Q1 2022 Origin Bancorp Inc Earnings Call
Good morning, and welcome to the origin Bancorp, Inc. First quarter 2022 earnings Conference call. Please note. This event is being recorded I would now like to turn the conference over to Chris Murray Goldman Head of Investor Relations. Please go ahead.
Good morning, and thank you for joining US today, we issued our earnings press release yesterday afternoon, a copy of which is available on our website along with a slide presentation that we were referred to during this presentation.
Please refer to slide two of our slide presentation, which includes our safe Harbor statements regarding forward looking statements and use of non-GAAP financial measures for those joining by phone. Please note. The slide presentation is available on our website at Www Dot origin Dot Bank. Please also note that our safe Harbor statements are available on page six of our earnings press release filed with the SEC yesterday I'll comment.
It's made during today's call are subject to the safe Harbor statement in our slide presentation and earnings release I'm joined this morning by origin Bancorp's, Chairman, President and CEO Drake Mills, our Chief Financial Officer, Steve Brolly, President and CEO of origin Bank Lance Hall our.
Our chief Risk Officer, Jim Crotwell, and our Chief credit and banking Officer Preston Moore.
After the presentation, we'll be happy to address any questions. You may have now I'll turn the call over to you Greg.
Thank you, Chris and good morning, looking at the start of 2022, and how we are positioned moving forward I am pleased with the fundamentals of our core business.
The external factors that are affecting the broader economy.
Out of how we performed in the first quarter and how our teams drove significant growth by adding long term relationships. This continued organic growth reflects our strategy and focus on building value.
Total loans held for investment excluding PPP in mortgage warehouse were $4 $66 billion, which is a three 6% increase compared to last quarter and a 14, 5% increase on an annualized basis and puts us in a great position to meet our expectations total deposits grew $196 5 million or <unk>.
3% compared to last quarter, and 12, 1% annualized Lance will get into more detail on our loan deposit growth, but I would add that our growth in loans and specifically noninterest bearing deposits as a reflection of our strategy and focus on profitable relationships throughout our markets.
Looking at the income statement, we reported $27 million net income $25 $6 million of pretax pre provision earnings and the diluted EPS of <unk> 87.
We released $327000 in credit reserves, Jim will provide more color on our credit portfolio, but I am pleased with our overall credit performance. Most of you are familiar with the origin story and you know we are an organization who takes great pride in our corporate culture is not something we just talk about but we build on it every day it is truly.
<unk> a competitive advantage for us in our markets as we attract new customers and equally as important as we attract new bankers during the first quarter.
We added seven new producers, primarily in our Texas markets, we continue to capitalize on opportunities in Dallas Fort worth and Houston Slide eight shows the consistent growth we've experienced in Texas from the standpoint of loans and deposits I am optimistic that our new bankers as well as our existing teams. We will continue to drive meaningful growth now I'll turn it over to Lance.
Thanks, Greg.
Origin is incredibly fortunate to have an amazing team of bankers, who share our vision and purpose to build the best Bank in America with a unique approach to corporate culture, serving clients and growing communities with.
We strongly feel that our award winning culture and geographic management model create a significant competitive advantage and hiring and retaining the best bankers in our markets.
This strategy combined with our drive to expand our business in Texas creates a platform that should allow origin to consistently drive double digit growth.
As I shared with you often we spent a great deal of time talking with our teams about the concept of being a trusted advisor and the process. We go through to manage and build meaningful long term relationships.
Our consistent growth in our core business is a reflection of our bankers putting that philosophy into action.
For the first quarter total loans held for investment, excluding mortgage warehouse and PPP increased $165 million or three 6%.
As Greg mentioned this is a 14, 5% annualized growth rate and puts us in a strong position as we begin the year.
As planned we saw the majority of this growth in our Texas market.
We also continue to add experienced bankers in mortgage loan officers to an already impressive team of high performers throughout our markets.
On slide 10, you can see a breakdown of our loan portfolio.
I am pleased with our diversification and the growth we're seeing.
We've come down from a historic high levels in our mortgage warehouse book, but we remained in our expected range for 2022 of 8% to 10% of total loans held for investment.
Our commitment to building meaningful long term relationships is also evident in our deposit growth for the quarter.
Total deposits grew $196 5 million or 3% compared to last quarter and of that growth total noninterest bearing deposits grew $132 2 million.
Or six 1% compared to Q4 'twenty one.
I'm very pleased that our noninterest bearing deposits currently represent 34% of our deposit mix.
We have confidence that our strategic plan and talented bankers will continue to drive results and build loyalty throughout our markets.
Now I'll turn it over to Jim to go through our credit quality metrics.
Thanks, Lance if you can see on slide 13, there are many reasons to be pleased with our credit quality.
Past due loans held for investment to total loans held for investment net of PPP loans ended the quarter at four 2%, which favorably compares to the 5% level reported over the past year.
Plaza five loans held for investment was stable coming in at 136% of total loans held for investment net of PPP, which compares to a level of 135% as of Q4 2021. This is a 25% reduction from the level a year ago and we are very pleased with the trend of our classified loans.
Nonperforming loans held for investment to total loans held for investment net of PPP reduced coming in at four 1% down from a level of six 3% a year ago.
Lastly, annualized net charge offs for the quarter to average loans held for investment came in at one 4%, reducing eight basis points from the last quarter levels. It was a solid quarter from a credit perspective, reflecting reduced levels of past dues stable levels of classified loans reduced levels of nonperforming loans.
And reduced levels of net charge offs.
The stability and resiliency of our portfolio continues to be driven by our focus on relationship banking as well as our unwavering focus on sound underwriting and credit structure.
We increased our allowance for credit losses to $62 2 million, a $2 $4 million reduction from the year end 2021.
As of 331 2022, our reserve represented one 2% of loans held for investment and 133% of loans held for investment net of PPP and mortgage warehouse loans, reducing from levels of one 3% and 143% respectively.
Decrease in the reserve was driven by the continued improving credit metrics discussed previously with no material adjustments to our ACL model assumptions based upon economic forecast.
As it pertains to economic forecast uncertainty remain stupid risks related to rising inflation labor pressures continue global supply chain disruptions as well as increased geopolitical risk.
As we have shared on our recent calls we are very pleased with the overall performance and stability of our loan portfolio I'll now turn it over to Steve.
Thanks, Jim Slide 14 is our yield cost and loans held for investment portfolio side.
During the first quarter, our total yield on loans held for investment decreased three basis points, which includes the impact of PPP loan forgiveness quarter over quarter exclude.
Excluding the impact of PPP loans, our yield on loans held for investment increased one basis point in quarter one.
As the fed raised interest rates until later in the quarter.
We anticipate our loan yields will increase as the fed is expected to continue their interest rate increases.
The top right graph shows the continued decrease of our cost of funds as our total cost of deposits decreased two basis points to 17 basis points for the quarter.
Through our relationship focused approach our bankers have done a great job managing deposit rates and we will continue to remain focused on this strategy.
On the bottom left graph, you can see our fixed and variable loan composition.
As an asset sensitive bank increased interest rates will be beneficial for origin.
A 100 basis point parallel shift in interest rates were to occur we would expect to generate an incremental $18 $4 million were eight 1% and net interest income.
The bottom right graph shows at March 31, 68% or $1 3 billion of our prime and one month LIBOR index loans have a current interest rate at or above the floor interest rate. Therefore, these loans have a 100% beta two interest rate increases.
This amount increased approximately $339 million from Q4 2021.
With an interest rate increase of 50 basis points 85, 4% of our loans.
We'll have a note interest rate above their floor interest rate and we will receive the benefit of the interest rate increase.
With a total of 100 basis point increased 94% of our loans will receive this benefit.
Slide 15 shows our recent net interest income and NIM trends.
The graph on the left showed a five quarter trend of income and NIM.
Our total net interest income decreased $1.7 million during the quarter.
Driven primarily by the decrease in PPP fees and mortgage warehouse average balances.
Excluding PPP in mortgage warehouse loans, our net interest income increased from $45 million to $46 2 million or two 6% quarter over quarter.
We believe that our net interest income will continue to improve throughout 2022.
The graph on the top right shows the change in net interest income excluding PPP in mortgage warehouse loans.
Every component improved compared to the prior quarter with exception of an annual dividend received in the fourth quarter from one of our non marketable equity securities.
The bottom graph shows our NIM quarterly changes, excluding PPP in mortgage warehouse loans with excess liquidity contributing to the largest impact as our average cash balance increased from $442 million in the fourth quarter to $746 million in the first quarter.
Slide 16 investment Securities is a new slide the top left graph shows the five quarter trend of investment average balance and yield.
The growth in balances due to excess liquidity during the periods presented.
The bottom left graph is a five quarter trend of accumulated other comprehensive income or OCI.
As the short end of the yield curve steepened at the end of the first quarter. The net tax effect of the changes in unrealized loss in the fair values of available for sale Securities was reported through OCI.
To fund future loan growth, we do not intend to sell any securities with unrealized losses as we have adequate on hand liquidity. In addition to approximately $50 million a quarter of expected cash flows from the securities and a proven ability to grow our deposit base.
Slide 17 is our net revenue distribution the top left graph shows our net revenue growth since our IPO.
During the first quarter noninterest income represented 23% of our net revenue.
The bottom left graph details on noninterest income lines.
Mortgage banking revenues increased 43% from the fourth quarter to the first quarter driven by the increased market rates improving the fair values of our pipeline in the MSR.
Insurance Commission and fee income, which is a seasonal revenue producer.
Increased to $6 5 million in the first quarter 2022.
$3 8 million in the first quarter of 2021, and $2 8 million in the fourth quarter of 2021.
The insurance agency acquisition that closed in December 31, 2021 contributed an additional $1 $5 million this quarter.
The top right graph details and components of other noninterest income.
Contributing to the $363000 loss with limited partnership income.
It was a $2 $2 million decline in fair value from one investment.
This represents a reversal of a fair value gain from the investment with third quarter 2021.
Slide 18, our noninterest expense analysis, we reported total noninterest expense of $42 $7 million, an increase of $2 4 million and in line with our expected $43 million quarterly run rate <unk>.
Including $346000 of intangible amortization insurance agency acquisitions mentioned earlier at $1 $2 million of noninterest expense.
Moving to the next slide similar to the change in NIM, our excess liquidity and growth of investment Securities were the primary contributors to the lower leverage ratio.
The bottom right graph reports the details of the change in our leverage ratio.
Overall as you can see referenced in the trends in our regulatory capital ratios, we continue to be well capitalized.
Now I'll turn it over to Drake.
Thanks, Steve we have a lot to be excited about this quarter.
Even in this competitive environment, our bankers were able to drive strong growth <unk> remains focused on building meaningful relationships that drive long term value because of our strategic investment in Dallas Fort worth and Houston, we have the luxury of not having to chase deals at the expense of yield duration and credit quality for the sake of growth. This is a strategy.
The entire team is committed to and we are proving that we can execute on that strategy, while achieving our targeted low double digit loan growth.
Origin is positioned to capitalize on the opportunities in the market and will benefit from a rising rate environment, we benefit from the new lift outs over the past year, we benefit from the impressive teams to create value through our culture and our trusted advisor philosophy. We also believe we benefit significantly through our partnership with BPH Bank.
We are pleased with where we are in the process and as I said on our announcement call. This partnership gives origin meaningful expansion across yes, 20 quarter in East, Texas and strengthens us in Dallas and Fort worth we have an incredible opportunity to add to what <unk> built in the attractive East, Texas market in closing, we did announced the increase of our quarterly dividend.
<unk>, which signifies our continued belief that we are in a strong position to consistently execute at a high level and provide value to our employees customers communities and shareholders. Thank.
Thank you for being on the call today and now we'll open it up for questions.
Thank you the floor is now open for questions. If you do have a question you May press star one on your telephone keypad at this time.
You're using a speaker phone Oems while posing your question you pick up your handset to provide the best sound quality.
If you have a question or comment please press star one on your telephone keypad at this time, please hold a moment, while we poll for questions.
We will take our first question today from Matt Olney with Stephens Stevens. Please go ahead Sir.
Hey, Thanks, good morning, everybody.
Good morning, Matt.
I wanted to dig in on deposit growth really strong numbers in <unk> anything, particularly driving this strong growth.
Deposits anything chunky it seems like lots of your peers are seeing more moderate deposit growth at this point and then kind of part two of the question.
That's related is around deployment of excess liquidity, we saw some of that in the first quarter, we'd love to hear updated plans about.
Further deployment of liquidity.
Throughout the year.
Yes, Matt first of all I'll start off on.
We have to recognize that.
Adding team members in the fourth quarter, 7% in the first quarter. These people have been extremely productive moving over their relationships relationships they've dealt with for years and the deposit side that was a significant impact for us. So this is core growth you saw the core deposit growth you saw there.
Increase in noninterest bearing deposit growth, which is meaningful.
And you've heard me for years say I'm never going to take my foot off the gas on growing core deposits liquidity, obviously is strong and for US It was impactful.
Not only negatively NIM, but giving us opportunities for deployment. So we feel very good about obviously, we see a slowdown in this growth but this is production from these these these relationship managers and I feel like it's sticky production so far.
From there obviously we.
Are getting busy trying to deploy some of that cash and.
It's difficult to get Super aggressive with that and you saw the impact of that cash to NIM because of the potential interest rate increases and what we're having to deal with there, but we were able to put some of that to work.
Our investment portfolio, we feel pretty good using.
Some SBA and things like that.
Yeah.
<unk> had been impactful and given us a little bit more yield, but the other side of the deployment of cash as we saw significant tax payments.
And a reduction of cash.
In the last few months or last few months last month, and so with that reduction I think we're seeing that across for instance, we're sitting here today I know theres a big concern about 10 be in managing that position I feel very good about our strategies and have or manage it and I will tell you because of tax payments because of <unk>.
Jason off some higher cost deposits that.
Because of these relationships that were bringing over their deposits now we're chasing off higher cost deposits, we're sitting here at seven $7 billion.
Today.
And continuing to reduce those high cost deposits, putting us in a very good position to be able to manage that <unk> project going into the end of the year. We also have relationships.
We will be able to overnight.
At the end of the year. So we have a tremendous amount of work internally going on to manage that process. So we're going to try to reduce cash today cash is some were around 290 million. So we're in a better position, but we have a number of levers to pull to continue to manage this <unk>.
<unk> and I feel very good about where we are.
Okay. That's great. Thanks for the color there and then.
I guess switching gears a little bit.
With the fed to raise rates again, and probably a lot more aggressively in the next few meetings.
Would love to hear about expectations.
For the bank with respect to both loan betas deposit betas that youre anticipating in.
I think we can go back and look at the bank's sensitivity to the last rate cycle and in 2015 to 2018, So I would love to.
How you view, the bank's positioning to higher rates today.
Fair to maybe back at that 2015, 2016 timeframe before the fed raise rates last cycle.
Yes, I think all the deposit betas as Steve has done a tremendous amount of work in.
Understanding because we wanted to get a grasp on really what the percentage of total deposits index deposits where.
And the impact that was going to have a 7% of our deposits are indexed and these are relationships we have that.
That we've had for a number of years that are meaningful so that number came in more favorably than I thought it would so we at this point a project in beta is in that 50 to 60 range on the deposit side.
We feel that.
That's probably a little higher but that's what we're basing.
The standpoint of being able to offset that one the betas on the loan side, because obviously being sensitive we are these.
These increases are going to be favorable we're seeing yields of loans pick up in each one of our markets.
And I suspect going into mid point of the second quarter that will start to see.
Low four handles on our own or new deals, which will start to help us in that range so loan betas.
Steve I don't know if you've had a good feel for loan betas overall, but we certainly think that we're at the.
Bottom, we've basically gone through with the next 25 basis point, all our floors and so we will have a full impact of the next rise arrays, depending on whether it's 25 or 50, UHD and Matt just when Drake said, 50% to 60% data that is after.
Total of 150.
This puts increase so we do have a lag so for this quarter, we're not expecting anything close to 6% as we said last quarter.
First 100 basis points, we're going to keep as much as we can to a zero percent data and we can't do that to 7% of our deposits, but for the other 93%. We really think we're going to be able to lag that however, after may if there is another 50 basis points cumulative at 75.
And that's when you may be able see June July that's when you may be able to see the 60% total data, but not until then.
Okay.
Good commentary I used to just following up on that point, you mentioned indexed deposits just 7% currently.
Any guesses or estimates of what this would compare to a few years ago back in 2015 timeframe.
I think I think in 2015, we probably were somewhat short of 7% because of recent relationships that we've used to to.
To manage those rates as they went down so I would probably say that.
Matt and this is a guess I'll go back and do a little work on this but I'm going to say we were in the 4% to 5% range potentially versus where we are at seven a day.
Okay.
Okay. Thanks, guys I'll hop back in the queue.
Okay. Thank you Matt.
As a reminder, ladies and gentlemen, if you do have a question or comment you May press star one on your telephone keypad at this time again Thats star one if you'd like to queue up for a question. We will take our next question from Kevin Fitzsimmons with D. A Davidson Sir the floor is yours.
Yeah.
Hey, good morning, guys.
Good morning, Kevin.
Just a.
A question on that.
The higher the pace of hiring Drake. So you mentioned, how adding nine members in fourth quarter and seven in first quarter and now you've got Dth coming on board I'm just wondering.
And at the same time, there's large mergers that are going on or have gone on.
Around your footprint I'm, just curious how you weigh that.
That may be ongoing opportunity of being able to hire producers like that versus the <unk>.
Well, maybe with all this movement, we had taken the foot not taking the foot off the gas, but taken the foot off the gas a bit on hiring to allow.
Some of their progress and their results on the top line.
Come through into show on core profitability I'm, just wondering how you weigh that or do you not do you just kind of when the when the opportunities come you just take them in.
And sometimes you can.
Get more during certain times than others, just just curious thanks.
Yes, Kevin this is this.
This is what we built this institution on this strategy and how we've managed this now.
The opportunity comes in different forms obviously, the dislocation in the market and the activity that we're seeing is providing some significant opportunities for us but on the other side we are.
Our strategy is to maintain our portfolio mix. So what that means is we can't bring one.
Let's say 10 real estate producers, we are CNS focused and we will continue to do that we happen to have what I think is a very good opportunity to add C&I producer for instance, even though you think that C&I looked flat this past quarter, 50% of all most of our real estate production was not was owner occupied.
Which is categorized there should be a CNS. So in reality, we had strong C&I growth.
Those are the type relationship.
People with footnotes, so we have passed one.
And the last three quarters, a couple of big time real estate producers because they just big they were what I would say.
Giant killers on those type of deals so and our.
World, we're going to continue to build the CNI presence through these lenders as we have the opportunity to do that I don't know that this opportunity will continue because.
The potential markets, but right now we have opportunity we're going to take advantage of it because that's how we've continued to build this organization.
Got it thank you and.
I just wanted to ask about warehouse so warehouse.
I think I think I heard earlier in the call about the.
Outlook for keeping that 8% to 10%.
Of the loans in 2022, so is that I think it's a 10% today. So does that imply we might have a little more room to go down in terms of.
The volume, but then we're getting close to a bottom.
Well I'll remind everyone that.
Right sized and mortgage warehouse has been a project for the last several months because of the activity in the.
The bulge lines in a number of things that we did our outlook for Q2 and Q3 is somewhere around that.
$500 million may be slightly low lower than that but we feel that we can keep that net 9%, 10% range and thats, where traditionally we would like to run mortgage warehouse. So I feel good about where we are and based on the projections thats coming out of that team.
They are say in Q2 Q3.
$500 million plus or minus.
Q4 is a little a little difficult to plan at this point, but historically and I reason I say that is historically, we get a lift in the fourth quarter, but I am extremely concerned about inventory what we're seeing in mortgage production, even though we have significant number of applications to be able to fill those two because of the lack of <unk>.
<unk> I think we will have maybe a negative impact in the fourth quarter mortgage warehouse, but thats, where we stand today.
Okay. One last one for me on credit and credit the trends appear solid and they're all moving in the right direction and you guys appear to have a very healthy reserve, especially when you're backing out the warehouse in TPP, which I think is the right way to look at it.
<unk> been very forward looking in terms of like.
Telling us sectors that you wanted to kind of.
Avoid or you've had this very proactive client selection process over the past few years too. So I'm wondering how you're feeling right now on one hand credit's great on the other hand.
This increased concern about the economy.
Given the things you guys mentioned earlier, so I'm wondering how you're feeling just generally and if theres any specific.
Types of loans or areas you would be avoiding.
Kevin. Thank you might have this room, Mike because the last couple of weeks, we've been doing a tremendous amount of work around understanding it's easy to run an institution like this when times are good.
When you understand that because of a potential recession, the aggressiveness of the fed a number of different things and certainly what we saw today with a decline in productivity.
You start to look at really where are the holes, where do you play and where do you manage that process and as I've told our team we're not going to do a negative credit cycle now go back to eight nine and 10, we have strong production with <unk>.
The average loss of 12 basis points per year. During those years. So we are identifying areas as we have through through the pandemic and other areas. For instance, we've had significant conversations around areas that when consumer spending slows and win those type of things around hotels and a number of different <unk>.
Retail environments.
That we saw in eight nine and 10 decline what does that impact how does that impact our portfolio I will say the team that we have today with Jim Crotwell impressed and more on what Theyre doing is so significant from a risk management standpoint, and how they look at this that for instance, we will continue to reduce.
Assisted living we will continue to reduce and look very closely at retail. We have worked diligently on office is and I know that.
People aren't as concerned with office I still remain concerned with office and this is an area that we're doing deep dives in had some we've had some great gifts recently of some of those leaving that we wanted to to chase all so even though things are good we see good growth our credit metrics and our profile is better than it's ever been.
We're looking at exactly where those concerns are so our C&I for instance, I have worked in the last two weeks to understand exactly.
How that.
The diversification of that portfolio works and where the real concentrations are and it is meaningful to sit here and look at a detailed list of of aspects of that those industries and know that our concentrations are in that 3% and 4% of the portfolio so to be able to do that type of work and understand it and I am pretty even.
Though we know that theres issues come in I feel still very good about the strength of this portfolio in house, So I'm still bullish on what we're being able to accomplish.
Yeah, Hey, Kevin This is lance good morning, I wanted to go back and.
Actually you talk about when you ask the lift out question.
For us the lift out strategy is just a much about credit quality. It is about production so for us the luxury of the dynamic markets. We're in plus the ability to continue to bring over experienced production individuals. We felt like we don't have to reach as much into new loan opportunities that we may not be knowledgeable about.
Have the cold call have to bid against others.
Dragging over relationships that have long term history with these production managers and Rms.
It gives us tremendous insight so for us the strategy is around high quality vetting on the front end of these production individuals to make sure that they fit our culture make sure our credit quality the portfolios that theyre going to be bringing over fit what we want from a strategy perspective. So.
If you go back to the strategic plan and you talked about lift outs, yes as production, but is also heavily about credit.
Yes.
Yes, Lance that's a great point.
Loan moving over to you can be a lower risk loan and a new one to.
To make yes, that's a great point, thank you guys very much.
Kevin Thank you.
What's more if you do have a question or comment you May press star one on your telephone keypad at this time. Our next question will return to Matt Olney with Stephens, Sir the floor is yours.
Thanks for taking the follow up on the.
Insurance side, some really nice growth in the first quarter I think you disclosed a chunk of that was from the acquisitions that you closed on <unk>, but just curious if there's anything else.
<unk> that higher insurance number.
Whether it's contingent commissions higher renewals just trying to appreciate where that insurance revenue could be over the next few quarters.
Yes, Matt it's a three legged stool at this point with growth client growth.
Contingent income is strong because of profit sharing.
Market outlook of losses. So we're in very good position there we've seen a slight tick on commission levels.
But.
Overall, and then obviously the hard market is.
Certainly we're seeing some increase in premiums so thats whats driving it where we were sitting at the beginning of the year thinking that insurance is going to produce around $20 million revenue, we're probably sitting here today at $21 million of revenue and outlooks. So feel very good about that looking for opportunities to enhance.
Those.
That those revenues through footprint acquisitions, and still remaining active there.
Okay great.
I guess switching gears on the expense side.
Steve where would you point us to as far as the.
Starting point for the <unk> earnings run rate.
Hey, Matt as we said last.
Quarter, we expect about $43 million for the next three quarters and so we are.
Slightly under that this quarter and we feel that the next few quarters.
Approximately a $43 million run rate.
Okay got it.
And then.
PTH I guess since we.
Last spoke on the deal announcements would love to hear any other updates on their first quarter or any updates on.
How do you see that coming together.
As I said in my comments I am tickled with the.
The integration process, we're going through one of the.
The real surprise.
Say surprise, but one of the.
Aspects that continues to make me feel really good.
Good about this partnership and this opportunity is the quality of people they have and how they manage.
Risk and how they think about client selection and a number of the things they do.
Just been so impressive in getting to know them and getting to know more of their people.
And how they think this has been rewarding and when I tell you that we joked a little bit about this being a unicorn, but will not tell you they truly are.
<unk>, what these people have been able to do from.
Our growth perspective with efficiency I think we need to take some lessons from them and see if we can pick up some of those things, but I am tickled, where we are I'm tickled with.
The regulatory outlook on this and and how we're dealing with our regulators and how they feel so.
Number of positive things that are going in and obviously as you know we hired.
Derek Mcghee and water find that's been for us. So we've made that process more efficient and certainly.
More enjoyable so.
Outside of putting up with them a little bit but.
This has been a great opportunity for us so I I'm tickled, where we are with BPH and feel like the integration process. We have our conversion date set we just need to get that regulatory approval and get going down the road, but I think they're excited I know, we are and we're going to continue to do things is going to make this a very successful integration process.
Great.
And then on the lift out strategy, you've already disclosed some of the new team members from last quarter and from this quarter and how youre thinking about the operating leverage.
I guess I'm kind of curious of where some of these team members.
Members are coming from and I guess from our side, we see three or four larger M&A deals in Texas.
Had been announced and some of them have been closed over the last.
Year, or so I'm curious, if you're benefiting directly from some of that disruption or the recruiting efforts that are successful in Texas, just more more broad and not really specific to those institutions.
Yeah, Hey, Matt. This is Lance I would say last year. It was a little more concentrated around BBVA and a few others.
Q1 this year.
We have three in Dallas, one in Frisco.
A couple in Houston.
And then we have two strong mortgage loan officers, we're excited about one in Oxford, Mississippi, one in Houston.
Those are really more spread out.
Sort of ones and twos versus larger teams that strategy has been working for us and I think it's.
Opportunity to kind of keep coming to us as we grow larger and people get to understand our culture better. So obviously, we're mindful of the disruption and we're watching it closely we have.
Our strategic board of talent in our markets of understanding who we want to attract and who we want to actively go after.
This quarter I would say it was spread out.
Okay. Thanks for that Lance and then just last question from me is around.
The core loan yield.
If I back out PPP.
It looks like the core loan yields.
Proved this quarter and are kind of sitting there in that low 4% range.
I think Drake and maybe in your opening comments, you mentioned expectations for some of the newer loans to have a low four handle on them as well.
Just want to clarify that and just any general commentary as far as.
Expectations and I'm curious how much pressure youre seeing on overall loan yields at this point if any.
Yes, I'll, let Steve answer the question, but Matt I don't want to.
Mislead anyone to say, there's not pressure.
Loan yields we passed up I think six deals.
In this in this past couple of months.
That were significant.
Great issue, so duration and rates have been a problem and as I said in my opening comments, we werent going to do deals at the expense of rate duration and quality. So yes, yes, Matt.
I'll just tell you anecdotally from.
What we're putting on the books, what we're seeing come through loan Committee I'm honestly surprised.
At the.
The rates that we're seeing from the rates and the duration that we're seeing in competition right now we have.
We have multiple things work, we pass on opportunities, where we're just still seeing a lot of competition doing seven and 10 year fixed.
In the low threes and.
I just think Thats a.
Our long term mistake that some of our competitors are making we feel like we have the luxury of.
The production teams the lift out teams, we're adding the market of Dallas and Houston that we don't have to get trapped in those mistakes.
And so we're being mindful so even though we grew 14, 5% annualized it could've been a lot more than that.
Yes.
But we're going to stick to our guns on what we think are long term right decisions around pricing and duration, Steve I don't want to go ahead and talk about loan yields.
Two things, Matt if you remember the fed increase on March 17th but.
Most of our contracts are end of month, and so we won't have anything when the first quarter of that 25 basis points. So we expect that full 25 basis points in the second quarter.
If you look at just the coupons. This is not the not the fees or anything else or coupons for the last four quarters.
Overall $3 63 in Q2.
373 Q3.
376, Q4, and then this past quarter of 384, so you'll see that our coupons are definitely increasing.
And once we only had like <unk>.
$20 million less of PPP loans once that goes will be better in the warehouses come down to a more normalized level. So I think youre going to see those rates continue to increase.
Yeah, Hey, Matt maybe last comment and this is sort of overarching when it comes to lift outs and production.
Really excited when I looked at Q1 of 'twenty two versus Q1 of 'twenty. One are new loan in line production was up 22% over that period.
Loan fee income that would be loans letter of credits and swaps was up 38% this quarter compared to the quarter a year ago.
And Treasury management fees were up 24% and that is.
Simply continuing to put on quality relationships base from these quality bankers and so on the production side I'm extremely pleased.
Alright, guys. Thanks for taking all the follow ups and congrats on the quarter.
Thank you Matt.
There appear to be no further questions at this time I would now like to turn the call back over for closing remarks, Mr. Mel.
Yes. Thank you. Thank each one of you for being a line I want to make this point.
I am so proud of this team because we are staying we are focused on what we really do well.
As our chief.
Risk I'll, just say is we're sticking to our knitting, we are staying very focused on quality pricing duration broker true relationships passing on deals I mean, we just have this unwavering focus on sound underwriting and structure and it is paying off so when you look at 14, 5%.
Annualized growth that is growth that we think is sustainable and growth that we feel is going to be profitable in the long haul so.
Thank you for listening today. Thank you for your partnership and your investment and we look forward to seeing you in the future.
This does conclude today's teleconference. We thank you again for your participation you may disconnect. Your lines at this time and have a great day.
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