Q2 2021 Veritex Holdings Inc Earnings Call
Good day and welcome to the vertex holdings second quarter 2021 earnings conference call and webcast all participants will be in a listen only mode. Please note. This event is being recorded I will now turn the conference over to MS. Susan Caudle Investor Relations Officer, and Secretary to the board of Air Techs Holdings.
Thank you.
Before we get started I would like to remind you that this presentation may include forward looking statements and those statements are subject to risks and uncertainties that could cause actual and anticipated results to differ the company undertakes no obligation to publicly revise any forward looking statement at this time, if you're logged into our webcast.
Please refer to our slide presentation, including our Safe Harbor statement beginning on slide 2 for those of you joining us by phone. Please note that the safe Harbor statement and presentation are available on our website vertex bank Dot com all comments made during today's call are subject to that safe Harbor statement some of.
Cancel metrics discussed will be on a non-GAAP basis, which our management believes better reflects the underlying core operating performance of the business. Please see the reconciliation of all discussed non-GAAP measures in our filed 8-K earnings release, joining me today are Malcolm Holland, our chairman and CEO Terry Earley our.
Our Chief Financial Officer, and Clay Riebe, our Chief Credit Officer, I will now turn the call over to Malcolm.
Good morning, everyone. My team and I are excited to discuss our second quarter earnings were back to business as usual feels like momentum is continuing to pick up for the quarter, We announced operating earnings of 60.
60 cents, a share or $30 million, while producing a pretax pre provision return of 1.66%. We also announced the dividend increase from 17 cents per share to <unk> 20 per share an 18% increase.
We have been communicating for several quarters the people investments we've been making over.
Over the last year.
We're beginning to see some of the early results of those investments for the quarter, we grew loans, excluding PPP in mortgage warehouse, 21% annualized.
For the year, we were at 14, 5% annualized growth, we expect that for the year we.
We will remain in the 14 per cent range due to our level of unfunded commitments early signs of increased C&I usage and our pipeline strength.
Our mid July pipeline is up over 50% from the same day in mid April and it is at its highest funding.
<unk> forecast in the company's history.
On page 7 bottom right, we're showing you that our lenders are incredibly productive with 26 of our top producers generating $47 million in average production for the quarter.
It should also be noted that the new loan.
On production for the quarter is made up of 545 loans with an average commitment of just under 2 and a half million dollars proving out that all areas of the bank are participating in our growth initiatives.
Additionally, we provided a quick snapshot of our construction loans that.
See some indication of the underwriting and ultimate approval metrics of new credits that were book during the quarter.
Deposits continue their positive trend upward growing 4.3% annualized linked quarter, but more impressive is the growth in the non interest bearing category.
We now sit at noninterest bearing deposits greater than 34% of total deposits.
With this growth and deposit pricing focus we continue to drive our deposit costs down from 31 bps to 23 bps quarter over quarter.
Our asset quality continues with all.
Gibbons in a positive direction.
N P as reduced for the third straight quarter to <unk>, 86% of total assets past dues declined to their lowest point over the last 5 quarters.
Our ACL decreased to 159, excluding mortgage warehouse on PPP with no.
No credit loss provision and net charge offs of $5.4 million for the quarter carrying clay will provide further details momentarily.
Sure.
Thank you Malcolm on page 5 youre going to see multiple graphs on 1 to make a comment on a couple of these first tangible book value per share increased.
Trent Teen dollars 16 from second quarter.
21% increase on a linked quarter annualized basis and translates to just over 21% year over year increase after adding back the impact of our quarterly dividends growing tangible book value per share remains an important priority for our management team.
The SEC.
Graph is on our operating return on average tangible common equity remained very strong in the second quarter and as average 15, 6% over the last 4 quarters as <unk> weathered it depend emmick rising capital levels and lower balance sheet leverage is putting downward pressure on this on this important metric moving to.
Slide 6 Malcolm has already mentioned our growth for the quarter, we saw growth in all on balloon segments, except multifamily.
Average mortgage warehouse balances declined 10, 8% in the second quarter, reflecting lower mortgage origination activity and shorter dwell times. This portfolio sits at 7% of <unk>.
Average total loans excluding PPP.
It has grown 49% year over year I'm talking about the average mortgage warehouse balances. This growth in the portfolio has been a great tool to absorb the excess liquidity generated during the pandemic.
It remains our intent to keep the average mortgage warehouse portfolio at 10%.
Average total loans.
Yeah.
Skipping over to slide 8 net.
Net interest income increased 1.5 million or 2.3% from Q1 and totaled $67.1 million in Q2, the most significant drivers of the increase.
Our loan growth and lower.
<unk> deposit rates. This was partially offset by lower loan yields and interest reversals on certain non pud PCB loans next day net net interest margin declined 11 basis points from Q1 to 311%.
For Q2, the PPP portfolio represented a 9 basis.
Center, let drag on the NIM and average liquidity was approximately $350 million higher than our normal target level.
This had the impact of depressing the NIM by 11 basis points. So on the aggregate PPP and excess liquidity represented a 20 basis point drag on the quarterly now.
Also note that Q.
2.1 production to 3.9% in Q2 interest bearing deposit production was at 24 basis points.
As you look forward to Q3 and model net interest income keep the following 3 things in mind.
Quarter end loans, excluding mortgage warehouse on PPP or $175 million.
At this point above the average balance for the second quarter.
The PCB accrued interest reversals of $1.3 million should not reoccur in Q3.
Lastly day count is always important these factors give us optimism that the growth in net interest income from Q2 to Q3 will be meaningful.
Meaningfully higher than the growth, we just experienced in Q2.
Please note the assets sensitivity information on the slide including the 67% of our floating rate loan book are eligible to reprice immediately.
On slide on slide 9 another strong noninterest income quarter with $12.5 million of revenue or.
$8 million, excluding the fair value impact of PPP, all categories, except mortgage were up for the quarter was the single biggest contributor being the origination and sale of SBA guaranteed loans gain on sale premiums are the strongest we've seen in years.
Operating expenses on slide 10 increased $1.5 million.
Or 10, leading the severance costs associated with our previously disclosed branch Reese.
Restructuring over 60% of the expense is the increase is attributable to marketing cost and this increase is a function of our sponsorship of the Korn Ferry golf tournament held in Q2 and Dallas Fort worth.
On slide 11 vertex had another.
Another good quarter on the deposit front as we grew $307 million.
Or a little a little over 4% on a linked quarter basis. The graph on the bottom left on the page shows the trend in quarterly deposit costs and are down 8 basis points from Q1 to Q2 not sitting at 23 bps. We have still have just over 1 billion in Cds.
Pricing over the next 4 quarters at a rate of 59 basis points.
On to slide 12 capital ratios at the holding company and bank started the year from strong position and remain that way most ratios declined slightly due to the balance sheet growth, while absolute capital levels grew by about $26 million per capital deployment.
<unk> refreshed priorities given the current valuation of our stock are organic growth dividends strategic growth and lastly share repurchases on.
On slide 13, 13, I want to end with a few comments related to thrive as we announced last week, we closed our 49% investment in thrive and we couldnt be more excited about this part.
Deployment.
Q2 earnings for thrive were $5.2 million as compared to $6.3 million in Q1 gain on sale margins declined due to competitive pricing pressures offset by origination growth and lower expenses thrives business continues to build momentum at close to 2.5 billion in originations in 2.
2000, and is on track to achieve between 2.8 and $3 billion in 2021, an increase of over 25%. This strong growth for 2021 is in contrast to the most recent MBA forecast, which reflects a decrease of approximately 7% from 'twenty to 'twenty 1. Additionally.
Additionally, thrive has achieved its growth was 63% purchase volume when the MBA is projecting purchase originations to only account for 64, 46% of 2021 volume there are many synergies between thriving vertex we're working to execute on those now and believe they will start to bear fruit in the back half of 2020.
2020 with that I'd like to turn the call over to clay for some comments on credit.
You Terry and good morning, everyone.
On the credit picture continues to improve as we move through the fallout of the pandemic here in Texas.
As Malcolm mentioned, our NPA has dropped over the quarter NPA has improved.
$21 million, our Npa's have dropped 17% from the high watermark experienced in the third quarter of 2020.
We continue to see encouraging signs of resolution in our problem loan portfolio and we're working on meaningful additional reductions.
5 third quarter.
Page 14 contains a credit metrics for the bank for Q2.
You can see in the top left chart that past dues for the quarter declined to their lowest levels since the beginning of the pandemic.
We booked $5.4 million of net charge offs for the quarter.
<unk> that were centered in 3 credits the first charge off on the amount of $2.5 million was alone to a franchisee restaurant group that failed the second charge off in the amount of $1.7 million was for equipment related to an entertainment operator that filed for bankruptcy protection during the pandemic.
And the final charter Hall.
Amount of $1.2 million.
It was related to a contractor that filed for bankruptcy protection as a result of the pandemic.
All of the charge offs. This quarter were fully accounted for with specific reserves in previous quarters. Some no provision.
What's required for any credit surprises.
You can see on the chart on the top right on the page that our allowance for credit losses to loans held for investment, including mortgage warehouse on PPP dropped from 176% as of Q1 to 159% as of the end of Q2 the reduction.
It was driven primarily by the $5.4 million in net charge offs with the ACL requirement for this quarter significant loan growth covered by the improving Moody's forecast for Texas, GDP and Texas unemployment.
The chart in the bottom right on the page reflects movement.
Movement in criticized assets over the last 4 quarters. After a run up in criticized assets due to the pandemic, we've experienced a 22% improvement in our levels of criticized assets from the high watermark that occurred in the third quarter of 2020.
Classified assets have decreased by 15%.
Over the first half of the year.
Our special assets team is doing a great job of reducing our levels of criticized assets and we expect that to continue through the balance of the year.
The migration of credits from the line to our special assets team due to deteriorating trends has almost come to a stop.
<unk>, which is really encouraging.
Our hospitality book continues to perform nicely.
We're tracking and logging data on 75% of the hospitality book relative to occupancy revenue and Revpar for the month of June Revpar for the book was 30.
34% higher than the previous high watermark set in March of this year average occupancy was 69% for June up from 65% per March of this year.
We're tracking about $50 million in hospitality loans, which have the potential to payoff on the ended the year.
And we're seeing some liquidity return to the hospitality market in the form of non distressed property sales, which is encouraging as well.
With that I'll turn it back over to Matt.
Thanks, Clay, we couldnt be more excited about our bank's performance and our prospects for the future isn't.
It is encouraging to see the upward trends and results in so many categories as well as our talent investments paying off in such a positive way I've said it many times, we're fortunate to be in arguably to the best markets in the country. In addition to incredibly strong in migration of new residents that continues to drive.
<unk> real growth in GDP in our state.
On the M&A front things continue to be quite dynamic.
We're having discussions with institutions of various size located in both our current metro markets and non Metro, Texas markets as well. Additionally, there are a few opportunities on fintech non.
Non bank space that we have engaged with recently all of this to say I do see the second half of 2021 being a very active time for M&A and our markets.
In closing as Terry mentioned, we finalize our investment to purchase 49% of thrive mortgage and I would like to formally welcome Roy.
Barbara Michael and the entire thrive <unk> to the vertex family the quality of this company's personnel its technology and processes will greatly add to the continued growth of our company.
Company.
At this time I would like to open the lineup for any questions.
At this time, if you would like to ask a question. Please.
So on the on number 1 on your telephone keypad. Your first question on Michael Rose with Raymond James.
Hey, good morning, guys how are you.
Hey, Michael.
Good so I appreciate the comment on loan growth. It looks like you guys ex PPP and warehouse.
That about.
$425 million, so far year to day it looks like if you keep it at that level. It's about the same amount in the back half, which implies a little bit of a slowdown from this quarter, which is understandable. Obviously it was a really really strong quarter.
Quarter can you just give us some color on what the drivers are what paydowns are doing and if.
We obviously saw a nice pickup in utilization through the quarter.
Does that factor into the outlook to continue higher thanks.
Yes, I mean.
So payoffs have been fairly.
Fairly normal nothing out.
Outside if you will we did have.
Have a big pay down week after the end of the quarter.
100 million plus actually but we've already made that back up.
This quarter the <unk>.
Drivers of this is really a texas economy, thats doing quite well.
Again, I mentioned the in migration.
So.
I mean, there's real real business going on here.
And so I continue to see also some of this.
These banks that have come together.
You know the big ones and so theres some theres some on.
Unrest in the marketplace.
If you will and so are 12 months or 15 months that we've been focusing on growth even during the pandemic, it's just starting to pay off.
1 of the areas I think.
Put a builder group together January 1st and third.
They're hitting their strides lots of great originations, but theyre fundings have been very.
Light.
So they're not even in there yet and the reason is because these buildings have so much cash, they're just using cash and not much leverage.
And so community bank is contributing a huge way to having its best year ever had so it's coming in all areas. Michael It's just not on the dominant we do have a <unk>.
Construction has been very very strong, but everyone's playing.
That's helpful. Malcolm I appreciate it and maybe for Terry It seems like there was some on the expense side there were some <unk>.
Non recurring charges you mentioned on the golf sponsorship I assume that from once a year.
Fee that will kind of have to pay.
And then it seems like there was some some items in other.
Noninterest expense that could come out of the run rate can you just give us a sense for what the what the expectation would be at least for a starting point from the third quarter.
Well I think I think you can just start with taking the expenses from the second quarter and adjusting from marketing because it's going.
Can be lumpy I mean, it benefits us I mean, it's not like we absorbed the costs in 1 quarter, but the benefit is much more longer lasting given the investment and brand that we're making there and the recognition we're getting.
Past that Michael.
I think were going on.
We're going to be opportunistic on the people side and.
Of all the recruiting and talent investments we've made we're out there trying to make more because there is there are people as Malcolm talked about the disruption.
Coming from M&A, there are people looking for new homes and their talented and they will bring loyal clients to us and so.
Yeah.
We think about.
What we're trying to do on the growth side and the revenue it's driving for us on OCA.
Kay if you get the revenue work right, especially the growth in the spread revenue right. The expenses are going to go up as we continue to make investments, but the efficiency ratio should be just fine and so.
Yes, I would make I wouldn't make a lot of adjustments down other than just thinking about marketing and realizing we're going to be opportunistic when we get the opportunity to hire the right people, they're going to continue to drive growth.
And we got enough reported.
Maybe wasn't defenses.
Yes, theyre not theyre not going down.
You're not really not much I think you know I tend to think in a month.
On a quarterly time I, just don't think there's a lot to cause them to go down a whole lot because look it's not just about hiring front in talent. It's the credit team to support it in the back office as well and the last thing we can afford to do is not be.
To deliver on the new business, we're bringing on and support it the right way. So those are there.
There is a less expensive I know, but we got to stay up to speed and there's a couple of teams right now candidly that were really close on really close so.
Those are going to be costly and they take 6 months.
Get some sort of traction so I would expect expenses to be pretty close to where they are.
Helpful and maybe just 1 final 1 from me.
You mentioned that.
I think you said NII would be I think you said meaningfully higher in the third quarter.
Any stab at what.
Able to that mean.
Give us some quantification.
Well I think if you start with Q2's net interest income.
And you add back the reversal, we had on the non pool PC day launch going Okay. I'll take your word for it they don't see that happening again and you go to day Count and you go.
Well day counts about 750000, and then the key thing is go to the average balance for the Q2 versus the ending and then you think okay, well, let's layer on growth from the ending and let's look at what the average balance in Q3 might be.
That's how you get there.
It is honestly the maps.
It's encouraging when you do that math.
Very helpful. Thanks for taking my questions.
Yes, Sir.
Your next question line of Brad Milsap from Piper Sandler.
Hey, good morning, guys.
Hey, Brett.
I.
Appreciate all the color.
Terry just kind of wanted to talk through the moving parts of the balance sheet. It sounds like you've got it.
Leased 4.
$400 million more growth coming in the back half of the year.
Obviously, you've got some pvp runoff to the plan to just simply fund that growth with that liquid.
You've got on the balance sheet and it would just be curious kind of how much cash flow, you're getting by month or by quarter off.
The investment portfolio to sort of fund.
Loan growth going forward.
Yes, that's a great question and I appreciate it.
Yes.
Yes, I do think I mean, certainly.
Liquidity pp acceleration forgiveness has accelerated and that's going to be a good source of liquidity. What we have not done is and nor do we intend to do is make significant increases in the investment portfolio the cash.
When we look at our growth profile and we look at our pipelines.
I just.
Certainly.
Don't feel the need to go up and so.
I feel like we can absorb the excess liquidity and a suitable time frame given the growth profile. When you look at the cash flow coming off the portfolio over the next 12 months off the investment portfolio, we've got about 10% of the balance.
And forecasted cash flows at current rate levels, so the reinvestment risk and the yield on those reinvestments.
<unk> is not as great as it could be for a lot of folks so.
We.
That's the best way on I think we can pretty well funded with the liquidity the PPP and the cash flow and the investment.
We don't we don't look to grow it because I'm afraid of inflation pressure in the TBD risk that long duration growing portfolio could could create.
Yeah.
Great that's helpful and then.
Just on the fee income side of the equation.
Port.
Kind of similar to Michael's question sort of in other feed I think you've mentioned, maybe some bully theres some syndication syndicated loan fees.
Is that bully kind of permanent run rate from investments that you've made or was there anything kind of 1 time in sort of the other fee line items outside of just the PPP income that you recognized in the quarter.
I would say that the bully is moral is lumpy, but what we didn't have a great quarter and with swaps.
And we're already up we probably just had the best month, we've ever had as a company in July so in my mind it's.
Yeah.
My belief is that the lumpiness of bolt could be offset with much better execute.
On the customer back to back swap program.
Got it and then just final question from me I know Youll get.
The first impact of thrive in the in the third quarter.
Any changes sort of your initial guidance that you guys talked about they're kind of based on kind of what you.
Execution in the second quarter or just kind of curious if you can.
On anything has changed in your mind about their contribution going forward.
Yeah.
It really.
If anything it's only gotten stronger and I will say that as we went into this year and went into this transaction with the folks that drive they are delivering.
I'll offer you some numbers $2.8 billion to $3 billion in production that's exactly what we thought when we announced this transaction their quarter was exactly where we thought it would be in terms of production. There is the gain on sale was down a little bit, but they they mitigated a lot of that with growth and production and.
Expense management.
And so we're feeling pretty good that given what's happened I mean, the 10 years down about 50 bps from Covid.
It was at its peak.
Late in Q Q3, and so I think the.
The mortgage business for everybody, but certainly for thrive is is looking good.
<unk> and so I am expecting I'm expecting better gain on sale and continued good production and so our belief is that the earnings contribution is going to be pretty much in line with what we were expecting when we did the transaction if not maybe a little better.
Great. Thank you.
Hum.
Your next comes from the line of Brad Gailey from K B W.
Yeah. Thanks, good morning, guys.
Okay, Great Hey, Barry.
If you look at non PPP loan growth. So, it's 14% year to day, you're saying that the full year is going to be 14%. So.
More good growth on the back half.
Is that just a really good 2021 and kind of as we're coming out of Covid or do you think that you know.
This kind of mid teens growth rate is sustainable for the next couple of years.
Oh Wow, that's a big question Brady Youre looking.
So.
I do think some of it is COVID-19, but here's here's what I. What we really think is there's 2 things 1 is and beat a dead horse about the investments that we've made and continue to make in people, but if you take us back to first quarter of 'twenty, we were cranking.
On that.
And we felt like what we've put together with green and retooled Green a little bit retooled with some people that we were on we were going to start seeing some great growth and efficiencies there and so.
Obviously pandemic shut up stopped everything so we think this is a culinary.
Culmination of.
Getting out of the pandemic and the Green combination it just a year later, because the pandemic and so we were really focused on growth.
Hi.
I'm not going to sit here and tell you that we're going to do 15 or 20% from the next several years.
But I wouldn't be surprised.
We're close to that.
Just a major focus for us.
Keep in mind that the credit side of that is the legacy <unk> tax credit.
Process policies, and what have you and so.
We feel really confident in what we're putting on right now.
I think that goes.
Is it maybe unsaid or on discussed but the quality is stuff, we're bringing on is really good.
And we've changed out some clients we've changed out some lenders and so I think the future years, the prospects are really really bright.
Alright, and then come out from that's great to hear your comments.
M&A.
Being pretty active in the back half of the year I know you all did thrive which was a nice nice deal.
As you look at the traditional bank M&A, where do you guys buy a smaller downstream community back, but we haven't seen a ton of that.
Texas, Yes.
Yeah.
So what did you reminders.
It's about the holdup, there is accelerating pricing expectations or is it <unk>.
<unk> bank stocks, what why haven't we seen more kind of traditional banking on that yet in Texas.
Yes, so and the answer to both of that the other thing is the.
Smaller deals.
They take a lot of bandwidth.
And when you can only move.
And the accretion number.
2 or 3% some guys are really happy with that I'm, just that's a hard 1 for me. So I think theres got to be something more than just the 3% or 4% that you can get whether it's a strategic play geography.
S annualized or they have a business unit, you think you might be able to exploit and grow a little bit. So I think theres just needs to be a reason and the reason I say that is.
We grew in the first half of the year $425 million in loans, well, that's a small Texas bank.
And I had no execution risk.
And I didn't have to pay extra for a premium for it and so.
Trade for me as well if I can keep up that growth.
I've got to be.
That'd be a real compelling reason for the smaller ones, but I do think everybody stock price kind of got back about 30 days ago, and then it got the right thing.
From then we all got got it he had again and so I think just some stability somewhere if we could see some stability I think youre going to see some of those deals trade but.
On the smaller ones are hard to do.
Yeah.
Thanks for that book.
Mhm.
Your next question comes.
Gary Tenner with D. A davidson.
Thanks, Good morning, guys.
Good morning, I wanted to ask.
Couple of questions I know you talked about fee income a little bit I don't think I heard much comment in terms of the SBA outlook in terms of production and kind of you on.
On a real solid quarter there.
Any thoughts on.
From the line of action on brands going forward.
I mean, yes, I mean.
We're pretty bullish on the back half of the year part of that is the 90% guaranteed on.
On new production allows you to sell certainly sell down more and gain on.
25 years.
Prime plus 175, or Youre getting about 15% premium GAAP to split 2 and a half with the FDA for your net in 12 and a half so think about that.
We're selling 90, Youre holding 10, and you are more than making up your hold with your gain on sale. So we'll do all that we can.
On the pipeline spill feel good.
So.
And we've made some hires in that line of business over the last quarter or 2 and so it just gives us reason of optimism to think that kind of what you saw this quarter somewhere it's always lumpy and.
You can have a big transactions.
Do you think is going to close in the quarter and suddenly it gets pushed to the next 1 but.
We feel we feel good about how the back half of the quarter. It looks from the SBA space, probably the best we have since pre before the pandemic just they've been so busy with PPP and net and we needed to given.
Needs that our customers had coming through.
Through the pandemic, but but pipelines talent team is the best we've seen it in.
And post screen I would say.
Alright, Thanks, and then as it relates to the back half of the year loan growth does that incorporate any kind of meaningful growth in the single family portfolio.
You may.
Purchased through the thrive channel or given the strength of the commercial.
You know fundings and outlook does that channel of growth.
Become a little less important at least for the rest of this year.
Well I would say our outlook for growth is not <unk>.
Anticipating a big pickup in growth in the single family mortgage side, it's more continuing kind of what we've been doing we were up a little bit this quarter, but we were down in Q1, but it's always a lever that we can pull if we need to if we've got liquidity and loan growth was a little lighter than we thought we're certainly in a position and we.
Not just to grow that part of the portfolio over time.
Got it.
7% to 8% of the average loans and average share love it to be in on.
And then go on up from there.
7.5% 2015.
High quality.
You know farms 5171 type arms well.
Underwritten, but I think it's fair to say, we don't have that in our forecast for the back half of the year and so it's another lever.
If deposits allowed us to pull that lever.
Yes.
Great I appreciate it and then last question from me just to clarify Terry your comments earlier.
Regarding.
The cash flow.
Investment book It sounds like not only will you not build it from here, but the bias just on uneven reinvest those cash flows to more favorable use them on loans with us.
Correct, yes.
Reinvest cash flows, but we're not looking for meaningful growth in the portfolio and I'm certainly glad.
We'll have a lot of cash flows to reinvest given where yields are on.
Okay.
Great. Thank you very much.
Alright, Thanks, Kevin Thanks, Gary.
And your final question comes from line of Matt Olney with Stephens.
Thanks, Good morning, guys.
Morning, Matt.
That we don't ask some questions on loan growth. So I'll try to ask mine here.
I guess, taking a step back any commentary you can provide about.
Just the number how many new producers you have hired recently or even what percent of your total producers today at the bank are relatively new to the aerotech.
Teams.
So the total number of producers not up very much.
But I would venture to say I'm looking at my lending guys, we're probably I'm going to guess and you cannot.
50%.
Up 5 that's it so up 5 total on produce.
Everybody, but we've changed out a good third 40% from where we were 2 years ago. So it's more of a change out but in terms of actual body count it's not a whole bunch on that.
Yes.
Okay. That's helpful and then on on on Slide 6 you guys gave us a good illustration of the.
<unk> unfunded.
Instructions portfolio. It was a pretty sizable any more color you can add about the lag from the commitment growth to the actual funded growth that you expect.
You know thats, a little bit of a crap shoot, but we're 6 to 9 months, probably till you start getting some funding.
Because we require so much equity upfront, 30% to 40% are pretty much on every deal.
So depending on the type of deal you know the industrial deal travels a lot faster rate than our multi deal does.
But it's about a 6 to 9 month lag from putting it on to you start seeing some funding.
Okay. So if the team just started in January then I guess, we're just now about to start seeing some actual growth from third quarter.
So you are speaking about the builder portfolio, specifically in the builder portfolio is a different issue the builder portfolio.
The builders around our markets.
<unk> are doing so well.
They have so much liquidity.
<unk> seen several guys putting houses on the books.
And the next thing we know theyre paying them off and then funded anything.
And so.
1 of our largest lines that we have in the whole bank the builder.
<unk> zero to the bank and they have hundreds of houses under construction and they don't know any bank.
So that's a function of just great cash flow from the builders specifically the ones I was speaking to before that was more on the commercial side.
As some of this liquidity dries up youre going to start seeing some more buildup.
Funding gets the point is is that our builder group has not added much to our loan growth in the first 6 months of the year I do see them, adding in the back half and certainly into the first half of 'twenty 2.
Okay. Thanks for the clarification on that and then lastly from me on the mortgage warehouse.
Our house, a little slower in the second quarter I think 1 of the items that you attributed the slowdown to with them slower dwell times in any anything you can any numbers you can put behind this and any outlook you could see for the back half of the year.
I don't know.
I don't have the actual dwell times I'll just note that they have shortened.
Sure.
Sure.
But I don't have the exact number in front on me.
I mean, I think they're going to stay pretty short because theres really no spread.
Yeah.
The mortgage lenders to carry it there so they're going to push it as hard as they can to get it off the line and get it to cash because they are just not picking up anything so.
I mean, I think I think what's going to drive I mean, I'm actually pretty encouraged as I've watched other banks who are in this space report.
First I was kind of I think this is really odd mortgage warehouse is never down from Q1 to Q2, but on average it is but I think thats a function of what ultimate Q1 was just unbelievable.
So good but I do think that debt that what's going on with rates is going to help that.
And the government has done some things too that I think are going to be beneficial in terms of that there was a 50 basis point fee that in Q3.
Round the negative market fee I don't know exactly what they called.
But they they wiped that out so I think there's multiple things that are going to contribute to better better volume better originations and I think that will help the activity will help warehouse balances, but I don't see dwell times moving much.
Okay. That's all from me. Thank you guys.
Thanks, Matt.
This concludes today's conference call. Thank you for participating you may now disconnect.
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