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DATE

Thursday, April 23, 2026 at 8:30 a.m. ET

CALL PARTICIPANTS

  • Chairman & Chief Executive Officer — Ira D. Robbins
  • Senior Executive Vice President & Chief Financial Officer — Travis P. Lan
  • Senior Executive Vice President & Chief Lending Officer — Gino Martocci
  • Senior Executive Vice President & Chief Risk Officer — Mark Sager

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TAKEAWAYS

  • Net Income -- $164 million reported, or $0.28 per diluted share; adjusted net income was $169 million, or $0.29 per diluted share, excluding noncore items.
  • Adjusted Pre-Provision Net Revenue -- Increased to $253 million, cited as a "strong jumping-off point for the rest of the year."
  • Loan Growth -- Total loans grew by nearly $700 million, equating to 5.5% annualized growth.
  • Direct Customer Deposits -- Increased by over $900 million, enabling repayment of $300 million in higher-cost brokered deposits and $350 million in FHLB advances.
  • Total Deposit Costs -- Declined by 18 basis points, attributed to proactive reductions in core customer deposit costs and funding mix changes.
  • Net Interest Margin (NIM) -- Remained flat compared to the fourth quarter, with management stating repricing tailwinds position the bank to meet year-end guidance.
  • Noninterest Income -- Increased 18% year over year, driven primarily by capital markets and deposit service charge revenues.
  • Adjusted Noninterest Expenses -- Effectively flat, with reported expenses at $310 million versus $299 million prior quarter, as seasonal payroll taxes were offset by reductions in compensation, legal, and FDIC insurance expenses.
  • Efficiency Ratio -- Improved to 53.1% from 53.5% in the prior quarter and 55.9% a year ago.
  • Net Charge-Offs -- Declined to 14 basis points of total loans, down from 18 basis points in the prior quarter.
  • Allowance Coverage -- Remained around 1.2%, with no material change anticipated this year.
  • Tangible Book Value -- Increased approximately 1% in the period, with retained earnings growth partially offset by OCI headwinds from available-for-sale securities.
  • Buybacks -- 4 million shares were repurchased for $52 million, with management noting buyback activity is expected to "pulls back a little bit" next quarter.
  • Capital Generation -- Over 30 basis points of regulatory capital generated in the quarter; more than half supported organic loan growth, and about a third went to buybacks (with subtotals not adding to 100% due to other uses).
  • CET1 Ratio Guidance -- Expected to remain at the higher end of the 10.5% to 11% target range, with management noting "modest" declines this period due to strong loan growth and buybacks.
  • Deposit Growth Outlook -- Anticipated to trend toward the high end of the 5% to 7% annual guidance range.
  • Loan Growth Outlook -- Management expects full-year loan growth to land between the midpoint and high end of the 4% to 6% guidance range.
  • AI Integration -- Specific use cases cited include a voice AI agent for contacting past-due auto loan customers, fraud-monitoring tools, and enhancements to sales processes.
  • CRE Concentration -- Regulatory CRE declined modestly; the concentration ratio is 329%, with a "longer-term priority" to get under 300%.
  • Employee Count -- 3,607 employees, down approximately 100 over the last year as roles were reduced and AI investments increased.

SUMMARY

Management projects annual net interest income growth will reach the higher end of guidance, citing core deposit momentum and a favorable yield curve. Operational efficiency is targeted to trend toward a 50% ratio by 2026, with investments in technology and data infrastructure driving scalability. Commercial and industrial loan pipelines doubled over the past year, particularly in healthcare and C&I, positioning origination to outpace recent periods as pipeline builds across all key geographies. Regulatory capital ratios are projected to benefit from proposed Basel III rules by 80 to 100 basis points, although timing remains subject to final rulemaking. Management reported that spot deposit costs decreased both in absolute terms and relative to December levels, helping to lower funding costs.

  • Travis P. Lan said, "We believe there is modest upside to our previous guidance range and existing consensus estimates."
  • AI-driven improvements targeted both operational efficiency and client service, with management stating these tools "helping our bankers prioritize opportunities and better understand client needs."
  • Noninterest income normalization from an elevated fourth quarter was led by a $4 million to $5 million reduction in swap-related revenue, with $10 million in capital markets revenue during the period described as a "good starting point" for the rest of the year.
  • The CRE loan runoff was primarily among lower-ROI, transactional clients, with management emphasizing strategic reallocation toward higher-ROI relationships.
  • Net prepayment activity declined to $1.2 billion from $1.4 billion per quarter, with no material impact on balances or net interest income.
  • C&I and deposit-rich businesses remain the focus for new talent investment, as Valley National Bancorp expands business banking in affluent markets such as Coral Gables, Tampa, Morristown, Manhattan, and Garden City.
  • Mark Sager reported that criticized/classified loan trends are expected to decline further during the year, following stabilization in the quarter and large reductions in the previous two quarters.
  • Non-depository financial institution (NDFI) loans comprise just 2.6% of the portfolio versus 7% peer average, primarily well-structured capital call facilities, which management views as "safe lending."
  • Office commercial real estate is more suburban than urban, with management reporting an improvement in leasing activity and noting, "our concerns on that portfolio have definitely abated."
  • M&A priorities remain unchanged, with management reaffirming a focus on maximizing shareholder value and no announced shifts in strategic direction.

INDUSTRY GLOSSARY

  • CET1 Ratio: Common Equity Tier 1 capital ratio, a regulatory capital measure indicating the proportion of a bank's core equity capital to its risk-weighted assets.
  • CRE: Commercial Real Estate loans, including various property-related business lending segments subject to regulatory monitoring.
  • NDFI: Non-Depository Financial Institution loans, referring to lending extended to financial entities that are not traditional deposit-taking banks.
  • FHLB Advances: Borrowings from the Federal Home Loan Bank system, typically used for liquidity and funding management purposes.
  • OCI: Other Comprehensive Income; unrealized gains and losses on certain assets, such as available-for-sale securities, that are not included in net income.

Full Conference Call Transcript

Ira D. Robbins: Thank you, Andrew. Valley National Bancorp delivered another strong quarter. With net income of approximately $164 million, or $0.28 per diluted share. Excluding certain noncore items, adjusted net income was $169 million, or $0.29 per diluted share. Despite traditional first quarter headwinds, including elevated payroll taxes and a lower day count, adjusted pre-provision net revenue increased to $253 million during the quarter, providing a strong jumping-off point for the rest of the year. While Travis will provide additional detail on the financial performance, I wanted to spend my time discussing strategic execution and long-term value creation. We have spent the past few years deliberately reshaping this organization.

We have strengthened our balance sheet and upgraded our operating model while supporting incremental investments in talent, technologies, and capabilities that we believe will be impactful over the long run. The cumulative impact of those efforts has become increasingly evident in our recent financial results. Just as importantly, these enhancements have positively impacted our daily operations and ways of working. Strategically, our focus is consistent and clear. First, we are building a higher-quality and increasingly resilient funding franchise. Our emphasis on core deposit generation is not just about short-term pricing advantages. We are focused on winning primary operating relationships, deepening engagement across our client base, and creating a stable funding engine that can support growth aspirations across cycles.

The combination of scalable specialty deposit verticals, enhanced treasury management capabilities, and an improving client experience has enabled us to better compete across markets and channels. Secondly, we are pursuing diverse, relationship-focused loan growth. We are intentionally allocating capital towards businesses, geographies, and industry verticals where we see durable demand and strong risk-adjusted returns. This includes business banking and middle market opportunities in our high-quality markets, as well as specific niches like health care, where we have a differentiated value proposition. To fund the strategic growth, we have remained disciplined, selectively exiting lower-return transactional clients that do not align with our future strategic focus. This is not about maximizing short-term growth.

We are building a relationship-focused portfolio that we believe will perform consistently across economic environments. Thirdly, we continue to focus on operating leverage and scalability. Many of the investments that we have undertaken over the last few years, including our core conversion, data infrastructure enhancement, and organizational redesign, were made with a long-term lens. As a result, we are increasingly able to grow deposits, loans, and revenue faster than our fixed cost investments and without adding unnecessary complexity. We view this as a critical advantage for a regional bank that operates in an underserved size range but still competes regularly with upmarket institutions.

That brings me to Valley National Bancorp’s positioning around artificial intelligence, which we believe represents a meaningful inflection point for the banking industry. Valley National Bancorp’s approach to AI reflects a balance between our pragmatic relationship-led culture and the acknowledgment that these technologies can enable us to reimagine how work gets done across our company. We believe these rapidly accelerating capabilities can augment productivity of our associates, enhance decision-making, improve operational efficiency, and most importantly, position Valley National Bancorp to better serve our diverse client base. Our dedication to improving the granularity, consistency, and infrastructure around our data over the last few years has been a key underpinning in our ability to effectively utilize AI tools today.

We invested early in AI talent and advanced analytics, and have embedded certain capabilities into our operating model in the wake of our core conversion. Already, AI is helping our bankers prioritize opportunities and better understand client needs. We have already utilized AI to improve access to our internal knowledge base, to rethink legacy back-office processes, including card service requests, certain elements of underwriting, and risk monitoring, and to accelerate data analytics and software development.

Specific use cases implemented to date include a customer-facing voice AI agent that proactively contacts past-due auto loan customers to motivate payment; fraud tools to verify transaction legitimacy and to prioritize suspicious activity alerts; and AI enhancements to our sales process to optimize the next best product offer. These are small examples of a much broader effort to unlock our associates to spend more time doing what they do best: building relationships and delivering high-value advice. We expect these capabilities will continue to translate into higher productivity, better risk outcomes, and a more consistent client experience with less friction, all while preserving the human element that defines our brand. Looking forward, our priorities remain consistent.

We plan to continue to selectively invest in growth, maintain our balance sheet discipline, and deploy capital thoughtfully. We are confident that the foundation we have built positions Valley National Bancorp to navigate uncertainty, capitalize on opportunities around us, and deliver sustainable returns over time. With that, I will turn the call over to Travis P. Lan to walk through the financial results in more detail.

Travis P. Lan: I wanted to start by giving a brief update on our 2026 financial expectations. As a result of continued strong core deposit growth, solid loan demand in our markets, and a favorable yield curve backdrop, we believe that annual net interest income growth will trend towards the higher end of our previously provided range. We expect more meaningful acceleration in the second half of the year, with no significant change to our expectations for noninterest income, noninterest expenses, or credit costs. We believe there is modest upside to our previous guidance range and existing consensus estimates. From a balance sheet perspective, we continue to believe that our CET1 ratio will remain towards the higher end of our target range.

Slide 12 illustrates the execution of our capital strategy during the quarter. We generated over 30 basis points of regulatory capital in the period. Over half of this supported well-funded organic loan growth, and we used roughly a third of our capital generation to buy back stock. Relative to last quarter, slightly more capital was used for the buyback. Slide 13 illustrates the strong momentum in our deposit gathering efforts. During the quarter, we increased direct customer deposits by over $900 million, which enabled us to pay off nearly $300 million of maturing higher-cost brokered deposits and $350 million of higher-cost FHLB advances.

As a result of the strong direct deposit growth, loans to non-brokered deposits improved to 106% from 107% last quarter and 112% a year ago. Total deposit costs declined 18 basis points during the quarter, reflecting proactive reductions in core customer deposit costs and the funding rotation I just mentioned. We remain laser-focused on improving our funding profile to further de-risk our balance sheet and drive continued profitability improvement. We anticipate that total deposit growth will be towards the high end of our 5% to 7% guidance range for the year. Turning to slide 16. Total loans grew nearly $700 million, or 5.5% annualized during the quarter.

Owner-occupied CRE, particularly within our health care specialty vertical, continues to contribute to our growth as regulatory CRE declined modestly. C&I loans grew nearly $150 million during the quarter, reflecting strength across existing geographies and business lines, as well as contributions from newly onboarded talent. We anticipate that loan growth for the year will be between the midpoint and high end of our previous 4% to 6% range. Slide 19 illustrates the fourth consecutive quarter of net interest income expansion, which occurred despite day count headwinds associated with the first quarter. This increase was the result of solid loan growth, core deposit generation, and repricing dynamics on both sides of the balance sheet.

Net interest margin was flat from the fourth quarter, which, combined with our continued repricing tailwinds, positions us well to achieve the year-end margin guidance that we laid out previously. Despite the expected normalization of noninterest income from the fourth quarter, we posted strong first quarter results as compared to one year ago. On a year-over-year basis, noninterest income was up 18%, driven primarily by capital markets and deposit service charge revenues. These results are in line with our expectations and we believe set the stage for further improvement throughout the year. Turning to slide 22. Reported noninterest expenses increased to $310 million in the first quarter, from $299 million in the fourth quarter.

On an adjusted basis, however, noninterest expenses were effectively flat as seasonal payroll tax headwinds were largely mitigated by modest reductions in other compensation costs, professional and legal fees, and adjusted FDIC insurance expense. As a result of our cultural focus on expense control, Valley National Bancorp’s efficiency ratio declined to 53.1% in the first quarter, from 53.5% in the fourth quarter and 55.9% a year ago. We continue to believe that positive operating leverage will accelerate throughout the year, which is expected to result in an efficiency ratio trending towards 50% by 2026. Slide 23 illustrates our asset quality and reserve trends.

Nonaccrual and accruing past due loans each declined modestly during the quarter, primarily as a result of positive migration of CRE out of each bucket. Net charge-offs as a percentage of total loans declined to 14 basis points from 18 basis points last quarter, and the modest uptick in provision expense reflected the quarter's strong loan growth. Allowance coverage remained generally consistent around 1.2%. We do not anticipate material changes to this level throughout the year. Turning to slide 24. Tangible book value increased approximately 1% during the quarter, as solid retained earnings growth was partially offset by an OCI headwind associated with our available-for-sale securities portfolio.

Regulatory capital ratios declined modestly as a result of strong loan growth and our stock buyback activity. Based on our preliminary analysis, we estimate that regulatory capital ratios would increase between 80 and 100 basis points under the proposed Basel III standardized approach. Until those rules are formalized, we continue to anticipate that our CET1 ratio will remain towards the higher end of our targeted guidance range. With that, I will turn the call back to the operator to begin Q&A. Thank you.

Operator: Thank you. For your name to be announced. To withdraw your question, please press 11 again. Our first question comes from the line of Manan Gosalia with Morgan Stanley. Your line is now open.

Manan Gosalia: Hi, good morning. My first question is on the NII side. You are pointing to the higher end of the NII guide. Strong deposit growth already, strong loan growth. Can you talk about some of the inputs around the NII outlook today versus your outlook in January, and the ways in which you can drive funding costs lower even if we do not get more rate cuts? And then, Ira, you spoke about investing in AI early and the benefits that should drive going forward. Are there any areas where you think you need to accelerate the spend there, or is a lot of the investment spend going to be self-funded from here?

If you can just help us with how to think about the expense outlook this year and next year and how we should think about the operating leverage going forward?

Travis P. Lan: Yeah. Thanks, Manan. This is Travis. Relative to where we were coming into the year, we had assumed two Fed cuts as of 12/31. Obviously, those are out of the forecast. But as we have said pretty consistently, we are neutral to the front end of the curve. So the elimination of those cuts in the model is not overly impactful to our NII outlook. We are more exposed to the belly and longer end of the curve, and there has been some migration higher there, which has been incrementally helpful.

From a deposit cost perspective, even if we are unable to materially reduce core customer deposit costs in a vacuum, we still have what we view to be pretty significant tailwinds from the structural rotation of higher-cost wholesale funding into lower-cost core. And that is what I think has given us so much confidence about the margin trajectory you have seen play out over the last year or two, and why we continue to have confidence through the end of year and into 2027.

Ira D. Robbins: Thank you. I think it is a significant opportunity for us and really for the entire industry as to how we think about how we service clients from an operating expense perspective, and then also how we enhance the revenue side of it as well. I think for us, when we think about the expense that would go into it, we have always been very mindful of what the efficiency ratio is within the organization and how we self-fund a lot of what we have done here.

We have spent about $450 million on CapEx in the last seven to eight years versus a $50 million number in the seven- to eight-year cumulative period before, while still maintaining a very efficient organization. When I became CEO, I think we were 3,350 employees and $20 billion in size. Today, we are 3,607 employees and $64 billion in size. So having a more efficient organization, the more we can press that, provides an opportunity to really enhance the AI spend as well as other opportunities within the organization.

Just over the last year, we declined about 100 employees within the organization, and as we think about the reduction in some of those roles, we are definitely enhancing the opportunities and reinvesting some of that back into AI that we think is going to be a lot more productive moving forward.

Manan Gosalia: Great. Appreciate the color. Thank you.

Operator: Thank you. Our next question comes from the line of Freddie Strickland with Hovde Group. Your line is now open.

Freddie Strickland: Hey, good morning. I was just wondering if you could talk about competitive landscape on the retail deposit side, maybe how that has changed and whether that has really shifted as broad expectations and more cuts seem to fizzle out?

Travis P. Lan: Yes. Thanks, Betty. This is Travis. Look, it does remain competitive out there for, I would say, consumer deposits. I mean, rates have kind of backed up; you see it in the offered rates that are posted in branches and online. I would just say for us, the consumer element is a component of our anticipated deposit growth. The majority does come from the commercial side, and that would include small business and business banking in that as well. There, we are competing with the relationship, the service model that we have, the treasury platform that we can provide. So, obviously, rate will always be an element of how you compete for deposits, but it is not the only one.

I think that is what has enabled us to differentiate ourselves from a deposit growth perspective while also driving down costs.

Freddie Strickland: Great. Thanks, Travis. And just on the common equity Tier 1 guide, you mentioned it in your opening remarks, but can you just refresh us on capital priorities and does that CET1 direction mean fewer buybacks or simply more generation? Or are you taking into account the Fed moves there? Just wondering if you can talk a little bit more about buybacks relative to the CET1 ratio.

Travis P. Lan: Yes. Thanks. So we have been pretty consistent that we have this range or target range of 10.5% to 11% on CET1. But throughout 2026, we anticipate staying at the higher end of that range. I think one key element, for us, the number one priority for capital utilization is to support high-quality, well-funded loan growth. And as we have seen good activity in the first quarter and the pipeline is building as well, and we anticipate, as we said, that loan growth will trend towards the higher end of our range, we want to be able to support that. So we bought back 4 million shares this quarter.

In aggregate, it was about $52 million of capital we utilized for the buyback. I would anticipate that pulls back a little bit because as we look at the loan growth opportunities for the next couple of quarters, we want to make sure that we are preserving the capital to support that. So we anticipate remaining active to some degree, but it would not surprise me if it is a little bit less than what the first quarter was on the buyback.

Freddie Strickland: Alright. Great. Thanks for taking my questions.

Operator: Thank you. Our next question comes from the line of David Chiaverini with Jefferies. Your line is now open.

Brooks Dutton: Hey, guys. Brooks Dutton on for Dave this morning. You know, with your CRE concentration ratio trending lower, 329%, what is the long-term target for this metric? How does that influence you guys' 4% to 6% loan growth guide for the remainder of 2026? And then just on fee income, there is lower capital markets activity quarter. Can you guys talk about your run-rate expectations for 2026 as we progress through the year?

Ira D. Robbins: I think we were very diligent within the last two-ish years in identifying a certain runoff portfolio that really was transactional for us. So they did not really bring the deposit relationships that we were looking for. So those tier three clients continue to run off, which creates capacity for a lot of other loan growth within the organization. I think when we think about absolutes, getting under 300% as an absolute number is a longer-term priority for us, and we think that we are trending there. But there is really very little pressure from an external perspective that we feel that we need to accelerate that.

These are good quality loans, but I think maybe it is just not hitting the return hurdle that we are looking for. So for us, it really becomes how do we rotate the profitability of clients from certain under-ROI clients into higher-ROI clients. And that is really what is driving how we think about the runoff of the CRE portfolio.

Travis P. Lan: Yes. Thanks. We did indicate on the fourth quarter call that fee income in general was about $7 million elevated in a variety of ways. One of that was $4 million or $5 million of elevation from a swap perspective in the fourth quarter. So that normalized as expected. The $10 million in Capital Markets in general is a good starting point. I would anticipate that we see growth throughout the rest of the year.

Operator: Thank you. Our next question comes from the line of Janet Lee with TD Cowen. Your line is now open.

Janet Lee: Good morning. For loan growth, is the more growth coming from nontransactional CRE and then still, you know, pretty robust growth in C&I there, should we expect the mix—should we expect more of growth to also come from CRE in the future quarters versus what you expected in the prior quarter? Or how should we think about mix of loan growth as we head into the rest of 2026?

Travis P. Lan: Yeah, Janet. Maybe I will start, and Gino can add some commentary in terms of what we are seeing in the pipeline. But coming into the year, we had guided to about $2.5 billion of loan growth, of which $1 billion was C&I, $1 billion was CRE, and $500 million was consumer and resi. Within that $1 billion of CRE, we anticipated a couple hundred million would be regulatory CRE—so investor and multifamily. As you saw in the first quarter, that was a slight decline. I would anticipate maybe seeing a little bit of regulatory CRE growth throughout the year, but the majority will remain in kind of owner-occupied and C&I, with support from the consumer areas as well.

So maybe, Gino, just about what you are seeing across the markets.

Gino Martocci: I will just add we continue to invest in new talent primarily for C&I. Talent, upmarket C&I and business bankers as well, are focused on C&I and deposit-rich businesses. Our C&I pipeline is up $1 billion since the end of the year, so we expect to see continued C&I growth throughout 2026.

Travis P. Lan: Both because of the investments we made and because our clients continue to invest. We have relatively robust economies. We are in affluent markets, whether that is Coral Gables, Tampa, Morristown, Manhattan, or Garden City. All of those markets remain strong and robust, and our clients, despite the noise out there and some of the headwinds from input costs, continue to remain confident and continue to invest. We are supporting.

Janet Lee: That is helpful. And your credit was very stable this quarter, but your criticized and classified loans were up a little bit, driven by C&I special mention loans. Could you provide some color on the trend you are seeing? And do you still expect the trajectory of criticized and classified to decline from here, or should it stabilize over the near term?

Mark Sager: Hi, Janet. The stabilization of criticized in first quarter is just a normal phenomenon of year-end financial collection and some migration. We do anticipate that we will still see a decline in the criticized throughout the year, noting we had the big decline in Q3 and Q4. And we still have an expectation for the year to be down.

Janet Lee: Got it. Thank you. Thank you.

Operator: Our next question comes from the line of David Smith with Truist Securities. Your line is now open.

David Smith: Hey. Good morning.

Ira D. Robbins: Morning, David.

David Smith: Can you give us a sense of where new loans are coming on the books today and how spreads have trended over the quarter given everything that is going on? And did you have the spot deposit rate for March 31?

Travis P. Lan: Yes. This is Travis. New loan yields declined modestly by—I think it was about 6.75% last quarter. It was maybe 6.55%, 6.60% this quarter. We are seeing modest spread compression in certain asset classes on the commercial real estate side. I think that led to a little bit more runoff in the regulatory CRE book than maybe we had anticipated coming into the year. But spreads have remained generally stable in most of our target portfolios. It obviously remains competitive for high-quality customers that we are banking, but I do think we have reached an air pocket from a size perspective.

We are one of very few banks remaining in this size category that can offer all the products and services of a large bank with the high-touch service and quick response and credit underwriting of a more community-oriented bank. I think that is playing well for us to be able to grow without necessarily seeing spreads collapse. Yeah. I do. Interest-bearing spot deposit cost was 2.95% versus 3.02% at December. All-in was 2.26% spot deposit cost versus 2.32% at December thirty-first. So down six basis points from the December to the March.

David Smith: Got it. Thanks very much.

Operator: Thank you. Our next question comes from the line of Anthony Elian with JPMorgan. Your line is now open.

Mike Petrini: Good morning. This is Mike Petrini on for Tony. So I will start on NIM. How are you guys thinking about NIM trending for the rest of the year? You mentioned coming into the year that the three-thirty mark was sort of what you expected. How do you guys see that trending? And on loan growth, now that you are sort of at the mid to high end of that 4% to 6% range, what categories do you feel more encouraged on now than you did before? Any color on the expected growth trajectory of the different categories over the rest of the year would be great.

Travis P. Lan: Yes. So coming into the year, we had anticipated a slight decline in margin in the first quarter and then building up to that $330 million level by the fourth quarter. And the reality is we posted a better starting point. And so I would anticipate that there is some upside to that $330 million fourth quarter 26 target that we have laid out. Again, I think the funding profile is better than we had maybe anticipated. The interest rate backdrop remains supportive of the margin expansion. And we saw the structural tailwinds that we outlined on the net interest income side of the deck, showing the fixed-rate asset repricing and then the fixed-rate liability repricing as well.

When you add it all up, I think we feel better about the margin guide than maybe we felt coming into the year, even though coming into the year was strong as well.

Gino Martocci: Our pipeline remains very robust. It is basically double what it was a year ago. It is primarily concentrated in C&I and health care. We have got a very terrific health care franchise with very experienced people, and that business continues to grow. We do have a reasonable amount of CRE demand that is offset by the runoff of the nonregulatory book. And it is robust growth across all of our geographies, whether it is Florida, New York, New Jersey, and even in our growth markets. We are seeing good growth in Illinois, LA, etc. So we expect a very robust origination year.

Operator: Thank you. Our next question comes from the line of Matthew M. Breese with Stephens Inc. Your line is now open.

Matthew M. Breese: Hey. Good morning.

Ira D. Robbins: Morning, Matt.

Matthew M. Breese: Maybe just a quick one on expenses first. Just given some of the moving pieces, severance, etc. What is a good starting place for the second quarter on salary expenses? Is $150 million the right place to be? Any other moving parts there? And then one thing I have not heard a lot about, but I have heard a lot of your peers talk about is just the extent they are seeing payoffs and prepayments. First, maybe just your thoughts on that—are you seeing that as well but able to offset it? And then secondly, is there prepayment penalty income going in the NIM?

I would love to get some sense for how that has trended and if it is extensive. Are we modeling too much of it right now?

Travis P. Lan: Matt, I think that is right. And I would just say the first quarter payroll tax impact was about a $7 million headwind. That declines by about $4 million in the second quarter. At the same time, our merit bonuses only went into place mid-March, so there is no real impact from that in the first quarter. Those two things effectively balance out. So if you take the severance away from the compensation line, I think that is a good starting point. The only element, and this moves around quarter to quarter, is we did see some higher insurance costs in that line in the first quarter.

So it is possible that we could outperform from that perspective, but I do not think that would be overly material. Yeah. I do not think—first of all, it does go through our NII, although it is not an overly material number. Prepayments this quarter declined to about $1.2 billion. They have been running at around $1.4 billion for the last couple of quarters. So we saw a slight decline in prepayment activity. But it has been fairly consistent when you look back over, you know, five or eight quarters or so. So I do not think it has been a material moving piece in terms of balances or the NII.

Matthew M. Breese: Okay. And could you remind us of what the accretable yield that is flowing through the margin is? And that was what it was last quarter too? And then last one for me, just on asset quality. The big areas of concern for the industry—I would love your thoughts on NDFI—not that you have a ton of it—and then office commercial real estate. Any sort of green shoots there or anything that is keeping you up at night?

Travis P. Lan: Yeah. It is, like, $10 million this quarter, which has been consistent. It is about $4 million on the security side and $6 million on the loan side. This quarter—excuse me—was $9.5 million this quarter. It was $10.9 million last quarter, so a slight decline.

Mark Sager: Hey, Matt. NDFI has never been a big portion of our portfolio. We have about 2.6% of the portfolio in NDFI, compared to 7% for our peers. That number for us also—we have mentioned in the past we have had a focus on capital call facilities out of our fund finance group. Those are exceptionally well structured to entities with a strong history and a very strong LP base. So we view that as safe lending. But yes, as you have mentioned, it is a small part of our portfolio. As it relates to the office portfolio, we have that breakout in our deck. We continue to be very granular in that space, diversified by geography, more suburban than urban.

And we definitely are seeing more rational transactions happen in the office space. If it has not hit bottom in all markets, it is close to bottom, and we are seeing new lease-up activity, a reduction in subleasing in the majority of our markets. So not actively growing that portfolio, but our concerns on that portfolio have definitely abated.

Gino Martocci: Hey. It is Gino too. I will only add that in the last two quarters, there has been record leasing in New York City, and record rents—especially your Class A properties. You can see upwards of over $200 a square foot in rent. So some of the concerns about loan demand and other things that are happening just are not materializing with corporations in their leasing strategies at least.

Matthew M. Breese: Thank you.

Operator: Thank you. As a reminder, to ask a question at this time, please press—Our next question comes from the line of Christopher Edward McGratty with KBW. Your line is now open.

Christopher Edward McGratty: Oh, great. Good morning.

Travis P. Lan: Good morning.

Christopher Edward McGratty: Travis, going back to the capital, just to push a little bit on the buyback. I mean, your ROE is going in the right direction, generating more capital. Can you not do both—high end of growth and buybacks—or maybe it is more of a back-half year as you kind of talk about the near-term loan growth? But I guess, what is the hesitation, especially with the Basel III proposal?

Travis P. Lan: I do not think that there is any hesitation. I just think we have a very robust pipeline, and we want to make sure that we are well positioned to support that loan growth, Chris. So again, we bought back $50 million of stock in the first quarter. Something in that $40 million-ish—$40 million to $50 million—range still feels reasonable. The average price we bought it back was below where the market is today. So that is another element that plays into it, but we will remain active in the buyback. I just indicated that I think it will be a little bit lighter than the first quarter.

Christopher Edward McGratty: Okay. That is better color. Thank you. And then, Ira, I did not hear M&A or strategic mention at all. I am getting an updated view there if there is a change. Thanks.

Ira D. Robbins: Yeah. I mean, from an M&A perspective, I do not think anything has really changed. I think, from a historical perspective, it has been important for us to remain shareholder friendly and do what is in the best interest of the shareholders, and I do not think that is ever going to change here.

Christopher Edward McGratty: Thank you.

Operator: Thank you. And I am currently showing no further questions at this time. I would now like to hand the conference back over to Ira D. Robbins for closing remarks.

Ira D. Robbins: I just want to thank everyone for their interest and look forward to speaking to you next quarter. Thank you.

Operator: This concludes today's conference. Thank you for your participation. You may now disconnect.