Peoples Bancorp Inc (PEBO) 2022 Q1 法說會逐字稿

Good morning, and welcome to the Peoples Bancorp Inc. Conference Call. My name is Chuck, and I'll be your conference facilitator. Today's call will cover a discussion of the results of operations for the quarterly period ended March 31, 2022. (Operator Instructions) This call is also being recorded. If you object to the recording, please disconnect at this time.

Please be advised that the commentary in this call will contain projections or other forward-looking statements regarding Peoples' future financial performance or future events. These statements are based on management's current expectations. The statements in this call, which are not historical fact are forward-looking statements and involve a number of risks and uncertainties detailed in Peoples' Securities and Exchange Commission's filings.

Management believes the forward-looking statements made during this call are based on reasonable assumptions within the bounds of their knowledge of Peoples' business and operations. However, it is possible actual results may differ materially from these forward-looking statements. Peoples disclaims any responsibility to update these forward-looking statements after this call, except as may be required by applicable legal requirements.

Peoples' first quarter 2022 earnings release was issued this morning and is available at peoplesbancorp.com under the Investor Relations tab. A reconciliation of the non-generally accepted accounting principles or GAAP (sic)[non-GAAP] financial measures discussed during this call to the most directly comparable GAAP financial measures is included at the end of the earnings release.

This call will include about 20 to 25 minutes of prepared commentary, followed by a question-and-answer period, which I will facilitate. An archived webcast of this call will be available on the peoplesbancorp.com in the Investor Relations tab section for 1 year.

Participants in today's call will be Mr. Chuck Sulerzyski, President and Chief Executive Officer; and Ms. Katie Bailey, Chief Financial Officer and Treasurer, and each will be available for questions following opening statements.

Mr. Sulerzyski, you may begin your conference.

Thank you, Chuck. Good morning, everyone. Thank you for joining us. As it relates to our results for the first quarter, we have several positives to point out. Our net interest margin expanded 4 basis points compared to the linked quarter.

Excluding the Vantage acquired loans, payoffs of previously acquired loans and forgiveness of PPP loans, our loan growth for the quarter was 12% annualized, and our asset quality remains stable, with meaningful reductions in nonaccrual loans since year-end and improvements in delinquency rates.

To summarize our financial performance, we reported earnings of $23.6 million or $0.84 per diluted share for the quarter. As I mentioned in our guidance last quarter, our first quarter results are impacted annually by certain expenses, which include stock-based compensation expense for certain employees, which was $926,000 or $0.03 per diluted share and employer contributions to health savings accounts totaling $620,000 and negatively affecting diluted EPS by $0.02.

We also had acquisition-related expenses totaling $1.4 million which reduced diluted EPS by $0.04. During the quarter, the completion of the Vantage acquisition also increased our expenses, which was not included in our guidance from our call last quarter.

Our allowance for credit losses declined since year-end, and we reported a release of provision for credit losses of $6.4 million, adding $0.18 to diluted EPS for the quarter. This amount includes $341,000 for the establishment of the allowance for credit losses for the leases acquired from Vantage.

We had several previously acquired Premier loans payoff during the quarter, which further reduced the required allowance. We continue to see improvement in the economic forecast and loss drivers. And when compared to the linked quarter, these contributed to the release of provision for credit losses.

Our allowance for credit losses comprised 1.2% of total loans at quarter-end compared to 1.4% at year-end. While we could experience modest decreases in our allowance in the remaining quarters of 2022, we do not anticipate it dropping meaningfully below current levels.

Moving on to our loan portfolio. Compared to year-end, our loan balances grew $66 million, which was driven primarily by the Vantage acquisition. We acquired $140 million in lease balances which is net of purchase accounting adjustments at the close of March 7. Excluding the acquired leases, total loans declined by $87 million, which was driven by the payoffs of some previously acquired Premier loans since year-end and forgiveness of PPP loans.

The total payoffs and amortization of the acquired loans during the first quarter was over $166 million, while PPP loans declined $45 million. While we are disappointed by the lack of loan growth, we remain optimistic about the full year. Our strong commercial production was more than offset by the fourth quarter loan sale and the first quarter payoffs from the Premier acquisition.

We anticipated losing a portion of the Premier-acquired loans over time. Going forward, we continue to see robust pipelines and a slowdown in Premier payoffs. Despite the large volumes of payoff we experienced, we do not like the -- we do like the improvement in our credit quality over the last 6 months and the reduction in out-of-favor portfolios.

For instance, our hotel portfolio declined $19 million due to our fourth quarter loan sale and another $11 million from recent payoffs. For the full year of 2022, we are lowering our projected loan growth from 6% to 8% to 5% to 7%. These payoffs muted the progress we made in loan production. Excluding these declines, commercial and industrial loans grew $33 million or 16% annualized.

While construction loans increased over $28 million, Premium Finance loans were up $10 million or 28% annualized and nonacquired leases grew nearly $8 million or 25% annualized. We have also seen some growth from the new geography added by the Premier acquisition as we continue to develop and cultivate relationships with vehicle dealerships.

We added over 20 new dealerships and over 2 million in consumer indirect loans during the first quarter. From a credit quality perspective, our metrics remained stable compared to year-end. Our nonaccrual loans declined by nearly $3 million or 8% compared to December 31, 2021.

Contributing to the decline was a 1.5 million commercial -- $1.5 million commercial relationship that paid off during the quarter. The portion of our loan portfolio considered current stood at 99% compared to 98.8% at year-end. As we have indicated in our guidance last quarter, our quarterly annualized net charge-off rate increased to 17 basis points as we have been experiencing low levels of net charge-offs in recent periods.

For the quarter, we had a $463,000 charge-off of 1 acquired commercial and industrial relationship from Premier. Our criticized and classified loans were relatively stable for the quarter. We did have an increase in our loans 90-plus days past due and accruing, which was driven by the addition of the Vantage leases.

On March 7, we completed the acquisition of Vantage Financial LLC, which is a specialty equipment leasing business. This addition builds up the capacity and growth potential we have already seen in our leasing division. We're excited to expand our specialty finance business suite and we are equally pleased with the talent we gained from Vantage.

As I previously mentioned, we continue to seek acquisition opportunities within our fee-based businesses. I am happy to announce that as of April 1, we completed the acquisition of an insurance agency with 5 offices located in Eastern Kentucky, which serves thousands of clients. The footprint of this agency complements the geographic locations of our branch offices in that area as well as adding opportunities in our insurance and other lines of businesses for all clients.

As far as our community involvement during the first quarter, our charitable foundation awarded grants to nonprofit organizations totaling $158,000. We also contributed $100,000 to a Junior Achievement Financial Literacy program that will take place over 3 years for high schools throughout Ohio.

We continue to strive to make meaningful investments in our communities and within our company. We take pride in providing a quality workplace for our associates and were a 2022 recipient of Top Workplaces USA National Award from Energage, a technology company that empowers workplace excellence.

We were recognized for providing an exceptional workplace culture, and we're one of 1,100 organizations acknowledged for their people-first culture. This year, we are celebrating our 120th anniversary and in celebration, our teams are delivering 120 Acts of Kindness throughout our footprint. We will continue to seek opportunities to improve our workplace and make a positive impact in our communities.

I will now turn the call over to Katie for additional details around our financial performance.

Thank you, Chuck. Our net interest income for the quarter declined 1% compared to the linked quarter, while our net interest margin grew by 4 basis points. The decline in net interest income was largely due to lower loan income driven by payoffs of loans during the quarter. At the same time, our loan yields increased by 4 basis points, with the increase driven by higher accretion on commercial real estate loans.

Our quarterly loan yields were also impacted by the addition of Vantage, which had outstanding leases with a lower yield than our historical lease portfolio, but still much higher than our typical loan product yield. The recent increase in the Federal Reserve benchmark interest rate was not meaningful for our first quarter results, but we should start to see some of our variable rate loans repricing soon and making a positive impact on net interest income and margin in future quarters.

Accretion income, net of amortization expense from acquisitions, was $2.7 million compared to $1 million in the fourth quarter adding 17 basis points and 6 basis points, respectively, to margin. PPP income is becoming less impactful and only added 5 basis points to net interest margin for the quarter compared to 6 basis points for the linked quarter.

Our average cash balance declined compared to the linked quarter, reflecting the impact of the Vantage acquisition payment, but still continue to be a drag on margin, negatively impacting it by 17 basis points for the quarter. As we noted last quarter, we did not anticipate that our cash balances would decline significantly in the first quarter of 2022 as we continue to have strong core deposit trends.

For the second quarter, of 2022, we expect to have some runoff of governmental deposits due to seasonality and along with the reinvestment of cash into investment securities, anticipated loan growth and payoff of some of the acquired Vantage borrowings during the second quarter.

Our net interest income grew by 53% compared to the first quarter of 2021, and our net interest margin expanded by 15 basis points. The improvement has been driven by our acquisitions, coupled with core growth. Loan yields improved by 24 basis points compared to the first quarter of 2021, which was driven by the addition of the lease portfolio.

Our investment portfolio yield improved 33 basis points as we have worked to reinvest into higher-yielding securities during recent quarters. We closely controlled our funding costs and our deposit cost declined 19 basis points compared to the prior year quarter.

For the quarter, our reported efficiency ratio increased to 66.8% compared to 62.7% for the linked quarter. When adjusted for non-core items, our efficiency ratio was 64.8% and also grew compared to 61.5% for the linked quarter. However, we anticipate that this metric will improve as the year progresses, contributing to the increase in the adjusted efficiency ratio for the quarter for annual items we noted earlier, such as the stock-based compensation expense and health savings account employer contributions.

For the first quarter, our fee-based income grew $1 million or 5%. This increase was driven by higher insurance income, which resulted from annual performance-based commissions that we typically recognize in the first quarter of each year. These annual performance-based commissions totaled $1.3 million for the first quarter of 2022.

In recent months, we have seen an increasing referral pipeline for trust and investment customers from the new Premier footprint and are actively gaining new fee income from this geographic area. Compared to the prior year quarter, our fee-based income was up $2.8 million or 16%.

Deposit account service charges grew 73% as we have benefited from increased customer activity, along with a higher number of accounts associated with the Premier acquisition. Electronic banking income grew 34% compared to the prior year quarter due to more customer activity in the acquired Premier accounts.

Moving on to our expenses. Total non-interest expense increased 8% compared to the linked quarter. A large portion of the growth was in salaries and employee benefits which was impacted this quarter by higher base salaries due to annual merit increases that occur at the beginning of each year; increased medical costs which were up $724,000 over the linked quarter and were driven by the health savings account employer contributions that Chuck mentioned earlier; along with higher payroll taxes; and stock-based compensation.

Typically, our payroll taxes are higher in the early part of the year than decline as associates meet maximum as the year progresses. We also had increased professional fees in conjunction with the Vantage acquisition that we completed during the quarter.

Compared to the prior year quarter, our total non-interest expense grew 36%. The increases were in almost all categories and were largely due to our recent acquisitions and associated ongoing costs. From a balance sheet perspective, most of our asset growth compared to year-end was related to the Vantage acquisition.

We maintained our investments to total assets ratio at 24%, consistent with year-end. As we had anticipated, we had further deposit growth during the quarter, which was up $140 million or 2% from year-end. The majority of this increase was driven by seasonally higher governmental deposits, which grew $118 million.

From a capital perspective, our regulatory capital ratios declined compared to year-end and were driven by the Vantage acquisition, which was an all-cash deal and added risk-weighted asset. Our tangible equity to tangible asset ratio was 6.8% at quarter end and declined compared to year-end.

Our book value per share was $28.41 which also declined compared to year-end. These decreases were driven by the Vantage acquisition in which we issued no equity while we added assets, including intangible assets compared to the prior period. We also had a large swing in our accumulated other comprehensive loss, which was further reduced by nearly $51 million and was driven by the increased interest rate environment.

In an effort to continue to provide an excellent return to shareholders, earlier this morning, we announced an increase in our dividend to $0.38 per share. We are pleased to be able to grow our dividends for the seventh consecutive year, and we'll continue to monitor our dividend payout ratio.

I will now turn the call back to Chuck for his final comments.

Thank you, Katie. With our recent acquisitions, we are poised for success in growing our lines of business with opportunities from our many new clients. We maintain a focus on providing the large bank products and services but in a community bank setting. We also offer our clients a diversified product offering including insurance, investments, leasing and Premium Finance, which differentiates us from competitors.

We pride ourselves on doing the right things for our clients. We win clients because our go-to-market proposition is different from others and our associates genuinely care about our clients and their needs. We are excited about the potential positive impact that future interest rate hikes will have on our earnings as we proceed throughout the year. While there are no guarantees, we believe the improvement in net interest income and net interest margin resulting from rate increases could be substantial.

The remainder of 2022 is promising. Here are a few updates to our guidance. We expect loan growth between 5% and 7% excluding PPP loans and potential growth from the Vantage acquisition. We believe the anticipated stabilization in credit cost will occur this year and want to reiterate that our annual gross charge-off rate which includes leases will likely return to a more historical level of between 25 to 40 basis points (inaudible) percent of balances.

While there is much uncertainty around the potential of interest rate increases this year, we estimate that for every 25 basis points increase in interest rates, net interest income will benefit by $1.5 million annually. If we get 8, maybe 9 additional rate increases during 2022, we estimate that the benefit to net interest income will be between $6 million and $6.5 million in 2022.

Fee-based income growth is expected to be between 25% and 30% compared to 2021, which includes the impact of the acquisitions this year. We are increasing our anticipated quarterly total noninterest expense guidance to between $50 million and $52 million, which is consistent with our prior guidance but includes the cost of Vantage and insurance acquisitions. And we are still on track to have the efficiency ratio of below 60% during the latter half of the year and for the full year of 2022.

This concludes our commentary, and we will open the call for questions. Once again, this is Chuck Sulerzyski, and joining me for the Q&A session is Katie Bailey, our Chief Financial Officer. I will now turn the call back into the hands of our call facilitator. Thank you.

(Operator Instructions) And the first question will come from Scott Siefers with Piper Sandler.

Chuck, I was hoping you could expand upon your loan growth comments, sort of the small downshift in expectations from the old 6% to 8% to the new 5% to 7%. How much of that would you say is sort of noise from Premier payoffs in sales? And how much is any change in the sort of the demand side that you're seeing or in other words, the go-forward outlook?

It's more Premier than it is the market. To be honest with you, Scott, several years ago, we got out of the blocks slow in the first quarter, and we said we would still make the numbers, and you all beat me up every quarter. We did make the numbers at the end of the year. And I didn't want to live that again, so I lowered it to 5% to 7%, but we feel pretty good.

Okay. Perfect. And then just for clarity. So it sounds like the 5% to 7% loan growth this year, that does not include growth from Vantage and it's also exclusive of PPP. Do you have just, I guess, for simplicity sake, just sort of an all-in expected loan growth kind of expectation for the year?

Yes, it's probably close to 9% -- 8% to 9%.

Okay. And that would be sort of off of the year-end '21 base, is that correct?

Yes, correct.

The next question will come from Ben Gerlinger with Hovde Group.

There's a lot of guidance, especially with the mix shift planned for 2Q and then also the rate hike net benefit. I was curious -- if you could give like kind of a spot rate, so to speak, once you're -- the change in average earning assets and then assuming a couple of rate hikes here in the second quarter, do you guys have an idea where your margin might be? And then kind of juxtapose against that Chuck, you said there the upside on an annualized basis. Is that kind of even throughout a 12-month period or is that kind of more front-loaded?

Yes. So I'll start on the margin, Ben. So what you saw, we printed a 3.41% for Q1 with rate increases and then some of the mix shift you talked about in the addition of Vantage for the full quarter. We think that could get up to 3.45% to 3.55% in the second quarter. So it will increase, and there will be some cash deployment in that too.

Again you saw, we sat on a fair amount of cash in the first quarter. We used some related to Vantage. We'll use a little more related to Vantage and paying off some debt that they had that we had not yet paid off as of 3/31.

And as far as the loan growth question, second quarter will be stronger than the first quarter. Third quarter will be stronger than the second and the fourth quarter should have growth but probably not as much as the growth between the second and third quarter.

Got you. And I'm sorry, and then just to finalize it here. You said the net rate hike benefit on an annualized basis. Is that something we should expect won't kind of even keel, that I know is really going to be hard to measure because we're seeing 8 (inaudible) or so?

Yes. So we quantified that a 25 basis point rate hike would have a $1.5 million benefit to us annually. Again, the 8 to 9 rate hikes we quoted in here, that's changed pretty regularly as you have experienced. So that had the 1 in March, I think we estimated the 2 in May, 2 more in June and then 25 basis points thereafter.

So again, that's 6 to 6 -- or the 6% to 6.5% we quoted would be the benefit of those rate hikes in the calendar year of '22, not an annual number. I mean annual number for '22s impact, but you would have then a benefit going into '23 for the full year benefit of those rate hikes in that period.

Okay. Yes. I think I understand what you're saying. And then finally, when you think about your share price today. Is there any sort of a ranking order of how you would view things, would you do share repurchases or would you potentially think another small bolt-on deal in the near future? Any kind of guidance on what you would put at the top of the list.

Well, you saw that we just increased the dividend. So we're committed to the dividend. I don't see us doing bank M&A with the stock at the current price anytime soon. So I would say, I would probably rank the dividend, buyback and then M&A.

Okay. That's great. I appreciate, a good start to the -- or at least the guidance seems like you have an upward revision here.

The next question will come from Steve Moss with B. Riley Securities.

This is Gates Schwarzmann, Steve's associate subbing in for him today. I guess the first question that I have is ex the acquisition expenses, we still are looking at this quarter's expenses being $50 million or so, picked up the guidance a little bit, $50 million to $52 million. So we're still at that lower end.

Just sort of curious, is that something that you guys expect the expenses are going to feel a little bit more pressure in the second half as some of these loan growth drivers start to pick up?

Let me just get a little bit of clarity for you on the expense base. So the expense base, as you quoted for the first quarter on a core, excluding acquisition cost, like you said, is the $50 million. That does include, as we have referenced in the fourth quarter and in the script here today, that does include Q1 expenses that are not reoccurring for the remaining 3 quarters of the year. That being the $920,000 of stock expense, and then there's a $620,000 expense related to employer contributions to health savings accounts for employees.

So that brings the expense base down a little bit from Q1 to Q2. But on the flip side of that, then you'll have the full quarter impact of Vantage given you only had a partial month in the first quarter. So that's how you get from our guidance of $46 million to $48 million that we gave in the fourth quarter to the $50 million to $52 million that we gave this quarter.

Okay. Awesome. Very helpful. So just following up as well. It feels like rates have moved a lot year-to-date. So just sort of curious, I mean, should we still think of the portfolio still being about 50-50 in terms of variable and fixed and any changes to the deposit beta assumptions here?

No, I think that those are all still fair and the deposit betas we're still running about a 25% deposit beta.

Okay. Awesome. And then last question from me, just a cleaning question. I may have missed it in the release. I'm just curious if you guys could give me the PPP loan balance.

The PPP loan balances are about $40 million, $43 million -- $42 million. And it was about $87 million at 12/31, so it went down about half in the quarter.

Next question will come from Michael Perito with KBW.

Question around the kind of the loan growth strategy. And I think looking at it with all these deals done now, it seems like you guys have a few different buckets that could contribute, maybe 1 quarter is not so great here, leasing or something else is better there. But just wondering if, Chuck, you could give us some overall guard rail of how you want the loan book to expand over a multiyear period here?

I mean are there any areas, I imagine, like leasing and Premium Finance that you're hoping are in larger percentages. Like how big do you think the consumer book you guys would be comfortable getting? Just anything you could provide there just kind of some guard rails would be helpful.

Sure. Well, first off, the businesses that will grow the fastest will be the specialty finance businesses, the small ticket, the Vantage that we just acquired in the Premium Finance business, and we see growth in all 3 of those north of 20-plus percent for the year.

On the retail side, mortgages had some headwinds. So we suspect that on balance sheet, the fee income will continue to decline as rates go up and we have inventory issues. Automobile has done well for us, and we anticipate that continuing to do well, but there are supply chain issues potential risk with that.

Heading over to the commercial side, we believe we'll see a fair amount of funding on the CRE -- excuse me, on the construction stuff that we booked last year. C&I has been going very strong for us. We don't see any of that slowing down. In fact, we see opportunities that we alluded to in the script as we begin to do more with auto dealers in the new footprint. We think over time, that will help us not only on the indirect that we mentioned in the script, but also dealer floor plan business.

And there's still a lot of demand for CRE, particularly in Central Ohio. So we see that having a robust growth. So pretty even. The specialty finance businesses being the plus, mortgage probably being a laggard. We've never been a big mortgage bank. So relatively, it doesn't hurt us that much, and really expect pretty strong consistent CRE, C&I activity.

Okay. If I look at the -- historically, the residential real estate, the home equity and the consumer, a few years back, I think it was like a little over 40% of loans, today it's like 34%.

So I mean, is it fair to think of you guys, though, in that 60-40 commercial consumer type of split, give or take, but the commercial pie will just start to tilt a little bit more towards the leasing and Premium Finance stuff, which will grow more rapidly as you laid out? Anything generally to (inaudible) with that thought process?

No, we would like it to be more balanced. In fact, we -- I think when -- if you go back in ancient history when I arrived here, it was very little consumer. And I think at the height, we drove it up to about 47% consumer at one point. But as we bolted on the specialty finance business, it shifted the other way.

So we would have appetite for more consumer lending. Right now, home equity is -- we're doing a great job of increasing origination of lines, but we're not doing a great job of increasing utilization, but that will likely come. Automobile has been good for us for over a decade in terms of growth. It gets a little bit more challenging as the portfolio is over $0.5 billion. So we would like to see more consumer growth over time.

Helpful. And then on the charge-offs, the 25 to 40 basis points, give or take. Obviously, Chuck, I've always felt like you've been fairly conservative on that front historically. And fortunately, have always been pretty firmly below that, at least as long as I've covered the company.

But with the leasing company and some of the assets added that you're expecting to ramp, I guess, do you feel that the probability of being within that range over a multiyear period is a bit higher than maybe the conservatism it was historically? Or just trying to gauge -- not that you guys are looking to take significant credit risk here, but just trying to gauge how some of the lost content might evolve as the mix shifts.

Yes. I think that the 3 specialty finance businesses have different risk characteristics, but I think that they have the chance for more charge-offs on a percentage than the bank in total. I would say, from my perspective, the Premium Finance business, the charge-offs are really more operating issues than they are credit issues. Vantage that we acquired had no losses last year.

And the North Star group up in Vermont, they've got a 15% plus margin. So on a risk-adjusted basis, it's a beautiful, beautiful business. In general, I think a risk for all banks are inflated asset prices on the consumer segment. I mean, 82% of the cars in America are sold over sticker and there's so much mortgages being done today on the consumer side without appraisals, without inspections, and bidding in a lot of markets over market prices, that's something that the country is going to have to digest.

The good news for us is that our footprint -- most of our footprint is more conservative. We don't see the volatility of price movements one way or the other. But I think that's something on a national level that needs to be thought of.

Okay. Helpful. And then just one last one. I apologize if I missed it. I don't think I heard it, but just Katie, any thoughts on tax rate for the balance of 2022 here? It seemed a little higher in the first quarter. I think you guys mentioned a couple of items in the script. Just curious if you have any thoughts about where that could shake out moving forward.

Yes. I think it's going to stay in that roughly 21%, and it's mainly driven more by the addition of states that we've entered into with the specialty finance businesses and the Premier acquisition driving that rate up a bit.

The next question will come from Russell Gunther with D.A. Davidson.

I appreciate your comments in terms of growth expectations within the specialty finance businesses. Could you give us a sense of where you'd expect those related loan yields to trend that's embedded in that NII guide provided?

Yes. I'll give a stab on that, and I'll let Katie fix me up if I blow it. Premium Finance, I think, would be between 5.5% and 6%. The North Star Leasing business is currently around 15%, and we see that trending higher. We think in the fourth quarter that will be back to the 17%, 18% level.

And the Vantage yields for margin are in the 7% area, but we also get additional income from the ending of the leases and the residual values, and that's about an additional 5%.

And I would just -- the only thing I'll clarify there is just on the Premium Finance business, the yields that Chuck quoted or the gross yields, what you're seeing come through the margin, the rate volume variance we put in the document is more the net yield, there's some referral fee amortization and so forth that's netting that down a little bit.

Okay. That's really helpful, guys. And then just a follow-up, last one for me in terms of deposit betas. So that 25% guide, is that a total deposit beta, an interest-bearing deposit beta? And if you could give us some thoughts about how you'd expect that to trend in the early innings of a hike versus, call it, the first 100 basis points you model versus the next 100.

Yes. So that's just the total. And as you're alluding to, I think that will -- it will be lower in the early onset of the rate hikes, and it will progress closer to that as we get later in the stages of rate hikes based on what we've seen today and where people -- where we believe everybody is sitting on, excess cash and heavy deposit balances.

(Operator Instructions) Our next question will come from Scott Siefers with Piper Sandler.

Katie, I was hoping you can unpack the fee guide a bit more. If I heard it correctly, and it's quite possible, I didn't. But I thought you said 25% to -- or I thought you guys said 25% to 30% fee growth this year, which compares to the 14% to 16% previously.

And I think the delta is just -- you've got Vantage now. But I want to make sure I understand sort of the movement in and out of how we go from the prior guide up to the new one, just so I'm not missing anything.

Yes, I think you touched on it, it's largely driven by the Vantage transaction and what Chuck alluded to as it relates to the end-of-life leases and the related residual valuations there that historically they have experienced.

So there may be a mix shift over time. Some of that's currently reflected in that fee guidance that may move to margin as we refine the residual valuation going forward under our ownership.

Okay. Perfect. And then otherwise, though, like if we didn't have Vantage in there, would you still be kind of thinking sort of organic growth in that 14% to 16% range this year?

Yes, that's right.

At this time, there are no further questions. Sir, do you have any closing remarks?

Yes, I want to thank everyone for joining our call this morning. Please remember that our earnings release and a webcast of this call will be archived at peoplesbancorp.com under the Investor Relations section. Thank you for your time. I wish everyone good health, and have a great day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.