Q2 2023 United Community Banks Inc Earnings Call
Speaker 2: Good morning and welcome to United Community Bank second quarter 2023 earnings call. Hosting the call today are Chairman and Chief Executive Officer Lynn Harten, Chief Financial Officer Jefferson Harrelson, President and Chief Banking Officer Rich Bradshaw, and Chief Risk Officer Rob Edwards.
Speaker 2: United's presentation today includes references to operating earnings, pre-tax, pre-credit earnings, and other non-GAAP financial information. For these non-GAAP financial measures, United has provided a reconciliation to the corresponding GAAP financial measure in the financial highlights section of the earnings release.
Speaker 2: as well as at the end of the investor presentation. Both are included on the website at UCBI.com. Copies of the second quarter's earnings release and investor presentation were filed last night on Form 8K with the SEC, and a replay of this call will be available in the Investor Relations section of the company's website.
Speaker 2: at UCBI.com. Please be aware that during this call, forward-looking statements may be made by representatives of United. Any forward-looking statement should be considered in light of risks and uncertainties described on pages 5 and 6 of the company's 2022 Form 10-K , as well as other information provided by the company.
Speaker 2: in its filings with the SEC and included on its website. At this time, I will turn the call over to Lynn Harten.
Speaker 3: Well, good morning and thank you all for joining our call today.
Speaker 3: Our operating earnings this quarter were 55 cents per share, down slightly from 58 cents per share last quarter.
Speaker 3: Our operating return on assets was 1% for the quarter, and our operating pre-tax, pre-provision ROA was 165 basis points, down modestly from 171 basis points last quarter.
Speaker 3: As expected, the current level of interest rates, and particularly the pace of rate increases, is influencing our results.
Speaker 3: While we were pleased with our deposit growth for the quarter, we did see continued deposit mix changes as customers moved from non-interest bearing accounts into higher yielding products. Our cost of deposits increased 164 basis points, up from 110 basis points last quarter.
Speaker 3: This was partially offset by a 21 basis point increase in our earning asset yields, leaving our net interest margin at 3.37% for the quarter.
Speaker 3: Our overall liquidity position continues to be strong, with no short-term borrowings or FH loan bank advances. Our loan-to-deposit ratio remains steady at 78%, providing ample liquidity to continue to serve our clients' borrowing needs.
Speaker 3: Loans grew at an annualized rate of 6.3% for the quarter and we continue to be excited about the opportunities we are seeing to expand our lending team with new hiring opportunities. Our markets continue to perform well economically with all of our states having both unemployment rates below the national average and ranking in the top 10 states nationally for in migration.
Speaker 3: Even with the strength of our markets, we are cautious about credit given the inverted yield curve and the Fed's focus on slowing the economy.
Speaker 3: Changes in our economic forecasting model caused us to build our allowance during the quarter, which now stands at 1.22% of loans.
Speaker 3: Over the past year, we've increased our allowance relative to loans by 16 percent. While we believe it's prudent to increase our reserve coverage, we are currently not seeing signs of widespread credit weakening. Past dues have been low, and our special mention in substandard loans have been essentially flat for several quarters.
Speaker 3: However, we are seeing those credits identified as substandard become weaker, as interest rates and inflationary costs are hurting their ability to recover and be upgraded. Our non-accrual loans increased this quarter as one of our senior care relationships, already identified as substandard, was placed in the non-accrual.
Speaker 3: On the strategic front, the Progress Bank conversion went very well and we're excited to be operating with that team under the United brand. They have great momentum and have been an outstanding addition to our franchise.
Speaker 3: On July 1st, we closed on First National Bank of South Miami, a deal we announced on February 13th of this year.
Speaker 3: Conversion is scheduled for October and we look forward to having their fantastic team fully integrated with the company. Progress was the first partner to be converted using our new branding and new logo. We think it looks great and represents both our history and our future in a positive way.
Speaker 3: This month we will also begin rebranding Seaside as United Community. When complete, we will be excited to have all of our banking franchises operating under one brand.
Speaker 3: And with that, I'll turn it to Jefferson for more detail on our performance.
Speaker 4: Thank you, Lynn, and good morning to everyone.
Speaker 4: I'm going to start my comments on page 8 and go into some more details on deposit.
Speaker 4: As Lynn mentioned, we had deposit growth in the quarter up $249 million.
Speaker 4: and excluding broker deposits and public funds, we grew deposits by $109 million or 2.3% annualized.
Speaker 4: Year to date, our customer deposits are up $533 million or 5.1% annualized.
Speaker 4: We did see increased price competition in the second quarter that drove our cost of deposits of 54 basis points to 1.64% and took our cumulative total deposit beta to 32% since the fourth quarter of 2021.
Speaker 4: We also saw continued deposit mix change in the second quarter as our customers are reasonably moving some liquid dollars into CDs and higher yielding money market accounts. This quarter our DDA as a percentage of deposits moved to 31% from 34% and conversely the percentage of CDs Communication quits in part 3. bar and Inner
Speaker 4: moved to 17% of deposits from 14%.
Speaker 4: On another note, we have a very granular deposit base as represented by the graph on the lower right.
Speaker 4: We turn to our loan portfolio on page 10.
Speaker 4: We grew loans in the second quarter by $270 million, which is 6.3% annualized and similar to the dollars at which we grew deposits this quarter.
Speaker 4: On page 10, we also lay out that our loan portfolio is very diversified and generally less commercial real estate heavy as compared to peers.
Speaker 4: Finally, on page 10, you can also see our manufactured housing slice of the pie at 2%.
Speaker 4: You will recall that this business came with the Reliance transaction in early 2022.
Speaker 4: After the deal we had said we would take some time to evaluate the business and after some time of looking at it We have decided that it doesn't fit into our model, and we have stopped originating new loans, and we will wind down the business
Speaker 4: We will continue servicing the existing book while it runs off over time.
Speaker 4: Turning to page 11, where we will highlight some of the strengths of our balance sheet. First, with similar dollars in loans and deposit growth, our loan-to-deposit ratio was flat at 78% in the quarter.
Speaker 4: On the bottom are charts of two of our capital ratios, our TCE and our CET1 ratios. They were flat this quarter and remain about 100 basis points higher than peers.
Speaker 4: On page 12 we take a deeper look at capital and we show a tangible book value waterfall chart.
Speaker 4: Our regulatory ratios remain above peers and generally increase slightly as compared to last quarter.
Speaker 4: Moving on to the margin on page 13, the margin increased 18 basis points year over year, but fell 24 basis points from last quarter.
Speaker 4: Our loan yield increased 17 basis points in the higher rate environment as new loans are being put on in the high 7s.
Speaker 4: But our cost of total deposits was up 54 basis points to 1.64%.
Speaker 4: The main driver of the cost of total deposits increase was a tougher competitive environment in the form of higher deposit rates.
Speaker 4: In addition to the higher rates, we had a continuation of mixed change away from DDA to higher cost money markets and CDs this quarter that contributed another five basis points of higher deposit costs, which is similar to the run rate of last quarter. So we have the benefits of loan yields moving higher and a positive mixed change on the asset side that was more than offset by higher deposit costs and a negative mixed change in deposits. On page 15, our fee income was up $6.2 million compared to last quarter. The increase was driven by higher service charges.
Speaker 4: two notable non-recurring items, including a $1.6 million gain from the sale of a small commercial insurance and corporate benefits business.
Speaker 4: $28.8 million, down $2.4 million from last quarter.
Speaker 4: the main drivers of the improvement are listed on the page.
Speaker 4: Moving to page 16 and on the topic of credit, we set aside $22.8 million to cover $8.4 million in net charge-offs and built the allowance for credit losses to 1.22% of loans.
Speaker 4: The main driver of the increase was a decrease in the forecast for the CRE price index which drove a $7 million dollar increase in the provision.
Speaker 4: MPAs increase to 60 basis points in the quarter, mainly due to the movement of a single senior care loan into non-accrual.
Speaker 4: For the quarter, Naveetis had just $2.5 million in net charge-offs or 69 basis points. That said, we expect Naveetis losses to be higher than typical in the third quarter and then to moderate in the fourth and end up in the 90 to 95 basis point range for the full year.
Speaker 3: With that, I'll pass it back to Lynn. Thank you, Jefferson, and many thanks to the United team for your tremendous focus and drive to perform and your heart for our customers. And now I'd like to open the floor for questions.
Speaker 3: We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys.
Speaker 3: We ask that you refrain from talking through speakerphone when asking a question. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster.
Speaker 3: Our first question comes from Catherine Mayallur of KBW.
Speaker 3: Our first question comes from Catherine Mailor of KBW. Go ahead.
Speaker 4: Thanks, good morning. Good morning, Catherine.
Speaker 5: I thought I'd just start with the margin. Jefferson, could you just walk us through your thoughts on your outlook for the margin of the back half there? Do you see some stabilization or do you think we'll still see some further compression after this quarter's decline? Thanks. Thanks, Catherine. I think we're at or near a bottom with the margin. I'm modeling down five.
Speaker 4: for my model for the third quarter. And I think you see increases from there. Some of the main drivers there are the mix change. We're seeing a little less mix change through June and into July , so hard to predict, but it feels like it's stabilizing. The exception pricing has been out there for us. Again, something that's hard to model.
Speaker 4: But again, we're getting less requests there, so that feels a little better as well. We've got some tailwind with First Miami, First National Bank of South Miami closing. Did you get the rate hike? That helps a little bit too, although we're pretty neutral now. Then I mentioned earlier that the new own yields are coming in, the high sevens, and we get mixed change on the asset side as well.
Speaker 4: So I think we're at or near bottom and increasing from there.
Speaker 5: Okay, great. And then on credit, can you talk a little bit about the Senior Care book? It's only 2% of loans, so it's not a big book, but I know it's been a book that we've talked a lot about over the past couple years. Any other credits in that book that are showing signs of deterioration like the one we saw this quarter?
Speaker 4: relationship had been in substandard accruing for some period of time. And so if you look at that 106 million that's showing as substandard on the slide, that's basically 32 million now non-accrual. We moved one in to non-accrual in Q1 and then the second relationship in Q2. And so there's three facilities in non-accrual.
Speaker 4: million two years ago, we're down to 200 million or $214 million now. So feel like there's not been a ton of change. There's half a dozen relationships that we're wrestling with in the substandard and non-accrual space. You know, I think that...
Speaker 4: upgrade and a payoff and you see some that haven't turned the corner. And that's kind of just where we are in that process. And if you're asking just about the industry, I think a lot of it just depends on what else is coming online in the market. We have one property that we're kind of...
Speaker 3: is a substandard property, but somebody's decided to build a hospital across the street, so we think that's favorable. Sometimes you get lucky. But generally, we're seeing some properties show improvement and gain traction, and some are slower to gain traction.
Speaker 4: So that's the senior care and that's really the driver in our CRE portfolio. So your second question around CRE in general is that we're seeing really favorable and consistent performance across the portfolio right now other than the senior care space.
Speaker 5: Great, thank you. So that increase in the reserve, would you say that's directly tied to this portfolio or just kind of general?
Speaker 4: CECL qualitative kind of factors? Well, it's, yeah, so the, as it relates to CECL, the drivers are, you know, charge-offs, loan growth, and economic forecast, and really the drivers in the economic forecast for the quarter were the CRE price index.
Speaker 4: the business investment expected forecast also drove some of the allowance up in some of the C&I and equipment finance categories.
Speaker 5: Got it. Okay, great. Thank you for the color.
Speaker 6: Our next question comes from Steven Scouten of Piper Sandler Companies.
Speaker 6: Go ahead. Hey, good morning everyone. Appreciate the time.
Speaker 7: I guess if I could maybe dig back into the margin guidance a little bit more, Jeff, you said maybe five basis points down next quarter, but could you give kind of updated thoughts on where you think that cumulative deposit data might go for the full cycle and kind of how you're thinking about the floor on non-interest bearing deposits as a percentage?
Speaker 4: Thanks, Stephen. Great questions. This is the total deposit beta.
Speaker 4: I mentioned I think that can move into the kind of 36 to 38 range is what we're thinking about the
Speaker 4: That's what we're currently modeling. Now what's going on is that you get a continuation of the asset data too that I think will upset that. It's continuing to increase the rest of this year and into next year.
Speaker 4: currently modeling. Now what's going on is that you get a continuation of the asset beta 2 that I think will upset that. So you have both continuing to increase the rest of this year and into next year.
Speaker 4: You know the DDA percentage is I think we are modeling for that to continue to move down I think it could be down another 100 basis points, maybe 200 basis points. I know that
Speaker 4: is I think we are modeling for that to continue to move down. I think it could be down another 100 basis points, maybe 200 basis points. I know that kind of
Speaker 4: 10 years ago we were much lower in the DDA percentage. I think our bank has much changed since then. A lot more CNI mixed in there since then. I don't think we're going back to where we were.
Speaker 4: way back historically, so I think you're getting close. I really think that once you see rates stop moving higher, that's when you're going to see that DDA percentage start to stabilize. I feel like we've already seen it start to stabilize, so I think it's moving down. We're modeling it to move down, but I don't think it's going back to...
Speaker 4: 2015 levels or 2012 levels.
Speaker 7: Yeah, that makes a lot of sense Jefferson, appreciate that. And then just kind of conversely on the on the asset side, is the repricing of fixed rate loans is that kind of the dynamic that makes you think the NIM could bottom here in the third quarter? And do you have any sort of numbers for for how much that book will reprice maybe fourth quarter or in 24 or what have you?
Speaker 4: Might have to get off the line with that, but I do have that, but it's coming off at like 4.5% and coming on around 7%, but I have to look at how much is actually coming off, but that is a driver of it. In addition, we're trying to push a little more towards putting on variable.
Speaker 4: now. So the mix of variable and fix is coming on the high sevens now. Naveedis is coming on just in the in the low tens now. So I was thinking about it more in combination, but we can certainly look at the fix by itself. I know it's coming off at 450 and going on close to seven.
Okay, that's great. And maybe just last thing for me, you guys hold a little bit more capital than peers on the average. It sounds like continued hiring is probably in the plants, but can you give me some thoughts on just capital priorities as you look out maybe over the next year or two, kind of longer term?
Yes, so organic growth will be number one, it always has been. Dividends will be number two and a distant third is buybacks. M&A would be kind of a kin with the organic growth there. So
We like having more capital. We think it serves us in times like now. We are buying back, put a modest amount of preferred. We like the opportunity with our preferred being less than $25. And we bought back less than $300,000 this quarter, but we're continuing to buy back a little preferred just because it's trading below.
that $25 level and you get a small gain on the TCE.
The other part on the growth, you mentioned hiring, should we go there with Rich and talk about?
hiring and how we're thinking about that? Sure, this is Rich and it's important to note that we did our another lift out here in East Tennessee that was a leader and six commercial people and since the last earnings call we have brought on
Kelly Key as our state president in Tennessee, we're very excited about that. He had 25 years at a Super Regional in Nashville. And between the lift out in East Tennessee and other hiring, we have gotten 14 yeses on the commercial side and 11 have started. So we're very excited in addition to our two lift outs in the first quarter.
I really appreciate it. Thank you, Stephen.
Our next call, our next question comes from Brandon King of Truist.
Go ahead. Hey, good morning.
So I wanted to talk about Navidus and I appreciate you guys, it seems like losses were lowered this quarter and it's suspecting that to trend higher next quarter and then moderate in the fourth quarter. But could you give some context as to the cadence of the losses for this year and what kind of what gives you confidence that losses will moderate?
towards the end of the year.
So, hey Brandon, this is Rob. Just, you know, as it relates to Navidus, if you go back, we purchased Navidus in 2018 and we sort of anticipated at that time a 1% loss rate.
Following that, two things happened. One is I think they improved, sort of moved upscale in their customer selection. And of course, we had some economic favorability. We continue to believe that the customer selection that they experienced over the last, really, many years after trades deal begun,
four and a half years has improved. But they've experienced in just one small segment of their transportation portfolio over the last 18 months, when they look back in time, they've identified about a $35 million book of long-haul tractor trailer.
loans that where the values have come down and the revenues have also come down on those businesses, shipping costs have come down and so they've identified a pool that they're going to have higher than normal stress in during the year.
during the second half of the year. And so that's really what's driving that. It's a small portfolio that they've contained, but it will drive losses up. And really the size of it being small is really why we anticipate it waning back in the latter half of the year.
So I'll just add in that we like that 90 to 95 basis point range for the year, but it's just going to be higher in the third quarter and lower in the fourth.
Okay, okay. So it's just coming from this small subset of loans and just kind of a normalized rate going into next year. Okay.
Yep. Yep. Okay. Okay. And then on expenses, Jefferson, what are your kind of...
Our expectation is for the run raid with First Miami coming online in third quarter and back half the year.
Right, thanks, great question. On the run rate of expenses, so the expenses you saw this quarter are a pretty good run rate for us. I know they were down. We were pleased to be able to offset the natural merit increases that we had this quarter. So I think this number plus First Miami with a small growth rate on it, we've been thinking a lot about expenses and where you have expenses.
in the branch network and 60% of our expenses are on people. Over the last three years we've closed 16 branches and we're about to close. We have five that are set to close at the end of July . We're going to be reviewing that. We have a management two-day get-together coming up here where I think we'll talk about these types of things and look at branches again.
60% of the expenses, as I mentioned, are in people, and we think about productivity quite a bit. What we have happening now, and it's a little bit despite of what Rich just mentioned, is a hiring, what we call a chill. It's not a hiring freeze because we're always going to hire great people or great producers, but we're being a lot more selective there than else.
have come down with higher rates.
So those are the types of things we're thinking about expenses, but I think kind of flattish with a small growth rate is how we're thinking about it.
Others can jump in there if they like.
I'll mention one more thing there is that as our margin has come down, our efficiency ratio has gone higher, so our plan to move this down is going to be some of the growth, some of the hires that Rich talked about, being able to grow loans in this mid-single digit range, keep expenses as flat as we can, and improve the efficiency ratio like that.
Got it, got it. And then last one from me, Jefferson, do you happen to have the name in the month of June ? June .
So, I don't have that. I have it, but there's so many of these non-recurring things that you annualize times 12 and it just doesn't make a lot of sense. But I do think we're, if you put a run rate, if I try to put a run rate on the June , I feel terrible but sometimes we're missing a long line. So I think those things are local.
margin, it would be very close to where we are now. I think our margin is bottomed out, or very close. It's really hard to take some of these things that are going in and out multiplied by 12 and get a real feel for what that is.
Yep, totally understand. Thanks for taking my questions. Alright, thanks. Our next question comes from Michael Rose of Raymond James.
Yep, totally understand. Thanks for taking my questions. Alright, thanks. Our next question comes from Michael Rose of Raymond James. Go ahead.
Hey, good morning guys. Thanks for taking my questions. Jefferson, maybe just to go back to the margin briefly, I know First Miami just closed. Can you give us a sense for what the total amount of accredable yield is now with First Miami and then what you would expect the accretion to run at over the next couple of quarters just on a scheduled basis? That's a great question.
We had $4 million of accretion come through before First Miami. Currently modeling for the third quarter that that's $6 million, although, again, we don't have the final mark, so it's really tough. But the rates haven't changed that much since.
We announced first Miami, so maybe that $40 million mark stays in there. But what I'm using for my forecast right now is that $40 million, but it is subject to change as we get to the final mark. So for now, I'm using that we're at $80 million currently, most likely, but then we'll get the final mark here probably in a month or two.
before the- Okay, perfect. That's very helpful. I think you said that the margin was kind of nearing a trough. I think you stood down about five basis points or so. What's your expectation for the third quarter? I assume that's on a core basis, correct, without the impact of accretable yield or is it all in? I just want to clarify. You're very close because the addition I'm using for the third quarter is $2 million.
So those numbers are very close, but I was thinking about it with.
But the difference isn't super huge at $2 million of increase I'm expecting for the third quarter.
Okay, perfect. I appreciate it. Maybe just switching gears a little bit. So you guys have been very kind of active with M&A over the years. I know your target size is kind of 1 to 3 billion is kind of what you targeted.
You guys have pretty good currency. There's a lot of chatter about M&A out there. Obviously, many people can't do it. Loan marks, credit, you know, interest rate marks are prohibitive. But just wondering if you guys sense for, you know, are you guys still open for business as it relates to M&A and are you actively engaged with anybody at this point? Thanks. Yes, Michael, this is Len. So, I would say, you know, we continue to be actively engaged.
for the reason you mentioned. The math is difficult, marks.
Prices are not what some sellers are expecting. I don't know. I do hear chatter about deals getting announced, but I would personally think that we don't see that pick up until maybe the middle part of next year or something like that. Okay, so maybe an M&A chill, just like a hiring chill as opposed to a…
Maybe just finally for me, I know it's hard to predict, but the Navitas SBA gains were up a little bit. Can you kind of describe the environment and what we might be able to expect in terms of loan sales here in the next couple quarters? Thanks.
So I'll pass to Rich on the SBA games and we'll talk about that. I'll follow up on the Navitas ones
Sure, SBA, it's timely because we sold SBA loans yesterday and I would say the market was a little bit up so I feel good about that. It's kind of a counter cyclical product and one of the things I wanted to mention in this call today is looking at that first of all we're fully staffed in that which is rare because there's always a lot of demand for that product and people.
But we are anticipating that that product will be up for us about 25% this year. So it's been really good for us and we're excited about that. And I'll add in that third quarter is usually a little bit seasonally stronger than second for SBA gain. So, I don't know, flat to higher maybe on the SBA side? No, I think it would be up because our inventory will be...
following seasonality and the volumes that we're seeing.
Well, we get it. Thanks for taking my questions, guys.
Thanks, Michael. Thank you. Our next question comes from Kevin Fitzsimmons of DA Davidson. Hi Kevin.
Hey, good morning everyone. Maybe just start out on your comments about manufactured housing. I'm just curious. Um
whether that, the line of thinking, is it something that you see out there in the environment or in terms of the economy or if the economy was perfect right now that would just not be a fit or is it a combination of...
Thanks. And Kevin, let me, I'll start with that and then Jefferson and Rich can jump in. You know, I would say first any of these businesses we start with the can it be meaningful for us, you know, and really be something of size enough that we want to, that it makes a difference. As we looked at that business we liked the team.
do we want to take this from 300 million to a billion? For those reasons, we really don't. And if we don't want to do that, then it's probably just better just to wind it down and put our effort somewhere else. So to me, we're the drivers. I don't know if Jefferson, you had to add. I'll just add in, too, that the same kind of reasoning we used to sell the corporate benefits.
existing clients. So we use a similar reasoning for that business as well. And we'll continue to look at our businesses, especially our smaller businesses with that lens. So it wasn't anything specific to the portfolio or any problems we saw. It's just really an overall business strategy question.
And that was a business you guys weren't in, it was just you inherited it from Reliant, correct? That's correct.
And will it, so you stop originating, then do you just let the loans mature out, or do you go actively trying to sell them? I don't know if there's a market to do that. I think with rates moving higher, I think the idea is just to let them mature over time.
If rates move down and there's a better market or you can sell them without a loss, then maybe you accelerate the exit of the business, but our plan currently is just to service the loans and let it run down.
Okay, great. And just a quick follow up on, you know, you guys obviously have very strong capital. You know, there's been some discussion that, you know, could banks look at selling some of their underwater securities and redeploying some of that at higher rates or paying down debt.
Is that something that's on the radar for you all? Or I would imagine that with every acquisition, like with First Miami coming in, you really get some of that just from dealing with their securities portfolio. Just curious how you're thinking there. Yeah, so we have looked at that, and we are not going to do a restructuring.
in the event of higher rates. We took our AFS portfolio from 3.5 years duration to 2.5 years duration. We took our AFS portfolio from about 20% floating to 60% floating and we get 150 basis points that initially anyway benefit.
Which wasn't the reason we did it, but you do get a little benefit by moving to the shorter end of the curve So part of the margin benefit next quarter is that the securities yield should be in the 280 range With this change depending on what rate to do if you get a rate hike you get a little more benefit from this and if you get raised down you get
It works against you, but we mainly did it for risk allocation and protecting TCE and unrealized losses in a rising rate environment. Okay, great. Thanks, Jefferson. Thank you. Our next question comes from David Bishop of the HOVD group. Go ahead. Hey, David.
I appreciate the color on the hires in the eastern Tennessee market there. I don't know if I missed this. Does that impact your outlook in terms of expected long growth this year? Will that have an inflationary result in the back after the year? Are you still comfortable with that mid-single digit growth outlook?
Hi, David. This is Rich. To answer your question, I think we're still looking at the mid-single-digit loan growth. I mean, clearly, we've tightened credit criteria for both commercial and mortgage as we move forward in this world, but we are thinking about that same. I expect Q3 to kind of look like Q2, both on loan and deposit growth.
And then maybe from a credit perspective, I know I appreciate the color on the office portfolio in this segment, but from the surface it doesn't look like there's any pressure from debt service versions, but as you look out, any change in terms of the birds, bka, all motor safety systems are on a drummer Australia records one million dollar debt with about three million dollars to do much for ellipsis, at least in Australia, these switches but just a very fun experience as we move past, the
ability or prospects for your borrow base to handle higher rates as these loans come up for renew or mature. Yeah, thanks David. This is Rob Edwards. So we've done several analysis, both at a, you know, sort of a special stress test at the top of the house that sort of focuses on the
So we're sort of in an ongoing sort of stress, the portfolio from different angles. And so far we haven't seen anything that really identifies as, you know, when the rates change, these people aren't going to be able to make payments. Really the first test we looked at was...
you know, fixed rate borrowers maturing in the next 24 months because I think you sort of go back in time and you're like, well, their rates are going to change the most. But we had one borrower that we would have graded special mention after the analysis, but as it turns out, they were already rated special mention. So we just didn't see anything that...
Hey good morning guys just a couple of quick follow-ups at this point. On the office topic I appreciate the recent remarks. Do you guys have a maturity schedule that you could share for that sector?
We could create one. We have looked at the maturities a couple of different ways. I was thinking there was a maturity in the K. We'd have to get back to you, or the Q maybe, I'd have to get back to you on that Russell.
Okay, no worries. And then just last one, on the deposit side, any color you guys can share in terms of retention out of progress in First Miami? I'll pass this to Rich because it's a hard question, but at First Miami just...
closed so we don't really have a lot there. But talk about progress. Sure, I think the the challenge that with progress at the beginning is they've had all this pressure and we had a conversion and so the great news is the conversion is behind us and talking with David Nast, our state president there.
He feels very positive on this quarter. Not only, we had loan growth last quarter, so that was strong, but he is anticipating forecasting that we'll have some loan growth this quarter as well. And with our pricing strategies and the fact that we have the conversion behind us, he is the new, he also is the first to get the new logo, so there's some excitement there as well. And I can give more detail. Okay, guys. I have some black numbers for you there.
that have come in this year and just existing customers doing more, what is the average life of those relationships? Is it something north of three years? Is it longer than that? I just kind of wanted to recast kind of franchise value for the organization as you've expanded. Wow, that's a great question. We've been thinking a lot about that. We have Alco, I think, later today that we're going to be talking about that because what we've seen is that as rates have risen, our asset durations have expanded.
and we think our liability durations have shortened. Now, what you're seeing is a mix change from the product that you would usually assume is your longest duration product, DDA, towards CDs, which have a stated duration to them, right? So you're seeing some mathematical mix change affecting the duration.
But then you're also seeing with price competition customers move around. So I still think we're longer than four years, four, four and a half years on our liability duration. And, but as we're doing the math, we have a billion dollars, we're trying to calculate surge. We're trying to calculate
all the different changes that we think are going on. But in total? In terms of the actual customer life, we actually are doing a deep dive into that in our strategic planning sessions coming up in August . So I don't have the numbers to share with you now. But if you look at the organizations that we've...
It's an outstanding deposit franchise. I would expect that number to look good as we look at it here in a month or so. We just got, the way I really try to focus on it is on the customer service side. We were disappointed to lose JD Power this past year. I will say.
In the first wave, they do four waves, a quarterly wave. We were in the lead in the southeast by 39 points, which is pretty outstanding. So great job to the employees that are listening to this. So I expect that we're very confident with how our deposit base will.
I'll add one more thing with that little change of lens of how we're thinking about it, but I look at our net new ratios every month and our year over year net new and look at every market and our new customers are well ahead of the customers that we lose. And then when you see the deposits growth or shrinkage, it's usually within our existing customers that are continuing as existing customers. It's just that maybe they've moved some more.
there's still opportunities in senior housing down the road.
So I think we don't have a separate category for senior housing. You're talking about 55 plus.
Chris? Exactly, yes. We have I think two multifamily, we would put senior housing in the multifamily category.
in our reporting and I'm not sure I have a break out of that. So senior care would in, as the way we have it listed in the investor deck would include independent living, assisted living and memory care.
And on the over 55, we have started to see that product, but it's probably limited to a handful. I would say less than five. Yeah, in the whole footprint. So we are interested in it, but cautiously. Yeah, that's good. Got it. Great. Good stuff. You're on. We're back.
we have started to see that product, but it's probably limited to a handful. I would say less than five. Yeah, in the whole footprint. So we are interested in it, but cautiously. Yeah, that's good. Got it, great, good stuff, thanks again. Thank you, Chris.
This concludes our question and answer session. I would like to turn the conference back over to Lynn Harton for closing remarks.
Once again, many thanks for being on the call. Great questions. I'd be glad to follow up with anything that you need. Just give us a call. And I hope you have a great rest of your day. Thank you. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
I.