Q1 2020 Earnings Call
[music].
Greetings, ladies and gentlemen, and welcome to the Spirit of Texas Bancshares first quarter earnings Conference call.
This time all participants.
A question that Asheville, all the formal presentation.
Operator please.
Please press star here on your telephone keypad.
Now my pleasure to introduce your host Cherry Coleman Chief operating officer.
Thank you Sir you may begin.
Thank you operator, and good morning, everyone.
We appreciate you joining us for the spirit of Texas Bancshares Conference call and webcast to review 2021st quarter results.
With me today, as Mr., Dane bass, Chairman and Chief Executive Officer.
Mr., David Maguire, President and Chief lending Officer.
Ms. Allison Johnson, <unk> interim Chief Financial Officer.
Following my opening remarks, we will provide a high level review and commentary on the financial details of the first quarter core opening up the call for Q1 night.
I'd now like to cover a few housekeeping items.
There will be a replay of todays call and it will be available by webcast on our website at www dot so TB dot com.
There will also be a telephonic replay available until may seven 2020.
More information on how to access. These replay features wasn't included in yesterday's release.
Please note that the information reported on this call speaks only as of today April Thirtyth 2020.
And therefore, you're advised that time sensitive information may no longer be accurate as of the title of any replay listening or transcript breathing.
In addition, the comments made by management during the conference call may contain certain forward looking statements within the meaning of the United States Federal Securities laws.
These forward looking statements reflect the current views of management, however, various risks uncertainties and contingencies.
Good cause actual results performance or achievements to differ materially from those expressed in the statements made by management.
The listener or reader is encouraged to read the company's annual report.
Form 10-K filed with the FCC for the year ended December 31 2019.
To understand certain of those risks uncertainties and contingencies.
The comments today will also include certain non-GAAP financial measures additional details and reconciliations to the most directly comparable GAAP financial measures or included in yesterday's earnings release, which can be found on the spirit of Texas website.
Now I'd like to turn the call over to our chairman and CEO Mr. going fast Deane.
Thank you Jerry and good morning, everyone.
I'd like to begin this morning by thanking all of our dedicated employees and their families for their service.
Their commitment is truly want make spirit of Texas Bank, a pillar of strength in their communities we serve.
I'd also like to save our customers and shareholders for their continued support.
That's becoming a public company in May of 2018, we have operated in a strong economy exemplified by expanding GDP growth robust loan demand and strong credit quality.
Managers, we should be judged not only by are performing and a booming economy, but in our ability to pivot in times of crisis and weakness.
Over the same hearing we have maintained strict credit underwriting standards diversification of loan portfolio, both in geography as well as concentration.
And retained experience credit managers, who are personally experienced entire credit cycle.
Numerous times.
We believe that these measures placed us in a position of strength.
To work through the current.
Phase of the credit environment.
Knowing very well that each economic battle that's different.
Additionally, we must make a preservation of capital as a strategic focus along with sustaining profitability and dynamically managing risk throughout the organization.
The current economic environment has presented us with a challenge to assess protect utilize our strength to ultimately provide us the ability to take advantage of the valuable growth opportunities once the economy stabilizes.
In the short term, we must do airport to ensure the safety of our employees customers. The communities we serve.
We have instituted best practices in prescribed protocol to respond swiftly and appropriately to the covert Nike and slow the spread of the global pandemic.
All branches are fully functioning even though the lobbies their clothes and we're offering a full range of banking services, and our drive thrus or appointments with lenders.
Despite the current environment, we're pleased to announce adjusted net income of 4.8 million for the first quarter and adjusted earnings per share of 26 cents.
Additionally, we completed the successful closing another branch acquisition with Simmons Bank during Q1 2020.
Which added over 260 million in loans.
And over 139 million and deposit as well as allowed us to expand our footprint into the Austin and San Antonio market.
To ensure that we can continue to report strong financial and operational results going forward. Our strategic objective in response to the current economic environment consist of preserving our strong capital position managing risk and mitigating losses to quickly if that resolve credit issues.
By working closely with our customers and addressing their needs time.
Balancing loan growth with the need this stabilized net interest margin and diligently managing expenses.
Additionally, we have been able to leverage our extensive experience.
But small business lending.
And our preferred lending status with the FDA to effectively and efficiently digest the provision of the cures Act and offer a customer payroll protection program loan.
Port their working capital needs.
As of the date of this call we have supported numerous customers and helped in preserving thousands of jobs in the communities we serve.
I would like to conclude by personally. Thank you know a hard working health care professionals.
I have experience first hand their level of care.
And though that these individuals or true heroes.
Now I'd like to turn the call over to Mr., David before our President and Chief lending officer to discuss the loan portfolio and provide some additional detail on our participation in the payroll protection program David.
Thank you Jane.
[noise] as I'm sure you would expect our strategic focus during the first quarter of 2020 quickly shifted.
I'm studying that appropriate paced an expectation for loan growth for the year to deploying all of our talented lending staff and accomplishing the mission of engaging with each of our borrowers and determining the unique challenges they face and their capital needs.
As we saw in 2008 in 2009 Christ as an economic weakness is not unprecedented however, when access to capital disappears. The problem is magnified.
We're committed to providing the liquidity in funding that our quality borrowers need to weather the storm, while aggressively managing our own liquidity and strong capital position.
While some of our borrowers works well experienced no loss of operating income during the global epidemic. It is imperative that we identify and monitor the industries in our loan portfolio that will be significantly impacted and continuously monitored the financial health of our customers operating and these industries to mitigate losses.
Wherever possible.
Industries currently being monitored by a credit administration personnel and related exposures, including retail strip centers.
Hospitality.
Restaurants, and direct and indirect auto exposure.
Retail centers at March 31, 2020 consisted of $116.2 million or 5.8% of the loan portfolio.
Are these retail strip centers, 71% or non owner occupied and the remaining 29% art owner occupied.
[noise] hospitality exposure at March 31, 2020 consisted of $90.1 million or 4.5% of the loan portfolio.
Now these hospitality lounge, 77% or term loans and the remaining 23% or construction loans.
At March 31st 2020, the loan portfolio consisted of $50.6 million of restaurant exposure or 2.5%.
Oh, these restaurant loans, approximately 54% or quick service restaurants, and the remaining 46% our full service restaurants.
Total exposure in the loan portfolio at the ended the quarter was $73.4 million or 3.6% of total loans outstanding direct energy exposure was 2.2% of total loans outstanding and 1.4% was indirect energy exposure.
During the first quarter 2020, the loan portfolio grew to $2 billion compared to 1.77 billion at December 31st 2019th.
The growth in our loan portfolio was primarily driven by the closing the recent branch acquisition, which added over $260 million at lunch.
Excluding the acquired lives. We're pleased to report total originations at $59 million or 19.9% annualized.
During the quarter, we still $50.2 million worth a loan participations to provide additional liquidity, which resulted in net organic loan growth to $8.8 million.
The yield on loans in the first quarter 2020 was 5.94%, which decreased nine basis points from Q4 2019.
The reduction year was anticipated given the decrease in underlying index rates in the fourth quarter of 2019 and the late in the late first quarter of 2020.
As at March 31, 2020, approximately 35% of our variable rate loans were at their floors.
58% of the remaining lens set to reprice will reprice in Q2 2020.
For the remainder of 2020, our loan growth expectations would be driven by the ability to price still at or above our current yield and the necessity of controlling risk within the before portfolio.
Asset quality continues to remain strong in the first quarter 2020, nonperforming loans outstanding loans were 38 basis points at the end of Q1 2020 compared to 37 basis points at the end of Q4, 2019, and 52 basis points at the end of Q1 2019.
The provision for loan loan losses for the first quarter was $1.2 million, which increased the allows to 7.6 million worth 38 basis points of our loans outstanding.
The coverage ratio on the organic portfolio was 63 basis points on the $1.2 billion and organic loans outstanding at the quarter in.
Annualized net charge offs were six basis points for the first quarter 2020.
Strong credit quality entering the current economic environment allows us the flexibility to work with borrowers to structure loan workouts deferments and other credit measures deemed prudent.
Our three veteran chief credit officers with.
Combined more than 115 years of experience provide the knowledge necessary to to determine exactly when to deploy these measures to mitigate losses.
Currently we have received an approved <unk> relief request, including the periods of interest only payments full payment deferrals.
And escrow deferrals associated with loans.
On an unpaid principal balance of approximately $418 million.
While these approvals were given for a period of 90 days the easy impact of business closures and reduced demand. We also use this time to stay in contact with our borrowers and gain more insight into their long term financial stability in our collateral position.
We will evaluate the need for additional action throughout the second quarter based upon the status of the permit the actions a federal state and local government and the needs of our borrowers.
Subsequent to the quarter end.
We have approved and funded approximately 500 million.
Dollars a P.P. lines.
This program has allowed us to assist roughly 3000 of our customers and has the potential to have saved as many as 60000 jobs.
Our lending staff has worked tirelessly over nights and weekends sacrificing their engine individual needs for the needs of the communities we serve.
I would like to take a moment to publicly say thank you for this sacrifice and note that I'm proud to work with many talented individuals who are positively impacting the lives of so many.
With that I'll turn the call back over to Jerry Goldman to provide a review of the funding side of the company.
Jerry.
Thank you David.
Total deposits at the end of Q1 2020 were 2.0 <unk> billion, an increase of 7.7%.
From Q1, 2019, and an increase of 72.6% over Q1 2000 might treat.
The year over year growth is largely due to the whole bank acquisitions email and Tyler and the recent branch acquisition.
Our acquisitions over the last 12 months have allowed us to reduce our reliance on certificates of deposits as a funding source.
As of March 31, 2019.
Time deposits made up 48% of our deposit base.
At March 31, 2020 that number had dropped to 34%.
This improved deposit mix, that's helped us keep our cost of funds deposit beta is well under control.
Our cost of interest bearing liabilities was down five basis points from Q4 2020.
Cost of all deposits declined five basis points to 0.93%.
Borrowings increased 8.1 million in Q1 to 113.3 million due primarily to drawing down on our third party borrowing by and at the holding company to support the company's repurchase plan.
Borrowings totaled 4.5% of total assets at March 31, 2020.
The loan to deposit ratio ended the quarter at 96.9% as compared to 91.7% at the end of Q4 2018.
93.6% at the end of Q1 2000 my team.
Illustrating the impacts of the acquisitions.
The bank maintain sound balance sheet liquidity was significant contingency funding sources.
With the banks active participation in the PPP businesses were required to fund their loans into a specialty created spirit of Texas Bank account.
This not only has eased the liquidity needs that arose from the program, but it also facilitates the proof of spending required for the eventual forgiveness of debt.
The bank is utilizing the federal reserves BPP liquidity facility.
To provide further liquidity as the business has spanned the funds.
At the end of Q1, the bank had availability at the FHLB, a $533 million, along with $90 million availability under fed funds lines with corresponded banks.
I would now like to turn the call over to our interim Chief Financial Officer, Alan Alan Johnson to provide a financial overview of the first quarter Allison.
Thanks, Jerry and good morning, everyone.
We provided detailed financial tables in yesterday's earnings release.
On a consolidated basis net income for the three months ended March 31st 20, 24.1 million with fully diluted EPS of 22 cents compared to earnings of 3.8 million and fully diluted EPS of 30 cents in the first quarter 2019.
Non-GAAP earnings for the first quarter of 2020 were 4.8 million or 26 cents a non-GAAP EPS.
The pretax non-GAAP adjustments for the first quarter of 2020 consisted of 1.6 million in merger related expenses for conversion costs related to the Tyler acquisition and the recent branch acquisition and from contract termination penalty offset a 575000 dollar tax benefit related to it.
No well carry back.
Our tax equivalent margin in the first quarter 2020 was 4.4% against fourth quarter 2019 margin of 4.43% for three basis point decrease.
The impact of the decrease in interest rates by the Federal open market Committee during the fourth quarter of 2019 and in March of 2020 was partially offset by the migration of our low yielding excess cash into higher yielding loans through the recent branch acquisition.
As of March 30, Onest 2020, our yield on loans with 5.94% a decrease of nine basis points from Q4 2019.
35% of our variable rate loans are currently at their floor and 58% of our remaining variable rate loans will reprice during Q2.
In light of the current economic environment, we are revisiting our current strategy related to earning assets updating our forecast with respect to loan growth with the goal of save a stabilizing net interest margin during the second quarter.
The provision for loan losses for the first quarter was 1.2 million, which increased the allowance to 7.6 million or 38 basis points of our loans outstanding.
The majority of the provision expense for the quarter related to increasing qualitative reserves in response to the current economic environment as opposed to a deterioration in credit quality or an increase in impaired loan balances.
The coverage ratio on the organic portfolio was 63 basis points on the 1.2 billion inorganic loans outstanding at quarter end.
We have reviewed each of the acquired acquired loan portfolios and have determined that it is not appropriate at this time to reserve for these loans beyond the 7.7 million unamortized discount at March 30, Onest 2020.
As an emerging growth company, we've opted to delay the adoption of Cecil until 2023.
Under our current incurred loss model our reserves are based upon an estimate of loss events, which have occurred as opposed to forecasting future lots of that.
Over the next few quarters as we gain additional insight into how our borrowers have been impacted we anticipate elevated provision expense and a corresponding increase in coverage ratios.
Noninterest income was 2.7 million for the quarter.
We saw 165000 dollar increase quarter over quarter in service charges and fees, primarily as a result at the rate of the recent branch acquisition.
Additionally, during Q1 2020, we began offering our customers interest rate swap, which are administered by a third party correspondent bank.
The bank is not a counterparty in the swap, but instead earns a referral fee when our customer enters into the interest rate swap with the correspondent bank.
This new product generated 580000 fee income during the quarter, which assisted an offsetting the decline in loan sales for the quarter.
Sta servicing fees net were down 381000, due to prepayments and fair value adjustments.
We currently believe that future declines in the Sta servicing asset due to fair value adjustments will not continue going forward. However, we do anticipate a continued period of fewer loan sales.
Noninterest expense was 21 million for the quarter, an increase of 2.3 million or 12.3% from Q4 2019.
The 21 million of expense 1.6 million related to pretax merger related expenses.
Additionally, during the quarter, we incurred 486000 and onetime employee related expenses.
For the second quarter, we expect noninterest expense to be flat, an 18.8 million as the conversion for Tyler has been post onto the third quarter 2020.
Our effective tax rate for the quarter was 7%.
During the quarter, we took advantage of the provision and the cares Act and allows us to carry back net operating losses to a prior tax year.
This resulted in a reduction of income tax expense of 575000.
We currently have a strong capital position at both the bank and the company on a consolidated basis.
We closely monitor the tier one leverage ratio and maintain a targeted minimum of 8%.
As of March 31st 2020, the bank at a tier one leverage ratio of 10.79% and the company on a consolidated basis had a tier one leverage ratio of 10.96%.
Additionally, by using the Federal reserve PPP liquidity facility loans originated under the payroll protection program are neutral the capital.
During the quarter, our stock began trading below tangible book value per share. We view this as an opportunity to repurchase 321000 shares of undervalued stock.
The company has previously considered the repurchase of shares as long as the internal rate of return from purchasing shares exceeds the return earned on other investment opportunities.
The stock buyback plan currently in place expires in June of 2020.
We will continue to reevaluate our stock repurchases as we get better clarity on the lengthened severity of the pandemic.
I'd now like to turn the call back over to Mr. bass for wrap up Deane.
Thank you Allison while challenging times are ahead for many we believe we will emerge from this period stronger.
And with the ability to significantly enhance shareholder value.
This concludes our prepared remarks.
I'd like to ask the operator to open up the line for any questions.
Operator.
Thank you, ladies and gentlemen will now be conducting a question answer session and we'd like to ask your question. Please start your telephone keypad.
Got you mentioned total indicate your line is in question.
You May go start to move your questions. Thank you.
Okay.
Maybe necessary.
Yes.
Our first question comes from the line.
Please proceed.
Hi, good morning, guys.
Good morning.
Hi, Dan it's great to hear from you and glad you're glad you're feeling better.
Well I was glad to be heard [laughter] I'm sure.
I wanted to start on the loan participations sold.
Around $50 million at a pretty sizeable chunk, how what's the normal level of participations.
Do you guys typically sell and what drove the decision to.
Participate these loans out and I guess it sounds like we could see additional participations the rest of year, just kind of update us on your strategy there. Thanks.
Matt This is David.
We when we close the branch transaction with Simmons.
There's a gap there that we needed to cover between the loans and deposits and that was part of the reason behind that and too.
Make ourselves as liquid as possible going into the ended the quarter not knowing really what difficulties lighter lie ahead for us and working in concert and Tony buyers, but.
We don't anticipate anymore at this point, we're in a good position right now and.
With that ERP program in place were able to fund that.
With their own money on the front end and then we have the ability to go and.
Go that PPP loan fund and get and get borrowings there as needed.
No I might add one thing David we're tracking at the what 98% to 99% Alison and I'm remembering that right loan deposit ratio 99, plus maybe 99, three and so what we're thinking is give a little more room there for us to build that back up we we have the capacity ability for the latter part of the quarters.
This year Weve felt comfortable not knowing exactly what might come out of so we mellowed that created a little more funding sources, there and I think we positioned ourselves very well back down in the 96 range that Craig Ellis.
Correct.
Okay. That's helpful. I guess, just taking a step back on the on loan growth for 2020 can you just kind of talk about the.
Pushes and pulls and that's on the new hires that you guys have have made over the last few months then.
I understand the visibility is challenging here, but what's the expectation for loan growth this year. Thanks.
Okay.
Matt right now is pretty foggy out there to be able to even look out 30 days to safe, we're going to all of sudden have big alone surge, but I can tell you that we believe that coming out of this that.
Customers will be need to reborrow, our or borrow Additionally for working capital purposes, and so we see that actually benefiting us in the SP, a world and possibly in our conventional loan portfolio. So too early to tell anything about that but most of our customers.
As you can expect probably nationwide you're hearing hit pause button and is that the I think is towards the ended the quarter.
The second quarter, we'll have a little bit clearer picture of what the rest of the year will look like.
Yes, I might add something this is dina as as the world turns back and we see the new normal you know the pains and sales will be seen different places, but also the high net worth individuals and and those that see opportunity and gain advantage. During downtime. Those are some of the individuals that we have been able to pull in their lenders and.
And those kind of that customer base over the last six nine months and so that's also an additional group became with us from Simmons and Jeff playing in that group has an outstanding banking group that is doing this along with our Dallas same in our corporate theme that joined us from Metroplex, and so you know as thing.
Things normalize turn back around we think we'll be well positioned we were heading into the quarter as good as we've ever look into in the February and position ourselves very well and really liked our positioning in like the team and the and the army we had behind us so.
Where we're still optimistic as to where we're going to be this year.
Soon as we can see they ended up on the light at the end of this kind of.
Okay, very good and then I.
I guess for Allison.
The margin outlook from here, obviously, there's lots of moving parts with the acquisition and the liquidity, but any kind of a commentary you can give us as far as the direction of the margin more more near term and obviously PPP adds another wrinkle that so if thats something you want to exclude from you know prefer just for your response that.
That would be that'd be fine too.
Sure, Matt Yeah, so I'm going to exclude any any discussion around the payroll protection program right now, but just creates so much noise, but going into Q2 as we mentioned on the call.
Currently 35% of our variable rates are at their floors.
We do in Q1 as of April 1st we're going to have 58% of our remaining variable rate while in three price. So you are going to see some compression in the loan yield. However, we do expect to see.
Cds reprice in Q1, so we'll get some relief and our cost of funds.
So going into Q2, I expect probably a compression of the net interest margin of approximately 15 basis points, and then seeing the stabilization and going into Q3.
Okay got it that's helpful.
That's all for me. Thank you guys.
Thanks.
Thank you.
Our next question comes from the line, Brad Milsaps with Piper Please.
Please proceed with your question.
Hey, good morning.
I wonder.
Pardon Dino Dean Grad, Yervoy slide glad you back and feeling well.
Thank you guys yes.
Guys addressed a lot of my questions already but also you mentioned that you thought expenses would.
Kind of remain flattish linked quarter.
Would you still expect to see some costs aid in the back half of the year and maybe the run rate falls off a bit from the second quarter level. After you complete the conversion that you mentioned that got pushed off into the third quarter.
Yes, so short in short answer, yes, I would like to say that when we started out this year, our strategic focus was on organic growth and expense reductions. We did see we've started making a lot of progress with strong organic loan growth and brought on an additional source of fee income through our new interest rate swap price.
Correct as well as made up a reduction on the head count for some redundancies on staff.
But then of course as a result with the pandemic that kind of got the real so our focus shifted more to the preservation of capital liquidity and credit quality, so but that being said you know the Tyler Act. The Tyler conversion got pushed back into Q3, which we were expecting in Q2 to get some cost savings from there. So we.
We'll see those cost saves coming in in Q3, and assuming that that doesn't get pushed back further.
So excluding the merger related expenses on the onetime employee related expenses that ran through Q1, Yeah. I do expect interest expense noninterest expense to remain flat at 18.8 million for Q2.
And obviously, we're going to remain cognizant of any discretionary spending during that time, but no. We will start seeing the cost savings again coming back in Q3.
Got it is the twoq might be it might be a peak.
All else equal for the year.
Yeah.
Got it.
You guys also talked about I believe RG correctly, you know.
I will like the provisioning would remain elevated.
I think our did you say the reserve.
Represents about 62 basis points of the organic portfolio and a quick math that thinks about a 1% or little less than 1% reserve or discount on that on the acquired book.
Any sense in your mind, what you might like to see that reserve level go to over the next.
Two or three quarters, obviously, I know a lot of depended upon the environment, but just kind of wanted to get a sense of where that 62 basis point number.
Could go.
For the remainder of the year.
So I'm I'm, just really hesitancy answer that question comes really too soon to tell we are aware that we do expect our provision expense to be elevated going forward as well as saying that corresponding increase on the coverage ratio.
We are credit closely monitor our credit portfolio and worked both loans to build to do those reserves, but as far as where we're where we want to land I just I really at this point can give you any guidance there.
Okay, and then final question just as it relates to the margin.
Was there any were there any significant amount of purchase accounting accretion or other discount that you recognized.
In the first quarter that that might not be there in the second just kind of curious kind of what that number was if any and the first quarter.
Yeah, so accretion of purchase accounting accretion is less than 3% of our at that number so it's really insignificant.
I expect that to probably remain flat going forward, so thats really not going to be a significant portion of the of the now.
Got 3% of interest income.
Yes, yeah.
Okay perfect Alright, Thank you guys.
Thank you Brad.
Our next question comes from line of Brady Gailey with KBW. Please.
[music].
Hey, Thanks, guys glad you do a better to him.
Thank you.
So 500 million.
Three lines is a big number for you guys. If you put the average 3% beyond there that's $15 million a pre tax income.
It was that the right way to think about the opportunity there.
Right, It's David that's why we're looking at it.
Yes, I think our that's that's an approximation you know course, but that's a that's a that's in the ballpark.
What's the opportunity on route to people, who do you have any idea how active you could be beyond the 500 million.
Is starting to slow down we're still actively accepting applications.
We're all of our customers they asked for them Gotham.
Proud to say that and we were able attracts another new customers to us that are going to lead to some opportunities in the future force, but we are still getting calls from people that we all know from our our past and saying Hey, you know.
It's why is the bank said I could and they couldn't do it for me and these are big National banks, and others have said, they and they come to us and were able to do them sales. So we have we have processed every loan application in the pp fee program as of.
Dave as of yesterday morning, and so is always money's available still in the PPP program route to will be open to accepting new applications.
And then it Theres a.
A.
Round three all of our employees now or are certainly scalable. They can do a lot and and we will get even more efficient that we were the first two rounds.
No I might add one thing. This is Dave I took a lot of free pretty work. The good thing in the bad thing with Sta being delayed Kevin.
Was or or getting approval.
It it gave us more time and David and team did an excellent job Prepping, then and preloading given as much as a leg work done so that when it clicked on it wasn't on our end because it can go through and so is it through it was very time consuming.
Okay, and then on share buybacks.
It looks like you repurchase a little under 2% of the company in the first quarter.
Your stock is still at about 80% of tangible you still have a half percent T C.
Yes will you be buying back stock.
Going forward.
We're going to continue to reassess that based upon the lengthen the severity of the pandemic.
And the current economy, but.
Given the given that it's so undervalued at this time and trading below tangible book, we just feel like it's a good investment opportunity to continue doing that at least through the end of our.
Repurchase plan, which expires in June.
And we like this the thing.
Absolutely we like we like the position we're in we but we don't like position when but we we certainly like as as a board will make that assessment look at that regularly and and try to do what's in the best interests of the company will reassess that through June.
So how how much is left in the buyback authorization.
Or formula.
That's under that program, though it's not right. So so we still have alternatives.
Correct.
And then the new fee income from the swap referrals about 600 ran this quarter. It was that is that something is that once you run rate kind of the right way to think about the run rate going forward no one that'll be a little follow to upside downside.
So honestly, it's little too soon to tell.
Again deals are put on hold right now so that probably is going to remain pretty nominal going into Q2, Q2, but I'll, let David elaborate further on that.
Brady, we turn that program on a kind of in the middle the quarter.
Really not in so we thought that it the run rate might be easily double that but right now no we had several deal.
That were scheduled to close right before the ended the quarter or right. After the ended the quarter that got put on hold I think every customer out there is a rightfully so assessing their situation and assessing what's around them and before there.
Making these big decisions, including new borrowings that this product would be great for but we have a lot of faith in this product because it's allowing us to compete in a in in a pricing arena that we hadn't been able to do before and so and that's that was very helpful to order, our new corporate banking group and anti.
Other large borrowers around the company. So we still see it is a very viable.
Product for us, but it's like I said, it it's going to be based on new volume new loan volume and any any.
Fixed rate customers that we can pull into that that are currently on the books.
And let me. This is the only just add it looked like mid February that that would be the any offset and be a positive plus for any maybe offset on SP, a that that might be a lagging or slacking or whatever might would happen there that that offset.
From from those loans would.
Oh penetrate over any type of target ranges, there and we in the pipeline itself was so strong not just in that market. Overall that has certainly look like that was going to be a an extremely strong quarter in that particular, one component here, what's going to exceed expectations as well.
Got it thanks guys.
Thank you, ladies and gentlemen, nice.
Hi session I'd like to turn it back to the batch for closing comments.
Thank you very much and thank you for your participation and interest in our company.
We hope to see you soon when things normalize and it will.
Please stay away from the virus, that's all I can advise thank you.
Thank you ladies and gentlemen. This concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation.
Are we still on.
I'm still here okay.
Yeah Okay.
Okay, we're off.
No.
[noise].