Earnings Call Transcript - MTB Q2 2024

Operator, Operator

Welcome to the M&T Bank Second Quarter 2024 Earnings Conference Call. All lines have been muted for listen-only mode, and questions will be taken after the presentation. Please note that today’s conference is being recorded. I will now turn the conference over to Brian Klock, Head of Market and Investor Relations. Please proceed.

Brian Klock, Head of Market and Investor Relations

Thank you, Ashley, and good morning. I'd like to thank everyone for participating in M&T's second quarter 2024 earnings conference call, both by telephone and through the webcast. If you have not read the earnings release we issued this morning, you may access it along with the financial tables and schedules by going to our website, www.mtb.com. Once there, you can click on the Investor Relations link and then on the Events and Presentations link. Also before we start, I'd like to mention that today's presentation may contain forward-looking information. Cautionary statements about this information are included in today's earnings release materials and in the investor presentation, as well as our SEC filings and other investor materials. The presentation also includes non-GAAP financial measures as identified in the earnings release and investor presentation. The appropriate reconciliations to GAAP are included in the appendix. Joining me on the call this morning is M&T's Senior Executive Vice President and CFO, Daryl Bible. Now, I'd like to turn the call over to Daryl.

Daryl Bible, CFO

Thank you, Brian, and good morning, everyone. As you will hear on today's call, the second quarter results continue M&T's strong momentum for 2024. This April, we released our fourth annual sustainability report. We are proud of our continued progress towards our sustainability goals. Our efforts are creating positive outcomes for our businesses, our customers, and our communities. In 2023, our total sustainability finance loans and investments totaled $3.1 billion. We continue to garner awards for our businesses, products, and employees, including the highest customer satisfaction for mobile banking apps among regional banks according to J.D. Power and the Securitization Trustee of the Year for Wilmington Trust from GlobalCapital. As for our second quarter results, we are pleased with the performance through the first half of the year. We keep growing loans while also shifting the composition of our loan portfolio and reducing commercial real estate. Customer deposits increased sequentially, and while total deposit costs have leveled off, net interest income and net interest margin both improved from the first quarter's low. Asset quality trends are performing as expected, with reductions in non-accrual and criticized balances and net charge-offs aligning with our full-year outlook. Capital continues to build with the CET1 ratio increasing to over 11.4%. We are making progress on our capital return considerations, and our stressed capital buffer decreased 20 basis points to 3.8%, reflecting the strength of our core earnings power and ongoing risk management efforts. For the second quarter, diluted GAAP earnings per share were $3.73, up from $3.02 in the first quarter. Net income for the quarter was $655 million compared to $531 million in the linked quarter, which is a 23% increase. M&T's second quarter results produced an ROA and ROCE of 1.24% and 9.95%, respectively. The CET1 ratio remains strong at 11.44% at the end of the second quarter, and tangible book value per share grew by 3%. Our GAAP results included pre-tax expenses of $5 million related to the FDIC special assessment, which amounts to $4 million after tax or $0.02 per share. In the prior quarter, results included $29 million for the FDIC special assessment, amounting to $22 million after-tax or $0.13 per share. M&T's net operating income for the second quarter was $665 million, compared to $543 million in the linked quarter, with diluted net operating earnings per share at $3.79, up from $3.09 in the first quarter. Net operating income resulted in a ROTA and an ROTCE of 1.31% and 15.27% for the recent quarter. Taxable-equivalent net interest income was $1.73 billion in the second quarter, a $39 million or 2% increase from the linked quarter. The net interest margin was 3.59%, rising by 7 basis points from the first quarter. Key factors for the margin increase included a positive contribution from fixed-rate asset repricing, higher non-accrual interest, and lower interest-bearing deposit costs, partly offset by the impact of swaps and higher borrowing costs. Non-accrual interest was $30 million compared to an average of $14 million over the previous five quarters, and the second quarter NIM would have been 3.56% if non-accrual interest was at its average run rate. Average loans and leases increased by 1% to $134.6 billion from the linked quarter. Commercial and industrial and consumer growth outpaced the decline in commercial real estate. C&I loans grew 2% to $58.1 billion, while CRE loans declined 4% to $31.5 billion. Residential mortgage loans remained stable at $23 billion, and consumer loans grew 4% to $22 billion. Loan yields increased by 6 basis points to 6.38%. Our liquidity remains strong, totaling $56.5 billion at the end of the second quarter, representing 27% of total assets. Average total deposits decreased slightly to $163.5 billion due to a decline in broker deposits, though average customer deposits showed sequential growth. Noninterest income was $584 million, reflecting an increase from the previous quarter. Noninterest expenses decreased to $1.3 billion, down $99 million from the first quarter, following typical seasonal patterns. Net charge-offs for the quarter totaled $137 million or 41 basis points, slightly lower than in the prior quarter. Overall, we see that the economy is slowing somewhat but remains in good health, with manageable inflation and expectations for continued stability in net interest income. As we move forward, we plan to initiate share repurchases in the third quarter, while managing our capital concentrations and supporting organic growth. Our results affirm a positive outlook for M&T as we maintain focus on shareholder returns and disciplined capital stewardship.

Operator, Operator

We'll take our first question from Manan Gosalia with Morgan Stanley. Please go ahead.

Manan Gosalia, Analyst

Hey, good morning, Daryl.

Daryl Bible, CFO

Good morning, Manan.

Manan Gosalia, Analyst

So, I wanted to ask on NII. So, you beat on NII this quarter, and then your new guide for NII implies that quarterly NII will be relatively flat from 2Q levels. And you did see a noticeable increase quarter-on-quarter this quarter in NII. So, can you just unpack the drivers in the back half? Is there some conservatism baked in there? Or is there some timing difference in being neutral to rates, but maybe perhaps being a little bit more asset sensitive with the first rate cuts? If you can just unpack those drivers there?

Daryl Bible, CFO

Yeah. Thanks, Manan. Our position from rate sensitivity is really quite neutral. It's based on assumptions, but I feel we are really neutral there. If you look on the slide deck where we had net interest income, in one of the bullets there, we highlight that we had a 5 basis point positive impact on non-accrual interest. So, let me explain that to you. So, when our loans go into non-accrual, we basically when we still receive payments, both principal and interest, all that goes to principal. And then, if the loan is basically resolved favorably and they pay us off, obviously, we pay off the principal balance and then anything left over goes into net interest income. So, what we saw in the second quarter was basically a large number of loans that came out favorably out of our non-accrual portfolio. So, what we put on there and what I talked about in the prepared remarks is that if you look at our average non-accrual interest for the last five quarters, it's been running around $15 million. This quarter, we got double that. So, I would basically say our NIM this quarter was actually on track, because if you adjust the $15 million out, we were at 3.56% NIM. I said that we would be mid-3.50%s for the second quarter. So, we're really on path to what I said, mid-3.50%s second quarter and high-3.50%s for third and fourth quarter is really where we wanted to be and expect to be. So, I think we're just on track, Manan.

Manan Gosalia, Analyst

Got it. And just to confirm that 5 basis points is where you are above normal, right? The 5 basis points isn't the total impact?

Daryl Bible, CFO

It's three, which I would consider normal for the run rate. Yes, please continue.

Manan Gosalia, Analyst

And you are 5 basis points above that?

Daryl Bible, CFO

No, we were at 3. So, we were 3.52%. We said we'd be in the mid-3.50%s. I say we really came in at 3.56% if you back out the extra above non-accrual interest that we normally get. I mean, we're going to get non-accrual interest every quarter. We've been averaging a couple of basis point benefit every quarter because of that. That's going to continue for a long time.

Manan Gosalia, Analyst

Got it. All right. Perfect. And then maybe you can put this in the category of no good deed goes unpunished, but on the buyback resumption, your message in the deck is that capital levels should at least stay at current levels of around 11.5%. Just given that the SCB went lower, given the excess capital position, what do you need to see before you accelerate the pace of buybacks and bring that capital ratio lower?

Daryl Bible, CFO

Yeah. I think it's pretty simple. I think we are aggressively working down our asset quality, our criticized loans, non-performing assets. I think we need to continue to make progress on that. As we make progress on that, you could see us decide to increase our repurchase shares potentially. Obviously, the economy is a factor. In my prepared remarks, we said we don't think it's likely, but it's possible that maybe you go into recession. So, if that were to happen, I think we'd have to view that and just be a little bit more defensive if that made sense or not. We still want to see the impacts of Basel III. I know we are carrying in more favorable things, but until we actually see it in writing, you really don't know what's going on. But those are probably the primary things that we're working on. We continue to shrink our CRE concentration, and made great progress there. I have no doubt we will continue to make great progress in the next couple of quarters as well there.

Manan Gosalia, Analyst

Great. Thank you.

Operator, Operator

Thank you. We'll take our next question from Matt O'Connor with Deutsche Bank. Please go ahead.

Matt O'Connor, Analyst

Good morning. I was hoping if you could elaborate on...

Daryl Bible, CFO

Good morning, Matt.

Matt O'Connor, Analyst

...good morning, the big drop in the commercial real estate on a period-end basis. I think it's down about 9%. Obviously, great job bringing that down. And I know you touched on some of the kind of opportunities to offload that, but it's just a bigger drop than I would have thought. And I didn't know if there was any reclass into C&I as you kind of improve some of those like guarantees and things like that. So, just elaborate on all that in terms of how you're able to bring it down so much. Thank you.

Daryl Bible, CFO

Yes, I'm glad to address that, Matt. We are highly focused on our efforts to reduce our commercial real estate concentration and have made significant progress. This quarter, we observed increased liquidity in the marketplace, which allowed some of our clients, whom we had previously critiqued regarding multifamily investments, to successfully engage in government placements for liquidity. This ongoing liquidity assists us in managing our criticized loan balances. Additionally, we are undergoing a finance transformation that involves implementing a new general ledger system and subledgers, and we are about halfway through this process. This transformation also entails enhancing and altering our processes, which leads to better controls and improved methods for originating loans. As a result, some of our loans previously categorized as CRE are being reclassified as commercial and industrial owner-occupied loans, essentially due to the nature of their repayment sources. If the repayment comes from an operating entity, it qualifies as a C&I owner-occupied loan rather than a CRE loan.

Matt O'Connor, Analyst

Okay. That makes sense. I think that's how others do that, too. And then, just separately, on the all other income line, you pointed to a couple of kind of positives there. Is that on a sustainable level? Or I know it could be lumpy, but how do you think about that all other fees of like $152 million? Thanks.

Daryl Bible, CFO

It is at a relatively high level. I would probably reduce it by about 5% to 10% on a run rate. A significant portion of that other revenue we discussed comes from merchant fees, and we had a strong quarter with increased activity. This trend could continue if the activity remains strong. Additionally, there is loan demand, and we are generating loan syndication fees, which can be unpredictable. We performed well in this area last quarter. However, we are observing some softening in certain commercial sectors, so it might be a bit lower than expected. Overall, I would say it could remain at that same level or decrease by 5% to 10%.

Matt O'Connor, Analyst

Okay. Thank you so much.

Operator, Operator

Thank you. We'll take our next question from Erika Najarian with UBS. Please go ahead.

Erika Najarian, Analyst

Yes, hi. Two follow-up questions, please. Daryl, the company clearly did a great job in terms of interest-bearing deposit costs coming down. I know some of that is a mix of broker being actively taking down in terms of exposure. Could you give us a sense before the rate cuts? And we appreciate the downside beta guide that you gave us, but if we don't rate cuts, how do you feel like this level of progress is sustainable? And maybe break it down in terms of what you're observing with client deposit rates versus the continued runoff in brokered CDs?

Daryl Bible, CFO

Yes. So, brokered CDs will continue to run off. We have another big chunk coming off in the third and fourth quarter. So, we'll be pretty much out of brokered deposit CDs at least by the end of the year. As far as the betas go and rates, we continue to just see more rational pricing in the marketplace, and we're able to maybe offer specials, but the specials that we're offering just aren't as high as what they were before. So, you're still seeing that. There is still some disintermediation. It is slowing down, but there's still continued disintermediation. The one that impacts NII the most is obviously the one that goes to DDA to interest-bearing deposit balances. We're capturing any disintermediation, but it's still seeing a little bit in the commercial area. The other thing is on the retail side, as long as rates are at this level, you're going to see a little bit of attraction of money going out of the non-maturity bucket into the CD deposits. But we feel pretty good that our deposit costs are flat and maybe down as the year progresses and into next year. I think it's just more rational pricing in the marketplace right now.

Erika Najarian, Analyst

Thank you. My second question is a follow-up to Manan. Last quarter and during this quarter, you mentioned not to focus solely on the 11% CET1 ratio when considering buybacks, emphasizing the total amount you're planning to repurchase. This quarter, you made significant progress with CET1, and the floor has increased further. I appreciate your response to Manan's question, and I understand this reflects the company’s conservative approach, which long-term investors highly value. Moving forward, how should we think about the future? I recognize there's still uncertainty and a desire to reduce CRE concentration while observing the economy. With earnings of $200 million, it seems you will continue to build capital, especially if C&I loan growth is overshadowed by declines in CRE. As long-term shareholders consider the situation, aside from buybacks, how should they frame their expectations regarding returns and the appropriate capital floor?

Daryl Bible, CFO

From a floor perspective, obviously, we are much higher than where we have to run the company long-term for M&T. We do have elevated criticized loan balances and we're really working hard. Our teams are working diligently to bring those balances down. And we hope and plan that to continue through the rest of this year into next year. So that is definitely one of the key things that we're looking at. We are conservative. What I've said in prior quarters, the capital is not going anywhere, Erika. We promise you that. We aren't going to waste it or do anything stupid. It will come back to the shareholders at some point down the road. We're just going to do it in a very conservative manner because that's just who we are.

Erika Najarian, Analyst

So, to align with what Jamie mentions, a better perspective for your shareholders might be to consider earnings in store.

Daryl Bible, CFO

We are being cautious. As I have mentioned in previous quarters, our capital is secure. We assure you that we won't misuse it or make unwise decisions. It will eventually benefit the shareholders in a responsible way, as this aligns with our values.

Erika Najarian, Analyst

All right. Thanks, guys.

Operator, Operator

Thank you. We'll take our next question from John Pancari with Evercore ISI. Please go ahead.

John Pancari, Analyst

Good morning, Daryl.

Daryl Bible, CFO

Good morning, John.

John Pancari, Analyst

On the topic of commercial real estate, I know you mentioned your continuing efforts to lower the concentration of CRE. What do you project for the risk-based capital percentage related to CRE? In the past, you've indicated a target in the 150% range, so I would like an update on that. Additionally, could you discuss the improvements you noticed in credit this quarter, specifically regarding declines in pass-throughs, non-accruals, and criticized assets? What factors do you believe are driving those changes, and do you expect these trends to continue? Thank you.

Daryl Bible, CFO

Yeah, sure. So, we've made tremendous progress over the last three-plus years on getting our CRE concentration down, the plans that we put into place at that point and continue to execute. And you saw the benefits in our stress capital buffer because of that and that will hopefully continue when we continue to submit the stress capital CCAR test. I would say we're getting close, John. We are at 151% now. I think we're in the neighborhood of being close to where CRE will be much more normal space for us. We're at a level that we think is makes sense for the size of our company and serving our communities and clients. So, we're probably maybe a quarter or two away, but I think that's not too far off. As far as non-accruals go, I tell you, this quarter, everything kind of worked out really strong. Our first-line credit team was working with our clients. We have a process in place where we're looking at all the CRE loans that are maturing, trying to see where and how we can work with our clients to either get it right-sized or get it upgraded off of criticized. We are seeing some of our criticized loans getting refinanced by others in the industry. And I talked earlier that we're seeing some of our criticized loans getting placed in the agencies with our programs with the GSEs. So, we're basically really focused on that. The teams are diligent and working hard, and we plan to have those numbers continue to drive down and be really positive.

John Pancari, Analyst

Great. Thanks, Daryl. That helps. And then related to that, maybe could you just talk about the role that loan modifications have played here as you've addressed commercial real estate? Maybe help us with the trajectory of your financial difficulty modifications? Do they continue to rise? And maybe if you could just talk about the concerns out there that they're simply kicking the can down the road, and a year from now, we can see these pressures rear directly ahead again?

Daryl Bible, CFO

So, when you look at loan modifications, when we are working with our clients, loan modifications, we are asking for more type of recourse or capital to be put into the transactions for them to get more time to work through their higher interest rates that we have. So, the modifications we are doing are actually enhancing our position. So, we're giving them more extension on time and they're giving us more capital liquidity recourse for that time. So, we're actually in a better spot. So yes, our modifications are going up. This is our history of M&T. We work with our clients. If our clients support us, we're going to support them. That's what we do and that's what we're going to continue to do.

John Pancari, Analyst

Great. Thanks, Daryl.

Operator, Operator

Thank you. We'll take our next question from Ebrahim Poonawala with Bank of America. Please go ahead.

Ebrahim Poonawala, Analyst

Hey, Daryl. Good morning.

Daryl Bible, CFO

Good morning.

Ebrahim Poonawala, Analyst

Just wanted to go back to the criticized C&I and CRE. So, a lot of decision-making on capital revolves around how some of this plays out. If you don't mind, give us a sense of when you think about criticized loans, if rates go lower, I think you mentioned soft landing base case probability most likely for you. Is there a point in time if rates are lower, you get the financials, maybe in March of next year, we could see a meaningful reset lower from this $12 billion going down by a couple of billion? Like, I'm just wondering, could there be a step function decline in criticized loans at some point in the first half of next year based on rates and macro clarity?

Daryl Bible, CFO

Yes. So, Ebrahim, that's a great question. We saw a short window in the fourth quarter, in December, when the 10-year dropped 4% or a little bit under that. And we had huge volume that we're able to place our clients out with the agencies. Our RCC business was able to place a lot of loans out because of that. So, I think our 10-year last time I looked was 4.18%. So, I think we're getting closer to more of a pivot point where more volume will actually happen. So, I think lower rates would definitely help us lower our criticized balances sooner and faster from that perspective. That would be even more liquidity in the marketplace than what we saw this past quarter.

Ebrahim Poonawala, Analyst

That's helpful. And I guess the other question on CRE, given all the work you've done over the past year, stress testing, et cetera on the CRE book, just give us your perspective on the loss content in these loans as they maybe some of these go into non-accrual based on what you know today, what's already been reserved, and as we think about like charge-offs relative to the 40 bps that you guided for this year?

Daryl Bible, CFO

We have a long history of strong credit performance. Looking at our loan-to-value ratios for the commercial real estate portfolio, including office properties, we're still under 60%. It's noteworthy that half of our non-accruals do not have any reserves against them, which is unusual since typically, non-accruals would have a specific reserve. This situation arises because the collateral value exceeds the current loan value. This reflects the strength of our underwriting practices, and our credit performance remains evident during challenging times. Although we have a higher level of criticized loans and non-accruals, we are actively managing them down, and we believe the potential losses are considerably lower.

Ebrahim Poonawala, Analyst

Got it. That's great color. Thanks, Daryl.

Operator, Operator

Thank you. We'll take our next question from Ken Usdin with Jefferies. Please go ahead.

Ken Usdin, Analyst

Thanks. Good morning. Hey, Daryl, you had a great amount of securities repricing this quarter, up 31 basis points on a bigger book. And I can imagine some of that was just a switch from cash. But I think you had talked about 15 basis points to 20 basis points going forward. So, maybe can you just give us a little back color on what drove that 31 basis points, and then how you're looking at what securities yields could look like from an incremental perspective going forward? Thanks.

Daryl Bible, CFO

We are being very disciplined with our security purchases, keeping our durations relatively short. We want to avoid a negatively convex portfolio. When we enter the market to buy securities, we are balancing between positively convex securities like treasuries and CMBS agency securities and some negative convex securities, such as certain agency CMOs or MBS. We aim to maintain our duration around three years. Given current rates, our blended yields are about 5%, with negatively convex securities yielding over 5% and positively convex ones yielding under approximately 5%. Our focus remains on three-year duration instruments. Additionally, as we look at maturities in the third and fourth quarters, those average yields are around 2.5%. Depending on rate fluctuations, we expect an increase in that yield portfolio as these mature. We are committed to our disciplined approach and have been dollar-cost averaging over the past year, which we plan to continue moving forward, with the hope of averaging up higher.

Ken Usdin, Analyst

Okay. M&T has maintained a strong cash position for a long time, with cash and earning assets comprising about 30%. Do you still expect to keep cash and securities above 30% in the future, and what factors could influence that?

Daryl Bible, CFO

Yes. So, on the prepared call, what I mentioned is that right now our investment portfolio is about $30 billion. We believe that the cash at the Fed is closer to mid-$20 billion-s, so closer to $25 billion. We're basically just trying to get out of some wholesale funding and just shrinking the balance sheet a little bit. So, our balance sheet size is coming down as well. So, we'll have a smaller balance sheet. It shouldn't really impact NII just because of the cost of the borrowings and what we earned on the Fed balance kind of canceled each other out. But we just feel mid-$25 billion is good. We do have limits in place to how well we go that be in the mid- to high-teens. So, we have well above that buffer that we're operating right now, but just want to be here again, conservative. If we could go into a recession, which we don't think will happen, but if we do, this will be a really conservative balance sheet.

Ken Usdin, Analyst

Okay. Thanks, Daryl.

Operator, Operator

Thank you. We'll take our next question from Gerard Cassidy with RBC. Please go ahead.

Gerard Cassidy, Analyst

Hi, Daryl.

Daryl Bible, CFO

Hey, Gerard.

Gerard Cassidy, Analyst

Daryl, you obviously did a good job with the DFAST and the stress capital buffer coming down. I guess a couple of questions. First is, when you look at the improvement and you touched on it what you've obviously done, do you think that improvement can be as large next year as you guys continue to reduce these risks to M&T as we look out into 2025?

Daryl Bible, CFO

Yeah. So, our plans right now, Gerard, we are really pleased that we were down 20 basis points in our peer group. We were one of three banks that had a lower SCB, so we were really excited to have that outcome. But by us really focusing on and pushing down our criticized, besides share repurchase maybe increasing, it's also going to help us in our stress capital buffer when we go through the stress test. So, we're really focused in trying to bring down our criticized levels to as much as we can, working with our clients over the next couple of quarters so that when we do seek our next year, if we decide to do it, which we may or may not, probably will though, we'll continue to try to get a lower stress capital buffer.

Gerard Cassidy, Analyst

Got it. And then, when you look at M&T's history, obviously, the organic growth has always been complemented very successfully with acquisitions. And when you look out over the landscape over the next 12 to 24 months, can you give us your views on depository acquisitions? Not to say that you're going to do anything near-term, but just how are you guys thinking about depository acquisitions? And I know there's changes and we've got a presidential election coming up, which could influence as well, but what have you guys been thinking in that strategy?

Daryl Bible, CFO

So, M&T has a long-term history of doing acquisitions, successful acquisitions, and that is one of the reasons how we grow here. But to be honest with you, we haven't really been talking about acquisitions. We're working on our four priorities that we have in the company right now. Our four priorities that we have are basically building out our markets in from the People's acquisition in New England and Long Island. We think that's really important, continue to build out. That's a great opportunity for us. And we think the M&T Bank will be really good in the markets that we serve theirs. I think they need a bank like us in those markets, and we want to deliver to those clients. We're enhancing our risk areas throughout the company and making great progress in those areas. We will continue to focus on that. We're also improving resiliency. Some of the transformations that we're doing, we're putting in data centers, putting things up into the cyber or applications into the cloud. So, all that is going forward. And then lastly, we're continuing to optimize revenue and expenses. We put some money into treasury management this past year, and we're now growing our treasury management revenues at double-digit pace. It's 13% right now. So, they're doing really good and continue to gain more momentum there in that treasury management. As we push more into C&I, that's a huge growth opportunity for us, and that's really what we're focused on in trying to grow and serve our clients.

Gerard Cassidy, Analyst

Great. Thank you.

Operator, Operator

Thank you. We'll take our next question from Chris Farr with Wells Fargo. Please go ahead.

Chris Farr, Analyst

Good morning. So, my question is just a little bit on expenses. Just wondering about headcount. What you're thinking about it going forward, since salaries expenses were up 4% year-over-year, which seems pretty good overall?

Daryl Bible, CFO

Yeah. I mean, we're right on track from our expense guidelines. Actually, we're doing a little bit better than what was in plan. So, you might see a little bit of shift in that in the second half of the year, but we're right on track. We're going to hit our plan numbers on expenses. I have no doubt about that. FTEs, we are down a couple of hundred in FTEs from the start of the year. So that's just being managed by all the leaders and their groups and all that. So, I think from an expense perspective, we really have an owner's mindset at M&T. They really take to heart how we spend money and make sure how we're spending money in the right places and getting the right outcomes from that. So, I'm really fortunate to have a really great company that really understands how to run a company both from a revenue and expense side basis. So, it's all really good.

Chris Farr, Analyst

And just to clarify, down a couple of hundred, not a couple of hundred million, correct?

Daryl Bible, CFO

No, a couple of hundred FTEs. Yeah.

Chris Farr, Analyst

I got you. All right.

Daryl Bible, CFO

Sorry.

Chris Farr, Analyst

And just on the outside data processing, how much does the big delta relate to the upgrade you've been discussing? Will some of that decrease, or have you reached a higher operating plateau in terms of tech expenses?

Daryl Bible, CFO

I would say the second half of the year, you might see elevations in outside data processing and professional services. As we have now seven projects and our investment accounts are ramped up. Those probably will be areas of increase or still come into our target that we set on expenses. So, I feel really good about that. Some of the projects are just larger and take time to ramp up. But as we get into '25, you'll see some projects start to complete. And whether we reinvest in other areas or not, we'll talk to you at that time right now. But overall, the company is making tremendous progress on many fronts, and we've got a lot of momentum going, and we're going to continue to press on that.

Chris Farr, Analyst

All right. Thank you.

Operator, Operator

And there are no further questions at this time. I'll turn the call back over to Brian Klock for any closing remarks.

Brian Klock, Head of Market and Investor Relations

Again, thank you all for participating today. And as always, if clarification of any of the items in the call or news release is necessary, please contact our Investor Relations Department at area code 716-842-5138. Thank you, and have a great day.

Operator, Operator

Thank you. This does conclude today's program. Thank you for your participation. You may disconnect at any time.