Fulton Financial Corp (FULT) 2022 Q3 法說會逐字稿

Welcome to third quarter of 2022. Your host for today's conference call is Phil Wenger, Chairman and Chief Executive Officer. Joining Phil are Curt Myers, President and Chief Operating Officer; and Mark McCollom, Chief Financial Officer. Our comments today will refer to the financial information and related slide presentation included with our earnings announcement, which we released yesterday afternoon. These documents can be found on our website at fult.com by clicking on Investor Relations and then on News. The slides can also be found on the Presentations page under the Investor Relations website.

On this call, representatives of Fulton may make forward-looking statements with respect to Fulton's financial condition, results of operations and business. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, and actual results could differ materially. Please refer to the safe harbor statement on forward-looking statements in our earnings release and on Slide 2 of today's presentation for additional information regarding these risks, uncertainties and other factors. Fulton undertakes no obligation, other than as required by law, to update or revise any forward-looking statements.

In discussing Fulton's performance, representatives of Fulton may refer to certain non-GAAP financial measures. Please refer to the supplemental financial information included with Fulton's earnings announcement released yesterday and Slides 10 through 13 of today's presentation for a 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.

Thanks, Matt. Good morning, everyone. Earlier this year, I announced my intent to retire as CEO of Fulton Financial on December 31. So since this will be my last earnings call with you, I wanted to take a minute to share my appreciation for your coverage of Fulton Financial. I have appreciated your interest in our company and the diligence you have displayed and learning about the company's activities to be able to provide sound advice to your investors. I've been with Fulton for 43 years serving as CEO for the last decade. And during that time, it has been my honor and pleasure to have worked with the thousands of Fulton team members who fully understand what it takes to fulfill our company's purpose of changing lives for the better.

As you know, Curt Myers will succeed me as Chairman, CEO and President on January 1, 2023, with Curt at the helm and the talented members of our senior management team, adding their expertise, I am confident that Fulton will be in good hands. I look forward to continuing to serve on the holding company and bank Boards of Directors after I retire.

And now I'll turn the program over to Curt.

Well, thank you, Phil, and good morning, everyone. Before I discuss the quarter, I want to thank Phil for the many contributions he has made to strengthen our company and for the legacy that he leaves behind. During his decade as CEO, Phil enhanced our company's financial strength by growing the bank significantly. Doubling the quarterly run rate for operating earnings from $39.2 million a quarter to $80.5 million this past quarter. This improvement allowed us to nearly double our quarterly common cash dividend from $0.08 to $0.15 per share over that time, plus provide shareholders with a special dividend almost every year over his tenure.

Phil also focused on shaping our culture and empowering our team to change lives for the better. He led the formation of our Fulton Forward initiative and the establishment and funding of the Fulton Forward Foundation. The foundation helps improve the communities we serve in the area of affordable housing and homeownership, job training and workforce development, financial education and economic empowerment and diversity, equity and inclusion.

Phil executed on key strategic initiatives by consolidating our 6 subsidiary banks into Fulton Bank to improve our operating efficiency and position the company for growth. And he also resumed our status as an active acquirer through the purchase of a number of investment advisory firms as well as Prudential Bancorp this past quarter. There are many more examples, but as you can see, Phil has made a tremendous impact. And I, along with other member leadership team are committed to driving future success.

Going forward, we will continue to lead your company prudently, pursue smart growth and make the changes necessary for future success. We will remain committed to our customers, committed to our communities, committed to our employees and committed to you, our shareholders. Thank you, Phil, for all that you have done for Fulton Financial and for me personally, your positive impact is a lasting one that will be felt for many years to come.

Now I'd like to switch gears and let's talk about Fulton's third quarter performance. The third quarter of 2022 was another good result, and we are pleased with our overall performance. Operating earnings per diluted share, which excludes merger-related expenses of the Prudential Bancorp acquisition were $0.48 and represents an increase of $0.06 over operating earnings last quarter and $0.03 above the year ago period. Operating earnings this quarter represent an all-time high for Fulton. Several factors helped drive this performance. Our net interest income benefited significantly from rising interest rates. We saw solid loan growth overall. We have the first full quarter effect of the Prudential Bancorp acquisition and fee income was consistent with the prior quarter. These positives were offset by some of the realities of the current economic environment. Expenses continue to migrate higher due to wage pressure and elevated performance-based compensation accruals, and our provision for loan losses increased linked quarter.

As of July 1, we completed the acquisition of Prudential Bancorp. And in early November, we expect the conversion to occur. We're excited to welcome Prudential Bank's team members and customers into the Fulton family, and we believe our opportunities for continued growth in the Philadelphia region remains strong. With the Prudential Bancorp acquisition closed, we have doubled our loan portfolio and expanded our deposit base threefold in the Philadelphia market.

Turning to the quarterly business results. Our overall loan growth was strong for the quarter at $776 million or 16.4% annualized. Excluding our acquisition of Prudential Bancorp, loans still grew $232 million or 5.2% annualized. Commercial loans were essentially flat for the quarter as we experienced consistent originations but accelerated prepayment. Consumer loans still produced solid overall growth as we continue to book adjustable rate mortgages in the portfolio and experienced slower prepayment speeds.

Turning to deposits. On an ending balance basis, we achieved total growth for the quarter of $233 million. Included in this total was $400 million of customer deposits from the Prudential Bancorp acquisition. So excluding that impact, we did see a decline of $167 million during the period, driven by declines in noninterest-bearing demand accounts as well as time deposits. To date, declines in deposit balances are driven by inflationary spending pressure, rebuilding of inventories and CapEx spending and are not related to customer attrition. Commercial and consumer households both showed modest organic growth during the quarter, but a decrease in average balances per content to an overall decline in deposits.

From a rate perspective, we continue to actively monitor and price our deposits in order to both retain and grow deposit customers. Moving to our fee income businesses. We were pleased with our overall performance despite a challenging economic environment for some of our businesses. Total fee-based revenue was up $771,000 from the prior quarter or 5.3% annualized. Our card and payments business grew during the quarter as did our capital markets. These positives offset a decline in wealth management and mortgage banking revenues.

Moving to credit. Our provision for credit losses of $19 million included $8 million related to our acquisition of Prudential Bancorp and the CECL day 1 charge. Excluding this, our provision increased by $11 million despite showing net charge-offs for the quarter of only $100,000. Factors contributing to this increase include growth in the overall portfolio, a few accounts migrating to nonperforming as well as an increase in the reserve of our office building portfolio.

So now let me turn the call over to Mark to discuss our financial performance and outlook in a little more detail.

Thanks, Curt, and good morning to everyone on the call. Unless I note otherwise, the quarterly comparisons I will discuss are with the second quarter of 2022. And the loan and deposit growth numbers I will be referencing are annualized percentages on a linked quarter basis.

Starting on Slide 3. Operating earnings per diluted share this quarter were $0.48 on operating net income available to common shareholders of $80.5 million. This is up from $0.42 in the second quarter of 2022. The operating results exclude $15.5 million of merger-related charges recorded during the quarter, with $7.5 million of this reported in operating expenses and intangible amortization and $8 million reported as additional provision for credit losses under CECL merger accounting rules.

Moving to the balance sheet. Commercial lending, excluding the impact of Prudential, was relatively flat linked quarter. Within commercial, organic loan growth was $51 million within C&I lending while commercial real estate declined $71 million during the period. Commercial line utilization increased slightly during the quarter to 22.5%. Consumer and small business lending produced organic growth, excluding Prudential, of $262 million or 17% during the quarter. Residential mortgage loans grew $210 million as we saw homebuyers shift to adjustable rate products during the period.

Application volumes did decline 35% linked quarter due to the sharp rise in interest rates, so we would expect residential loan growth to moderate going forward. As Curt noted, total deposits grew $233 million during the quarter, and excluding the acquisition of Prudential Bancorp, total deposits declined $167 million, consistent with broader market trends. You should have to see our deposit betas increase at a faster pace in future quarters versus what we have seen thus far in the cycle.

With respect to the investment portfolio, balances declined modestly during the period, decreasing $181 million to $3.9 billion at quarter end. As part of our overall asset liability strategy, we've opted to pare back on securities growth in the near term.

Putting together all of those balance sheet trends on Slide 4, our net interest income was $216 million. a $48 million increase linked quarter. This increase was a function of both sharply rising interest rates as well as the Prudential Bancorp acquisition. Loan yields expanded 65 basis points during the period, increasing to 4.21% versus 3.56% last quarter.

Our current deposits increased 7 basis points to 18 basis points during the quarter. Therefore, our net interest margin for the third quarter was 3.4%, 3.54% versus 3.04% last quarter. The 50 basis points of linked quarter increase resulted primarily from loan betas being higher than deposit betas during the period. Going forward, I would expect our net interest margin to expand with additional rate increases but at a reduced rate due to both higher deposit betas as well as changes in the composition of our funding. Our loan-to-deposit ratio increased from 89.5% at June 30, and to 92.1% currently.

Curt gave you an overview of our credit quality results. I would only add that our allowance for credit losses to total loans increased 4 basis points during the period ending at 1.35% at September 30. As always, our allowance for credit loss trends could change in future periods, based on new loan origination volumes, our loan mix, net charge-off activity and larger and long-term economic projections.

Turning to Slide 6. I'll provide some additional color on the fee income business results. Commercial banking fees grew $450,000 to $20.8 million with increases in cash management and capital markets leading the way, driven by trade swap activity. Consumer banking fees grew $800,000 to $13.3 million led by increases in payments and overdraft fees. As a reminder, in June, we announced some changes to our overdraft products and services. These changes will be effective in the fourth quarter of 2022. They are not expected to have a material impact to 2022 results less than $1 million, and this reduction is reflected in the 2022 guidance provided at the end of my comments.

Wealth Management revenues declined during the quarter to $17.6 million from $18.3 million in the prior quarter. New business activity did continue with all of the revenue decline due to a decrease in the value of managed assets as of the beginning of the quarter. At September 30, the market value of assets under management and administration increased modestly to $12.7 billion, up from $12.6 billion in the prior quarter.

Mortgage banking revenues declined and were driven by a decline in mortgage loan sales offset in part by an increase in gain on sales spreads to 202 basis points during the third quarter versus 190 basis points last quarter.

Moving to Slide 7. In noninterest expenses, excluding merger-related charges, were approximately $162 million in the third quarter, up $14 million linked quarter. This increase was driven by the following factors: additional performance-based compensation accruals of $2.6 million, additional expenses of $3.6 million related to Prudential Bancorp, a $1 million contribution to our Fulton Forward Foundation, An additional calendar day during the third quarter, which added approximately $1.3 million and additional technology costs of $1.7 million due to the timing of certain projects. A material amount of the cost savings in the Prudential Bancorp acquisition will not be realized until later in the fourth quarter due to the timing of our systems conversion. We do expect operating costs to come down in the fourth quarter, and this is reflected in our refreshed guidance at the end of my remarks.

Slide 8 provides more detail on our capital ratios. As of September 30, we maintained solid cushions over the regulatory minimums and our bank and parent company liquidity remain very strong. Accumulated other comprehensive income decreased $139 million during the quarter. This impacted our tangible common equity ratio as well as our tangible book value per share, offset by strong net retained earnings.

Our tangible common equity ratio was 6.7% at quarter end, down from 7% last quarter. Excluding the impact of AOCI, our tangible common equity ratio increased during the quarter to 8.3%, up from 8.2% at June 30. During the quarter, we did not repurchase in common shares. Our $75 million share repurchase authorization remains in place before expiring at year-end. With Prudential Bancorp now completed, we are currently weighing macroeconomic conditions and their possible impact on AOCI and tangible capital. As a result, we will likely pause until deeper in the fourth quarter before we would consider repurchasing common shares.

On Slide 9, we are providing updated guidance for 2022. Our guidance now assumes a total of 125 basis points of additional Fed funds increases occurring in 2022 as follows: 75 basis points in November and 50 basis points in December. Based on those assumptions, our provided guidance is as follows: we expect our net interest income on an FTE basis to be in the range of $770 million to $780 million. We expect our noninterest income, excluding securities gains, to be in the range of $225 million to $230 million. We expect noninterest expenses to be in the range of $615 million to $620 million for the year and note that this operating expense guidance excludes merger-related charges related to the Prudential Bancorp acquisition.

And lastly, we expect our effective tax rate to be in the range of 18%, plus or minus for the year. Many of you look at pre-provision net revenue, or PPNR, as a key metric to assess the profitability of core operations. Our version of this metric is included in the financial tables of our press release. PPNR has increased 25% year-over-year and 27% linked quarter. As a result of our 2021 balance sheet restructuring, earning asset growth over the past year, and core margin expansion from our asset-sensitive balance sheet.

With that, I'll now turn the call over to the operator for your questions. [Norma]?

(Operator Instructions)

And our first question comes from Justin Crowley with Piper Sandler.

This is Frank Schiraldi. Just first, I want to congratulate Phil on his coming retirement as well. Phil, it's been a real pleasure and good luck with everything from here.

Thanks, Frank.

Just to follow up on your comments, Mark, about the growth in the card and payments business. Do you -- could you talk a little bit more about opportunities there and whether you see that as a significant offset to the change in overdraft that will flow through more in 2023?

Yes, I think we do, Frank. When you look at our payments businesses in total, I mean, they show up in a couple of lines on our income statement. But when you look at the merchant and card within commercial banking, as well as consumer card, that's a business that through 3 quarters is $40 million of revenue for us. And so we think going forward, that the changes to overdraft -- again, less than $1 million this quarter, now we're implementing those sort of mid-October. So if you annualize that, that gets to maybe around $5 million impact for next year.

When we made that assumption for that guidance, that was based off of incident levels that were occurring early in the year. And as you saw here in the third quarter, we did have an increase in overdraft [that is] just based on increased incident levels. So I think exactly where that number ends up for next year will be reflected in our 2023 guidance that we give in January. But definitely, as you've seen the momentum in both consumer and commercial card, those are both up between 5% -- well, 4% and 8% over last year, and we think there will be continued growth as the economy continues to reopen.

Okay. Great. So the real driver there, I guess, is overdraft income then, is that right? Not overdraft income, interchange rather?

Correct. Yes, interchange on merchant and then on the consumer side, also based on just incident levels of usage.

And Frank, it's Curt. I would just add too, we're really focused on growing the customer base, adding accounts, adding transactional accounts that add overall growth in all of those transactional fee areas that help offset that lost income in overdraft. If you see linked quarter overdraft was up, it was up because of increased accounts and increased activity within those accounts.

Okay. And then just given your commentary around buybacks and TCE levels, your updated thoughts on further M&A here. Is that something that's also unlikely in the near term, just given the likely impact of marks on things like TCE? What's your appetite there for further M&A?

Yes, Frank, I think it depends on opportunities. Obviously, it is a factor as we look at M&A going forward. But we will look at our good M&A opportunities and work through the math on that. We'd like to continue to be active at least in smaller transactions as we look forward, given some of the dynamics in the marketplace.

Okay. Could you just remind me, is there a threshold in terms of the tangible book dilution that you'd be willing to take with the deal?

Yes. Frank, that really always depends, obviously, on the relative size and then the relative earnings accretion that comes back from that. We've been wanting to announce tangible dilution earn back within 3 years generally. I mean in the Prudential deal, I think ended up being 1.1 years. And -- but out of the gate dilution, it's going to be a function of the size of the deal. If we stick to that sort of $1 billion to $3 billion transaction size, then you're generally going to see dilution in that kind of 1% to 4% kind of range and an earn back within 3 years generally.

And our next question comes from Daniel Tamayo with Raymond James.

(inaudible) just starting on deposit betas. Mark, I get your commentary on expecting those to accelerate going forward. But can you just let us know kind of how you're thinking about what those may be or what the forecasts are internally kind of through the cycle, how you're thinking about those or how we should be thinking about them?

Yes, through the cycle, I think we're going to be in the 30% range, but to get to 30% range from where we are today, depending on how you calculate it, if you're just looking at the quarterly levels that we report, we've gone from 11 basis points to 18 basis points. So that 7 bps on 300 bps of rate moves, that's a beta kind of at least on a quarterly average basis of 2.3% to date. So that would imply that to get to a 30% beta, we'd obviously be ramping that up a lot more in the back half of the cycle. And when I say cycle, I guess I usually think of it as kind of a full year after the Fed would reach a terminal Fed funds rate.

Okay. That's very helpful. And then I guess just not meaningful numbers by any means, but nonaccruals have ticked up for a couple of quarters in a row here. It looks like this quarter, it was in -- primarily in commercial real estate. Just curious if you have any more color on the type of credits there that drove that? And then how you feel about the rest of that book?

Yes. Danny, it's Curt. Just a little more color. As we look throughout this year, we had an uptick last quarter and an uptick this quarter as well. It's really been individual accounts. We have account in health care. We have account in C&I and an office account that are the bigger numbers in there as we look through the overall year, and they tend to be individual accounts with supply chain issues or leasing issues, things like that. So that's really what's driven the nonaccrual increase as we monitor those portfolios.

Office, overall referenced on the last quarter, relationships over $10 million. That portfolio aggregated to about $560 million 65% loan to value. That portfolio stands at $553 million at the end of this quarter. We continue to closely monitor that as leases come up and the composition of that office space changes, we do expect certain accounts to have challenges. So that's the portfolio that we're paying particular attention to.

Okay. That's great. And then lastly, just in terms of reserves. Just curious how you think about the amount of qualitative within that the total bucket in terms of how much maybe wiggle room you'll have to adjust those numbers when we start to get changes in macro forecasts?

Well, yes, Danny, I mean, overall, we have qualitative factors on several items. We've taken since we've implemented CECL, I mean we had [COVID] reserves, related reserves at one point, qualitatives. And currently, we do have an overlay qualitative reserves related to our office portfolio, and we'll continue to monitor that. And if we think it's prudent to add more in future periods, we will -- but based on our best estimate of the economic outlook today and with the overlays that we have as a part of that as of Sep 30, we feel that the reserves are at the right level.

And our next question comes from Chris McGratty with KBW.

Mark, maybe a question for you on just deposits. The $64,000 question at the industry level. Can you just help us dig into what at this point might be risk of outflow or I guess, further migration, just trying to get a sense of balance sheet size?

Yes. So I think our loan-to-deposit ratio, I think it's safe to say that, that's going to continue to drift upward over the next couple of quarters. One of the things, Chris, when you look at the third quarter for us, we have historically have a municipal deposit portfolio that fluctuates between about historically between $1.6 billion and $2.2 billion. So generally, from trough to peak, and you'd see that peak in the third quarter, there'd be about a $600 million increase in September. That was about half that this year.

We felt that we had room to hold the line a little bit more on pricing in that portfolio. And as a result, we did not see as much inflow that we would see in past quarters. Now the $1 million -- you said $64 million, I think it's a million dollar question or more. But is -- how much of that portfolio and others do we see outflows in the next couple of quarters.

As Curt referenced, we did see growth in both consumer and commercial households and both in consumer and commercial checking accounts from June to September. So what we're experiencing right now is not a loss of households or customers we're experiencing a loss of deposits per customer. And that's, again, really to be expected when the government stopped their stimulus and people are spending money again.

Okay. Great. And then maybe a follow-up. What's the -- I guess, what's the monthly or quarterly cash that's coming off the bond portfolio? And is the assumption you just take all of that and put it into the loan book? Or will you maintain the size of the investment portfolio?

Yes. We do let that run down the last 2 quarters. It's not much. It's about $25 million a month as our current cash flow. But our intent would be at least going into the fourth quarter here to continue to allow that to shrink a little bit. And then going into 2023, at some point, I'd expect us to then just grow the portfolio commensurate with growth in overall earning assets.

And our next question comes from David Bishop with Hovde Group.

The funding side of the equation, I think I heard maybe or maybe I misinterpreted on the preamble. Do you see in terms of, as you move into 2023, the funding mix changing in terms of how you view funding anticipated loan growth. Do you do more wholesale or brokered or you see the ability to fund that through sort of the commercial and consumer channels?

I don't necessarily see a large increase in the wholesale deposit channels. But I would expect, if you go back historically to sort of where we were pre pandemic before we received a lot of stimulus money, it's normal for us to either have both FHLB advances of which we've had none for a long a couple of years running now and/or overnight borrowings as well.

Got it. And then as it relates to loan growth, it sounds like commercial line utilization up a little bit. As you look at your crystal ball and talking to commercial clients, as we had in the last quarter of the year and the next year, do you think you'll maintain or see a potential pickup as you move into the Philly region with greater exposure on the commercial side? Or I'm just curious what you think the outlook is there in terms of loan growth on the commercial side heading into next year?

Dave, we look at our pipeline linked quarter comparison, pipelines pretty much exactly the same as it was. We are seeing that pull-through rate of that pipeline, we expect to come down because we have customers saying, "Hey, would it delay this project because of cost, I can't get employees." There's still headwinds in spending on project. So I think our pull-through rate is going to come down. So our loan growth on the commercial side is, I think, going to be consistent as we look forward. with the benefit of increased line utilization.

At this point, really, line utilization has not moved at all, but we're seeing the outflows of average balances on deposits, which customers are going to spend their own money first and then borrow. So that combination of eventual increased line utilization and pretty consistent pipeline origination, we think is going to keep us in a consistent range of organic commercial growth.

And our next question comes from Matthew Breese with Stephens.

I was looking to touch on Mark, your NIM commentary. First, what is kind of the NIM outlook the next couple of quarters? I know you had mentioned that it would expand, but less than the pace we saw this quarter. It's just a pretty high bar considering the NIM was up 50 bps. And then secondly, given your rate outlook, when and where do you see the NIM kind of peaking in '23?

Yes. Yes, great question, Matt. So for the month of September, margin was 360. And month of September, obviously, didn't have the full impact of the last 75 basis point rate increase. So you can expect to see in the fourth quarter, certainly, margin expand some from the third quarter. And again, with our assumption that there's going to be a 75 basis point rate increase coming here in a couple of weeks, first week of November.

As far as when the margin peaks I think that's really -- it depends on your bias of when you think terminal Fed funds are achieved. If we hit a terminal Fed funds rate in the first quarter, which I think the dot plot currently shows that, then I would expect that either deep in the first quarter or sometime in the second quarter, maybe on an individual month basis is when you'd see your max on margin. And then as your deposit beta starts to catch up to that loan beta, which will be tempered somewhat by repricing of fixed rate assets that mature. But clearly, you're going to see deposit betas. We think right now in our own forecast, deposit betas will be faster than loan betas in the back half of '23.

Okay. And then maybe touching on the loan yield side of things. First, could you either provide a blended loan yield for the pipeline or maybe bucket by bucket CRE, C&I, what are you getting for loan yields today? And then the other question I had is if I look at loan yields relative to Fed fund moves, you're looking at about a 75 basis point increase in loan yield versus 300 basis points of Fed hike? It feels a little light to me. When do you expect to see a ramp-up in loan betas and I think 50% of your book is floating rate? When do you expect to get to see the full reprice there?

Yes. So a couple of things on that. So first, with respect to our loan book, right, we have a $19.5 billion loan portfolio now, about $8 billion of that is variable. $1 billion of that was hedged because we had kind of excess asset sensitivity month, 1.5 years ago, so you have about $7 billion, which is about 42% or so of the loan book is truly variable. Then we got another $4.9 billion that is adjustable. And then the remainder, about $6 billion is fixed or about 1/3 of the portfolio is fixed. When you think about -- just to give you a sense on some -- what we're getting on new loan yields coming in for -- I'm sorry, I'm just slipping here.

In the third quarter, overall blended yield for new assets is in the 5% range. And take that going back to where we were in the first quarter, where it was blended closer to 3% for new originations in the third quarter. So we're up pretty significantly if I just take kind of either new originations or increases to existing loans, we've gone from blended around 3% range in the first quarter to blended just a shade under 5% in the third quarter.

Right. Do you have the pipeline yield, understanding what you put on the books this quarter?

Yes, Matt, this is Curt. The going-forward pipeline yield, we really don't track yield in the pipeline until we get to the pricing point of new origination. So the visibility there are credit spreads, we are pretty committed to. So what changes that is just the change in interest rate based on the underlying index. But we really don't track yield till it gets to commitment that is going into then the loan book within that 3 to 30 days.

Got it. Okay. Last one for me is just in a static environment, looking at the AOCI, is the recapture, the $25 million that Chris talked about a month, I'm just curious how much that you look -- you would think you'd get back if nothing else changes on a quarterly basis?

Yes. So we would recapture all of that AOCI hit, which over the last 2 quarters combined, Matt mentioned in our prepared comments, it was 130...

$139 million this quarter.

$139 million this quarter, and it was roughly the same amount, I think, in the last quarter as well. So of that amount, with all other things being equal, you would add back over the duration of the portfolio, which with rising rates, the effective duration of our investment book is going from like 4.5 years to 5.5 years. So all other things being equal, you would recoup that over the 5-year period of time. So that's roughly $50 million a year.

(Operator Instructions)

And our next question comes from Manuel Navas with D.A. Davidson.

I guess on the -- a little bit of a follow-up on the NIM trajectory. Is there a point where you're take more steps to kind of protect it? Is that more of something of a consideration when you feel that Fed fund hits terminal? Or are there some other steps you can take sooner?

Yes. So we are thinking about that. And we are currently looking at and have executed it in a small way on some cashless corridor trades where a combination of a purchase floor and a sold cap. So we are considering that and executing that in a small way to shave some of the edges off of our net interest income volatility and to give us protection on the downside. In addition to that, I mean, we still -- we have several billion dollars of loans today that have floors. The number is about $6.5 billion today that already have floors. So we would be doing this cashless corridor to give us additional protection for loans that do not currently have a floor.

Okay. I appreciate that. As a follow-up, can you kind of describe where you're seeing the most competition in your markets on the deposit side?

Yes, sure. More color on that. So we're really seeing it across the board in each market. We monitor each of the markets very closely. Some markets are more CD driven, some are more money market driven. So we manage that across the board. I would say the markets that are most competitive are the markets that have banks that have a really high loan-to-deposit ratio and really need to grow deposits to fund their loan growth. Those markets tend to be more competitive right now.

And I'm showing no further questions at this time. I'd like to hand the conference back over to Mr. Myers for any closing remarks.

Well, thank you again for joining us. And have a good day.

This concludes today's conference. Thank you for participating. You may now disconnect.