Nitin Mhatre: Laurie, I’ll give David in a minute to think through that. But just on a strategic level, what we will continue to do is invest in the opportunities to grow deposits. As David highlighted earlier and also deepen relationships with the clients that we have. So, if you asked about things that we’re looking to invest in, I think it’s going to be investments in finding more frontline bankers, especially in the commercial private banking, cash management types of areas, where we get larger deposit relationships and opportunities for fees. We’re also looking to continue to improve our Digital platform. We’ve launched our Online and Mobile platform. We’re looking to do our public website refresh. So I think there’s going to be a little bit of investment there.
We’re also looking to do a swap location within Boston. So I think those are the elements that are ensuring that we also invest in the future. So those would be the types of investments that will continue to go on improving banker experience, client experience and our technology stack.
Laurie Hunsicker: Got it. Okay. And so really yes — go ahead.
David Rosato: No. I was going to answer kind of in the context of the full quarter, the full year and the guidance we put out in January. And at a high level, what are the goods and what are the bads, right? So, we are light on NII and we were light on fees as Mark was questioning earlier. We were better on credit and we were better on expenses. Project A, we made the point, we caught out the cost saves and the income give up, but we made the point that no change to ’24 earnings from Project Day, right, because that’s inclusive of the security sale. So while where you’re going is yes, we are in light on expenses to the guidance that we gave, we’re not at this point because of the all the investments that we continue to make in conjunction with all the expense controls we have, we’re not ready to take the expense guide down yet. We’re only through one quarter of the year. We’ll probably have this discussion midyear.
Laurie Hunsicker: Okay. Sounds good. Thanks for taking my question.
David Rosato: Yeah. Thanks, Laurie. Good question.
Operator: Next question will be from Chris O’Connell at KBW. Please go ahead.
Chris O’Connell: Morning.
Nitin Mhatre: Good morning, Chris.
David Rosato: Good morning.
Chris O’Connell: Just want to start off for the — on the average balance sheet. I know they are truncated in terms of the held-for-sale amounts on there. Are the yields there good in terms of the $572 million loan yield and the $275 million deposit cost? Is that reflective — or is it a little bit skewed due to the short duration that they were on the average is there?
David Rosato: So if you’re talking the margin, we tried to call this out on the margin page in the press release, Chris. So the short answer, are the numbers good? Yes. The — what we tried — there’s a big difference between endings and averages related to loans and deposits associated with Project A. And that shows up on — I’m sorry, I think I said page seven, on page 10 of the press release. So you see low average balances, for example, for loans that we sold of only $18 million in the quarter. The footnote tells you the day that we move them out of the regular portfolio into a held-for-sale portfolio. Does that answer your question?
Chris O’Connell: Yeah.
Nitin Mhatre: Yeah. Just one thing I noticed you said at $544 million and $275 million. I think its $544 million for earning assets and $245 million for total liabilities just to — for apples-to-apples.
Chris O’Connell: Oh, No, I was just referring to the held-for-sale yields.
David Rosato: Yeah. Just the — and just the nuance there Chris, so the $572 million is the loans impact on the quarter. If you look carefully you can see that, we broke out the deposits between interest-bearing and non-interest-bearing as well.
Chris O’Connell: Yeah.
David Rosato: So the $275 million is just the interest-bearing piece.
Chris O’Connell: Great. And then — so just wanted to talk to the impact on the margin once the actual sale occurs there. I mean, you seem to indicate in the commentary that, the NIM going into 3Q should be fairly flat to 2Q. So there’s really — you’re expecting not much of an impact once the transaction occurs?
David Rosato: Yeah. So it’s complicated, admittedly. So the point I was making with Laurie, is the spot NIM in March really not reflecting the security sales. So you have security sale in Q2 helping the margin you have deposit sale in Q3, going the other way. Our interest rate risk position is neutral. I think that’s — we haven’t been asked that yet, but that’s probably important in the context here. We’re — three months ago we were talking about four to five. Some people were talking about six Fed moves. Now we’re talking about one and now at September, a month ago it was July and there were two. So that’s an incredible amount of noise around interest rates. For us, we basically have a neutral balance sheet, which is the good news.
So, all the market gyrations aren’t moving our NIM all over the place. At the end of the day, the one thing and from my perspective that’s going to drive margins this year is deposit cost. And deposit costs are the competitive pressure of how we all behave. The deposit costs were up 18 basis points, Q4 to Q1. Not great news. but the good news is the prior quarter, they were up 30 basis points. In the quarter before that, they were up 30 basis points. So, the — while deposit costs are going up, the pressure is abating we’re all generally behaving as an industry and the CD books that we all have are about a year and they’re all almost all rolled over. So, we’re not going through that very low old rates to market rates. They’re now kind of close to market rates to close to market rates.
That’s why the pace of increase the second derivative is slowing down. But ultimately, the assumptions that we make around our cost of deposits for the balance of the year is the number one issue that’s going to drive our margin and everyone else. So, our asset yields are really quite steady and then we’ve improved them with the security sales. But we can lose all that benefit on the deposit side it deposits get much more aggressive pricing from competitors.
