Valley National Bancorp (VLY) 2022 Q1 法說會逐字稿

Thank you for standing by, and welcome to the First Quarter 2022 Valley National Bancorp Earnings Conference Call.

(Operator Instructions)

As a reminder, today's program may be recorded. I would now like to introduce your host for today's program, Travis Lan, Head of Investor Relations. Please go ahead.

Good morning, and welcome to Valley's First Quarter 2022 Earnings Conference Call. Presenting on behalf of Valley today are CEO, Ira Robbins; President, Tom Iadanza; and Chief Financial Officer, Mike Hagedorn. Before we begin, I would like to make everyone aware that our quarterly earnings release and supporting documents can be found on our company website at valley.com. When discussing our results, we refer to non-GAAP measures, which exclude certain items from reported results. Please refer to today's earnings release for reconciliations of these non-GAAP measures.

Additionally, I would like to highlight Slide 2 of our earnings presentation and remind you that comments made during this call may contain forward-looking statements relating to Valley National Bancorp and the banking industry. Valley encourages all participants to refer to our SEC filings, including those found on Form 8-K, 10-Q and 10-K for a complete discussion of forward-looking statements.

With that, I'll turn the call over to Ira Robbins.

Thank you, Travis, and welcome to those of you on the call. A few comments to make this morning, and then we'll ask Tom to provide some insight on our loan growth and strategic progress. Mike will then discuss the quarter's financial results in more detail.

In the first quarter of 2022, Valley reported net income of $117 million, earnings per share of $0.27 and a return on average assets of 1.07%. Exclusive of noncore charges, EPS and ROA would have been $0.28 and 1.10%, respectively. The benefits of our diverse and agile business model and strong balance sheet were evident during the quarter. Strong organic net interest income growth and robust swap revenues more than offset both a $10 million reduction in PPP income and mortgage banking headwinds. Tangible book value was also preserved as the March 31 valuation of our relatively modest available for sale portfolio had limited impact on our equity.

Over the last few years, we have made significant investments in both people and technology to capitalize on the enormous and diverse growth opportunities we have identified. The organic growth results that we continue to generate justify these investment efforts. Exclusive of PPP, gross loans increased $1.4 billion during the quarter or over 17% on an annualized basis. These impressive results are a continuation of the success we have seen over the last year. In the past 12 months, we have generated nearly $4 billion of organic loan growth, representing a 13% increase from March 31, 2021. Tom will provide additional details on our loan growth and strategic efforts in a moment.

As it relates to Bank Leumi, we were very pleased to close the transaction as expected on April 1. Onboarding and integration efforts are proceeding in line with our expectations, and we are already observing exciting collaboration between the teams. Leumi generated strong commercial loan growth in the first quarter and noninterest income is running ahead of schedule.

Importantly, their differentiated technology banking business also has seen a solid increase in deposits since announcement. The compelling strategic rationale for the transaction is more evident than ever, and we are extremely excited for our collective future. During my tenure as CEO, Valley has proven the ability to grow both organically and through acquisition. Our current focus is on successfully integrating Bank Leumi and driving continued organic growth within our combined organizations. While we strongly believe M&A provides opportunities to accelerate our strategic initiatives, we do not anticipate being active in the traditional bank M&A market in the near future.

Now I want to ask Tom to discuss our loan results and what we view as key strategic drivers for our revenue growth.

Thank you, Ira. As Ira mentioned, during the quarter, we generated $1.4 billion of non-PPP loan growth. As expected, growth was primarily concentrated in our commercial segment and was diversified across geographies. Specifically, CRE growth was split approximately 75-25 between our Northern and Southern regions. C&I growth was more balanced at approximately 60-40. On the construction side, we saw an increase in advances on previously approved projects. While a sequential growth in construction loans is strong on an annualized basis, the dollar increase was relatively modest, and this segment continues to comprise only 6% of our total loan portfolio. .

We remain optimistic on our prospects for organic loan growth throughout the year. As of March 31, the loan pipeline was historically high at over $3.5 billion. While the first quarter results benefited from some pull forward, we anticipate generating 2022 loan growth in the low double digits. Over the last few quarters, we have discussed our new market expansion efforts and lending hires. We are pleased to report that as of March 31, these initiatives have contributed $750 million and $600 million of loans, respectively.

While total deposits were flat during the quarter, we continue to have a diverse set of funding channels available to us. Specifically, we benefited from meaningful commercial checking account growth over the last few years. We also continue to grow our niche efforts, targeting homeowners’ associations, cannabis companies and professional services firms. This enabled us to allow retail CDs to run off further during the quarter. Rounding out the revenue discussion, we saw noninterest income improved modestly. Swap revenue was robust and helped to offset a challenging mortgage banking environment during the quarter. We are working hard to develop and grow sustainable sources of noninterest income.

During the quarter, our diverse revenue streams helped absorb the headwinds of a volatile market. All in non-PPP revenue increased 17% from the first quarter of 2021. We are heading into the second quarter from a position of strength and expect a combination of loan growth and rising interest rates to contribute to strong revenue growth throughout -- through the remainder of the year.

Thanks, Tom. As you can tell, we are laser-focused on driving organic loan and revenue growth, which we believe will result in additional positive operating leverage over time. Admittedly, over the last 2 quarters, we have seen expense growth outpace revenues. This is due to a combination of proactive investments on our part and broader external expense pressure seen across the entire industry. We continuously work to limit and offset when possible growth in expenses and are confident that revenues will accelerate as a result of our commercial lending engine and the expectation of rising interest rates. We continue to focus on positive operating leverage and believe this progress will emerge throughout the year.

With that, I'll turn the call over to Mike to update our guidance and discuss some of the quarter's financial highlights.

Thank you, Ira. I will start this morning on Slide 5 with an update on certain guidance items that we provided in January. Due to the exceptional growth generated in the first quarter and an improved outlook for the rest of the year, we are increasing our 2022 organic loan growth projections to a range of 10% to 12%. As a result of this higher growth and using the forward curve as of March 31, we now anticipate 2022's net interest income growth of between 8% and 12%. As a reminder, we project this growth compared to reported 2021 net interest income, which included approximately $85 million of PPP loan interest and fee income.

Slide 6 illustrates Valley's recent net interest income and margin trends. Net interest income increased over $2 million from the linked quarter despite a $10 million reduction in PPP income. This reflected the benefits of liquidity deployment into loans as well as a full quarter's impact from the Westchester Bank acquisition. Our reported net interest margin declined 7 basis points to 3.16%. Exclusive of PPP, however, the margin increased 1 basis point to 3.11% from 3.10% in the fourth quarter. We estimate that the first quarter's lower day count weighed on both reported and PPP adjusted margin by approximately 5 basis points. Additionally, we saw the margin expand throughout the quarter as cash was put to work.

We anticipate further benefits from rising interest rates as origination yields expand and our floating loans reprice higher. While lagging deposit costs may not be easy in the future, our focus on less sensitive commercial operating accounts and the diversity of our funding sources should provide a relative benefit as rates rise.

Slide 7 details our loan balances and the key drivers of our strong growth during the quarter. As Tom mentioned earlier, our non-PPP loans increased over $1.4 billion or 4.3% from December 31, 2021. Our growth results continue to benefit from geographic and asset class diversification. We were also pleased that loan origination yields increased 9 basis points during the quarter.

Turning to our deposit composition on Slide 8. You will see that total deposits were flat as compared to the fourth quarter. That said, noninterest-bearing and other transaction account balances continue to increase replacing a further reduction in our CD balances. You will see that noninterest and transaction accounts comprised 33% and 57% of total deposits up from 31% and 52% in the first quarter of 2021, respectively.

During the quarter, our CD and nonmaturity deposit costs declined 4 basis points and 1 basis point, respectively. Over the last few years, our deposit transition has benefited in part from a focus on commercial operating account originations. The niche focus areas that Tom mentioned earlier also contributed to the growth in transaction balances during the quarter.

Moving to Slide 9. We generated noninterest income of $39 million for the quarter as compared to $38 million in the fourth quarter and $31 million in the first quarter of 2021. The linked quarter increase reflected higher swap income and advisory fees, which offset a meaningful compression in mortgage banking income as the expectation for higher interest rates accelerated we saw more customers opting for floating loans with an associated swap. Mortgage banking results were pressured by both lower sales activity and a negative valuation mark on our loans held for sale at the end of the quarter.

On Slide 10, you can see that our adjusted expenses were over $189 million for the quarter. As depicted in the waterfall chart, this includes approximately $7 million of expenses related to elevated seasonal factors. A portion of the nonseasonal expense increase is for investments we have made to position ourselves for the significant growth that we continue to achieve. That said, we acknowledge that pressures on other business as usual expenses continue to build. We are working to maximize efficiencies to ensure that more of our anticipated revenue growth will drop to the bottom line. As a result of our ongoing review of delivery channels, we are targeting approximately 13 branch locations for closure by the end of the year.

Turning to Slide 11. You can see our credit trends for the last 5 quarters. Our allowance for credit losses declined to 1.08% of non-PPP loans on March 31 from 1.11% on December 31. For the second consecutive quarter, we recognized modest net recoveries. Still, we recorded a $3.5 million provision largely to account for the significant growth that we experienced. Nonaccrual balances continued to decline in the first quarter, driven primarily by our CRE and C&I portfolios. While early-stage delinquencies ticked up in the quarter, much of the increase is associated with what we consider noncredit issues. We remain confident in the quality of our underwriting and our future credit performance.

On Slide 12, you can see that tangible book value was flat for the quarter and approximately 7.5% higher than a year ago. The lack of quarterly tangible book value growth is primarily the result of the modest negative OCI impact associated with our available-for-sale securities portfolio. Relative to peers, this headwind was minimized as a result of our relatively small securities portfolio and modest AFS exposure, which reflects our continued focus on tangible book value preservation. As our loan and securities growth was primarily funded with excess cash during the quarter, tangible common equity to tangible asset ratio was effectively flat. However, our risk-based regulatory ratios declined as we replaced cash with loans carrying a higher risk weight.

With that, I will turn the call back to the operator to begin Q&A. Thank you.

(Operator Instructions)

And our first question comes from the line of Frank Schiraldi from Piper Sandler.

Just on the updated guidance. It seems like the NII growth, the change there is just really a function of the increased loan growth. Just wondering is -- I would assume the revised guidance has more rate hikes baked in. And just wondering, given your ALCO positioning if that's sort of de minimis or how you have that baked into guide?

Frank, it's Mike. I'll go ahead and take a stab at this one. We do have 7 Fed rate hikes included in our modeling. And then also, I would point out that the lower end of our NII guide reflects a potential beta stress test that while we don't anticipate will actually happen, we want to be prepared for. So we have stress test -- stress tested that range for various beta outcomes, which I think will be the bigger driver down the road.

Okay. So the low end is if you seem like given where liquidity is in the banking system, you don't really expect to get to the betas that would be implied by the low end of the guide. Is that right?

On the low end, that's correct. Yes.

And then just on the -- continuing on the vein, just a follow-up on the loan growth guide. What the more normalized utilization rates look like versus where they are now? And just wondering if you have any of that pickup baked into your expectations?

Frank, it's Tom. We're seeing a slight uptick on the utilization rate from 39% to 40%. So nothing material. But with our focus relationship-driven C&I and commercial growth, we are seeing an increase in our committed lines. So we're going to get a natural real dollar increase, but we haven't baked in anything above that 40% utilization rate.

Our next question comes from the line of Michael Perito from KBW.

I wanted to start. Piggybacking on one of Frank's questions. So you guys obviously updated some of the revenue guide on the top line. I noticed the efficiency guide is unchanged. So I guess just kind of a simple question. I guess, does it -- do you guys have kind of increasing confidence given the updated NII outlook that's more going to be towards the below 50 -- at 50 part of that range? Or are there other kind of accelerated expense growth items or investments we should be mindful of that might have pay off longer term, but near term will offset some of that pickup in the top line?

I'll take a stab at this one. The guide that we would give is that we're fairly confident with the core run rate being around $183 million. But as a reminder, I want to make sure everybody knows the first quarter of this year included the Westchester Bank, which we estimate contributed around $2 million of nonseasonal sequential increase. So that somewhat overstates the growth rate. But to the degree that there's any expense growth in the second quarter, we would expect it to be much more modest. And obviously, to achieve positive operating leverage, we understand the need to lag that expense growth as our revenue growth accelerates. And so that's really the strategic imperative.

And Mike, this is Travis. Just to follow up on that, and it goes back to Mike's prior response. The unchanged guidance is more tied to the low end of the NII range to get that beta stress, that's what that would be otherwise you would anticipate some improvement to the efficiency ratio.

Great. That's helpful. And then secondly, just on some of the newer platforms that you guys are -- well, I guess, already have gained access to on April 1, like the venture banking side, some of the commercial lending and non-kind of traditional Valley markets maybe that's not the best way to put it, but on Miami, Chicago. Curious how those have performed over the first quarter? And if there's any kind of notable updates there that are worth mentioning in terms of the growth profiles of those newer platforms that you guys are bringing on?

Yes, Mike, I'll kind of explain it. And our new platforms at legacy Valley was our entrance into Philadelphia, Nashville and Atlanta, and we have seen very strong growth. And keep in mind, a lot of it is following our existing customers who go into those markets as our starting point. Then we build -- we put feet on the street, and we start building more locally from there. And we've seen that success first in Phili and now and the other.

When you mentioned Chicago and Miami, and I think you mentioned Los Angeles, I'm not sure, that's really related to Leumi and the new businesses that we obtained through the Leumi merger. The first quarter, all of those were active. They had very strong pipelines and origination results annualized growth for the Leumi portfolio in total on the loan side was a little over 13%. So I think that answers your question. It's 2 different market questions. Valley legacy and a new Leumi.

Yes, that's great color. Just the only other item I mentioned was just on the venture banking side.

Mike, this is Ira. I think as Tom alluded to, they're really not in any of our numbers yet, but we're really excited about the opportunity that they're going to bring to us. The tech business, as you know, is really focused more on the deposits from the time of announcement to where we are today, we've seen significant increases north of 30% in those deposits. So we continue to be really excited about what that business is going to bring to us from a core funding perspective.

Awesome. Helpful. And then just lastly for me and I'll step back. Just on the buyback. I know you guys have historically had an authorization outstanding. This one seems to be a little bigger. We have a shorter time period around it. I appreciate your comments on bank M&A near term here. So is it fair for us to think that with some of this pullback here and some of the clearly positive outlook you guys have for your business that, that could be utilized to some degree or with some regularity? Or is it not necessarily -- is that reading too much into it?

I think you're probably reading a bit too much into it. But I think from a normal governance process perspective, it actually makes sense for us to have a buyback. And we haven't had a new one since 2007, so to be able to put something with some significant optionality, and I think makes a lot of sense for us. That said, I think the priority continues to be to support the strong organic loan growth when we think about the capital utilization, 17% is a tremendous organic growth number. What that may not continue, we do anticipate strong organic growth to continue for Valley. And obviously, the best use of capital continues to be for that utilization.

Our next question comes from the line of Steven Alexopoulos from JPMorgan.

So not to beat a dead horse on the NII outlook. But if I look at loan-to-deposit ratio, it's near 100%. So I would assume you're going to need to fully fund loan growth with deposits. So one, is that correct? And then secondly, what is the range of deposit beta you're assuming at the low and high end of the NII guide?

So the average for our modeling is 30%. The range on the highest, I think maybe gets about 45 around 55, around 55, 60. So I mean, those are pretty extreme examples. You're not wrong, obviously, deposit growth for the kind of loan engine that we have is really important. And maybe would remind everybody on the call today, that's kind of why we have the various delivery channels that we have.

And when you look at our organic growth, both in personal and business accounts, we both every quarter over the last 2 years. And maybe it's times like this that it's great to have the retail footprint that we have that we get roughly 1/3 of our total funding sources because in the consumer space, they tend to be a little less rate sensitive. And even if they are, as rate sensitive as the commercial side, it's another avenue and another product offering that we can offer to meet the needs of this growing balance sheet on the lending side.

Steven, I just maybe add to that a little bit. I think over the last few years, there's been an intense strategic focus in this organization to diversify the funding source. And our organic loan growth has been a significant priority as well, many in the industry assets have been really the focus. For us, the strategic focus has really been on the liability side in conjunction with the assets. We entered into the cannabis market. We worked more on the HOA market. Tom talked about some of the areas from the financial perspective businesses that we've gone after. The shift in balance sheet from CRE to C&I that brings on a lot of deposits as well has really transformed what the balance sheet looks like. And I think you can sort of take a look at what happened from the NIM this quarter. Traditionally going from fourth quarter to first quarter is a challenge for us, especially in a rising interest rate environment. And when you look at Valley, you would historically say we're a pre-organized Northeast bank that would have a liability sensitive structure. We're actually asset sensitive, and you saw that in this specific quarter. That's obviously going to bode well for us as rates continue to rise. But really reflects the changing funding structure of this organization, and we think there's a lot of optionality for us out there today that wasn't necessarily prevalent a few years ago as to how we fund this balance sheet without having some of the negative impact to NIM that maybe you would have historically seen.

Steve, it's -- the only thing I'll add to that on our business deposits, the new account openings, traditionally, over 60% of those deposits come in is noninterest-bearing deposits, and they're very sticky deposits. That's been our focus of growth on the depository side.

And maybe one more that will help. Looking forward, keep in mind, Leumi loan-to-deposit ratio was 75% and their cost of funds was cheaper than ours. So that provides a ready source on April 1 of funding to help fund our loan growth.

Okay. That's helpful. But I just want to understand, so it sounds like 55% to 60% is the beta assumed at the 8% growth range. So to get to the upper end of the NII guide, what's the beta that you would need to achieve to get to that about?

Around 30%. You have it right. And the answer is around 30%.

Okay. That's helpful. Okay. So Ira, I wanted to ask so if we look at the $750 million of loans from the expansion to Phily, Atlanta, Nashville, it's always great right to see banks doing what you're doing, but I always go back to having covered Valley for a long time, a predecessor, Jerry would always say the only way to grow in new markets was to offer a better deal than the banks that were already there. Are you just offering a better deal? Maybe you could give some color on why you're seeing such strong growth out of these new markets so quickly?

I think it's a differentiated approach. We didn't go into these markets largely with setting up an LPO and said we're going to be out there offering the best rate in individual markets. As Tom alluded to, and maybe you can provide a little bit more color, it was really relationship-driven as following some of our new customers into there and having them really provide sort of what that introduction to some of the other borrowers in this footprint look like. So the yields on those for us are right in line with the overall portfolio. But I think a very different perspective as to how we're looking at growth in those markets versus maybe what some others are doing, but Tom probably some more color would probably be up for there.

Yes. And Ira was right. We enter those markets following our good customers into those. We've maintained the same margins and yields in those markets. And more importantly, we maintain our underwriting standards to those markets, stress testing, interest rates and cap rates on the loans. So we're not compromising to go in either on credit standards or on return. And they become deposit. We've been successful in raising deposits in those markets also.

Yes. Okay. Last question for me. The comment, Ira that you don't expect to be active in M&A for traditional banks at least over the near term. Is that just reflective of there's not many great opportunities out there today or the environment is tough to close deals? Or is this a longer-term strategic shift that you're really announcing to the market today?

I think one of the things I've tried to do as CEO of the organization and the Board has really been supportive of is looking at M&A from a strategic level perspective. We have a pretty defined approach as to how we think about growth is going to look like in this organization and from an environment perspective. And there's an opportunity to layer strategic M&A that really accelerates that growth is something that we prioritized over the last few transactions that we've done, where historically, M&A might have been how do we think about cut costs within an acquisition and then really what is the or organization look like. So a very different approach.

For me, organic growth drives valuation, organic growth drives are right from an independence perspective. So we need to create strategic opportunities and partly through M&A to help us create organic growth. I would say today, there's less options out there that really provide that. But the last couple of deals that we've done have really provided us amazing organic opportunities today, and you're seeing that with 17% loan growth. If you go back and look at what the organic loan growth in this organization has been since I took over as CEO were -- our CAGR is around 9%. We've been able to do that while doing M&A. We created a juggernaut when it comes to organic loan growth in this organization, and we're really excited about what those opportunities look like for Steve.

Okay. So maybe think about it that there's a higher bar today for you to do a traditional bank deal than maybe what we would have thought about 1 or 2 years ago, is that right?

I think the bar is higher, but I think the type is higher, which to me is more important, right? Doing a deal where you're just looking at cost saves across an organization to me distract sort of what the opportunities are for us where there's an opportunity from a strategic perspective to lever growth is something we would potentially look at. But that said, I think we have amazing opportunities today, and it's not really a huge priority for us right now.

(Operator Instructions)

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

I want to go to the NII guide, maybe tackle this a different way. Throughout the course of this year, I think it's expected that we're going to see a weak sequence of fed fund hikes potentially 50-50 or 50-50, 25. If I were to look at 4Q '21 NII versus 4Q '22 NII. How do you think that compares? Would it be towards the upper end of the guidance or the lower end the 8% range using kind of median assumptions on your end?

I want to make sure I understand the question correctly. You can see what our previous guide was, which would be more related to fourth quarter at 5% to 7%. And that guide at that time did not incorporate the kind of variability that I talked about earlier related to various betas. And it's mostly because of the size of projected Fed increases, right, not 25 bps, but maybe 50. And they continue to accelerate the number of them, which could drive a higher beta potentially. So we wanted to make sure that our guide included -- on the lower end of the guide included the potential for those higher betas to actually be reality.

Got it. Let me try it this way. With Leumi, what is the kind of interest rate sensitivity profile on a plus 200 basis point environment for the combined organization?

Yes, it would be approximately 9% or 10% positive NII impact. That would be a good guess to asset sensitivity position. I would just -- I mean just to try and simplify it, right, like the guide that we gave you in January of 5% to 7% was based on the 12/31 balance sheet and the 12/31 curve. Fast forward 3 months, our starting position on loans is much higher, and we've guided to higher loan growth. And then the curve is more beneficial, I would say, to our NII outlook as well. So the range goes up because of those 2 factors. The reason that the bottom end of the range, I would say, is expanded is because we think it's prudent to provide a beta shock scenario to the degree there is additional funding pressure beyond what we anticipate. So we've told you what our historical betas have been and what goes into our internal modeling. But to be conservative and appropriate and give the right range of results. That's what the low end of that guide captures.

Got it. Okay. I did want to go back to expenses just for a moment. Mike, you had mentioned that the core rate is $183 million. And I just want to make sure when you referenced there being modest growth in the second quarter that we're basing that off of $183 million mark? And could you give us some idea of off that $183 million what the all-in expenses are expected to be for the second quarter, kind of the baseline assumptions with Leumi at that point?

I don't have the list of Leumi numbers at my fingertips, but I can answer the first part with clarity. Yes, $183 million is the baseline core expense number for the second quarter, but exclusive of Leumi.

Yes. Leumi contribute, I mean, just on a stand-alone basis, they would contribute, call it, $45 million, $47 million of expenses a quarter. So obviously, there are some early-stage cost saves that you get that would reduce that impact.

Right. Okay. Okay. Thanks for the clarification. The swap fee income, how sustainable do you think that is? Or do you think there was a number of kinds of "fence jumpers" that want to get into it prior to rates going higher?

Yes, Matt, it's Tom. I think there was some acceleration in the first quarter. I think we'll return to normalized levels, which is probably that $8 million to $10 million a quarter.

Okay. okay. The last one for me is this quarter, we're not really seeing any signs of credit deterioration across any of the Northeast banks. But the 1 area I continue to get questions on is the health of office. And I was curious: one, could you just remind us of what your exposure is to office? And then two, are you seeing any sort of signs of deterioration on that front? Or do you have kind of concerns with it on a go-forward basis?

Yes. I mean, obviously, it's something that we focus on. Our office is less than 10% of our total real estate portfolio, and very little, we have minimal in the Manhattan high-rise market. Most of our office portfolio is suburban not urban and it tracks more towards the growing Southeast markets where we're seeing any new business and any growth. I just want to remind you, Matt, that we've always rest at a much higher cap rate than some of our competitors have even in the better times. We do not have a large office exposure in general, and it's very spread out, very diverse. There's quite a context. Our average loan in -- for our new business for the first quarter, average real estate loan was $5.5 million with a 62% weighted average LTV. So we continue to grow in a very granular fashion, 65% of our new business production was with existing customers. So we get a lot of repeat business from people that have been through these cycles. But we're very conscious of what's going on in the office space and very careful in how we proceed there.

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

Maybe keeping on the credit lines. I know it's a rather modest pickup, but a little bit of a hiccup or a pickup in the early-stage delinquencies, the narrative noted 2 loans, just maybe any sort of granularity you can provide in terms of those inflows?

Sure. Dave, it's Tom here. It's about a $37 million pickup, and that piece, $27 million of that is administrative and they're in a process of being removed. There were 2 real estate loans that are paying but slow pay, one has an LTV at below 35%, the other has an LTV in the 70% range. Both are well collateralized. And again, we stress our cap rates, and we underwrite with cap rates that were much higher than I would say our competitors have. So we don't expect any losses.

Got it. And then maybe one final question. In terms of new money yields on new originations this quarter. Just curious how that compared to origination yields in the fourth quarter?

Yes, Dave. So total origination yields increased 9 basis points during the quarter. But I would tell you as we exited March, I mean, those origination yields had ticked up even further. And there's just -- there's a chart on our loan page, the bottom left chart, will show you origination yields over the last couple of quarters to put that in context.

Yes. It's on Slide 7 at the bottom, if you want to know the reference.

This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Ira Robbins for any further remarks.

Thank you. I just want to thank everyone for the time to join us today. And once again, just reiterate how excited we are about the opportunities for organic growth within this organization, both from what we've been doing on our own and in conjunction with the excitement around Bank Leumi closing on April 1. Thank you, and look forward to talking to you next quarter.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.