Q2 2022 Allegiance Bancshares Inc Earnings Call
of the 20 largest MSAs in the US. These students among the seven, which have now fully replaced the job losses that resulted from the pandemic, and now also includes job expansions in the energy sector.
Texas overall continues to post very strong employment gains compared to the rest of the nation.
I will not belabor the point, but we'll say that we are encouraged by the growth opportunity that is presented with an RTA graphic footprint.
Now, with sending our overarching positive sentiments, today's macro level volatility, reflective of inflation and the impact of higher interest rates on the overall economy, clearly evokes a degree of care and caution. As it relates to establishing changes in your term tactics and strategy,
The team has made manifold progress as it relates to our preparedness for the merger with community bank detectives. As we have come together with our integration planning, our alignment to a full unified strategy and culture have progressed to a level that further pauses our confidence that we will most certainly benefit the scale and a uniquely powerful market position in one of the best markets in the country.
So that end we have received your hold approval from both sides and regulatory approval from the FDIC and the Texas Department of Banking. Once we get the nod from the Federal Reserve, we are prepared to schedule the merger close and get closer to operating as stellar bank.
Well, brief today, if I hide a degree of confidence about our current posture and my appreciation for the talent and committed efforts of our staff, we're determined to link to my comments how we go on for hours.
With that, I'll turn it over to Ray for a more detailed review of our operational results followed by Paul. We'll cover our financial results. We'll cover our financial results.
more detailed review of our operation results followed by Paul, we'll cover our financial results. Thank you.
We are very pleased to report another quarter of solid long growth, as our lending team, for the first time in the bank's history, exceeded half a billion dollars in core loan origination.
We have reported healthy pipelines over the past few quarters, and it's nice to see the flow from pipeline to origination to lung growth.
When looking at the composition of the origination, we continue to see expansion of our existing customer base, coupled with loans to new customers.
Our bankers are focused on providing a standing service, which has set a support in a market that is dominated by other state banks. bells zeros
I recently received an email with a subject line, a note from a happy customer.
The email described how we responded quickly to solve the problem.
After referencing our team of bankers that helped during this matter, the customer ended the email with, at a legion, relationships with your clients, really do come first.
As we approach our 15-year anniversary, it never gets old to share these stories and to thank our bankers and customers for what has been created over the years and what is certain to continue as we complete our merger to become Seller Bank.
Moving now to our production results. Our staff and lending teams looked at new records of 565 million of new core loans that fund a tool level of 366 million by 230. 3100 vote as tomorrow 6 Enclothes about 2.30.
Compared to the first quarter, when 469 million of new four loans were generated, which funded to a level of 370 million.
The weighted average interest rate charged on the new second quarter core loan was 4.92%, compared to the weighted average rate charged on the new first quarter core loan of 4.55%.
Paydoth core loans were 276 million in the second quarter compared to 214 million in the first quarter.
The $276 million that paid off core loans during the quarter had a weighted average rate of 4.85%.
Carrying cord loans experienced advances of 143 million at a weighted average rate of 5.10% and pay down of 124 million, which are at a weighted average rate of 4.93%. Which are at a weighted average rate of 4.93%.
All in, the overall period-end weighted average rate charts on our funded core loans increase 13 basis points.
Ending the second quarter at 4.93% compared to 4.80% as of March 31.
Strong core long growth, 112 million for the quarter. We are pleased to report core-funded loans of just over 4.3 billion, setting another record for the bank. Setting another record for the bank. Setting another record for the bank. Setting another record for the bank.
Turning asset quality, non-performing assets into the second quarter at 42 basis points of total asset, up slightly from 37 basis points in the first quarter.
Non-approval loans into the second quarter at 28.2 million, up 1.9 million from the first quarter.
This increase was due to 7.3 million in addition, partially offset by 2.7 million in that grade placed back on a gruel, 1.3 million in pay off, 725,000 in payment and 697,000 in charge of balances.
In terms of our broader watch list, our classified loans as a percentage of total loans decreased to 3.29% of total loans as of June 30.
Compared to 3.80% as of March 31.
Criticize loans decreased to 3.97% at June 30 from 5.01% at March 31.
In aggregate or asset quality, Acc Wherever and remotely, insist and request.
with single-digit charge-offs for the quarter.
On the deposit run, total deposit decreased 282 million in a second quarter compared to the first quarter, and increased 447 million over the year ago for it. And increased 447 million over the year ago for it.
The decrease in the second quarter was primarily due to continued strategic optimization, which included the runoff of broker deposits, as well as the emphasis on certain historically high beta deposits, particularly within our CD book.
We continue to see growth and non-interesting deposits primarily as a result of net new accounts that were opened during the quarter.
With that, our non-intersparing deposits, the total deposit ratio was 40.7% for June 30. The total deposit ratio was 40.7% for June 30.
Compared to 38.2% from March 31.
and 36.3% for the year ago quarter.
In closing, in the most recent issue of the Greater Houston Partnership Economic Update, the Metro Houston population is reported at 7.3 million people.
As Steve mentioned, the region has recovered from the pandemic.
And there are a number of trends that place the region in a position for future growth.
From housing costs at nearly 20% below the national average.
to being on the most ethnically diverse populations in the country.
As we work towards the closing of our merger, we see even more opportunity for growth and market share gains as the go-to bank for small and medium-sized businesses and this dynamic reaches. And I am the dynamic region. And I am the dynamic region. And I am the dynamic region.
I now turn it over to our CFO Paul.
Thanks, Frank. We are happy to pour solid results with another quarter of meaningful longer and healthy on it. With another quarter of meaningful longer and healthy on it.
Net income for the second quarter was $16.4 million, or 80 cents per duly-led share, as compared to $18.7 million for 91 cents per duly-led share in the first quarter, and $22.9 million for $1.12 per duly-led share in the second quarter of 2021. Net income for the second quarter of 2021.
Now with standing lower headline earnings, we are really pleased with our second quarter results, particularly when you consider the significantly lower PPP revenue, the more normalized provisioning, and the significant non-recurring expense noise, we have this quarter versus comparison quarter.
to put some numbers behind these items.
During the second quarter in Newtodake's 2020-22, we only recognize net TPPC revenues that interest income of $1.4 million and $4 million respectively, compared to $6.4 million in $13.3 million respectively to the same period in 2021. Super-t façon that has to take place in 2021.
We made up for the PPP revenue gap with lower interest expenses, increased securities revenue, and the broader relations team has done an extraordinary job of increasing core loan revenues through excellent core loan growth.
Next, we saw a more normalized provision story in 2022 due to the core loan growth as compared to a recapture provision for credit losses during the comparable period in 2021.
Bye.
Our elevated expenses in the second quarter were primarily driven by $3.9 million of what we consider to be non-recurring item.
which included $1.7 million in M&A-related expenses.
and a $2.2 million operating loss during the quarter.
Adjustment of all utility provisioning are pre-tax pre-visioning income for the second quarter with $22.3 million. As compared to $24.7 million in the first quarter, which of course featured $1.3 million of extra SBIC income,
and $25.3 million for the year of the quarter.
Now, if we were to add back the $3.9 million in non-recurring M&A expenses and that operating loss, an adjusted measure for pre-tax provision income for the second quarter would have been approximately $26.2 million.
which we feel reflects meaningful progress.
On to the detail.
That interest income was $57.5 million for the second quarter. Up from $55.2 million in the first quarter, primarily due to the effects of core long growth, a more favorable rate environment.
Partially offset by a $1.1 million decrease in PPP revenue recognized in interest income, and only slightly higher interest expense.
Net interest income was also up from $56.6 million for the second quarter of 2021, primarily due to lower interest expenses and increased income from securities, partially offset by decreased PPP net fee income.
Recall that net fee revenue related to PPP loans recognized into interest income during the second quarter with only $1.4 million.
compared to $2.5 million in the first quarter in $6.4 million for the second quarter of 2021.
The future's expense increased by $227,000 during the second quarter compared to the first quarter.
in decrease by $878,000 when you compare it to the prior year quarter.
Before moving on, I should note that we only had approximately $934,000 of net-deferred PPPC remaining at mid-year.
We're selecting on PPP revenue. It was great while last year.
And we now feel very well positioned going forward as PPP revenue loses its impact.
Yield on loans is unchanged at 5.02% for the second quarter compared to 5.02% for the first quarter. And this decreased from 5.09% in the year ago quarter.
When you exclude PPP loans and related revenue, yield on loans would have been 4.93% in the second quarter, 4.87% in the first quarter, and 5.07% in the year ago quarter.
Total yield on the asserting asset with 3.81% for the second quarter, up from 3.56% for the first quarter, and down from 4.41% for the year of their quarter. And down from 4.41% for the year of their quarter.
These trends are primarily reflective of changes in interest rates and the mixed shift in our earning assets.
which we are really pleased to see reflect toward the higher proportion or less.
With respect to interest expense, our cost of interest bearing liabilities increased slightly to 56 basis points from 51 basis points for the first quarter and down from the year ago quarter cost of 67 basis points.
driven principally by depository pricing and lower borrowing.
The overall cost of funds for the second quarter increased slightly to 34 basis points in the first quarter.
We are working really hard to preserve our optimized deposit positioning as we manage expected changes in interest rates throughout 2022 in the hour.
As we look at our tax quibbling net interest margin over the last year, lower PPP net fee income recognition and mixed shifts in the composition of our earning assets drive this story, resulting in a margin of 3.53% for the second quarter as compared to 3.3% in the first quarter and 4.02% in the year ago quarter.
excluding TPP loan balances and related revenue, the net interest margin would have been 3.46% for the second quarter, from 3.14% in the first quarter, and 3.88% for the year-go quarter.
After so many quarters of the structural downtrend in corn nins, the structural downtrend was a more diluted earning asset next.
It is very gratifying to see such meaningful inflection in our core NIM profile.
From here, we like the prospects of Glow Growth Striving Increased Core Lones at the percentage of the overall earning assets.
which should set us up very well for both NIMS and net interest income growth.
Pivoting to non-interest items.
Non-interesting come decreased to $2.7 million for the second quarter from $4 million in the first quarter. Our merely due to the fact that the first quarter included $1.3 million of extraordinary income from FDIC investors.
Total non-interest expense increased in the second quarter to $37.9 million compared to the $34.5 million in the first quarter.
This is largely due to the aforementioned operating loss.
along with merger-related expenses recorded in the court.
Aside from these items, which we consider to be one-off, we are very pleased to be holding the line on expenses.
as non-shoot expenses would have been about $34 million for the.
Our efficiency ratio for the second quarter increased to 62.96%, compared to 58.32% from the first quarter of 2022. Reflective of that increase in non-accurring noise.
Q-to exclude non-recurring items, specifically M&A expenses in both Q-1 and Q-2, that SBIC gaining Q-1, and the aforementioned operating loss in Q-2, the adjusted efficiency ratios for the first and second quarters, with 58.5%.
in 56.54% respectively.
which we view as good progress on a core basis.
Moving on to credit, we recorded a provision for credit losses of 2.1 million dollars during the quarter.
which is primarily reflective of the strong core long growth during the period.
Our allowance for credit losses on loans ended the quarter at $50.2 million, representing 116 based on total loss.
So bottom line, our second quarter ROAA and ROTC metrics came to 0.94% and 13% respectively.
Representing what we feel are solid results, all things considered.
Quarter-end TANF book value per share was $23.25.
which represent a meaningful decrease since year end, and not with standing in solidarity.
This decrease is reflected by the ALA CI impact of the significance shifts in interest rates on the value of our available for sale with testing and vision MI review, It's actually a big, unique opportunity for allaria. journey for all of you.
We went from an 18.2 million dollar game position in the TIA year end to a 115.5 million dollar loss position in June 30th. The TIA year end to a 150.2 million dollar loss position in June 30th.
We view this as trans-cultural.
We continue to feel very well positioned on Capitol. The company declared dividend of 14 cents per share.
And we were active repurchasing shares during the second quarter, buying back 217,000 shares at a weighted average share price, $39.24.
In closing, we are extremely excited and looking forward to the closing of our pending merger with BDTX as soon as possible, if we have such great conviction in the strategic and finding two benefits of the merger. We are looking forward to finding two benefits of the merger.
You can't wait to form stellar day.
I will now turn the call back over to speed.
Thank you, Paul. And with that, I'll turn it over to the operator to open the line for questions. Thank you.
Thank you. Again, ladies and gentlemen, would you like to ask the questions for a star 11 on your touch tone telephone? Thank you. Thank you. Thank you.
One moment for our first question.
Our first question comes from David Feaster of Raymond Daines. Your line is open.
and everybody.
Maybe just starting on growth. I was hoping you could talk through some of the puts and takes here. You talked about record originations. Just curious whether you think there might be some dynamic of a pull forward of demand there and how much maybe just driven by the strength of the economic backdrop in Texas, which we all know is obviously really strong. Any commentary on the pulse of your economies and how the pipeline is trending and expectations for growth as we look forward.
This is Ray. On those originations...
You know, it set a record and everything about it is just really what we like. I mean, you had granularity average loans, was $586,000 in there. So still granular, the mix looks like a regular portfolio and 46% of those floating. So we were really excited about that. And that was, we reported a pipeline that we felt would generate.
you know, kind of a nice solid origination. And that pipeline, which is fresh, are going into the third quarter, if this time looks about the same. So we feel pretty good about at least as we look out of the quarter and maybe Steve might want to talk about the thing on the economy. Yeah, it's just, it just continues to do well. Obviously we have had good population growth and use in our cost of...
Housing is still below the national average, so that's a positive. Probably average home prices being sold are still 20% below comparable to other areas of the country, the average. We've got a positive purchasing manager's index in Houston. Port of Houston is doing great. The refining industry is doing well. There's just a lot of positives in the area, and we still have that affordability index.
Why isn't it once was, but still there, and you know, the issues could cover all those jobs from the pandemic. So we're actually seeing a little bit of growth in interview-related jobs. So, you know, we've seen hotels perform better than obviously through the pandemic. There's still probably a few sub industries, and maybe a event center or something like that. Some kind of small business things that we keep close eye on.
trends that you're seeing, whether you're seeing any migration within the book and just how you think about your ability to continue to drive core deposit growth. Any commentary on deposit data is just given these recent two.
75 basis point hikes.
Absolutely. You know, it's been a good almost two years of optimization that we've been working on with respect to our deposit book. And we're really pleased with where we stand kind of going forward as we should stand alone. And in particular, as we put these two companies together to form Stellar Bancorp, especially given the great strength of CVTX's deposit book. So both companies are extremely focused on...
the core relationship to POSIT. And that's going to be really where we...
earn our paychecks and that focus is going to be non-interest-bearing as well as the interest-bearing relationship deposit. So what you see in our financials is a de-emphasis towards CDs. We still are going to have CDs as part of our deposit book, but we look at the deposit composition of our partners at CBTX and understand that a more optimized book is going to be available.
be somewhere in between theirs and ours as it relates to composition with a great focus on the non-interest bearing which we focused on getting with our loans as well as that interest bearing relationship. So as long as we're in the customer acquisition business and we're really pleased with not only our ability and our track record of adding and retaining customers but what our potential will be together at Stellar Bancorp. So we're pretty bullish as Steve said we're in one of the best markets.
out there and we're positioned to get more than our fair share of the growth that's out there.
That's extremely helpful. And then last thing, just maybe at a high level, touching on asset quality. And you talked about Steve maintaining a degree of care and caution, just given the environment. Boys maintained a very conservative approach to credit, but there's real challenges in the economy, but obviously Texas is relatively insulated, or always better positioned. But maybe at a high level, just, you can hear your thoughts on the credit outlook from your standpoint, the pulse of your clients, whether that started to shift it all, and then...
As you look out, are there any segments that you're maybe more cautious on or watching more closely?
We're really pleased with the year-to-date progress on all of our asset quality metrics, whether it's charge-offs or criticized assets. They all seem to be getting back to that more normal level that we're used to. We've had most of those sectors that we've watched really closely and maybe even received.
deferral payments during the pandemic are outback, non-deferral, they're performing better. So at this point, up to now, we're seeing improvement.
Obviously, you know, we're not everybody else. The world is volatile, interest rates, discussions that you see around thoughtful recessions and so on. So we just, when I make that comment about being cautious, we're just always cautious. We continue to underwrite closely, we look for, you know, dear kids, we look for great underwriting on our credit. So we're just gonna be careful. You know, there are some macro transacted, you water.
Always be aware of, and whether it's electric cars, or just changes in our social fabric in the country that we cause you concerned about one credit here or one credit there. But generally speaking, we love our granularity. The nice thing about that is everybody would know and recognize that if something did happen to one, it's a small one, right? So we really like that approach. And it's all those sector that really appreciate relationship.
Thanks guys, great quarter.
Thank you.
Thank you....
Our next question comes from Brad Millsap, Apopka Family, the line is open.
Tap your lines open.
Thank you, morning guys.
Look at that.
Thanks for taking my question. Just wanted to maybe start with the margin. Ray, I think your loan yields maybe pre-pandemic reached a height of $5.50 or $5.60. It sounds like you had some good improvement on the margin.
New funded loans in this quarter. I'm just gonna curious, you know, with these last few rate hikes, you know, in your mind how quickly Can you get back there just kind of want to think about you know kind of what you're stand alone margin, you know could be I'm getting some of the replies and characteristics of your own book. I'm getting some of the replies and characteristics of your own book.
Sure, when we saw we've seen nice improvement with the bump we got.
Yeah, June . So we reported us a new loan production. We reported that right on that was $4.92. And, um, Intra-Corder June had a five-handle. So we're pretty pleased about that. So that's your trajectory that picked up nicely. So as far as when might we get back there, I think, you know, with this rate, something we just got, I mean, I think, with five handles on our new production.
And we're able to maintain this kind of pace of half a billion a quarter. You know, we can do the math and figure out where when we get there, but we still get about getting back into the five. And while we might get there this quarter, but on the new production, we're happy with 492. We're happy with 492.
And I might add, you know, about a third or a little over a third of our loans are variable rate and
A quarter ago, only a little over half or two-thirds of those were above four, with those will count as services, those there with PLAY Tulf Bridge 68.
It's all about floor and it positions us really well and that all of our variable is truly variable from here on in, there were probably only few exceptions. And then an extra color 20 to 25% of our portfolio is the type that matures in the next 24 months. So there in my I think some potential for retriting in addition to the great kind of poor origination that's going on at mix shifting.
to a higher overall yield. Thanks, Paul. That's helpful. And just as you think about funding, I know you had some nice improvement in your deposit mix this quarter, and this is a little complicated because you're coming together with CBTX, but it looks like your liquidity is down to a fairly low level. From here, Paul, would it be that you guys would need to be out raising deposits to fund your growth, or do you have enough cash flow coming out of the bond portfolio to sort of...
you know cover, you know, that you're liquidity needs to find that the good that you do have.
There's a good amount of cash flows coming out of the securities portfolio and it's a high class problem to get to if we find ourselves having to go race. To be more
commercial as it relates to raising our deposit funding. But we do fully acknowledge the extent to which we need to be competitive. And with this most recent rate hike, it does make sense for us to be... It does make sense for us to be...
Chiming the bar for our clients a little more than we have. It's thus far in the Ray-Tike cycle. So we're working on ensuring that we're... So we're working on ensuring that we're...
Providing the right value proposition to our deposit customers and the goal to be measured and find with our partners at CBTX, we put these companies together to form stellar to kind of get a sense.
Have the right mix of discipline as we speak to kind of get everything we're trying to accomplish out of the transaction, which is better operating leverage in an overall strong value proposition for all of our stakeholders. Thank you for all of our stakeholders. Thank you for all of our stakeholders.
Thanks, Paul. And just to file one for me, just an expensive recognizing that there's a couple things that you guys pointed out in the early weeks. Thank you. Thank you. Thank you.
Your personal costs are still down, we're in court. Is it, would it be possible that we're already seeing some of the expense savings from the deal sort of showing up in the run rate and we should maybe kind of adjust what we're thinking about in terms of expense savings when the companies come together or if you're a different way we should be thinking about it.
There's definitely a pull through of the expected call saves. I mean, we're in an environment where there is meaningful managed to expense pressure and notwithstanding that, our ability to hold lines is definitely a function of... It's definitely a function of...
some pull through of those expenses both on the personnel side and otherwise It all really kind of puts us in a good position on a pro forma basis really we want to close our merger as soon as practical and There are people working day and night and we're probably arguably a hair thin as a function of
How we're trying to operate here in the intra. Okay, great. I'll hop back and keep you. Thank you, guys.
Thanks. All right, thank you.
Thank you.
Our next question comes from Rady Gailey of KDW. Your line is open.
Thank you. Good morning, guys.
Move through.
I know a lot has changed over the last nine months in between the wind y'all announced the merger and today, like you have to enter straight back drop is a lot higher. But you know, the outline 265 of pro forma. The outline 265 of pro forma.
2023 EPS vision that any of them and I'm guessing that is probably going to be better than 265 now but any updates on how you think about kind of the combined earning our next year of stellar
Yeah.
You nailed it. We feel really, we felt good about the numbers that we presented when we announced the transaction. We've got no reason to have anything but even more conviction around, you know, our prospects of hitting and potentially outperforming that.
The market has come to a degree. If you recall, there were some embedded rate hikes in the scenarios that we look for to get to that number. But we have outpaced the rate hikes. The market has come to a degree.
Schedule has outpaced those expectations and separately we've had wind at our backs as it relates to the nature of each company's respective loan growth. So we feel great.
Restaurant new.
Nothing we've identified that would tell us there's something material to change that.
Okay, then on the topic of longer, I think you guys normally point to high single digits. I think you guys normally point to high single digits.
CDTX points to five to eight percent. So if you think about the pro forma number of stellar, it's somewhere around eight or nine percent is probably the right way to think about it.
I think that's probably good. There's long term and short term, there's going to be quarters where things are a little warmer than others and there will be quarters when they're not. But I think a good solid high single digit for the combined companies. This is a powerful business combination to put together this $12 billion regional presence. I think you're going to see good things in terms of market response to what we're putting together.
So I feel confident in those numbers, being in that kind of high single digit region on a go forward.
And then finally to me, the $2.2 million operational loss that you're kind of back, I'm out of the extent. What happened there? What is that? That's not a merger charge, or is it? What is that 2.2 operational loss? The 2.2 million operational loss is related to a possible fraud. That's a recent event that's still under pretty deep investigation. So I said, we're really not able to comment on this specific around that.
All right, great. Thanks, guys.
Thank you. Again, ladies and gentlemen, if you'd like to ask a question, please press star 11 on your touchstone telephone.
Our next question comes from Matt Olney of Steven Jeline.
Hey guys, good morning. Can you hear me?
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Hey, most of my questions have been addressed. I just want to clarify the funding topic and make sure I appreciate the plans for the third quarter. It sounds like there could be some more runoff of some of the higher-cost CDs that we saw in 2Q, and it looks like some of the long growth is going to be funded by either securities cash flow or overnight liquidity. Is that more or less the...
kind of a short term plan for funding growth and pre-Q. I say so. I don't expect that much more by way of rather kind of feel like our at least are more planned and deliberate efforts of optimization are pretty close to complete. Although we are going to strategically not be
extremely competitive for that funding class, PIGE. But you're right, we, in the pro-forma, we've got plenty of liquidity and a settlement basically, plenty of liquidity. So ultimately, we are, and until we use up our existing liquidity, and we're going to be focused on...
continued optimization, but we're also focused on customer acquisition on the funding side of the book and really tying funding to our lending relationship. And really that's the optimal dynamic as it relates to driving.
Profitability that we want and the business makes it that we want.
I think the rest of my questions have already been addressed, so thank you.
Sorry, thanks a lot.
I'd like to turn the call over to Mrs. Steve Wieslauf for any closing remarks.
We appreciate everyone's time and interest in the bank. I just want to comment one more time that we're very appreciative of our staff and all those from our merger partner who have really performed at an exceptional level as we prepare to become Stellar Bank. So again, thank you and we look forward to speaking to you again or with you again in the future. Thank you very much.
Thank you. Ladies and gentlemen, this does conclude today's conference. Thank you all for participating. You may now disconnect. Have a great day.
of our field and central booking departments, but also of the strength of the regional economy. Of the 20 largest MSAs in the U.S., Houston is among the seven which have now fully replaced the job losses that resulted from the pandemic and now also includes job expansions in the energy sector. Texas overall continues to post very strong employment gains compared to the rest of the nation. I will not belabor the point, but will say that we are encouraged by the growth opportunity that is presented within our geographic footprint. Notwithstanding our overarching positive sentiment, today's macro level volatility, reflective of inflation and the impact of higher interest rates on the overall economy, clearly evokes a degree of care and caution as it relates to establishing changes to near-term tactics and strategies. The team has made manifold progress as it relates to our preparedness for the merger with Community Bank of Texas. As we have come together with our integration planning, our alignment to a fully unified strategy and culture have progressed to a level that further fosters our confidence that we will most certainly benefit to scale in a uniquely powerful market position in one of the best markets in the country. To that end, we have received shareholder approval from both sides and regulatory approval from the FDIC and the Texas Department of Banking. Once we get the nod from the Federal Reserve, we are prepared to schedule the merger closed and get closer to operating as a stellar bank. While briefed today, it is my high degree of confidence about our current posture and my appreciation for the talent and committed efforts of our staff were to determine the length of my comments I would go on for hours. With that, I will turn it over to Ray for a more detailed review of our operational results followed by Paul who will cover our financial results. Thanks, Steve. We are very pleased to report another quarter of solid long growth as our lending team, for the first time in the bank's history, exceeded half a billion dollars in core loan origination. We have reported healthy pipelines over the past few quarters and it's nice to see the flow from pipeline to origination to loan growth. When looking at the composition of the origination, we continue to see expansion of our existing customer base coupled with loans to new customers. Our bankers are focused on providing outstanding service which has set us apart in a market that is dominated by out-of-state banks. I recently received an email with the subject line, a note from a happy customer. The email described how we responded quickly to solve the problem. After referencing our team of bankers that helped during this matter, the customer ended the email with, at Allegiance, relationships with your clients really do come first. As we approach our 15-year anniversary, it never gets old to share these stories and to thank our bankers and customers.