Good morning, ladies and gentlemen, and welcome to the Fulton Financial first quarter 2021 results. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session, and instructions will follow at that time. If anyone should require assistance during the conference, please press star then zero on your touchtone telephone. I would now like to turn the conference over to your host, Matt Jozwiak, Director of Investor Relations. Thank you. Sir, please go ahead.
Good morning, and thanks for joining us for Fulton Financial's conference call and webcast to discuss our earnings for the first quarter of 2021. Your host for today's conference call is Phil Wenger, Chairman and Chief Executive Officer. Joining Phil are Curt Myers, President and Chief Operating Officer, and Mark McCollom, Chief Financial Officer. Our comments today will refer to the financial information and related slide presentation included with our earnings announcement, which we released yesterday afternoon. These documents can be found on our website at fult.com by clicking on investor relations and then on news. The slides can also be found in the presentations page under the investor relations website. On this call, representatives of Fulton may make forward-looking statements with respect to Fulton's financial condition, results of operation, and business.
These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors. Actual results could differ materially. Please refer to the safe harbor statement on forward-looking statements in our earnings release and on slide two of today's presentation for additional information regarding these risks, uncertainties, and other factors. Fulton undertakes no obligation other than as required by law to update or revise any forward-looking statements. In discussing Fulton's performance, representatives of Fulton may refer to certain non-GAAP financial measures. Please refer to the supplemental financial information included with Fulton's earnings announcement released yesterday in slides 11 and 12 in today's presentation for a reconciliation of those non-GAAP financial measures to the most comparable GAAP measures. I would like to turn the call over to your host, Wenger.
Thanks, Matt. Good morning, everyone. I'll begin today's call by sharing a high-level overview of the quarter. We'll hear Curt's thoughts on our business performance. Mark will follow Curt, and he'll discuss the details of our financial performance. After that, we will be happy to take your questions. Now, Fulton's performance was solid in the first quarter of 2021. In fact, our earnings per share of $0.43 in the first quarter was a quarterly record for us, surpassing our previous record of $0.38 per share, which was in the third quarter of 2020. Though the lasting presence of COVID-19 and a prolonged low interest rate environment have brought some challenges, our customers and our team members continue to meet those challenges. Throughout the past year, Fulton has continuously worked to serve our customers while keeping everyone safe.
Our financial centers remained accessible, and customers escalated their use of our telephone, digital, and online platforms, so our banking and financial services delivery remained largely uninterrupted. In terms of our back office and operations staff, team members whose roles could be performed off-site worked remotely whenever possible to reduce the direct contact that could potentially spread the virus. Now, as the vaccine rollout continues throughout the world, we are seeing our communities plan to more fully open, and we are cautiously optimistic about the reopening of the economy and the markets we serve. As we look forward, we have been carefully developing our own plans to bring more employees back to our offices. Late last week, we shared our timetable for doing this with our team members, letting them know we plan to bring more people back on-site in September.
This is the first time we've offered a specific timetable for returning more of the team to our offices, and it is contingent upon the continued successful vaccine rollout, the loosening of government requirements in the communities we serve, and the advice of health experts at the national and local levels. We plan to use the months between now and September to clearly communicate how the return process will work. While most of our employees will perform some amount of on-site work, some will continue to work remotely for the longer term. We want to do our part to enable every team member to achieve peak performance no matter where they sit. Last quarter, I shared some updates on the Small Business Administration's Paycheck Protection Program, or PPP, and I'm pleased to report we continue to realize volume that has exceeded our expectations.
We also continue to support all CARES Act initiatives. In terms of other highlights in the first quarter, order loans grew modestly because of the impact of the wave three PPP loans. Deposit growth continues to be extraordinarily strong, and we continue to be encouraged by our asset quality performance through the pandemic, as Curt and Mark will discuss in a few minutes. Our mortgage business continues to be a strong performer, and the pipeline remains elevated. Our wealth management business also continues to be growing and a significant contributor to non-interest income. This line of business delivered record income during the quarter on an all-time high in assets under management and administration. In March, we announced a restructuring of our balance sheet that will help manage our interest rate risk profile. This had a minimal impact to earnings in the first quarter.
However, it will meaningfully enhance net interest income as we move forward. Mark will discuss this in further detail in a few minutes. Despite the pandemic-related challenges, we remain fully focused on our strategic priorities. These include achieving growth, enhancing our technology, and increasing our efficiency. One way in which we're growing is by moving forward with plans to open additional financial centers in our two priority urban markets of Philadelphia and Baltimore. In 2021, we remain focused on efficiency and investment in technology, which we believe are closely linked. We currently have a number of technology system replacements and upgrades in progress. These include new platforms for consumer loan origination and mortgage servicing. In addition, we're making a significant upgrade to a new customer relationship management or CRM system, and we are fully integrating that system in our sales and service processes.
Now I'll turn things over to Curt for more detail on our business results.
Thank you, Phil, and good morning, everyone. As Phil noted, our first quarter performance produced solid results, and I'd like to share some detail on several key areas. Loan growth for the quarter was modest, as we experienced strong growth in residential mortgage originations and generated PPP wave three performance that exceeded our expectations. These results were offset by continued line of credit utilization headwinds and greater than expected residential mortgage prepayments. First, let me touch on PPP. We continue to support our small business customers by both satisfying forgiveness requests and processing wave three applications. As I mentioned on last quarter's call, we anticipated between $500 million and $600 million in total wave three PPP funding. As of the end of the first quarter, we were at $685 million, and we expect to modestly exceed $700 million for the program before it expires. This is well beyond our expectations.
At this point, applications continue to come in, but at a significantly reduced pace. We continue to also work diligently to support our wave one and two customers with their forgiveness requests. In the first quarter, we successfully processed $579 million of PPP forgiveness requests and have a remaining wave one and two outstanding balance of approximately $1 billion. Turning to commercial loans, balances declined $48 million or 0.4% on a linked-quarter basis, excluding PPP loans. Originations were down modestly from the fourth quarter, and we experienced continued decline in line utilization. These factors combined to contribute to the slight pullback in overall commercial balances. Looking forward, our commercial loan pipeline at March 31 was up approximately 9% versus year-end 2020. It was down 10% year-over-year. In consumer lending, our loan balances grew $45 million or 0.9% linked-quarter on an ending balance basis.
This growth was driven primarily by growth in residential mortgages in spite of the elevated refinance activity. Our mortgage pipeline remains very strong, and we continue to be optimistic about our growth targets as we enter the traditional home buying season. As we mentioned in prior quarters, our asset-sensitive balance sheet provides room to continue growing this segment of high-quality in-market residential mortgages. Overall, we anticipate loan origination levels to continue at a rate that is adequate to support the annual net interest income guidance in our outlook that Mark will discuss in a few minutes. Turning to deposits, growth for the quarter far exceeded our expectations. We had anticipated a modest decline in deposits as we actively managed deposit costs down. However, strong customer liquidity has continued to drive our balances higher, and government stimulus payments provided significant inflows during the quarter.
Total deposits grew approximately $800 million on a linked quarter basis, with growth in virtually all non-maturity categories. More specifically, non-interest-bearing demand deposits drove this growth, increasing $550 million or 7.9% on a linked quarter basis. Total deposits are up $4 billion on a year-over-year basis. During the quarter, we continued to actively manage our deposit costs down. As a result, deposit costs declined five basis points linked quarter. Now total deposit costs have dropped to 18 basis points. In addition, we have made further pricing adjustments to our earnings credit rates on commercial accounts. Moving on to fee income, excluding the PPP gain on sale, our fee-based businesses delivered growth in revenue on a linked quarter and year-over-year basis. As Phil mentioned, our wealth management business continues to perform well as we add new customers and equity markets continue to move higher.
We also have a full quarter's impact of BenefitWorks, an investment advisory and retirement plan service firm we acquired in the fourth quarter of 2020. Our assets under management and administration grew to $13.1 billion at quarter end, up from $12.8 billion last quarter and $11.8 billion at the end of the first quarter of 2020. This drove record quarterly income for the second quarter in a row. Mortgage banking revenues declined modestly linked quarter when excluding the MSR write-up. However, these revenues are up 26% on a year-over-year basis. Our mortgage banking business remains strong as we continue to experience elevated origination activity and historically strong gain on sale spreads. Total residential mortgage originations for the first quarter of 2021 were $714 million, an increase of 89% from the same period last year. Purchase activity represents approximately 49% of total originations and remains relatively consistent with recent quarters.
Our mortgage pipeline remains strong and has increased from year-end and year-over-year levels. Capital markets revenue, which are primarily commercial loan interest rate swap fees, declined in the first quarter. This decline was in line with moderately lower commercial originations during the quarter. Moving to credit, despite a challenging COVID-19 environment, our asset quality remains relatively stable. Delinquent loans declined on a linked quarter and year-over-year basis. Loans on non-accrual increased slightly, however, has remained relatively stable since prior to the beginning of the pandemic. In terms of net charge-offs, after two quarters of net recoveries, we had $6.1 million in net charge-offs for the quarter, which was 14 basis points when excluding PPP balances. On slide 14, we have again provided updated loan deferral trends through March 31st, 2021.
Commercial deferrals declined approximately $153 million, down from $200 million at the end of the year, and stand at approximately 1.1% of the commercial portfolio. Consumer loans on deferral and forbearance also declined and are now at $94 million, down from $130 million at year-end. These stand at approximately 1.9% of the consumer portfolio. In previous calls, we noted selected industries we believe may have more risk due to COVID-19. Slide 15 provides an updated summary of these selected industries. Our credit outlook remains cautiously optimistic for the remainder of 2021. Now I'll turn the call over to Mark to discuss our financial results in a little more detail.
Thank you, Curt. Good morning to everyone on the call. Unless I note otherwise, the quarterly comparisons I will discuss are with the fourth quarter of 2020. Starting on slide three, earnings per diluted share this quarter were $0.43 on net income available to common shareholders of $70.5 million. This is $0.13 higher than the fourth quarter of 2020. Our first quarter performance included a lower provision for credit losses and higher net interest income. We also reported higher non-interest income and higher non-interest expense, largely due to a balance sheet restructuring I'll discuss in more detail in a minute. Moving to slide four, our net interest income was $164 million, a $3 million increase linked quarter, primarily due to additional fees earned on PPP loans forgiven during the quarter.
As C urt noted, during the quarter, we originated $685 million of new PPP loans, and this was offset by forgiveness of $579 million of PPP loans that were originated in 2020. The latest round of PPP loans have a larger average fee, 4.54%, due to a smaller average loan size for this wave of funding. As of March 31, we have approximately $45 million of PPP loan fees yet to be recognized. $15 million from 2020 originations and $30 million from our first quarter originations. We grew our investment portfolio $272 million during the first quarter as we selectively redeployed some of our excess cash into mortgage-backed securities as the yield curves steepened during the quarter. As Curt noted, the latest round of government stimulus fueled deposit growth during the quarter, and our first quarter saw deposits grow by approximately $800 million.
We continue to manage our deposit mix, and our cost of deposits for the quarter was now only 18 basis points, a decline of five basis points linked quarter. We would expect our deposit cost to migrate moderately lower in future quarters as we have approximately $775 million of CDs maturing over the next two quarters at costs that are approximately 100 basis points higher than current market costs. Our average loan-to-deposit ratio declined during the quarter from 91.4% to 89.9%. During the quarter, Fulton completed a balance sheet restructuring which reduced our interest rate risk and improved several of our performance metrics going forward. This restructuring was detailed in an 8-K filed on March 30th and is summarized on slide five. It included the sale of our Visa Class B shares at a gain of $34 million.
This gain was offset by losses on the extinguishment of higher cost debt, which included the prepayment of $535 million of long-term FHLB advances at a cost of 1.78%, the tender of $75 million of subordinated debt at a rate of 4.5%, and the tender of $60 million of senior notes at a rate of 3.6%. When you add those up, we removed $670 million of liabilities at a cost of 2.25% and paid these off with cash that was currently yielding eight-10 basis points. We also entered into $500 million of notional value, received fixed interest rate swaps during the quarter. Those have 69 basis points of positive carry currently. Overall, this restructuring reduces our interest rate risk and improves our net interest income by approximately $17 million on an annualized basis.
The impact of 2021 is incorporated into the updated guidance I will provide at the end of my remarks. Our net interest margin for the first quarter was 2.79% versus 2.75% in the fourth quarter. The four basis points of linked quarter increase largely resulted from PPP loan forgiveness and the related fee income recognition. Turning to credit, our first quarter provision for credit losses was a negative $5.5 million, versus $6 million for the fourth quarter and $44 million a year ago. As you know, the adoption of CECL, as well as the impact of COVID, had a significant impact on our allowance for credit losses in the first half of 2020. As economic forecasts have improved in recent periods, it has reduced the amount needed in our allowance for credit losses.
As always, this could change in future periods based on new loan origination volumes, our loan mix, net charge-off activity, and updated economic projections. Slide six also provides you with our normal quarterly credit metrics, which do not contain any noteworthy trends or surprises. Moving to slide seven, non-interest income, excluding those security gains, were $62 million, up $6 million from $56 million last quarter, and up $7 million from $55 million a year ago. Fee-based revenues were strong and were driven by outperformance in mortgage banking and wealth management. Mortgage banking revenues benefited from a $6 million reversal of a mortgage servicing rights reserve that was established in 2020. Our remaining mortgage servicing rights impairment reserve is $4.4 million at March 31st. Wealth management revenues were $17 million for the quarter, an increase of 11% from the fourth quarter, and an increase of 15% from the prior year.
Moving to slide eight, our non-interest expenses were $178 million in the first quarter, up $24 million linked quarter. In the first quarter, we had incurred $33 million in debt extinguishment costs related to our balance sheet restructuring, and in the fourth quarter of 2020, we had incurred $15 million of expenses related to cost savings initiatives. Excluding these items from each period, our core expenses increased approximately $5 million due to higher benefits costs, seasonal occupancy costs, and higher incentive compensation accruals compared to the prior quarter. Our effective tax rate was 16% for the quarter, compared to 10% in the fourth quarter of 2020 as a result of higher pre-tax earnings. Slide nine gives you more detail on our capital ratios.
The balance sheet restructuring did have a modest impact to total risk-based capital due to the reduction in subordinated debt, but all other capital ratios improved slightly. Our liquidity remains very strong. We also announced a new $75 million share repurchase during the quarter but did not repurchase any shares under that program during the first quarter. Lastly, we'd like to provide our updated guidance for 2020. This updated guidance reflects the impact of our balance sheet restructuring, the current wave of PPP, as well as other items that are now known to us as of March 31st. We expect our net interest income for the year to be in the range of $640 million-$660 million. We expect our provision for credit losses to be in the range of $20 million-$40 million for the year.
We expect our non-interest income to be in the range of $220 million-$230 million. Lastly, overall, we expect operating expenses, excluding charges related to the balance sheet restructuring, to be in the range of $555 million-$575 million for the year. With that, we'll now turn the call over to the operator for your questions.
Ladies and Gentlemen if you have a question at this time, press the star and then the number one key on your touch-tone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the star key. Your first question is from Frank Schiraldi of Piper Sandler. Your line is open.
Morning.
Morning, Frank.
I wonder, just, Mark, you mentioned the updated guide obviously includes the balance sheet restructuring and the second round or the latest round of PPP. The interest rate picture has also improved a bit. I'm wondering if that provides some potential upside, do you think, to NII guide, or is that just not impactful enough unless the short end moves, and is that already baked into updated guide?
Yeah. The short end of the curve definitely impacts us a lot more than the long end would. We did take advantage in the first quarter, as I noted, and put some money to work in the investment portfolio out of cash. We're still sitting, obviously, on a lot of excess liquidity. Our expectation is that the 10-year is going to stay relatively range bound to where it is right now. Candidly, the trade-off is if we invest too much into the investment portfolio today, then at some point in the future when PPP funds are burned through, we think we're going to start to see line utilization draws happen again. We'd rather use our liquidity for core loan growth than putting too much in the investment portfolio at this point.
Okay. Does the guide then just sort of assume the securities book is kind of flattish at these levels, or is there some of that excess cash gets redirected through the rest of the year?
No. I'd expect for the balance of the year, the securities book will stay relatively range bound unless if we would see an opportunity, if the 10-year would pop up to 180 again temporarily, we could put a little bit to work there. I'd expect it to stay relatively consistent as a percentage of the balance sheet.
Okay. Just thinking about reserve levels. It seems like this could be a fairly normal year in terms of charge-off levels. As qualitative factors continue to normalize, do you think there's opportunity for additional reserve release? I guess where is a good level to assume the reserve-to-loan ratio could move back to? Is it where it was with CECL day one, Mark? Can you just give us your thoughts there?
We went from 99 basis points to 120 basis points when CECL was first implemented, to 140 basis points. We went from 140 up to our current level as a result of COVID. Do I think it can drift down to day one CECL again? Yes, I do. That's obviously dependent. That's assuming our business mix stays the same. That assumes that our pace of growth stays relatively the same as well as what we were historically. I think there's definitely opportunity for that to happen, Frank. Just it's obviously hard to predict the timing.
Sure. Okay. Thank you.
Thank you, Frank.
Your next question is from Daniel Tamayo of Raymond James. Your line is open.
Good morning, guys.
Good day.
Morning.
I'm not sure if I missed this or not, but did you provide I know you gave some fee numbers from PPP, but did you provide the impact that had on the margin in the first quarter, excuse me?
Yeah. The way to think about the margin, what I can share you is that our fee income totals, Daniel, were $19.4 million in the first quarter. That's up from $14 million in the fourth quarter.
Okay.
We also saw increased excess liquidity in the first quarter. To me, when you're talking about the effect of PPP in the margin, you really have to consider both sides. You need to think about the fees, you also need to think about the fact that we're sitting on some excess liquidity. If both of those would normalize, the impact's about seven basis points in the first quarter.
Okay. That's helpful. Maybe if you can talk a little bit about the assumptions embedded in your net interest income guidance within the NIM and then maybe on the balance sheet as well.
Well, yeah. We were intentional when we gave our guidance to not provide NIM guidance for the year because the timing and the volatility with PPP makes it a little bit harder to predict balance sheet size. I think as you've seen from the whole industry, the whole industry is sitting on a crush of excess liquidity that wasn't even there back when that fourth quarter guidance was originally put out. I can comment that our guide does include our current assumptions on PPP. We assume that, as I said earlier, we have $14 million, $14.7, of wave one and two fees yet to be amortized. With the new originations that have just come on, we have a little over $30 million. You have $45 million of fees that still need to be recognized.
I would anticipate of that remaining $1 billion that somewhere between 80%-90% of that gets forgiven and is off the books by the end of the year. How much of the new originations, which is approximately $700 million, how much of that comes off by the end of the year is a little bit more of a wild card. Our assumptions on that are baked into the guidance. What's also baked into that guidance, again, would be the full year or the stub year impact of the restructuring, which really didn't take place until the last two weeks of March. You really didn't see any material impact of that in the first quarter. You'll see a nine months effect of that $17 million, would be factored into 2021, the full year impact of that restructuring would be factored into 2022.
Okay. That's terrific. I guess, last thing here on the balance sheet restructuring you mentioned. Reducing asset sensitivity a bit, coming into the quarter pretty strong given the increase in deposits. How's the bank from an asset sensitive perspective now relative to maybe before COVID or this increase in asset sensitivity? How would you guys expect to benefit from rising short-term rates relative to prior periods?
It's a great question. The answer is, with everything we've done, we're really just treading water. We've reduced our asset sensitivity slightly. Remember, every time you get excess liquidity, if you got a non-maturity deposit and it's sitting in overnight cash, that's inherently very asset sensitive. That non-maturity deposit, even if it's government stimulus, it's going to be sticking around for a little bit of time. Our asset sensitivity would've gone up a lot more had we not done this. This has reined it back into acceptable levels. Depending on that dynamic of how quickly, as loans get forgiven on our books, you're taking off a loan and replacing that with cash.
Unless that cash gets used, unless your balance sheet shrinks, both in terms of excess cash and in deposits, that is going to increase asset sensitivity a little bit more. We are still very well-positioned to benefit from rising rates.
I appreciate all the color, Mark.
Your next question is from Erik Zwick from Boenning & Scattergood. Your line is open.
Hey, Erik. Good morning.
Morning, Erik.
Hey, Erik, we can't hear you. If you were on mute by any chance?
Oh, how about now?
Oh, much better.
There we go.
Okay, great. Sorry about that. Maybe first just a question for Mark on the non-interest expense outlook for the year. If I remove the restructuring charges from the first quarter and then kind of annualize that level of $145 million on a quarterly rate, kind of coming towards the top end of that range. Just curious, you mentioned investing in new branches, some of the urban markets, the tech investments. Just curious, where does the opportunity potentially improve from that quarterly run rate that would get you closer to the bottom end of that outlook range?
Yeah. Great question, Erik. You should definitely not be taking that number and just multiplying by four. In the first quarter, we had some items that definitely won't repeat. We did have some bonus payments that were just related to our frontline personnel for all the great work they've done throughout COVID. There were some kind of final true-ups of some of our 2020 bonus plans. I referenced snow removal. It was a tougher winter this year for us than some prior years. Just in terms of the number of incidents, not necessarily the amount of snowfall, but the number of incidents which increased costs there. If you look at our five-quarter trend on occupancy expense, because of that seasonality, both in terms of heating, as well as snow removal, the first quarter always tends to be our highest level.
When you strip those things out, and if you look at what our guide was a quarter ago versus what it is now, we increased it by about $5 million. That increase was really the amount that would be attributable to bonus accrual adjustments for this year's plans.
Thanks. That's helpful. Then one for maybe Phil or Curt. In the prepared comments you mentioned that you're expecting loan growth to support the NII guide. Just curious where you're seeing opportunities to grow. I've spoken to a couple of smaller banks in your markets, and they're still seeing pretty tepid loan growth. I'm curious if maybe it's just your access to some larger customers, but maybe just access to some of the urban markets that might present more opportunities. Where do you see the opportunities for improved loan growth this year?
Yeah. We're seeing opportunities across all our markets. Maybe a little more in the urban markets. It's really hard to grow your loan portfolio ex-PPP when all that PPP money's coming in, and a lot of it's paying down lines. As that disappears and people start using their lines of credits like they have in the past, we see just great opportunity for growth there. We're still entertaining a lot of requests and we are settling. It's just hard to show growth when that PPP money's coming in.
Yeah, Erik, this is Curt. Just one point to that. Just linked quarter, the line of credit utilization headwind that we had was over $100 million, just linked quarter. For the 18 months, it's been $700 million, if we would get back to kind of normal long-term utilization rates.
Got it. Thanks for the color there. Just one last one, thinking about the mortgage banking line, and if I exclude the impact from the mortgage servicing assets valuation of what the run rate was, maybe kind of $8 million or so. Just curious, thoughts going forward. We're entering the peak home-selling season. Seems like inventory's definitely short, and with the increase in 10-year yield, I'm guessing a refi maybe starts to tail off a little bit. Just curious what you're thinking in terms of what you can generate from that business line.
We see that business continuing to be strong. We are putting loans on the balance sheet, so it depends if you look at fee income or if you look at the balance sheet growth. That operation really funds and fuels both of those. We expect a seasonal improvement, just moving from first quarter into then the normal higher home buying season. The business remains strong for us. We continue to have really high gain-on-sale spreads, and we expect them to moderate over time. It'll really depend on the pace of that margin moderating, but we still see strong volume.
Great. Thanks for taking my questions today.
Thank you.
Yeah. Thanks, Erik.
Your next question is from Russell Gunther from Davidson. Your line is open.
Let me just first start, if I could, on the NII guide. One other follow-up, please. The $640-$660 you guys mentioned includes PPP assumptions. Do you have a number for how much of that $45 million of remaining fees is included in that guide?
Well, we're not providing that specific guidance, but again, what I can tell you is that of the $15 million that relates to the first wave, we're assuming that between 80% and 90% of those loans, so that's about $1 billion left on our balance sheet, we're assuming that that comes off by the end of the year. Keep in mind, one of the other things that's going to create more volatility, not just for us, but for everybody who's participating in wave three, is that these wave-three loans are actually accreted, the fee is accreted over five years because it's a five-year note, unlike the first waves, which were a two-year note.
The $30 million of fees that we have yet to be recognized from this current wave, until they start being forgiven, there's going to be a little bit lower amount that's going to be coming in on a more normalized basis until the forgiveness process starts. We would expect these wave three forgiveness would start in the third quarter, in the middle of the third quarter.
Okay. That's helpful. Thanks, Mark. Then just following up on Erik's question on the loan growth expectations. I know you don't put too fine a point on it and talked about some of the geographic contributors, but how about mix for the year? I know you mentioned portfolio, some residential real estate, but the organic growth that you do show, do you have a sense for how that might contribute from the different loan verticals?
Yeah, Russell, it's Kurt. We do still see residential mortgage continuing to be a significant provider of growth as it has, and we have the ability to balance sheet that activity, and that activity is strong. On the commercial side, we continue to focus on being diversified in our portfolio, so we really are trying to grow each segment, and we feel that mix is going to be very similar to what we've experienced over the last three to five quarters. You'll have a mix of C&I and CRE driving the commercial growth.
Okay. Great. Thank you. Just last one for me. You mentioned the $75 million buyback authorization. Could you discuss your appetite to buy back stock at current levels?
At current levels, Russell, we run a model and just look at what the earn back will be on that dilution. Obviously as the stock price goes up and you're buying at a higher premium to a tangible book value, it increases the earn back length. We want to continue to have that out there as one tool in the toolbox. At current levels, I think it would be unlikely that we tap it. That's going to ultimately be a question of what other opportunities are there to use capital for, which would include organic growth. It would include inorganic growth using cash as a component in M&A transactions as well.
Got it. Great. Thanks, Mark. Thanks, guys, for taking my questions. That's it for me.
Thank you.
Thanks, Russell.
Your next question is from Zach Westerlund from Stephens. Your line is open.
Hey guys, it's Zach Westerlund here covering for Matt Breese. How are you?
Good. How are you doing?
Good. Just to go back to the margin really quickly. I was just hoping that you could provide a little color on incremental loan yields coming on the book and what new deposit costs are looking like.
What I can share is, without answering your question directly, but what I would share is that I had stated in last quarter's earnings call, which I know you weren't on, Matt was on. I said that we expected within the next quarter or so to be at our trough on margin on a core basis. I would say that with the balance sheet restructuring that we've just affected, we do feel confident that on a go-forward basis, if you stripped out the impact of PPP, that on a core basis now we are at a floor and should expect to see some modest margin expansion going forward. The only wild card in that, again, is going to be what that utilization of excess deposit from PPP in the timing of that.
Great. Appreciate that. I know you talked a little bit about asset sensitivity of the loan book. Are you able to share what percentage of the loan book is floating and or how much of that is at the loan floor, if you're able to share that?
Yeah. When we look at it today, our loan book appears on the surface to be 31% fixed rate. That includes PPP. When you strip out PPP, the fixed rate of our loan portfolio is about 23%, and so we would still be then about 77% between adjustable and variable. In total, we have about $12.6 billion of loans that are tied to either prime or LIBOR, so about two-thirds of the loan book.
Great. Appreciate that. Last one from me, just on the M&A landscape. Obviously, we've seen some pretty big deals in your market here lately. Just curious about how these larger deals are impacting the conversations. Have conversations been picking up, slowing down, or just any color you're willing to share on that front?
I would just say over the last six months, conversations have picked up.
Perfect. Well, that's it for me. Thanks for taking my questions.
Thank you.
Okay. Thanks, Zach.
I'm showing no further questions at this time. I would now like to turn the conference back to you, Phil Wenger.
Well, thank you again for joining us today, and we hope you'll be able to be with us when we discuss second quarter results in July. Thank you.
Ladies and gentlemen, this concludes today's conference. Thank you for your participation and have a wonderful day. You may all disconnect.