Fulton Financial Corp (FULT) 2014 Q1 法說會逐字稿

Good morning, ladies and gentlemen. Welcome to the Fulton Financial Corporation first-quarter earnings call. This call is being recorded. I will now turn the call over to Laura Wakeley, Senior Vice President of Corporate Communications. Please go ahead, ma'am.

Thank you. Good morning, everyone, and thanks for joining us for Fulton Financial's conference call and webcast to discuss our earnings for the first quarter of 2014. Your host for today's conference call is Phil Wenger, Chairman, President, and Chief Executive Officer of Fulton Financial. And joining him is Pat Barrett, Senior Executive Vice President and Chief Financial Officer.

Our comments today will refer to the financial information included with our earnings announcement, which we released at 4:30 yesterday afternoon. These documents can be found on our website at fult.com by clicking on Investor Relations and then on News.

On this call, representatives of Fulton may make forward-looking statements with respect to Fulton's financial condition, results of operations, and business. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond Fulton's control and difficult to predict and which could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements.

Fulton undertakes no obligation other than required by law to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. In our earnings release, we've included our Safe Harbor statement on forward-looking statements and we refer you to this section and we incorporate it into today's presentation.

For a more complete discussion of certain risks and uncertainties affecting Fulton, please see these sections entitled Risk Factors and Management's Discussion and Analysis of Financial Condition and Results of Operations set forth in Fulton's filings with the SEC.

In discussing Fulton's performance, representatives of the Company may refer to certain non-GAAP financial measures. Please refer to the supplemental financial information included with Fulton's earnings announcement released yesterday for reconciliation of those non-GAAP financial measures to the most comparable GAAP measures.

Now I would like to turn the call over to your host, Phil Wenger.

Thank you, Laura. Good morning, everyone, and thanks for joining us to review our first-quarter progress. After my prepared remarks, our Chief Financial Officer Pat Barrett will give you more color on the financials. Then we will both respond to your questions.

We were pleased to report $0.22 diluted earnings per share for the quarter. These earnings were 10% or $0.02 greater than the same period last year and matched the prior quarter. Our return on average assets increased to 1.01% and our return on average shareholders' equity increased to 8.21%. Return on tangible equity was 11.13%.

We saw continued improvement in our asset quality. Total delinquencies decreased $6 million from $232 million to $226 million. Net charge-offs decreased by $2 million. Classified and criticized loans decreased and non-accrual loans were flat at $134 million linked quarter.

On a linked-quarter basis, net loans declined slightly during the first quarter of 2014. We believe that winter weather tempered demand for new loans during the first two months of the quarter, and because of those conditions, we elected to defer the start of two planned loan promotions. We launched those loan promotions during March, but too late to positively impact the first quarter.

We are pleased to see an uptick in the loan pipeline late in the quarter and we will remain focused on achieving quality loan growth for the remainder of 2014. Specific tactics we are pursuing include the addition of commercial lending talent in areas we believe present good growth prospects, like Virginia and Maryland, along with further promotional efforts. Of course, the rate of loan growth will be somewhat dependent on the pace of economic expansion.

With respect to our residential mortgage operations, the severe weather as well as higher interest rates impacted origination activity and related sales gains for the quarter. As in other lending segments, we are seeing signs of a pickup in mortgage activity. The volume of residential mortgage loans in process but not yet closed improved to $165 million as of March 31, 2014, compared to $125 million as of December 31, 2013. At March 31, 33% of our activity was refinancing, 67% was purchase.

We continued to adjust mortgage staffing levels to reflect changes in mortgage activity. In addition to the 25% overall mortgage staff reduction we reported last quarter, 13 additional full-time equivalent staff positions were eliminated in the first quarter.

Two other factors in particular enabled us to report a strong first quarter. They were a significant reduction in expenses from the fourth quarter of 2013 and effective management of our net interest margin. Linked quarter, total noninterest expense decreased by 6.2% or $7.2 million. As of April 11, all 14 of the branch consolidations we announced have been completed.

We believe that our commitment to superior customer service is evident in the strong customer retention we have seen during these closures. We also created larger roles for fewer people through regional management reorganization and discontinued a number of employee benefit programs. I am pleased to report that we are on target to realize all the annual savings we anticipated when these initiatives were announced, although we do expect higher expense levels in the second quarter, which Pat will discuss.

The buildout of our regulatory compliance and IT infrastructures continue. We've added talent in these areas, particularly in our BSA function. Quarterly expense levels will be impacted by project implementation dates and by the extent and timing of outside consulting engagements as we continue to strengthen our compliance risk management processes' capabilities, which includes BSA.

On the spread, we essentially maintained our net interest margin despite ongoing pressure on earning asset yields and deposit costs. While we're seeing signs that the margin may be approaching an inflection point, there are numerous competitive and economic factors that will continued to impact it.

One of those is the intense current pricing competition for loans. Core household deposit account growth continued at the pace we have seen over the last several quarters, enabling us to increase our core deposits by 6% year over year.

Pressure on total noninterest income continued due to changes in retail customer account usage behavior. In the business section -- in the business segment, clients are maintaining higher core deposit balances, a trend that reduces account analysis fees. Lower mortgage sale gains also impacted this revenue category; however, a high point was the nice growth we have seen from our investment management and trust services area linked quarter and year over year.

During the first quarter, we completed our most recent 4 million share repurchase program, bringing the total number of shares we have brought back since the second quarter of 2012 to 14.1 million at an average cost per share of $11.41. With our strong capital position, management and the Board of Directors regularly evaluates methods of capital deployment with enhancement of long-term shareholder value.

In closing, I want to review how well we executed our stated priorities this quarter. We generated solid earnings per share, improved our asset quality, expanded our base of core deposit households, effectively managed our net interest margin, generated strong returns on assets and equity, and controlled our expenses while continuing to invest in infrastructure critical to support our future growth.

Loan growth and noninterest income fell short of our expectations this quarter. We are working hard to grow not only quality loans, also core deposits, and fee income throughout 2014. With additional traction in the economy and an increase in overall loan demand after a slower first quarter, we believe we are positioned well to grow our earning assets along with account-related revenue in 2014.

At this time, I would like to turn the call over to our CFO, Pat Barrett. When he concludes, we will take your questions. Pat?

Thanks, Phil, and good morning to everyone on the call. Unless I note otherwise, quarterly comparisons will be with the fourth quarter of 2013.

As Phil noted, earnings per diluted share this quarter were $0.22 per share, a net income of $42 million. While earnings remain consistent with the prior period, we saw a notable improvement in expense levels offset by decreases in net interest income and noninterest income. The provision for credit losses remained unchanged.

Net interest income decreased by $3.4 million or 2.5%, driven by two fewer days of interest accruals during the quarter and, to a lesser extent, by slightly lower average earning asset balances. Average earning assets were down $78 million or half a percent. Average investment securities declined $36 million or 1.4%, while the remaining drop in average earning assets was due to a slight decrease in average loans of $30 million or 0.2%.

Average yield on interest-earning assets decreased by one basis point, while the average costs of interest-bearing liabilities increased one basis point. The average yield on new loans originated during the first quarter was approximately 10 basis points lower than on loans originated in the fourth quarter.

While average core deposits were up 5.9% in comparison to the first quarter of 2013, and ending deposits were up slightly in comparison to the fourth quarter of 2013, we did see a seasonal decrease in municipal accounts, causing a 1.5% linked-quarter drop in average deposit balances. This decline was principally in demand deposit accounts.

Net interest margin of 3.47% exceeded the estimate we provided last quarter, which was 3.42% to 3.46%, by one basis point. This favorable variance reflected higher-than-expected interest recoveries on non-accrual loans, cash flows on securities, and loan fees. For the second quarter of 2014, we're again expecting the net interest margin to be in the 3.42% to 3.46% range.

The provision for credit losses for the first quarter was unchanged, at $2.5 million. Overall, most of our credit metrics showed continued improvement. The $6 million improvement in delinquencies Phil referenced was mainly seen in the 30- to 89-day delinquency bucket, which decreased $6 million or 8%. Total classified and criticized loans declined $20 million or 3% and net charge-offs decreased from $10 million to $8 million for the quarter, for an annualized net charge-off rate of 26 basis points.

Noninterest income for the first quarter decreased just over $2 million or about 5%. This decline reflected two main drivers. First, service charges on deposits decreased by about $1 million, or 8%, due to declines in both overdraft fees and other service charges. And second, mortgage banking income decreased $760,000 due to the factors mentioned by Phil.

This decrease was mainly driven by lower gains on sales as a result of both lower volumes and lower spreads. The declines in service charges and mortgage banking income were partly offset by increased investment management and trust services income as well as commercial loan swap fees.

Noninterest expenses were $109.6 million for the quarter, lower than both the fourth quarter of 2013 and the range that we guided to for the first quarter of 2014. Phil briefly discussed the cost savings initiatives that were implemented during the first quarter. It's important to note that while these will have a meaningful positive effect on our costs going forward, they did not have a net impact on total expenses during the first quarter, as the $1 million of run rate expense reductions we realized were offset by associated branch closure and severance costs.

We anticipate that these actions will result in a $2 million quarterly decrease in expenses over the remainder of 2014, which translates to an $8 million annual run rate, with $7 million of that realized for the year 2014.

In comparison to the fourth quarter of 2013, expenses were $7.2 million or 6.2% lower. Significant variances included a $5.6 million decrease in salaries and benefits, mainly in incentive compensation and health insurance costs, and a $1.8 million decrease in outside services. These variances and smaller improvements in other expense categories were partially offset by seasonal increases in payroll taxes and occupancy expenses primarily related to snow removal costs.

Again, just to reiterate, in comparison to our previous expense guidance of $113 million to $117 million for the quarter, lower incentive compensation and the timing of outside services expenses were the most significant drivers of the favorable variance.

Overall, our internal projections indicate that second-quarter expenses will be in the range of $111 million to $115 million. While these levels are higher than actual expenses for the first quarter, they represent an improvement over both our previous guidance and over our actual run rates for the last three quarters of 2013.

As a reminder, however, certain expenses, such as other real estate owned and reposition expense, operating risk loss, and professional and outside services can and do experience volatility based on timing or events that cannot always be reasonably predicted. Such volatility could result in expense levels being higher or lower than projected, but we will continue to make expense discipline a top priority.

Our effective income tax rate returned to a more normalized rate of 25.4% in the first quarter due mainly to the absence of deferred tax asset valuation benefits recognized in the prior quarter. Aside from the impact of such adjustments, which could reoccur, our internal projections indicate an annual effective tax rate in the mid-20s.

Touching briefly on capital, our ratios remain very strong with estimated Tier 1 and total risk based capital at 13.0% and 14.9%, respectively,. Note that the slight linked-quarter drop in our ratios resulted from the execution of the 4 million share repurchase program during the first quarter.

Thank you all for your attention and for your continued interest in Fulton Financial Corporation. Now we'll be glad to answer your questions. So I'll return the call to the operator.

(Operator Instructions) Bob Ramsey, FBR.

The expenses, as you all have talked a lot about, obviously looked really good this quarter. I'm just trying to sort of think about the run forward. I know you gave a range of $111 million to $115 million. Could you just help me think about if we start this quarter at $109 million and change and $2 million comes out of that from the efficiency initiatives next quarter, how do you get from $107.5 million into that range you've given?

Is it incentive comp that gets billed back in? And I can't remember, is this the quarter where you all have equity awards to retirement eligible employees or what takes us from that $107 million level to the guided range?

Hey Bob, it's Pat and yes, it's a good point and you're keying in on a fairly complicated area for us. First of all, the effect of the cost-saving initiatives quarter on quarter from 1 to 2 will only be a $1 million incremental savings, because we did realize half of a quarter savings in the first quarter.

Okay.

So we'll have a full quarter of run rate starting in the second quarter, which gets us to a total of seven for the year.

Wasn't there also $1 million of implementation cost, though, that should go away next quarter?

There were. I think there were a number of other one-time costs associated with other expense savings initiatives that hit in the first quarter around adjustments to pension and other benefit programs, so there's a lot of net of one times that relate to the expense initiatives that will disappear. So you're also right in mentioning that the incentive comp, or the VCP as we call it, that will be a big add-back going forward, because we did have an adjustment downward in the first quarter that came late in the quarter that was not so much performance related as it was a top-of-the-house adjustment.

Now, in addition to that, our outside services -- and I should say probably the professional fees and other outside services -- came in well under the run rate that you would've seen in the last three quarters and this is really more timing than it is anything else. We still anticipate that line item to continue on at a level that's much more consistent with what we've seen in the last two or three quarters. And that's where we've seen a lot of increases earlier on last year around our conversions and that's kind of migrated over time to a variety of other outside and professional fees.

Okay, and is next quarter the quarter that you all have the comp for retirement eligible employee impact and could you also maybe tell me how much was the drop in incentive comp first quarter versus fourth?

Bob, it's Phil. From fourth quarter to first quarter is $2.5 million on the incentive comp. And as far as the options, we have changed that program somewhat so that that initial increase in expense won't happen going forward. But that area will have an impact on expenses this year.

It gets complicated, but we did change the program so they are issued in the second quarter. They used to be in the third quarter, so we actually will have a one quarter of expense from last year and this year. That will happen in the second quarter. So that expense in the second quarter will be about $250,000 more than it will be then in the quarters following it.

Okay. That's helpful. I guess I'll shift gears a little bit and ask one more question, then I'll hop back out of the queue. Could you -- I know last year -- last quarter, you guys had talked about loan growth expectations for the year of being around 5%. Obviously, balances were down this quarter. Is 5% still what you guys are targeting for the full year?

You know, Bob, I think we gave a range of 3% to 7% and that is still the range that we would give today.

Given the first quarter, is your bias towards the lower end of that range or still full range?

Yes, at this point it would still be full range.

Okay, great. Thank you, guys. I'll hop back out and give someone else a chance.

Casey Haire, Jefferies.

Couple of questions, I guess, on the NIM. Phil, your commentary about NIM nearing an inflection point obviously is a good sign, but at the same time, it sounds as if there's a couple of promotions that are on the come that might hurt the asset yields, which held up pretty nicely this quarter. So I'm just trying to figure out what's giving you that confidence in sort of the NIM stability outlook. Is a positive mix shift? Just some thoughts there would be helpful.

Well, you know, the spread between the new production and what's running off in our loan portfolio continues to narrow. We expect that to continue to narrow. Now, you know, this whole pricing scenario for us has been -- I think we talked a little about it last quarter. It is a real tough balance to be -- to have rates that are competitive, that will help you grow, but not rates too low that it's going to impact your margin to a large degree.

So we talked about it last quarter. We are going to get more aggressive with some promotional programs, but probably not to the same extent that we had first quarter of last year. So again, in the first quarter of 2013, I think our rates were probably at the low end of our competitors.

By the end of the year, we had migrated to the high end and where we want to get is back in the middle, to a level that will allow us to grow but not have the same negative impact on margin that we've experienced in the past. And it is far from an exact science, Casey.

Understood.

And this is Pat, Casey. Also, if you think about just the recovery of the numerator in the NIM fraction as we go to the second quarter, we are bound to see -- likely to see the actual dollars of net interest income rise at a rate that will likely be higher than the rate at which the denominator does.

So we've got a recovery and day count and all that. So I think it's reasonable to expect, at least in the quarter-on-quarter basis, that we'll see dollar increases that will give us some further stability on the ratio.

Okay, understood. Switching gears to the fee side, obviously weather kind of slowed you down this quarter on the service charges and mortgage banking. I'm just curious -- I know it's tough, but any ballpark estimate as to how much weather slowed down those line items?

Well, mortgage, obviously, was a big area. So mortgage is impacted seasonably, anyway, from the winter. I think it was this year impacted even more in that normally you're not starting new homes in January and February, but when it's 15 degrees and there's a foot of snow on the ground, no one is out looking at existing homes to buy, either. So how much that recovers, I can't give you a real feel right now, but we do believe mortgage is going to recover at a pretty good pace.

As far as fees -- deposit-related, other fees -- again, first quarter tends to be lower, and I think it was -- they were further impacted this quarter from the weather because we were closed -- January and February, it was a unique winter in that every year, we get some weather-related events. They tend to be more in Pennsylvania than anywhere else. This year, we had weather-related events in every area that we operate in.

And so one day our Pennsylvania operation would be closed; the next week we have a day off in New Jersey and then Maryland and Virginia would get hit. It just seemed like we were never -- had the whole operation open. But -- that's stretching a little. So we do expect a recovery. I have a hard time putting an exact number on it.

Understood. And just last one for me on the capital management front -- I know you guys have been pretty quiet on the M&A front, but you did get the buyback done. Just wondering what we could expect for the balance of the year as it relates to capital management.

So I think we also indicated last quarter that M&A activity in 2014 we see is highly unlikely, so we continue to build out a lot of infrastructure. So that eliminates that from the way to use our capital. We still believe we have excess capital.

So that will be deployed in the form of funding growth, so part of it will depend on how we start growing and how quickly we start growing. We would like to increase dividends as earnings increase and then, given all those things, we would look at share repurchases.

Okay, thank you.

Frank Schiraldi, Sandler O'Neill.

Frank Schiraldi Just a couple of questions. First on the -- loan deposit ratio fell a little bit linked quarter. It's been sort of hovering around 100%. It fell right to 100% and I know others have keyed in on that ratio. I'm just wondering if that in any way has perhaps constrained loan growth and how you think about that ratio?

So Frank, I think we are comfortable at that level and we believe we can grow our loans in that 3% to 7% range and still fund it without having any kind of issues.

Okay. So are you saying, Phil, that you think that will probably continue to hover around this 100% as you have similar deposit growth to match the loan growth?

I would say so.

Okay.

You know, Frank, if you look back over our quarterly run rate, it tends to bump up one or two percentage points and then drop back down to 99% or 100% and then it'll go up, and it really is driven on the back of the public funds seasonality as they ebb and flow.

Okay. And then on expenses, I don't know if we can do this, but as you look out maybe further than 2Q, Phil, you sort of mentioned, I believe, that there was $250,000 of expense in 2Q that would fall off in future quarters. By the same token, are there other outside services, perhaps consulting fees, that you're sort of thinking could fall off as we approach the back half of the year?

So Frank, I think over time there are some, but I wouldn't be able to say right now that that would happen in the third quarter or the fourth quarter. So not impossible, but I would not say that would necessarily happen this year.

Okay. So maybe the range you gave in 2Q is probably a decent run rate through the remainder of the year as you see it today?

I think [staying] today -- I think that could be a reasonable assumption.

Okay, great. Thank you.

Chris McGratty, KBW.

Good morning, guys. This is Mike Pareto stepping in for Chris.

Hey, Mike, how are you doing?

Good, thanks. Phil, I think on the conference circuit in February, you made a passing comment about your hopes for revenue growth in 2014 and I believe the comment was along the lines of X mortgage, you guys are hopeful that you can grow your revenues year over year this year. Are you guys still after Q1 results in senior pipelines right now? Is that still kind of the hope and the target for you guys?

Well, it certainly is the target. Or, obviously, the first quarter is not going to help it there, but it was our target, yes.

Okay, thanks. And then maybe, are there any -- following some of the branch closures and some of your markets outside of PA and just after seeing this quarter, are there any updates on how you guys are thinking of performance on some of your other markets? New Jersey, Maryland?

Well, we continue to see some improvement in New Jersey. I would still say that southern New Jersey, especially, is what I would categorize as our weakest market, but it is getting better. And Maryland has been -- the market is pretty strong there. We were able to bring on four lenders in Maryland in the last four months and we expect Maryland to be a growth area for us.

Okay. Are you guys seeing any difference in commercial pipelines by region or anything like that, or is it pretty strong across the footprint?

I would say that -- I would say it's similar across the footprint.

Okay. All right, thanks guys.

David Darst, Guggenheim Partners.

Phil, as you talk about the promotional activities, let me look at kind of where your growth was last year. A lot of it came around the home equity category in addition to residential and commercial real estate. Is that kind of the similar promotional activity you're doing this year, or is there something different you're doing, as you noted hiring some people in Maryland and Virginia?

David, I would say that the promotional -- specifically the promotional activity is very similar to last year and it would be in the home equity space and then CRE and C&I.

Okay. As you're looking at Virginia, are you building out, maybe, to franchise in northern Virginia or are you actually doing some things to maybe rejuvenate the Tidewater region?

So we've also been able to add four lenders in a Virginia market in the last 90 to 120 days and they have been actually spread across the state, but a little more in the Tidewater region.

Okay. And then with the CD growth you had this quarter, looks like you're trying to extend the duration of your CDs. Should that rate be the floor and maybe grow as you try and manage the inflection point of the margin this year?

Hey, David, this is Pat. Yes, I think the CD growth that we were seeing is probably more a reflection of us working to just get back in the market with a broader range of competitive products. On the funding side, we, like most banks, haven't been able to turn away money for the last four or five years and as the belief of rates going up increases, it's something that we just want to be prepared for.

It's one of our top priorities and has been for a couple of quarters now. So it's probably more a reflection of that change than actual asset and liability management.

Okay, got it. So all of it together has been more proactive. And then back to the buyback, should we kind of assume you're maybe done for now and then if the loan growth doesn't materialize, then you would revisit the buyback later in the year. And then if it does, you're probably done for the year?

So we evaluate that all the time, David, and both management and Board regularly look at our capital position and in context to a lot of different things. We still think we have excess capital and we will look throughout the year at ways to deploy that. So growth will have an impact, I think, on how much or when or if, in fact, we do buy back additional shares.

Okay. Would any of it be dependent on feedback from your DFAS submission later this year?

Well, we work closely with our regulators and we have submitted our DFAS, so I would anticipate that they certainly would look at that submission and I can't imagine that it wouldn't be part of the analysis that they do when they look at our overall capital position.

Okay, great. Thank you.

Matthew Kelley, Sterne Agee.

What was the average yield on the commercial loan originations during the quarter?

So the new originations -- the yield actually decreased 10 basis points; I believe from 385 to 375.

Got you, got you. Okay, and then just getting back to your deposit service charges, down 8% year over year, how much of that do you think was due to the weather, just on interchange and swipe volumes on the consumer side?

Part of it, Matt, is changing consumer behaviors, particularly in the overdraft category

Yes.

And then part of it, I think, was because of lower activity. But I would say there was at least as much reduction resulting from the overdraft category as there was in the others.

Okay, got you. And then from the fourth quarter to the first quarter, was there any changes in your deposit pricing and all? I know on your website you got a 60-month promotional type thing, trying to get in some longer-term CD money. Any success in bringing that in, in any of the products that you changed pricing on during the first quarter?

The primary change was in that five-year CD, and so that would be -- I think that did generate about $75 million in deposits for us. But that would be the primary change.

Got it. All right, thank you.

(Operator Instructions) Jason O'Donnell, Merion Capital Group.

Just following up on Bob's question earlier on expenses -- given the higher guidance on OpEx of a $111 million to $115 million for the second quarter, should we be assuming comp and benefits expense somewhere in the neighborhood of $62 million for the second quarter? Is that a good guesstimate at this point?

That's a good guess.

Okay, fair enough. That makes sense. And then in terms of the margin trajectory, in the guidance you provided a 3.42% to 3.46% for the second quarter. Does that assume a resumption of the loan yield compression going forward, and then if so, do you expect to see that bottom, all else equal in terms of rates?

Well, it does assume that, yes.

Okay, and then at what point do you expect to see that stabilize; is that later this year? The back half of the year? Do you guys have any sense -- all else equal, where do you expect to see that bottom?

So -- We do. Our models show that happening in the third to fourth quarter of this year. But that is still dependent on pricing not getting more competitive, deposit pricing not increasing, those two things. But if everything stays the way it is now, we believe third or fourth quarter.

Great, thanks a lot.

Blair Brantley, BB&T Capital Markets.

I had a follow-up question on the capital planning. What is your comfort level from a total payout perspective? Obviously, last year was almost 100% and you're at a pretty good pace for this year with the buyback and just the dividends you have in place. Is there any commentary you could add to that?

We were at 100% last year and we still maintain an overall capital level of very close to 15%, so we still think we have some excess capital and I think it would be fair to think that we'd like to be close to that 100% again.

Okay. And then on a different note, with credit costs, they've been pretty flat over the last -- from Q4 to Q1. How do you think about credit costs in the near future, given the trends that you're seeing with problem asset balances and loss content and things like that?

So most of our credit metrics continue to improve. So as we sit here right now, we don't see a lot of change on the provision side, but that is subject to positive or negative things happening at any time.

All right, thank you very much.

Bob Ramsey, FBR.

Thanks for taking the follow-up. I was actually going to ask about credit and provision, given that your charge-offs are probably at the lowest level they've been at since the crisis. I know you just said you don't expect a lot of change in provision. I think in the past you said to expect over time the allowance-to-loan ratio could trend closer to peers, at maybe 125%. I'm just curious if that is still how you're thinking about the allowance level bigger picture?

Over time, I would say that yes, that would be what we are looking at. So at the end of last quarter, I think we were at -- our ALL was at 160 and now we're down to 156. So we think we have some room to trend down lower. But we've always done that on a pretty conservative basis and I would expect that we continue.

Okay, great. Thanks again for the follow-up.

And with no further questions in queue, I'd like to turn the conference back over to Phil Wenger for any additional or closing remarks.

Well, thank you all for joining us today. We hope you'll be able to be with us when we discuss second-quarter results in July. Thank you.

This does conclude today's conference. We appreciate your participation.