Q1 2022 Umpqua Holdings Corp Earnings Call
Good day and thank you for standing by welcome to the Umpqua Holdings Corporation first quarter 2022 earnings call.
Lines have been placed on mute to prevent any background noise. If you should need assistance during the call. Please press star zero and an operator will come back online to assist you. If you require further assistance. Please press star Zero and you ask a question. During this session you will need to press star one on your telephone keypad.
At this time I would like to introduce Jackie Bohlen Investor Relations director for Umpqua to begin the conference call. Thank you. Please go ahead.
Thank you Lee good morning, and good afternoon, everyone. Thank you for joining us today on our first quarter 2022 earnings call with me. This morning are Cort Ohaver, President and CEO of Umpqua Holdings Corporation, Tory Nixon President of Umpqua Bank, Ron Farnsworth, Chief Financial Officer, and Frank Namdar, Our Chief Credit Officer after our prepared.
Next we will take your questions.
Yesterday afternoon, we issued an earnings release discussing our first quarter 2022 result, we've also prepared a slide presentation, which we will refer to during our remarks. This morning. Both of these materials can be found on our website at Umpqua Bank Dot com in the Investor Relations section.
Today's call, we will make forward looking statements, which are subject to the risks and uncertainties and are intended to be covered by the safe Harbor provisions of Federal Securities Law for a list of factors that may cause actual results to differ materially from expectations. Please refer to slides two and three of our earnings presentation as long as the disclosures contained within our SEC filings.
We will also reference non-GAAP financial measures alongside our discussion of GAAP results. We encourage you to review the GAAP to non-GAAP reconciliation provided in the earnings presentation Appendix I will now turn the call over to court alright. Thank you Jackie I'll provide a brief recap of our performance then passed to Ron to discuss financials, Frank will discuss credit and then.
We will take your questions for the quarter, we reported earnings available to shareholders of $91 million. This represents EPS of <unk> 42 per share compared to the 41 reported last quarter and 49 cents reported in the first quarter of last year.
On an operating basis, which excludes excludes a number of interest rate driven items and merger expenses that Ron will review EPS of <unk> 36 compares to <unk> 44 last quarter and 46 cents in the first quarter of last year.
Lower mortgage origination volume and the return of it.
Provision for credit losses impacted first quarter compared to the 2021 results I'll provide an overview of actions we are taking in our mortgage banking segment later in my remarks.
Non PPP loan balances grew $630 million in the first quarter, representing a quarterly growth rate of two 8% and annual growth rate of 11%.
This level of expansion during what is typically a slower growth quarter for the bank is commendable in its own right, but is particularly notable on the heels of last quarter's record loan generation.
This quarter's organic generation is significantly offset.
This quarter's organic significantly offset continued declines in PPP loan balances, enabling total portfolio expansion of one 9% or 7% annualized during the first quarter.
Net expansion was centered in the commercial real estate and residential mortgage portfolios as commercial loans contracted by 1% following a three 9% growth in the fourth quarter.
Commercial pipelines have since rebounded following a lower start to the year that reflected the fourth quarter's volume.
The quarter the quarter's growth reflects both favorable market conditions and outstanding execution by our teams who continue to bring new relationships to the bank.
Ongoing talent acquisition remains successful, we released certainly added a middle market leader in the Denver, Colorado region, and we will continue to hire bankers and new and existing markets throughout the west.
The first quarter provided an excellent start to our net portfolio growth expectations for 2022, and we expect our brand momentum and banking team's execution to drive net expansion through throughout the year remaining PPP balances, which are now less than 1% of the portfolio are no longer a headwind to growth.
And any favorable movement in line utilization, which we have not yet seen to date, we will provide additional tailwind.
Moving on to a handful of initiatives.
Our advancements in payments technology during the quarter included announced collaboration with visa to launch two commercial card solutions. One the visa commercial preferred solution helps our middle market businesses business owners streamlined money movement through digital first capabilities, while meeting the rewards preferences and to.
The Umpqua bank commercial pay solution Leverages visa visa commercial pay to provide an app based solution and real time transaction visibility to enable businesses to virtually digitize and streamline their payment needs.
This week, we launched a new collaboration with rectangles health, a leading healthcare technology company to introduce an industry specific payment solution to provide to improve practice efficiency and optimize security for our healthcare practice customers.
Our human digital initiatives remain critical to our long term strategy to actively and personally engaged with our customers through digital channels and I'm excited to announce that an enhanced version of Umpqua go to is in pilot and initial feedback is highly complementary.
We also continue to rollout encino through the bank in the first quarter, creating efficiencies internally, while improving speed to market and the overall customer experience.
As it relates to our ESG journey, we published our fourth annual report this week, which is evidence of our continued evolution in this important area.
We are aware of the increased regulatory disclosure expectations and we are positioned to meet them.
We have a program and it is continuing to mature we have many of the elements in place already and we are in good shape to be able to deliver on the proposed SEC disclosures.
Other actionable items relate to our mortgage banking segment, which was adversely impacted by the sharp increase in mortgage rates during the quarter.
In April we adjusted our capacity in expense run rate through a head count reduction to meet the demand that we anticipate over the foreseeable future.
We're also looking at actions related to MSR, which Ron will detail later, we will continue to evaluate ways to ensure we have the optimal mix of salable on portfolio originations in order to balance the business mix to support the bank and our investors.
Regarding capital in February we paid our shareholders a dividend of <unk> 21 per share consistent with historical payments and as we previously communicated we did not repurchase any shares given our pending combination with Columbia banking system, which received shareholder approval on January 26th.
We continue to project a mid 2022 closing timeframe, an integration management office, which includes senior executive leadership from both Umpqua and Columbia enable arm close bankers to have undisturbed to focus on generating business and serving customers.
While the <unk> facilitated the completion of the post closing organizational design and made progress on system selections and cost savings realization plans during the quarter caused bankers generated net loan and deposit growth and replenish pipelines for continued expansion for the <unk>.
Past two quarters I've told you to hold us accountable for our growth the separation of our integration planning activities from our growth objectives has enabled us to successfully drive our business forward and I remain highly enthusiastic that our operating markets and top tier banking teams will contribute to the net expansion that.
Deliver shareholder shareholder value through 2022 and beyond.
With that Ron take it away alright, Thank you Cort and for those on the call I want to follow along I'll be referring to certain page numbers from our earnings presentation.
First up I'll reiterate we've expanded our financial disclosures and both the presentation and earnings release to include more detail and also include non-GAAP internal operating information with reconciliations to GAAP included in the appendix. We've just given the moving parts in the past projected did an excellent job this quarter laying out the new format on pages 16 through <unk>.
Many of the Orange release, along with the appendix in the presentation and we hope you find it useful.
And now I will start on page 11 of the slide presentation, which contains our summary quarterly P&L.
Our GAAP earnings for Q1 were $91 million or <unk> 42 per share.
The adjustments to our internal operating measures include various fair value changes from interest rate volatility.
Along with merger and exit disposal costs, which are detailed in the appendix on slide 30 on it.
Operating basis, we earned $78 million or <unk> 36 per share.
For the moving parts as compared to Q4 net interest income decreased $4 6 million due mainly to a $4 3 million decline in PPP fees and related interest income.
Higher average loan balances and the mid March rate increase contributed to higher interest income that was offset by two less days in the quarter.
We had a provision for credit loss of $5 million driven primarily by the continued strong loan growth.
And noninterest income declined $2 7 million, reflecting lower home lending gain on sale revenue along with the fair value adjustments driven by the significant bond market selloff and higher yields namely.
Namely MSR and swap CVA gains not fully offset by rate driven fair value losses on bonds and loans held at fair value as detailed later on the right side of slide 30.
And finally, non interest expense declined $17 million from lower merger expense and lower mortgage banking expense.
As for the balance sheet on slide 12 interest bearing cash decreased slightly to $2 $4 billion. This quarter driven by the asset remix into loans with the non PPP growth this quarter.
The decline in the investments <unk> related primarily to the unrealized loss, resulting from higher market yields this quarter as new purchases offset maturing cash flows.
Overall loans held for investment increased $423 million or 2% during the quarter and again. This was net of the $208 million in PPP loan forgiveness.
Ex PPP, we had $630 million or 3% and non PPP loan growth.
This makes four quarters in a row of robust loan growth than the total amount of PPP growth over the past year.
It was $2 7 billion or.
13, 5%.
At quarter end, we had $173 million in remaining PPP loans, which are expected to be mostly forgiven over the coming quarters.
And deposits were up $105 million, which was net of a seasonally expected $114 million decline in public funds deposits.
Our total available liquidity, including off balance sheet sources ended the quarter at $15 7 billion.
Representing 51% of total assets and 59% total deposits.
I noted on the bottom of slide 12, our tangible book value decline due to the OCI right Mark on NFS investments.
But we've also added measures for this and the TCE ratio, both including and excluding the OCI for reference.
Slide 14 highlights the declining impact of PPP fees on net interest income.
And following that on slide 15 of the presentation, our NIM decreased one basis point in total to $3, one 4% in Q1 and.
And we presented waterfall on the margin change on the right of the page.
The NIM, excluding the impact of PPP loans and discount accretion was up two basis points in Q1, which is great to see the impact of continued non PPP loan growth and deposits continue to reprice lower offsetting the impact of the low rate environment.
Our cost of interest bearing deposits declined 10 basis points in Q1 and key for me here is following the 25 basis point increase to the federal funds rate in mid March our NIM for the month of March was $3, one 8% four basis points higher than the full Q1 amount.
Which bodes well for the remainder of the year.
The next two slides include information, which investors may find helpful. As the market is pricing and the potential for fed funds rate increases in 2022.
First on slide 16, we provide the repricing and maturity characteristics of our loan portfolio.
The first table on the upper left breaks down the pricing drivers home loans.
And as of quarter end, 34% of the portfolio is fixed.
1% is in the remaining PPP balances.
32% is in floating rate and 33% are in adjustable rates over time.
The lower left table shows the maturity schedule by category.
In the upper right table shows the loan rate floor buckets for floating and adjustable rate loans and 23% of the combined total are at their floor.
77% have no floor or above it.
For the $3 5 billion in floating and adjustable rate loans at their floor, the lower right table breaks down the balances by rate change band along with the weighted average rate change required for these wounds to move above their floor.
Hopefully investors and analysts will find this information useful in assessing the beneficial impact on net interest income future potential rate hikes.
Next on slide 17.
On the left we have included a projected net interest income sensitivity for future rate changes in both ramp and shock scenarios over two years.
This is a simulation we run them back to us quarterly and assumes a static balance sheet Ivy.
Ideally, we'll continue to see an asset remix with cash skipping bonds and flowing down into loans, which will benefit our net interest income absent any rate change, but this is not included here.
Yeah.
The deposit beta is using the simulation range from 43% to 45% on interest bearing deposits and.
And for sensitivity on our model results every 10% change in the beta is plus or minus one 3% on the plus 100 basis points shock results.
The table on the right shows our deposit beta from the last rising rate cycle started in Q3 2015.
Running through Q3 2019 to catch the lag effect.
Our beta them was 42% on the spring deposits.
Okay now onto our segment disclosures.
Starting with the core banking segment on slide 20 of the presentation.
Net interest income was down slightly versus Q4, given the decline in PPP fees and related income.
I'll talk about seasonal in the provision in detail in a few minutes, but youll see here, we have a 5 million provision this quarter related to continued loan growth.
Four rows down as the change in fair value of loans carried at fair value and the loss of $21 million here in Q1, driven entirely by the bond market selloff, and resulting significant increase in long term yields this quarter.
Noninterest income of $35 7 million was down from Q4 due to lower swap in syndication revenue from some outsized transactions back in Q4.
In the noninterest expense section Youll see the merger expense recognized to date on the combination.
Along with exit disposal costs related to lease exits on recent store consolidations.
And a right of use lease asset impairment as we execute our return to work plan.
The direct non interest expense for the core banking segment decreased this quarter, primarily related to lower compensation and other costs.
The efficiency ratio for the segment remained at 64% as net fair value losses reduced income.
And this would be 58% extra nonoperating fair value changes in merger exit costs.
And the operating disclosure for the core banking segment back in the appendix and also on page 19 of the release, it's great to see the operating <unk> increased 4% year over year.
Which is great again to see the benefit of continued loan growth more than offsetting the significant decline in PPP fees over.
Over the past year.
This is significant and bodes well for future core banking revenue with four forecasted fed funds rate increases.
Turning now to slide 21 of the presentation, we show the mortgage banking segment five quarter trends.
To start with a significant increase in longer term yields led to volatility in our volume gain on sale margin and MSR.
We had $649 million in total held for sale volume this quarter down 25% from Q4.
In part seasonal and in part due to the lower refi activity with higher rates.
Gain on sale margin was $2 five 9% down from Q4, given the slowing mortgage market and impact the pipelines from rising rates.
These two items resulted in the $16 8 million of origination and sale revenue noted towards the top left of the page.
Our servicing revenue was stable.
And for the change in MSR fair value of the passage of time piece again was stable while the change due to valuation inputs was a gain of $40 million.
Due again to the increase in long term interest rates in the second half of the quarter.
Non interest expense totaled $25 million for the quarter again this represents hell.
Held for sale origination costs servicing costs, along with administrative and allocated costs.
The direct expense component of this was $14 3 million as noted on the right side of the page representing two 2% of production volume.
Slightly in basis points from the last few quarters with the lower volume.
As Cort mentioned earlier homeland is now facing significant headwinds given the sharp increase in mortgage rates driven by the bond market selloff.
We are adjusting capacity by reducing head count in the expense run rate to meet expected origination volume over the foreseeable future.
And given the MSR is at a record high valuation of $1 two 9% as of quarter end.
Even higher through the first half of April .
We are working through the governance and risk management process to hedge the MSR asset.
In an effort to reduce future net volatility.
We expect to have this in place by Q3, and we'll keep you updated.
A couple of finalized before I turn it over to Frank.
On Slide 23, we've included the quarterly loan balance roll forward.
Quarterly non <unk> non PPP loan growth was driven by a $1 $7 billion in new originations.
Offset by $1 $1 billion in pay offs.
And next let me take your attention to slide 25 on seasonal and our allowance for credit loss.
As a reminder, our seasonal process incorporates a life of loan reasonable and supportable period for the economic forecast for all portfolios with the exception of C&I, which is a 12 month reasonable and supportable period reverting gradually to the output mean thereafter.
Hence these forecasts incorporate economic recovery through 2022 and beyond is most economic forecast for virtual meeting within a two to three year period.
We use the baseline economic forecast this quarter updated in March.
Overall, the forecast showed continued improvement in several key areas, along with higher expected inflation and interest rates.
We included a $9 million overlay for various CRE portfolios to hedge against any potential near term slowdown or negative turns with the pandemic net.
Net of this overlay, including providing for the strong loan growth, we recognized $5 million provision for credit loss.
Net charge offs for Q1 remained low at $5 5 million or 0.1% of loans much lower than the models from last year suggested.
And the majority of net charge offs this quarter related to the small ticket lease portfolio.
The ACL at quarter end was $1 one 4%.
As these are economic forecast driving the reserve it will simply take the passage of time received net charge offs followers muddled.
But to date the models are simply overestimated the actual net charge offs given the lag of at least seven quarters.
Our day, one seasonal level was right at 1% on the ACO.
Which is about $30 million lower on the ACL for non <unk> loans and we are at currently.
All else equal this excess ACL will going to be charged off in future periods. If the models are eventually proven correct.
Or be recaptured Andover used for providing for future loan growth at the economic forecasts continued to improve.
I will tell.
And lastly, I want to highlight capital on page 27.
Noting that all of our regulatory ratios remain in excess of well capitalized levels.
Our tier one common ratio was 11, 3% and our total risk based capital ratio was 14%.
Our bank level total risk based capital ratio was 12, 6%.
And with that I'll now turn the call over to Frank Namdar to discuss credit.
Thank you Ron turning back on page Slide 26, our nonperforming assets to total assets ratio declined three basis points to one 4% and.
And though our classified loans to total loans ratio increased modestly to eight 7% the lift was particularly low level at year end.
Our annualized net charge off percentage to average loans and leases was 10 basis points in the quarter, reflecting continued below average net charge off activity and the pin pad portfolio. This impact portfolios ratio came in at 149%, notably below its historical 3% to three 5% range for the <unk>.
Third consecutive quarters still reflective of the higher levels of customer liquidity, improving economies and the overall favorable impact of strategic credit tightening implemented last year.
Essentially all of the quarters charge off activity was in the pin pad portfolio as the bank's activity was de Minimis.
We are very pleased with the credit quality metrics.
Charge off activity is minimal nonperforming and classified loan ratios are low and delinquency migration continues to cure. This latter metric in particular is indicative of the bank's strong credit risk profile as it is a positive signal of continuous stability within the overall portfolio we have.
Remain confident in the quality of our loan book and we look forward to continued high quality growth Matthew Korn.
Thank you Frank and Ron for your comments, we will now take your questions.
At this time, if you would like to ask a question. Please press star one on your telephone keypad again to ask a question simply press star one on your telephone keypad.
And your first question comes from the line of Jeff <unk> from D. A Davidson. Your line is open. Please go ahead.
Thank you good morning.
Jeff.
On maybe Cort you.
<unk> talked about the first quarter loan growth being.
Encouraging.
Seasonally a bad quarter.
Coming off of a pretty big one in Q4, I guess, where do you would you sign them.
Yes.
The production.
And then probably a mix but.
Backrow environment, improving our or market share gains I know you've pointed to hires but I just wanted to kind of get a sense for the environment versus what youre doing.
In house.
While seasonally I don't know first quarter is a bad quarter for his chest, but I know you didn't mean it that way. It's just generally we have AG stuff that goes on in Q1, and so we don't see a lot of commercial loan growth. We didn't see that here in 2022, either so that you know that.
Due to the lack of growth of commercial to answer your question directly I think as rates started to move up specifically in multifamily, which we've got a very <unk>.
Experienced vertical that's been around for a long long time as rates start to move up people start to refinance <unk> acquire assets and get them in their portfolios their production and growth in the first quarter.
He was very very strong sandy with commercial real estate, because we were having commercial real estate and same thing with RASM to write Ritchie portfolio grew so I'm going to attribute the growth in it.
And the real estate side to rates moving up people that may have been sitting on defense to get in get into the market.
And that's not to take away from all of the teams that we've got the hires that we've made the professional folks in the new markets and in the markets that we've been serving.
For many many years.
And a follow up on the sort of the loan officer Cowen and maybe a question for Tory just interested and Cort you.
Called out the higher you've made in Denver, but.
Getting a sense for kind of net loan officers that yields you've added versus those that have departed do you have a.
Either a specific number or a general sense for how that.
<unk>.
In the last couple of quarters, how that numbers fluctuated.
All our pitches.
Pitches over to Tory, but let me make just a guess.
Global comment because I'm sure you won't be the only person to be thinking it or ask it we have not seen any extra ordinary turnover and lenders due to the.
Pending combination with with Columbia, we always lose some.
When bonuses payout at this time of year. There's also there's always a natural churn.
How's the door and you're in the door and I would say this year is consistent with what we've seen in my 12 years being at the bank now specifically I'll pitch it over to Tory and he can answer your question, yes, Thanks, Cort and Jeff I, you know I don't have an exact number for you but.
Court's point.
Attrition in the commercial bank in particular.
Really light.
We are seeing very very few leave the company.
And we just continue to look for talent to bring in the company. So we're we're bringing in talent from the Pacific Northwest to the Bay area to Sacramento.
Two southern California, I've made a couple more hires in Arizona, So that came in Arizona.
People strong.
Somebody in Denver to lead it and build the team there. So we just continue to bring net talent into the company it takes them.
Three to six months to build a pipeline but.
Bodes well for us to continue to find opportunities to <unk>.
Take market share and to do more for our existing customers.
Great appreciate that and if I could.
One more last one.
One of the mortgage banking side, if we kind of exclude the MSR MSR noise.
Just looking at combined.
Mortgage banking revenue and servicing.
Yes, it's roughly $26 million this quarter right.
Perhaps Ron touched on this a bit I am interested in your thoughts about the return to mortgage seasonality versus.
Right moves that we had did that kind of wipe that.
Impacts will come off a pretty robust mortgage.
Production, but just.
Just your sense of how mortgage trends through the year and what you what you saw in Q1 any thoughts there.
Okay. Jeff This is Ralph great question.
Typically historically have seasonality right in the summer quarters, Q2, Q3, and then dropping off in Q4 and Q1.
With where rates are in the market over the last few years, that's definitely made a change the volatility here this quarter, it's tough to get a read on.
What do we think Q2 Q3 looked like traditionally they can maybe be higher I would say, it's too early to say you will always have some seasonality, though just given.
Movement of relocation, but.
Hard to give an updated guide on that for the balance of the year.
Fair enough. Thank you.
Thanks, Jeff.
Thank you and your next question comes from the line of Brandon <unk> from <unk> Securities. Your line is open. Please go ahead.
Thank you.
I wanted to touch on the actions and the mortgage segment as far as reducing head count.
I know the direct loan held for sale are expected to kind of maybe he can go up as a percentage of volumes and I'm wondering with the reduction of head count in China getting better it can see within the segment there is a certain target there.
Trying to achieve over the long term.
Hey, Brandon Good morning, this is Ron yes.
Certainly we've been closer to the 2% that pushed up above it a bit this quarter, just given a certain chunk of that cost is fixed underneath and that's part of what we're looking to address.
It's also around market.
Allocation from a search.
Certain markets are.
More favorable towards held for sale volume versus portfolio volume and then vice versa. The other way so hard to say here, where we will have that number over the course of the year, but long term goal is to be two or just under.
Okay.
And then in regards to the hedge on the MSR.
I know, it's an imperfect cage.
Is it completely but I was wondering if there is a certain quantification you could provide more color on as far as hedging just handful of beta or trying to hedge all of it and then just some more details around the mechanics of that.
Yes, Randy this is Ron again, so yes. It is in perfect. Although it is better than nothing the interesting thing about those.
Record levels on that just given.
Again, the activity over the last few years and record levels over the course of my career and it's even higher here in Q2 hedging will be a combination of.
Yeah.
Treasury future purchases some options indoor.
Mortgage purchases just arrived at game down if we do see rates down in the future, which eroded the value of the MSR too early to say how much we've looked to hedge again, it's probably easily three to four month process, just with the risk and governance side to stand it up I think we've got time on that front.
But more to come we will talk about that more in July as vehicles in terms of the specific tactics oriented, but I do agree that it is imperfect.
But it is better than nothing when you've got an asset at record levels.
Got it got it.
And then lastly in regards to liquidity management now with higher yields on securities is there more of an intent to purchase more securities kind of lay into that more now.
Given the.
Lower downside risk.
Yeah, I mean, obviously the south in the bond markets to give opportunities I'd much rather though that cash go into loan since we've talked about consistently over the last.
Couple of quarters, and that's been $2 7 billion of non GDP growth over the past year very much look forward to.
Seeing that chunk, if not most of that continue over the coming years. So.
There could be opportunities on the bond portfolio side, but again I'd, rather it skip that and go into Lawrence's for a higher return overall.
Okay. That's all the questions I had thank you.
Thank you Brian .
Thank you. Your next question comes from the line of Jared Shaw from Wells Fargo Securities. Your line is open. Please go ahead.
Hey, good morning, guys, everybody thanks for taking the call.
Maybe sticking with the loan growth side could you give a little update on what youre seeing for commercial Utilizations and I know that it's tough to to withhold.
Moving parts, but you know give a little more color on what the commercial pipeline looks like and then as rates are higher should we expect that payoff number that's.
Been a little bit higher to really go down, especially on the CRE side.
Pete Jarrett is Tory I'll start with line utilization for a second.
We've been relatively flat over a couple of years now on the commercial line utilization, we were actually down this quarter.
8% in half from.
From last quarter, and so we're still not seeing any uptick in utilization and we're about probably I think about 10% down from maybe two and a half years ago, So still some upside and some opportunity there.
On the pipeline, we had such a strong Q4, and we mentioned in the call for Q4.
We just kind of reduce the pipeline a little bit because of all the activity all the success in all of the booking of loans in Q4, we've now rebuild that pipeline. So we were at about $4 4 billion in total pipeline at the end of September kind of dipped down into the low three billions and now we're back up to $4 $4 billion. So we've.
Increase the pipeline and I think really nicely in the C&I space in an ink in the commercial real estate space. So feel really good about activity really good about the growth in the pipeline.
And bill positive looking over the next nine to 12 months.
On.
On payoffs and Paydowns at I think.
The market is highly highly competitive as you as you guys all know and everybody knows it and certainly in the real estate space is one where you can potentially have more payoffs and and others. When people are selling property, maybe refinance to talk now.
There's a lot of things happening in the real estate space, we certainly see that and we tend to cover it every quarter, but it's just something that we deal with is how we do business so not overly concerned or alarmed about that either so really good momentum from the teams in pipeline is strong so we feel very positive.
Okay. That's good color. Thanks, and then just one.
I guess over to funding.
You've had such strong growth in DDA over the you know over the last few years. It seems like we are sort of plateaued here do you think that you know we serve a natural peak for DDA and as we as you go forward.
To fund that additional loan growth you're going to see.
More you know whether it's hopefully its core but you know maybe more and more time and more interest bearing growth.
Yeah, Jerry this is Tory again.
The growth is it relatively speaking I think ex Q1 is a quarter, where we tend to see some deposit outflow.
This quarter, we did not so we're still we're still getting growth from the core bank.
The deposit front on the funding side so.
As we are progressing to.
Bring more of a relationship of our existing customers into the bank or taking market share and bringing new customers into the bank. We continue to be focused on loan growth deposit growth and core fee income growth from those customers. So expect that to continue and I expect us to continue to grow.
Are the liquidity side of the balance sheet and have it be in DDA balances.
Okay. Thanks, and then just finally for me just on <unk> on.
On slide 17, I'm I'm, just I'm, assuming but its at all as of March 31 as well.
The asset sensitivity.
Yes, this is Ron and meadows, let's update through Q1.
Okay. Thank you.
You bet.
Thank you and your next question comes from the line of Christopher Granny from K B W. Your line is open. Please go ahead.
Great. Thanks.
Thanks for the question.
Maybe a high level picture on just the status of the merger.
Since it's been announced what the world has changed.
Interest rates been.
One of the big ones.
Just conceptually how are you thinking about the economics of the deal today versus.
Last fall.
Hey, Christopher Christopher I'm going to go Chris Christopher Criss Cort, let me start high level.
Our assessment.
The merger remains the same we're as bullish and as enthusiastic as we were on our October .
October 12 for me announced about the combination we think the long term.
<unk> solutions for our customers for our associates and our shareholders.
It's certainly the right thing for both companies do so we're extremely enthusiastic.
Hum.
We must have message since October .
Still anticipating sometime in this quarter for a close of that deal now relative to the economics I'll, let Ron.
Mentioned make a couple comments, yeah, you bet, Chris Yeah, I'm very very excited where both have subsequent rent. This is the time, where net interest margin.
We should see some benefit and we've got the liquidity to fund that with continued loan growth. So feel very good about that.
Okay, and if I could.
One more on just the marks obviously I know, you're probably finalizing them all in.
But we obviously saw the move in the bond market this quarter.
Drove your book value down in Columbia down a little bit more.
How do we think about the fair value marks.
Directionally given what's happened.
Yes, directionally, what could have been a rate premium what we're talking about there was mostly rate all right right. So directionally, what would've been a rate premium in the summer fall last year could turn into a rate discount at this point so.
Maybe utilize some of that excess capital through those marks but then you have higher earnings on the back end through.
Accretion of discount versus amortization of premium that's dramatically.
The main the main changes you'd see.
Okay. Thank you.
Would that affect any capital.
Capital.
Return post post close with the buyback is it enough to impact your decisions there.
I'd say always post close pretty close the last couple of years. It's always been about continued to fund organic strong organic loan growth with a healthy dividend and.
We will take a look at that from a buyback standpoint, just based off of opportunities. We see looking ahead at that point. So a lot of moving parts in answering that other than to say, it's never the focus but as long as an option.
Okay. Thank you.
Thank you.
And again to ask a question or if you have any question simply press star one on your telephone keypad.
And we don't have any further question at this time I would now like to turn the call back over to Jackie Bohlen Investor Relations director for Umpqua.
Please take it away Jackie.
Thank you Lee and thank you everyone for your interest in Umpqua Holdings Corporation and the participation on our first quarter 2022 earnings call. Please contact me if you'd like clarification on any of the items discussed today are provided in our presentation material. This will complete our call goodbye.
Thank you ladies and gentlemen. This concludes today's conference call. Thank you for your participation you may now disconnect.
[music].
Okay.
Okay.
[music].
Yes.
Okay.
Okay.
Okay.
[music].
Hum.
Okay.
[music].
Thanks.
[music].
Yes.
Yes.
[music].
Yes.
[music].
Yes.
Yeah.
Okay.
[music].
Okay.
Sure.
[music].
Yes.
Okay.
[music].
Yes.
[music].
Yes.
Yes.
[music].
Okay.
Okay.
[music].
Okay.
Yeah.
Thank you.
[music].
Yes.
Yes.
[music].
Yes.
Yes.
Yes.
Yes.
Okay.
Yes.
Okay.
Okay.
Okay.
[music].
Yes.
Yes.
Okay.
[music].
Yes.
Okay.
[music].
Yes.
Yes.
Yes.
Yes.
Yes.
Okay.
Okay.
Hi.
[music].
Yes.
Yes.
Okay.
Yes.
[music].
Yes.
Sure.
[music].
Right.
Okay.
[music].
Sure.
Okay.
Yes.
Okay.
Okay.
Okay.
Yes.
Yes.
Yes.
[music].
Okay.
Yes.
Okay.
Yes.
Okay.
Okay.
[music].
Okay.
Yes.
Yes.
Okay.
Yeah.
Yes.
Yes.
[music].
Okay.
Okay.
[music].
Okay.
Sure.
Yes.
Yes.
[music].
Okay.
Okay.
Okay.
Okay.
Okay.
Okay.