we gave you on margin, we're sticking by it. Margin should expand from what it is. We're happy it expanded as much as it did, and we remain pretty optimistic about that as well. Expenses also, Leslie will talk about it. We're happy where we came out. So no real change to our guidance. We still remain focused on growing DDA. That is, at the end of the day, the long-term single driver of success is for me to bring in core, commercial, DDA, and and uh we're executing on that pipeline said good uh overall deposit growth will be lower uh than our uh low growth uh long growth we've said it would be in high single digits and deposit growth total deposit growth will be in you know uh low single digits uh so we're not changing any of that uh in in terms of uh you know i didn't make remarks on on the environments usually i start my my comments with that let me let me do that before handing it over to tom We are obviously in uncertain times, but I take a somewhat optimistic view of this. Actually, this is a definition of getting old. I'll recycle a joke that I've probably told you guys many times over. The optimist and the pessimist are walking down the street, and the optimist says to the pessimist, look around you, life couldn't get any better. And the pessimist says, well, that's exactly what I'm afraid of. That's sort of the environment that we're in. It depends on, you know, beauty is in the eye of the beholder. If I was to be analytical about it and say, you know, where do we fall on that optimism, pessimism spectrum, one being totally pessimistic and ten being totally optimistic, we're somewhere in the six, six and a half range. That's, you know, the average sort of view of the management team. There are opportunities. We're cautiously optimistic. if, you know, there clearly are signals coming from Wall Street of, you know, of trouble that might be ahead maybe six months or so down the road, and we will monitor that carefully and change our attitude. But right now, I see slightly more optimism than pessimism. But we're being very careful, right? And loan growth is strong. Margins are better than we've seen in the recent past. And we had an event just three days ago, Monday, with our top clients in New York. And 60 of these people were together. We were there with them all the entire day. Got to speak with people from various industries. And overall, I'd say they were even more optimistic than what I am being. There is concern about the economy. We have to be careful, but also there are opportunities that we can tap into in this environment. So cautiously optimistic and always opportunistic. That's what I would say is the stance of the management team. With that, let me pass it over to Tom. He'll get a little deeper into the numbers.
spk00: Good. Thanks a lot, Raj. Maybe before we dig into the numbers, a few comments on Roger's view on opportunities that we're thinking about and investments that we made over the previous quarter because the second quarter was a pretty busy quarter in terms of activities for us from a growth initiative investment perspective. So we've talked before about both the Dallas and Atlanta offices. I'd start with Atlanta where our goal is to have a full wholesale banking team in that market, both from a corporate banking, a Cree, and a treasury management perspective. We're probably about halfway through the hiring process there. We've got the corporate banking team fairly built out at this point. We've got a Cree leader, and we're recruiting other members of that team, and we're also working on the treasury management position and some credit support there. But overall market, Reception has been really good. We've started to book new relationships, and the pipeline for business in Atlanta and the opportunities that we're looking at, I think, are matching our expectations when we talked about going into this market. So we're happy with that. We've got our Dallas branch up and running, and we are seeing good deposit activity out of our business operations in the Texas market, and Texas continues to be you know, a strong growth opportunity for us in the future. Beyond that, we made several different investment position hires in the second quarter that I think are notable. We bought in a head of a sponsor finance team. We had never had a specific initiative to focus on sponsor finance relationships. We've done that. We're happy, you know, with our early traction in that. We added a position to focus on, you know, environmental enhancements and alternative fuel type opportunities within our client base. We're excited about that opportunity. We've added to our commercial banking team in the Jacksonville market. We like Jacksonville a great deal and like the growth opportunities in Jacksonville. Our wholesale team has done well there, predominantly focused on corporate banking and CRE. So we've added a commercial banking segment to that area as well. We've added a couple of positions to our New York commercial private banking team. We have added to our HOA teams during the quarter and also bought in an experienced salesperson on the deposit side to focus on multinational relationships in the Florida market. And Florida is a big multinational market. So we had a pretty strong quarter in terms of investing in areas where we see opportunities in the economy. both from an industry segment and a geographic perspective. So a little bit more detail about some of the numbers that Roger articulated earlier. As he said, total loans grew by $780 million for the quarter. The majority of that was in the commercial segment, which grew by $553 million. That includes for CNI and the mortgage warehouse business. Commercial growth was led in the CNI segment with $474 million. million of growth. Mortgage Warehouse was at $116 million. A couple of comments there. I think when we look at the commercial growth through the quarter in the commercial and industrial segment, commitments grew by 7.5% for the quarter. Loans grew by 6.9%. Year-to-date, that line item has grown by 13.2%. And we've seen really good growth across all segments that flow into the CNI. It's been predominantly led by corporate banking, but we've seen really good growth in commercial banking and small business lending. And not only is it broad among all of the segments in the CNI world, but it's also, you know, broad among the number of industries that we serve. No one industry drove that. It was probably, if you look at the additional supplemental information and compare it to last quarter, you can see that growth was among a number of the different industries that we service. The other point I would make is that growth was really exclusively driven by new business. Our overall line utilization has remained pretty flat from a CNI perspective. And actually, even the growth in the mortgage warehouse business were pretty historical low points in utilization on those facilities. So it's really a new business driven kind of quarter from a CNI and from a mortgage warehouse perspective. CRE declined slightly, pretty flat for the quarter, $26 million decline. We had a couple of large transactions that were closing that we thought by the end of the quarter didn't close to the following quarter. I would also point out within the CRE book, we did see nice growth within the industrial segment. We grew the industrial segment, which is an area focused for us, by $118 million for the quarter. And we have started to select to focus on doing more construction lending, and that grew by $37 million in the quarter. So we had about $145 million of growth within the Cree segment, and some of the specialty segments were really focused pretty hard on. On to some other areas, bridge declined somewhat, pretty much as we anticipated, particularly in the franchise finance area, where we're cautious in that segment and not necessarily seeing risk-adjusted returns that kind of fit into where we want to go strategically. We did see some nice growth in the Pinnacle portfolio during the quarter, and residential grew by $228 million during the quarter. So overall, a really good growth quarter. And as we look into Q3, pipelines in all areas have stayed very strong, kind of at the Q2 kind of pipeline numbers that we were looking at. going into the second quarter. So we're pleased with what we see within the book as it relates to the pipeline. On to deposits, consistent with previous guidance, total deposits and total NIDDA were pretty stable quarter over quarter. Average non-interest-bearing deposits grew by $371 million for the quarter. As you might recall, on our last quarter call, we pointed out about the $200 million that Raj mentioned as being fairly stable. fast-moving money at the end of last quarter that we expected to run off. So factoring that in, we continue to be pleased by NIDDA for the quarter. We continue to be pleased by the amount of new logo growth within all of our lines of business. It was a very strong quarter from a new relationship perspective. Loan-to-deposit ratio ended the quarter at about 85%, which is a level that we're pretty comfortable with at this point. So with that, we'll turn it over to Leslie for More detailed comments next quarter.
spk04: Thanks, Tom. We're very pleased to report that the net interest margin increased to 263 this quarter from 250 for the prior quarter, largely on the strength of increasing earning asset yields. The yield on the investment securities portfolio increased to 212 from 173. Given the short duration of the portfolio, we're obviously seeing the impact of rising rates and widening spreads on the overall portfolio yield. The yield on loans increased to 359 from 336 last quarter, and resetting of coupons on variable rate loans and new production at higher rates contributed to that increase. The cost of total deposits was 30 basis points for the quarter, up from 17 basis points last quarter. Again, as Raj said, the Fed continues to hike rates. Slide 9 and 10 of the deck give some more details about the allowance for credit losses. The reserve as a percentage of loans was flat to the prior quarter at 54 basis points, and I want to point out that the ratio of the reserve to non-performing loans increased to 90 basis points this quarter. The provision for the quarter was $24 million, impacted by a number of factors. Total criticized and classified commercial loans continued to decline this quarter down by $181 million with the largest decrease being in the substandard accruing bucket, which came down by $169 million. And total non-performing loans also declined for the quarter to $144 million from $151 million. Not surprisingly, given the macro environment and what's happening with rates, unrealized losses on available-for-sale securities increased this quarter to about Four and a half percent of amortized costs, which I still think is overall, given the environment, ran a pretty modest mark at 630. More detailed information about that is presented on slides 21 and 22 of the deck. The segments with the largest impact were private label RMBS, private label CNBS, and agencies. We continue to believe that all those unrealized losses are attributable to increasing rates and widening spreads brought on by the Fed's actions and the market's expectation of their future actions. We believe these losses are temporary in nature. We haven't recognized any credit impairment losses, and we don't think these losses are indicative of any credit concerns in the portfolio. You have some information on slide 22 in the deck about subordination levels that are very strong for the major categories of private label securities. On the non-interest income side, we took a negative mark through the P&L of $9.3 million on some preferred stock investments. Again, attributable fairly to rising rates. The decline in other non-interest income compared to the prior year was really due to lower BOLI revenue and lower gain on sale of loans, as we haven't had the kind of gains on sale of EBO loans in this environment that we had in a different rate environment. Non-interest expense, compensation expense declined this quarter. Some of that was expected seasonal declines in payroll taxes and other benefits, and we also have some share awards that are liability classified that are marked based on the stock price at quarter end, and the stock price was lower at quarter end, so that reduced compensation expense this quarter, and that piece is probably temporary. So we probably will see that go back up a little bit in future quarters. As Raj said, we still feel good about the previous guidance we've given you overall on expenses and no change to that. With that, I'll turn it back over to Raj for any closing remarks he wants to make.
spk05: No, I think I'm good. It was a good quarter. Feeling pretty good about the next quarter or two. I'll open it up for questions.
spk01: Certainly. As a reminder, to ask a question, you will need to press star 1 on your telephone. Please stand by while we compile the Q&A roster. And our first question will come from Ben Gerlinger of Hoved Group. Your line is open.
spk07: Hey, good morning, everyone. Sorry if there's any background noise. There's a pretty big thunderstorm in Atlanta. I was curious if you guys could just kind of break out a little bit of the loan growth expectations here going forward as CRE had a pretty healthy rebound in the quarter. But from thinking about growth from here? Is there any areas that you're more targeting? I know construction was called out where bridge is kind of winding down and just kind of thinking about a mix going forward.
spk05: Yeah, I mean, construction is still going to be, you know, not the main story. We're not a construction heavy bank and that's just, I think core growth is going to come from CNI commercial CRE, I'm very happy to, you know, we were really hoping this quarter would be actually a positive, you know, we just missed a couple of bucks, but CRE, you know, has been declining for many quarters, but I see growth in CRE as well. I think some of the national businesses like Bridge and Franchise will probably not contribute to growth as they've been declining for a while. And you know, mortgage while we had predicted will decline, we're seeing margins that are very healthy, especially in the jumbo business where they've been very tight for a long time, right? We've been doing mostly EBO business where the margin has been wider. Now we're seeing tighter margins over there, but wider margins in jumbo. So that's growing. So we tend to basically focus on where the market is and allocate capital based on what we're seeing. That's sort of what it looks like today. Now, if that changes tomorrow, if jumbo pricing and spreads start to come down or any other category comes tighter, it'll be harder to grow and allocate capital to those business lines. But right now, it looks like OCNI, even CRE, and to some extent, Resi will continue to grow. Mortgage Warehouse is an attractive business. We're growing commitments over there. but utilization will stay low unless there's a refi boom, which I don't see one happening. And, you know, so we're chasing better risk-adjusted returns. Wherever they are, we will try and allocate. You know, you can't change, you know, on a day-to-day basis or a week-to-week basis, but over a period of a quarter or two, we always look for where the margin is best and where the returns are the best, and we try and allocate capital there. Those are the areas which look like are the ones that will grow. That's where the pipelines are good.
spk00: I would also add that when you look at the Cree market, I mean, it's a divergent story of how you feel about different asset classes. You know, the asset classes that we like the best, you know, are industrial, which we actually grew, you know, 13% in the quarter. And we like the industrial market a great deal. And we still think we have room to grow industrial. We like multifamily. a good deal. A lot of our construction activity, as Rod said, is not, when I say that, it sounds bigger than it is, but a lot of the growth in the $37 million was in the multifamily space on a couple of projects we're involved in. So I think multifamily and industrial are going to continue to be the favored asset classes. If you look at our mix in the Cree book, our mix improved a lot. this quarter because it is more the favorite asset classes, and we pared down a bit the retail segment, we pared down the hotel segment a bit, and actually, you know, we were watching that number very carefully. Some of the loans that led to a slight decline were actually, you know, criticized and classified loans, you know, that left. Being the optimist, if I looked at performing loans, we grew performing loans. So the ones that left were ones we wanted to leave.
spk05: I'm on the optimist side of it. Yeah, the six and a half that I said on the scale of one to ten, that's the average of the management team. There's a spread in the management team also.
spk07: Gotcha. No, that's fair. That's a great color. Then my second question, to take more of that pessimist view, is there anything in your loan book that's kind of more for lack of a better word, like PE or sponsor or kind of cash flow lending that isn't already specifically called out within those specialty lending verticals, although there is clear classifications where you would have to call it out. Is it kind of by a different name or kind of in that line of lending that's somewhat embedded in the CNI?
spk00: Yeah, it's embedded within the CNI, you know, lines. I would say that... our overall level of sponsor finance related activity is not a significant portion of the overall portfolio. I think it could be better, which is why we hired, you know, an experienced sponsor finance relationship officer in the New York market that's going to focus on better developing that business. But it flows through the geographic and industry-specific teams and rather than residing in a specific sponsored finance unit cost center.
spk07: Gotcha. Okay. That's helpful. I appreciate the color, and congrats on a solid market expansion quarter. Thank you.
spk01: One moment. Our next question comes from Will Jones of KBW. Your line is open.
spk08: Hey, great. Good morning, guys.
spk04: Morning.
spk08: Hey, so just wanted to start on deposit cost and deposit pricing. You know, if you look at total deposit cost, they were up just modestly. You know, I calculate somewhere, you know, a low 20% beta. You guys have been very vocal about keeping betas lower this cycle. I was just curious if you could talk about, talk through some of the puts and takes of your confidence on maintaining a lower beta through this cycle? And how are you guys internally benchmarking where deposit betas could play out openly?
spk05: What I'll say is if there is uncertainty in our budgeting and planning, it is actually in trying to predict betas. And the reason I say that is often you predict betas by looking at historical information. How did your deposit base behave last time around? When we go back and look at four or five years ago when Fred was raising rates, our deposit base and our customer mix has changed quite dramatically. And so making predictions based off of that is not a very accurate way. So while we have modeled this every which way possible, I still think that it's sort of the hardest thing to pin down as to what they will be. Now, I will say up to now, based on our own models and what has emerged so far, we're doing better. So our modeling has been more conservative than where we are today. I'll also add, actually, by the way, all our modeling work was done was, you know, like late last year when we had run our budget and everything and we'd given you guidance for margin and all. It was based on a very different trajectory of Fed rate increases. The trajectory has been much steeper, as we all know. So the Fed is moving faster than what our plan was. Our betas emerging slower. Actually, our betas are lower, at least so far in the cycle. But that's the hardest thing. It's all assumption-laden. Our margin is came out better than we had expected, largely because of that. My focus is really on DDA. We've worked very hard to get us to 34%, and we started this journey at like 14%. We've come a long way, and I don't want to give even an inch of that. Some of that will happen as rates go up, ECRs go up, people do move deposits around, but as long as we're bringing in new relationships, core relationships, smaller relationships, I feel very good about the quality of this deposit franchise today than it was even two or three years ago. So I know I'm not giving you a very direct answer because I don't have, you know, we haven't announced what our betas are or what we project them to be. We've given you a total assumption that we expect markets.
spk04: You're never right, obviously, on what they are.
spk05: You know, anyone can do that calculation. It's running around at 20%. But overall, I'd say that, you know, the way we position the balance sheet is that we expect margin to expand from here.
spk04: Gotcha.
spk08: And I wrote that down.
spk04: Yeah, the only thing I would add is that we're still pretty confident that the betas will be lower than they were in the last rate hiking cycle, but how much lower?
spk05: I mean, just the fact that last time we had like 12% or 15% sort of in that range DBA, and now we have 34%. That will cost lower betas overall. So we're starting off at a much better place. We're starting, you know, the bottom was 17 basis points. Last time the bottom was like 50, 60 basis points in terms of our deposit costs. We're starting at a better place. We have more DDA. We work very hard at this. But it is, you know, it is one of the hardest things to predict.
spk08: Gotcha. Very helpful. And you guys undoubtedly have one of the better deposit mix shift stories out there today. So thanks for the color there. Just switching paces, going to the buyback. You know, I know we've talked about buybacks a lot over the past handful of quarters. You guys have been, you know, just wildly active the past handful of quarters. I mean, should we just assume the baseline at this point is just a buyback continue of, you know, and it's, you know, big magnitude. as long as valuations kind of stay put?
spk05: So we have a board meeting coming up in August. This is going to be one of the topics of discussion. In the past, when we've taken authorizations to the board, there have been like five-minute discussions, and very quickly the authorization comes through. I think this time it will be a more interesting discussion, mostly because we're seeing better pipelines, right? If you have excess capital, you want to deploy it in organic growth, you want to do buybacks, you want to do something else with it. Six months ago, we were not seeing the level of pipeline that we're seeing today. But on the other hand, we're also seeing a stock price, which is very, very attractive. So you've got to balance it. I understand the economy is in a more precarious place today than in the past, which is bearing on the stock price, but it's also creating this opportunity of a really low stock price, but I'm also looking at a great pipeline. So I think it's going to be more than a five-minute discussion this time. It might be a 30-minute discussion, but I don't want to preempt that, let that happen in August, and then we'll announce when the board comes out.
spk08: Yeah, it makes sense. Outside of growth, do you see any other constraints maybe to being active to this extent on the buyback? How do you think about capital levels? No, no.
spk05: There's extra capital, clearly. But if we can deploy it organically and how fast, it's also accreting, right? So it's a sort of dynamic equation you have to solve. You accrete capital, but at the same time, you're growing. Margins are better. What would be the best way to allocate this? In a perfect world, I would love to not do any buyback and just grow. That's the best thing. Can you put towards growth? How much can you safely grow? Is the economy, you know, where is it going? Not the next three months, but in the next six or nine or 12 months, all those discussions will be on the table, you know, and we'll announce when the board decides.
spk08: Yep. Awesome. Thanks for the color and congrats and a good quarter.
spk05: Thank you.
spk02: Thank you. And our next question comes from Steven Scouten of Piper Sandler.
spk01: Your line's open.
spk06: Hey, good morning, everyone. Thanks for taking the question. I guess I would love some color on where you saw new loan yields in the quarter. Obviously, we can see what the average did, and it looks like you had some nice movement higher there. But I'm just wondering what you're seeing relative to what we've seen from rate hikes, and if you feel like you're getting paid – you know, for credit risk today if the spreads are, you know, maintaining where they have been overall, I guess.
spk05: I'll have Leslie just take the details on this, but as a general matter, I will say that spreads are better. Spreads are better in our loan business. Spreads are better in our securities business, you know, our portfolio. Overall, given the fact that the largest participant in the marketplace has announced that they want to be a seller and not a buyer, which is a Fed, you should not be surprised that spreads are better today than they were over the last two years. Some businesses more so than others, but as a general matter, spreads are better.
spk04: Steven, in terms of where new loan yields are coming on, there's obviously a wide range. But on average, new commercial loan yields for the quarter as a whole, a little bit higher at the end of the quarter, obviously, were coming on at about 430. Okay.
spk06: And where did that kind of compare ballpark to what you saw last quarter, maybe if you have a frame of reference there?
spk04: I don't have that number in front of me. It's up considerably. And, you know, it's a little bit of a – it's not a great comparison because we didn't have as much production last quarter or as much growth last quarter, so that was a smaller – smaller set of loans, but it's up considerably, you know, over 100 basis points over what we saw on average last quarter. But I think the more important comparison is that it's significantly higher than the previous average yield. You know, it's higher than the back book, and that inflection point has finally turned, and that's good to see.
spk06: Yeah, that's helpful. Okay. And then thinking about deposit costs. I know you guys have talked about wanting to hold the line on non-interest bearing, and that movement has been tremendous over the last couple of years. But I'm just, I'm kind of wondering, you know, what you guys are seeing competitively, especially on money markets. I mean, I think your loan deposit ratio is 84%, still traditionally low, but maybe higher than the industry average. So just kind of wondering how you think those competitive pressures could push on money market deposits in particular.
spk05: Yeah, it's a pretty big range, depending on what business you're talking about, right? So in our branches, we are not seeing as much competition yet. We don't compete fairly online, but we monitor online. We're seeing, obviously, very, very aggressive competition there. And in commercial, it's a big range. Small business and core middle market, it's still very modest level of competition. But in some larger corporate and some bigger depositors, we're seeing that competition emerge very quickly. So if you take our book, we've seen a pretty wide spread of where we've had to move and very aggressively. And on other hands, a large part of the book, we haven't moved at all. So it's a pretty wide spread. We're not competing on the retail side. What we don't have, as you know, we're not focused so much on retail prices. We really haven't changed. At some point, I think we'll have to move that there as well. Otherwise, we'll just try the way what business we have. But we've not had to do that. So there isn't a single answer. It's anywhere from 10 basis points all the way to Fed funds effective. It's a pretty wide swath of where different segments are and different types of customers are and what they're demanding and getting in the marketplace.
spk04: I would also say, even Raj and I were talking about this just before the call, looking forward, our willingness to raise deposit rates will be dependent to some extent on spreads that we're seeing on the asset side of the balance sheet. If we are seeing really healthy, wide spreads on new business on the asset side of the balance sheet, that gives us the flexibility to be able to pay a little bit more for funding than if we don't see that. So that's also going to enter into the future equation in terms of what happens with the cost of funding is what kind of spreads we're seeing on the left side of the balance sheet.
spk06: Yeah, yeah, that makes sense. And I think, you know, last quarter, if I'm looking at this right, it was maybe plus 2.6% on the asset sensitivity and an up 100 basis point scenario. But I know you said you're a little bit ahead of your deposit beta projections. So any material change there? Is that still kind of the ballpark range?
spk04: I mean, I think you'll see a little bit more probably asset sensitivity when we release those numbers this quarter, but still philosophically, you know, we managed to a relatively neutral level. And I think all of the volatility that we have seen over the past couple of years and some of the predictions about volatility to come, in terms of rates has only reinforced my belief that our board's mandate to continue to manage to a relatively neutral position is wise, and so you probably won't see us all of a sudden make a big bet on rates. We never have, and I don't think you will. To Raj's point, our deposit betas are lower than what we have been modeling, and that is still true. It's difficult to predict how much they're going to pay in the future.
spk06: Yep. Yep. And then maybe just last question for me. I think you guys noted some of that stock expense. It was maybe somewhat temporary help. And then I know Tom noted some new hires and so forth. Can you Can you maybe remind us what that overall expense guidance was and what a good starting point for third quarter might be?
spk04: Yeah, we had guided to a mid-to-high single-digit increase for the full year over the full year last year after adjusting for some really weird one-time things in last year's fourth quarter, and we still think that's good guidance.
spk06: Got it. Okay. And so probably just a couple of million quarter-over-quarter, that was that temporary effect, nothing over the material? No.
spk04: Yeah, I would say that's probably in the right ballpark.
spk06: Okay, great.
spk02: Thank you guys for the call. I appreciate it. I would now like to turn the call to Ms. Sissing for closing remarks.
spk05: We must be competing with other earnings.
spk04: There's about 20 people coming out this morning.
spk05: Yeah, that's a long list. Okay, that's fine. I'll take that as good news. Now, thank you very much, everyone, for joining us. Like I said, you know, we're happy about the and look forward to optimistically. Thank you for your time. We'll talk to you in the photo thereafter.
spk01: This concludes today's conference call. Thank you for participating. You may now disconnect.
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