FIRST BANK (Hamilton) (FRBA) 2022 Q1 法說會逐字稿

Good day, everyone, and welcome to First Bank's First Quarter 2022 Earnings Call. (Operator Instructions) At this time, I would like to turn the call over to Patrick Ryan, President and CEO. So Patrick, please go ahead.

Thank you. I'd like to welcome everyone today to First Bank's First Quarter 2022 Earnings Call. I'm joined by Andrew Hibshman, our Chief Financial Officer; and Peter Cahill, our Chief Lending Officer. Before we begin, however, Andrew will read the safe harbor statement.

The following discussion may contain forward-looking statements concerning the financial condition, results of operations and business of First Bank. We caution that such statements are subject to a number of uncertainties, and actual results could differ materially, and therefore, you should not place undue reliance on any forward-looking statements we make.

We may not update any forward-looking statements we make today for future events or developments. Information about risks and uncertainties are described under Item 1A Risk Factors in our annual report on Form 10-K for the year ended December 31, 2021, filed with the FDIC.

Pat, back to you.

Thanks, Andrew. I'd just like to take a couple of minutes to hit on some of the highlights from the quarter and then turn it back to Andrew and Peter for a little more detail.

Overall, I'd say Q1 was a very strong start to the year. We enjoyed very good core loan and deposit growth. We saw a continued decline in our cost of deposits. The asset quality trends look good. Our loan yields are moving higher, while our deposit costs remain low. Our core return on assets, excluding PPP, continues to move higher.

We are seeing employee turnover creating some challenges, but I wanted to point out that I'm really quite pleased with the high quality of new people we've been able to bring in. And I think the strength of our team is as good or better than it's ever been. And specifically in our Pennsylvania region, that team is fully staffed and off to a great start, and we're looking for continued growth and strength in that area.

Again to hit on a couple of the key financial ratios, we had strong ROA of 1.31% in the quarter. Our return on tangible common equity was over 13%. We had an efficiency ratio below 50% for the fifth straight quarter. Our pre-provision net revenue return on assets was over 1.8% once again for the last 5 quarters.

Our net interest margin was over 3.5% again for the last 5 quarters. And we realized tangible book value per share growth during a period where many banks actually saw their tangible book value per share decline. On the lending side, we had $65 million in net loan growth, excluding PPP, which is just over 12% annualized.

The weighted average yield on our first quarter production was 3.97%, which was up from 3.54% in the fourth quarter of '21. And as I mentioned, asset quality is holding up quite well given the environment. Slow quarter for SBA gain on loan sale income. However, we did have good activity towards the end of last year and in the first quarter, which should lead to some SBA loan sale fee income over the next couple of quarters.

And our pipeline for SBA deals remains very active with 15 deals currently in process. We continue to be very busy across all of our markets and all of our lending specialties. On the deposit side, we had $65 million in overall deposit growth and half of that increase came from noninterest-bearing account categories.

We continue to drive our cost of deposits lower, achieving a 19 basis point cost of deposits in Q1, which was down slightly from 21 basis point cost of deposits in the fourth quarter. And we have continued success in our commercial deposit and cash management areas. Commercial deposits are now up to 46% of total bank deposits and the cash management pipeline continues to be strong and active.

In summary, it was a really great start to 2022. We feel like we're hitting on all cylinders and lending. Growth is strong. The pipeline is robust. Yields are rising, and regions and teams are busy and asset quality looks good.

The positive results are also strong with good noninterest-bearing growth, continued success in cash management and an ability to continue to keep funding costs low. The core business is growing nicely. We're actively exploring additional mix lending opportunities and deposit opportunities that will allow us to continue to grow in the commercial loan and deposit area.

So at this time, I'd like to turn it over to Andrew to dive into a little more detail on our financial.

Thanks, Pat. For the 3 months ended March 31, 2022, we earned $8.2 million in net income or $0.41 per diluted share, which translates to a 1.31% return on average assets. Factors contributing to another strong income quarter included an improving net interest margin and effective management of noninterest expenses.

Net income increased from the linked fourth quarter but declined slightly compared to Q1 2021. And that decline from Q1 '21 was primarily due to higher loan loss provision expenses, lower PPP fee income and lower noninterest income.

After a strong loan growth quarter in Q4 2021, we are very pleased with our net loan growth in Q1 2022. Excluding PPP loan forgiveness, loans were up $65.3 million in Q1 2022 compared to an increase in non-PPP loans of approximately $134.4 million in Q4 2021. During Q1 2022, $25.5 million in PPP loans were forgiven, which leaves approximately $25.5 million in PPP loans outstanding at March 31, 2022.

During Q1 2022, we earned $860,000 in PPP fees compared to $1.1 million in the fourth quarter of 2021 and $1.6 million in the first quarter of 2021. As of March 31, 2022, we had $829,000 in deferred PPP loan fees remaining. Total deposits were up $63.3 million during the first quarter, while we continue to reduce our reliance on higher cost time deposits.

Noninterest-bearing demand deposits as a percentage of total deposits increased to 27.4% at March 31, 2022, compared to 26.4% at the end of 2021, while time deposits dropped to 15.1% of total deposits at March 31, 2022, compared to 18.5% at December 31, 2021.

In addition to shifting our deposit mix, we have been able to lower the cost of our interest-bearing deposits, which both have contributed to the lower cost of deposits that Pat mentioned. Our total cost of deposits was reduced another 2 basis points in Q1 2022.

Our tax equivalent net interest margin increased to 3.57% for the quarter ended Q1 2022 compared to 3.52% in the previous quarter. Excluding PPP fee income, our margin would have been approximately 3.43% in the first quarter of 2022 compared to 3.34% in the fourth quarter of 2021.

Our margin continues to benefit from the lower cost of deposits and minimizing the decline in the average yield on interest-earning assets. We are also well positioned for a rising rate environment and anticipate that excluding the impact of PPP fees, we should be able to maintain a relatively stable margin with potential opportunities to improve the margin through rising asset yields as our March 31, 2022, GAAP position is slightly asset sensitive.

Based on strong deposit growth and PPP forgiveness, during the first quarter of 2022, our liquidity levels increased slightly during the quarter. However, we have not increased our on-balance sheet liquidity to the level of many of our peers because of our strong organic loan growth.

This strong organic loan growth has also kept our investment portfolio relatively small when compared to peers, and we have not taken any significant credit or interest rate risk positions. The size and fairly short duration of our investment portfolio has limited our unrealized losses somewhat, but these losses have reduced our stated equity capital in the first quarter of 2022.

We also had limited buyback activity in the first quarter of 2022. We only repurchased 200 shares during the quarter. This also limited our capital declines. However, we have seen a pickup in buyback activity in April as our share price has dipped below our established buyback price at certain points in April.

In spite of the decline in capital due to the unrealized losses in our AFS portfolio, as Pat mentioned, we were able to increase our tangible book share, tangible book value per share by $0.12 during the current quarter. Based on another quarter of modest charge-offs and continued strong asset quality profile, we reduced our allowance for loan losses as a percentage of loans slightly to 1.13%.

This is excluding the impact of PPP loans, which was down from 1.15% at the end of 2021. Nonperforming loans were down slightly in the current quarter and COVID-related deferrals are now negligible. In the first quarter of 2022, total noninterest income decreased to $1.3 million from $2.2 million for the fourth quarter of 2021. The decrease from the fourth quarter of 2021 was due to declines in gains on recovery acquired loans, declines in gains on sale of loans and lower loan swap fees. Gains on recovery of acquired loans in Q4 of 2021 were elevated due to a large recovery on one commercial loan during the quarter.

SBA loan sale income, which is our primary source of loan sale gains, was down due to less SBA loan activity during the quarter. As Pat mentioned, we still have an active SBA loan pipeline and expect this activity to increase. While noninterest income levels may continue to fluctuate, the underlying strength of our noninterest income generation capabilities has improved from prior years.

Annualized first quarter 2022 noninterest expenses were 1.79% of average assets compared to a peer average of 2.07%. In total, noninterest expenses were $11.1 million in the first quarter of 2022, down $703,000 compared to Q4 2021. The decrease was primarily due to higher incentive comp and merger-related expenses in the fourth quarter of 2021.

We are continuing to be laser-focused on expense control, but we anticipate our quarterly expenses will be slightly higher than we had anticipated during our last conference call, and will increase slightly from Q1 2022 levels and year-end salary adjustments were made in March 2022 and inflationary pressure is affecting certain other expense items.

With a strong commercial loan pipeline, our improving deposit mix and anticipated pickup in noninterest income from the current quarter and effective management of noninterest expense, we are well positioned to continue our strong and improving core profitability trends during the remainder of 2022.

At this time, I'll turn it over to Peter Cahill, our Chief Lending Officer, for his remarks. Peter?

Thanks, Andrew. The earnings release outlines well the overall results in the lending area, and Pat and Andrew highlighted what we accomplished. My comments mainly will be focused on non-PPP-related results.

All in all, after a strong finish to the year in the fourth quarter of 2021 and December in particular, I'm pleased to report a very solid quarter for the following 3 months ending 3/31/22. The first quarter results were a big turnaround from the first quarter of 2021.

In 2021, loans actually declined in the quarter. Despite funding new loans of $68 million in Q1 2021, we had loan prepayments of $103 million. For comparison, this quarter, we funded $126 million of new loans, 85% more than the same period last year.

And importantly, paid off loans declined from the $103 million level I just mentioned for 2021 to $53 million this past quarter. The reasons behind the payoffs this past quarter were that 45% of total paid off loans were refinanced out of First Bank and 43% paid off loans occurred when the underlying asset was sold.

The loans refinanced number is a little higher than normal, and that's -- as more than half of the total comes from one large construction loan that stabilized and refinanced as planned out of the bank with an insurance company. Additionally, regarding the line of credit utilization, the utilization rate was down slightly from 45% at the end of the fourth quarter to 42% this quarter.

Net-net for all the activity in Q1, our organic loan growth of $64 million in change put us just about $14 million ahead of plan and in good shape to meet our 10% organic loan growth goal for the year. At this point, I'll talk a little bit about our loan pipeline, which remains strong.

We continue to source good business in our market and the pipeline continues to be well diversified. We haven't had any real pressure to extend terms or otherwise structure loans in a way that we haven't been doing.

We're looking at the same business under the same basic terms. Our pipeline numbers are based upon probable funding, which means we project first year usage and then apply a multiple against that for a probability factor based upon where in the approval process the loan request is.

For example, a loan that's already approved waiting to close and still in the pipeline, will have a higher probability of closing than with one that just went into underwriting. Looking back a couple of quarters, our pipeline at the end of the third quarter of 2021 stood at $265 million which was a record level for us at that time. Then after a very strong fourth quarter in terms of loan closings, which obviously removes loans from the pipeline, we still finished the year with a pipeline of $262 million.

Now a quarter later, after a good first quarter, our pipeline stood at $283 million at 3/31/22. A review of the pipeline leads one to a discussion of projected loan fundings. Each month, we look at 60 days and project funding of new loans and payoffs or prepayments for Andrew's team in finance. To get on the list of projected funding, a loan has to be approved and moving towards closing.

As you might expect from the healthy pipeline, the beginning of the second quarter looks solid and I'm expecting that we'll continue to be ahead of plan for the first half of 2022. Despite the economic uncertainty these days, I think our loan growth prospects are in line with the rest of the industry, which expects positive loan growth in the near term.

I'll also attribute our growth to the hard-working teams of RMs and their managers that we've developed. Last year, we had some relationship management turnover. We were able to bring in some solid bankers and they've helped a lot. We also added a team of relationship managers in the Montgomery County sector of our Pennsylvania region in the latter part of 2021, and they are beginning to show a lot of progress.

We plan on continued growth, and we're always on the lookout for people that can help us do that. I should point out that regarding the pipeline, our SBA team has built a good pipeline for 2022 and we really haven't seen the benefits of it yet.

Pat referenced this in his comments, Andrew touched upon loan sale income being down in Q1. We only sold 1 loan during this period, but the good news is that the number of loans the SBA has in process is growing. This includes 5 loans that have closed but not been fully advanced, which is what you need to do in order to sell the guaranteed portion.

So we have another 5 loans that have been approved and they're in documentation and will be closed soon. And then as Pat referenced, a decent pipeline of deals in process behind them. This should all help with income generation in the coming quarters. Another thing worth mentioning is interest rates.

We, like most banks are trying to react to the impact of rising rates. Those customers seeking longer-term fixed rate loans are being offered interest rate swaps. Otherwise, for longer-term loans, we are committing to spreads over a base rate and fixing interest rates on loans 2 to 3 days prior to closing, not 2 to 3 months prior to closing.

Looking back over the past few quarters, one can see an increase in our weighted average interest rate on new loans. Pat referenced the first quarter. Drilling down a little further, our weighted average rate on new loans in March, for example, was around 4.17%.

Lastly, regarding asset quality. There's not much to say beyond Andrew's comments, what's in the earnings release. Things from my perspective continue to look good, delinquencies are low and other credit metrics solid. That's my report for lending for the first quarter.

I'll turn it back over now to Pat for some final comments. Pat?

Great. Thanks, Peter. Thanks, Andrew. I appreciate those additional details. And at this point, we'd like to open it up for folks on the line for the question-and-answer session. So I'll turn it back to the operator.

(Operator Instructions) The first question we have from the phone lines comes from Nick Cucharale from Piper Sandler.

So I just wanted to follow up on the opening remarks regarding employee retention. Can you help us think about the impact on the overall expense base? And you later mentioned the higher quarterly rate going forward. But can you quantify your expectations?

Yes. I mean I think we took a look at where we were at the end of last year and the feedback we provided. And I think we had sort of indicated we thought the quarterly expense base would be somewhere sort of in between Q3, which was artificially low and Q4, which was artificially high.

And I think the short answer is we're seeing some inflationary pressures that probably going to push that up a little bit higher, higher than where we are right now. Not significantly higher, but I think at the $11.1 million that's probably the low end of the quarterly range that we expect going forward. So Andrew, anything you want to add on that?

Yes. I think you said it right. I think we expect some increases off of the current quarter run rate. We are doing a lot of things to help mitigate that, and we'll continue to do that. We just had our annual reviews and salary increases for our employees happened in mid-March. So you'll definitely see an increase in salaries. But we were able to I think hold the line a little bit on some folks.

We were awarded the kind of the top performer. So it's not going to be enormous increases, but we're continuing to see pressure. So expenses are going to move up for sure. We expect the second quarter to be up slightly from the first quarter, and there will be continue to be pressure. But I think we've done a pretty good job of holding the line.

We're going to keep working hard to keep expenses low, but we're definitely going to see some inflationary increases in other areas, too, in occupancy in certain other areas. But we have some other things we can do to help mitigate the increase, but we're definitely going to see some increases over the next couple of quarters.

That's very helpful. And then back to the...

Nick, one thing to think about is kind of the timing for how inflationary pressures come through. It's not necessarily the good news, but it takes longer to fill open positions, right? So that actually means for a short period of time, we actually have some savings that offset the ultimate decreases that come around.

So again, I think Andrew is right. There's got to be a little bit of a movement up, but I think it will be will be manageable.

Yes, that's a good point. That's good color. So back to the remarks for the stable NIM in 2022, excluding PPP. Given strong loan yields and limited liability pick up in the near term, is your anticipation to show continued NIM expansion through the first several hikes and then erosion is liability cost pick up? Is that kind of how you're thinking about things?

Yes. I think that's certainly an opportunity, Nick. The timing of how the changes trickle through is a little bit difficult to predict. But as Peter mentioned, overall yields in Q1 were up from Q4. And the yields on new production at the end of the first quarter were higher than at the beginning.

So we're definitely seeing the movement higher on the rate side for loan yields. And the real unknown, obviously, is what happens on the depository side. But the fact that we saw our overall costs continue to some down in Q1, I think is a very good sign. Overall, liquidity levels are good. And we're not seeing a lot of banks pushing rates higher right now. It just seems to be a market where there's not huge pressure at the moment on deposit costs.

Now once the Fed moves and if they move again and short-term rates are up 1% from where they are today, I'm sure they're going to start to see deposit costs move higher. But I'm cautiously optimistic we can see a little bit of margin expansion in the short run.

Nick, I would just add to that. Yes, your comment on how kind of these happen. I mean typically, the last time rates moved, that's kind of how it typically works, right? The beta -- the deposit betas are a little lower in the first couple of hikes and then they tend to get higher on the later hikes. We'll see how this cycle works. It does feel like this cycle might be a little different because typically, when rates are moving, there isn't as much of excess liquidity at all the banks and especially the big guys and a lot of our competitors.

So Hopefully, that means that the deposit pressure will be a little bit less this time than maybe in previous cycles, but that's the big unknown for the next few quarters what happens on the deposit side.

Right. And then lastly, when you look at the mix in the loan pipeline, are you anticipating similar segment growth this past quarter with commercial real estate leading the way?

Well, it's a little hard to predict, Nick. If you look back at 2021, we actually saw C&I and owner-occupied leading the way in terms of overall growth for the year. So it's not -- the pipeline continues to show healthy levels across all categories.

The investor real estate category tends to pop up here and there if there's 1 or 2 larger deals that get done. But correspondingly, next quarter or quarter after, if you've got 1 or 2 large deals that pay off, you're going to see the growth coming from C&I and owner-occupied. So it's tough to predict, but I think overall, our ratios across categories should stay pretty consistent. Peter, what would you say on that question?

No, I'd say definitely, they stayed consistent. I can't really add to what Pat said. It does -- different segments are up and down over the course of the year. I know first quarter of 2022, investor real estate was probably up a shade more than normal, but that followed a year where C&I was way up. So -- but the way the pipeline looks today, all segments are consistent with where they've been in the past few years.

We now have the next question on the phone line from Manuel Navas from D.A. Davidson.

So the loan pipeline commentary is pretty nice, pretty strong. How would you characterize it for the full year? I know you feel like kind of ahead of plan in the first half of the year. Does that mean you're a little bit more cautious about the back half? Or you're just taking the activity as it comes?

Well, if you're -- as far as my comments are concerned, we kind of take it as it comes. I mean I know last year, we were way beyond plan. We thought we'd -- just because of the pipeline and the folks who were talking to out there that we would still make plan for 2021, and we did point-to-point growth. Being ahead of plan after Q1 -- and, yes, I'll take that every year, and I think we'll continue to be ahead of plan when we get to June 30. So I'm still focused on exceeding 10% and that's our number today.

Yes. And I would just add that the dynamics of the commercial business are such that lots of folks want to get stuff done by year-end. So fourth quarter almost always tends to be a higher-than-average production month. And that's what starting the year strong is important because usually have those kind of seasonal factors that lead to pretty robust production at the end of the year.

So listen, the big variable in overall net loan growth tends to be the payoffs and pay downs because those are a little harder to predict because not only get heads up too far in advance that folks are selling assets and things like that. So I think if the payoff and the paydown activity slows, which you think it would, given rates are higher now than where they've been, I think that portends a good opportunity to finish the year ahead of plan.

That's great. You touched on finishing the quarter with a little bit better loan yields on new production. Is that continued into April? And also answer based on the deposit side, you haven't seen any -- you just touched on that deposit pricing competition hasn't picked up yet. Can you expand on that as well?

Yes. I mean I don't know that we've run the numbers for April yet, but based on what I know that's come in to committee to get approved, I think the trends for higher loan yields absolutely are continuing to move up.

And on the deposit side, it's interesting because we're not seeing the pressure yet sure it will come. But as Andrew pointed out, there's a fair amount of excess liquidity out in the market right now, which I think in the short run, it's going to keep deposit rates low, I think when the Fed starts to actually sell some assets, it will be interesting to see how much of an impact that has on the overall liquidity in the system.

But listen, our deposit rates moving higher? Yes. Do I think they might move higher at a beta or a rate that's less than what we've seen in prior cycle given the all the excess liquidity? Yes, I think we will.

I appreciate that. My last question is on the expense discussion. Previously, you've kind of given a range on a quarterly run rate studies about -- that could be about $1.5 million give or take. Is that -- would you still hold to that range and this is kind of the low end and across the year will kind of fluctuate between $11.1 million and like $12.5 million during the quarter?

Yes. I don't know that it's going to be that big of a gap, right? I mean we were $11.1 million in Q1. I expect Q2 will be a little bit higher than that. Q3 may be a little bit higher than that depending on how the inflationary pressure kind of ease into the expense base. But I don't even envision it jumping up $12.5 million or anything near that. I mean, obviously, if there's onetime events or things, but just in terms of the core, I think a little bit of an increase from where we are, but nothing up in the mid-12s. I don't know, Andrew, do you want to jump in there?

Yes, I agree with that. I mean I think some of that kind of range you're talking about was we had a big jump in the fourth quarter last year, which was up about $1.3 million, $1.4 million from the level it was in the third quarter of last year.

But I don't anticipate there being that kind of big jump like that unless here's some kind of onetime event. But we are going to continue, I think, over at least the next couple of quarters to see a little bit of creep up in -- obviously, salary and employee benefits is one, but there are some increases coming in some other areas.

But yes, I'd agree with that we should be able to manage it more tightly than up the $12.5 million. I don't see that number seems ...

And Q4?

Q4 has the merger related cost in there.

Yes, Yes. Right. So it had a merger, and it had some higher incentive comp. So that was a little bit of an outlier. So yes, I agree with that. I think there'll be some increases from our current level, but I wouldn't expect it to go that high.

We now have David Bishop of Hovde Group.

Pat, it sounded like, obviously, there's some timing issues on the SBA, maybe loan sales this quarter, it sounds like the pipeline's rebuilding. Can we see maybe a little bit of a rebound in the fee income at least on the gain on SBA activity as we test it out through the remainder of the year?

Yes, I think so. I mean given the loans we've already closed or haven't sold and given the level of activity within the group, which is the highest it's ever been, I think the prospects for strong next few quarters in SBA are good.

Got it. And it sounds like you guys remain at lookout in terms of hiring in terms of different niches. It sounds like maybe on both the lending and deposit side. Just curious maybe the outlook there and maybe some of those niches that you mentioned and are you continuing to look for some those cash management centric commercial bankers to hire as well?

Yes. I mean, absolutely. I mean, we're always on the lookout for quality bankers. Obviously, our focus is primarily on the C&I side on lending. And we've got a strong team on the real estate side. It's harder to find the C&I folks sort of always in the market there. And we've got a good suite of cash management products, but we're always here to the ground in terms of new technologies, new initiatives.

But I think for us, listen, we do get the name in the path. I think it will continue to be something that's on our radar. But we've always been a strong organic growth bank. And in order to do that, you need really good people and you need to have a active pipeline of folks for replacing folks that leave and just continuing to add.

So I think we're pleased with some new hires that we recently were able to bring in over on the PA side and seeing some really good opportunities over there. And we continue to be very busy both in North and Central Jersey and even in South Jersey. So yes, I mean I think the team is rounding out. I think we're seeing some nice high-quality folks that we're able to bring in. So turnover is an issue.

But at the end of the day, if you're able to find opportunities for great new folks, you can end up at an even stronger place even if it takes you a little while to get there.

Got it. And then you mentioned that, obviously, you know that the fact that you guys always have a great asset generator. And you're not saddled with the excess equity that maybe some of your peers are. As we think about the funding of loan growth here or maybe the waning of the PPP funding coming in, how should we think about loan-to-deposit ratio?

And is there a chance to know some of your peers have starting to get aggressive moving up ways maybe ahead of time and bringing in some maybe longer duration money what could be cheap rates over time? And any thoughts on how maybe sort of prefunding the expected growth and ahead of the rise in interest rate, just curious how we should think about maybe deposit growth this year relative to loan growth.

Yes. I mean, listen, I think there's probably opportunity there, David, but it all depends on what you need and what you're seeing in your deposit pipeline and our loan pipeline. So will we, at some point, have some longer-term CD offerings to try to lock in some longer-term funds? I think we probably will. But we're sort of taking that on an as-needed basis.

Yes, I would just add to that. I mean we did have a little bit -- it's been -- it's hard to offer most kind of in market. Deposit customers aren't willing to lock in rates, but we did do some brokered CDs a little bit longer to try and lock in some money. So we're looking for opportunities to lock in.

But as I mentioned, we're -- as of March 31, we're just slightly asset sensitive, we're pretty balanced. And that's kind of what we've done historically. We're always try to say fairly balanced. And so there's no real huge interest rate risk positions that we need to deal with.

But we are selectively looking to expand. Like I said, we did it in the brokered area, that's sometimes easier than trying to offer something in market because most folks are on keeping their money short. So we're doing it selectively. But again, we don't have any kind of real risk from an interest rate perspective that we need to deal with right now.

Got it. One more housekeeping question. Maybe a good tax rate to use the rest of the year and how much is the buyback authorization?

I think that's quite a bit still left on the buyback. Andrew, I don't know if you've got a round number, Andy.

The buyback was 1.3 million shares. We only purchased 200 shares during the first quarter. We have been a little bit more active in April as we have a set plan with a set price that we don't mess with. But our price has dipped below that. So we've been a little bit more active in April, but we still have plenty of availability under our current program, which goes through the end of September.

And then from a tax rate perspective, our tax rate was a little bit lower than potentially our run rate going forward because we did have some discrete items. As folks exercise options, sometimes we get some extra tax benefits from that. But that's something that does happen fairly regularly. But I think our tax rate is a little bit lower this quarter than what you can anticipate going forward.

But I think we'd say around 24% to 25% in a normal quarter, but we do tend to have a decent amount of these discrete items. So the 23% to 25% is the number you can expect, which will jump around a little bit, but it will probably never go outside of that range of 23% to 25%.

We now have a question from Erik Zwick of Boenning and Scattergood.

Most of my questions have been asked at this point. One, I guess, just a little bit of a follow-up on the niche lending opportunities. And at this point, I believe all of your lending is done in-house with your own lenders and some other banks out there have started to partner with some third-party providers for different kind of avenues.

Curious, if you've ever considered something like that? Or is that something you might at some point? Or are you more comfortable kind of sticking all in-house at this point?

Yes. I mean, listen, there's always value in outsourcing. However, I think it gets a little dicey when you're outsourcing your core competency, which for us is commercial credit underwriting. We have used some technology to help us on the small end of the small business segment where we've leveraged some quality established providers to help automate and streamline the underwriting on some very small business loans.

But for the most part, that customer relationship, understanding that customer, underwriting the risk, that's a key part of what we do, and I don't suspect we're going to look to outsource that anytime soon.

I appreciate the color there. And then just on the topic of kind of using capital for growth -- organic growth would probably be the priority. Given where the stock is trading today, the multiple may not be exactly where you want if you wanted to undertake an M&A deal. But just curious, I'm sure you're keeping up conversations with certain potential partners and may be hearing from some of the bankers coming around. Curious about that the pace of M&A discussions today, whether they've changed much in the past 3 or 6 months or fairly similar?

Yes. I mean, listen, I think there's always a certain amount of dialogue. And I think when buyer stocks are up, there's a little more dialogue and when they're down, there's a little less dialogue. So I think what you've seen in the banks stock community, unfortunately, over the last several months is just kind of a downward decline in overall price levels and multiples.

So I suspect that will have a bit of a dampening impact on M&A. Now for us, we've always been sort of selective, opportunistic. We've never been once to go out there and just pay up for banks because we had an inflated currency. We've always had to be disciplined on the M&A side.

And so our M&A activity isn't always as correlated to having or not having the premium multiple. Obviously, it's a little bit easier to do deals if you've got a better multiple. But yes, I think for us, it's just a combination of continuing to focus on the core organic growth strategy and continue to look for those unique opportunities that we've been able to successfully integrate in the past.

Thank you. We now have a follow-up question from Manuel.

I want to hop back on to kind of follow up on your asset sensitivity disclosure. You've been liability sensitive in the past. And just wanted to hear a little bit more about how -- what shifted -- what input shifted to kind of to get you on the asset sensitive side? I know it's pretty neutral, but still just anything you could give on how that shift occurred?

Yes. I mean, Andrew can give you the details, but I would start the answer by saying, to the extent that we've ever been liability sensitive, it's been very, very, very modestly liability sensitive. And so it feels like a flip to go from one to the other. But if you're very close to the middle on one side and then you inch to being very close to the middle on the other side, it may seem like more of a change than it really is. But Andrew, why don't you jump in with a little more of the detail?

Yes. I mean, Pat, you hit it. I mean it's not a significant change from where we were last quarter. We did add some additional liquidity. We let some CDs run off. We have more kind of noninterest-bearing balances at the end of the third quarter, a little bit higher level of on-balance sheet liquidity. We did a decent amount of loan swap deals last year, which is helping our variable rate loan totals compared to the total loan balance.

So a little bit of a couple of things got us to swing from slightly liability sensitive to slightly asset sensitive. But it's not a huge shift from where we were at the end of the year.

And you continue to use historical deposit betas in your assumptions?

Yes. We tweaked betas a little bit last year, but we made no significant changes in our model. I think really the only thing we moved some betas up a little bit on some of our kind of smaller ancillary deposit products, government and broker and things like that. But we haven't made any significant changes to our model over the last few years.

Again, we look at the assumptions every year and we tweak, but we haven't made major changes.

Thank you. We currently have no further questions registered. (Operator Instructions)

We have had no further questions registered. So I'd like to hand it back to the management team.

Thank you. I'll just wrap by saying thanks, everybody, for taking the time to listen in. We appreciate all the interest in First Bank and the great questions, and we look forward to regrouping with everybody at the end of the second quarter. Thanks, everybody. Have a great day.

Thank you. This does conclude today's call. Thank you all again for joining. You may now disconnect your lines.