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TriState Capital Holdings Inc (NASDAQ:TSC)
Q1 2020 Earnings Call
Apr 21, 2020, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning everyone, and welcome to the TriState Capital Holdings conference call to discuss financial results for the three months ended March 31, 2020.

[Operator Instructions]

Before turning the call over to management, I would like to remind everyone that today's call may contain forward-looking statements related to TriState Capital that may generally be identified as describing the company's future plans, objectives or goals. Such forward-looking statements are subject to risks and uncertainties that could cause actual results or outcomes to differ materially from those currently anticipated. These forward-looking statements are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. For further information about the factors that could affect TriState Capital's future results, please see the company's most recent annual and quarterly reports filed on Forms 10-K and 10-Q. You should keep in mind that any forward-looking statements made by TriState Capital speak only as of the date on which they were made. New risks and uncertainties come up from time to time, and management cannot predict these events or how they may affect the company. TriState Capital has no duty to and does not intend to update or revise forward-looking statements after the date on which they are made.

To the extent non-GAAP financial measures are discussed in this call, comparable GAAP measures and reconciliations can be found in TriState Capital's earnings release, which is available on its website tristatecapitalbank.com. Representing TriState Capital today is Jim Getz, Chairman, President and Chief Executive Officer. He will be joined by David Demas, Chief Financial Officer for the question-and-answer session.

Please note this event is being recorded. At this time, I would like to turn the conference over to Mr. Getz.

James F. Getz -- Chairman & Chief Executive Officer

Thank you. Good morning.

Our hope is that you, your families and your colleagues are safe and sound. We appreciate your participation this morning and believe you will find that our first quarter results demonstrate once again TriState Capital's proven model and growth strategy. We are entering the current environment in our strongest position ever. This differentiated model has been perfected over the last 14 years during good times and bad. The agile nature of our business with unwavering focus on sophisticated clients in highly targeted markets has delivered consistent performance across different environments. Founded in 2007 at the beginning of the Great Recession, growing the income statement and balance sheet year after year, TriState Capital has been profitable in every single quarter since the fourth quarter of 2009.The balance sheet is pushing on $9 billion of assets, having surpassed $8 billion during the first quarter, we surpassed $7 billion, just six months ago, all through our well-established lines of business and purely organic responsible growth. The balance sheet is strong, healthy and liquid. Superior credit metrics are a product of the intentional selection of clients, market segments and products, giving a very attractive risk profile, along with a credit team that is as experienced and disciplined as any you'll find in the business. Our diversified funding platform produced the record level of over $1.3 billion [Phonetic] in on balance sheet liquidity. The relationship-driven funding mechanism enabled us to grow deposit balances by 69% annualized during the first quarter. The balance sheet is also flexible, illustrated by the repricing for nearly all of our floating rate deposits, and the interest rate floors put on more than 50% of the loans both in response to the last month's cuts in the target fed funds rate.

Our Chartwell national investment management unit, our national private banking business and our regional middle market business are designed to provide us with diverse revenue streams across operating environments. Again, they delivered. In the first quarter for example, organic net interest income growth was 22% annualized on stable net interest margin and 23% annualized loan growth. At the same time, record swap fees helped to balance investment management income that was dampened by March market volatility offsetting positive net client asset inflows. Together, these three businesses generated record quarterly revenue, organically growing the top line by 15% annualized. Pre-tax income grew 10% annualized. All in a first quarter display that with the exceptional for some financial service companies. For TriState Capital, it's representative of what this company is built to deliver.

This consistent performance comes even as we move most of our employees to remote working environments. Through their exceptional efforts, combined with the system's digital client experience and scalable infrastructure we've invested in for years, we've been able to help our clients through the historic challenges in the first quarter. Even as TriState Capital's sales and client-facing professionals were limited in meeting face to face with clients in recent weeks, I believe this company has never been closer to its clients than in the last 45 days. This is not by accident. In March, we implemented a proactive plan to communicate with our entire client base, ensure that we understood their concerns and needs and address them accordingly. Asset quality has long been a differentiator for TriState Capital. And that has never been more important than it is right now.

As many of you know, our company does not serve retail banking customers or market consumer or traditional residential mortgage loans. Non-performing loans and adverse rated credits on March 31 were essentially unchanged from the end of last year. NPLs totaled just $184,000 on a $7 billion loan portfolio. Adverse rated credits of less than $35 million at quarter end made up just 50 basis points of total loans. No additional credits were moved to the adverse rated category.

Private banking loans represented 56% of total loans at quarter end, and are primarily collateralized by marketable securities. These are monitored on a daily basis through our proprietary technology, are liquid, over collateralized and subject to favorable treatment under regulatory capital requirements. The private banking portfolio is approaching $4 billion and grew 24% on annualized basis during the first quarter. Commercial real estate loans totaled $1.9 billion, increasing 12% annualized during the quarter. Commercial and industrial loans had a record $1.2 billion, an increase of 39% annualized for the fourth quarter. Roughly $34 million were less than a third of our C&I growth in the quarter, was attributed to net increased utilization of revolving commercial credit lines. As we've grown our portfolio, we should know that we are doing so with very strong and high-quality borrowers. Through our private banking business, TriState Capital is the nation's premier provider of non-purpose margin loans marketed through financial intermediaries. We had extensive engagement with thousands of investment advisors and trust officers about loan requirements as they managed portfolios in periods of historic volatility. As a result, limited cure activity was required and this was fulfilled in an orderly fashion. Year-to-date through April 15, we required maintenance cures [Phonetic] on 616 loans, or approximately 7% of our private bank accounts.

Compare this to the fourth quarter of 2018, when we required cures on 3% of accounts when volatility was high, but nothing like March of 2020. We still were happy to report that we have not had to force the liquidation of any accounts for clients to meet the cure obligations. For TriState Capital's private banking loans, it's important to keep a few data points in mind about the portfolio. The average loan size was less than $500,000. The median loan to value ratio across the portfolio was approximately 40%, given the collateral cushion we maintain beyond the maintenance cure level. And the private banking portfolio has maintained a zero-loss history since inception.

To give you a sense of the demand for this offering from high net-worth clients, and the investment advisors and trust officers we market them through, look at our applications. In the first quarter of 2020, our team processed new record 1,300 private banking loan applications with an increase of 65% for the first quarter 2019 when we generated 788 applications. In March alone, we processed 542 private banking loan applications. And in the first 15 days of April, we had 300 applications, benefiting from the past investments we've made in developing our digital loan platform that has allowed financial intermediaries and their clients to easily engage with TriState Capital in the current environment.

On the commercial side, we have an incredibly strong team serving middle market clients across our four-state footprint, who know this company, our clients and our market very well. Beginning in February, we saw the early aspects of the quarantine starting to develop. We began client outreach efforts to understand the impact of COVID-19 situation. We also organized a credit strategy committee comprised of leaders from credit, legal, finance, operations and compliance so that we could develop responsive action plans. We have been talking with every one of our commercial borrowers about their experiences, their expectations for the future and any need for additional solutions to help them through this situation. Our lender team is made up of highly qualified professionals who average 20 years of experience. About half have been with TriState Capital for over five years. They maintain close relationships with each of our clients and are able to make each of these conversations deep and meaningful.

From these focused conversations with our commercial clients, we develop customized solutions where something was needed to help them. In connection with this effort through April 15, we have developed deferral arrangements with fewer than 100 loans, totaling approximately $378 million and representing less than 6% of our $7 billion of total loans. We view these arrangements as investments, investments in relationships with high-quality organizations, some of which have banked with us for more than 10 years. These investments are designed to help them weather the storm, get back to work when the seas come and enable them to succeed and back with us for another decade.

Our commercial clients and projects are well diversified by industry and property type to strong sponsors and relationships. This diversity is also enhanced by the granularity in the portfolio, which is assisted by our preferred hold level of $10 million for commercial loan. The majority of our commercial real estate lending is income-producing real estate, including 21% in multi-family or apartment projects, another 18% is construction or land, and about 11% is in owner-occupied projects. Within our $1.2 billion C&I portfolio, our largest lending category is financial services and insurance, comprising 30% of C&I loans. Another 23% is in service, including healthcare, waste management, remediation, administration and other service industries. 16% for real estate-related services, such as portfolio and property managers, 10% is manufacturing and 4% is transportation, and the remainder is spread across a variety of industries.

Importantly, we have limited our exposure to some of the front line types of business that may be most immediately impacted by COVID-19, social distancing and quarantines. For example, our $3 billion commercial loan portfolio includes only $44 million to hotels, $18 million related to restaurant operations, $43 million to senior housing and other healthcare-related real estate, and $25 million to nonrenewable energy distribution and production, and about $300 million of projects with retail component each of which we have underwritten with strong sponsor support and recourse. Further, we have maintained our disciplined approach of focusing on commercial lending opportunities within our four-state Atlantic region, where our team has deep experience and relationships. At the same time, we have worked to keep our commercial loans broadly distributed across these markets. And our commercial credit verticals and strategies continue to be aligned with our deposit and treasury management verticals and strategies.

TriState Capital continues to be well capitalized under regulatory requirements. We review our capital ratios in the context of our business model and credit quality, meaning that we believe that the very strong credit quality of our portfolio and the amount of non-interest income, especially from Chartwell business, requires less capital cushion and provides a more efficient use of capital than other $5 billion to $10 billion asset banks. While we are comfortable with our capital levels at the holding company, we're exploring fixed income opportunities to bolster capital at the bank level to support our ongoing and exceptional loan growth, and maintain excess liquidity. We are considering a perpetual preferred offering or subordinated debt, both of which we've executed previously as well as senior notes and intend to execute on one of these options this year.

As we noted in yesterday's news release, TriState Capital elected to defer the implementation of CECL in accordance with relief provided under the CARES Act. We conducted a thorough analysis and determined that at this time, delaying was the right choice for this company. Continued application of the incurred loss method resulted in reserve levels of $17.3 million or 50 basis points of our total commercial loans. These levels are nearly identical to what we would have reported had we implemented CECL in the quarter. TriState Capital's unique loan portfolio, which is 56% collateralized by private banking loans, primarily backed by marketable securities will not require a reserve for credit loss under CECL.

As I mentioned earlier in my comments, nearly all of our floating rate deposits were repriced in March, aligned with prevailing federal reserve rates and floors are in place in more than 50% of our total loans. Active management of interest rate risk is enabled by the deliberate construction of our flexible balance sheet, most of our deposits are variable rate linked to indices or priced at rates set by the bank at our discretion. For loans, 93% are floating rate on primarily indexed to 30 day LIBOR.

Turning to our investment management business, Chartwell generated fees of $7.6 million, comprising 57% of non-interest income during the first quarter of 2020. While new business and new flows from existing accounts were offset by outflows and market depreciation, we reported net inflows of $57 million during the first quarter. Today, Chartwell has in excess of $200 million in institutional commitments in its new business pipeline, most of which we expect to fund before the end of the second quarter. As we shared with you in January, last year, Chartwell took active measures to lower expenses. By the end of last year, Chartwell had reduced its annual expense run rate by more than $2 million accordingly, and it also lowered its expenses in the first quarter of 2020 versus both the linked and year-ago periods, and EBITDA improved in the first quarter versus the fourth quarter of 2019.

We have confidence in our investment managers' unique product offerings and highly credible performance, its outstanding distribution capability, the talented people leading its funds and their ability to attract business. Our goal is to profitably grow this business across operating environments, accelerating this progress when the broader economy and financial markets improve.

TriState Capital's resilient business model was designed to thrive in all operating environments. And our first quarter performance underscores the strength of our proven approach. It's a model that our company's leadership stands behind fully. We believe that TSC shares are dramatically undervalued even in the current market. Accordingly, executives and directors acquired more than 167,000 shares of TriState Capital stock in the first three months of 2020, with 21% of those shares purchased in March. We have a solid balance sheet, ever-growing income statement and robust new business pipelines for our loan, deposit and investment management offerings. The strategic steps we've taken in recent years and months to make this company more nimble, efficient, innovative and position us well to help lead our clients through the challenges of 2020 from a position of strength in order to continue delivering value to our shareholders over the long term.

Before we open up the call to Q&A, I want to emphasize that we would not be where we are today without the talented people we have across this organization. Individuals who joined Tristate Capital and Chartwell are successful before they ever walk through our doors. We provide them the entrepreneurial environment, the team culture and the resources they need to flourish. In the last 45 days, their abilities and commitment to our clients have never been more apparent to me. I simply could not be prouder of the entire team that I have today.

That concludes my prepared remarks this morning. I'll now ask Dave to join me for Q&A. Operator, please open the lines.

Questions and Answers:

Operator

[Operator Instructions]

The first question is from Michael Perito [Phonetic] of KBW. Please go ahead.

Michael Perito -- Keefe Bruyette & Woods Inc. -- Analyst

Good morning, guys. Thanks for taking my questions.

James F. Getz -- Chairman & Chief Executive Officer

Good morning, Michael.

Michael Perito -- Keefe Bruyette & Woods Inc. -- Analyst

So while we understand the lower risk nature of the balance sheet, is there any minimum tangible common equity ratio that the Board is comfortable running at?

James F. Getz -- Chairman & Chief Executive Officer

I would say, Mike, nothing like that has been clearly established. We, in fact, review that all the time with the Board, and we feel comfortable where we are, if that's the question you're asking at this point.

David J. Demas -- Chief Financial Officer

We're really focused on bank capital levels. If you look across our three businesses, you've got the asset manager, which only really requires capital for acquisition purposes to grow through acquisition. You've got the private bank, which really only requires capital for leverage purposes. The private banking portfolio does not require an allowance. And so it doesn't require risk-based capital. And then you've got the traditional commercial bank, which is about $3 billion of loans. That requires traditional risk-based capital. And so we really focus on Tier 1 leverage at the bank, and we're comfortable with those levels that at the quarter end.

As Jim mentioned, we will access the capital markets at some point this year, but we really have a unique holding company, much different than the traditional peer of $5 billion to $10 billion institution in that. We've got two businesses, asset management and banking and half the -- more than half the banking business doesn't require risk-based capital.

James F. Getz -- Chairman & Chief Executive Officer

And keep in mind, the asset manager throws off approximately $30 million of revenue a year.

Michael Perito -- Keefe Bruyette & Woods Inc. -- Analyst

Okay. That's helpful. Thank you. And then on the reserve build in the quarter on the commercial book, it was a bit lower than your peers that have reported so far. Can you provide some detail around the economic assumptions used in your credit models at this time?

David J. Demas -- Chief Financial Officer

Yeah. So let me maybe start by saying, I think you'll agree that our asset quality speaks for itself, asset quality and underwriting. In the past 10 years, we've only charged off $37 million worth of loans. In the past five years, we've charged off $5 million worth of loans. So our asset quality historically has been much better than peers. As I mentioned a minute ago, more than half of our bank, 56% is marketable securities, based loans over collateralized by those types of securities. So the remaining portfolio, 44% of C&I, commercial and industrial, and commercial real estate has an allowance that's effectively 57 basis points against those loans, which is comparable to other institutions that are highly thought of such as First Republic.

Importantly, we don't have any retail loans, we don't have any credit cards, we have no mortgages or other retail exposure that's really driven CECL provisions. And as Jim outlined, we don't have significant exposure to industries that are currently under stress, hospitality, restaurants, hotels and energy. He also mentioned that proactively, we've been in touch with every single one of our commercial credit clients in the past 30 days to understand how they're doing and whether they need to seek help through deferral loan payments.

And I will remind you that we only have $184,000 of non-performing loans. So we've looked at this carefully. We've gotten to a conclusion both through the Moody's CECL model that we use and our incurred loss model that arise at the same place. We feel good about where we sit. We've been focused on unemployment and GDP to answer your question specifically in terms of the economic drivers that we're looking at for both incurred and CECL. And I would expect that you'll see us continue to build returns in the second quarter, but we feel good about where we are today.

Operator

The next question is from Steve Moss of B. Riley FBR. Please go ahead.

James F. Getz -- Chairman & Chief Executive Officer

Good morning, Steve.

Steve Moss -- B. Riley FBR -- Analyst

Hi, good morning. I wanted to start, I guess, with just where are your funding costs as of March 31. And kind of also in a related area, what are you thinking about loan spreads these days? Or where are loan spreads? And, start there.

David J. Demas -- Chief Financial Officer

Good morning, Steve. So as Jim mentioned, we put floors in on a lot of our loans, private banking specifically and new commercial loans. And so what we're looking at, we're going to give you some all-in numbers. All in, for commercial loans, yields of about 3.75%, all-in yields for private banking loans of about 2.75%. We will, as Jim mentioned, carry excess liquidity through the end of the year. Deposit costs, we've been able to moderate quite well in the quarter, some immediate pricing adjustments. And so you'll see deposit costs anywhere from just slightly under LIBOR to effectively 15 basis points now. So we feel good about being able to bend the cost curve with respect to deposits.

Steve Moss -- B. Riley FBR -- Analyst

Okay. And just with the floors, I meant to ask, how long -- what's the duration of those floors?

David J. Demas -- Chief Financial Officer

There's no duration. They're just there until we have a fundamental change in the rate environment.

James F. Getz -- Chairman & Chief Executive Officer

Yeah, these loans are all demand notes and they're set up to meet the clients' needs. Overwhelmingly, we're talking about the private banking portfolio here, but we're doing the same thing on the commercial banking, putting floors on any of the new loans that we're putting in place. And it's about 52% of the loan portfolio as floors on it.

Steve Moss -- B. Riley FBR -- Analyst

Okay. And then with regard to CECL here, just wondering how do we think about the delay? Do you think about going effective April 1, or further out? Thanks.

David J. Demas -- Chief Financial Officer

So the SEC came out with some guidance. The CARES Act provided for this deferral CECL, but we really needed the SEC to provide guidance because that's the standard center. And their requirement was that if we delayed the implementation of CECL, we would implement on the earlier date of when the government lists the emergency declaration so in that quarter, or at 12/31/20, the earlier of those two dates. And so it will be implemented either at some point this year or at the very latest at the end of the year.

Operator

The next question is from Daniel Tamayo of Raymond James. Please go ahead.

James F. Getz -- Chairman & Chief Executive Officer

Good morning, Dan.

Daniel Tamayo -- Raymond James -- Analyst

Good morning, guys. Can you provide a little more detail on the $378 million of deferred loans just in terms of what segments those come from?

James F. Getz -- Chairman & Chief Executive Officer

Yeah. It's fairly diversified, Dan. And there's 92 of them. These are businesses. Keep in mind that essentially, the government shut these businesses down. And so it's a combination of principal and interest, not forgetting as deferral, and it goes -- they're either signed up for three months or six months. And as we mentioned, we aggressively went out and talked to the clients and communicated to them, and we're doing that even before this program was introduced.

Daniel Tamayo -- Raymond James -- Analyst

Okay. Thank you. And so I'm assuming you did not participate in the PPP program? And if that's correct, are you aware if any of your clients did participate in that program with other banks?

James F. Getz -- Chairman & Chief Executive Officer

Let me explain to you how we participated in the program. This is a company that is really focused on its target markets. Our target markets are middle market companies, Pennsylvania, Ohio, New Jersey, New York, with revenues between $10 million and $300 million a year. These are not small businesses at all. So we never bother to pursue being qualified for SBA lending. But what we did do is, in fact, identify parties that we felt were highly professional, would respond to our clients. And to be candid with you, we have 52 -- 42 clients that we have positioned with other parties for that program that they could participate in. And we believe that with the funding that's going to be available, there probably won't be much more than another dozen that have an interest in it at this time. We were able to get everyone, for the most part, that requested, we got them positioned and funded.

Operator

The next question is from Russell Gunther of D.A. Davidson. Please go ahead.

James F. Getz -- Chairman & Chief Executive Officer

Good morning, Russell.

Russell Gunther -- D.A. Davidson & Co. -- Analyst

Hey. Good morning, Jim. Good morning, David. Just follow-up on the $378 million of deferrals. Curious as to how you would expect that number and volume to trend in the second quarter? And whether you guys are holding any specific reserves for the deferrals?

James F. Getz -- Chairman & Chief Executive Officer

We're not holding any specific reserves for the deferral, and we believe that it won't have any impact on our second quarter. Like I said, these are folks that we engaged with and understand what their particular needs are and their needs at the time were of a cash flow nature, they had to essentially close their company down for a period of time until the governor or the President allows them to reopen.

Russell Gunther -- D.A. Davidson & Co. -- Analyst

Got it. So I guess, Jim, just to make sure I understand, you're saying you would not expect to see the $378 million balance or roughly 100 loans to increase in the second quarter. Is that correct?

James F. Getz -- Chairman & Chief Executive Officer

Yeah, I would say that if anything, it will be very, very minimal since we engaged them early on in the program.

Russell Gunther -- D.A. Davidson & Co. -- Analyst

Got it. Okay, great. No, I just want to make sure I understood there.

James F. Getz -- Chairman & Chief Executive Officer

[Speech Overlap] number that we have in place right now of the $378 million.

Russell Gunther -- D.A. Davidson & Co. -- Analyst

Okay. Thank you for that clarification. And then my second question would also be a follow-up on the commercial reserve. David, you mentioned the 57 basis points and that reserves would likely continue to build from where they are today. Just curious where you would expect that commercial reserve to end the year and what that contemplates for potential loss rates within those two buckets?

David J. Demas -- Chief Financial Officer

Russell, I wish I knew. We're in very unprecedented times. We're heading into what's -- or we're in what's going to be a really tough quarter for the US economy. And so we'll just continue to play it quarter-by-quarter. We'll be as transparent with you guys as possible. Just back to your deferral question for a second. We reached out to these customers proactively and early because we didn't want them to exhaust all cash reserves before they came to speak with us. And so we wanted to understand where they stood and whether they needed to see deferrals. We've completed all those conversations. We feel good about where we stand, but we're going to continue to check in with these people. And that might drive more deferrals, maybe another $100 million or so, and it may drive some reserves at some point.

So what we'll do is, we're going to keep talking to these clients, understanding where they stand. And we'll keep you guys informed as that process continues to evolve.

Operator

[Operator Instructions]

The next question is from Matt Olney of Stephens. Please go ahead.

Matt Olney -- Stephens Inc. -- Analyst

Hi. Thanks. Good morning, guys.

James F. Getz -- Chairman & Chief Executive Officer

Hi Matt.

Matt Olney -- Stephens Inc. -- Analyst

Hey. I hopped on the call a few minutes late, so you may have covered this in some of your prepared remarks, but I wanted to ask about the common equity levels, I guess, the tangible book value per share was around $14.5, and that was below the forecast. And we've seen this with peers this quarter that implement CECL, but with CECL implementation delay at TriState, I was surprised to see the lower tangible book value per share. Any color, any kind of unrealized loss or anything that would help explain where tangible book value per share came in this quarter?

David J. Demas -- Chief Financial Officer

Matt, I'd be happy to call you separately. We talked about this a few minutes ago when we talked about how we really focus on capital levels at the bank, because at the holding company, we've got two differentiated businesses, the bank and the asset manager. And the asset manager really only requires capital for acquisition -- growth through acquisition and you've got the private bank that doesn't require risk-based capital. So capital levels really are focused on -- our capital levels are really focused on the commercial bank, and we really focus on Tier 1 leverage, but I'd be happy to give you a call afterwards, and we can talk further about that.

Matt Olney -- Stephens Inc. -- Analyst

Okay. Yeah, let's follow up on that. And then I think you also mentioned an expense initiative at Chartwell that's been ongoing. Can you just remind me about this expansion initiative, where are we on this? Is there more to come? And what's the ultimate goal of profitability in that segment? Thanks.

James F. Getz -- Chairman & Chief Executive Officer

To give you a little history on Chartwell. If you look at -- we acquired them in March of '14. If you look at our '14, '15 and '16 numbers, they contributed on average about 24% to our earnings at that time. And I would say for the past couple of years, the past three years -- that was '14, '15 and '16. For '17, '18 and '19, it was more at a high single-digit number at that point. So we had put in place the infrastructure for a much larger asset base. And so we made some reductions in general expenses and a few personnel changes there. And you're seeing it reflected in the first quarter numbers at this point. Those changes were made in the third and fourth quarter of last year.

Operator

Next, we have a follow-up from Daniel Tamayo of Raymond James. Please go ahead.

Daniel Tamayo -- Raymond James -- Analyst

Thanks again, guys. So just kind of shifting over to the balance sheet growth, you've had tremendous growth in that private banking group. How are you thinking about growth from here, kind of, through the end of the year or more in the medium term?

James F. Getz -- Chairman & Chief Executive Officer

I think we would go by the direction on the goals that we had set before that we're looking for our loan portfolio in general to go to grow by 15% to 25%, and we're certainly in line with that in the first quarter. And we expressed you the demand that we saw on the private banking side so far in the month of April has been pretty meaningful with regard to applications.

David J. Demas -- Chief Financial Officer

Dan, you could see that portfolio grow by $1.0 billion to $1.2 billion this year. Again, quarter-to-quarter, things could change, but that's what it looks like right now.

Daniel Tamayo -- Raymond James -- Analyst

And do you have an ultimate percentage of the overall portfolio that you'd be comfortable letting that segment run to?

James F. Getz -- Chairman & Chief Executive Officer

No, we don't. And what it does is it clearly assists us from a capital standpoint. And secondly, and most importantly, a risk profile. There's probably not another bank in the country that's pushing on 60% of the loan portfolio. You can count the collateral on a daily basis.

Daniel Tamayo -- Raymond James -- Analyst

Understood. Thanks. That's all I had.

James F. Getz -- Chairman & Chief Executive Officer

Thanks, Dan.

Operator

Next, we have a follow-up from Steve Moss with B. Riley FBR. Please go ahead.

Steve Moss -- B. Riley FBR -- Analyst

Just wanted to tie out expenses -- or total expenses here. I'm not sure if I missed it. Just wondering what your expense expectations here are for the second quarter, after they're well controlled here this quarter?

David J. Demas -- Chief Financial Officer

Steve, I would expect the second quarter to probably be very similar to the first. I don't imagine that we're going to get back to normal with a lot of travel and entertainment in the second quarter. That obviously, those costs are more modest in the first. I would remind you that we've got a variable cost structure and so our expenses are likely to stay in line with first quarter expenses as best we can tell right now.

Steve Moss -- B. Riley FBR -- Analyst

Okay. Thank you very much. I appreciate that.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Jim Getz for closing remarks.

James F. Getz -- Chairman & Chief Executive Officer

Thank you very much. We certainly appreciate your continued commitment to TriState Capital and look forward to talking with you on the next call.

Operator

[Operator Closing Remarks]

Duration: 41 minutes

Call participants:

James F. Getz -- Chairman & Chief Executive Officer

David J. Demas -- Chief Financial Officer

Michael Perito -- Keefe Bruyette & Woods Inc. -- Analyst

Steve Moss -- B. Riley FBR -- Analyst

Daniel Tamayo -- Raymond James -- Analyst

Russell Gunther -- D.A. Davidson & Co. -- Analyst

Matt Olney -- Stephens Inc. -- Analyst

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