Hey everyone, and welcome to First Bank's first quarter 2022 earnings call. If you would like the opportunity to ask a question today, please press star followed by one on your telephone keypad. If you change your mind, please press star two at any time. At this time, I would like to turn the call over to Patrick Ryan, President and CEO. Patrick, please go ahead.
Thank you. I'd like to welcome everyone today to First Bank's first quarter 2022 earnings call. I'm joined by Andrew Hibshman, our Chief Financial Officer, and Peter Cahill, our Chief Lending Officer. Before we begin, however, Andrew will read the Safe Harbor statement.
The following discussion may contain forward-looking statements concerning the financial condition, results of operations, and business of First Bank. We caution that such statements are subject to a number of uncertainties and actual results could differ materially and therefore you should not place undue reliance on any forward-looking statements we make. We may not update any forward-looking statements we make today for future events or developments. Information about risks and uncertainty are described under Item 1A, Risk Factors in our annual report on Form 10-K for the year ended December 31st, 2021, filed with the FDIC. Pat, back to you.
Thanks, Andrew. I'd just like to take a couple minutes to hit on some of the highlights from the quarter and then turn it back to Andrew and Peter for a little more detail. Overall, I'd say Q1 was a very strong start to the year. We enjoyed very good core loan and deposit growth. We saw a continued decline in our cost of deposits. The asset quality trends look good. Our loan yields are moving higher while our deposit costs remain low. Our core return on assets, excluding PPP, continues to move higher. We are seeing employee turnover creating some challenges, but I wanted to point out that I'm really quite pleased with the high quality of new people we've been able to bring in, and I think the strength of our team is as good or better than it's ever been.
Specifically in our Pennsylvania region, that team is fully staffed and off to a great start, and we're looking for continued growth and strength in that area. I'd like to hit on a couple of the key financial ratios. We had strong ROA of 1.31% in the quarter. Our return on tangible common equity was over 13%. We had efficiency ratio below 50% for the fifth straight quarter. Our pre-provision net revenue return on assets was over 1.8%, once again for the last five quarters. Our net interest margin was over 3.5%, again for the last five quarters. We realized tangible book value per share growth during a period where many banks actually saw their tangible book value per share decline.
On the lending side, we had $65 million in net loan growth excluding PPP, which is just over 12% annualized. The weighted average yield on our first quarter production was 3.97%, which was up from 3.54% in the fourth quarter of 2021. As I mentioned, asset quality is holding up quite well given the environment. Slow quarter for SBA gain on loan sale income. However, we did have good activity towards the end of last year and in the first quarter, which should lead to some SBA loan sale fee income over the next couple quarters. Our pipeline for SBA deals remains very active with 15 deals currently in process. We continue to be very busy across all of our markets and all of our lending specialties.
On the deposit side, we have $65 million in overall deposit growth, and half of that increase came from non-interest bearing account categories. We continue to drive our cost of deposits lower, achieving a 19 basis point cost of deposits in Q1, which was down slightly from 21 basis point cost of deposits in the fourth quarter. We have continued success in our commercial deposit and cash management areas. Commercial deposits are now up to 46% of total bank deposits, and the cash management pipeline continues to be strong and active. In summary, it was a really great start to 2022. We feel like we're hitting on all cylinders in lending. Growth is strong, the pipeline is robust, yields are rising, and regions and teams are busy, and asset quality looks good.
Deposit results are also strong with good non-interest bearing growth, continued success in cash management, and an ability to continue to keep funding costs low. The core business is growing nicely. We're actively exploring additional niche lending opportunities and deposit opportunities that will allow us to continue to grow in the commercial loan and deposit area. At this time, I'd like to turn it over to Andrew to dive into a little more detail on our financial.
Thanks, Pat. For the three months ended March 31st, 2022, we earned $8.2 million in net income or $0.41 per diluted share, which translates to a 1.31% return on average assets. Factors contributing to another strong income quarter included an improving net interest margin and effective management of non-interest expenses. Net income increased from the linked fourth quarter, but declined slightly compared to Q1 2021, and that decline from Q1 2021 was primarily due to higher loan loss provision expenses, lower PPP fee income, and lower non-interest income. After a strong loan growth quarter in Q4 2021, we are very pleased with our net loan growth in Q1 2022.
Excluding PPP loan forgiveness, loans were up $65.3 million in Q1 2022 compared to an increase in non-PPP loans of approximately $134.4 million in Q4 2021. During Q1 2022, $25.5 million in PPP loans were forgiven, which leaves approximately $25.5 million in PPP loans outstanding at March 31st, 2022. During Q1 2022, we earned $860,000 in PPP fees compared to $1.1 million in the fourth quarter of 2021, and $1.6 million in the first quarter of 2021. As of March 31, 2022, we had $829,000 in deferred PPP loan fees remaining. Total deposits were up $63.3 million during the first quarter, while we continue to reduce our reliance on higher cost time deposits.
Non-interest-bearing demand deposits as a percentage of total deposits increased to 27.4% at March 31, 2022, compared to 26.4% at the end of 2021. While time deposits dropped to 15.1% of total deposits at March 31st, 2022, compared to 18.5% at December 31, 2021. In addition to shifting our deposit mix, we have been able to lower the cost of our interest-bearing deposits, which both have contributed to the lower cost of deposits that Pat mentioned. Our total cost of deposits was reduced another 2 basis points in Q1 2022. Our tax equivalent net interest margin increased to 3.57% for the quarter ended Q1 2022, compared to 3.52% in the previous quarter.
Excluding PPP fee income, our margin would have been approximately 3.43% in the first quarter of 2022, compared to 3.34% in the fourth quarter of 2021. Our margin continues to benefit from the lower cost of deposits and minimizing the decline in the average yield on interest earning assets. We are also well-positioned for a rising rate environment and anticipate that excluding the impact of PPP fees, we should be able to maintain a relatively stable margin with potential opportunities to improve the margin through rising asset yields as our March 31, 2022, GAAP position is slightly asset sensitive. Based on strong deposit growth and PPP forgiveness during the first quarter of 2022, our liquidity levels increased slightly during the quarter.
However, we have not increased our on-balance sheet liquidity to the level of many of our peers because of our strong organic loan growth. This strong organic loan growth has also kept our investment portfolio relatively small when compared to peers, and we have not taken any significant credit or interest rate risk positions. The size and fairly short duration of our investment portfolio has limited our unrealized losses somewhat, but these losses have reduced our stated equity capital in the first quarter of 2022. We also had limited buyback activity in the first quarter of 2022. We only repurchased 200 shares during the quarter. This also limited our capital decline. However, we have seen a pickup in buyback activity in April as our share prices dipped below our established buyback price at certain points in April.
In spite of the decline in capital due to the unrealized losses in our AFS book portfolio, as Pat mentioned, we were able to increase our tangible book value per share by $0.12 during the current quarter. Based on another quarter of modest charge-offs and continued strong asset quality profile, we reduced our allowance for loan losses as a percentage of loans slightly to 1.13%. This is excluding the impact of PPP loans, which was down from 1.15% at the end of 2021. Non-performing loans were down slightly in the current quarter, and COVID-related deferrals are now negligible. In the first quarter of 2022, total non-interest income decreased to $1.3 million from $2.2 million for the fourth quarter of 2021.
The decrease from the fourth quarter of 2021 was due to declines in gains on recovery of acquired loans, declines in gains on sale of loans, and lower loan swap fees. Gains on recovery of acquired loans in Q4 of 2021 were elevated due to a large recovery on one commercial loan during the quarter. SBA loan sale income, which is our primary source of loan sale gains, was down due to less SBA loan activity during the quarter. As Pat mentioned, we still have an active SBA loan pipeline and expect this activity to increase. While non-interest income levels may continue to fluctuate, the underlying strength of our non-interest income generation capabilities has improved from prior years. Annualized first quarter 2022 non-interest expenses were 1.79% of average assets compared to a peer average of 2.07%.
In total, non-interest expenses were $11.1 million in the first quarter of 2022, down $703,000 compared to Q4 2021. The decrease was primarily due to higher incentive comp and merger-related expenses in the fourth quarter of 2021. We are continuing to be laser-focused on expense control, but we anticipate our quarterly expenses will be slightly higher than we had anticipated during our last conference call and will increase slightly from Q1 2022 levels as year-end salary adjustments were made in March 2022, and inflationary pressure is affecting certain other expense items. With a strong commercial loan pipeline, our improving deposit mix, an anticipated pickup in non-interest income from the current quarter, and effective management of non-interest expense, we are well-positioned to continue our strong and improving core profitability trends during the remainder of 2022.
At this time, I'll turn it over to Peter Cahill, our Chief Lending Officer, for his remarks. Peter?
Thanks, Andrew. The earnings release outlines well the overall results in the lending area, and Pat and Andrew highlighted what we accomplished. My comments mainly will be focused on non-PPP related results. All in all, after a strong finish to the year in the fourth quarter of 2021, and December in particular, I'm pleased to report a very solid quarter for the following three months, ending 3/31/2022. The first quarter results were a big turnaround from the first quarter of 2021. In 2021, loans actually declined in the quarter. Despite funding new loans of $68 million in Q1 2021, we had loan prepayments of $103 million. For comparison, this quarter, we funded $126 million of new loans, 85% more than the same period last year.
Importantly, paid off loans declined from the $103 million level I just mentioned for 2021 to $53 million this past quarter. The reasons behind the payoffs this past quarter were that 45% of total paid off loans were refinanced out of First Bank, and 43% paid off loans occurred when the underlying asset was sold. The loans refinanced number is a little higher than normal, and that's, as more than half of the total comes from one large construction loan that stabilized and refinanced, as planned, out of the bank with an insurance company. Additionally, regarding the line of credit utilization, the utilization rate was down slightly from 45% at the end of the fourth quarter to 42% this quarter.
Net net for all the activity in Q1, our organic loan growth of $64 million and change put us just about $14 million ahead of plan and in good shape to meet our 10% organic loan growth goal for the year. At this point, I'll talk a little bit about our loan pipeline, which remains strong. We continue to source good business in our market, and the pipeline continues to be well diversified. We haven't had any real pressure to extend terms or otherwise structure loans in a way that we haven't been doing. We're looking at the same business under the same basic terms. Our pipeline numbers are based upon probable funding, which means we project first year usage and then apply a multiple against that for a probability factor based upon where in the approval process the loan request is.
For example, a loan that's already approved, waiting to close and still in the pipeline, will have a higher probability of closing than will one that just went into underwriting. Looking back a couple of quarters, our pipeline at the end of the third quarter of 2021 stood at $265 million, which was a record level for us at that time. After a very strong fourth quarter in terms of loan closings, which obviously removes loans from the pipeline, we still finished the year with a pipeline of $262 million. A quarter later, after a good first quarter, our pipeline stood at $283 million at 3/31/2022. A review of the pipeline leads one to a discussion of projected loan fundings.
Each month, we look out 60 days and project funding of new loans and payoffs or prepayments for Andrew's team in finance. To get on the list of projected funding, a loan has to be approved and moving towards closing. As you might expect from the healthy pipeline, the beginning of the second quarter looks solid, and I'm expecting that we'll continue to be ahead of plan for the first half of 2022. Despite the economic uncertainty these days, I think our loan growth prospects are in line with the rest of the industry, which expects positive loan growth in the near term. I'll also attribute our growth to the hardworking team, teams of RMs and their managers that we've developed. Last year, we had some relationship management turnover, and we were able to bring in some solid bankers, and they've helped a lot.
We also added a team of relationship managers in the Montgomery County sector of our Pennsylvania region in the latter part of 2021, and they are beginning to show a lot of progress. We plan on continued growth, and we're always on the lookout for people that can help us do that. I should point out that regarding the pipeline, our SBA team has built a good pipeline for 2022 that we really haven't seen the benefits of yet. Pat referenced this in his comments. Andrew touched upon loan sale income being down in Q1. We only sold one loan during this period, but the good news is that the number of loans the SBA has in process is growing. This includes five loans that have closed but not been fully advanced, which is what you need to do in order to sell the guaranteed portion.
As I said, we have another five loans that have been approved, and they're in documentation. We will be closed soon. You know, as Pat referenced, a decent pipeline of deals in process behind them. This should all help with income generation in the coming quarters. Another thing worth mentioning is interest rates. We, like most banks, are trying to react to the impact of rising rates. Those customers seeking longer-term fixed rate loans are being offered interest rate swaps. Otherwise, for longer-term loans, we are committing to spreads over a base rate and fixing interest rates on loans two to three days prior to closing, not, you know, two to three months prior to closing. Looking back over the past few quarters, one can see an increase in our weighted average interest rate on new loans. Pat referenced the first quarter.
Drawing down a little further, our weighted average rate on new loans in March, for example, was around 4.17%. Lastly, regarding asset quality, there's not much to say beyond Andrew's comments, what's in the earnings release. Things from my perspective continue to look good. Delinquencies are low. Other credit metrics solid. That's my report for lending for the first quarter. I'll turn it back over now to Pat for some final comments. Pat?
Great. Thanks, Peter. Thanks, Andrew. Appreciate those additional details. At this point, we'd like to open it up for folks on the line for the question and answer session. I'll turn it back to the operator.
Thank you. If you would like to ask a question, please press star one on your telephone keypad. When it is your turn to speak, I will call your name and company. As a reminder, please press star one to ask any questions today. The first question we have from the phone lines comes from Nick Cucharale from Piper Sandler. Please go ahead when you're ready, Nick.
Good morning, everyone. How are you?
Good. Good morning, Nick. How are you?
I'm doing well, thank you. I just wanted to follow up on the opening remarks regarding employee retention. Can you help us think about the impact on the overall expense base? You later mentioned the higher quarterly rate going forward, but can you quantify your expectations?
Yeah, I mean, I think we, you know, we took a look at where we were at the end of last year and the feedback we provided, and I think we had sort of indicated we thought the quarterly expense base would be somewhere sort of in between Q3, which was artificially low, and Q4, which was artificially high. I think, you know, the short answer is we're seeing some inflationary pressures that probably gonna push that up a little bit higher, you know, higher than where we are right now. Not significantly higher, but, you know, I think at the $11.1, that's probably the low end of the quarterly range that we expect going forward. Andrew, anything you wanna add on that?
Yeah, I think you said it right. I think we expect some increases off of the current quarter run rate. We are doing a lot of things to help mitigate that, and we'll continue to do that. We just had our annual reviews and salary increases for our employees happened in mid-March, so you'll definitely see an increase in salaries. We were able to hold the line a little bit on some folks. We rewarded the kind of the top performers. It's not gonna be enormous increases, but we're continuing to see pressure, so expenses are gonna move up for sure. We expect the second quarter to be up slightly from the first quarter, and there will continue to be pressure.
I think we're doing a pretty good job of holding the line. We're gonna keep working hard to keep expenses low, but we're definitely gonna see some inflationary increases in other areas too, in occupancy and certain other areas. We have some other things we can do to help mitigate the increase, but we're definitely gonna see some increases over the next couple quarters.
Okay. That's very helpful.
I would.
Back to the remarks.
I would just-
I'm sorry.
Hey, Nick, one thing to think about is, you know, kind of the timing for how, you know, inflationary pressures come through. You know, It's not necessarily good news, but, you know, it takes longer to fill open positions, right? So that actually means for a short period of time, you actually have some savings that offset, you know, the ultimate increases that come around. So, you know, again, I think Andrew's right. There's gotta be a little bit of a movement up, but, you know, I think it'll be manageable.
Yeah, that's a good point. That's a good color. Back to the remarks first for the stable NIM in 2022, excluding PPP. Now, given strong loan yields and limited liability pickup in the near term, is your anticipation to show continued NIM expansion through the first several hikes and then erosion as liability costs pick up? Is that kind of how you're thinking about things?
Yeah, I think that's certainly an opportunity, Nick. You know, the timing of how the changes trickle through is a little bit difficult to predict. As Peter mentioned, you know, overall yields in Q1 were up from Q4, and you know, the yields on new production at the end of the first quarter were higher than the beginning. We're definitely seeing you know, the movement higher on the rate side for loan yields. You know, the real unknown, obviously, is what happens on the depository side. You know, the fact that we saw our overall costs continue to come down in Q1, I think is a very good sign. Overall liquidity levels are good, and we're not seeing a lot of you know, banks pushing rates higher right now.
It just seems to be, you know, a market where, you know, there's not huge pressure at the moment on deposit costs. Now, once the Fed moves and, you know, if they move again and, you know, short-term rates are up 1% from where they are today, I'm sure you're gonna start to see deposit costs move higher. I'm cautiously optimistic we can see a little bit of margin expansion in the short run.
Yeah, Nick, I would just add to that.
That's helpful.
I think your comment on how kind of these happen. I mean, typically the last time rates moved, that's kinda how it typically works, right? The betas, the deposit betas are a little lower the first couple hikes, and then they tend to get higher on the later hikes. We'll see how this cycle works. It does feel like this cycle might be a little different because typically when rates are moving, there isn't as much excess liquidity at all the banks and especially the big guys and a lot of our competitors. So hopefully that means that the deposit pressure will be a little bit less this time than maybe in previous cycles, but that's the big unknown for the next few quarters, what happens on the deposit side.
Right. Lastly, when you look at the mix in the loan pipeline, are you anticipating similar segment growth as this past quarter with commercial real estate leading the way?
Well, it's a little hard to predict, Nick. If you look back at 2021, we actually saw C&I and owner-occupied leading the way in terms of overall growth for the year. It's not. You know, the pipeline continues to show, you know, healthy levels across all categories. The investor real estate category tends to pop up here and there if there's one or two larger deals that get done. You know, correspondingly, you know, next quarter or quarter after, if you've got one or two large deals that pay off, you're gonna see the growth coming from C&I and owner-occupied. It's tough to predict, but I think overall our ratios across categories should stay pretty consistent. Peter, what would you say on that question?
No, I'd say definitely, they've stayed consistent. You know, I can't really add to what Pat said. Different segments are up and down over the course of the year. I know first quarter, 2022, investor real estate was probably up a shade, more than normal. You know, that followed a year where C&I was way up. The way the pipeline looks today, all segments are consistent with where they've been in past few years.
Thanks for the detail, and thank you for taking my questions.
Thank you, Nick.
You're welcome.
Thank you, Nick. We now have the next question on the phone line from Manuel Navas from D.A. Davidson. Please go ahead when you're ready. Your line is open.
Good morning.
Good morning, Manuel.
The loan pipeline commentary is pretty nice, strong. How would you characterize it for the full year? I know you feel like kind of ahead of plan in the first half of the year. Does that mean you're a little bit more cautious about the back half, or are you just taking the activity as it comes?
Well, if you're as far as my comments are concerned, you know, we kind of take it as it comes. I mean, I know last year we were way behind plan. We thought we'd, just because of the pipeline and the folks we were talking to out there, that we would still make plan for 2021, and we did on point-to-point growth. You know, being ahead of plan after Q1 is, you know, I'll take that every year, and I think we'll continue to be ahead of plan when we get to June 30th. You know, I'm still focused on exceeding 10% and that's our number today.
Yeah. I would just add that, you know, the dynamics of the commercial business are such that, you know, lots of folks wanna get stuff done by year-end. Fourth quarter almost always tends to be a higher than average production month. You know, that's why starting the year strong is so important because you usually have those kind of, you know, call them seasonal factors that lead to, you know, pretty robust production at the end of the year. You know, listen, the big variable in overall net loan growth tends to be the payoffs and pay downs because those are a little harder to predict because you don't always get the heads-up too far in advance if folks are selling the assets or things like that.
I think if the payoff and the pay down activity slows, which you would think it would, given rates are higher now than where they've been, you know, I think that portends a, you know, good opportunity to, you know, finish the year ahead of plan.
That's great. You've touched on finishing the quarter with a little bit better loan yields on new production. Is that continued into April? Also answer based on the deposit side. You haven't seen any. You just touched on the deposit pricing competition hasn't picked up yet. Can you expand on that as well?
Yeah. I mean, I don't know that we've run the numbers for April yet, but based on what I know that's come into committee to get, you know, approved, I think the trends for higher loan yields absolutely are continuing to move up. On the deposit side, it's interesting because we're not seeing the pressure yet. I'm sure it'll come. As Andrew pointed out, there's a fair amount of excess liquidity out in the market right now, which I think in the short run is gonna keep deposit rates low. I think when the Fed starts to actually sell some assets, it'll be interesting to see how much of an impact that has on the overall liquidity in the system. You know, listen, are deposit rates moving higher? Yes.
Do I think they might move higher at a beta or a rate that's less than what we've seen in prior cycles given all the excess liquidity? Yeah. I think we will.
I appreciate that. My last question is on the expense discussion. Previously, you'd kind of given a range on a quarterly run rate that is about that could be about $1.5 million, give or take. Would you still hold to that range? This is kind of like the low end and across the year will kind of fluctuate between $11.1 million and like $12.5 million per quarter.
Yeah, I don't know that it's gonna be that big of a gap, right? I mean, we were 11.1% in Q1. I expect Q2 will be a little bit higher than that. You know, Q3 may be a little bit higher than that, depending on how the inflationary pressure kind of seeps into the expense base. But I don't envision it jumping up, you know, 12.5% or anything near that. I mean, obviously if there's one-time events or things, but just in terms of the core, you know, I think, you know, a little bit of an increase from where we are, but nothing up in the mid 12s. I don't know. Andrew, you wanna jump in there?
Yeah. I agree with that, Pat. I mean, I think some of that kind of range you're talking about was we had a big jump in the fourth quarter last year, which was up about $1.3-$1.4 million from the level it was in the third quarter of last year. I don't anticipate there being that kind of big jump, like Pat said, unless there's some kind of one-time event. We are gonna continue, I think over at least the next couple quarters to see a little bit of creep up in, obviously salary and employee benefits is one, but there's some increases coming in some other areas.
Yeah, I'd agree with Pat that we should be able to manage it more tightly than up to $12.5 million. I don't see that. That number seems high compared to-
Well, Q4 has the merger related costs in it. Forget the exact number.
Yeah. Yeah. Right. It had merger and it had some higher incentive comp, so that was a little bit of an outlier. Yeah, I agree with that. I think there'll be some increases from our current level, but I wouldn't expect it to go that high.
Thank you. Appreciate it.
Thank you, Manuel.
Thank you. We now have David Bishop of Hovde Group. Please go ahead, David.
Hey. Good morning, Pat. Good to be back covering you all again. Hope all is well.
Yeah. Good morning, Dave.
Hey, Pat, it sounded like obviously there's some timing issues on the SBA, maybe loan sales this quarter. Sounds like the pipeline's rebuilding. Should we see maybe a little bit of a rebound in fee income, at least on the gain on sale, maybe SBA activity as we pencil it out through the remainder of the year?
Yeah, I think so. I mean, you know, given the loans we've already, you know, closed but haven't sold and given the level of activity within the group, which is as high as it's ever been, I think, you know, I think the prospects for a strong, you know, next few quarters in SBA are good.
Got it. It sounds like you're on the lookout in terms of hiring in terms of different niches. It sounds like maybe on both the lending and deposit side. Just curious, maybe the outlook there and maybe some of those niches that you mentioned and, you know, are you continuing to look for some of those cash management centric commercial bankers to hire as well?
Yeah, I mean, absolutely. Right? I mean, we're always on the lookout for quality bankers. Obviously, our focus is, you know, primarily on the C&I side on lending. You know, we've got a really strong team on the real estate side. It's harder to find the C&I folks who are sort of always in the market there. You know, we've got a good suite of cash management products, but we're always, you know, ear to the ground in terms of new technologies, new initiatives. You know, I think, you know, for us, you know, listen, we've used M&A in the past. I think it will continue to be something that's on our radar. You know, we've always been a strong organic growth bank.
You know, in order to do that, you need really good people, and you need to have an active pipeline of folks for, you know, replacing folks that leave and just continuing to add. I think we're pleased with some new hires that we recently were able to bring in over on the PA side, and we've seen some really good opportunities over there. You know, we continue to be very busy both in North Jersey and in Central Jersey and even in South Jersey. I mean, I think you know, the team is rounding out. I think we're seeing some nice high quality folks that we're able to bring in.
You know, turnover is an issue, but at the end of the day, if you're able to, you know, find opportunities for great new folks, it, you know, you could end up in an even stronger place, even if it takes you a little while to get there.
Got it. You mentioned and obviously you alluded to the fact you guys have always been a great asset generator and, you know, you're not saddled with the excess liquidity that maybe some of your peers are. As we think about the funding of loan growth here, maybe the waning of the PPP funding coming in, how should we think about the loan to deposit ratio? You know, is there a chance, I know some of your peers have started to get aggressive in moving up rates maybe ahead of time and bringing in some maybe longer duration money at what could be cheap rates over time. Any thoughts about maybe sort of pre-funding the expected growth and get ahead of the rise in interest rates?
Just curious how we should think about, maybe deposit growth this year relative to loan growth?
Yeah, I mean, listen, I think there's probably opportunities there, David, but it all depends on what you need and, you know, what you're seeing in your deposit pipeline and in your loan pipeline. You know, will we at some point have some, you know, some longer term CD offerings to try to lock in some longer term funds? I think we probably will. You know, we're sort of taking that on a, you know, as needed basis, so.
I would just add to that. I mean, we did a little bit. It's hard to offer most kind of in-market deposit customers aren't willing to lock into rates. We did do some brokered CDs a little bit longer to try and lock in some money. We're looking for opportunities to lock in. As I mentioned, we're as of March 31, we're just slightly asset sensitive. We're pretty balanced. That's kind of what we've done historically. We always try and stay fairly balanced, so there's no real huge interest rate risk positions that we need to deal with. We are selectively looking to extend. Like I said, we did it in the brokered area.
That's sometimes easier than trying to offer something in market because most folks are on keeping their money short. We're doing it selectively, but again, we don't have any kind of real risk from an interest rate perspective that we need to deal with right now.
Got it. One more housekeeping question. Maybe a good tax rate to use the rest of the year. Pat, remind us, how much is left under the buyback authorization? That's it for me. Thanks.
I think there's quite a bit still left on the buyback, Andrew. I don't know if you've got a round number handy, but
Yeah, we had.
Definitely open.
The buyback was 1.3 million shares. We only purchased 200 shares during the first quarter. We have been a little bit more active in April as we have a set plan with a set price that we don't mess with. But our price has dipped below that, so we've been a little bit more active in April, but we still have plenty of availability under our current program, which goes through the end of September. Then from a tax rate perspective, our tax rate was a little bit lower than potentially our run rate going forward because we did have some discrete items. As folks exercise options, sometimes we get some extra tax benefits from that. But that's something that does happen fairly regularly.
I think our tax rate's a little bit lower this quarter than what you can anticipate going forward. I think we'd say around 24%-25% in a normal quarter. We do tend to have a decent amount of these discrete items. Twenty-three to twenty-five percent is the number you can expect, which will jump around a little bit, but it'll probably never get outside of that range of 23%-25%.
Great. I appreciate the color.
Thank you. We now have a question from Erik Zwick of Boenning & Scattergood. Sir, please go ahead when you're ready.
Good morning, guys.
Hey, good morning, Erik.
Most of my questions have been asked at this point. One, I guess just a little bit of a follow-up on the niche lending opportunities. You know, at this point, I believe all of your lending is done in-house with your own lenders and, you know, some other banks out there have started to partner with some third-party providers for different kinda avenues. Curious if you've ever considered something like that or is that something you might at some point? Are you more comfortable kind of sticking all in-house at this point?
Yeah, I mean, listen, there's always value in outsourcing. However, I think it gets a little dicey when you're outsourcing your core competency, which for us is commercial credit underwriting. We have used some technology to help us on the small end of the small business segment where we've leveraged some quality established providers to, you know, help automate and streamline the underwriting on some very small business loans. But, you know, for the most part, that customer relationship, understanding that customer, underwriting the risks, that's a key part of what we do, and I don't suspect we're gonna look to outsource that anytime soon.
Thanks. I appreciate the color there. Just on the topic of you know kind of using capital for you know growth, organic growth would kind of be the priority. You know given where the stock is trading today, that the multiple may not be exactly where you'd want if you wanted to undertake you know an M&A deal. Just curious you know I'm sure you're keeping up conversations with certain potential partners and maybe hearing from you know some of the bankers coming around. Curious about the pace of M&A discussions today, whether they've changed much in the past say three or six months or you know fairly similar.
Yeah, I mean, listen, I think there's always a certain amount of dialogue and I think when, you know, buyer stocks are up, there's a little more dialogue and when they're down, there's a little less dialogue. You know, I think, you know, what you've seen in the bank stock community unfortunately over the last several months is, you know, just kind of a downward decline in overall price levels and multiples. I suspect that will have a bit of a dampening impact on M&A. Now, for us, you know, we've always been, you know, sort of selective, opportunistic. You know, we've never, you know, been ones to go out there and just pay up for banks because we had an inflated currency. We've always had to, you know, be disciplined on the M&A side.
You know, our M&A activity isn't always as correlated to, you know, having or not having a premium multiple. Obviously, it's a little bit easier to do deals if you've got a better multiple. Yeah, I think for us it's just a combination of continuing to focus on the core organic growth strategy and continue to look for, you know, those unique opportunities that, you know, we've been able to successfully integrate in the past.
Appreciate the commentary there, Pat. Thanks for taking my questions today.
Yeah, no problem. Thank you, Erik.
Thank you. We now have a follow-up question from Manuel Navas. Sir, please go ahead. I've opened your line.
Hey, I wanted to hop back on to kind of follow up on your asset sensitivity disclosure. You've been liability sensitive in the past, and just wanted to hear a little bit more about what shifted, what input shifted to kind of get you on the asset sensitive side. I know it's pretty neutral, but still just anything you could give on how that shift occurred.
Yeah, I mean, Andrew can give you the details, Manuel, but I would start the answer by saying, you know, to the extent that we've ever been liability sensitive, it's been very modestly liability sensitive. So, you know.
Sure. Sure.
It feels like a flip to go from one to the other. If you're very close to the middle on one side and then you inch to being very close to the middle on the other side, it may seem like more of a change than it really is. Andrew, why don't you jump in with a little more of the detail?
Yeah. I mean, yeah, Pat, you hit it. I mean, it's not a significant change from where we were last quarter. We did add some additional liquidity. We let some CDs run off. We have more kind of non-interest-bearing balances at the end of the third quarter, a little bit higher level of on-balance sheet liquidity. We did a decent amount of loan swap deals last year, which is helping our variable rate loan totals compared to the total loan balance. A little bit of a couple things got us to swing from slightly liability sensitive to slightly asset sensitive, but it's not a huge shift from where we were at the end of the year.
You continue to use historical deposit betas in your assumptions?
Yeah, we tweaked betas a little bit last year, but we made no significant changes in our model. I think really the only thing we moved some betas up a little bit on some of our kind of smaller ancillary deposit products, government and broker, things like that. We haven't made any significant changes to our model over the last few years. Again, we look at the assumptions every year and we tweak, but we haven't made major changes.
Okay, this has been helpful. Thank you.
Thank you, Manuel.
Thank you. We currently have no further questions registered, but as a reminder, it's star 1 to ask any more questions today. We have had no further questions registered, so I'd like to hand it back to the management team.
Thank you. I'll just wrap by saying thanks everybody for taking the time to listen in. We appreciate all the interest in First Bank and the great questions, and we'll look forward to regrouping with everybody at the end of the second quarter. Thanks, everybody. Have a great day.
Thank you. This does conclude today's call. Thank you all again for joining. You may now disconnect your line.