OFG Bancorp (OFG) 2024 Q1 法說會逐字稿

Thank you for joining OFG Bancorp's conference call. My name is Jamie, and I will be your operator today. Our speakers are Jose Rafael Fernandez, Chief Executive Officer and Vice Chair of the Board of Directors; Maritza Keith, -- I'm sorry, apologies, Maritza Arizmendi, Chief Financial Officer, and Cesar Ortiz, Chief Risk Officer.

A presentation accompanies today's remarks. It can be found on the homepage of the OFG website under the first quarter 2024 section. This call may feature certain forward-looking statements about management's goals, plans and expectations.

These statements are subject to risks and uncertainties outlined in the Risk Factors section of OFG's SEC filings. Actual results may differ materially from those currently anticipated. We disclaim any obligation to update information disclosed in this call as a result of developments that occur afterwards. (Operator Instructions) After the speakers' remarks, there will be a question and answer session. Instructions will be given at that time. I would now like to turn the call over to Mr. Fernandez. Please go ahead.

Thank you for joining us. We are pleased to report our first quarter 2024 results, which reflected good, solid performances across all our businesses. Growth was in line with both our short and long-term strategies and plans.

Our detail first strategy continues to drive customer acquisition and engagement. Business activity, consumer liquidity and employment levels in Puerto Rico continue to do well in a strong economy. And our (technical difficulty) interest rate environment. Thanks to the entire team for their hard work and commitment, helping our customers reach their goals and our communities to achieve progress.

Please turn to Page 3 for a summary of our first quarter results. Looking at the income statement, earnings per share diluted increased more than 9% year-over-year to $1 and $0.05 on close to a 6% increase in total core revenues to $174.2 million. Net interest margin was in line at 5.4%. Provision was $15.1 million, non-interest expenses were in line at $91.4 million, pre-provision net revenues totaled $83 million.

Turning to the balance sheet, total assets were $11.2 billion, 2% less than last quarter and 11% higher than a year ago. Customer deposits were $9.5 billion, reflecting the $1.2 billion public funds deposited in mid-December. Loans held for investment totaled $7.5 billion, approximately level with last quarter and up 10% from a year ago.

New loan production was $536.6 million (technical difficulty) and total, $2.5 billion down from the fourth quarter, mainly due to the sale of a treasury bill position. Cash increased to $754 million from last quarter. Looking at capital, the CET one ratio was 14.45%, up from 14.12% in the fourth quarter. We increased the quarterly cash dividend 14% to $0.25 per share, approved a new $50 million stock repurchase authorization.

Please turn to page 4 for an update on our digital-first strategy. As of the first quarter, 94% of all routine retail comes from customer transactions, 96% of retail deposits and 64% of retail loan payments are being made through our digital and self-service channels. This is being driven by year-over-year growth of 12% in digital enrollment, 68% in digital loan payments and 32% in virtual teller utilization and 3% in customer growth.

Another factor is the continued success of our Oriental servicing portal, which was introduced in mid-2023. The portal, as you know, is a cornerstone of our self-service strategy. Customers can manage all loan and deposit accounts. It enables digital account opening for checking and savings and CDs, applying for and accessing loans, managing automatic loan payments and downloading bank letters and tax documents among other things.

Every quarter we add new features and this quarter was no exception, the additional functionality to manage IRA accounts and IRA funds. All of this continues to validate our Digital First strategy and investments. Our goal is to use technology to provide more value added service, increase our efficiency and have more staff dedicated to new business development activities.

Now I'd like to turn call to Maritza to go over the financials in more detail.

Thank you, Jose. Please turn to Page 5, to review our financial highlights. And starting with the components of core revenues, total interest income was $183 million, up 4% from the fourth quarter. Key factors were increases of $5 million from investment, $1 million from cash and $800,000 from loans.

Investment securities benefited from an 18% higher average balance and at 24 basis points higher yield. Cash reflected a 16% higher average balance and a six basis point higher deal. And loan had a 2% higher average balance and two basis points higher yield. There was one last day in this first quarter compared to the fourth quarter. This reduced income by $1.4 million. Total interest expense was $39 million, an increase of $6.7 million from the fourth quarter. This reflected the full effect of the $1.2 billion in government funds deposited this past December. Borrowings and brokered deposits declined (technical difficulty) to the reduced need for wholesale funding. The factors reduced interest expenses by $300,000.

Total Banking and Financial Service Revenues were $30 million compared to $32 million in the fourth quarter, which included annual insurance commission recognition of $2.5 million. First quarter mortgage banking revenues increased $400,000 due to higher MSR valuation. Year-over-year, total fee revenue was up $1.5 million, reflecting increased wealth management and mortgage banking revenue. There was a minor amount of other non-interest income compared to the fourth quarter, which included $6 million in gains on sale of nonperforming Puerto Rico small business loans.

Moving to non-interest expenses, they totaled $91 million, down $3 million from the fourth quarter, which included $3.2 million due to the cost of workforce, early retirements and facilities rightsizing. We continue to expect to average about $90 million to $92 million of non-interest expenses per quarter over the rest of 2024. The first quarter efficiency ratio was 52.49%, 10 basis point improvement from the fourth quarter.

The efficiency ratio should continue in the low to mid 50 percentage range this year, although performance metrics remain high, return on average assets was 1.77%, return on average tangible common equity was 70.92% and tangible book value per share was $23.50, but [40%] fall from the fourth quarter, mainly due to the increase retained earnings.

Please turn to page 6 to review our operational highlights. Average loan balances were [$47.5 billion]. End of period balances were approximately level. March 31 balances reflected sequential growth in auto and consumer loans offset by decreases in commercial and residential mortgages.

Commercial reflected seasonal paydowns of lines of credit, residential mortgage reflect the regular paydowns of securitization and sale of conforming loans. Long year was 7.98%, up 2 basis points from the first quarter.

This reflected variable rate commercial loans, higher entry yields on new loans and a smaller proportion of residential mortgages in the loan book. Average core deposits were $9.5 billion, up 10% from the fourth quarter due to the large deposit of public funds in December. End of period balances declined 1% from December 31. This reflected a $48 million decline in commercial deposits generated through the launch of (technical difficulty) partially offset by a $20 million increase in retail deposits.

Core deposit cost was 147 basis points compared to 107 basis points in the fourth quarter. This increase reflects the full impact of the new government deposits. Non-government deposits cost was 82 basis points. As of the first quarter, our communities deposits (technical difficulty) and 23.24% for total deposits included interest-bearing deposits, excluding government deposits, it was about 16%. Average borrowings and brokered deposits were $280 million compared to $602 million in the fourth quarter. The March 31 balance was $203 million. The rate paid on wholesale funding decreased 41 basis points to 4.80% in the first quarter.

Looking at non-interest expenses, they totaled $91 million. Net interest margin was 5.30% as anticipated. With the prospect of higher for longer, we now anticipate three direct costs versus five as a result for this year, we had guided a net interest margin range of 5.45% to 5.55%.

Please turn to page 7 to review our credit quality and capital strength. Net charge-offs totaled $20 million, up $4 million from the fourth quarter. Then [surcharge] rate was 105 basis points, up 17 basis (technical difficulty) included two factors. One was $3.5 million from the previously and fully reserve nonperforming PPP loans. The second was $1.7 million, as a result of the strategic sale of our performing US commercial loans. The overall net charge-off rate declined sequentially while the consumer rate increase.

Looking at provisions for credit losses. It totaled $15 million related to volume factors including net charge-offs. The first quarter included $1.7 million related to the US loan sale, which was offset by a separate $1.7 million reduction in a specific reserve for payments received on substantially reserve US commercial loans.

Looking at our credit metrics, first quarter early and total delinquency rates were lower than the fourth quarter at 2.41% and 3.3% respectively. The nonperforming loan rate of 1.7% was the lowest over the last five quarters. Overall State continues to be good, with COVID cash stimulus fading away respected increases [NCA] net charge-offs in auto and consumer, but lower than (technical difficulty). However, net charge-offs and delinquencies performed fairly well in the first quarter due to a strong employment on Puerto Rico's economy, as well as the further tax charge already.

Looking at some of our other capital metrics. Total stockholders' equity remained level at $1.2 billion and tangible common equity ratio increased to standpoint -- our first quarter tax rate of 26.8% decreased from 31.9% in the fourth quarter. The first quarter reflected two factors, while it was unexpected for the year effective tax rate of 29% in 2024 due to higher forecasted business activities with preferential tax treatment on the Puerto Rico tax code. The second item was a $1.1 million discrete benefit for the stock vested in the first quarter.

To sum up during the first quarter, net interest income continues to grow despite the slight decline in net interest margin. This reflected higher average balances and yields of securities, cash and loans and lower wholesale funding costs, partially offset by higher cost of government deposits.

Excluding government deposits, core deposits declined slightly due to commercial withdraws reflecting seasonal line of slight paydowns, while loans remain level quarter over quarter, and we anticipate growth over the balance of the year based on the strength of our pipeline. As I mentioned, net interest margin should gradually improve credit continued to look (technical difficulty) expenses were in line with our expected range, and our expected tax rate should be lower. Now, here's Jose.

Thank you, Maritza. Please turn to page 8. Our outlook is positive for both Puerto Rico and OFG. The flow of federal funds to rebuild the island's infrastructure continues at a solid pace. Local businesses are expanding. Overall business activity is good. It's doing well.

We continue to be vigilant for the big macro uncertainties, interest rate changes, inflation trend at possible named and recession and ongoing global conflicts. Of course, we're always keeping an eye on the competition. We are optimistic about Puerto Rico and the future. We look forward to continuing overall economic and business growth as well as strong levels of employment.

Turning to our [G], we're well positioned to continue to benefit from a higher for longer interest rate environment as well as loan and client growth. Consumer grade trends should remain below pre-pandemic levels and digital adoption and customer acquisition should continue to expand. Clearly, our strategy is working. So we will continue to invest in and deploying more customer friendly technology, adapt to customer needs and tirelessly work to improve customer experience. Overall, we look forward to another strong year in 2024.

In closing, I want to emphasize that our results could not have been achieved without the hard work and dedication of all our team members. We are thankful to them, and we are excited for what's to come. This year marks our 60 anniversary in business on our 30 (technical difficulty) on the New York Stock Exchange. With this, we end our formal presentation.

Operator, let's start the Q&A.

Thank you. (Operator Instructions)

Brett Rabatin, Hovde Group.

Hey, good morning, everyone. Wanted to start with the margin and my call is breaking up a little bit intermittently. But if I heard correctly, the guidance for the full year margin is 535 to 555. And if I think about the low end of that guidance that would suggest that the margin only has a few basis points of downside from here. And I wanted to kind of think about that versus the cost of interest-bearing funds increase.

If I think about the past three quarters, that's gone from 30 basis points to 32 basis points to 43 basis points. And so it seems like the higher for longer more normal for longer is having somewhat of an impact on the lower funding costs in Puerto Rico, in the past quarter or two. Just wanted to make sure I understood that guidance from here, and if it sounds like much, do you think the margin despite the funding cost increase is bottomed out here? Is that a fair assessment.

So, Brett, just to correct, the guidance, as you pointed out, is not what Maritza said. She said [545] to [565].

Okay.

So it's actually north of 540, which is what we had this quarter. So just to clarify that and I'm sorry that you have that --

Okay. Well, is that again, that wouldn't (multiple speakers)

I just changed the premise of your question. So I don't know if you want to ask a question again?

Well maybe to rephrase it, you have and that's a margin that is expected to be slightly higher from here. I just wanted to make sure I understood. Obviously, we've had margin pressure with the rise in funding costs the past three quarters. The margin moving higher from here, what would that be a function of? And can you talk maybe about what you expect the betas to do from here?

Yeah. So let me see if I can give you a high level and the Maritza needs to chime in here on the more specifics she will do so. But remember, one when we spoke last time, we were assuming five rate cuts in the second half of the year as part of our guidance on the margin, after what's going on in the first quarter and a little bit afterwards, we are now modeling three cuts the second half of the year. So since we're asset-sensitive and we have been for a while, we're going to be benefiting from that. That's number one.

And then number two, we have a large government deposit, as you alluded, and we mentioned in the call, our expectation for that deposit is to fall out of the balance sheet -- not in its entirety for a significant amount at the end of the second quarter or the beginning of the third quarter. So that in itself also has implications on how we're guiding a range on the margin. Is that --

Am I answering your question. Is that giving you enough color?

Yeah, that's helpful. And then wanted to talk about credit quality for a second. Just around the mainland net charge-offs were higher, auto performed better than I would have expected. And I don't know if you would attribute that to tax returns or anything specifically, that was just hoping for some color on both of those, if I heard you correctly, it sounds like you do expect the auto to have a little bit of softening from the Q1 levels from here.

So on the US commercial loan, remember, we have a seasoned portfolio and we make decisions based on risk management and that's kind of -- was a risk management decision. The sale of that performing loan, we just felt that it was the right thing to do from a risk management perspective, and that's what you saw. And we certainly look at the auto portfolio as a key component of our balance sheet. As you know, it's around 30% of our loan book, and we're very encouraged with the first quarter levels of delinquency and lower charge-offs.

So from our perspective, we're still seeing good trends. He has a lot to do with how we manage that loan book. And I let Cesar give you a little bit more specifics on the auto portfolio because we have mentioned it's somewhat last quarter, but we have made some changes throughout the last couple of years on the credit profile.

I want to highlight that the first quarter is always seasonal in terms of tax benefits, Maritza mentioned as tax credits, tax refunds, but also the end of the holidays that benefits the quarter, especially first quarter of the year. So you'll see those benefits in the retail portfolios.

But it also, we strategically improve the credit profile of our portfolio back in 2022. And we shifted this portfolio from [64%] (technical difficulty) the benefits of that shift in credit profile since we eliminated the tranches that due to the higher losses during those years. So I think that was being noted in the credit that is taking out right now.

Okay. That's helpful. And then if I could sneak in one last one, Jose, any high level comments on we've seen stronger flows of funds to the island for projects, anything in particular that you would highlight -- maybe some more impactful things that you see happening this year in Puerto Rico. Obviously, the economy is a lot stronger than it's ever been or has been in a long time.

Yeah, I mean, let's step back a second here. When you look at the macro and when you look at Puerto Rico, what we're seeing today is not only federal funds coming in and flowing in at a steady pace and a higher pace than a right after the hurricanes and the earthquakes and certainly the pandemic kind of accelerated all, but if we also think about it, Puerto Rico came out of bankruptcy a couple of years ago. So what you're seeing now is private capital at work from abroad as well as internally.

So you're seeing businesses expanding, commercial business (technical difficulty) investments in their own businesses. And you're seeing a US capital coming to Puerto Rico and expanding businesses and buying businesses. So that has a lot to do with that bankruptcy getting out -- getting off bankruptcy.

I think going forward, there's one more bankruptcy that needs to be eliminated and this is the Electric Power Authority. Hopefully 2024 will be the year where it's out of bankruptcy. And there are $11 billion of federal funds that are on the sideline right now to continue to strengthen the electric grid and the transformation that has been done there for resiliency as well as for diversified sources.

So I think if you look forward, there's still quite a bit of a backwind for Puerto Rico's economy because the engines are at work, federal funds, private capital coming in and businesses putting capital to work to. So we're optimistic on Puerto Rico, and that's what bank success. And that's why we're here. We're here to support small and midsized commercial clients. We're here to support our consumers and our clients and trying to help them achieve their goals.

So I just think that we have a pretty strong pipeline on the commercial side, on a larger kind of middle and higher kind of commercial clients, but we also have a pretty strong quarter. We had a pretty strong quarter in the small business commercial, and we have a pretty good pipeline there too. So we're seeing good momentum overall, right?

Okay, great. Appreciate all the color.

Yeah. Thank you.

Alex Twerdahl, Piper Sandler.

Hey, good morning, all. I Alex (technical difficulty). I will -- Thanks. I wanted to start on just kind of sort of longer-term strategy and sort of growth outlook and when I look at your capital levels that continue to rise TCE now above 10%. And that Common Equity Tier 1 continues to rise and getting coupled with all the money you guys are making, it just seems like you. It's hard to envision you being able to deploy all that capital just through organic growth.

So I'm just -- I'm wondering if you have any update, is there a longer term thoughts on utilization of capital and kind of how you're thinking about deploying the accesses in the next couple of quarters or years?

Yeah. So the game plan for us remains relatively the same. We still see opportunities for us to grow here in Puerto Rico and we still see opportunity for us to deploy capital here in Puerto Rico. I agree with you. We have a lot of capital and we're generating a lot of capital. So we also have shareholder capital return strategies.

We increased the dividend. We continue to look at that. We announced -- the Board announced a $50 million repurchase program that is also available to us and we will be opportunistically executing on all three fronts. We operate with higher levels of capital than our peers in the States. But in general, I agree with your with your premise in terms of our capital generation and we expect to deploy it accordingly.

Okay. I mean, I guess as you sort of look over the next couple of years in balancing the outlook in Puerto Rico, which continues to be favorable. Do you see the chances of expanding a little bit more deploying a little bit more towards the US is something that's likely or I mean, I guess when you talk about the growth opportunities in Puerto Rico, would that sufficient to sort of absorb all that excess?

Yeah. Good point. We have the US business and we have been growing for the last five, six years. We will continue to invest in that business. It's been a very good profitable business for us. So we see opportunities. We also recognize that Puerto Rico is decoupling our economies, decoupling steadily from the US, although the US is being more resilient these days, and it's showing some growth, and that is also good for Puerto Rico by the way. But we expect Puerto Rico's economy to continue trending upwards, and we see somewhat a little bit choppiness in the US economy. So we'll be more cautious there. But in general, we will be investing also on the points on capital for the US business.

Okay. Thanks. And then I was hoping you could give us a little bit more commentary on the consumer and Puerto Rico. And just, I recognize that there's still some normalization going on and maybe just kind of frame sort of where you expect net charge-off levels on the consumer and then also on the auto to level out and just kind of help us square that continued deterioration, if you can call it that with the strength in the consumer that we're seeing in all the jobs numbers and the unemployment numbers and the wage salary numbers and all that kind of stuff that all seem to suggest that credit on the consumer side should be significantly better than that even has been in the last couple of years?

Yeah. So I'll give you some thoughts and then add some of the details. But when you look at consumer and auto, our own auto portfolio, you need to start by recognizing that both have different loss content in itself. Inherently, there are different types of loans. One is secure and the other one is unsecured, that's number one. Number two, when you look at auto loans, it's a necessity Puerto Rico to own a car. As you know, we don't have a mass transportation in the island, all that stuff.

So consumers prioritize the auto loan payments and that is why you're seeing a diverges and you see a natural divergence historically between consumer and auto. And, but again, we come back to the same kind of land in the same place. Puerto Rico's economy is doing well. Unemployment levels are low.

So we are not seeing neither portfolio to go back to pre-pandemic or worse. We are seeing them trending inching upwards because certainly some of this stimulus is being taken away and it is kind of flowing out. But in general, we're not seeing those portfolios performing worse than pre-pandemic levels. But that's kind of my 30,000 feet kind of be -- let says I'll give you a little bit more details on the consumer side because you already gave on the auto side.

Yeah, the consumer portfolio -- what before (technical difficulty) So that coupled with the macroeconomic strong outlook that we have, we as I also mentioned, we don't expect it to deteriorate worse than that the pandemic, and we expect it to be actually better attended than pre-pandemic levels.

So in outlets, as we mentioned, we did shifted that portfolio, as I mentioned before, from the 64% [priming] to 82% prime. So the outlook for our toys is going to be better than pre-pandemic levels because of that shift, so.

And again, you're going to see, right now, what we have for 4.4 in terms of net charges for consumer that is lower than what we had in the past before the pandemic, in auto we're around 1% or so has significantly lower also.

High [yielding] portfolios.

Yeah, and these are both very high yielding portfolio. So we're very happy with the performance and the profitability of both portfolios,

Right. Would you mind just going through, I don't know whether anyone else on the call again, the same issues with that kind of breaking up every so often, but the percentage prime before the pandemic to today, I think you said 64% to 82%, and I wasn't sure if that was just for the auto or if that was for consumer as well?

No. This is auto.

Auto portfolio. The auto portfolio shifted from 64% and now it's 82% prime. The consumer portfolio has always been the 89% prime portfolio. So that's why I'm mentioning that the consumer portfolio hasn't still a subprime, super-prime portfolio.

Okay, thank you. And then just one final question. Just also on credit. I'm just curious if you can give us a little commentary on commercial real estate in Puerto Rico and just kind of how that market has fared up recently? And then also just remind us, I think one of the big concerns here is just the refinancing risk of loans going from 3.5% yields up to 7.5% or 8% yields as they kind of roll over in the next couple of years.

If we look back to 2020 and 2021, were there loans, commercial real estate loans being put on with yields as low as three -- with a three handle or were they a little bit structurally higher in terms of the yield back then?

I'll take the last part first, we did not dabble much on the 3%, 3.5%, 4% type of commercial real estate loans. We don't have that type of yield on our CRE book. So it's not something that we have to a content with. And then in general, we are have a very diversified well diversified CRE book, a most of the I would say the diversification comes from several industries.

One is hospitality, hotels and the other one is a retail space and shopping centers. And then we have around $90 million in office space. This is non-owner occupied and these are 40%, 45% loan to value. We have 90%-some occupancy. We have good coverage. We're not seeing any stress on the commercial real estate in our book and for that matter in the Puerto Rico market. So it's a different story here in Puerto Rico versus what you're seeing in the states from or up from what I can gather.

Thank you very much for taking my questions.

Yes. Sorry for the intermittency. I know Brett, also brought it up.

Yeah. Nothing, I'm sure there's nothing you can do about it. So no.

(Operator Instructions)

Kelly Motta, KBW.

Good morning. Thanks for the question.

Hi, Kelly

And the tax rate was lower this quarter, and I know you had a discrete benefit there. But it also, as you mentioned, was related to the mix of tax-advantaged activities that Puerto Rico business mix. So just wondering how we should be thinking about the overall tax rate as we look ahead, prior year who knows and that run rate or is given the shift in mix that might be a bit lower?

Well, hi, Kelly. Thanks for the question. And as I shared in my prepared remarks, we are now expecting a 29% effective tax rate for the full year. So that does decrease from what we saw last year. So yeah, we see a lower tax rate for the full year of '29.

All right. Appreciate the color and I believe to your prepared remarks you discussed some you expect kind of loan growth continuing from here throughout the year. Previously, you had said about 3% to 4% growth, assuming the economy grows 2% to 2.5%. Just wondering, where you see the drivers of growth ahead and if there's any kind of shifting the outlook as you -- what growth approach you can sustain?

No, shift in the outlook. We're seeing the 3% to 4% growth for the year, and we are seeing mostly from the commercial business. We see opportunities there and we have a pretty good pipeline there. And we're also seeing, as you saw this quarter, we're seeing some growth on the consumer and auto. We're expecting commercial to have a higher contribution to the origination than in the first quarter.

Got it. That's really helpful. I guess final question for me. I mean, it seems like the margin outlook is somewhat better than what we had been expecting before. I'm with growth from here, as we look ahead, I know you had said the efficiency ratio low to mid-50s. It seems net-net given your expense outlook hasn't changed yet, we may be in the lower part of that range versus the higher end. Just wondering kind of how you're thinking about as we look ahead, kind of where we could fall out and how you're managing. What could get us to the higher or lower end of that range? Thanks.

Yeah, I think, I understand very well your question, at the end, when we're having expected to have the mean. But when we think about expenses, we think also about timing and when the investment are being able to be deployed, and I think we will continue to be in that range and probably most of the time would be in the lower of that range. But in all instances, (technical difficulty) high end of that range.

So I think we'll continue to see these businesses, as I mentioned, $90 million to $92 million. We need to continue investing in our strategy. And I think that the range and I don't see any way of cost being lower than that.

Got it. That's helpful. Maybe one last for me and then I'll step back most of my questions have been asked and answered at this point. Just wondering, if there's any rule of thumb as to, I know you had said you're still asset-sensitive about, how each kind of rate card impacts margin, at least on the near term? Do you have any kind of [juristic] on that?

We update that on the 10-Q and you see it when we file the 10-Q for us, you will see we have been gradually being opportunistic investing longer on the duration side of the investment portfolio and locking in rates at a higher level, and that has helped us in reducing our asset sensitivity. But we are still asset sensitive and you'll get the details in the 10-Q when we file it because I think that's kind of the timing that we share that with the market.

Fair enough. Thank you so much. I'll step back.

Thank you.

(Operator Instructions)

We'll return to Alex Twerdahl, Piper Sandler.

Hey, just one follow up on the NIM. Just when you think about that the large government deposit that I think you mentioned is going to flow out or a good chunk of it's going to flow out in the end of the second early third quarter. Does that get funded with sales and securities portfolio? Or does it get replaced with borrowings? Are you thinking about managing that outflow?

Yeah, I'll let Maritza give you details.

Yeah. When we think about this, we as we experienced this quarter, we did have some -- we are living -- have increasing the deposit side with respect to deposits to growth. That will be filed that replacing that funding, we will use wholesale funding. And if you think about the maturities that we have in the investment portfolio that we do have about $200 million in treasury notes that will mature in May. And about $150 million already matured now in April. So we do have a plenty of resources to replenish that exit. And there could be some effectiveness in the process on through that process.

And we're not taking that into consideration completely in our margin guidance.

Okay. Perfect. Thanks for taking my follow-up.

Yeah, thank you.

At this time, there are no further questions. I will now turn the call back over to management for closing remarks.

Thank you, operator. Thanks again to all our team members, and thanks to everyone for listening. Have a great day.

Thank you. Ladies and gentlemen, we apologize for the audio issues experienced on today's event. We thank you for your participation. You may disconnect at this time and have a great day.