F.N.B Corporation (NYSE:FNB) Q1 2022 Earnings Conference Call April 19, 2022 8:30 AM ET
Company Participants
Vince Delie – Chairman, President and Chief Executive Officer
Lisa Constantine – Investor Relations
Vince Calabrese – Chief Financial Officer
Gary Guerrieri – Chief Credit Officer
Conference Call Participants
Frank Schiraldi – Piper Sandler
Daniel Tamayo – Raymond James
Michael Young – Truist Securities
Timur Braziler – Wells Fargo
Tyler Marks – Jefferies
Michael Perito – Keefe, Bruyette & Woods
Russell Gunther – D.A Davidson
Brody Preston – Stephens Inc.
Brian Martin – Janney Montgomery
Operator
Hello, and welcome to the F.N.B Corporation First Quarter 2022, Earnings Call. All participants will be in listen-only mode. [Operator Instructions]. After today’s presentation, there will be an opportunity to ask questions. To ask a question [Operator Instructions] Please note today’s event is being recorded. I now would like to turn the conference over to Lisa Constantine, Investor Relations. Ms. Constantine, please go ahead.
Lisa Constantine
Thank you. Good morning and welcome to our earnings call. This conference call of F.N.B Corporation and the reports it files with the Securities and Exchange Commission often contain a forward-looking statement and non-GAAP financial measures. Non-GAAP financial measures should be viewed in addition to and not as an alternative for our reported results prepared in accordance with GAAP. Reconciliations of GAAP to non-GAAP operating measures to the most directly comparable GAAP financial measures are included in our presentation materials and in our earnings release. Please refer to these non-GAAP and forward-looking statement disclosures contained in our related materials, reports, and registration statements filed with the Securities and Exchange Commission and available on our corporate website. A replay of this call will be available until Tuesday, April 26, and the webcast link will be posted to the About Us Investor Relations section of our corporate website. I will now turn the call over to Vince Delie, Chairman, President and CEO.
Vince Delie
Thank you and welcome to our First Quarter Earnings Call. Joining me today are Vince Calabrese, our Chief Financial Officer, and Gary Guerrieri, our Chief Credit Officer. FNB began 2022 with solid fundamental performance in the full integration of the Howard Bank acquisition. We’re pleased that the deal metrics associated with Howard came in at or better than planned with a positive impact to our capital ratios. Howard added $1.8 billion of loans to the balance sheet, bringing our total assets to $42 billion. In fact, on a combined basis, FNB had strong loan pipeline growth in the Mid-Atlantic region, up 13% year-over-year, and 61% linked quarter.
Our expectation is that the Mid-Atlantic region will continue to grow with the exceptional employees and new clients who joined FNB. Additionally, we expect to receive revenue benefit from FNB’s more robust product set as we offer these services to the existing customer base already in the market. Earlier this month, FNB’s Board of Directors approved a new 150 million share repurchase program, providing additional flexibility to effectively manage capital and benefit our shareholders. FNB reported first quarter GAAP earnings per share of $0.15 and $0.26 on an operating basis.
Revenue increased 3.4% linked-quarter, led by net interest income increasing 5%. We remain well positioned to grow net interest income given the strategic steps we undertook to position our balance sheet and benefit from the current interest rate cycle. These include favorable deposit mix changes and investing in a short-term securities portfolio. We remain well positioned with $16 billion of assets that are tied to short-term rate [Indiscernible]. Loans increased $2 billion or 8.2% when excluding PPPs. While Howard contributed to the growth, commercial loan production was more than $1 billion, up 30% year-over-year.
As we look ahead, pipelines have rebuild from our strong growth in the fourth quarter and are up 23% quarter-over-quarter. This gives us additional confidence in our mid-to-high single-digit organic loan growth guidance for the full year. Our fee income businesses contributed another solid quarter at $78 million, essentially flat to the last quarter. Wealth management continued to produce record results with revenues increasing $1.1 million linked-quarter or nearly 30% annualized, driven primarily by record organic sales activity. Mortgage banking income increased 700,000 linked quarter to 7 million amid significant interest rate volatility.
While rising mortgage rates are expected to reduce refinance activity, we are confident our diversified geographic footprint and consistent commitment to the home purchase and new construction market will help us outperform the industry. In fact, nearly 80% of our originations this quarter were for purchase money mortgage. FNB’s investment in technology has also enabled us to efficiently bring in more mortgage clients with 66% of our mortgage applications submitted through our online e-Store. As we continue to grow our balance sheet, we remain vigilant in examining the current macroeconomic environment of high inflation, supply chain disruption, and geopolitical unrest.
We have proactively assessed the risks and activated plans given the current environment. Our credit team is continually monitoring the industries that are potentially affected by the rising interest rates. Higher food, oil, and gas, and commodity prices, and supply chain disruption. We will continue to assess the environmental risks and adjust our strategy appropriately to ensure consistent performance while addressing the needs of our key stakeholders. I will now turn the call over to Gary to discuss overall credit performance and the steps his team taken to position our portfolio.
Gary Guerrieri
Thank you, Vince. And good morning, everyone. Our first-quarter results remained strong and we are very pleased with the continued favorable positioning of our credit portfolio as evidenced by our key asset quality metrics. The quarter also marked the successful completion of the Howard Bank acquisition, which I am pleased to report, came over slightly better than expected and did not have a material impact to the overall credit portfolio. I will provide some additional color on the transaction, including the Day 1 and Day 2 impacts to the reserve levels, which I will touch on later in my prepared remarks. Let’s first review our GAAP asset quality results for the quarter.
As I have mentioned previously, we entered 2022 with our credit portfolio in a position of strength, and with the newly acquired Howard loan book now reflected in our total consolidated results, we saw only slight increases in our delinquency and NPL levels as compared to our very low year-end results. The level of delinquency ended March at a very solid 66 basis points reflecting an increase of five bips driven entirely by Howard. And exclusive of that acquired book of loans, delinquency would have decreased slightly compared to the prior quarter.
NPLs and OREO also reflected a small increase on a linked-quarter basis against very low year-end results with the GAAP level up two basis points to end March at 40 BIPS, which was again due to the absorption of Howard’s portfolio. Net charge-offs for the quarter were very low at $1.9 million or three basis points annualized, as we continue to track the historically low levels over the past several quarters. We recognized provision expense of $18 million for the quarter, including the $19.1 million initial provision for non-PCD loans associated with the Howard acquisition. With the additional Day 1 PCD gross up of $10 million, our ending reserve position stands at 371 million or 1.38% of loans at quarter end.
Acquired PCD loans were relatively low and represented just over 10% of the Howard loan book. Absent the Howard transaction and the associated provision and gross up activity, our reserve level would have been down slightly compared to December, which is consistent with the favorable credit quality trends we’ve seen. Our NPL coverage position remains strong at 365%. Regarding Howard’s loan portfolio, we are very pleased with the successful conversion of the book and the ongoing tracking and monitoring our teams continue to perform to help us better manage risk during this transition phase.
Howard’s credit book performed slightly better than we were expecting leading up to the conversion with our loan risk profile and credit concentrations all remaining satisfactory. We look forward to the additional lending opportunities and access to the expanded customer base within our Mid-Atlantic footprint, which helps support our overall loan growth objectives and provides us with deeper opportunities for our other fee-based services. I would like to congratulate the team for their tireless efforts to close the transaction and expand our position in this highly desirable market.
I would now like to briefly touch on recent global and macroeconomic activity that we have been monitoring, including the potential effect on our borrowers and the markets in which we operate. With the ongoing challenges of widespread inflation, elevated input cost, supply chain disruptions, labor shortages, and geopolitical influences, We are focused on these factors in our underwriting and in our credit discussions to address and mitigate these risks upfront. While we have not seen any material impact to our credit portfolio at this time, we remain vigilant and have tailored our credit decisioning approach to address the impact that these various factors could have on a borrower’s EBITDA, and margin levels, including the effects of fluctuating operational and supply costs, as well as potential interest rate sensitivities that may lead to increased borrowing costs.
That said, we have been very proactive in utilizing interest rate instruments to provide borrowers the option to fix their borrowing costs and reduce their sensitivity to the rising rate environment. In closing, we remain very pleased with the position of our portfolio and the successful acquisition of Howard Bank. And we’ve remained focused on the year ahead to manage our growing credit book through a potentially softer economic environment. Maintaining our strong credit culture stands front-and-center, and we are well prepared and remain proactive in our approach to quickly identify and better manage emerging risks in our loan portfolio. Our disciplined credit framework is built on a foundation of consistent underwriting, a tenant risk management and selectivity of high-quality lending opportunities, all of which has served us well and positions us for the year ahead. I will now turn the call over to Vince Calabrese, our Chief Financial Officer for his remarks.
Vince Calabrese
Thanks, Gary. As Vince mentioned, we’re very excited about the Howard acquisition, and the potential this deal offers to continue growing our fee-based revenues. After the merger closing date onto deposits were both $1.8 billion with 43% of deposits in non-interest bearing accounts. Terms of significant items, first-quarter had $28.6 million in merger-related expenses, $19.1 million of initial provision for non – PCD loans, and $4.2 million in branch consolidation costs. In conjunction with the acquisition FNB issued a little over 34 million shares of common stock at $12.99 in exchange for 18.9 million shares of Howard common stock. Going forward, Howard will be included in all of our reported numbers, including guidance as there now part of FNB.
With that, let’s turn to slide five, discuss the first quarter financials starting with the highlights. First quarter reported EPS totaled $0.15 and $0.26 on an operating basis after adjusting for the Howard related items and branch consolidation costs previously noted. But excluding PPP and Howard loans as of the acquisition date, which is more reflective of underlying loan growth, period end total loans increased $259.7 million or 4.3% annualized on a linked-quarter basis, including an increase of $81.7 million in commercial loans and leases, and a $178 million in consumer loans. Average loans excluding PPP and Howard increased $440 million or 7.4% annualized. Let’s continue with the balance sheet on Slide 7.
First quarter average securities reached $7.0 billion, an increase of $469 million from the prior quarter as we increased our investing activity, take advantage of the higher interest rate environment. Securities growth coupled with the loan growth contributed to a 3.9% increase in total average earning assets. Average deposits excluding Howard totaled $31.7 billion, an increase of 7.8% year-over-year. Reflecting continued organic growth in households and account balances, partially offset by decline in time deposits given customers preferences to move funds into liquid accounts.
Turning to Slide 8, net interest income totaled $234.1 million, an increase of $10.8 million or 4.8% from the prior quarter primarily due to growth in average earning assets and initial benefits from the higher interest rate environment, partially offset by the $4.2 million decreased contribution from PPP. Our net interest margin increased six basis points to 261, reflecting the early stages of benefiting from upward movement in interest rates. Total impact of PPP, purchase accounting accretion, and higher cash balances on net interest margin was a reduction of 13 basis points for the quarter, similar to the 14 basis point reduction last quarter.
Now let’s look at non-interest income and expense. Non-interest income totaled $78.3 million, essentially flat from the prior quarter. We have previously mentioned the strategy of investing in our diversified fee-based businesses, and this quarter again demonstrates it’s importance. For example, the insurance commissions and fees, increased to $2.3 million linked-quarter, offset the capital markets decrease of $2.4 million, as it reverted from elevated levels in the fourth quarter. We expect our diversified fee income strategy to be advantageous as we continue along the economic cycle. Reported non-interest expense increased $45.8 million or 25.2% linked-quarter. On an operating basis, non-interest expense increased $13.9 million or 7.7% to $194.6 million, excluding merger-related expenses and branch consolidation costs from the current and prior quarters.
On an operating basis, salaries and employee benefits increased $8.1 million or 7.8% linked-quarter, primarily related to normal seasonal long-term compensation expense of $6.2 million in the first quarter of 2022 as well as seasonally higher employer pay payroll taxes. Also, included in the quarter total is a little over two months of salaries and benefits for the Howard employees that joined F.N.B. Occupancy and equipment increased $3.1 million or 10.1%, primarily due to higher seasonal utilities cost. Bank shares and franchise taxes increased $2.3 million due to the recognition of state tax credits in the prior quarter.
The efficiency ratio equaled 60.7% compared to 58.7. Higher efficiency ratio resulted from nearly $20 million of lower triple fee and purchase accounting accretion income versus a year ago. Excluding PPP and PAA, our efficiency ratio would have improved around 220 basis points year-over-year. We expect improvements in this quarter’s efficiency ratio moving forward with a positive impact from expected rate hikes and synergies in revenue and expense associated with Howard. Tangible book value per share decreased linked-quarter to $8.09, primarily related to $202 million or $0.57 per share and accumulated other comprehensive loss as of March 31, 2022, reflecting the impact of higher interest rates on the fair value of AFS securities.
This compares to $52 million or $0.19 negative impact at the end of the prior quarter. Increased unrealized losses in the AFS portfolio due to rising interest rates should come back into capital over time as securities mature or pre -pay. During the first quarter of 2022, the company repurchased 2.2 million shares of common stock, at a weighted average share price of $13.25 for a total of $29.8 million. To date, FNB repurchased 111 million under the program approved in September 2019. Earlier this month, our Board approved a new 150 million-share repurchase program, continuing to provide FNB with a tool to optimize capital management and enhance overall shareholder returns. Now let’s turn to guidance on Page 12.
We expect loans to increase in the low double digits to low teens with underlying organic growth in the mid-to-high single-digits on a year-over-year spot basis. Total deposits are projected to grow high single digits on a year-over-year spot basis. Full-year net interest income is expected to be between $1.0 billion and $1.04 billion, with the second quarter between $249 million to $253 million. Our base guidance currently assumes 125 basis points of rate increases for the remainder of the year, including a 50 basis point increase in May. Full-year non-interest income is expected to be between $315 and $330 million with the second quarter around $80 million.
The revised full-year guidance is due slightly lower-than-expected market-related fee income. There is no change to our full-year guidance for non-interest expense with a range of $760 to $780 million on an operating basis for the full year, and $190 to $195 million for the second quarter. This does not include the onetime expenses associated with the Howard Bank acquisition. Positive credit quality is expected to continue throughout 2022 with provision guided to $20 to $40 million. This does not include the initial $19.1 million of provision related to Howard and is dependent on net loan growth experience throughout the year. Lastly, the effective tax rate should be between 17.5% and 18.5% the full year, which assumes no changes to corporate income tax rates and is dependent on the level of investment tax credit activities. With that, I will turn the call back to Vince.
Vince Delie
Thanks, Vince. We’ve worked hard to build a strong differentiated brand, including our commercial lending and wholesale banking businesses. Our knowledgeable team and investments in products and technology result in a commercial banking experience that is unique for it’s high level of convenience and sophistication. Our commercial business ranges from large corporate clients to small business lending, including highly specialized industry verticals, creating an opportunity for FNB to surpass the needs of most clients. Thus far in 2022, FNB has been named as one of America’s Best Bank, and World’s Best Banks by Forbes, received 17 branch excellence and Best Brand Awards.
And was recognized as a top workplace USA by Energage for a second consecutive year. These awards add to an extensive list of honors that FNB has received for its differentiated culture and business model, which focuses on doing what is right for its clients, communities, and employees, and ultimately benefiting our shareholders. For example, FNB is increasing our closing costs assistant grant to 5000 in April 2022, advancing our commitment to borrowers in low-to-moderate-income communities.
We also enhanced our mortgage product offerings through Fannie Mae and Freddie Mac to provide additional access for homeowners with income at or below the area median income for their markets. Our goal is to ensure all stakeholders benefit from the products and services that we offer. Our first-quarter results provide a solid foundation for us to continue building momentum throughout 2022. As always, our performance is a testament to our team and I thank each employee for their dedication and contribution. With that, I’ll turn the call over to the Operator for questions.
Question-and-Answer Session
Operator
Yes, thank you. At this time, we will begin the question-and-answer session. [Operator Instructions] At this time we will pause momentarily to assemble the roster. And the first question comes from Frank Schiraldi with Piper Sandler.
Frank Schiraldi
Good morning. In terms of — Vince, you mentioned still a lot of confidence in the loan growth expectations for the year. And I think you said that the current pipeline is up 23% linked-quarter. And so I just want to follow up on that, is that the commercial pipeline? And I wonder if you could talk a little bit more about that pickup? Does it reflect supply chain issues improving? Is it more seasonal? Just wondering if you can frame a little further that significant tick up in the pipeline linked-quarter.
Vince Delie
Yeah, I can address that. I think it’s pretty broad-based. If you look at the dispersion of our pipeline, we have a little chart here for our unsafe that shows the trending. You can see almost every region — and the company has seen growth in their pipeline on a linked-quarter basis. If you remember, back in the fourth quarter, we had a pretty strong — it was a record production quarter for us. So typically what happens, the bankers are busy closing transaction, the pipeline kind of shrinks a little bit.
And then we started to move back into prospecting or accommodating borrower’s requests and the pipeline builds again, I think you’re seeing that here. The other factor is the first quarter is seasonally slower. You don’t have the financial results from your corporate borrowers to act upon. Typically the companies haven’t devised their CapEx plans until now. So now is the time when you start to see a pickup in the pipeline. We’re very pleased with the growth in the Mid-Atlantic region. Mid-Atlantic is up 13% year-over-year, 61%, quarter-over-quarter.
So you’ve got a big boost because of that Howard acquisition. A lot of critical mass and scale, deeper penetration in the market and some great bankers that we picked up who are seem to be pretty happy with our system. So we’re very excited about the opportunities there. We also feel that as I mentioned, on the call. From a non-interest income perspective, we fee-based businesses that we have. We have a tremendous opportunity to penetrate that customer base with some sizable fee opportunities in wealth than the market.
So I think that should help us in that market. So that’s a big driver. Charlotte’s up 33% year-over-year, 52% on a linked-quarter basis. So there’s quite a bit going on in the Southeast. I’ve just spent some time — spent a week in Charleston and Raleigh, and both of those markets are performing very well. Spent a lot of time with clients, and I think our brand is being received well in those markets. We’re pretty well established, we have regional headquarters that we’ve established in Greensboro in Charlotte, and Raleigh and Charleston, South Carolina, with highly visible signage and a decent delivery channel. So things are starting to close there. And we’ve expanded from a de novo perspective into Asheville, North Carolina.
It’s been a couple of years now. So that’s starting to peak up for us. As well as Greenville, South Carolina, we were on the outskirts of Greenville, but we have a plan to move into that market more heavily which provides quite a few commercial opportunities for us, particularly C&I opportunities. And then, small business banking for us historically has lagged from a growth perspective because we’re consolidating portfolios every time we did an acquisition that stabilized and has actually started to grow nicely for us across the footprint.
So we’re seeing a little bit of lift from our small business lending activity, so that gives you the landscape. I think it’s more related, Frank, to when you look at line utilization rates within the company, [Indiscernible] and I were just looking at that data. What you see is a substantial drop-off in utilization, so borrowings declined post pandemic, beginning of the pandemic. After the first quarter of the pandemic in 2020, things really fell off from a borrowing perspective for commercial borrowers. So a lot of those businesses went to cash.
They got stimulus or benefit from stimulus and drove down their balances, and then a series of things occurred which were unpredictable, but supply chain disruption, all kinds of things happened. That slowed their ability to grow or expand, and I think we’re starting to see a pickup if you dived into that utilization where even though we haven’t seen much of a global rise in utilization rates across all the portfolios, when you start to drill down into it, we’re seeing growth in the middle market now. We’re starting to see things pick up.
So that’s telling me that we’re working through those supply chain issues. Companies while the wars in Ukraine is probably a worry. I think some things are starting to get back to normal and — from an operating perspective. Anyway, that’s — we’re still — we still are very cautious as I’ve said in my remarks. We’re still watching what’s going on from a credit perspective because there are concerns about additional supply chain disruption, the price of oil and gas rising and impacting certain industries. So we keep a close eye on it, but all in, we’re seeing — we haven’t seen any significant weakness anywhere in the portfolio. In fact, the credit quality is holding in there. I hope that answers your question. I tried to be comprehensive as possible.
Frank Schiraldi
That was helpful, thank you. And I guess just as a follow-up, in terms of — just given how strong — just given your confidence on the loan growth picture, is there any room to ramp up the buyback at all? Just wondering if with bank stocks having pulled back a little bit, from where you bought back stock in the first quarter, if we should think about that maybe ramping up a bit. If we should be thinking about that any differently than we did going into 1Q.
Vince Delie
I think we’re — our guidance on loan growth isn’t crazy. We’re mid to high single-digit growth, so there is some room like for us to fund that growth with capital that we generate internally plus buyback shares. And that’s why the Board approved the buyback program. We want to have options so that we can continue to drive shareholder value in support of the stock price, if we see movement downward. And the company has performed admirably over the last few years, so there’s a lot of confidence in the Board in putting forward a buyback program.
If you look at the financial performance of the company, it’s been very strong and some very challenging times, and the actions that Gary and the credit team have taken in our commercial bankers. We really prepared ourselves well and gotten through in pretty good shape so that gives them a lot of confidence on the buyback. And if you look at the capital ratios, and I can’t remember Chris, we’re at 10% [Indiscernible] Anyway, from a regulatory capital perspective, we will good. I think we’re really good place, Frank, where there are options for.
Frank Schiraldi
All right. Great. Thank you, Vince.
Operator
Thank you. The next question comes from Michael Young with Truist Securities. Your line is live.
Vince Delie
Sounds like his on a horse.
Operator
All right. Well, moving on. Next question will come from Daniel Tamayo with Raymond James.
Daniel Tamayo
Good morning, guys.
Vince Delie
Hey there. How are you?
Vince Calabrese
Morning.
Daniel Tamayo
Doing well, thank you. May be first on the mortgage-banking outlook. You gave some good color on continuing to expect that to be, I should say, outperform the industry going forward. But maybe if you could provide a little more detail on how you’re thinking about how we should be thinking about sizing that revenue stream going forward, or are you still expecting that to increase from here or flat or how from an overall perspective, do you see revenue trending from here?
Vince Delie
I’ll let Vince answer that question. In [Indiscernible], but as before, I will tell you that the pipeline has shifted as we’ve indicated. We are very well positioned across the Southeast and the Mid-Atlantic and some fairly dynamic housing market. So we have an opportunity to benefit more heavily from purchase, money, mortgage origination. I think our current pipeline sitting at around 90%. So we purchase money. So we did make that shift, which provides some support, which is why I indicated in my prepared comments that we should outperform the industry.
We’re not as dependent on refinance activity, and we are spread across including broad geographies in some very attractive markets. And about 50% of the franchise citizen very stable, more stable markets, gives us some stability and we’re able to maintain a lower growth trajectory. And then half of it sits in more dynamic, higher growth markets, where we’re seeing more housing start and a lot of activity. But go ahead, Ben. I don’t know if you want to give them a little bit more color on the top line. And what were our expectations?
Vince Calabrese
Yes. No, I would say for the quarter you saw the results that we were up a little bit from a low last quarter, we were thinking it was going to be low. The purchase versus refi mix as Vince mentioned positions us well to focus on purchase there. For the quarter we’re 77% and now it’s up to the refi last quarter going down to 5% of the total. So kind of the way our business is built is very well positioned and the activity on the purchase side has still been very strong. But I guess if you boil it down to the mortgage banking income, that’s a function of how much you sell and how much your portfolio too depending on the nature of the originations.
We’ve definitely seen some shift to customers wanting to get arms seven, six months, it’s not one anymore. And in 10-year and six months. So we’ve started seeing some movement towards that. So that’s up close in the portfolio. So you’d have poor portfolio, higher net interest income, a little bit less gain on sale on that. I guess if you boil it all down, I would expect mortgage banking to move up from here from the first-quarter. We’re entering this the seasonal second and third quarters that are kind of high, but around the level to a little bit higher from here would be the best way to characterize it. And it’s really going to be a function of the mix of those originations. But they’re still very healthy, the applications are very strong, and the purchase market continues to be strong. So that helps to support the activity there.
Vince Delie
The other side of it too is there’s quite a bit of activity in the consumer lending area relative to mortgage lending. So outside of the mortgage bank itself, we have a surge in pipelines. [Indiscernible] We have one of the strongest pipeline we’ve ever had right now. So there’s been a significant pickup. There was a lot of pent-up demand. I don’t know, there was the capacity to execute a lot of the construction projects. So I think we’ve seen a surge in demand across our footprint and it’s pretty much every geography. [Indiscernible]
So all of that leads to — the reason I brought that up is because ultimately that may lead people to take out a consumer loan secured by real estate and then they roll it into a larger — from a larger mortgage loan and it’s taken out. Anyway, that’s — there’s quite a bit of activity. So we’re feeling pretty good about being positioned where we are with repurchase money opportunities and the growth in certain segments of our business.
Daniel Tamayo
That’s terrific color. I appreciate all of that. And maybe switching gears here, thinking on the — about net interest income and obviously we’re in a much different rate outlook environment now than we were last quarter and you’ve updated guidance to reflect that. How should we think about or how are you thinking about the change in the bank’s sensitivity to rates from the pike we just had all the way out to what you’re forecasting by the end of the year. Is there any impact? Are you expecting any difference in terms of loan betas like what you’re able to reprice on the loan side and then just remind us if you’re still thinking that deposit betas end up around the 40% to 50% range by the end of the year?
Vince Calabrese
I would say a few things as far as what’s based into the guidance, you see what we have in there an additional 125 basis points [Indiscernible]. If we get more than that, obviously there’s upside to the range there. I know everybody is modeling it with their interest rate projection. So clearly there is some upside to the range depending on where we end up. As far as the [Indiscernible] continue to be pretty strong. You know from the past, we have close to 50% of total loans that are tied to [Indiscernible] three months or less on those two measures as well as prime. So it’s $13 billion dollars, 48% of total loans, so that benefits as rates move up.
The cash position we have is benefiting, while we still have around $3 billion — $3.2 billion, that was earning 50, now it’s earning 40, and then we would expect that to move up by the time the Fed moves, so that would be another 50 basis points to get 50, so that’s helping. While that cash is not yet deployed in loans, you’re getting a benefit there too. And then, the investment portfolio we’ve been able to take advantage of the higher rates in recent quarter to put some more money to work there and to do that in the growth of the investment portfolio. That’s supporting the overall margin. And PPP is almost gone.
If you put PPP on the side, our loan yields were actually up five basis points, kind of continue businesses there so and then on the deposit betas side, there’s — again, none of us really know how — the level liquidity in the banking system obviously still in consideration for all of us. I do think we’ll feel more pressure as we continue to move down this path of fed moves, what kind of commercial depositary being earlier in that process? Our current projection for us based on what we see and what we think will be really on the quarter the rate hikes coming through in total cost of deposits, kind of 25% on a total deposit basis. And around 40% for interest bearing deposits at the end of the year. That is kind of our current projections.
Daniel Tamayo
Terrific, that’s all I had. Thanks for all of that.
Vince Calabrese
Thank you.
Operator
Thank you. And the next question is from Michael Young with Truist. Go on Mr. Young, your line is live.
Michael Young
Hey, can you hear me?
Vince Delie
We can now.
Michael Young
Okay, sorry about that. Having some technical issues here this morning, I apologize.
Vince Delie
You sounded like you were running around on a horse the first time. We just had a clicking noise, but glad to have you on the call.
Michael Young
Yes. Maybe it’s the ghost of cellphone past, I don’t know. But I apologize.
Vince Delie
It always happens. Go ahead.
Michael Young
It did great. Just maybe Vince, I wanted to walk through the fee income side. Obviously, a lot of big swings this quarter with the MSR value adjustment can have big moves in insurance to the upside, the capital markets to the downside. It sounds like a slight weakening, it’s kind of the outlook, but is that more mortgage-driven or are you seeing some things in some of the other business lines that you think will be a little weaker as we move throughout the year?
Vince Delie
It’s a combination of several areas you’ve got red on. I think the mortgage banking fee income in general year-over-year is going to be challenging to meet last year’s fee income obviously, because it was so strong. But there are — the way we’ve tried to build out our fee-based businesses is to ensure that when ones not performing at the highest level, we have enough balance within our offerings to make up for it. And the guide that we gave you implies some of that shifting, as you mentioned. So capital markets, we — sure from a pure derivative perspective interest rate, hedging, obviously, a lot of customers clients took advantage of the hedging products during a time when rates were extraordinarily low.
So that business has come down a little bit. But on the flip side, in capital markets, we launched our debt capital markets platform. So we’re seeing good activity there and good prospects there, so we’re expecting to have pretty decent year in that space. We have invested in our international banking platform and added products. We’re expecting to see some growth there. We’ve had some really solid growth in SBA. We expect that to continue. So our SBA platform that we shrunk and then rebuilt and integrated into our integrated more in-depth into our calling activities across the company, versus being a standalone. Business is starting to take off. So those things should balance the mortgage and derivative business.
Well, obviously, of course we rely on net asset values as well. I mean if the market remains steady, we should be able to benefit there as well because we’re seeing a lot of organic growth. We’re very opportunistic in DC and Baltimore with that Howard portfolio and the fact that they didn’t have a product offering. We’re starting to see some good opportunities there. And in the Carolinas, so Charleston, Asheville, Greenville roll-up rate markets for us with the private banking involved respective and we’re starting to see some activity.
Michael Young
So Howard will be additive, just across the base.
Vince Delie
Oh, yes. So if you added quite a few households, nice little commercial bank that fit in well culturally with us. So the people there did a nice job and we were able to take cost out but still keep the vast majority in the front line people. So we’ve added to our teams and those folks are doing really well.
Vince Calabrese
And they didn’t have the same product set that we have gotten the test on the fee side is significant, given the quality of the customer base that how it has really across-the-board wealth management, cap markets, insurance, mortgage, so there’s opportunities across the different fee-based revenue categories. And that’ll be additive.
Vince Delie
So while there are challenges, we’re not trying to fidget. It’s going to be tougher in mortgage banking this year, it’s going to be tougher in capital markets, particularly center around hedging. But I think the guide that we gave you, we feel confident about because of our ability to drive the income in those other areas.
Vince Calabrese
I think that’s important too, right? So the quarter’s 78, our guide for next quarter is around 80 and then 315 to 330. So obviously we feel diversification within the fee-based categories that we’re comfortable with those guidance range you gave out which is higher than per quarter level.
Michael Young
Okay, great. Just following up on the prior questions, just as we look at the cash balances, the 10-year rate moved up pretty considerably, or are you guys thinking about kind of laddering some of that out into securities and growing the size of the balance sheet. Or you opting more for kind of remix and just funding loan growth with the cash. So we should expect a little less balance sheet growth, but higher margins.
Vince Calabrese
Given the opportunities with rates, I mean, we’ve definitely put some more money to work during the first quarter. We invested $600 million into the portfolio, which is about $200 million higher than cash flows. And when you look at that, the average balance was up almost a $0.5 billion. So if you take advantage of rates moving — but we still stayed within our strategy of duration around kind of 3.5 to 4. We haven’t wanted to go along today, and as we sit here right now, for the current quarter at least, our anticipation would be to kind of reinvest the cash flows that are coming on. And the rates are — we were — in the fourth quarter we reinvest around 1.34 the first quarter, up to 1.90, again with the 3.5 duration.
I think one of the things it’s important for us too is with the movement in interest rates, our securities portfolio is 50/50 AFS versus Health and maturity. So, and it’s on the short side. So I think the AOCI hit that we had was much smaller than others depending on how they structure your portfolio. So that helps us manage as far as that impact to kind of book equity, but also helps us manage and create opportunities with a billion dollars worth of cash flow coming that Sprague’s continue to move. We will be opportunistic and — that makes sense. We will put — we will grow the portfolio itself, but we’ve been good amount here. But we’ll just monitor very closely and look for those opportunities as we have been doing.
Michael Young
Okay. Thank you.
Operator
Thank you. And the next question comes from Jared Shaw with Wells Fargo.
Timur Braziler
Hi, good morning. This is Timur Braziler filling in for Jared. My first question, I guess, is following up on the NII guidance and looking at the guidance quarter versus last quarter. Last quarter, it was — it’s fairly similar with expectation for two rate hikes and I think 3% sensitivity if there was a third rate hike. Now going to five rate hikes with one that already occurred and expectation for 50 basis points in May. I’m a little surprised that the guidance wasn’t higher. Is there anything else that changed in the calculation of that guidance that offset some of that sensitivity to the incremental rate hikes or maybe the current combination with Howard, I guess if you can frame that, that would be great.
Vince Calabrese
I would say the one place that we’re conservative is on the betas because I really don’t know what’s going to happen there with Howard coming onboard and just looking ahead from here. We’ll see what happens. Just like I said, a lot of liquidity in the banking system. So I think banks are going to be methodical about moving rates up as you need to, but there’s a lot of cash on your balance sheet. I mean that’s one area where we’re probably being a little conservative on the betas, but nobody really knows for certain. We moved the guide up quite a bit from the guide that was in the first quarter. Given what we have in here, and I know some of the analysts have more rate hikes baked into their forecast, so as I said earlier, if we get more than 125 basis points from here, which the future’s market, I don’t know where [Indiscernible]? It’s higher than that. It’s higher than that. Higher than that. So if you get more, there’s more upside there too. Those are the two things I will comment on.
Timur Braziler
Okay. And then, as far as power goes, maybe for Gary, just an outlook for purchase accounting dollars starting here in the second quarter?
Gary Guerrieri
Yeah, — go ahead, Vince. I’m sorry.
Vince Calabrese
I wasn’t sure of the question.
Vince Delie
Just the expectation and outlook for accretion — purchase accounting accretion.
Vince Calabrese
Okay. You want to [Indiscernible]
Vince Delie
The net acceptable discount overall was only around $10 million once you do the PCD gross up. So we would assume maybe 600,000 or a little more than a 0.5 million a quarter going forward subject to prepay.
Vince Calabrese
That’s just for Howard.
Vince Delie
This is for Howard, yeah. Hey Gary, do you have any other color on Howard and for the group?
Gary Guerrieri
Yes, Vince, I can ask you an update, everyone. As I mentioned in the remarks, the portfolio came over better than expected. We were very pleased with the information that we’ve gathered as we got deeper into the transaction around some clients that we had some missing information on upfront and we were able to get very comfortable with some of those clients and move those ratings upward to pass ratings. That helped tremendously from the market perspective, as well as how the portfolio performs through the quarter. The portfolio was very nicely underwritten, was actually the best-underwritten portfolio that we’ve seen. And we expect it to continue to perform very, very nicely as we move forward. As you saw in the metrics, the changes in the metrics were very minimal. Generally speaking, they’re significantly higher than that and from a ratings standpoint, the portfolio rated very nicely, very closely to FNB’s are very pleased overall with it.
Vince Calabrese
I’m sorry, just for a second, any accretion. The total purchase accounting accretion in first quarter was about 3 million pre – Howard, right? And that number would be projected to come down as it has on a quarterly basis. And then you add in Howard with $600,000 a quarter that we were talking about. So net-net will be somewhere between $3 million and $3.5 million a quarter over the next few quarters, all that Howard plus what we had before.
Timur Braziler
Got it. Okay. That’s helpful. Thank you. And then just one more follow-up for me. So glad to see that the pipeline is being rebuild. I’m just wondering as you look out at the expected loan growth this year, is the composition going to be similar to what we saw in the back-end of ’21 or with some of these new digital initiatives, should we expect to see more of the loan production coming on the consumer side versus on the commercial side?
Vince Delie
Well, to start the year off, we’re seeing pretty strong production coming out of consumer bank in total. And I attribute that to a couple of things. Some of it is just economic, macroeconomic. Some of it is the embedding of the e-Store into our mobile application and our online offerings. Basically, what we pushed those products essentially put them in front of the client repeatedly in those digital channels, so they are able to act on it pretty easily, are scheduled appointment and go out and see somebody in a branch. For example, it’s added to our online user base and we’ve increased online users 10% year-over-year.
We have over 900,000 enrolled users now; our mobile banking is up 12%. The number of mortgage applications that we pushed through our e-Store is up to 60% of production, which is up from 59. We’ve invested pretty heavily in a number of areas. But if you look at the total e-Store visits that I mentioned, that’s up 56% year-over-year. So that for us is a very reasonable way to advertise our products and services, particularly when there’s macroeconomic factors that flex. People need to borrow money for renovation or renovation.
So that seems to be working for us. The data analytics tools that we put into place and the leads that we’re able to generate, some analysis that we do on pools of data in our data hub. That’s helped us immensely. We can find opportunities within the systemic way. We can find opportunities within the portfolio and then exploit them by contacting those customers proactively. And if you look at all of those statistics in total, there’s quite a bit going on there and it’s driving that activity. On the commercial side.
I think that we’re well positioned. We have very, very good bankers across the footprint for high-quality bankers. We don’t have a lot of carpetbaggers, just a lot of bankers that I ran corporate banking groups for long time. There’s a lot of bankers that move around from bank to bank to bank. We don’t have a lot of that, we have pretty sound respected bankers in each of the markets. They’ve not going around 50 times. We may have attracted them. Your career opportunities. We really rely pretty heavily on their skill set. Salesmanship being one of a series of skills that we expect. So I think we’re starting to see the benefits of all of this. Anyway.
Vince Calabrese
That’s — production in the first quarter was very strong resignation levels, very strong.
Vince Delie
The originations were strong.
Timur Braziler
Great. Thank you for the color, much appreciated.
Vince Delie
All right. Thank you.
Operator
Thank you. And the next question comes from Casey Haire with Jefferies.
Tyler Marks
Hi, good morning. This is Tyler Marks on for Casey. Following up on Frank ‘s question on share buyback appetite, how much lower are you you willing to go below your target fee, the C1 ratio of 10%?
Vince Calabrese
I would say that’s really the target that we’re managing to. We’re 10.0 for this quarter, we were 10.0 a year ago, and 9.9 I think in the prior quarter. So that’s really the level we’re using as our floor to manage to. With the earnings generation capabilities plus the expectation for higher rates, obviously that generates more earnings, which is building to our guidance. So we’ll use that as a governor and we’ll — we depended on the amount of loan activity. If the loan activity was lower for some reason, we’d be more accurate here.
But if you look at what we did with the first program, we bought back $111 million at a very attractive price as I mentioned. We were opportunistic when the opportunity was there and the markets were dipping and this will take our stock to a very attractive value. So we will continue to be opportunistic. And we were down to $30 million or so, so we’re aligned to approve a new level to give us that flexibility to manage capital. So 10’s really the governor that we’re using. We think that’s a good level for us, for our profile as a company. And as we move up above that, we’ll opportunistically do share buybacks.
Tyler Marks
Okay. Understood. And then how are you addressing the secular pressures seen with the overdraft fee? And is your fee guide assuming any of this impact within service charges?
Vince Delie
I’m sorry, can you repeat the question?
Tyler Marks
How are you addressing the secular pressures seen at the overdraft fees, and is your fee guide assuming any of this impact within service charges?
Vince Delie
I didn’t hear secular pressure I was wondering what that was. So I heard — I know what you’re talking about. First of all, we had — we rolled out a product that is bank-on certified that we recommend to clients, particularly those that are afraid that they’re going to overdraft or have an issue with over drafting and it just simply does not permit it. So the product that we offer just — you can’t overdraft the account. If there isn’t overdraft because of some POS transaction or some posting issue, it’s refunded to the customer, so we have this product that we rolled out. It’s a Top 4 product for us, it’s actually the third most popular checking account product.
So it’s already had an impact on overdraft fees for us. And we made a number of changes over the years to our overdraft practices and plan on continuing to make those changes. And I think we mentioned when we rolled out the guide for the year on the income, that we were expecting that category to decline throughout the year. So that’s another area. Add that to the mortgage and other capital markets area that I said, there will be headwind pressure that we have to overcome and make up. That’s another category. I don’t have an exact number for you, I don’t have it at my fingertips, but it’s a pretty meaningful decline that we were expecting because of that pressure. And there are additional changes coming to our practices, but it’s reflected in the guides that we had given you at the beginning of the year.
Vince Calabrese
I would just add too that the consumer fees are about $6 to $7 million a quarter.
Vince Delie
Right.
Vince Calabrese
Putting it in perspective.
Tyler Marks
Understood. Thanks so much.
Vince Calabrese
Thank you.
Vince Delie
Take care.
Operator
Thank you. And the next question comes from Michael Perito with KBW.
Michael Perito
Yeah, thanks. Just one last clarification question for me. I was just curious if you guys could comment, you talked about Howard going well and some of the appetite on the buyback by maybe putting the whole capital deployment picture together here as we move forward. It seems like the fundamental outlook is fairly bullish for you guys, margins moving higher, growth pipelines are filled. The expense guide was unchanged. I mean, how do you view the new buyback program versus incremental M&A as you guys look out over the next 12 to 18 months, just in terms of the capital deployment priorities, as you guys see it? That’d be great. Thanks.
Vince Delie
We’ve spent a lot of time modeling all of these things and evaluating them. And when we look at loan growth relative to buybacks from a return on capital perspective, we look at M&A the same way. Our decisions are based upon what’s best for the company and the shareholders moving forward. So we try to balance that out. I think having the ability to buy shares back in the event that loan growth doesn’t materialize or M&A opportunities that are accretive and provide us with substantial returns over our cost of capital aren’t out there. We have another tool to essentially return capital to the shareholders. So we look at it as a backstop and then we evaluate the option. So I’m not ruling anything out, but nor am I saying that there’s something looming. I’m just simply telling you that we’re very careful about the deployment of capital when we look at the effect on tangible book value dilution and the earn back and all of that.
Vince Calabrese
And the primary focus, it’s the loan growth is the primary focus for the future of capital.
Vince Delie
That’s right.
Vince Calabrese
So that’s really [Indiscernible] the loan growth is strong, that’s where we’ll put our capital. If its closed like Vince said, then we are looking to buyback and become more active on the buyback.
Michael Perito
Got it. I guess just to be clear. I mean, so if you’re growth guidance is achieved as expected and no additional M&A comes to fruition for this year, you guys would expect, given current market conditions that buyback would be utilized to some extent?
Vince Delie
Yes.
Vince Calabrese
Yes.
Michael Perito
Got it, great. Thank you guys.
Vince Calabrese
Thank you.
Vince Delie
Thanks Michael.
Operator
Thank you, and the next question comes from Russell Gunther with D.A. Davidson.
Russell Gunther
Hey, good morning, guys.
Vince Calabrese
Hi, Russell.
Vince Delie
Morning Russ.
Russell Gunther
Good morning. Just a bigger picture in terms of better understanding your view of the operating environment from a growth perspective. On the one hand, we’ve talked about how pipelines are often and giving increased confidence in that mid to high single-digits. And then on the other, for potential for a softer environment, some caution from a credit watch perspective, just things you guys are focused on there. So does the mid-single-digit guide reflect a stable operating environment — growth environment, or are you dialing in the potential for some software growth in the back half of the year, recessionary pressures just to help me frame that would be great. Thank you.
Vince Delie
I think mid-single-digits dials in the current environment, including the factors that we laid out as potential areas of concern. I don’t want to alarm everybody. We haven’t seen — as I said, we haven’t seen weakness yet, but those are areas that any prudent thinker would look at and say, hey, we’ve got a number of things coming at us, we have to be prepared to deal with, right? So that could potentially result in a slowing of the US economy and lower loan demand. And it’ll hit first in the commercial segment.
There is some talk about consumer spending declining in the latter half of this year, I’ve read that, a number of economics report. Some economists say they think consumers are stronger than we expect, we’ll see how that plays out. If you look at the — if you look at what’s going on right now and we only know what’s happening at our bank and within our portfolios, right? The consumer portfolio pipeline is up record levels as I mentioned. The mortgage business has shifted pretty dramatically to purchase money. The commercial business slowed in the first quarter, we had the war in Ukraine, and some supply chain disruption and a very robust pipeline in the fourth quarter that was closed, the closed cap which reverted to production, and we’ve got some seasonal slowness. So the expectation, our expectation, which is built into our guide, is that the beginning of the year would be slower.
Things would start to accelerate just like they did last year. We were the same spot last year, a little better growth in the first quarter than last year. And the consumer bank didn’t have anywhere near the production and pipelines that we have this far. So I hope that sums it up for you. I’m cautious about our growth prospects as we move throughout the year. Obviously, with Gary and he’s a very skilled professional, the team, Tom Fisher, the people we have here, we’re watching very carefully what’s happening and we’re going to continue to monitor it because we don’t want to balloon into a recession. So that’s why we’re giving you the guidance we’re giving you. But it’s all baked in. We’ve thought a lot about it, spent a lot of time modeling it, it’s built from the ground up, portfolio by portfolio, and then we derived it.
Russell Gunther
I appreciate it, Vince. It’s exactly the type of color I was hoping to better understand. So I appreciate the input.
Vince Delie
I can understand it’s confusing because on one hand and we’re saying, hey, we’re going to achieve mid to high single-digit loan growth. And the other hand, we’re saying we’re real concerned about certain things that are going on in the economic environment that could potentially impact that growth in the latter half of the year. So I think we’re — I think given the geographic diversification, the quality of the credit portfolio skill or bank skills we can achieve our guide.
Russell Gunther
I appreciate the color. That’s it for me, guys. Thank you.
Vince Delie
Thank you.
Vince Calabrese
Thank you.
Operator
Thank you. And the next question comes from Brody Preston with Stephens, Inc.
Brody Preston
Hey, good morning, everyone.
Vince Delie
Hey, Brody.
Brody Preston
I just wanted to circle back. Thanks for all the color on the securities book earlier. I just wanted to ask — just clarify, was it $134 million per quarter in cash flows that you said you’re reinvesting, Vince. And then, could you give us some indication as to what the new yields look like that are coming on the book versus what’s rolling off there in that re-pricing cadence?
Vince Calabrese
The 12-month cash flow that we estimated $1 billion and that’s rolling off the yield of 174. If you look at where we’re putting money to work, so far this quarter we’ve invested $150 million so far in April at yields closer to 3%. New purchases are still within that kind of 3.5 to 4 duration, little bit on the higher end of that, but still within that [Indiscernible]. That’s your moving parts there, Brody, if that answers you.
Brody Preston
Got it. That’s helpful. Thank you. And I just wanted to ask on the timing of the hikes that you all are modeling. I know you have the 50 in May, but beyond that, where’s the additional 75 coming in from a timing perspective?
Vince Delie
It’s pretty much one for meeting Brody after that.
Brody Preston
Got it. Thanks Chris. Did have one follow-up on the capital markets business. Could you remind me? I know you have a lot that goes into it, but could you remind me what the big drivers are from a revenue perspective within capital markets?
Vince Delie
Absolutely. We have syndications. We do both large CRE and C&I syndication. We have a big derivatives practice that I mentioned which focuses principally on interest rate derivatives, but there’s the ability to do commodity-based derivatives within that space as well. Then we have international banking, which we throw into the capital markets to clean up because we’re offering hedging products in the international space since spot transactions. And then we have our — I call it the debt capital markets platform where we participate bond economics for public bond offerings, that business was started last year.
And I think that pretty much covers it. Those are the principal areas that drive the bulk of the revenue in capital markets. And the syndications within this is lumpy, right? Because you get big syndications, if you got it right you’re getting paid more heavily than best efforts arrangement. And then the debt capital market’s there is lumpy too, because if you’re participating in a larger deal and we may be getting syndications, the income because we’re participating in distribution and we’re getting now bond economics, because the company’s issued public debt or is included in the syndicate. Anyway, that’s — those are the businesses that we put on.
Brody Preston
Got it. Thank you for that. I just have two last ones here. The first one is on expenses. Can you maybe give us a sense for what would cause you all to be either at the low end or the high end of the expense guidance, just in terms of — are there any individual items that come to mind that would cause it to be one way or the other?
Vince Calabrese
I would say, as you know, we manage expenses very tightly within the company and we’ve had that discipline for many years. Within our guidance for 2022, as we mentioned in January, was a $10 million cost savings target.. We have the cost savings from Howard still to be realized given the timing in the quarter and some of that’s been realized for on track for what we initially said early on. One of the drivers is always commissions tied to production, so that can swing depending on the business activity in the different businesses.
So that is a swing item, it could move from quarter-to-quarter, can move you within that range. But we’ll continue to manage expenses tightly as we always have. And I think the range for the full year is a pretty tight range, so really the key drivers for us, and we’ve talked in the past about RPA continuing to go after ways to automate our processes and making — that’s just continuous every day, and there’s more opportunity to set up to get done quicker. There’s opportunity there too. But again, it’s a pretty tight range for the guidance.
Brody Preston
And then my last question would be, Vince, I just from a follow-up. I appreciate the color on the deposit Betas, which they are modeling. I think it was 40% interest bearing, it was what you mentioned in that. That’s pretty in line with last cycle. And so I guess I wanted to — for what you did on the interest-bearing deposit Beta side last cycle. And so I guess I wanted to get your thoughts on what’s driving the Beta to be close to last cycle. I think a lot of folks initially, just given the industry-wide improvements in terms of liquidity, lower loan-to-deposit ratios, off the cash, higher securities balances, or thinking that maybe Betas could lag last cycle at least on a percentage basis. But you’re assuming it indicates that you expect them to be in line. So could you give us any color on why you expect that?
Vince Calabrese
Yeah. I would say what we had said last time was we tried being around 50% would be kind of maybe the historical and things are quite a bit different as far as liquidity in the system. So we’re kind of inside that to begin with as far as at the 40 and then as I mentioned earlier, again, we’re being conservative on the Betas. We’re going to manage them to optimize the earnings for the Company overall and not be more aggressive than we need to be. So, as I said earlier, I think there’s some conservatism baked into that. But even at the 40, we’re inside of — I think last quarter we said that. So we’re at 40. And I think the pace of the changes, the rapid nature of them, the large amount, 50 basis point moves is just something we have to manage closely. And the customers get more alert as things are going through. So it’s just — it’s just for all of us to mention that. But I would just say the 40s, inside the 50s so already it gets bottom line and then there’s conservatism with that status.
Brody Preston
Got it. Thank you very much for taking on my questions and for giving us all the time this morning, guys. I appreciate it.
Vince Calabrese
Okay. Thank you.
Vince Delie
Thank you.
Operator
Thank you. And the next question comes from Brian Martin with Janney Montgomery.
Brian Martin
Hey, guys. Thanks for taking the questions just a couple of follow-ups here, just the yields on new loans, Vince, can you — commercial loans, can you just talk about where those are at — where those are coming on today?
Vince Calabrese
The new loans in total I would say came on at 309 during the quarter, and that was 291 last quarter. So clearly a nice move up. The overall spot portfolio rate, ex-PPP, that sounded like $180 million, increased 10 basis points to 322. So that’s all-in figures there.
Brian Martin
Got you. Okay. That’s helpful. And then, just a couple of other housekeeping. The line of credit leases the line utilization. It didn’t sound like that moved up a lot this quarter. Is that fair or is it pretty similar to what it was last quarter, but the expectation is this going to move higher or is that kind of what I’m hearing?
Vince Delie
I think with the debt capital markets platform, we did some larger transactions that were unfunded. So that kind of — we got the income. So we would expect those to fund off at some point, right? So we brought over larger commitments with lower borrowings on them. That’s part of it. The other part is, as I’ve said, I think if we drill down into the various segments, we saw certain areas starting to grow, expand, small business, middle market banking on the C&I side saw expansion, and then, we brought on some large construction yields and those large corporate transactions, which kept us still or moved it back slightly, actually kind of flat, but slightly down. If you took those out of the equation, we saw an expansion in utilization. I don’t have the exact numbers for you, but that’s what we were seeing.
Brian Martin
Got you.
Vince Calabrese
I would add, overall, if you look year-over-year, it didn’t really move up above 3 points from the first quarter of last year to the first quarter of this year. And then, it’s pretty stable for where it was at the end of the year, in that mid 30s.
Vince Delie
I would expect it to continue to move up over time. It was running in the 42% to 44% range historically. We expect it to get back there at some point,
Brian Martin
Okay. And then just last couple — just on the Howard expense savings, just is second quarter a largely clean quarter given the back-office consolidation in this quarter, I guess? So just kind of how should we think about that clean expense quarter?
Vince Delie
Yes. So like we said in announcement, we expect cost saves to be greater than 50% and we’re well on track on getting the 85% phase-in that we talked about during 2022. I mean, Howard really didn’t add that many expenses for the quarter. I mean, we’re talking less than mid-single-digit million type number. So I think we’ve got a pretty good handle on the expenses and we’re all looking out for the rest of the year.
Vince Calabrese
Brian, I would think it would take some more like the third-quarter till you kind of get clean or try to force it. I mean, second-quarter, yes.
Vince Delie
We’re running from dual branches right now as we’re doing some renovations. If that finishes up during the summer, we’ll see the last bit of the tail come out.
Brian Martin
Okay, that’s helpful. And then just on the just given the cautiousness about some items you mentioned, just the reserve coverage with some of the noise this quarter with Howard, I mean, where do you see the given your outlook on credit quality seems pretty robust is it certainly with some caution, just where that reserve. The level, the reserve coverage may trend to over the next couple of quarters.
Gary Guerrieri
In terms of the reserve, I mean, we’ve been very cautious all through the pandemic and didn’t have any large Releases as you’re aware. With the headwinds that we see out there with inflation supply chain transportation costs, higher interest rates. Those things, as we’ve talked we’re cautious about them, and they do have the ability to impact borrowers that are on the lower end of the liquidity range or higher end of the leverage range. We were flat in the quarter at 138 even including bringing Howard on.
We’re comfortable with that level right now and we’ll continue to watch it all play out as we move forward just by it’s only 3 basis points at charge-offs. The other thing that’s going to play a role there, is loan growth. We’ve talked about that a good bit today and that has its impact. So I would tell you that we’re we’re looking at, right now, the guide being 20 to 40, as it surely come in on the low end of that guide based on the strength of the book right now. Surely it can, but I would expect with all the headwinds, we’ll be cautious around those items as we move forward.
Brian Martin
Got you. Thanks, Gary. And then just last one, Vince Calabrese, I guess just — last quarter you talked about the liquidity levels, maybe cutting that in half by year-end. I think you’re still similar level on liquidity right now, I guess, is that still your expectation or is this of how you’re thinking about things?
Vince Calabrese
It’s hard to say. The deposits keep growing, PPP [Indiscernible] another $180 million of forgiveness and that goes into the coffers too, so I would think that’s probably too low at this point and we’ll see how the year plays out, Brian, but we’ve already started moving down, and we’ve been saying that for six quarters now. So those deposits are quickly fast growing. I would think we’d start to slowly bring that number down, but the pace of it is just hard to say with certainty.
Brian Martin
Yeah. Okay. Thank you for taking the questions, guys.
Vince Calabrese
Thank you.
Vince Delie
Thanks, Brian.
Operator
Thank you. And next question is a follow up with Brody Preston with Stephens Inc.
Brody Preston
Hey, guys, sorry to hop back in like this. Just one quick question. Could you remind me how much you have left in PPP fees going forward? I know the portfolio is smaller. I just want to make sure I’m understanding what you have left.
Vince Delie
$3.5 million.
Brody Preston
Awesome. Thank you very much.
Operator
Thank you. That does conclude the question-and-answer session. I would like to turn the floor to Vince Delie for any closing comments.
Vince Delie
Well, first of all, thank you for all the thoughtful questions. About a few questions, I thought they were great. Glad we were able to answer. If we weren’t able to get to you or or get to your question, please call. We posted a pretty extended data, we’ll walk you through it. But thank you. We appreciate your support and look forward to — we’ve got a lot of work to do. It was a good solid quarter, but we still have a lot in front of us and we plan on executing. So I want to thank the employees for a great start. And we keep working on your behalf. So thank you very much for joining me on the call and all of us. Take care, guys.
Operator
Thank you. The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect your lines.
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