Fulton Financial Corp (FULT) 2022 Q1 法說會逐字稿

Good day, and thank you for standing by. Welcome to the Fulton Financial First Quarter 2022 Results Conference Call. (Operator Instructions) Please be advised this call is being recorded. (Operator Instructions) I would now like to hand the conference over to your host today, Matt Jozwiak, Director of Investor Relations. .

Good morning, and thanks for joining us for Fulton Financial's conference call and webcast to discuss our earnings for the first 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 under the Presentations page under the Investor Relations tab of our 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 and 11 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, and good morning, everyone. After I share a high-level overview of the quarter, Curt will discuss our business performance, and Mark will share the details of our financial performance and then we would be happy to take your questions. We were pleased with our performance during the first quarter of 2022. We saw solid loan growth in both our consumer and commercial lines of business, despite a very volatile rate environment. And once again, our wealth management business produced record income. Expenses declined in the first quarter, and you'll hear more detail on that in a few minutes.

We made several announcements in the first quarter. First, we announced our intent to acquire Prudential Bancorp, Inc. later this year. This will be our first bank acquisition in 16 years, though we have acquired some -- although we did acquire some small wealth management firms in recent years. As I've shared in the past, it is Fulton's intend to once again be an acquirer of banks that fit our strategy, our geography and our culture.

The Prudential acquisition meets all 3 of these objectives. As you know, we have identified Philadelphia as a market that offers a lot of opportunity for us, and we have been steadily growing our presence there over the past few years. With the Prudential acquisition, we look forward to bringing our products, expertise and community-oriented style of banking to more of Philadelphia's neighborhoods.

Also during the quarter, we raised our quarterly common stock dividend to $0.15 per share, a $0.01 or 7% increase over the previous quarter. And in March, the Board approved a new stock repurchase program, authorizing us to repurchase up to $75 million of shares of our stock. Though we are currently not able to repurchase stock due to the upcoming Prudential acquisition, we look forward to pursuing this opportunity later in the year if it makes financial sense to do so.

And lastly, in March, I announced my intent to retire as Chairman and CEO of Fulton, effective December 31, 2022. I've shared that it has truly been a privilege and a pleasure to be part of this company for the past 43 years. I look forward to continuing to serve on the holding company and bank boards of directors once my staff rule comes to an end. And I'm very pleased that the Board has announced that Curt Myers will succeed me assuming the role of Chairman, CEO and President, effective 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. So now I'll turn things over to Curt to discuss our business performance.

Well, thank you, Phil, and good morning. As Phil mentioned, we were pleased with our performance in the first quarter. So let me share a little detail with you on several key areas. Loan growth exceeded our internal expectations for the quarter. Total loan growth was approximately $290 million or about 6.4% annualized when excluding PPP loans. We were also pleased with the diversification of our loan production as most areas experienced solid growth.

As a reminder, the loan growth percentages I referenced are on an annualized basis. We experienced strong growth in C&I lending, residential mortgage commercial and residential construction, leasing and also with our student lending fintech partnership. Our commercial mortgage portfolio grew modestly as we saw originations decline from a seasonally high fourth quarter.

Turning to provide more detail on consumer lending business. Consumer loan balances grew $120 million or 8.5%. This was primarily driven by 10.4% growth in residential mortgages. We also saw double-digit growth in residential construction and our student lending portfolio. Residential mortgage originations for the quarter were $465 million, a decrease of 20% from the prior quarter and a decrease of 35% from the prior year. Purchase originations of $353 million accounted for approximately 76% of total residential mortgage originations during the quarter.

At March 31, the mortgage pipeline was $439 million, up 18% from year-end as we approach the traditional home buying season. Residential construction mortgages continue to grow double digits and contributed nicely to our overall loan growth. This quarter, residential construction growth was $16 million or 31%. This growth is seasonal and is in line with our expectations.

As I mentioned in the past 2 quarters, our recent fintech partnership for student loan refinance business continues to progress nicely with $11 million of originations during the quarter. Now let me provide a little more detail on commercial lending. The commercial loan portfolio grew $170 million or 5.5%, a seasonally strong quarter. C&I loan growth accelerated, increasing $85 million or 8.8% versus 4.5% growth last quarter. Increased originations as well as increased line utilization combined with a decline in paydowns drove this growth. I would note that we have seen increases in line balances for the third consecutive quarter.

Commercial line utilization ended the quarter at 23%, up from the low point of 20% in the second quarter of 2021. This has generated approximately $150 million in growth in outstandings over the past 3 quarters. As a reminder, commercial line utilization was 32% as of the first quarter of 2020. As a result, we see growth opportunity as line utilization migrates to more historical levels. Also contributing nicely, commercial construction loans grew $54 million or 23%, driven by increased advances during the quarter.

Commercial mortgages grew at a modest $10 million or 0.6%. Originations declined from a seasonally elevated fourth quarter, however, remain in line with the first 3 quarters of 2021. Offsetting the seasonal decline in originations was an equal decline in prepayments and paydowns. After 2 strong quarters of originations, our commercial pipeline continues to rebuild and remain solid. Overall, we were pleased with our loan growth to start the year.

Turning to deposits. We saw a modest decline in deposits for the quarter, driven by a decrease in certain interest-bearing products, partially offset by continued growth in noninterest-bearing products. Total deposit balances declined $32 million or 0.6%, and our mix continues to migrate toward lower cost or noninterest-bearing products.

During the quarter, we maintained our cost of deposits at 11 basis points and our excess cash position gives us strategic flexibility as we consider multiple rising rate scenarios. Moving to our fee business. We were pleased with many of our business lines. Our wealth management business delivered another record quarter, and cash management revenues continue to grow nicely. Despite these positive results, we did experience pressure in residential mortgage banking and capital markets. First, our wealth management business continues to grow. Our strong sales effort, client retention and the cumulative effect of several small acquisitions continue to drive customer growth.

Despite these efforts, we did see assets under management and administration declined as markets have declined on a linked quarter basis. Assets under management and administration declined to $13.8 billion, down from $14.6 billion at year-end. However, they remained up from $13.1 billion at the end of the year ago period.

Turning to our commercial lines of business. Total fees declined $2.5 million, down 6% versus the year ago period. This is driven by seasonality and some transactional businesses. Cash management grew 8.4% linked quarter annualized and was up 10% versus the year ago period as we see business activity continue to expand. Offsetting cash management was near-term pressure in capital markets or our commercial swap fee program, lower SBA gain on sale fees and seasonal declines in merchant fees.

Capital markets and SBA revenues will exhibit modest volatility throughout the year. Swap fees were impacted by a decline in activity as some customers have turned their preference to direct fixed rate loan structures and this pressures our swap income. SBA gain on sale fees declined linked quarter after coming off a record '21. However, our SBA pipeline remains solid.

As a reminder, this SBA income is separate from the PPP program and is generated by our dedicated SBA team.

Turning to our consumer banking line of business. We did see pressure during the quarter, led by a decline in mortgage banking revenue. While residential mortgage applications and the pipeline were up during the quarter, originations and gain on sale margins declined, leading to a quarter-over-quarter decline in fee income. With interest rates moving higher, the remaining portion of our mortgage servicing rights valuation allowance was reversed, and Mark will talk about that a little later.

Overall, residential banking fee income was down $2.7 million linked quarter. In addition to mortgage banking fee income, consumer transactional fees were down 3.1% linked quarter or 12.7% annualized as customer activity experienced and expected seasonal decline. Finally, moving to credit. Asset quality continues to remain solid. Delinquency remains low despite a modest uptick during the quarter. Non-performing loans remain within a narrow range, and we experienced net recoveries for the quarter.

Net recoveries of $1.1 million in the first quarter compares to $3 million or 7 basis points of annualized net charge-offs in the fourth quarter of '21 and 7 basis points of net charge-offs for all of 2021. Our first quarter provision for credit losses was a negative $7 million versus a negative $5 million provision in the fourth quarter of 2021. This is our fifth consecutive quarter of negative provision.

The allowance for credit losses, excluding PPP loans, stands at 1.33%. As always, our allowance for credit loss trends could change in future periods based on new loan origination volumes, loan mix, net charge-off activity and longer-term economic projections. Overall, our credit outlook remains stable with no material change in our current trends.

Now I'll turn the call over to Mark to discuss our financial results and our outlook in a little more detail.

Great. 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 2021. Starting on Slide 3. Earnings per diluted share this quarter were $0.38, on net income available to common shareholders was $61.7 million. This is up from $0.37 in the prior quarter. Our first quarter performance included a decline in net interest income and noninterest income, a negative provision for credit losses and a decline in operating expenses, and I'll cover each of these in more detail later in my comments.

Moving to Slide 4. Our net interest income was $161 million, a $5 million decline linked quarter. This was primarily due to a $6 million linked quarter decrease in fees earned from PPP loan forgiveness. This decrease was offset by solid loan growth, a modest increase in yields on earning assets and a modest decline in interest expense.

With respect to our PPP program, at the end of the fourth quarter, we had $301 million of outstanding PPP loans and $8 million of unearned fees. During the first quarter, PPP loan forgiveness was $137 million, and the fees earned on that were $4 million, down from $10 million in the fourth quarter. So at March 31 then, we have $164 million of PPP loans still in our books with approximately $4 million of loan fees yet to be recognized.

Turning to the investment portfolio. Balances grew modestly during the period, increasing $121 million to end the quarter at $4.3 billion. With a sharp increase in rates, we did put some of our excess cash to work. However, we remain measured in our approach to deploying excess cash into investment securities.

Turning to deposits. Total deposits declined approximately $32 million on an ending balance basis. As Curt noted, our cost of deposits for the quarter remained low at 11 basis points. During the quarter, we saw increases in noninterest-bearing and savings deposits, offset by decreases in certain interest-bearing categories as well as signed deposits for the net decline of $32 million.

Our ending loan-to-deposit ratio increased from 84.9% for the fourth quarter to 85.8% in the first quarter, primarily due to increased loans outstanding. Our net interest margin for the first quarter was 2.78% versus 2.77% in the fourth quarter. The 1 basis point increase linked quarter resulted primarily from an improvement in the mix of earning assets, interest-earning assets, higher loan yields and stable deposit costs, partially offset by a decline in PPP loan fee recognition.

Turning to Slide 6, our noninterest income. I'll provide some additional detail on the business results Curt just discussed. Wealth management continued to deliver a good quarter despite volatility in the market. Our mortgage banking revenues declined and resulted from a decrease in loan sales and a decline in gain on sale spreads, which were 161 basis points this quarter versus 174 basis points last quarter.

We also recorded a reduction to the valuation allowance for our mortgage servicing rights asset of $600,000 due to higher interest rates and slower prepayment fees. Our MSR asset was $35.6 million at March 31. At quarter end, there are no mortgage servicing rights valuation allowances remaining. Other fee income decreased $4.2 million on a linked quarter basis. Last quarter included gains of $3.8 million from equity method investments as our investment in a fintech fund generated very strong returns during that quarter.

Moving to Slide 7. Noninterest expenses were approximately $146 million in the fourth quarter, down $8 million in linked quarter. This decline was driven by the following factors: Total salaries and benefits were down $1 million linked quarter, driven by a certain onetime incentives and bonuses in the fourth quarter totaling $3.6 million. This was partially offset by increases in first quarter salary costs, payroll taxes, increased incentive compensation and lower FASB 91 deferrals due to a declining mortgage banking market. Also contributing to the linked quarter decline in expenses were lower outside services costs due to the timing of certain technology projects in the fourth quarter, resulting in a $1.5 million linked quarter decline.

And lastly, we reported a $4.7 million decline in other expenses, primarily due in part to a $2.2 million decrease in charitable contributions linked quarter and the net gain on fixed asset sales of $1.5 million recorded in the first quarter. Slide 8 provides more detail on our capital ratios. At March 31, we maintained solid cushions over the regulatory minimums that our bank and parent company liquidity both remain very strong. With a significant increase in interest rates during the quarter, accumulated other comprehensive income swung from a positive $27 million to a negative $159 million during the quarter.

This swing impacted both our tangible common equity ratio as well as our tangible book value per share by 68 basis points and $1.16 per share, respectively. During the quarter, we did not repurchase any shares. And as Phil mentioned, our Board approved another $75 million share repurchase authorization expiring at year-end. Given the pending acquisition of Prudential Bancorp, we won't be repurchasing any shares prior to the closing, which is anticipated to be in the third quarter.

On Slide 9, we're providing updated guidance for 2022. A lot has obviously changed in the macroeconomic environment over the past 3 months. Our guidance now assumes a total of 150 basis points of Fed funds increases occurring as follows: The 25 basis points previously announced in March, 50 basis points in May and 25 basis points in each of June, July and September.

Based on this rate forecast, our revised guidance is as follows: We expect our net interest income on a nontax equivalized basis to be in the range of $690 million to $705 million. We expect our noninterest income, excluding securities gains, to be in the range of $225 million to $235 million. We expect operating expenses to be in the range of $595 million to $605 million for the year; and lastly, we expect our effective tax rate to be in the range of 17% to 17.5% for the full year.

This guidance excludes the impact of the Prudential transaction, which is expected to close in the third quarter. We will incorporate the impact of Prudential in future guidance that we provide. 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. We'd also like to point out a couple of additional items for you to consider as you assess our PPNR results.

Our PPP fees earned have declined $6 million from the fourth quarter to the first quarter. MSR valuation allowance adjustments resulted in an additional $600,000 decrease in the valuation allowance in the first quarter. And when removing the impact of these 2 items, we believe our PPNR has shown improvement since the first quarter of 2021 as a result of our first quarter 2021 balance sheet restructuring, earning asset growth over the past year, core margin stabilization and fee income business growth.

Additionally, our asset-sensitive balance sheet is positioned to benefit from anticipated rate increases in 2022 and beyond. With that, I'll now turn the call over to the operator for questions. Justin?

(Operator Instructions) And our first question comes from Russell Gunther from D.A. Davidson.

I wanted to follow up on the loan growth discussion, very healthy result this quarter and diversified As you guys look out through the remainder of 2022, could you give us a sense for how you expect that to progress both from a mix and magnitude perspective?

And then just bigger picture, kind of characterize the operating environment from a growth perspective, more stable? Or is there any concern for softness in the back half of the year?

Yes. Thanks, Russell. This is Curt. I'll answer that question for you. So as we look at our loan growth, we were happy with the first quarter loan growth. I think we're off to a good start. As you look at the consumer business, I think consumer business will be a steady growth contributor for the remainder of the year. We see it becoming more diversified. We had really relied on residential mortgage growth in consumer, we see that becoming more diversified. And we had less prepaid headwinds as we look forward.

So we think consumer will be a good steady performer as we look forward.

On the commercial side, we have good origination activity. Again, last quarter, our pipeline is stable even with that good origination activity. The growth is diversified in geography and in product. So we're encouraged by that, and we do expect that to continue as we look at our pipeline. And we have the added tailwind of line utilization. We referenced those in the script, and we think that's going to continue to be a growth supporter as we look forward.

The final thing I'd say on loan growth is we've been adding talent. So we added a tech -- a team in D.C. We've added a government services team, and we added the team in Southeast PA. So with those additions that are pretty recent, they're going to give growth opportunities in that second half of the year. So we think we're positioned well in our outlook that we can meet the targets that we have set out.

Okay. Great. And then just one more question for me on the fee income guidance and the revision there. Could you just give us a sense in terms of what's driving that dial back expectations? And where you expect the fee income growth to be more concentrated this year?

Yes. It's Curt again. I'll let Mark follow up. But 2 key headlines items are: The swap business, given the rate environment, it's going to be choppy. We were expecting increases in that year-over-year, and we're probably kind of flat to last year, hopefully flat to last year's, that's a headwind for us; and then the mortgage business. Rates went up quicker than we thought. The mortgage business in the first quarter were softer than we thought. But we have a purchase money driven shock, and we think we can continue to perform going forward. Those are the 2 key headwinds that we have in fee income.

And our next question comes from Frank Schiraldi from Piper Sandler.

Just wondered if you guys could -- to follow up on the guide. Talk a little bit about the updated expense guide. Is that just strictly inflationary pressures? Or what's kind of the driver there for that adjustment for the full year, especially given the good start or the strong start on expenses in 1Q?

Yes. I would say, Frank, it's almost entirely related to inflation and the effects of that in multiple categories. That will be it.

Okay. And just thoughts on how the near-term rate hikes play out in terms of the deposit picture in terms of balances and deposit costs. Mark, you mentioned the mix shift in the quarter on the deposit side. Any updated thoughts as to betas here and/or potential run-off in the coming quarters?

Yes. We saw in the first quarter, Frank, even a stronger shift than we had anticipated to noninterest bearing. So we have a much higher percentage of noninterest-bearing DDAs than we had, and if you go back to kind of 2015 and the start of the last up rate cycle. So when you combine a higher percentage of noninterest-bearing DDA and also just still sitting generally right now, somewhere in the $800 million range day-to-day and overnight cash, it gives us strategic flexibility as we think about what those betas will be.

But I mean, at the end of the day, we're a customer-centric organization, and we're going to make sure that we increase rates in a way that's going to corn on to all of our key customers, but we do expect betas. If you look through the last cycle, our beta was just a little bit north of 30% through the cycle. And we think that there's going to be opportunities at least early one here to be at a slower pace than what we were in the last up rate cycle because of the composition of our balance sheet.

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

Just first, I wanted to confirm what you guys said that the guidance on -- in the slide deck does not include any of the numbers from Prudential. Is that -- did I hear that correctly?

Correct, Danny, it does not. Yes, we'll be providing those next quarter. We'll start incorporating that into the guide.

Got it. Okay. So adding on a quarter and change whenever that deal closes, has anything changed at this point in terms of -- I know you're going to provide guidance next quarter, but has anything changed with the way you're thinking about accretion related to the deal, with the rate environment changing?

No, no, it hasn't, Danny. We're -- our existing guidance we gave back when we announced the deal for the relative accretion of that acquisition has stayed the same at this point.

Got it. Okay. And then just maybe a clarification on the NII guidance. Does that include -- you still got excess cash levels, you talked about that giving you flexibility, they did come down in the first quarter as well. Does the guidance include a normalization of excess cash levels at all? Or how is that included in the guidance?

Yes. So in that guide does assume that there's going to be some level of normalization. I would say that by the end of this year, we still have excess cash than what we held historically sort of pre-pandemic. But it does assume that there would be a gradual normalization, which is really more a function of loan growth. And if we have continued loan growth, then obviously, we'd rather put our cash to use that way than in securities or over in cash.

Okay. Great. And then finally, just on reserves, just curious what your updated thoughts are on where those may move from here given expectations for higher rates and potentially higher losses down the road?

You're talking about loan losses, is it correct? Danny, still on the line? We lost him.

He is not on the line.

We lost him. All right. Yes, yes. So for others who might be interested in his question, so we don't give specific guidance on our loan loss provision. But obviously, we've had a very benign credit environment. And as folks know with CECL, the amount of provision that we have on the books today in theory is a sufficient allowance for credit loss to cover all credit losses that we may incur in the future.

So our future, unless that economic outlook changes, then the only thing that would really impact our provision levels going forward would be loan growth.

Our next question comes from Chris McGratty from KBW.

Mark, I want to just to revisit the balance sheet growth for a second. Obviously, deposit projections are very hard, given all the dynamics out there today. How should we be thinking about the Fed taper and just the size of earning assets? I'm trying to get a sense of appetite to add bonds, reduce cash. I know it's a function of deposit growth. But if I just took a step back and think over the next 12 to 18 months, what's the size of the earning asset base in your projections?

Yes. So as you think of overall earning assets, I mean, for us, our overnight cash position at some point over the next 6 to 8 quarters is going to be entirely replaced by loans, right? So I mean, that's really where our investment portfolio, we've stayed pretty consistent over the years at roughly 15% of our total assets. I don't see that changing more than a couple of percentage points. And we're willing to be patient to allow that to come back into loan growth as opposed to just grossing up the loan portfolio right now.

Okay. And then in terms of what you may be buying in the bond book, what kind of yield pickup are you experiencing relative to the blended yield in the first quarter?

In the 40 basis point range.

And our next question comes from Erik Zwick from Boenning and Scattergood.

First one for me. Wondering if you can just remind me in terms of how you kind of bill or charge for the wealth management fees, just given the decline in AUM balances quarter-over-quarter? Are those built in arrears or kind of based on average balances? Just trying to get a sense of where that might trend going forward given kind of recent market dynamics.

Yes, Erik, it's Curt. So we have different business lines in wealth management, so the billing is a little different. But a bulk of our business is recurring fee based on assets under management levels and portfolio levels. So it's a good solid business on recurring fees. And we typically bill quarter end looking forward. So we would see assets down a little bit. There'll be a little pressure on revenue as we look forward. But again, we continue to grow the business, customers and adding assets, too.

Appreciate that color there. And just kind of a broader question, not specific to this quarter's earnings or the outlook, but curious if you could provide some commentary into your current ESG positioning and initiatives given the proposals for enhanced regulatory disclosures?

Yes. So we're working very hard at understanding what reporting requirements will have going forward. We will be over the next couple of weeks issuing our first corporate social responsibility report. We are paying a lot of attention to being -- managing that appropriately. Internally, we have climate test force working diligently so that we can navigate the business impact as we move forward. So we feel we are making the effort necessary to understand where we need to be and to make positive impact.

And our next question comes from Matthew Breese from Stephens Inc.

Just on the NII forecast. So you now have 125 basis points of additional Fed hikes in your model through year-end versus 50 basis points last quarter. And it feels very much like today, the Fed funds could increase as much as 200, 220 basis points by the end of the year. So if we were to get more than you expect, 200 versus the 125, how does the NII outlook change?

Well, it would definitely go up. And for us, then obviously, as each incremental 25 comes on, you would probably likely see a little bit more of a deposit beta corresponding with that. But the rough numbers, Matt, which I think you're aware, is we have roughly $10 billion of loans that are tied to either prime LIBOR or SOFR that are unhedged. We have about a little over $1 billion, but then $1 billion that are already hedged back to fixed. So you take that incremental impact on NII, that's about $25 million give or take for each 25 basis point rate move, offset by whatever that deposit beta would be.

Okay. And has there been any movement in spot deposit prices yet? Have you changed your offered rates or core base rates at this point?

No.

Not in any product.

Okay. In your prepared remarks, you had mentioned historical C&I utilization rates. I think you mentioned 32% versus kind of like the low 20% range today. If you were to get back to 32%, what would that be on today's book in terms of incremental loan growth? And over what kind of time frame do you think we can get back there?

Yes. So it's probably north of $500 million, and 2 things. So 23%, historical normal average about 32%. But over the past couple of years, we've really grown the business as well. So our commitment and line commitments are up. So we think we have upside to get to historical average between $500 million and $700 million from where we stand right now.

The pace that, that will occur, we do think that will accelerate. We've pretty much moved up 1% each quarter, the last 3 quarters. And we do think that, that pace will increase, but we're not sure how much that will increase. But I think we will see an increasing pace over the next quarters.

Okay. Going to the mortgage business, how much of the $465 million originated this quarter was retained versus sold? And has the recent hike in mortgage rates changed thinking at all in terms of what you're originating for sale versus holding on the books?

Yes, let me grab the numbers there. Yes, yes, I just need to look here really quickly. I can't find it at my fingertips. But I can tell you that as we think about how much we're going to retain, there was only a nominal amount of sort of saleable product that we kept on the books this past quarter. It was roughly $30 million. So -- but we would consider, obviously, with the increasing commercial business that over time, it might make more sense for us to just sell some of that remaining product as well, that's currently under consideration.

Okay. Last one for me. You touched on the reserve, but I was just curious in terms of the CECL process. Obviously, this quarter, there were 2 kind of opposite direction items. You had the Russia-Ukraine conflict increasing, but you also have COVID items declining. Could you just talk about the inputs and outputs? And how those items impacted the thought process around reserve and provisioning?

Yes. So we like a lot of midsized banks relying on Moody's and for their base economic forecast. So Moody's obviously has a team of economists who think about all of those different macroeconomic factors, and that produces their base output as well as their different stress scenarios that we look at as well.

And our next question comes from Dave Bishop from Hovde Group.

Mark, I think you talked about some of the targets longer term in terms of the investment securities portfolio, maybe centering around that 15% range. How should we view about the excess liquidity at this point in cash and overnight liquidity from a dollar perspective asset basis where you see that sort of normalizing over the longer term?

Yes. Pre-pandemic, David, we were between $50 million and $100 million a night is kind of where we like to run our overnight cash. That number has been as high, during the pandemic is $1.3 billion, $1.4 billion. It's down right now at about $800 million. And again, we've been reluctant to go much above that 15% of assets in the investment portfolio.

So we've just been sitting that in overnight cash, which is obviously earning a little bit more today than it was a month ago. But we're going to stay patient. And with the forecast for loan growth here over the next 3 quarters, what I'd expect to see by the end of the year, we'd still be a little bit higher than that historic level. But then sometime in '23, we probably revert back to historic levels.

Got it. And then one final question. I think you noted in the preamble the increase in cash management fees up nicely on a year-over-year basis. Any change in terms of sort of fee structure or pricing on that product? Or does that just represent just better commercial account penetration?

Yes. It's really growth in customers and as well as just growth in activity.

And I am showing no further questions. I would now like to turn the call back over to Phil Wenger, CEO, for closing remarks.

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

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