First Bank (FRBA) Q1 2026 Earnings Transcript

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DATE

Tuesday, April 28, 2026 at 9 a.m. ET

CALL PARTICIPANTS

• President and Chief Executive Officer — Patrick Ryan
• Senior Executive Vice President and Chief Financial Officer — Andrew Hibshman
• Executive Vice President and Chief Retail Banking Officer — Darleen Gillespie
• Executive Vice President and Chief Lending Officer — Peter Cahill

TAKEAWAYS

• Net Income -- $7.6 million, or $0.30 per diluted share, resulting in a 0.79% return on average assets for the period.
• Net Interest Income -- Down $2.2 million sequentially from Q4 2025, driven by lower average loan balances and the timing of loan payoffs.
• Net Interest Margin -- 3.69% for the period, representing a five basis point decline sequentially, with purchase accounting accretion dropping to $1.2 million from $2.6 million in the prior year.
• Loan Growth -- Loans closed and funded totaled $106 million, offset by $73 million in payoffs, with payoffs comprising 59% investor real estate loans and 59% due to asset sales.
• Loan Pipeline -- Quarter-end pipeline reached $383 million, up 15% from year-end, with C&I loans making up 66.5% of the pipeline.
• Deposit Growth -- Deposits increased by $25.1 million, with average interest-bearing deposit costs decreasing 15 basis points during the period.
• Noninterest Income -- Rose to $2.4 million compared to $2.3 million in Q4 2025 and $2 million in Q1 2025, primarily from higher earnings in small business investment funds.
• Noninterest Expense -- $20.9 million, higher due to seasonal payroll taxes and recurring overhead, and up from Q4 which had a $1.9 million nonrecurring gain offsetting expenses.
• Net Charge-Offs -- Increased to $5 million from $1.7 million sequentially, almost exclusively related to the credit-scored small business portfolio.
• Allowance for Credit Losses -- Increased by one basis point to 1.39% of total loans, with $2 million in specific reserves on the small business book and "north of a 3% reserve" on that portfolio.
• Efficiency Ratio -- Remained below 60% for the 27th consecutive quarter, placing the company in the top quartile among peers for efficiency.
• Tax Expense -- $2.3 million at a 22.7% effective rate, reduced from 25.7% last quarter due to stock compensation activity.
• Buyback Capacity -- Fully executing the $20 million buyback would leave total risk-based capital at approximately 12.5%, well above regulatory minimums.
• Floating-Rate Loan Exposure -- Approximately 25% of the loan portfolio is floating rate, expected to reprice “pretty much right away.”
• Branch Network Optimization -- Minimal new or relocation activity planned in 2026; retention from prior consolidations has tracked to plan.

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RISKS

• Patrick Ryan said, "Earnings came in below our expectations in the first quarter," citing elevated credit costs in the small business portfolio as the primary cause.
• Andrew Hibshman reported, "Net charge-offs increased to $5 million in the first quarter from $1.7 million in the linked quarter, almost exclusively related to our small business portfolio."
• There is ongoing enhanced deposit pricing pressure as the market adjusts to the expectation that the effective Fed funds rate will stay higher for longer, potentially impacting future net interest margin.

SUMMARY

Management directly attributed weaker earnings in the period to increased credit costs arising from the credit-scored small business portfolio, which experienced a pronounced rise in net charge-offs. Sequentially lower loan balances and heightened loan payoff activity further reduced net interest income, contributing to margin pressure. Despite near-term credit and top-line headwinds, management emphasized a strengthened allowance for credit losses, robust capital ratios, and strong initial loan growth in April as indicators of portfolio stabilization and future earnings potential.

• Specific reserves against the small business portfolio stand at $2 million.
• Nonperforming asset levels remain within historical and peer norms, despite the addition of a single-borrower commercial real estate loan totaling $9.5 million to nonperforming status.
• Buyback execution remains discretionary; management stated they retain "significant dry powder" for repurchases within capital policy limits.
• First quarter expenses, impacted by seasonality and annual salary adjustments, are expected to represent the near-term run rate, with no material further increases anticipated.

INDUSTRY GLOSSARY

• OREO: Other Real Estate Owned; foreclosed property owned by the bank pending sale.
• C&I: Commercial and Industrial loans, primarily short- to medium-term loans to business clients.
• FHLB: Federal Home Loan Bank, a government-sponsored enterprise providing banking services to member institutions.
• Efficiency Ratio: Noninterest expense divided by the sum of net interest income and noninterest income, indicating cost management efficiency.
• Buyback Program: Board-authorized share repurchase plan, enabling the company to buy back its own stock within specified limits.
• Loan-to-Value (LTV): The ratio of a loan to the value of the underlying collateral property.
• Net Interest Margin (NIM): Net interest income as a percentage of average earning assets, measuring profitability of lending and deposit activities.

Full Conference Call Transcript

Patrick Ryan: Thank you, Andrew. Earnings came in below our expectations in the first quarter. Elevated credit costs in the credit-scored small business portfolio were the primary driver. We have taken a very proactive stance regarding the management and cleanup of this portfolio. The product parameters and sales processes were revamped starting in 2025, and all known issues in the portfolio have either been charged off in full or specific reserves have been established. Elevated loan payoff activity also impacted earnings. As Peter and Andrew will discuss, unusually high payoffs in the fourth quarter drove lower average balances during Q1 and that impacted the overall results.

We are still working to make up for those elevated payoffs, but strong loan growth so far in April and healthy pipelines provide reason for optimism that we can still achieve our loan growth goals. The net interest margin was down slightly in the first quarter, partly driven by reduced purchase accounting accretion income and partly driven by heightened deposit competition. Overall, credit quality seems to be holding at manageable levels. Specifically, our levels of nonperforming assets and criticized loans remain at levels well within historical norms and peer averages. Furthermore, our strong allowance for credit losses and overall capital levels provide a strong buffer.

Regarding overall core profitability, I believe we will see a return to strong balance sheet growth as we move forward as payoffs normalize. In fact, through mid-April, net loan growth was up $50 million, putting us pretty close to plan. The margin will obviously be dependent on the overall rate and competitive environment, but we expect it should remain at healthy levels moving forward. First quarter expenses were somewhat elevated based on seasonal factors like payroll taxes and snow removal, and we expect they will remain relatively stable throughout the remainder of this year. Furthermore, our strong capital levels provide significant dry powder for share buybacks should attractive buying opportunities emerge.

In summary, while the quarterly results were disappointing, we believe the elevated credit costs are isolated to the small business portfolio, and profitability should return to stronger levels as we move forward in 2026. At this time, I would like to turn it over to Andrew to provide some additional detail on the financial results. Andrew?

Andrew Hibshman: Thanks, Pat. For the three months ended 03/31/2026, we recorded net income of $7.6 million, or $0.30 per diluted share. This translates to a 0.79% return on average assets. Net interest income decreased $2.2 million compared to the fourth quarter, primarily due to lower average loan balances, which resulted from limited growth during the current quarter coupled with the late-quarter timing of payoffs in the linked fourth quarter. Additionally, the yield on average loans declined by 21 basis points, which was partly related to the elevated level of prepayment fees in the linked fourth quarter. This outpaced the 15 basis point decline in interest-bearing deposit costs and contributed to a five basis point decline in the net interest margin.

I will note that compared to last year’s first quarter, net interest income grew by $1.9 million, or 6%, and that was primarily driven by lower interest-bearing deposit costs. At 3.69%, we believe our first quarter net interest margin remained very strong and compares favorably to our peers. Looking ahead, we continue to manage a well-balanced asset and liability position, and we anticipate stronger loan and deposit growth, which should result in increased net interest income generation regardless of what happens with rates. We anticipate continued declines in our purchase accounting accretion over the next several quarters.

We are also seeing enhanced deposit pricing pressure as the market adjusts to the expectation that the effective Fed funds rate will stay higher for longer. Offsetting some of that pressure is that we continue to replace the runoff of lower-yielding assets with higher-yielding loans. We expect these factors in aggregate to support a relatively stable margin, with the potential for some pressure should the current flat yield curve environment persist. Net charge-offs increased to $5 million in the first quarter from $1.7 million in the linked quarter, almost exclusively related to our small business portfolio. This was the primary driver of increased credit loss expenses in the first quarter.

Our allowance for credit losses to total loans increased one basis point to 1.39% from 1.38% at December 31. With the recent increases in our allowance, our reserve coverage ratios are very strong. Noninterest income grew to $2.4 million in the first quarter of 2026, compared to $2.3 million in the linked fourth quarter and $2 million in 2025. The slight increase in the current quarter primarily relates to higher earnings from some modest investments we have made in certain small business investment funds. Noninterest expenses were $20.9 million for the first quarter, compared to $17.1 million in Q4.

The increase was primarily driven by a $1.9 million gain on sale of an OREO asset, which was booked as a contra expense in the fourth quarter. Excluding the impact of this nonrecurring item in Q4, noninterest expense increased by $1.9 million primarily due to seasonal factors. Salary and benefits expense increased primarily due to typical first quarter increases related to merit salary adjustments, benefit cost increases, and increased employment taxes connected to annual incentive payments. Occupancy and equipment expenses were impacted by annual rent increases, along with the impact of higher maintenance costs given the harsh winter in our primary footprint.

Looking ahead, we view our first quarter expense level as a reasonable overall run rate as we move forward. The first quarter marked our 27th consecutive quarter of operating with an efficiency ratio below 60%. This has positioned us as a top quartile performer among our peers on this metric and is a differentiating strength for First Bank. We expect to drive revenue growth during the rest of the year without needing to add to expenses, which should move our efficiency ratio down over the next several quarters. Tax expenses totaled $2.3 million for the first quarter, with an effective tax rate of 22.7%. This compares to 25.7% for Q4.

First quarter taxes included the benefit of items related to stock compensation and compensation activity, which historically has an outsized impact during the first quarter. We anticipate our future effective tax rate will be approximately 24% to 25%. Our capital ratios remain strong. We executed a modest amount of share repurchases during the quarter, and we could fully execute our approved $20 million buyback program and still maintain strong capital ratios. For example, assuming $20 million in buybacks and a static balance sheet, our total risk-based capital would be approximately 12.5%, well in excess of any regulatory minimums or internal policy limits.

Going forward, we aim to continue driving shareholder value through a combination of core earnings, a stable cash dividend, and share buybacks as applicable over time. At this time, I will turn it over to Darleen Gillespie, our Chief Retail Banking Officer, for her remarks. Darleen?

Darleen Gillespie: Thanks, Andrew, and good morning, everyone. Deposit growth of $25.1 million was modest during the quarter. While we saw solid activity onboarding new relationships and expanding existing ones, seasonal fluctuations and some expected outflows influenced ending balances for the quarter. Average interest-bearing deposit costs came down 15 basis points during the quarter, and we benefited from the Federal Reserve rate cuts that occurred in 2025, as well as our continued proactive efforts to optimize and manage deposit pricing. Going forward, we may see some moderation in this benefit as heightened industry competition continues to place pressure on deposit pricing. We remain focused on striking the appropriate balance between growth and cost discipline.

Overall, we continue to execute effectively against our dual priorities of deepening relationships while prudently managing funding costs. In addition, targeted promotional pricing has proven successful in attracting new customers and, importantly, retaining those relationships beyond the promotional period. Our newly opened and relocated branches are doing well and meeting deposit growth expectations. Retention levels among customers impacted by branch consolidations have remained strong, and associated attrition has tracked within our plans and budgeted expectations. This is a testament to the outstanding execution of our relationship bankers across our footprint.

Looking ahead in 2026, deposit growth continues to be a priority in order to fund our expected loan growth in a profitable manner and to maintain a strong net interest margin. We intend to achieve this by maintaining a strong deposit funding pipeline, continuing to retain and grow existing relationships, and utilizing promotional pricing when prudent and necessary to win in this highly competitive market. Our teams are closing loans and adding full operating accounts, which is a key element of our growth and funding strategy. After a very active year of optimizing our branch network in 2025, we have minimal branch activity on the horizon in 2026.

We will continue to be opportunistic where it makes sense to enhance the efficiency of our network, the convenience for our customers, and our potential exposure to new clients in existing or adjacent markets. But right now, our focus is on optimizing the growth and pricing of our deposit portfolio. We intend to keep working to achieve our goal of bringing our deposit costs closer to our peer bank median. At this time, I will turn it over to Peter Cahill, our Chief Lending Officer, for his remarks. Peter?

Peter Cahill: Thanks, Darleen. As Pat and Andrew described, our Q1 numbers reflected a slower quarter in terms of loan growth. Last year, as you know, despite average loan growth of $267 million, we finished with annual growth of $149 million, or 4.7%. Much of that second-half decline was due to loan payoffs in Q4 of $135 million, which far exceeded payoffs that averaged $50 million in each of the previous three quarters. Results this past quarter were impacted again by loan payoffs. We mentioned a good loan pipeline at year end, and I think we had a pretty good quarter from the standpoint of converting that pipeline into new funded loans.

Loans closed and funded in Q1 totaled $106 million, which equals the quarterly average for both 2024 and 2025—so not a slow quarter from the standpoint of new loans closing and funding. Payoffs in Q1 were $73 million, however, higher than our average quarterly payoffs in each of the past five years. Payoffs bank-wide were made up of 59% investor real estate loans. Of all the payoffs in the quarter, the same figure, 59%, stemmed from the underlying asset being sold, and the balance of those payoffs were primarily from loans being refinanced out of the bank. As in previous quarters, new loans continue to be centered in C&I and owner-occupied real estate.

For the quarter, this category made up 50% of new loans, with investor real estate loans comprising 40% and consumer lending 10%. We are seeing the same competition we have seen in previous quarters, primarily from the regional banks in our market. We continue to get decent spreads in the 250 basis point range over FHLB. Some of the competition is pricing lower, and we are also seeing banks loosening terms a bit by not requiring deposits or offering longer amortization schedules, etc. Despite the competition, we are still seeing good things in our lending pipeline.

After closing and funding over $100 million in new loans during the quarter, the pipeline at quarter end—what we call probable fundings—stood at $383 million, up 15% from where it was at year end. The number of loans in the pipeline—the number of individual loans—at quarter end was up 9% over year end. Regarding the makeup of those loans, 66.5% are C&I loans compared to 61% at 12/31. The impact of our solid pipeline, as Pat mentioned, has been seen already in Q2. In mid-April, we hit loan growth for the year of close to $50 million, which is where we should have been a couple of weeks earlier at March 31.

On the topic of asset quality, we have mentioned the softness we have been experiencing in the small business portfolio over the last couple of quarters, and Pat and Andrew both talked about the impact this past quarter. Last quarter, I mentioned that we have turned over staffs in that area and significantly tightened credit parameters, which, as you would imagine, has slowed production significantly. Delinquencies are no longer growing; we are very focused on providing attention to the relationships we have in that portfolio presently. Otherwise, delinquencies across all business lines were very manageable at quarter end.

The earnings release did mention that our increase in nonperforming loans was related primarily to the addition of a well-secured single-borrower commercial real estate credit totaling $9.5 million. I will just add that this assisted living property shows current cash flows north of 1.8 times debt service coverage and a loan-to-value of 52%. So while it impacts our numbers presently, we expect a positive resolution there. In summary, while the payoffs we experienced resulted in a slow quarter as far as loan growth goes, we have seen a pickup since then and we remain confident in our plan to grow the loan portfolio by $200 million this year. All segments are expected to contribute to that growth.

That concludes my remarks about lending, so I will turn things back now to Pat for some final comments.

Patrick Ryan: Thanks, Peter. We will now open the call for questions.

Operator: Press star then the number one on your telephone keypad. Your first question comes from the line of Justin Crowley with Piper Sandler. Your line is open.

Patrick Ryan: Good morning, Justin.

Justin Crowley: First, I was just wondering if you could spend a little more time on the small business portfolio that I know we have discussed a lot—what has been driving the weakness there, and what gets you to a point where you are comfortable that any further negative impact in that book should be contained, given some of the actions taken over the past couple of quarters?

Patrick Ryan: Yeah. Absolutely. So the short answer, Justin, is there is no one factor. Certainly, we have seen plenty of data in the market that small businesses have been feeling some stress given the volatility in the overall economy. In general economic factors within a small business portfolio, these are companies by definition that have a smaller revenue base and therefore less of a cushion to absorb things like volatility in margins or the loss of a big customer, etc. On top of that, some of it, we believe, was tied to folks being a little more aggressive than we would have liked on the overall marketing of the product. It is a credit score product.

It is one that we have been using for six or seven years now, so it was not a brand new solution. But we were looking to grow and scale that business over the last couple of years, and I think some folks, in an effort to try to build that, were moving beyond the core tenets of our relationship banking model. So we have revamped those processes. We have tightened up the parameters. And as Peter mentioned, new production has slowed down significantly. We are tracking the data closely. When we see issues—when we have significant delinquency—we are moving quickly to take care of those loans either through charge-off or specific reserve.

As Peter mentioned, as we have looked at some of the delinquency trends, it feels like things are starting to settle down there. Obviously, time will tell, but we are definitely feeling like that initial surge is past us. Given the changes we have made over the last nine months, we think the results moving forward should be significantly better. Exactly what “better” means, time will tell. But again, it is a relatively small portfolio; it is down under $100 million at this point. Given the steps we have taken to address the known issues, we think we are getting past the uptick, and we think we will see some better performance out of that portfolio moving forward.

Justin Crowley: And then just to clarify, the stress you are seeing is not coming from the SBA product; it is coming outside of that program and the smaller-dollar-type loans. Is that accurate?

Patrick Ryan: These are smaller-ticket—couple hundred thousand—lines of credit and term loans that are not necessarily SBA-related. So it is not an SBA-specific situation.

Justin Crowley: And you said it was about $100 million. Just looking to put some more numbers around it—do you have what the reserves against that portfolio are, and then a sense of where charge-off rates have been in that book specifically so far?

Patrick Ryan: If you looked at the quarter, the $5 million number was almost exclusively related to that portfolio. Over a 12-month period, the number was probably closer to $9 million. But if you scroll back further, again, this is not a brand new product. It is one that we have been using for a while, and it felt like the scoring became a little less predictable. Some of it might have been related to some of the cash infusions from COVID—we cannot really say for sure. Prior to that, the performance was actually really good; we had very minimal charge-offs. If you look at it at a point in time, the numbers look really high.

If you spread it out over a two- or three-year period, you are probably looking at maybe 2% to 3% a year over that time frame. Again, higher than we would like, and, obviously, as a result, we made changes to the underwriting and the sales process to slow that production down. But what we have in the portfolio now is folks that have been with us for a while, have been paying as agreed, and have not been showing delinquency issues. So, again, we think the performance moving forward should be significantly better.

Andrew Hibshman: I will just quickly add: we have about $2 million of specific reserves allocated to known problems, and we have also made some adjustments in our allowance calculation to put some money away for unknown problems. Right now, it is $2 million of specific reserves for identified specific loans, and we have adjusted some of the other factors within our calculation to address some potential issues going forward.

Justin Crowley: Okay. So does that get you north of a 3% reserve in that book?

Andrew Hibshman: Yeah, probably.

Patrick Ryan: Within the allowance models, small business is part of overall C&I, but you can see the overall allowance is up in the 1.37% range, which is a very healthy level relative to where we have been and relative to where the industry is. We certainly think there is significant money set aside to deal with potential issues. And listen, we are charging everything off in full. There will be some recoveries here—we are not factoring that into the numbers. But we think that we have put a lot of money aside to make sure we are protected here.

Justin Crowley: Got it. Shifting gears: on the comment that the NIM should hold relatively stable here—that has been the messaging—could you detail what is embedded in that in terms of new loan yields versus what is rolling off the portfolio, and the volume of repricing opportunity as we get through the year?

Patrick Ryan: I can address part of that. Peter can jump in on new loan yields. With some of the volatility in the markets, Treasury yields moving higher, I think loan pricing is well in the 6% to 6.5% range—higher depending on asset class, product type, things like that. Then, Andrew, if you want to provide some details on the repricing and the modeling.

Andrew Hibshman: We still have a good chunk—without getting into a ton of specifics—of loans that are repricing off of loans that were originated five years ago in a significantly lower interest rate environment. So we have a lot of loan activity that is repricing a couple hundred basis points higher in some instances. We believe that repricing is going to offset some of the purchase accounting accretion declines, and those declines we expect to be a little more muted than they were over the last couple of quarters. I believe purchase accounting accretion was $1.2 million in the first quarter. It was $2.6 million last year.

That will continue to come down, but probably only $100 thousand to a couple hundred thousand dollars a quarter going forward. So that will continue to have a negative pull on the margin, but we continue to see enough loans repricing higher that should offset most of those declines. The big wildcard will be what we need to do on the deposit pricing side—whether we need to price up to bring in new money to fund the loan growth that we expect. Again, we feel fairly confident that we can maintain a fairly stable margin with a lean towards maybe some pressure depending on deposit pricing over the next several months.

Justin Crowley: And do you have what floating-rate exposure is in the loan book?

Andrew Hibshman: It is still about 25% of the portfolio. It fluctuates a little bit. That number has moved a little higher over the last couple of years because we have been doing more C&I and shorter-term stuff than we had been doing in the past, but it is still about 25%. It was closer to 20% a couple of years ago, and now it is between 25% and 30%, but around 25% is still the right number.

Justin Crowley: Would that all reprice immediately, or is there a lag, and is there any protection in the way of interest rate floors?

Andrew Hibshman: I do not have the details on the floors, but yes, there is some protection there. Most of it would reprice either right away or the next month. We still have some interest rate swaps in place that are protecting us a little bit on some of these things, but not much. Especially as rates move lower, some of those would move lower. It is pretty much right away for the 25%. There are some floors, but I do not believe most of the loans are at the floors. Obviously, if we see some bigger rate cuts, the floors become more relevant than a quarter-point adjustment by the Fed.

Justin Crowley: That is helpful. On expenses, you called out some of the seasonally higher occupancy costs inflating the number in the period. As we look at compensation, is that a good way to think about that level moving forward? You mentioned higher payroll taxes—curious how much should flow back out as we think about the forward trajectory.

Peter Cahill: The first quarter is a pretty reasonable expectation.

Andrew Hibshman: It could move a little bit down because of the technical factors you noted. We did our salary increases in March, so you do not have the full impact of those salary increases in the first quarter. I think the run rate in Q1 is pretty close to where we would see things going forward because some of the one-time items will get offset by the increases in the salary line item that happened late in the quarter. I do not anticipate any significant increases to that number going forward. Across most expense line items, a fairly stable run rate over the next several quarters is where we see things.

Justin Crowley: On the broader topic of expenses—balancing further investment, particularly on the technology side as we are seeing more rapid AI adoption—how are you thinking about implementing that?

Patrick Ryan: I would say it is a combination of working internally with folks who are our first movers. We have a full team doing testing; they have access to the more advanced tools and are developing use cases. As those use cases roll out, there will almost certainly be some tech cost associated with them, but in many cases there should also be corresponding savings. There may be a situation where tech spend increases a bit, but we would also envision some other expenses coming down. In conversations with our primary technology providers, they are looking at embedding AI tools into products and services we are using.

We have, in most cases, fixed-price contracts there, so we do not expect that will drive significantly higher cost in the short run. Over time, as the quality or value-add of the tools they embed are more noticeable, that could drive some pricing power on their part. The short answer is we will be looking to make strategic incremental investments based on use cases that we uncover, but it is not something we expect would be huge additional dollars. We are not spending time on R&D and coding like the big guys are doing to try to get a step ahead.

We want to be ready to move quickly, which is why we have developed the working groups, the use cases, the testing parameters, and the sandbox safety parameters so that we can start using some of these AI tools in a safe way.

Justin Crowley: Great. I appreciate the color. I will leave it there. Thanks so much.

Patrick Ryan: Alright. Thanks.

Operator: Your next question comes from the line of David Bishop with Hovde Group. Your line is open.

David Bishop: Hey, good morning, guys.

Patrick Ryan: Morning, David.

Andrew Hibshman: Hey.

David Bishop: I think you mentioned in the preamble that you still sit in a very enviable tangible and regulatory capital position. Maybe your view of excess capital—how aggressive can you be in terms of addressing the buyback on any pullback in the share price?

Patrick Ryan: We have an approved buyback in place and plenty of availability within the plan. Obviously, slower growth in the quarter is not the goal, but the paydowns during the fourth quarter and first quarter led to some significant additional capital accretion during the last half year. The short answer is we have strong capital levels to put to work if it makes sense.

David Bishop: Got it. And then, in terms of revamping the small business group—you have the other specialized business units. Do you continue to see good opportunity to grow there? Any stress in any of those segments, like private equity or ABL, and your appetite to continue to grow those segments?

Patrick Ryan: Those segments are doing well. We talk about them together as niche businesses, but they are very different. You are talking about a credit-scored product that is supposed to be scalable and light-touch, which is very different than the detailed, thorough, traditional underwriting we are doing on the ABL and the private equity side. Those other groups are performing well. We take a measured, methodical approach—not looking to bet the farm on any one of these individual segments. We think each of them could grow reasonably over the next couple of years and continue to contribute to overall profitability and diversification of the portfolio.

David Bishop: Got it. As a follow-up, I think Peter mentioned the one larger commercial real estate credit—assisted living. Any additional color on ultimate resolution and the near-term outlook for that credit?

Patrick Ryan: We are a participant with a larger bank on that, so we are taking our cues from them. All the data regarding our specific borrower—which is part of a much larger corporate entity that is going through a restructuring—points to the fact that we are in a very strong position. When you have a corporate restructuring, things get put on hold while that gets sorted out. Given the underlying strength of the asset, from a cash flow and LTV perspective, we have every reason to believe we are going to be fine there. The timing of when that comes off the books will be driven by how long it takes to work through the corporate restructuring process.

We think and hope it would be gone by the end of the year, but it is hard to be more specific than that.

David Bishop: Got it. Final question: there is a lot of discussion about deposit pricing competition across the Metro New Jersey/New York market. It is very competitive. Do you have the spot rate of deposits or margin at the end of the quarter, and maybe the marginal cost of deposits so far through April?

Patrick Ryan: Andrew probably has the March deposit cost number; maybe that is the best place to start. Certainly, for incremental dollars, we are seeing pressure. If you want to try to raise some money in the CD market, that might have been a 3.50% rate six months ago, and now it is moving closer to 3.75% or even higher. You have seen the cost move higher on the brokered and wholesale side, and those markets are moving in lockstep. Andrew, if you have more specific data around what the March deposit level looks like.

Andrew Hibshman: We had a rate cut in December and a couple of other rate cuts earlier in the quarter, so that trickled into the first quarter. We saw the big benefit of that hit in January. Pricing has stayed relatively stable when you look at overall deposit costs in January, February, and March. There is a little bit of pressure now with us trying to bring in some additional money, and pricing has gotten a little bit more competitive with Treasury yields moving a bit.

I think deposit pricing should remain relatively stable compared to the first quarter, with maybe a little bit of pressure as we saw starting in March, and we will have to continue to be competitive into the second quarter.

Operator: Your next question comes from the line of Jake Civillo with D.A. Davidson. Your line is open.

Jake Civillo: Hey, good morning. On the compensation expense side, you talked about some of the moving parts. Is any of that competition-related or opportunistic hiring?

Patrick Ryan: Regarding hiring, that is always happening, but I do not think there was anything in particular I would point to in Q1 as a driver. It was more a function of seasonal items that are nonrecurring for the remainder of the year, and that was the driver of the elevated numbers in Q1.

Andrew Hibshman: I would just add that the market is still competitive for finding people, but we have not seen a ton of extra pressure. Salary increases are pretty standard this year. Overall, it is more standard stuff and some seasonal items in Q1, but nothing outside of normal or outsized salary increases, and we do not expect that we will have to be more competitive than normal to continue to bring good people into the bank.

Jake Civillo: Fair. Thanks, Andrew. And then one more for me. You pointed to the $50 million net loan growth number in the first couple weeks of April. Does that follow the similar 50/40/10 split you referenced earlier?

Patrick Ryan: I think year to date has been pretty consistent with the portfolio that exists today. In any given quarter or month, you could have a particular larger loan that might sway the numbers one way or the other. Peter, was there anything that jumped out at you if you looked at year-to-date growth that was an outlier from the overall portfolio composition?

Peter Cahill: No. I would say it fits right in. Because it is more recent, I know a couple of the chunkier loans since 03/31 were in the C&I owner-occupied category. It was not the case where we closed and funded a couple of investor real estate loans to help the numbers or anything like that. It has been more of what we have been chasing for previous years.

Jake Civillo: Okay. Great. Thank you.

Operator: Again, if you would like to ask a question, press star then 1 on your telephone keypad. I will now turn the call back over to Patrick Ryan for closing remarks.

Patrick Ryan: Thank you, everybody. We appreciate your time today, and we will look forward to regrouping with folks once we get through the second quarter here. Thanks, everyone.

Operator: Ladies and gentlemen, that concludes today’s call. Thank you all for joining. You may now disconnect.

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