Ladies and gentlemen, thank you for standing by, welcome to the Heritage Financial earnings call. At this time, all lines are in a listen-only mode. Later, we'll conduct a question and answer session. Instructions will be given to you at that time. If you need assistance during the call, press star and then zero, and an operator will assist you offline. As a reminder, today's call is being recorded. I would now like to turn the conference over to Mr. Jeff Deuel. Please go ahead. Thank you, Cynthia. Welcome and good morning to everyone who called in and those who may listen later. This is Jeff Deuel, CEO of Heritage. Attending with me are Don Hinson, Chief Financial Officer, Bryan McDonald, Chief Operating Officer, and Tony Chalfant, Chief Credit Officer. Our earnings release went out this morning pre-market, and hopefully you've had an opportunity to review it prior to the call. We have also posted an updated Q1 investor presentation on the investor relations portion of our website. We will reference that presentation during the call. Please refer to the forward-looking statements in the press release. Overall, we are very pleased with our financial results for the Q1, particularly given the pandemic environment that has been imposed on all of us. We are also very proud of our team and their strong performance during a very difficult period of time. The Q1 results have been influenced by the declining rate environment, carefully managed expenses, and full participation in PPP Round Two. Additionally, our longstanding focus on credit quality and managing loan concentrations has played out well for us so far, and that discipline, together with the improving economic forecast, has enabled us to report more favorable credit trends and recapture of some of our reserve build from last year. The combination of these factors has allowed us to report an EPS of $0.70 for the Q1, as well as an ROA of 1.51%. While overall loan volume continued to be muted in the Q1, our team's focus was on portfolio management and Round Two of PPP with notable success. With most branch lobbies reopened, together with PPP Round 1 and Round 2 moving into forgiveness phase, as well as widespread vaccine deployment in our region, our teams are now focused on more traditional outreach to customers and prospects. We are already seeing results in a rapidly growing pipeline of deposits and loans, which positions us well for the balance of the year and into 2022. I also want to add that we have continued to focus on completing important technology initiatives during the past year, which we have highlighted on page six of the investor deck. I'm pleased to report that our CL360 initiative, one that will automate the loan origination process, has launched internally, and we will continue to enhance that platform over the balance of this year. Our new CRM platform, Heritage 360, will launch in June and becomes the foundation for client service across the Bank. Both of these undertakings will enable us to be more efficient, will enhance capacity on the team, and allow us to provide a more seamless customer experience. It's very exciting for the team to be moving these two initiatives into production. We'll now move to Don, who will take a few minutes to cover our financial results. Thank you, Jeff. As Jeff mentioned, overall profitability was very positive in Q1. I will be reviewing some of the main drivers of this Q1 performance. As I walk through our financial results, unless otherwise noted, all of the prior period comparisons will be with the Q4 of 2020. Starting with net interest income, there was only a slight decrease in net interest income from the prior quarter, and that was due more than anything to fewer days in Q1 compared to Q4. Other factors affecting this line item were an increase of $129 million of average interest-earning assets, partially offset by a two-basis point decrease in the net interest margin. The increase in average-earning assets was due mainly to the strong deposit growth in Q1. The decrease in net interest margin was due mostly to a higher percentage of excess liquidity. Interest earning deposits increased to 11.8% of average earning assets in Q1 compared to 9.5% in the prior quarter. This increase in the percentage of overnight cash was offset by a similar size decrease in the percentage of loans to average earning assets. Trends in the composition of average earning assets is shown on page 24 of the investor presentation. Removing the impacts of discount accretion and PPP loans, the yield on loans increased two basis points from the prior quarter. This increase was due mostly to a three-basis point positive impact from the payoff of a non-accrual loan during Q1. Bryan will discuss loan production and balances, including PPP lending, in a few minutes. We continue to work down the cost of our total deposits, with interest-bearing deposits decreasing three basis points from the prior quarter. Our cost of total deposits decreased to 12 basis points in Q1, which is an all-time low for the bank. More information regarding deposit growth and cost deposits can be found on page 23 of the investor presentation. As I previously mentioned, Q1 deposit growth was very strong. This growth was due to a combination of factors, the most significant of which was the deposit of PPP Round 2 loan proceeds into customer accounts. Even with the significant balance sheet growth, all of our regulatory capital ratios increased from the prior quarter and remain strongly above the well-capitalized thresholds. The combination of strong liquidity and capital gives us tremendous flexibility as we continue to grow the bank. As mentioned in the earnings release, non-interest income decreased substantially due mostly to significant gains totaling $2.8 million that were recognized in Q4. In addition, we experienced a decrease in the mortgage loan sale gains from the prior quarter. We expect that quarterly loan sale gains in 2021 will be somewhat lower than they were in the last half of 2020. We continue to see nice improvement in our overhead ratio. Due to the combination of expense management measures and asset growth, our overhead ratio decreased to 2.22% for Q1, compared to 2.30% in the prior quarter and 2.70% in Q1 2020. Non-interest expense decreased in the prior quarter due mostly to the costs in Q4 relating to the branch consolidations which we completed in January. Since the consolidations occurred in mid-January, we were able to realize substantially all of the cost savings in Q1. Additionally, non-interest expense levels in Q1 benefited from approximately $450,000 of deferred costs related to PPP Round Two originations. Offsetting the deferred costs in Q1 were approximately $600,000 of direct costs associated with PPP in Q1. These direct costs are expected to decrease to approximately $300,000 in Q2 and to $100,000 per quarter from Q3 of this year through Q1 of next year. A significant impact to our earnings for Q1 was the reversal for provision for credit losses in the amount of $7.2 million. Of this amount, $6.1 million was related to the allowance for loans, and $1.1 million was related to the allowance for unfunded commitments. Partly due to lower loan balances and a net recovery in Q1, the most significant factor for the provision reversal was due to an improved economic outlook. In addition, we are seeing improvements in many of our credit quality metrics. I will now pass the call on to Tony, who will have an update on these credit quality metrics. Thank you, Don. As you stated, in the Q1, we saw the first meaningful improvement in our credit quality metrics since the start of the pandemic in early 2020. We ended the quarter with net recoveries of $175,000. A modest level of primarily consumer loan charge-offs was more than offset by recoveries on several commercial loans. These loans had been in non-accrual status, and we were successful in recovering all of the principal and accrued interest. It's important to note that these were long-term workouts where the borrowers were already on non-accrual prior to the onset of the pandemic and were not directly impacted by COVID-19. For the quarter, non-accrual loans declined by $5.2 million, or 9%. As of March 31st, non-accrual loans totaled $52.9 million, or 1.15% of total loans. Loan payoffs and paydowns accounted for $3.6 million of the reduction, while the remainder was the transfer of several loans back to accrual status. The loans moved back to accrual status have a long history of payment performance and are all well secured by real estate. The addition of new loans to non-accrual status at $468,000 was much lower than we've experienced over the last three quarters. Potential problem loans decreased by $18.5 million during the Q1, or 10.2%. A significant component of this decrease was a paydown on a loan for a borrower in a COVID-19 impacted industry. Additions to this category during the quarter were generally offset by loans upgraded to a pass rating and TDRs that were reclassified to performing status. For more information on our credit quality, I would direct you to page 21 of our investor presentation. As we see many of our COVID-19 impacted borrowers continue to recover, we're seeing reduced levels of loan modification requests that we've been providing under the CARES Act. As of quarter end, there were 67 loans totaling $46.7 million that remained in a payment deferral modification status. This is down from 177 loans totaling $92.5 million at the end of 2021. Of these remaining modified loans, $36.7 million, or approximately 79%, are in the hotel and restaurant industries. In summary, we believe with the vaccine rollout and a continued movement back to a more normalized business environment, we should continue to see improved credit metrics over the next several quarters. I'll now turn the call over to Bryan, who will have an update on our loan production and our SBA PPP loan activity. Thanks, Tony. I'm going to provide detail on our Q1 production results, starting with our commercial lending group. For the quarter, our commercial teams closed $200 million in new loan commitments, up from $140 million last quarter and up from $161 million closed in the Q1 of 2020. The commercial loan pipeline ended the Q1 at $540 million, up 31% from $413 million last quarter and up from $506 million at the end of the Q1 of 2020. New loan demand has increased significantly in the last two months as discussions with customers on capital projects and expansion plans continues to accelerate. Loans excluding SBA PPP balances decreased to $44 million during the Q1, due in part to a 3% decline in the loan utilization rate, which reduced balances by approximately $50 million. Consumer production was $16 million for the Q1, down from $18 million last quarter and down from $49 million in the Q1 of 2020. The decline versus 2020 was due to the discontinuation of our consumer indirect lending business during the Q1 of 2020. Moving to interest rates. Our average Q1 interest rate for new commercial loans, excluding PPP loans, was 3.53%, which is up 21 basis points from 3.32% last quarter. The average Q1 rate for all new loans, excluding PPP loans, was 3.66%, up 24 basis points from 3.42% last quarter. The mortgage department closed $43 million of new loans in the Q1 of 2021 compared to $57 million closed in the Q4 of 2020 and $31 million in the Q1 of 2020. The mortgage pipeline ended the quarter at $36 million versus $33 million in Q4 and $54 million in the Q1 of 2020. Refinances made up 71% of the pipeline at quarter end. Based on the pipeline going into the quarter and a relatively higher mix of portfolio loans, we anticipate gain on sale to be closer to $1.1 million for the Q2. Moving on to SBA PPP. During the quarter, we provided 2,235 Round Two SBA PPP loans for $353 million, we would direct you to page 19 of the investor deck for additional PPP loan details. We plan to continue taking applications until close to the extended end of May expiration date for the program, unless funding expires sooner. Based on the current application flow, we now anticipate total volume for Round Two PPP will approach $375 million. The SBA PPP forgiveness application process continues to progress smoothly for Round One PPP customers, and we anticipate having the bulk of Round One applications processed by the end of August. We are already receiving requests from Round Two PPP customers who want to apply for forgiveness and are planning to start accepting applications for this phase by mid-May. I will now turn the call back to Jeff. Thank you, Bryan. As I mentioned earlier, we're very pleased with our performance to date. We are also delighted to be pivoting away from the defensive position we've been in for the last year and focusing on the more positive environment ahead. We are seeing a nice upswing in our pipeline across the bank, with deals coming from existing customers and new high-quality prospects. The heavy lifting by our team with PPP loans will pay dividends for years to come, and we continue to see evidence of that. Most recently, a significant new C&I relationship that was referred to us by a new customer in Portland who we helped with PPP Round One last year. Additionally, our presence in the core markets of Seattle, Bellevue, and Portland is still relatively new for us and continues to offer many new and exciting business opportunities, which will help further establish our positions in those markets. With the vaccine rollout, the latest stimulus package, and given what we know today, we believe the risk in the loan portfolio is much improved over just a quarter ago, and as things continue to open up, the performance of many of our most severely impacted businesses should continue to improve. We are also happy to see some long-term problem loans get resolved this past quarter. Our capital levels and our robust liquidity provides us with a strong foundation to address any remaining challenges and take advantage of opportunities. Our focus is on growth supported by efficient operations, and the leadership team continues to identify and implement process improvements and efficiencies that will allow us to continue to deliver consistent long-term performance in all of our financial metrics. You can see evidence of this focus in the notable decline in FTE numbers and the increase in average deposits per branch and the increase in average assets per employee. That's the conclusion of our prepared comments. With Cynthia, we're ready to open up the call to any questions anyone might have. Certainly. Ladies and gentlemen, if you wish to ask a question, please press one and then zero on your touch-tone phone. You'll hear an acknowledgement tone, and you only need to press the one-zero command once, as pressing it more than once will remove you from the queue. Once again, for any questions or comments, press one and then zero on your touch-tone phone. One moment, please. Once again, that's one and then zero. Allowing a few moments. I'm showing no questions in queue at this time. Well, Cynthia, thank you. That's a little unusual, but we'll move forward, and we'll see many of these people in the coming weeks. Jeff, if I could interrupt for just one moment. We do have a few people in the queue. Cynthia, I see four people. Okay. Actually, one moment. I do see a few questioners here. One moment, and we'll go to the first line. We'll take the first question from Matthew Clark with Piper Sandler. Your line is open. Hey, good morning. One-offs, I guess, throwing a curve ball at least at this time. I guess first question, wanted to hone in on the core NII outlook and the core NIM as well. Is your plan to try to grow core NII with maybe leveraging the balance sheet with securities from here? Obviously, loan growth sounds like it's going to be stronger going forward too, with the pipeline up. I just want to get your overall thoughts on kind of stabilizing, if not growing, core NII of $42 million in that core NIM of 3.27%. Thanks, Matthew, for the question. Just a sidebar comment. When you don't get questions, you worry if anybody's interested. Glad you joined in. Yeah. Don probably wants to jump in on this, too, but I think the overarching project that's in front of us is to just leverage our cash just in general. That's going to be a combination of us, obviously, leveraging through growing the loan portfolio, which we're feeling better about this quarter than maybe we were last quarter, and also more on the investment side. Don, anything you want to add to that? Sure. I think we're going to continue to experience some core pressure on the margin just related to the loan yields still coming down over the next few quarters. I do think we are going to offset that some by continued leverage of our cash position, which has continued to grow. I think that cash position will subside some now that we're kind of getting through round two of originations on PPP. As you know, we added quite a bit of reinvestments, almost $100 million, I think, in Q1. We'll continue to do that in addition to, again, hoping to ramp up kind of the core loan production going forward. A combination of the leverage of loans and investments. We will see the margin come down some more over the next few quarters. Okay. Then just on the pipeline, the increase in terms of what you're seeing specifically in terms of projects and maybe by region within your footprint? Bryan, you want to take that one? Sure, Matthew. To be honest, it's across the board. Just looking at the detail quarter-over-quarter, we've seen a big jump in King County, in and around Seattle, Bellevue, also down in the Portland market. Also the large counties on either side of the Seattle-Bellevue market have seen significant increases. We are seeing a lot of requests from our customers as well as new customers. There's also an uptick in development going on, we're getting an uptick in development requests. Really across the board, Matthew. All categories have been heading up really the last couple of months. Matthew, I would just for anecdotal feedback, I tend to use a measure of production based on how frequently the executive loan committee sees deals. We went from very few actions to we're kind of at a point where we're seeing something at least every day, which is a great sign for us. That's great. Last one for me, just on M&A. Any update in terms of discussions you're having and just overall activity there? Well, unlike the rest of the country, the Pacific Northwest seems to be pretty quiet still. I think the messaging we've been giving is thinking that first half would be fairly quiet. Based on where we are now, I think that's the expectation. We might start to see things move in the second half of the year. That would be ideal for us, primarily because it gives us more time to kind of launch these undertakings that we talked about a few minutes ago without distraction. We're ready if anything presents itself. Right now, things are fairly quiet. Okay. Thank you. Thank you. Our next question comes from Jeff Rulis with D.A. Davidson. Your line is open. Thank you. Jeff, we always have questions, getting through the queue here. I guess I wanted to add a question on the branch closures and kind of the retention of which or the impact to customers into sort of an update as you've seen it so far, what that might translate on expenses, kind of next question, and then just, I guess, looking at additional closures if thereafter. Kind of three-part. How's it going? Yeah. How does it impact expenses? Then the rest. Thanks. I'll let Don answer the expense question. I'll do the first and the third. We have been monitoring for the last couple of months. You can imagine that the deposits are overly impacted by the liquidity that's on the balance sheet. We're watching not just deposits in those locations, but also numbers of accounts. The result has been quite good in terms of retention. Even one location that was pretty distant relative to the consolidating branch is not seeing over-the-top runoff. We're feeling good about the actions that we took, and things are still well within what we budgeted for in terms of runoff. Additional branch closures, I would just put it to you that much like our compatriots in the industry, we're all laser-focused on expenses, and I think that we're always analyzing to determine what we can do to pare back or control expenses. We'll always be looking at the branch footprint, and I think you'll just see more activity in that area in general that you would've seen anyways over time. Eight branches for us was 15% of the footprint, so we're not going to rush to do eight more. We're going to wait a little bit longer and see how we've done with these eight before we step out again. I think that any expense in the organization is under review, and we're taking the steps that we think are appropriate as we progress through 2021. I'll jump in, yeah, on this. As I mentioned in my comments, Jeff, that most of the cost savings were baked into Q1, so there's not much more that you'll see in the future quarters on these. Overall, the savings per branch were about 250, so it's about $2 million on an annualized basis. I guess not much more to say about that because it's in Q1 numbers already. All right. It's wonderful, Don. Thanks, Don. Jeff, maybe I'll just circle back. I do try to recall last year at this time, you kind of mentioned it was sort of pencils down on M&A. As you say, it may be a quiet restart up in our region. I guess that's more on the maybe seller's readiness. Is that what's keeping it quiet? Certainly, your appetite. I think from a risk standpoint, you're feeling better. I just wanted to confirm that it really is the seller pace versus your readiness. Is that correct? Absolutely correct. We did go pencils down this time last year, and I think that was the right move given what we saw in front of us. As the year progressed and we got to the end of the year, we started feeling better about things. I think we've been ready to roll if an opportunity presents itself for the last couple of months. I do agree with you, Jeff. I think it's the sellers are quiet. It's not us not being ready to go because we are if it presents. Okay. The alternative to that, I guess, is if we get longer in the year, you guys have been pretty adept at capital management. Should M&A sort of stall, I guess kind of buy back the other capital deployment priorities, obviously funding organic growth. Beyond that, assume that you look at the other avenues if M&A doesn't play out. Yeah, I think we would. I think our top choice would be probably to see that loan growth continue to develop in front of us. There's always the notion of potential opportunities in the form of teams, which is also something we'd be interested in. We have added a couple of new folks to our team on the production side. There are conversations going on in that area that could develop into something. There's a lot of things that could develop. On the M&A side too, just wanted to point out that we have continued the usual conversations that we have to keep us in front of people and top of mind. Fortunately, the whole leadership team is pretty well connected with the other banks, so I am comfortable that we are staying close enough that if someone decides to do something, that they will remember to give us a call. Okay. Thank you. Thank you. Thank you. Our next question comes from the line of Jacquelynne Bohlen with KBW. Your line is open. Hi, good morning. Good morning. I just wanted to dig into the reserve ratio a little bit. Even with the quarter to capture, you're still really well reserved, especially if you look at where you were at on January 1st, 2020, which I kind of view as the starting point before we all knew what the next year was going to look like. With that in mind, you've already put some of the approved economic forecasts in there, what would need to happen in order to not have to do another recapture? Don may want to join in on this or Tony, I think where we sit now is, as I said earlier in our presentation material, that even just a quarter ago, we're feeling better about it, and feeling much more optimistic than we were in December, January. I think we are a fairly cautious institution, J acquelynne, and I think one of the things that we're waiting to see unfold is what is going to happen with that portion of the portfolio that falls into the high-risk categories. We feel good about where we sit right now and what we can see, things can change, as you are aware from being in the region, that just in the last week, we've gone backwards in the phases for a couple of the counties that we're in. One being Pierce, which is where Tacoma is, and the other being Cowlitz, which is where Longview is, Cowlitz County and Pierce County. I think that we're happy that we're taking it in gradual steps, and I think if we see things, portfolio quality deteriorate, obviously, that would stop us from releasing in the future, and the other would be potentially loan growth, Which we're hoping for as well. I think the reality is that things probably will progress the way they are, and I think that you would expect us to continue to have potentially continuing releases throughout the year. Yeah. Jeff, I guess I'll just add onto that. Jacquelyne, We still haven't started experiencing any losses, so our loss history is still really low. Until we start seeing some losses or have some significant growth on the loan side, it'll probably continue to work itself down over the year. We do take this on a quarter-by-quarter basis. Okay. Thank you. That's very helpful. Just one other one that I had. I know that we've spent a lot of time talking about the loan pipeline, but one of the prepared remarks also discussed the robust deposit pipeline. I was just curious about your expectations for growth there, particularly in light of you obviously had very strong growth from stimulus in the quarter, so how you're thinking about balance fluctuation for the rest of the year. I know which one should answer. Don, I'll let you jump in with the deposit growth rate. Jacquelyne Bohlen, one of the things that we realize and recognize is that while our expectation is that a good portion of the PPP related deposits will run off as forgiveness occurs and many of the business owners who got the proceeds and haven't spent it are going to start spending it and using it for other things. We know that deposits are precious. We feel they're even precious in this environment. The focus on originating deposits is an ability that we brought into our organization in a bigger way in the last few years, and we really don't want to stop that because we're probably going to want those deposits in the future. They also come with relationships, and those relationships continue to grow and evolve and help us expand the base of customers, too. Even though we have a preponderance of deposits right now, we have not taken our eye off the ball for developing deposits for the longer term. Don, maybe you could talk about the growth rate that's built in for us going forward. I think we're just in such unusual times here. Normally through the Q1 and most of through April, we see very flat and sometimes even contraction of deposit balances. Even if you remove the dollar amount of the PPP originations we did in Q1, we still saw pretty significant deposit growth. We're in uncharted territory here. I think that we are liable to see over time the deposit growth to flatten out, and then we would expect that over time, again, that some of these deposits will flow out of the bank because people start reducing the amounts that are in their accounts. We have added quite a few accounts related as a result of the PPP origination, so we're expecting those to stick around, at least maybe not as high balances, but overall. I think the deposit growth overall would be somewhat muted for the rest of the year, but I think we'll still see some growth. It all depends on when people feel more comfortable about taking their deposits out. Okay. All right. Thank you, everyone. Thanks, Jacquelyne. Jacquelyne, just want to go back to your question about the reserve release. I just wanted to highlight a piece of advice that someone in the industry gave us is that the market likes to see gradual moves. Any release on the reserve side, you're going to see it be, well, gradual. Okay. Somebody should have given that memo to FASB and CECL, huh? Yeah, that's true too. Thanks, Jeff. Thank you. Next, we will go to the line of David Feaster with Raymond James. Your line is open. Hey, good afternoon. Good afternoon, David. Just wanted to follow up. In light of your commentary on increasing demand, strong pipeline, new hires, and roaring into a seasonally stronger quarter, I guess, do you think we're at a trough here in terms of loans ex PPP, and that we should probably see accelerating growth going forward? I think that based on our comments, you could see that it has been relatively quiet for us. Part of that is because we've had our people so focused on managing the existing portfolio and originating round two of PPP, which was not an insignificant undertaking. Bryan may want to join in on this, but we've started to focus on, as I said, the more traditional customers, at calling and prospecting. I guess based on what we are seeing in the pipeline, we are seeing some really nice positive progress there. I think for second half, we're probably looking at high single-digit growth on the loan side ex PPP. That's what we're planning for. We may do better than that. I don't know. We'll have to wait and see. A little bit more time needs to go by before we can make that statement. Bryan, anything you want to add? I was just picking up on your comments, Jeff. Q1, if you dropped out the change in the utilization rate, would've been flat. What happens with that utilization rate is a bit of a driver. Overall production with the pipeline is heading up in the right direction. The third piece, which we really didn't talk about, was the prepay piece. Prepays were about $132 million for Q1, down from $176 million in Q4. If we go back pre-pandemic, we had some periods of $200 million or higher. To Jeff's point, we're seeing the loan demand and pipeline going up, and at some point, we would anticipate that utilization rate to bottom out and then head up. Yeah, higher single digits in Q2 or Q3 and Q4 certainly appears feasible based on what we're seeing in the pipeline right now. Okay. That's encouraging. Just looking at the slides, it looks like loan yields ex PPP actually increased in the quarter, and it's actually higher than it was in the Q3 as well. Just curious what's driving that. Is it a mix issue? Just generally, how is pricing trending? Has the steepening of the yield curve allowed for better pricing at all? Are there segments where you're seeing better pricing momentum or conversely, maybe even more pressure? Bryan, you want to take that one? Yeah. There's a bit of a lag, David, just what you're seeing closing out in the Q1 was kind of tail end of Q4 predominantly. Indexes are up. We've been doing our best to pass on pricing increases. We're seeing a really competitive market, more competitive right now certainly than what we saw at the end of the year or the beginning of Q1. Maybe that's related to the loan demand and others pivoting away from the PPP focus. Indexes are up. That's a real positive. I think we just have to wait and see just how competitive the market gets with all this increased liquidity. Certainly, loan repricings that are built into the book are at spreads. Those are going to convert to higher rates than they would've before the indexes moved up. How much pressure do we get from other competitors looking to refi? We're watching all of it very closely. Certainly in the quarter, we were able to pass on some of the index spreads. Again, we're just watching it week to week and month to month in terms of what our competitors are doing. David, this is Don, just for a follow-up comment here. The slide deck has going up about, I think, six basis points, the yield without PPP. We also have a table in the earnings release that also backs out the incremental accretion. That also had a three basis point positive impact quarter-over-quarter. It really went up two basis points, and then as I mentioned I believe in my comments, about three basis points was just due to one non-accrual loan that we settled on, and we were able to recapture the interest on that. I think overall, the yield was pretty flat quarter-over-quarter, and those were some bigger impacts on that. Okay. That's good color. Just want to touch on some of these tech initiatives. Whether there's going to be any upcoming expenses that we should expect associated with this, and then the ultimate impacts of these. It sounds like that they could help both on the growth and the efficiency side of the equation. Just how do you think about the benefits of these initiatives and maybe even what else might be on the docket coming up? Yeah. David, I think that someone seeing this from the outside may say, "Why are you developing it yourself and not buying it off the shelf?" Well, we went through that exercise and decided that we had the capacity to build more of what we wanted than what we could get off the shelf. A lot of the expense related to this is embedded in the IT expense that's been on our income statement for the last several years. It was in the form of a small team of developers that we brought on to help us develop this platform for us. It does create an opportunity for us to flex either capacity-wise to accommodate more growth, or to the other direction is not the direction we want to go in. We can shrink faster if we need to with the platform that we've put in place. We think that we're set up to manage through the growth that we believe is coming at us a little bit more easily than we would've in the past, where a lot of things before now were manual, and if we wanted to increase capacity, we had to add expense in the form of bodies. We can pass on that this time. I think that's why you can see us holding back on the FTE, for example, and that you can see in the FTE numbers. The ability to flex is one of the benefits that we're going to get out of it. Let alone the better customer experience that we're going to be able to put in front of our customers. The one piece of the technology that we referenced, the Heritage 360 and the platform, it being the platform for serving clients in the future. It is on the platform for our customers. It's a way for us to service our customers where and when they want to interact with us, which we haven't had up till now. If someone starts to do online account set up and they get stuck, they can go into a branch, and the branch will be able to go into the system and pick it up right where they left off and keep going. That's an advantage that we haven't had, and I think will benefit us in the future and maybe hold us out there as being a little bit different in our ability to support our customers. Don, maybe you want to make some comments about the actual expenses related to the initiatives and how they impact us. Yeah. Like you said, Jeff, most of the expenses are baked in. We do have some additional expenses coming on later this year, probably about $150,000 per quarter starting in Q3 that we'll be adding to it. Nothing as much significant as opposed to just the continued of what we're doing. Okay. That's great color. Thank you. Thank you. Next, we will go to the line of Andrew Terrell with Stephens, and your line is open. Hey, good afternoon. Good afternoon. Hey, I wanted to just ask on the office commercial real estate portfolio. It looks like the risk rating here was fairly stable this quarter. Can you just remind us of the underwriting in this portfolio from maybe a loan-to-value or debt service coverage perspective? Tony, you want to take that one? Yeah, sure. Andrew, good morning, or good afternoon, I guess, to you. I think one of the things I'd probably point out with that portfolio is it's split about 50/50 between owner-occupied and non-owner-occupied. We look at the owner-occupied as having a bit lower risk profile because you typically have the guarantee of the occupant, and you have much better visibility into the financial condition of that occupant. The other thing I would point out is when you take a look at that portfolio, we've segmented the portfolio into core versus what we call more suburban. The core we've defined pretty specifically as the very close-in zip codes around Seattle, Portland, and Tacoma. If you look at that portfolio, a little less than 5% of that is actually in those core markets, which have been a little bit less impacted by what's going on. We also do a very deep dive into our entire commercial real estate portfolio once a year and look at a very high sample of those loans. Just to give you a flavor of our office portfolio, when I look at the non-owner occupied, we have a weighted average loan-to-value of just under 59%, and on the owner occupied, it's just slightly over 60%. If you look at the debt service coverage on those portfolios, at least this large sample of those portfolios, the weighted average debt service coverage is about 1.65 on a non-owner occupied and 2.21 on a owner occupied. That's pretty stable year- to- year when we look at these samples. Generally speaking, our office portfolio has held up really well. We do see some pressure points on that as we move forward, but we just haven't seen anything yet. Perfect. That's really helpful color. You mentioned pressure points moving forward. Can you just maybe speak to the appetite in lending here, just moving forward, maybe given some of the lingering COVID work-from-home impacts and considering it's about 10% of the total loans? Yeah. I think we're always going to have an appetite for the right deals that are properly underwritten, and particularly that are relationship-oriented. I would say that in the office category, we're going to be very selective as we go forward until we sort of see what's really going to happen with the trends that we're all seeing out in the marketplace. Again, at this point, it's different from the suburban versus the core markets. We have to take that into consideration. Also, what we're finding is, to a certain extent, some of these opportunities are self-limiting because there's not as much, from what we can see, activity in the office market out there that we would really have opportunity to look at loans for, if that makes any sense. More of our opportunities, I think we're seeing, particularly on the non-owner occupied pipeline, would be more in the multifamily and industrial spaces. Mm-hmm. Okay. Great. Thank you for taking my questions. Thank you. Thank you. We have a follow-up from Jacquelyne Bohlen with KBW, and your line is open. Hi. Thanks, guys. Just one quick one. What was the balance of indirect auto at the end of the quarter? Don, do you have that? No, but I can look it up quickly. I think we're down to 120, but that's off the top of my head. I can look it up, though, really quickly. While you do, Jacquelyne, I remember you asked me about this last quarter, and how is it performing? That whole portfolio has performed quite well throughout the COVID environment. We did do waivers and things at the beginning, but that was fairly short-lived in the very first 90 days. We've had very few bad stories come out of that portfolio, which is nice. I think in retrospect, we might have expected more negative out of it than we got. Yeah. I was a little light, $177 million. We do pretty much expect that to kind of run off over the next two years. Hopefully that won't be as much of an impact on our overall loan growth by the time that hits. Okay. Jeff, to your added comments on its performance, does that change your view on the decision to exit? Well, I can't say we haven't talked about it, Jacquelyne. The timing of that original decision was not great, obviously, because loan growth is precious right now. We made that decision with our eyes wide open, and it was a strategic decision, and we've decided to stick with it and continue to hone the strategy of the organization to be very much focused on the commercial aspects of our organization. That, quite frankly, just doesn't fit with it. That's where we've come out on it. Okay. Thank you. Thank you. Thank you. At this time, I'm showing no further questions. Please go ahead with any closing comments. Thank you, Cynthia. Thank you, everybody. We appreciate the questions. You had me going there for a couple of seconds when we didn't get any, but happy to chat and looking forward to seeing some of you in the next couple of weeks as we start to have some investor meetings. Virtual investor meetings, I should say. Thank you very much for your time, your support, and your interest, and we'll see you all soon. Thank you. Thank you. Ladies and gentlemen, today's conference call will be available for replay after 9:00 P.M. today and ending May 7th. You may access the AT&T Replay System by dialing 866-207-1041 and enter the access code of 6157116. International participants may dial 402-970-0847. Those numbers once again, 866-207-1041 or 402-970-0847, and enter the access code of 6157116. That does conclude your conference call for today. Thank you for your participation. After using AT&T Executive Teleconference Service, you may now disconnect.