Fulton Financial Corp (FULT) 2023 Q1 法說會逐字稿

Good day, and thank you for standing by. Welcome to the Fulton Financial First Quarter 2023 Results Conference Call. (Operator Instructions) Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Matt Jozwiak, Director of Investor Relations. Please go ahead.

Good morning, and thanks for joining us for Fulton Financial Corporation's conference call and webcast to discuss our earnings for the first quarter, which ended March 31, 2023. Your host for today's conference call is Curt Myers, Chairman and Chief Executive Officer. Joining Curt is 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 tab on our 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 the 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 in Slides 15 through 19 of today's presentation for a reconciliation of those non-GAAP financial measures to the most comparable GAAP measures.

Now I'd like to turn the call over to your host, Curt Myers.

Well, thanks, Matt, and good morning, everyone. Today, I'll provide some high-level thoughts on the banking industry and our business strategy. I'll also give you some perspectives on our balance sheet, liquidity, credit quality and the impact of these items on our first quarter earnings. Then Mark will share more details on our financial results and step through our revised outlook for the remainder of 2023. After our prepared remarks, we'll be happy to take any questions you may have.

Fulton's business strategy is built upon a community banking model, which focuses on taking local deposits, lending locally and banking all segments of our community. The events for the past few weeks have brought into sharp focus the benefits of our model and the value that can be created through cultivating lasting customer relationships.

On that point, I want to thank our team for the remarkable way that they performed this past quarter. The team went above and beyond to truly make banking personal. These past few weeks, we reached out to and talked with many of our customers. We talked to them about our financial position and our stability, and our customer base continue to expand. We now serve more than 507,000 households.

Our industry is built on trust and the Fulton Bank team has been earning the trust of our customers for 141 years. With a long-term strategy at times, it is necessary to make decisions, which may impact near-term results in order to strengthen the balance sheet, improve our liquidity, support our customers and position our company for future success.

So let me talk first about our funding and the balance sheet. You can see on Slide 13 that we expanded the disclosures on our deposit base. We have approximately 734,000 accounts with an average life of 12 years on a balance-weighted basis. This highlights the loyalty, longevity and value created by our stable customer base.

You will also notice on this slide that we bolster our deposit funding by approving the utilization of broker deposits in the quarter. This was done prior to the market disruption as we focused on slowing the increase in our loan-to-deposit ratio to maintain our internal target of 95% to 105% and to make sure we can continue to meet our customers' borrowing needs.

Our balance sheet was also strengthened during the quarter as our tangible common equity ratio improved and our liquidity position increased to over $8.4 billion in committed funds. Early in the quarter, we were buying back shares and utilized $40 million of our $100 million repurchase authorization. In total, we repurchased about 2.4 million shares during the quarter. We paused that program in early March.

Turning to credit. We have provided more detail on our loan portfolio and specifically on our office portfolio on Slides 6 and 7. As noted last quarter, we performed a comprehensive review of all real estate loans, casting a wide net to include any loans within the office component. Under this approach, last quarter, we reported balances of $1.05 billion.

On Slide 6 and 7, we isolated our discrete office-only portfolio, which includes all loans with a primary revenue stream from office rents. As you can see, this segment is a diversified and granular portfolio originated consistently over time, spread throughout the footprint and with very limited large exposures.

As we discussed last quarter, we have a large office loan on nonaccrual status, which was charged down in the fourth quarter. Given the challenged office environment, we have further charged down this loan. Here are a few more details on this credit. The loan was originated in 2019 in the D.C. suburbs. The original loan balance was $42 million, with a loan-to-value at origination of 72%. COVID impacted the rent roll and an underlying ground lease further impacts the marketability of this product -- property. We have decided to further charge down this loan to enable a flexible workout strategy to maximize value. The remaining book balance of this loan is $8 million.

Looking at our overall credit, net charge-offs of $14 million were driven by the $13.3 million write-down on the loan that I just discussed. Our remaining loan portfolio credit performance has been in line with our expectations. NPAs, NPLs and loan delinquency have all declined for the past 2 quarters. Our higher provision for credit losses this quarter is due to changes in macroeconomic factors and our loan growth.

Moving to our quarterly results. Our first quarter earnings were $0.39 per share. Pre-provision net revenue or PPNR, for the first quarter was approximately $108 million, an increase of 51% year-over-year. This was a result of asset growth and net interest margin expansion.

During the first quarter, we saw deposit growth of $667 million and loan growth of $391 million. Fee income declined quarter -- linked quarter and year-over-year as interest rates and seasonal declines impacted several of our business units. We managed expenses prudently during the period as expenses declined $9 million from the fourth quarter.

While our first quarter earnings did not meet our overall expectations, we took the necessary steps to strengthen the balance sheet, improve our liquidity, support our customers and position the company for future success.

Now I'll turn the call over to Mark to discuss our first quarter financial performance and our 2023 outlook in more detail.

Thank you, Curt, and good morning to everyone on the call. Unless I note otherwise, the quarterly comparisons I will discuss are with the fourth 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 $0.39 on operating net income available to common shareholders of $65.8 million. This compares to $0.48 of operating EPS in the fourth quarter of 2022. Those operating results in the fourth quarter excluded $2.4 million of merger-related charges and intangible amortization, recorded during that quarter for our acquisition of Prudential Bancorp.

Moving to the balance sheet. Loan growth for the quarter was $391 million or 8% annualized. This is down from $584 million or a 12% annualized growth rate that we saw in the fourth quarter of 2022. And this percentage decline is in line with what we typically see moving from the fourth quarter to the first quarter.

Commercial loans were $238 million of this increase or about 60% of our overall growth. C&I lending grew $123 million across a diversified customer base. Commercial real estate lending grew $53 million or 3% annualized. Consumer lending produced growth of $153 million or 9% during the quarter. Mortgage lending was still the majority of this consumer loan growth and increased to $144 million, with most of this growth coming from adjustable rate products.

Total deposits increased $667 million during the quarter or 13% annualized. We did see a meaningful shift in our deposit mix during the quarter as our noninterest-bearing DDA balances declined approximately $600 million during the period. Almost all of this shift in deposit mix occurred earlier in the quarter as our noninterest-bearing deposit balances were essentially flat from the end of February to the end of March. We increased our deposit pricing across several products throughout the quarter and we also acquired broker deposits early in the quarter, well ahead of the sector-wide concerns over liquidity.

Our loan-to-deposit ratio ended the quarter at 97%, down from 98.2% at year-end. Our investment portfolio declined modestly during the quarter, closing at $3.95 billion. Putting together these balance sheet trends on Slide 4, net interest income was $216 million, a $10 million decrease linked quarter. Our net interest margin for the quarter was $3.53 versus $3.69 in the fourth quarter. Loan yields expanded 41 basis points during the period, increasing to 5.21% versus 4.8% last quarter.

Our total cost of deposits increased 40 basis points to 82 basis points during the quarter. Cycle-to-date, our total deposit beta is 16% cumulatively. We have previously communicated to you that our deposit beta would accelerate in 2023. With the first quarter beta higher than the anticipated due to the mix shift away from DDAs, we now believe a through-the-cycle deposit beta of approximately 35% is more likely.

Turning to credit quality on Slide 5. Our NPLs declined $7 million during the quarter, which led to our NPL to loans ratio improving from 85 basis points at year-end to 80 basis points at March 31. Overall, loan delinquency was lower to 1.27% at March 31 versus 1.39% at year-end. Despite these positive trends, changes to our macroeconomic outlook and loan growth during the period, led to the increase in our provision for credit losses this quarter.

Our allowance for credit loss as a percentage of loans increased from 1.33% of loans at year-end to 1.35% at March 31.

Turning to Slide 8. Wealth Management revenues were up modestly from the prior quarter at $18.1 million. We continue to build out this business line with new hires. New business activity continued and the market value of assets under management and administration increased to $14.2 billion at March 31, compared to $13.5 billion at year-end.

Commercial banking fees declined $1.1 million to $17.5 million, with seasonal declines in most categories. Year-over-year, commercial banking fees increased $1.5 million or 9%. Consumer banking fees declined $0.9 million to $11.2 million, led by decreases in overdraft fees as a result of changes to our overdraft programs. Mortgage banking revenues declined as expected and were driven by a decline in both mortgage loan sales as well as a decrease in gain on sale spreads.

Moving to Slide 9. Noninterest expenses were approximately $160 million in the first quarter, a $9 million decline linked quarter. As we noted last quarter, several items contributed to the linked quarter decline. Those included higher incentive compensation accruals in the fourth quarter of '22, merger-related charges in the fourth quarter of 2022, which did not repeat in the first quarter, branch closure cost in the fourth quarter of 2022 for the closure of 5 branches this year, 1 of which occurred in March, with the remaining 4 occurring later this month, lower legal and contingent liability accruals in the first quarter of 2023, and lastly, run rate expenses from the 2022 acquisition of Prudential Bancorp now being fully recognized.

Turning to Slides 10 through 12. Given recent industry events, we're providing you with expanded metrics and a discussion on capital and liquidity this quarter.

First, on Slide 10. As of March 31, we maintained solid cushions over the regulatory minimums for all of our regulatory capital ratios. Our tangible common equity ratio was 7% at year-end up from 6.9% -- or sorry, at quarter end, up from 6.9% last quarter. Included in tangible common equity is the accumulated other comprehensive loss on the available-for-sale portion of our investment portfolio and derivatives. This totaled $282 million after tax on a total AFS portfolio of $2.6 billion. Including the loss on our held-to-maturity investments, which was $94 million after tax, on a held-to-maturity portfolio of $1.3 billion, our tangible common equity ratio would still be 6.7% at March 31, which represents over $1.7 billion in tangible capital.

Despite share repurchases during the quarter, a combination of net income and an improvement in accumulated other comprehensive loss during the period combined to produce linked quarter growth of 3.3% in our tangible book value per share.

Slide 12 provides you with an expanded look at our liquidity profile. When combining cash, committed and available FHLB capacity, the Fed discount window and unencumbered securities available to pledge under the Fed's bank term funding program, our committed liquidity is $8.4 billion at March 31. In addition, we maintain over $2.5 billion in Fed funds lines with other institutions. Our uninsured deposits totaled $6.7 billion at March 31 or 31.3% of total deposits.

Excluding municipal deposits for which we hold collateral, this balance drops to $4.6 billion or 21.4% of total deposits. Some investors have started to focus on a liquidity coverage ratio which takes committed available sources of liquidity divided by uninsured deposits less collateral health. Our calculation of this non-GAAP metric at March 31 shows coverage of 185%.

We have also provided you with details of our deposit portfolio, shown on Slide 13. As Curt noted, our deposits are granular with an average balance per account of $29,000 and have an average life of 12 years.

On Slide 14, we are providing our updated guidance for 2023. Our guidance now assumes a total of 1 additional 25 basis point increase to Fed funds occurring in May followed by constant rates through the balance of the year. Based on this rate outlook, our 2023 guidance is as follows: we expect our net interest income on a non-FTE basis to be in the range of $850 million to $870 million; we expect our provision for credit losses to be in the range of $55 million to $70 million; we expect our noninterest income, excluding securities gains to be in the range of $220 million to $230 million. We expect noninterest expenses to be in the range of $645 million to $660 million for the year. And lastly, we expect our effective tax rate to be in the range of 18.5%, plus or minus, for the year.

Lastly, as Curt noted, PPNR for the first quarter was approximately $108 million, an increase of 51% year-over-year as a result of earning asset growth and net interest expansion over the past year.

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

(Operator Instructions) Our first question comes from the line of Daniel Tamayo from Raymond James.

Thanks for all the additional disclosures this quarter, we all appreciate that. I guess my first question, just around the net interest income guidance. Obviously, a big decline from last quarter, and I appreciate the color that you gave in your prepared remarks there, Mark. But I guess if we could just get a little bit more detail on the driver there. How much of it is margin, how much of it is balance sheet, if you're able to give any kind of period-end margin or funding costs there to give us a better sense of how things are trending through the quarter?

Yes. Sure, Danny. Yes. So margin for the month of March was 3.45% during the month. And on the question of whether it was more margin or balance related, our outlook on NII assumes -- we really didn't back off at all from loan and deposit assumptions for the year. So I would say it is primarily the mix shift that occurred in the first quarter. And as I noted, that mix shift largely stabilized in the month of March.

Danny, it's Curt. I would just add that during the quarter, we did both things. We kind of stepped in to assure funding through adding our broker deposits based on the outflows that we really saw from November 15 to about February 15, that have now stabilized. So we had the effect of that, and then we had the effect of repricing. Our current deposits, you see the mix is going from noninterest-bearing to growing money market and the CD portfolio. So we really look at the first quarter is having a big impact because we had both of those occurrence. As we look forward, we're going to continue to have mix changes which should, over time, be more muted than the impact that we saw both things in the first quarter.

Understood. I appreciate that color. And then maybe just your guidance assumes 1 more rate hike and then flat rates. Where does the sensitivity of the balance sheet stand now? And then if we do get rate cuts in the back half of the year, like the forward curve is assuming, how does that impact your guidance?

Yes. We are modestly more asset sensitive from where we were at year-end. But we continue to look at ways to mute that overall asset sensitivity. We have put on about -- a total of about $1.5 billion of either cashless corridors or floors to protect ourselves in a down rate environment. So we are thinking about that possibility. While our forecast assumes no declines, we are starting and put on some protection should rates start to decline more quickly than what our models assume.

Our next question comes from the line of Chris McGratty from KBW.

Maybe start with a balance sheet question since that's top of mind. And Mark, we've seen some of your peers flex the balance sheet up or down based on the pressures that we're seeing on deposits. I guess, number one, with your loan-to-deposit ratio where it is and kind of the environmental changes to deposits, is there a situation where you might consider just slowing. I think your updated NII guide was just a margin play. Would you consider slowing the balance sheet, since I would presume the profitability on a marginal loan is a little bit lower?

Yes, Chris, it's Curt. As we look at future growth, I mean, we want to continue to support our customers and grow on the loan side. And the deposit side, we expect those to be more in line. We really stepped in to slow the pace of increase in the loan-to-deposit ratio. And we think we've done that effectively, and we will look for balanced growth and really be mindful of that incremental margin as we evaluate loan opportunities as we move forward. We're really focused on maximizing risk adjusted return.

Okay. The -- on capital, how should we -- I totally appreciate the pause on the buyback seems like the right move. How do we think about the direction of capital ratios in today's environment?

Yes. We're going to continue to be prudent and grow our capital base as we typically do. We did pause the buyout, we would potentially reevaluate that as we move forward. But first and foremost, we're focused on capital preservation and the improvement with the balance sheet.

Okay. And then maybe just 1 more, if I could go a little bit into credit. Your provision guide, Mark, would suggest that the last 2 quarters' run rates, given the 1 credit you've been talking about, would step down pretty notably. I'm just trying to get a sense of, I guess, why throw out the target that I don't want to say aggressive, but much lower given how uncertain the environment is and investors looking for reserve builds, any thoughts there would be great.

Yes, Chris, as we look at credit, the last 2 quarters, so fourth quarter and first quarter, we had a combined $26 million in charge-offs and $25 million of that was this individual credit that we talked about. As we look at the credit portfolio right now and the forward look on credit and large and/or isolated credits, we feel comfortable with the guidance, and we thought it was appropriate to give guidance. This 1 significant unique credit for us really had a significant impact on the last 2 quarters.

Yes. And what I would also add, Chris, is that as you know, your provision is largely a function of growth. And the loan growth, 8% linked quarter was a solid first quarter for us. Now again, stepping down from a very solid fourth quarter -- but I would anticipate that our first quarter loan growth is going to be higher than what our overall loan growth would be for the full year based on just kind of where you see macroeconomic factors going.

Our next question comes from the line of Feddie Strickland from Janney Montgomery Scott.

Was just curious, is the FHLB borrowing capacity you list on Slide 12, is that what's currently pledged at FHLB? Or is that inclusive of all potential loan and securities collateral on the balance sheet?

That is what we currently have that is committed.

Got it. Okay. And then kind of along that same line, I appreciate the detail on liquidity on Slide 12. But I was curious if you can talk about the bank term funding program and just how you view that versus other liquidity sources. I think it does on the additional -- or you haven't used any of it so far, but was just order of operations, how do you view it?

Yes, yes, correct. We view that similarly to the way we view the discount window, and it's great that it's there, but we view that more as a lender of last resort for us, and we would tap FHLB and other things before we would consider using that.

Got it. And then just 1 more for me would be most of the changes to your 2023 outlook makes sense. But was curious what drove the slightly lower top end on noninterest expense. Are you seeing a little less wage pressure? Just wondering what changed the guide there.

Yes. Yes. So when you just consider the guide to NII and that will result in lower earnings for the year. So a lot of that for us is just going to be lower incentive compensation accruals.

Got it. That makes sense.

Our next question comes from the line of Matthew Breese from Stephens Inc.

I wanted to touch on the office loan. What was the ultimate change in value from origination to now? And was there anything else more idiosyncratic to this particular credit beyond COVID impacts and pardon my ignorance, could you go into color -- provide a little bit more color on the ground lease impacts just feels like a drastic change in valuation from the rough math I have here. And I want to get a sense of that paints a board dire picture for the rest of the CRE office book.

Yes, Matt. So our original value is $58 million, that gives the loan-to-value on the original balance. We currently have it on the books at $8 million. So you're correct, it is a drastic adjustment in value. So a specific impact on rent roll based on COVID, the re-rent ability in that market and then the contributing factor of a land lease is just a fee simple exit in a workout is just easier than somebody jumping into a land lease. So we feel we wanted to get this credit at a book amount that gave us maximum flexibility to maximize the value over time.

Okay. And then stepping back on your -- on your reserve at large, what kind of economic scenario does it contemplate? And could you go through some of the high points, the unemployment, GDP, interest rates. And I just want to get a sense for if that kind of scenario were to play out, what kind of charge-offs are baked into there?

Yes. So we assume the Moody's base case, but then from there adjust for certain overlays for any piece of the portfolio like office where we think that there may be heightened risk.

Okay. And is there an assumed charge-off amount in there that we should be contemplating?

Well, ultimately, charge-offs, I mean, I mean, the model that we calculate every quarter just assumes what the allowance needs to be, right? It doesn't -- I mean -- so you're taking the net present value of all of your future cash flows and all your loans. So you have charge-offs implied in there. But ultimately, you're calculating a balance sheet charge. I can tell you that our 10-year plus net charge-offs going back to -- coming right out of the great financial crisis, averaged about 17 basis points.

Okay. Okay. And this is more of a nitpicky one. Mark, 1 thing I noticed this quarter was that overdraft fees fell down quite a bit, and a lot obviously happened this quarter, so I could make up a narrative on -- for giving a lot of what went on from a consumer standpoint. Should we expect that line item to come back to a normal kind of $4 million run rate, as things get back to normal here?

No. As a reminder, we had made some changes to our overdraft programs. And we had implemented some of those in the fourth quarter and then the remainder of those changes were implemented in the first quarter. So we had highlighted for the last 3 quarters, I think, now that we would be doing that and that it would impact that line item on a run rate basis going forward.

Okay. So the $2.7 million is probably a bit of run rate here. .

For that line, yes, we think so.

Our next question comes from the line of Frank Schiraldi from Piper Sandler.

Just a couple of a balance sheet questions. Just in terms of -- Mark, you mentioned that the mix shift added noninterest-bearing really sort of stabilized through March. I'm just wondering what your outlook assumes? Do you assume basically stabilization in that percentage of total loans? Or do you see it falling further? And if so, what kind of levels do you assume there?

Yes. No. We still assume that there's going to be some rundown of noninterest-bearing DDA, but at a slower pace than what we saw from sort of Thanksgiving through the end of February.

Okay. And -- if you could just remind what are your loan growth? You talked about the 8% this quarter and kind of maybe slowing from there. So is that sort of still mid-single digits kind of thinking for the full year?

Yes, Frank, we're looking at a pretty typical year for us 4% to 6% loan growth, certain categories we do expect to moderate as we move forward. So that's a pretty consistent organic loan growth rate for us, and we would expect to be in that 4% to 6%.

Okay. And then on the credit side of things, just on that 1 property. Is there any -- sorry if I missed it, but is there any recent appraisal on that property, the value of which you can share with us?

Yes. Current appraisal on it is roughly $15 million, but it has come down over the last year, and we are looking at just conservative book balance to give, again, us maximum flexibility as we look forward. But our current appraisal on that property is $15 million.

Okay. As far as the ground lease is concerned, I mean, I guess that appraisal takes that into account. And I know those leases are generally pretty long -- very long term. So just wondering the timing of any sort of lease termination there or any buyouts coming up that you could share with us as it pertains to the ground lease?

Yes. So the appraisal does contemplate the ground lease. The ground leases long term in order to keep the property available that the building is located the 1, so we usually require the ground leases to be long term. Termination or dealing with the ground lease or buy out of the ground lease would be -- would potentially be part of the workout plan going forward, but it does create unique circumstances. Just so you all know, we only have 1 other in the entire portfolio that's on a ground lease and we're very comfortable with the dynamics of that loan. So it is a very discrete and unique attribute given the overall portfolio.

Okay. Great. That's helpful. And then just lastly, on the LTVs, you gave up the office book, a weighted average of 60%. And you say in the deck that's as of most recent appraisal. Can you talk a little -- at all about what percentage of these underlying buildings have been reappraised call it, last year or so or since the pandemic?

Well, appraisal policy and how we work through that from a -- we're focused on getting the risk ratings accurate. We have a very disciplined approach to that. We would get updated appraisals, if there is a credit reason to get that where it's a rent change or some change within the dynamics. So that would be what would lead to in a new appraisal. So the weighted average of all the appraisals is portfolio. So some of those are at origination, and then we would get updated appraisals as the credit would need those. Our range in those appraised values are 35% to 75% with that average then that we have on the investor deck on a weighted average basis.

Okay. And does that LTV -- weighted average LTV change markedly at all for -- if I just look at the larger size, either above $10 billion -- $10 million or above $20 million those LTVs pretty -- the weighted average is pretty consistent?

Yes. The larger the credit, the more conservative we are on loan-to-value and loan-to-cost. So if anything, they would be less.

Our next question comes from the line of Manuel Navas from D.A. Davidson & Co.

So that NIM that was around 3.45% in March, does that have some stress on it? Or is that a good place to start going into April going forward. I know some of the movements in the mix shift happened earlier in the quarter. Just wondering how much of leeway on around that 3.45% in March, we should use going forward?

Yes. I think 3.45% is a good place to start from. And I mean, we had -- we did see our noninterest-bearing DDAs stabilize a little bit in March. As I mentioned, we still anticipate that there's going to be some runoff in that going forward, but at a slower pace than what we saw -- and in the month of April, you would also then see the full effect of the 25 basis point rate increase that occurred in March.

Okay. That's helpful. And going forward, as loan and deposit growth is a little bit more balanced. And it looked like borrowings were already coming down by end of quarter versus the average is most incremental dollars going towards borrowings? Can you just kind of talk about that mix of borrowings versus maybe brokered CDs, kind of thoughts going forward there?

Yes. We thought it was important in early March to just really have a stabilized diversified funding base. So that led to wanting to tap the broker market, which we actually tapped in largely in February. But going forward, I wouldn't anticipate us needing to tap the brokered CD markets and instead, we're just going to focus on some of our internal rate products and promotions that we have in place to fund loan growth in the future.

And then -- in your disclosure that uninsured deposits kind of declined, I guess, around $300 million. Was that just through normal exits, loss of market share? Or did you use mitigation programs like the InterFi Network, ICS. Can you just talk about that for a moment?

Yes. It was a little bit of InterFi deposits grew a little bit, but some of it was just kind of normal seasonality of some of those larger customer bases. But then we typically see some rundown in the first quarter in some of our uninsured deposits.

That actually probably brings up my last question. Is most of the mix shift customers moving things around within the firm. You're not losing -- you're not seeing the customers exit, things like that, just touch on that?

No. We saw a net account and household growth in the first quarter. So I would say it is largely more -- some of them taking money out of either low or 0 cost money and placing them with us, with other products. In some cases, you do have them going to other banks for higher rate products. But then in some cases, our promotions are winning new customers.

Okay. That's helpful. And the age of your customer base across accounts, that was really good disclosure. Just kind of on a separate topic, what would kind of drive you to restart buybacks?

Yes. As we look at capital, as things settle down, we get more clarity as we move forward. We have $60 million remaining in that authorization. We would utilize that if it's appropriate. But in this environment, we're still looking at capital preservation and stability first, but we feel we are in a good position and at some point, would reengage in that activity.

Our next question comes from the line of David Bishop from Hovde Group.

A quick question on maybe the -- turning the prism a bit on the loan side of the equation. Just curious what you're seeing in terms of new origination yields this quarter and maybe where you see those yields trending to?

Yes. So it's obviously going to vary, David. This is Mark, between product class. On the commercial side, our C&I in the first quarter, so we're kind of hovering right around 7% for new originations there. A little bit off that number, maybe 25 basis points or so off that number on commercial real estate.

And then on the mortgage side, we're going to average for our ARM production, we're going to average in kind of the 5.5% to 5.75% range for adjustable rate mortgages right now. And then other consumer classes depending whether it's indirect versus other consumer classes are going to be higher.

Got it. And in terms of sort of a holistic question there in terms of as you look at the loan pipeline and ability to pass on the higher pricing, higher yields, is that impacting the pipeline or the quality of loans or the number of loads that sort of in cash flow, debt service coverage, loan-to-value in terms of what's happening from a broader macro environment? Is it I guess another way questioning is, is it getting tougher to find quality loans that sort of pass the credit underwriting and pricing test.

Yes. It's Curt. We do not change our credit standards. And if anything, are tightening credit standards. So we don't allow that to happen -- from a pricing standpoint, we're really focused on risk-adjusted returns, and we need to get the appropriate pricing given the risk in each of these buckets as we move forward. So we will see pricing continue to move up to get our risk-adjusted return, and we will hold or even tighten credit standards in certain buckets.

Got it. And then 1 final question. Just curious if you can disclose the broker deposits raise. Just curious if you had any sort of color you could add in terms of duration and average cost of those funds?

Yes, sure. Yes, we raised them in 3 separate tranches throughout the quarter. And we specifically went out of market. So these are retail customers, but they are not in our 5-state footprint at all. And the coupons of those and duration, they are going to mature in early 2023. So these are all generally between 9 and 13 months with coupons for each of the tranches between 4.70% and 5.30% for the last tranche, which was only about $200 million. So the majority of it came in a little bit below 5%.

I would now like to turn the conference back over to Curt Myers for closing remarks.

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

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