FNB Corp (FNB) 2022 Q1 法說會逐字稿

Hello, and welcome to the F.N.B Corporation First Quarter 2022 Earnings Call.

(Operator Instructions)

Please note today's event is being recorded. I now would like to turn the conference over to Lisa Constantine, Investor Relations. Ms. Constantine, please go ahead.

Thank you. Good morning, and welcome to our earnings call. This conference call of F.N.B Corporation and the reports that filed with the Securities and Exchange Commission often contain forward-looking statements and non-GAAP financial measures. Non-GAAP financial measures should be viewed in addition to and not as an alternative for, our reported results prepared in accordance with GAAP.

Reconciliations of GAAP to non-GAAP operating measures to the most directly comparable GAAP financial measures are included in our presentation materials and in our earnings release. Please refer to these non-GAAP and forward-looking statement disclosures contained in our related materials, reports and registration statements filed with the Securities and Exchange Commission and available on our corporate website.

A replay of this call will be available until Tuesday, April 26, and the webcast link will be posted to the About Us Investor Relations section of our corporate website. I will now turn the call over to Vince Delie, Chairman, President and CEO.

Thank you, and welcome to our first quarter earnings call. Joining me today are Vince Calabrese, our Chief Financial Officer; and Gary Guerrieri, our Chief Credit Officer. FNB began 2022 with solid fundamental performance and the full integration of the Howard Bank acquisition. We are pleased that the deal metrics associated with Howard came in at or better than planned with a positive impact to our capital ratios. Howard added $1.8 billion of loans to the balance sheet, bringing our total assets to $42 billion.

In fact, on a combined basis, FNB had strong loan pipeline growth in the Mid-Atlantic region, up 13% year-over-year and 61% linked quarter. Our expectation is that the Mid-Atlantic region will continue to grow with the exceptional employees and new clients who joined FNB.

Additionally, we expect to receive revenue benefit from FNB's more robust product set as we offer these services to the existing customer base already in the market. Earlier this month, FNB's Board of Directors approved a new $150 million share repurchase program providing additional flexibility to effectively manage capital and benefit our shareholders. FNB reported first quarter GAAP earnings per share of $0.15 and $0.26 on an operating basis.

Revenue increased 3.4% linked quarter, led by net interest income increasing 5%. We remain well positioned to grow net interest income, given the strategic steps we undertook to position our balance sheet and benefit from the current interest rate cycle.

These include favorable deposit mix changes and investing in a short-term securities portfolio. We remain well positioned with $16 billion of assets that are tied to short-term rate indices. Loans increased $2 billion or 8.2% when excluding PPP. While Howard contributed to the growth, commercial loan production was more than $1 billion, up 30% year-over-year.

As we look ahead, pipelines have rebuilt from our strong growth in the fourth quarter and are up 23% quarter-over-quarter. This gives us additional confidence in our mid- to high single-digit organic loan growth guidance for the full year. Our fee income businesses contributed another solid quarter at $78 million essentially flat to the last quarter.

Wealth Management continued to produce record results with revenues increasing $1.1 million linked quarter or nearly 30% annualized, driven primarily by record organic sales activity. Mortgage Banking income increased $700,000 linked quarter to $7 million amid significant interest rate volatility. While rising mortgage rates are expected to reduce refinance activity, we are confident our diversified geographic footprint and consistent commitment to the home purchase and new construction market will help us outperform the industry.

In fact, nearly 80% of our originations this quarter were for purchase money mortgages. FNB's investment in technology has also enabled us to efficiently bring in more mortgage clients with 66% of our mortgage application submitted through our online e-Store. As we continue to grow our balance sheet we remain vigilant in examining the current macroeconomic environment of high inflation, supply chain disruption and geopolitical unrest.

We have proactively assessed the risk and activated plans given the current environment. Our credit team is continually monitoring the industries that are potentially affected by the rising interest rates, higher food, oil and gas and commodity prices and supply chain disruption. We will continue to assess the environmental risk and adjust our strategy appropriately to ensure consistent performance while addressing the needs of our key stakeholders.

I will now turn the call over to Gary to discuss overall credit performance and the steps his team has taken to position our portfolio.

Thank you, Vince, and good morning, everyone. Our first quarter results remained strong, and we are very pleased with the continued favorable positioning of our credit portfolio as evidenced by our key asset quality metrics. The quarter also marked the successful completion of the Howard Bank acquisition, which I am pleased to report, came over slightly better than expected and did not have a material impact to the overall credit portfolio.

I will provide some additional color on the transaction, including the day 1 and day 2 impact to the reserve levels, which I will touch on later in my prepared remarks. Let's first review our GAAP asset quality results for the quarter. As I have mentioned previously, we entered 2022 with our credit portfolio in a position of strength. And with the newly acquired Howard loan book now reflected in our total consolidated results, we saw only slight increases in our delinquency and NPL levels as compared to our very low year-end results.

The level of delinquency ended March at a very solid 66 basis points, reflecting an increase of 5 bps, driven entirely by Howard and exclusive of that acquired book of loans, delinquency would have decreased slightly compared to the prior quarter. NPLs and OREO also reflected a small increase on a linked quarter basis against very low year-end results, with the GAAP level up 2 basis points to end March at 40 bps, which was again due to the absorption of Howard's portfolio.

Net charge-offs for the quarter were very low at $1.9 million or 3 basis points annualized as we continue to track at historically low levels over the past several quarters. We recognized provision expense of $18 million for the quarter, including the $19.1 million initial provision for non-PCD loans associated with the Howard acquisition.

With the additional day 1 PCD gross-up of $10 million, our ending reserve position stands at $371 million or 1.38% of loans at quarter end. Acquired PCD loans were relatively low and represented just over 10% of the Howard loan book. Absent the Howard transaction and the associated provision and gross up activity our reserve level would have been down slightly compared to December, which is consistent with the favorable credit quality trends we've seen.

Our NPL coverage position remains strong at 365%. Regarding Howard's loan portfolio, we are very pleased with the successful conversion of the book and the ongoing tracking and monitoring our teams continue to perform to help us better manage risk during this transition phase. Howard's credit book performed slightly better than we were expecting, leading up to the conversion with our loan risk profile and credit concentrations all remaining satisfactory.

We look forward to the additional lending opportunities and access to the expanded customer base within our Mid-Atlantic footprint, which helps support our overall loan growth objectives and provides us with deeper opportunities for our other fee-based services.

I would like to congratulate the team for their tireless efforts to close the transaction and expand our position in this highly desirable market. I would now like to briefly touch on recent global and macroeconomic activity that we have been monitoring, including the potential effect on our borrowers and the markets in which we operate.

With the ongoing challenges of widespread inflation, elevated input costs, supply chain disruptions, labor shortages and geopolitical influences, we are focused on these factors in our underwriting and in our credit discussions to address and mitigate these risks upfront. While we have not seen any material impact to our credit portfolio at this time, we remain vigilant and have tailored our credit decisioning approach to address the impact that these various factors could have on a borrower's EBITDA and margin levels, including the effects of fluctuating operational and supply costs as well as potential interest rate sensitivities that may lead to increased borrowing costs.

That said, we have been very proactive in utilizing interest rate instruments to provide borrowers the option to fix their borrowing costs and reduce their sensitivity to the rising rate environment. In closing, we remain very pleased with the position of our portfolio and the successful acquisition of Howard Bank and we remain focused on the year ahead to manage our growing credit book through a potentially softer economic environment. Maintaining our strong credit culture stands front and center, and we are well prepared and remain proactive in our approach to quickly identify and better manage emerging risks in our loan portfolio.

Our disciplined credit framework is built on a foundation of consistent underwriting, attentive risk management and selectivity of high-quality lending opportunities all of which has served us well and positions us for the year ahead.

I will now turn the call over to Vince Calabrese, our Chief Financial Officer, for his remarks.

Thanks, Gary. As Vince mentioned, we are very excited about the Howard acquisition and the potential this deal offers to continue growing our fee-based revenues. As of the merger closing date, loans and deposits were both $1.8 billion, with 43% of deposits in noninterest-bearing accounts. In terms of significant items, the first quarter had $28.6 million in merger-related expenses, $19.1 million of initial provision for non-PCD loans and $4.2 million in branch consolidation costs.

In conjunction with the acquisition, FNB issued a little over 34 million shares of common stock at $12.99 in exchange for 18.9 million shares of Howard common stock. Going forward, Howard will be included in all of our reported numbers, including guidance, as they are now part of FNB. With that, let's turn to Slide 5 to discuss the first quarter financials, starting with the highlights.

First quarter reported EPS totaled $0.15 and $0.26 on an operating basis after adjusting for the Howard-related items and branch consolidation costs previously noted. But excluding PPP and Howard loans as of the acquisition date, which is more reflective of underlying loan growth, period-end total loans increased $259.7 million or 4.3% annualized on a linked-quarter basis, including an increase of $81.7 million in commercial loans and leases and $178 million in consumer loans.

Average loans excluding PPP and Howard increased $440 million or 7.4% annualized. Let's continue with the balance sheet on Slide 7. First quarter average securities reached $7.0 billion, an increase of $469 million from the prior quarter as we increased our investing activity to take advantage of the higher interest rate environment. Securities growth, coupled with the loan growth contributed to a 3.9% increase in total average earning assets.

Average deposits, excluding Howard, totaled $31.7 billion, an increase of 7.8% year-over-year, reflecting continued organic growth in household and account balances, partially offset by a decline in time deposits given customer preferences to move funds into liquid accounts.

Turning to Slide 8. Net interest income totaled $234.1 million an increase of $10.8 million or 4.8% from the prior quarter, primarily due to growth in average earning assets and initial benefits from the higher interest rate environment, partially offset by the $4.2 million decreased contribution from PPP.

Our net interest margin increased 6 basis points to 261, reflecting the early stages of benefiting from upward movement in interest rates. Total impact of PPP purchase accounting accretion and higher cash balances on net interest margin was a reduction of 13 basis points for the quarter, similar to the 14 basis point reduction last quarter.

Now let's look at noninterest income and expense. Noninterest income totaled $78.3 million, essentially flat from the prior quarter. We have previously mentioned the strategy of investing in our diversified fee-based businesses, and this quarter again demonstrates its importance. For example, the insurance commissions and fees increase of $2.3 million linked quarter offset the capital markets decrease of $2.4 million as it reverted from elevated levels in the fourth quarter.

We expect our diversified fee income strategy to be advantageous as we continue along the economic cycle. Reported noninterest expense increased $45.8 million or 25.2% linked quarter. On an operating basis, noninterest expense increased $13.9 million or 7.7% to $194.6 million, excluding merger-related expenses and branch consolidation costs from the current and prior quarters.

On an operating basis, salaries and employee benefits increased $8.1 million or 7.8% linked quarter, primarily related to normal seasonal long-term compensation expense of $6.2 million in the first quarter of 2022 as well as seasonally higher employer paid payroll taxes. Also included in the quarter total is a little over 2 months of salaries and benefits for the Howard employees that joined FNB.

Occupancy and equipment increased $3.1 million or 10.1%, primarily due to higher seasonal utilities costs. Bank shares and franchise taxes increased $2.3 million due to the recognition of state tax credits in the prior quarter. The efficiency ratio equaled 60.7% compared to 58.7%.

Higher efficiency ratio resulted from nearly $20 million of lower PPP and purchase accounting accretion income versus a year ago. Excluding PPP and [PAA], our efficiency ratio would have improved around 220 basis points year-over-year. We expect improvement from this quarter's efficiency ratio moving forward with a positive impact from the expected rate hikes and synergies in revenue and expense associated with Howard. Tangible book value per share decreased linked quarter to $8.09 primarily related to $202 million or $0.57 per share and accumulated other comprehensive loss as of March 31, 2022, reflecting the impact of higher interest rates on the fair value of AFS securities.

This compares to a $62 million or $0.19 negative impact at the end of the prior quarter. Increased unrealized losses in the AFS portfolio due to rising interest rates should come back into capital over time as securities mature or prepay. During the first quarter of 2022, the company repurchased 2.2 million shares of common stock with a weighted average share price of $13.25 for a total of $29.8 million.

To date, FNB repurchased $111 million under the program approved in September 2019. Earlier this month, our Board approved a new $150 million share repurchase program, continuing to provide FNB with a tool to optimize capital management and enhance overall shareholder returns.

Now let's turn to guidance on Page 12. We expect loans to increase in the low double digits to low teens, with underlying organic growth in the mid- to high single digits on a year-over-year spot basis. Total deposits projected to grow high single digits on a year-over-year spot basis. Full year net interest income is expected to be between $1.0 billion and $1.04 billion with the second quarter between $249 million to $253 million. Our base guidance currently assumes 125 basis points of rate increases for the remainder of the year, including a 50 basis point increase in May.

Full year noninterest income is expected to be between $315 million and $330 million, with the second quarter around $80 million. The revised full year guidance is due to slightly lower than expected market-related fee income. There is no change to our full year guidance for noninterest expense with a range of $760 million to $780 million on an operating basis for the full year and $190 million to $195 million for the second quarter. This does not include the onetime expenses associated with the Howard Bank acquisition. Positive credit quality is expected to continue throughout 2022.

The provision guided to $20 million to $40 million. This does not include the initial $19.1 million of provision related to Howard and is dependent on net loan growth experienced throughout the year. Lastly, the effective tax rate should be between 17.5% and 18.5% for the full year, which assumes no changes to corporate income tax rate and is dependent on the level of investment tax credit activity. With that, I will turn the call back to Vince.

Thanks, Vince. We've worked hard to build a strong, differentiated brand including our commercial lending and wholesale banking businesses. Our knowledgeable team and investments in products and technology result in a commercial banking experience that is unique for its high level of convenience and sophistication. Our commercial business ranges from large corporate clients to small business lending, including highly specialized industry verticals, creating an opportunity for FNB to surpass the needs of most clients.

Thus far in 2022, FNB has been named as one of America's best banks and world's best banks by Forbes, received 17 Greenwich Excellence and Best Brand awards and was recognized as a Top Workplace U.S.A. by Energage for a second consecutive year. These awards add to an extensive list of honors FNB has received for its differentiated culture and business model, which focuses on doing what is right for its clients, communities and employees and ultimately benefiting our shareholders.

For example, FNB is increasing our closing cost [assistant] grant to $5,000 in April 2022, advancing our commitment to borrowers in low to moderate income communities. We also enhanced our mortgage product offerings through Fannie Mae and Freddie Mac to provide additional access for homeowners with income at or below the area median income for their market.

Our goal is to ensure all stakeholders benefit from the product and services that we offer. Our first quarter results provide a solid foundation for us to continue building momentum throughout 2022. As always, our performance is a testament to our team, and I thank each employee for their dedication and contributions.

With that, I'll turn the call over to the operator for questions.

At this time, we will begin the question-and-answer session. (Operator Instructions)

And the first question comes from Frank Schiraldi with Piper Sandler.

In terms of, Vince, you mentioned still a lot of confidence in the loan growth expectations for the year. And I think you said that the current pipeline is up 23% linked quarter?

And so I just want to follow up on that. And is that the commercial pipeline? And I wonder if you could talk a little bit more about that pick up? Does it reflect supply chain issues improving? Is it more seasonal? Just wondering if you can frame a little further that significant tick up in the pipeline linked quarter?

Yes, I can address that. I think it's pretty broad-based. If you look at the dispersion of our pipeline, we have a little chart here for our own sake that shows the trending. You can see almost every region in the company has seen growth in their pipeline on a linked quarter basis. If you remember, back in the fourth quarter. We had a pretty strong -- it was a record production quarter for us. So typically, what happens, the bankers are busy closing transaction. The pipeline kind of shrinks a little bit. And then we start to move back into prospecting or accommodating borrowers' requests and the pipeline builds again. I think you're seeing that here. The other factor is the first quarter is seasonally slower. You don't have the financial results from your corporate borrowers to act upon.

Typically, the companies haven't devised their CapEx plans until now. So now is the time when you start to see a pickup in the pipeline. We're very pleased with the growth in the Mid-Atlantic region, Mid-Atlantic is up 13% year-over-year, 61% quarter-over-quarter. So you've got a big boost because of that Howard acquisition, a lot of critical mass and scale, deeper penetration in the market and some great bankers that we picked up who seem to be pretty happy with our system. So we're very excited about the opportunities there. We also feel that, as I mentioned on the call, from a noninterest income perspective, we -- fee-based businesses that we have we have a tremendous opportunity to penetrate that customer base with some sizable fee opportunities in wealth and (inaudible) market.

So I think that should help us in that market. So that's a big driver. Charlotte is up 33% year-over-year, 52% on a linked quarter basis. So there's quite a bit going on in the Southeast. I just spent some time, spent a week in Charleston and Raleigh. And both of those markets are performing very well, spent a lot of time with clients. And I think our brand is being received well in those markets.

We're pretty well established. We have regional headquarters that we've established in Greensboro, in Charlotte and Raleigh and Charleston, South Carolina with highly visible signage and a decent delivery channel. So things are starting to cook there. And we've expanded from a de novo perspective, into Asheville, North Carolina. It's been a couple of years now, so that's starting to pick up for us as well as Greenville, South Carolina.

We were on the outskirts of Greenville, but we have a plan to move into that market more heavily, which provides quite a few commercial opportunities for us, particularly C&I opportunities. And then small business banking for us historically has lagged from a growth perspective because we're consolidating portfolios. Every time we did an acquisition, that stabilized and has actually started to grow nicely for us across the footprint.

So we're seeing a little bit of lift from our small business lending activity. So that kind of gives you the landscape. I think it's more related, Frank, to -- when you look at line utilization rates within the company, Chris, Jan and I were just looking at that data. What you see is a substantial drop off in utilization, so borrowings declined post pandemic, beginning of the pandemic. After the first quarter of the pandemic in 2020 things really fell off from a borrowing perspective for commercial borrowers. So a lot of those businesses went to cash.

They got stimulus or benefited from stimulus and drove down their balances. And then a series of things occurred which were unpredictable, but supply chain disruption, all kinds of things happen. That kind of slowed their ability to grow or expand and I think we're starting to see a pickup. If you dive into that utilization rate, even though we haven't seen much of a global wise in utilization rates across all the portfolios, when you start to drill down into it, we're seeing growth in the middle market now. We're starting to see things pick up.

So that's telling me that we're working through those supply chain issues companies while the war is -- in Ukraine is probably a worry. I think companies are starting to get back to normal and -- from an operating perspective. Anyway, that's -- we're still -- we still are very cautious as I've said in my remarks, we're still watching what's going on from a credit perspective because there are concerns, right? About additional supply chain disruption, the price of oil and gas rising and impacting certain industries. So we keep a close eye on it. But all in, we're seeing -- we haven't seen any significant weakness anywhere in the portfolio. In fact, the credit quality is holding in there.

I hope that answers your question. I tried to be comprehensive as possible.

That was helpful. And I guess just as a follow-up, in terms of -- just given how strong -- just given your confidence on the loan growth picture, is there any room to ramp up the buyback at all? Just wondering if with bank stocks having pulled back a little bit from where you bought back stock in the first quarter. If we should think about that maybe ramping up a bit if we should think about buybacks any differently than we did going into 1Q?

Yes. I think we're -- our guidance on loan growth isn't crazy. I mean, we're mid- to high single-digit growth. So there is some room, right, for us to fund that growth with capital that we generate internally plus buy back shares. And that's why the Board approved the buyback program. We want to have options so that we can continue to drive shareholder value and to support the stock price if we see movement downward. And the company has performed admirably over the last few years. So there's a lot of confidence in the Board in putting forward a buyback program. If you look at the financial performance of the company, it's been very strong through some very difficult and challenging times.

And the actions that Gary and the credit team have taken and our commercial bankers, I mean we've really prepared ourselves well and gotten through in pretty good shape. So that gives them a lot of confidence on the buyback. And if you look at the capital ratios and I can't remember, Chris, were at 10% I think. Anyway, from a regulatory capital perspective, we look good. I think we're in a good place, Frank. There are options for us.

And the next question comes from Michael Young with Truist Securities.

All right. Well, moving on. Our next question will come from Daniel Tamayo with Raymond James.

Maybe first on the mortgage banking outlook. You gave some good color on continuing to expect that to be -- to outperform the industry going forward. But maybe if you could provide a little more detail on how you're thinking about -- how we should be thinking about sizing that revenue stream going forward? Are you still expecting that to increase from here or flat or how from an overall perspective, do you see revenue trending from here?

I'll let Vince answer that question. Vince Calabrese, but before he does, I will tell you that the [front] line has shifted as we've indicated. We are very well positioned across the Southeast and the Mid-Atlantic and some fairly dynamic housing market. So we have an opportunity to benefit from -- more heavily from purchase money mortgage originations. And I think we're -- our current pipeline is sitting at around 90%. So we purchase money. So we did make that shift, which provides some support, which is why I indicated in my prepared comments that we should outperform the industry.

We're not as dependent on refinance activity, and we are spread across a broad geography in some very attractive markets. And about 50% of the franchise sits in very stable, more stable markets which gives us some stability and we're able to maintain a lower growth trajectory. And then half of it sits in more dynamic, higher-growth markets, where we're seeing more housing starts and a lot of activity.

But go ahead, Vince, I don't know if you want to give them a little bit more color on the top line and what are our expectations.

Yes. No, I would say for the quarter, you saw the results thy were up a little bit from kind of the low last quarter. We were thinking it was going to be the low. The purchase versus refi mix, as Vince mentioned, positions us well to focus on purchase there. For the quarter it was 77% and now it's up to -- the refis last I looked was even down to 5% of the total.

So kind of the way our business is built is very well positioned. And the activity on the purchase side has still been very strong. But I guess if you boil it down to the mortgage banking income, right, that's a function of how much you sell and how much you have your portfolio too, depending on the nature of the originations. We've definitely seen some shift to customers wanting to get arms 7/1 or [7, 6] months, it's not 1 anymore in 10 year and 6 months. So we've seen some movement towards that. So that stuff goes in the portfolio. So you have more portfolio, higher net interest income, a little bit less gain on sale on that. I guess if you kind of boil it all down, I would expect mortgage banking to move up from here from the first quarter.

We're entering the seasonal second and third quarters that are kind of high, but kind of around the level to a little bit higher from here would be the best way to characterize it and it's really going to be a function of the mix of those originations. But they're still very healthy. applications are very strong. And like I said, the purchase market continues to be strong. So that helps to support the business activity there.

The other side of it too is there's quite a bit of activity in the consumer lending area relative to mortgage lending. So outside of the mortgage bank itself, we have a surge in pipeline, I don't know (inaudible) ...

We have one of the strongest pipelines we've ever had right now in (inaudible).

Yes. So there's been a significant pickup. There was a lot of pent-up demand. I don't know that there was the capacity to execute a lot of the construction projects. So I think we've seen a surge in demand across our footprint, and it's pretty much every geography.

Absolutely.

We continue to add banks (inaudible) .

So all of that leads to -- the reason I brought that up is because ultimately, that may lead people to take out a consumer loan secured by real estate and then they roll it into a larger or a larger mortgage loan, and it's taken out. Anyway, that's -- there's quite a bit of activity.

So we're feeling pretty good about being positioned where we are with the purchase money opportunities in the growth in certain segments of our business.

All right. That's terrific color. I appreciate all of that. And maybe switching gears here thinking on the -- about net interest income. Obviously, we're in a much different rate outlook environment now than we were last quarter, and you've updated guidance to reflect that. How should we think about -- or how are you thinking about the change in the bank's sensitivity to rates from the hike we just had all the way out to what you're forecasting by the end of the year. Is there any impact -- are you expecting any difference in terms of loan betas like what you're able to reprice on the loan side? And then just remind us if you're still thinking that deposit betas end up around the 40% to 50% range by the end of the year.

Yes. I would say a few things, as far as what's baked into the guidance, you see what we have in there an additional 125 basis points with 50 in May, if we get more than that. Obviously, there's upside to the range there. So -- and I know everybody is modeling it with their interest rate projection. So clearly, there's some upside to the range depending on where we end up. As far as the betas -- I mean the loan betas continue to be pretty strong. As you know from the past, I mean we have close to 50% of total loans that are tied to LIBOR, SOFR, 3 months or less on those 2 measures as well as prime.

So it's $13 billion, 48% of total loans. So that benefits as rates move up. The cash position we have is benefiting while we still have around $3 billion, $3.2 billion, that was earning 15, now it's earning [40], and then we would expect that to move up at the time that the Fed moves. So that would be up another 50 basis points if you get 50.

So that's helping -- while that cash is not yet deployed in loans, you're getting a benefit there, too. And then the investment portfolio, we've been able to take advantage of the higher rates in recent quarter, to put some more money to work there, and you'll see that in the growth of the investment portfolio. So that's kind of supporting the overall margin. And PPP is almost gone. So if you kind of put PPP on the side, our loan yields were actually up 5 basis points kind of the continuing businesses there.

So -- and then on the deposit beta side, there's -- again, none of us really know, level of liquidity in the banking system obviously, still a consideration for all of us. We do think we'll feel more pressure as we continue to move down this path as Fed moves with kind of commercial municipal deposit being earlier in that process. Our current projection for us, based on what we see and what we think would be (inaudible) a quarter of the rate hikes coming through in total cost of deposits. So kind of 25% on a total deposit basis and around 40% for interest-bearing deposits at the end of the year. That's kind of our current projection.

And the next question is Michael Young with Truist.

Can you hear me?

We can now.

Sorry about that, having some technical issues here this morning. I apologize.

It sounded like you were trotting around on a horse the first time. We just had a clicking noise. I don't know but I'm glad to have you on the call.

Maybe it's the ghost of cell phone past, I don't know. My apologies.

It always happens. Go ahead.

At any rate, just maybe, Vince, I wanted to walk through kind of the fee income side. Obviously, kind of a lot of big swings this quarter with kind of the MSR fair value adjustment. You kind of have big moves in insurance to the upside, but capital markets to the downside. It sounds like slight weakening as kind of the outlook, but is that more mortgage driven? Or are you seeing some things in some of the other business lines that you think will be a little weaker as we move throughout the year?

It's a combination of several areas you (inaudible) on. I think the mortgage banking fee income in general, year-over-year, it's going to be challenging to meet last year's fee income, obviously because it was so strong.

But there are -- the way we've tried to build out our fee-based businesses is to ensure that when one is not performing at the highest level, we have enough balance within our offering to kind of make up for it. And the guide that we gave you implies some of that shifting, as you mentioned. So capital markets, we -- from a pure derivative perspective, interest rate hedging.

Obviously, a lot of customers' clients took advantage of the hedging products during a time when rates were extraordinarily low. So that business has come down a little bit. But on the flip side, in capital markets, we launched our debt capital markets platform. So we're seeing good activity there and good prospects there. So we're expecting to have a pretty decent year in that space. We have invested in our international banking platform and added products. We're expecting to see some growth there.

We've had some really solid growth in SBA. We expect that to continue. So our SBA platform that we shrunk and then rebuilt and integrated into our -- integrated more in-depthly into our calling activities across the company versus being a standalone. Business is starting to take off. So those things should counterbalance the (inaudible) mortgage and derivatives business.

That's -- and then wealth, obviously, of course, we rely on that asset values as well, right? I mean if the market remains steady, we should be able to benefit there as well because we're seeing a lot of organic growth. We're very opportunistic in D.C. and Baltimore with the Howard portfolio, the fact that they didn't have a product offering, we're starting to see some good opportunities there.

And in the Carolinas. So Charleston, Asheville, Greenville are all great markets for us from a private banking and wealth perspective, and we're starting to see some activity.

Plus Howard will be additive, just across the base.

Yes. You've added quite a few households, nice little commercial bank that fit in well culturally with us that people there did a nice job and we were able to take costs out but still keep the vast majority of the frontline people. So we've added to our teams and those folks are doing really well.

And they didn't have the same product set that we have today. The opportunity there on the fee side is significant given the quality of the customer base that Howard has really across the board, wealth management, cap markets, insurance, mortgage. So there's opportunities across the different fee-based revenue categories. That will be additive.

So while there are challenges, I can't -- we're not trying to kid you. There's -- it's going to be tougher in mortgage banking this year. It's going to be tougher in capital markets, particularly centered around hedging. But I think the guide that we gave you, we feel confident about because of our ability to drive fee income in those other areas.

Yes. I think that's important, too, right? So the quarter is $78 million. Our guide for the next quarter is around $80 million and then $315 million to $330 million. So obviously, we feel with diversity -- diversification within the fee-based categories that we're comfortable with those guidance ranges that we gave out, so which is higher than first quarter level.

Okay. Great. And just following up on the prior questions. Just as we look at kind of the cash balances, the 10-year rates moved up pretty considerably. Are you guys thinking about kind of laddering some of that out into securities and growing the size of the balance sheet? Are you opting more for kind of remix and just funding loan growth with the cash? So we should expect a little less balance sheet growth but higher margins?

Yes. Given the opportunity with rates, I mean, we definitely put some more money to work during the first quarter, we invested $600 million into the portfolio, which is about $200 million higher than the cash flows. And when you look at that, the average balance was up almost $0.5 billion. So we did take advantage of rates moving. But we still stay within our strategy of duration around kind of 3.5% to 4%, we haven't wanted to go long to date.

And as we sit here right now, for the current quarter, at least, our anticipation will be to kind of reinvest the cash flows that are coming on. And the rates are -- I mean, we were -- in the fourth quarter, we were reinvesting around [134] first quarter it was up to $190 million again, with the 3.5 duration. And I think one of the things that's important for us, too, is with the movement in interest rates, I mean, our securities portfolio is 50-50, AFS versus health and maturity. So -- and it's on the short side.

So I think the AOCI hit that we had was much smaller than others depending on how they structure their portfolio. So that helps us manage as far as that impact to kind of book equity, but it also helps us manage and create opportunities with $1 billion worth of cash flow coming that rates continue to move.

We'll be opportunistic and that makes sense, we will grow the portfolio some. But (inaudible) a good amount here but we'll just monitor very closely and look for those opportunities as we have been doing.

And the next question comes from Jared Shaw with Wells Fargo.

This is Timur Braziler filling in for Jared. My first question, I guess, just following up on the NII guidance and looking at the guide this quarter versus last quarter. Last quarter was fairly similar with expectation for 2 rate hikes, and I think 3% sensitivity, if there was a third rate hike now going to 5 rate hikes with one that already occurred and expectation for 50 basis points in May.

I'm a little surprised that the guidance wasn't higher. Is there anything else that kind of changed in the calculation of that guidance that offsets some of that sensitivity to the incremental rate hikes or maybe the combination with Howard, I guess, if you can frame that, that would be great?

I would say the one place that we are conservative is on the beta is because we really don't know what's going to happen there with Howard coming on board and just kind of looking ahead from here, we'll see what happens. So like I said, a lot of liquidity in the banking system.

So I think banks are going to be methodical about moving rates up as you need to, but there's a lot of cash on the balance sheet. So I mean that's one area where we're probably being a little conservative on the betas, but nobody really knows for certain. Our -- we moved the guide up quite a bit from the guide that was in the first quarter. And given what we have in here, and I know some of the analysts have more rate hikes baked into their forecast.

So as I said earlier, if we get more than 125 basis points from here, which the futures market -- I don't know where it is now Scott. It's higher than that.

So if you get more, there's more upside there too [commercial]. I mean that's -- those are the 2 things I would comment on.

Okay. And then as far as Howard goes, maybe for Gary, just an outlook for purchase accounting dollars starting here in the second quarter?

Yes. And -- go ahead, go ahead, Vince. I'm sorry.

I wasn't sure about the question?

Just the expectation and outlook for accretion, purchase accounting accretion?

Okay. You want to comment?

Go ahead, the net accretable discount overall was only around $10 million once you do the PCD gross up. So we would assume maybe $600,000 or a little more than $0.5 million a quarter going forward subject to prepaid.

That's just for Howard.

For Howard.

Gary, do you have any other color on Howard and for the group?

Yes, Vince, I can update everyone. As I mentioned in the remarks, the portfolio came over better than expected. We were very pleased with the information that we gathered as we got deeper into the transaction around some clients that we had some missing information on upfront, and we were able to get very comfortable with some of those clients and move those ratings upward to past ratings. That helped tremendously from the market perspective as well as how the portfolio performed through the quarter. The portfolio was very nicely underwritten. It was actually the best underwritten portfolio that we've seen, and we expect it to continue to perform very, very nicely as we move forward. As you saw in the metrics, the changes in the metrics were very minimal.

Generally speaking, they're significantly higher than that. And from a rating standpoint, the portfolio rated very nicely, very closely to FNB. So very pleased overall with it.

I'm sorry, just for a second on the accretion. So the total purchase account accretion in the first quarter was about $3 million pre-Howard, right? And that number kind of would be projected to come down as it has kind of on a quarterly basis. And then you add in Howard, which is the kind of $600,000 a quarter that we were talking about. So net-net, we'll be somewhere between $3 million and $3.5 million a quarter over the next few quarters. All-in, Howard plus what we had before.

Got it. Okay. That's helpful. And then just one more follow-up for me. So glad to see that the pipeline is being rebuilt. I'm just wondering, as you look out at the expected loan growth this year, is the composition going to be similar to what we saw kind of in the back end of '21? Or with some of these new digital initiatives, should we expect to see more of the loan production coming on the consumer side versus on the commercial side?

Well, to start the year off, we're seeing pretty strong production coming out of the Consumer Bank in total. And I attribute that to a couple of things. Some of it is just economic, macroeconomic. Some of it is the embedding of the e-Store into our mobile application and our online offering. Basically, what we've done is we've pushed that, we pushed those products essentially, put them in front of the client repeatedly in those digital channels. So they're able to act on it pretty easily or schedule an appointment and go out and see somebody in a branch. For example, it's added to our online user base, and we've increased online users 10% year-over-year.

We have over 900,000 enrolled users now. Mobile banking is up 12%. And the number of mortgage applications that we push through our e-Store is up to 66% of production, which is up from 59%. We've invested pretty heavily in a number of areas, but -- if you look at the total e-Store visits that I mentioned, that's up 56% year-over-year.

So that, for us, is a very reasonable way, right, to advertise our products and services particularly when there's macroeconomic factors at play. People need to borrow money for renovation -- home renovation. So that seems to be working for us. The data analytics tools that we put into place and the leads that we're able to generate, some analysis that we do on pools of data and our data hub. That's helped us immensely.

We can find opportunities within the -- in a systemic way, we can find opportunities within the portfolio and then exploit them by contacting those customers proactively. And if you look at all of those statistics in total, there's quite a bit going on there and it's driving that activity. On the commercial side, I think that we're well positioned. We have very, very good bankers across the footprint, they're high-quality bankers. We don't have a lot of carpet baggers. There's a lot of bankers that have ran corporate banking groups for a long time.

There's a lot of bankers that move around from bank to bank to bank. We don't have a lot of that. We have pretty sound respected bankers in each of the markets. They've not jumped around 50 times. We may have attracted them here for career opportunities. We really rely pretty heavily on their skill set, salesmanship being one of a series of skills that we expect. So I think we're starting to see the benefits of all of this. Anyway, that's...

Production in the first quarter was very strong. origination level was very strong.

Originations were strong.

And the next question comes from Casey Haire with Jefferies.

This is Tyler Marks on for Casey. Following up on Frank's question on share buyback appetite, how much lower are you willing to go below your target CET1 ratio of 10%?

So I would say that's really the target that we're managing to. We're at 10.0% for this quarter. We were 10.0% a year ago and 9.9%, I think in the prior quarter. So that's really the level we're using is kind of our floor to manage to. With the earnings generation capabilities plus the expectation for higher rates, obviously, that generates more earnings, which is (inaudible) our guidance.

So we'll use that as kind of a governor and we'll be dependent on the amount of loan activity. If the loan activity was lower for some reason, we'd be more active here. But if you look at what we did with the first program, we bought back $111 million at a very attractive price, as I mentioned. We were opportunistic when the opportunities were there and the markets were dipping. And we still think our stock is still very attractive to value.

So we will continue to be opportunistic, and we were down to $30 million or so. So we wanted to approve a new level to give us that flexibility to manage capital. But 10% really kind of the governor that we're using. We think that's a good level for us the overall profile of the company. And as we move up above that, we'll opportunistically do share buybacks.

Okay. Understood. And then how are you addressing the secular pressure seen with overdraft fees? And is your fee guide assuming any of this impact within service charges?

I'm sorry, can you repeat the question? I...

How are you addressing the secular pressure seen with overdraft fees? And is your fee guide assuming any of this impact within service charges?

I didn't hear secular pressure. I was wondering what that was. So I know what you're talking about. First of all, we had -- we've rolled out a product that is Bank On certified that we recommend to clients, particularly those that are afraid that they're going to overdraft or have an issue with over drafting and it just simply does not permit it. So the product that we offer, just you can't overdraft the account. If there is an overdraft because of some POS transaction or some posting issue, it's refunded to the customer.

So we have this product that we rolled out. It's a top 4 product for us. It's actually the third most popular checking account product. So it's already had an impact on overdraft fees for us. And we've made a number of changes over the years to our overdraft practices and plan on continuing to make those changes.

And I think we mentioned when we rolled out the guide for the year on fee income, that we were expecting that category to decline throughout the year. So that's another area. Add that to the mortgage and the capital markets area that I said there will be headwind pressure that we have to overcome and make up. That's another category. I don't have an exact number for you. I don't have it at my fingertips, but it's a pretty meaningful decline that we were expecting because of that pressure. And there are additional changes coming to our practices. But it's reflected in the guide that we had given you at the beginning of the year.

Yes, I would just add too that the consumer fees are about $6 million to $7 million a quarter.

That's right.

Put it in perspective.

And the next question comes from Michael Perito with KBW.

Yes. Just one last kind of clarification question for me. Just curious if you guys could comment -- you talked about Howard going well and some of the appetite on the buyback, but maybe putting the whole capital deployment picture together here as we move forward. It seems like the fundamental outlook is fairly bullish for you guys. Margins moving higher, growth pipelines are filled, the expense guide was unchanged. I mean how do you view the new buyback program versus incremental M&A as you guys look out over the next 12 to 18 months, just in terms of the capital deployment priorities as you guys see it, that would be great.

I mean, we spend a lot of time modeling all of these things and evaluating them. And when we look at loan growth relative to buybacks from a return on capital perspective, we look at M&A the same way. So our decisions are based upon what's best for the company and the shareholders moving forward. So we try to balance that out. I think having the ability to buy shares back in the event that loan growth doesn't materialize or M&A opportunities that are accretive and provide us with substantial returns over our cost of capital aren't out there.

We have another tool to essentially return capital to the shareholders. So we look at it as kind of a backstop and then we evaluate the options. So I'm not ruling anything out but nor am I saying that there's something looming, I'm just simply telling you that we're very careful about the deployment of capital. And we look at the effect on tangible book value dilution and the earn back and all of that.

And the primary focus is the loan growth is the primary focus for use of capital.

That's right.

So that's really -- (inaudible) home growth is strong, that's where we'll put our capital. If it's close, like Vince said, then we buy back and become more active on the buyback.

Got it. But I guess just to kind of be clear, I mean, so if your growth guidance is achieved as expected and no additional M&A comes to fruition for this year, you guys would expect given current market conditions that buyback would be utilized to some extent.

Yes.

Yes.

And the next question comes from Russell Gunther with D.A. Davidson.

So just a bigger picture in terms of better understanding your view of the operating environment from a growth perspective. So on the one hand, we've talked about how pipelines are up and giving increased confidence in that mid- to high single digits. And then on the other, the potential for a softer environment, some caution from a credit watch perspective, just things you guys are focused on there. So does the mid-single-digit guide reflect a stable operating environment, growth environment? Or are you dialing in the potential for some softer growth in the back half of the year, recessionary pressures? Just help me frame that would be great.

Yes. I think mid-single digits dials in the current environment, including the factors that we laid out as potential areas of concern. I don't want to alarm everybody. We haven't seen -- as I said, we haven't seen weakness yet. But those are areas that any prudent painter would look at and say, "Hey, we've got a number of things coming at us, we have to be prepared to deal with," right? So that could potentially result in a slowing of the U.S. economy and lower loan demand, and it will hit first in the commercial segment.

There's some talk about consumer spending declining in the latter half of this year. I've read that in a number of economists report. Some economists say, they think consumers are stronger than we expect. We'll see how that plays out. If you look at -- if you look at what's going on right now, and we only know what's happening in our -- at our bank and within our portfolios, right?

The consumer portfolio pipeline is up record level as Gary mentioned. The mortgage business has shifted pretty dramatically to purchase money. The commercial business slowed in the first quarter, we had the war in Ukraine and some supply chain disruption and a very robust pipeline in the fourth quarter that was closed, it closed out, was converted to production. We've got some seasonal slowness. So the expectation -- our expectation, which is built into our guide is that the beginning of the year would be slower, things would start to accelerate just like they did last year.

We were in the same spot last year, a little better growth in the first quarter than last year. And the consumer bank didn't have anywhere near the production and pipelines that we have this quarter -- so I hope that sums it up for you. I'm cautious about our growth prospects as we move throughout the year.

Obviously, with Gary and he's a very skilled professional, his team, Tom Fisher, the people we have here. We're watching very carefully what's happening and we're going to continue to monitor it because we don't want to balloon into a recession, right? So that's why we're giving you the guidance we're giving you. But it's all baked in. We've thought a lot about it. I spent a lot of time modeling it. It's built from the ground up portfolio by portfolio, and that's how we've derived it.

Yes. I appreciate it, Vince. It's exactly the type of color I was hoping to better understand. So I appreciate the...

I can understand it's confusing, right, because on one hand, we're saying, hey, we're going to achieve mid- to high single-digit loan growth. And on the other hand, we're saying we're a little concerned about certain things that are going on in the economic environment that could potentially impact that growth in the latter half of the year.

So I think we're -- I think given the geographic diversification, the quality of the credit portfolio, the skill of the bankers, we can achieve our guide.

And the next question comes from Brody Preston with Stephens Inc.

I just wanted to circle back -- thanks for all the color on the securities book earlier. I just want to ask, just clarify, was it $134 million per quarter in cash flows that you said are that you're reinvesting, Vince? And then could you give us an indication as to -- as to what the new yields look like that are coming on the book versus what's rolling off there in that repricing cadence?

Sure. The 12-month cash flow that we estimate is $1 billion and that's rolling off of the yield of [174]. If you look at where we're putting money to work so far this quarter, we've invested $150 million so far in April, it yields closer to 3%.

New purchases are still within that kind of 3.5% to 4% duration, a little bit on the higher end of that, but still within that kind of type thing. So that's kind of the moving parts there Brody. Hope that answers your...

Got it. That's helpful. And I just wanted to ask on the timing of the hikes that you all are modeling. I know you have the 50 in May. But beyond that, where is the additional 75 coming in from a timing perspective?

Yes. It's pretty much one per meeting, Brody, after that.

Got it. I did have one follow-up on the capital markets business. Could you remind me -- I know you have a lot that kind of goes into it, but could you remind me what the big drivers are from a revenue perspective within capital markets?

Absolutely. We have syndication. We do both large CRE and C&I syndication. We have a big derivatives practice that I mentioned, which focuses principally on interest rate derivatives, but there's the ability to do commodity-based derivatives within that space as well. Then we have international banking, which we throw into the capital markets arena because we're offering hedging products in the international space and spot transactions.

Then we have our, I call it, the debt capital markets platform where we participate in bond economics for public bond offerings. That business was started last year. And I think that pretty much covers it. Those are the principal areas that drive the bulk of the revenue in capital markets. And the syndications business is lumpy, right, because you get big syndications. If you underwrite a deal, you're getting paid, won't have a [late] in the best efforts arrangement. And then the debt capital markets area is lumpy, too, because if you're participating in a larger deal. And we may be getting syndications fee income because we're participating in the distribution, and we're getting now bond economics, right, because the company has issued public debt, so we're included in syndicate.

Anyway, that's -- those are the businesses that we have.

Got it. And I just have 2 last ones here. The first one is on expenses. Could you kind of maybe give us a sense for what would cause you all to be either at the low end or the high end of the expense guidance just in terms of -- are there any individual items that come to mind that would cause it to be one way or the other?

No, I would say, as you know, we manage expenses very tightly within the company, and we've had that discipline for many, many years. Within our guidance for 2022, as we mentioned in January, was a $10 million cost savings target. We have the cost savings from Howard still to be realized given the timing in the quarter. Some of that's been realized on track for what we initially said early on.

One of the drivers is always commissions tied to production. So that can swing depending on the business activity in the different businesses. So that is a swing item. It could move from quarter-to-quarter. So kind of can move you be within that range. But we'll continue to manage expenses tightly as we always have. And I think the range for the full year is a pretty tight range. So those are really the key drivers for us. And we've talked in the past about RPA continuing to go after ways to automate our processes and make them -- that's just a continuous every day, and there's more opportunity. To the extent some of that stuff can get done quicker, there's opportunity there, too. But again, it's a pretty tight range, I think, for the guidance.

Got it. And then my last question would be, Vince, I just want to follow up. I appreciate the color on the deposit betas that you all are modeling. I think it was 40% interest-bearing was what you mentioned. And that's pretty in line with last cycle. And so I guess I wanted to -- for what you did on the interest-bearing deposit beta side last cycle. And so I guess I wanted to get your thoughts on what's driving the beta to be close to last cycle? I think a lot of folks initially just given industry-wide improvements in terms of liquidity, lower loan-to-deposit ratios, lots of cash, higher securities balances are thinking that maybe betas could lag last cycle at least on a percentage basis, but you're assuming indicates that you expect them to be in line. So could you give us any color on why you expect that?

Yes. I would say what we had said last time was we'd probably be around 50% would be kind of maybe the historical, right? And things are quite a bit different as far as liquidity in the system.

So we're kind of inside that to begin with as far as at the 40%. And then as I mentioned earlier, again, we're being conservative on the betas. We're going to manage them to optimize the earnings for the company overall and not be more aggressive than we need to be. So as I said earlier, I think there's some conservatism baked into that. But even at the 40%, we're kind of inside of -- I think last quarter, we said 50% -- so we're at 40%. And I think the pace of the change is the rapid nature of them, the large amount, 50 basis point moves is just something we have to manage closely and the customers get more alert as things are going through.

So it's just -- for all of us to mention, but I would just say the 40% is inside the 50%, I guess, bottom line, and then there's conservatism within the betas.

And the next question comes from Brian Martin with Janney Montgomery.

Just a couple of follow-ups here. Just the yield on new loans, Vince, commercial loans, can you just talk about where those are at -- where those are coming on today?

The new loans in total, I would say, came on at [309] during the quarter. that was [2.91] last quarter. So clearly kind of a nice move up. The overall spot portfolio rate ex PPP, that's down like $180 million, increased 10 basis points to 322, so that's kind of the all-in figures there.

Got you. Okay. That's helpful. And then just a couple of other housekeeping things. The line of credit line utilization it didn't sound like that moved up a lot last this quarter. Is that fair? Or is it pretty similar to what it was last quarter, but the expectation is it's going to move higher? Is that kind of what I'm hearing?

Well, So I think with the debt capital markets platform, we did some larger transactions that were unfunded. So that kind of -- we got fee income. So we would expect those to fund off at some point. right? So we brought over larger commitments with lower borrowings on them. That's part of it. The other part is, as I've said, I think when you drill down into the various segments, we saw certain areas starting to grow, expand, small business, middle market banking on the C&I side, saw expansion. And then we brought on some large construction deals and those large corporate transactions, which kind of kept us still or moved it back slightly. Actually, it's kind of flat, but [playing] down -- if you took those out of the equation, we saw an expansion in utilization. So I don't have the exact numbers for you, but that's what we were seeing.

I would add, overall -- if you look year-over-year it did move up about 3 points from the first quarter last year to first quarter of this year. And then it's pretty stable to where it was at the end of the year, kind of in that mid-30s.

I would expect it to continue to move up over time. It was running in the 42% to 44% range historically. And we expect it to get back there at some point.

Yes. Okay. And then just last couple, just on the power expense savings, just kind of is second quarter kind of largely a clean quarter given the back office consolidation this quarter, I guess? Or just kind of how should we think about that clean expense quarter?

Yes. So like we said in the announcement, we expect cost saves to be greater than 50%. And we're well on track on getting to 85% phase in that we talked about during 2022. I mean Howard really didn't add that many expenses in the quarter. I mean we're talking less than mid-single digit million type number. So I think we've got a pretty good handle on the expense saves and where (inaudible) for the rest of the year.

Yes. Brian, I would think it would take some more like the third quarter until you kind of get clean (inaudible) second quarter.

We're running some dual branches right now as we're doing some renovations. As that finishes up during the summer, you'll see kind of the last of the tail come out.

Okay. That's helpful. And then just -- on the -- just given the cautiousness about some of the items you mentioned, just kind of the reserve coverage with some of the noise this quarter with Howard, I mean where do you see the -- given your outlook on credit quality seems pretty robust here that with some caution. Just kind of where that reserve level, the reserve coverage may trend to over the next couple of quarters?

Gary, why don't you?

Yes. In terms of the reserve, I mean, we've been very cautious all through the pandemic and didn't have any large releases as you're aware. With the headwinds that we see out there with inflation, supply chain, transportation costs, higher interest rates, those things, as we've talked, we're cautious about them. And they do have the ability to impact borrowers that are on the lower end of the liquidity range or higher end of the leverage range. We were flat in the quarter at 1.38, even including bringing Howard on.

We're comfortable with that level right now, and we'll continue to watch it all play out as we move forward despite only 3 basis points of charge-offs. The other thing that's going to play a role there is loan growth. We've talked about that a good bit today. And that has its impact. So I would tell you that we're looking at right now the guide being 20 to 40. Could it surely come in on the low end of that guide based on the strength of the book right now? Surely, it can. But I would expect, with all the headwinds, we'll be cautious around those items as we move forward.

Got you. And then just last one, Vince Calabrese. I guess just last quarter, you talked about the liquidity levels kind of maybe cutting that in half by year-end. I think there's still a similar level on liquidity right now. I guess, is that still your expectation or just kind of how you're thinking about things?

Yes, it's hard to say. I mean the deposits keep growing. PPP is going to feed another $180 million of forgiveness, and that goes into the coffer too. So I would think that's probably too low at this point, and we'll see how the year plays out, Brian. But I feel we've already started moving down, and we've been saying that for, I don't know, 6 quarters now. So those deposits are -- they keep us growing. So I would think we'd start to slowly bring that number down, but the pace of it is just hard to say with certainty.

And next question is a follow-up with Brody Preston with Stephens Inc.

Sorry to hop back in like this. Just one quick question. Could you remind me how much you have left in PPP fees going forward? I know the portfolio is smaller. I just want to make sure I'm understanding what you have left?

About $3.5 million.

That does conclude the question-and-answer session. I would like to turn the floor to Vince Delie for any closing comments.

Well, first of all, thank you for all the thoughtful questions, quite a few questions. I thought they were great. Glad we were able to answer. If we weren't able to get to you or get to your question, please call. We posted a pretty extended [deck] to walk you through it. But thank you. We appreciate your support and look forward to -- we have a lot of work to do. It was a good solid quarter but we still have a lot in front of us, and we plan on executing. So I want to thank the employees for a great start and we'll keep working on your behalf. So thank you very much for joining me on the call and all of us. Take care.

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.