Q2 2023 Origin Bancorp Inc Earnings Call
Your line is muted.
Good day and welcome to the origin Bancorp, Inc. Second quarter 2023 earnings call. My name is James and I'll be your ethical coordinator the former.
This call includes prepared remarks on the company followed by a question and answer session. Please note that all participants will be on a listen only mode until the Q&A portion of the call at this time I will turn the call over to Chris <unk> with origin Bancorp.
You may now begin.
Good morning, 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 the slide presentation that we will refer to during this call.
Please refer to page two of our slide presentation, which includes our safe Harbor statement.
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 Bank.
Please also note our safe Harbor statements are available on page seven of our earnings release filed with the SEC yesterday.
All comments made during today's call are subject to the safe Harbor statements in our slide presentation and earnings release.
I'm joined this morning by origin, Bancorp's, Chairman, President and CEO Drake Mills, President and CEO of origin Bank Lance Hall, our Chief Financial Officer, Wally Wallace.
Chief Risk Officer, Jim Crotwell, our Chief Accounting Officer, Steve Brolly.
And our chief credit and banking Officer Preston Moore.
After this presentation, we'll be happy to address any questions you may have.
The call is yours.
Thanks, Chris as we enter the second half of the year of uncertainty I am very pleased with our overall performance to date economic activity remains robust throughout our footprint with strong credit conditions.
The deposit wash continues to rage, we are committed to our strategy of exiting in the cycle in a position that allows us to take advantage of opportunities that fit our model.
I am proud of the way our bankers remain laser focused on relationship pricing credit quality and client acquisition as we navigate our market opportunities are.
The success of our bankers are enjoying with new relationship acquisitions has been impressive.
As an example, net account openings are up 15% year over year. This is a testament to our lift out strategy as well as our focus to create deep banking relationships with existing clients.
This quarter's results were in line with our expectations.
We finished the quarter with total assets of $10 2 billion, though we still anticipate we will finish the year under the $10 billion more tangible common equity ratio at the end of the quarter was eight 3% tangible book value grew again this quarter to $26.71 credit quality remains strong with annualized net charge offs to loans for the quarter of.
Just 10 basis points and nonperforming loans of just 44 basis points I've been with this company for 40, plus years and leading it for more than two and a half decades.
My confidence in this management team is strong as its ever been yes. The stock will have a short term impact, but as we have throughout our long history, we will come out stronger than before.
We continue to invest in our employees technology and infrastructure, while remaining diligent with expense management, we remain focused on executing our long term strategy and continuing to provide value to stakeholders.
Now I'll turn it over the line.
Thanks strike.
Our market President and bankers clearly understand that we have to be smart in these types of cycles, and then to drive sustainable value. We must stay focused on building long term relationships the value of community banking model.
Our consistently reinforce our commitment to our vision and to our trusted advisor philosophy.
Strategically executing on this commitment remains at the center of what we do.
In this period, where deposit costs are rising and margins compressing across our industry.
We feel it is critical to continue to focus on technology is an essential tool to drive efficiencies eliminate manual processes.
Improve the speed of delivery as well as enhance the overall client experience.
We continue to grow our robotics process automation.
I have recently partnered with a fintech to enhance our call center and chat experience and have created real time data dashboards for our exec and relationship bankers.
This focus on data analytics has given us deeper insight into our deposit client trends and behaviors.
From this data we are clearly observing hidden by industry deposit loss and the cyclicality of our public funds that origin is experiencing meaningful growth in new deposit clients and new deposit accounts in 2023.
From the data and surveys we can see that our teams understand and are executing on our process and our strategy of lifting out strong banking teams has been very successful.
As Drake mentioned in his opening our net deposit account openings have increased 15% in the second quarter compared to the same period last year.
Also new deposit customer accounts are up 26% in the second quarter of 2023 compared to the same period last year.
We will continue to focus on adding new customers and growing deposits through the second half of the year.
On top of our existing 2023 banker incentive plan, we recently launched a new deposit specific initiative with our producers within our banking centers that will strongly as new deposit growth. We continue to communicate how deposit growth will govern our loan growth and that remains top of mind as we strategically loan into this cycle.
We remain focused on pricing discipline and strong credit quality, while never losing our relationship based approach to grow and our clients.
Our bankers remain disciplined with client selection and growing loans and our pipeline remained strong throughout 2023.
Our commitment to our culture delivering for our clients and executing on our long term strategy guides us in all that we do.
I continue to be confident in our bankers and delivering meaningful results and providing value for all of our stakeholders.
Now I'll turn it over to Jim.
Thanks Lance.
Our constant focus on relationship banking continues to deliver a well diversified loan portfolio and is the driver for our continued sound credit profile.
As reflected on slide 12 pass through loans held for investment increased to point to two 6% as of June 30th from a level of 0.16% as of the prior quarter end and compares favorably to historical levels of 0.50% endpoint four 2% as of December 31 2021.
In March 31 2022.
Nonperforming loans as a percentage of loans held for investment continues to normalize increasing to four 4% as of June 30th from <unk> to 3% as of March 31 of this year and compares to levels of 0.49% and 0.41% as a big December 31 2021.
<unk> 31 of 2022.
As reflected in our earnings release, a significant contributor in the increase in nonperforming loans held for investment was the transfer of $7 1 million in nonperforming mortgage loans held from the held for sale to held for investment.
The vast majority of which carry government guarantees.
We continue to diligently monitor our loan portfolio and proactively address any identified issues.
These ongoing efforts resulted in the $1 $9 million reduction in our overall level of classified loans held for investment from 1.17% as of March 31% to 111% as of June 30th.
Annualized net charge offs for the quarter came in at 0.10% and compares favorable to the 0.12% level for Q2 2022 for.
For the quarter, our allowance for credit losses increased $2 3 million to $94 $4 million slightly decreasing from $1 two 5% to $1 two 4% as a percentage of total loans held for investments.
Due to the strong historical performance of this segment.
Net of mortgage warehouse, we did build our reserve from 1.30% as of March 31% to 132% as of the quarter end.
As to reserve levels, we continued to balance our sound credit quality and the resiliency of our loan portfolio with continued economic headwinds.
The event, we do experienced an economic recession, we continue to believe that the markets. We serve will also be more resilient to its impact than other areas of the country.
On slide 13, we have updated the additional information of our CRE office portfolio that we shared last quarter.
As of June 30 at this segment of our portfolio totaled $389 million with an average loan size of only $2 2 million.
The credit profile of this segment remains sound, reflecting a weighted average loan to value of 53, 8% no past dues only 0.22% in classifieds no nonperforming and no charge offs. This segment.
Our portfolio continues its sound performance driven by our relationship focus.
I'll now turn it over to Wally.
Thanks, Jim and good morning, everyone.
Turning to the financial highlights in Q2, we reported diluted earnings per share of <unk> 70.
On an adjusted basis Q2, EPS were <unk> 69, after excluding a $471000 gain on a retirement of $5 million of our sub debt that we repurchased during the quarter.
Starting with deposits, we continued to see a shift of noninterest bearing deposits into interest bearing accounts.
As a result noninterest bearing deposits declined five 5% this quarter and the mix fell to 25% of total deposits in Q2 from 28% in Q1 and from their peak of 35% last Q2 importantly.
Importantly, the pace of the decline in Q2 was a deceleration from the pace. We saw in Q1, which we view positively. However, we do anticipate some additional pressures over the next couple of quarters to our noninterest bearing deposit mix.
Ultimately combined with the continued need to price up interest bearing deposits. Our deposit betas continued to increase from 35% in Q1 to 42% in Q2, which is adding continued pressure to our net interest margin.
We continue to expect our deposit beta will increase in the second half of the year.
These deposit pressures continue to outstrip rising loan yields and our net interest margin contracted 28 basis points during the quarter to $3, one 6% as a result <unk>.
Excluding $530000 and net accounting accretion, our adjusted NIM contracted 22 basis points to 3.14% from 336% in Q1.
Notably this rate of contraction was lower than the 37 basis points of contraction from Q4 to Q1. Additionally.
Additionally, while we paid off our excess liquidity during the quarter, we still held portions of it throughout which added 12 basis points of pressure to Q2 versus six basis points in Q1.
Importantly, while down sequentially, our net interest margin and net interest income for Q2 were both generally in line with our expectations, giving us more confidence in our forward estimates.
While we expect rising deposit betas to continue to pressure net interest margin in Q3 and Q4, we see these pressures waning through each quarter.
Shifting to fee income, we reported $15 $6 million in Q2.
Excluding the $471000 gain on the retirement of sub debt mentioned previously our adjusted fee income was $15 2 million down from $16 $2 million in Q1.
The primary drivers of this decline were lapping the seasonal strength in our insurance business from Q1, and a decline in our mortgage banking segment revenue as mortgage trends remained relatively weak in the current interest rate environment or.
Our noninterest expense increased to $58 9 million from $56 $8 million in Q1 <unk>.
Growth in salaries and benefits regulatory assessments and office and operations lines were the primary drivers of this increase.
Notably Q2 growth was actually slightly better than our expectations due to a renewed focus on expense management in the current environment and we anticipate relatively stable expense levels in the second half of the year.
Turning to capital our TCE ratio remained above 8% ending the quarter at eight 3%.
Furthermore, as shown on slide 21 of our Investor presentation, all of our regulatory capital levels at both the bank and holding company remain above levels considered well capitalized even if we were to include our OCI losses in the calculations.
To close with an immaterial level of securities classified as held to maturity. We remain confident that we have the capital flexibility to take advantage of any potential future capital deployment opportunities to drive value for our shareholders with that I'll now turn it back to Drake.
Thanks, Wally as I've traveled throughout our markets. This past quarter I reminded of how special Award news, we have an incredible team of people who have a shared vision of who we are and what we can accomplish our markets are diversified across our three state footprint, including a wealth of dynamic growth opportunities in our metropolitan larger markets coupled.
With stable economy in our rural markets.
While we were not public at the time I think back to how our bank with well positioned going into the downturn and.
And how we were able to capitalize on opportunities and build relationships that are still with US today. We are positioned to do the same in 2023 and I'm optimistic about what we will accomplish.
Thanks to our employees, who continue to do an incredible job of living out our culture and serving our customers the communities in a dynamic way.
Thank you for being on the call today, we will open up the call for questions.
Thank you.
At this time, we will conduct the question and answer session. If you would like to ask a question. Please press star one on your telephone keypad to enter the queue.
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Those briefly to allow any questions to generate.
Our first question comes from Matt At Stephens, Inc. Your line is open.
Great. Thanks, good morning, everybody.
More of that.
I want to start with loan growth and if I take out the.
The mortgage warehouse trends that were that were strong this quarter it looks like kind of the core loan growth trends.
<unk> and <unk> from the pace that we saw in <unk> and I guess, if I just kind of dig down a look by segment. It looks like the slowdown was mostly from the C&I category any general commentary on loan growth in C&I in C&I Utilizations and just more broadly just love to hear a bit of thoughts on borrower appetite.
Yeah, Hey, Matt Good morning Lance.
You're exactly right.
And interesting when you dig into the numbers, our actual new loan production volumes were.
Really in line with where they thought they were going to be there as the interesting combination of.
Of timing around C&I at the same time, we saw clients using cash.
Clients are using cash to pay down debt. So.
Interestingly, our utilization on our CNI lines actually dropped from 51% to 48%. So that was a little over $100 million in that regard, but as we look at pipelines pipelines remained strong.
And so as we think about.
What the second half looks like we're going to continue to harp on.
Loan growth is going to be governed by our ability to grow core deposits.
And we're going to stay with that so we would think.
Low to mid single digits on loan growth.
I feel like the C&I is definitely going to come as we've seen some really nice projects through the pipelines and kind of what we're already seeing in the quarter.
Okay I appreciate the commentary Lance on the loan side on the on the credit.
Syed.
In your presentation, you have a nice details there on the office portfolio I think it's slide 13.
On the on the debt service coverage ratios I appreciate kind of the stress scenario there with the higher rate.
You mentioned in there.
Wed love Depreciate any takeaways that team had.
Once you guys go through the deep dive office.
And the and the stress test.
You are kind of general thoughts on the portfolio.
How much stress are you anticipating in that portfolio and then any other details you have on office loans with respect to the maturities I think we've seen some of your peers detail that in recent weeks to know if you had anything on office maturities. Thanks.
Good morning this jam.
As to the portfolio and how its performing we feel really really good about it.
I think it's a direct result of our relationship focus that we have one of the things. We've also talked about is the.
Primary and secondary sources of repayment.
We have a total portfolio CRE office of 380.
The liquidity of the of the guarantor supporting those credits of $352 million, so that that speak to the financial support from our secondary with share of the debt service coverage. We're very pleased from was shocked that they still performed well when we looked at the fixed rate only.
A portion of that from a debt service standpoint in shock.
Ed look quite.
We felt really good about that as well showing a 1.75 with shock that at one point to one of the other things that we did.
As we looked at the secondary source of repayment from an LTV perspective.
The original weighted average LTV for.
The sector is 54%, which is very very strong and when we shocked that at a cap rate of 10% that stress weighted average LTV of 79%.
And lastly, as far as looking forward.
For many maturities, we only have $5 2 million or <unk>.
Fixed rate loans in this sector that will reprice this year.
And then when you look to 'twenty four we have about $32 million is all that will reprice. So all in all feel really really good about this portfolio and again is driven by our relationship focus throughout our markets.
Perfect. Okay. Thanks for that Jim.
And then I guess shifting over towards the deposits deposit growth I think Wally mentioned expectations for deposit betas to to increase in the back half of the year would love to get much more general thoughts around this the back half of the year and then as it relates to the margin thoughts in the margin in the back half of the year.
Thanks.
Yes.
Thanks.
Matt Good morning.
So I said in the prepared remarks that we expect like you said continued increase in deposit betas, which will drive some further.
Pressure on margins, maybe to provide some context to how we're thinking about.
Our deposit mix and the impact to margin in the back half of the year.
The key is trying to figure out where are our noninterest bearing deposits going to end up.
As a percentage of total deposits. So we went back and looked at rather than the cycle right right before Covid, we went and looked back to the cycle 2004 to 2006 that in that cycle the fed height more aggressively.
And in this cycle, it's been even more aggressive.
And that cycle, our noninterest bearing deposits they bottomed in the mid teens as a percent of percentage of total deposits but.
At that point in time, we were only in Louisiana.
So what we did is we said all right, let's assume that our Louisiana noninterest bearing deposits decline to the mid teens and then let's look at our Texas markets relative to Louisiana, Texas is more C&I heavy and as a result, they have more noninterest bearing deposits as a percentage of total so when we took Louisiana Dan Dow.
We assumed that our Texas markets shifts down it, but but remain kind of similar to where they are now on a relative basis. So they come down but they don't come down to the mid teens. If you put all that together that would that would suggest that our noninterest bearing deposits would get down into the low 20%.
So we are now modeling a decline from 25%, where we ended the second quarter down to about 2021% by the end of the year.
And what that has the effect of doing is increasing our deposit betas, we think we'll settle in around 50% on our total cumulative deposit beta.
And that will drive net interest margin compression in the third quarter, and then again in the fourth quarter, but at lower rates than what we saw in the first and the second quarter. We anticipate that we'll end the year around 3% net interest margin and we are targeting and trying to maintain that level moving forward and ultimately.
Improve on it as we continue to see the impact of.
More disciplined loan pricing impact the loan side of the equation.
Okay. That's helpful. Walter Thanks for the commentary and just following up on one of your points there on the noninterest bearing deposit flows.
Any commentary about what you're seeing more in recent months and weeks any kind of signs of stabilization there more recently thanks.
Yes, if you look at what occurred in the first quarter the shift.
Shifting and noninterest bearing deposits was.
More than double what we saw in the second quarter. So.
We feel that that is suggesting that there is some stabilization in the trends.
And we we.
Want to be too aggressive we're trying to be conservative in our modeling.
But we are we are modeling that that continues to stabilize through the course of the back half of the year.
Okay.
Okay guys. Appreciate all the commentary I'll hop back in the queue.
Thank you.
Our next question comes from Michael at Raymond James Michael Your line is open.
Hey, good morning, guys. Thanks for taking my questions.
Good morning.
Maybe just to circle the loop on the on the margin. So you guys.
Also there are the excess funding that you guys had cap you guys paid off that was a 12 basis point drag.
Soon you'll get that back, but still just given the increase in betas in niv mix shift or that mix shift youre still kind of with all that youre still expecting the margin down around 3% by the end of the year.
Understand that right.
Yes, Michael that's that's correct. If you if you had.
It just for the impacts of the excess liquidity that we had in the first quarter and then that we carried in the second quarter and the first quarter you would've shown net interest margin compression of 31 basis points in the second quarter that was 16 basis points and then in the third quarter, we would expect the rate of decline of compression too.
<unk> declined say may be cut in half of what we saw in the second quarter, and then down maybe half again in the fourth quarter.
Okay. Thanks for that and then I think I heard that you guys were kind of targeting <unk>.
Flattish noninterest expenses.
For the next quarter. So can you just talk about just just given the spread compression that you expect it to have just what more you can do to offset some of that I understand that you're a growth franchise and try to balance that with with try to.
Preserve profitability, but what more can you guys do to kind of offset some of those spread income pressures. Thanks.
Wireless strike, where we are.
Have a.
What I would call a laser focus on expense management in areas that arent being productive for us at this point is weak.
Move into the second half of the year, so it's going to be the responsibility of this team too.
Ensure that we continue.
The momentum we saw in the last couple of years of making progress, even though we're going to take a step back from efficiency standpoint.
ROA, we will continue to focus on.
Areas that are not being productive as said just a few minutes ago.
I think we can buy us and success there.
We were.
I think with the footprint growth that we have what we're focused on from an expense.
Management standpoint does it in any way impact the momentum we see from a profitable growth perspective, and that's going to be our focus.
Got it.
You guys have pretty solid capital ratios, we have seen a few banks I'd say, an increasing number of banks do at least some partial.
Bond portfolio restructurings to help offset some of the NIM pressure is that something that you guys have or would consider.
If so I mean.
What would be the kind of potential side that you could potentially look at thanks.
Yes.
We actually had a couple of projects that while I was working.
Before SBB that.
You gave us some opportunities to take some gains in some areas that would have been beneficial to be able to offset the losses in that portfolio to better position us.
When I say better position is probably to pay down debt would be most.
Efficient way for us to utilize those sales.
The concern we had in the optics of that certainly put that on the back burner and I think there is an opportunity for us to move forward with a couple of those projects. So.
We are going to be looking at every possible trigger we can pull.
To put ourselves in a better position from a portfolio perspective moving forward.
And I just feel like that's going to be.
Yes.
Top.
But for US in next two quarters.
Alright, maybe finally for me we've seen.
Interesting two deals here in the past few days it seems like the chatter is picking up.
You know again I know your currency is probably not where you want it to be but can you just talk about your expectations for the M&A environment.
What you guys would.
In theory would be looking for.
As we move into the next couple of years. Thanks.
And this is one of the.
I would say exciting aspects of this market, there's always opportunities when you look at challenges and the.
Shifts that we've built in these markets the opportunity we.
We had with Bta's to create a partnership and also <unk>.
Reputation of how we're going to manage these.
Opportunities have been highly beneficial to us so I'm excited about what the outlook is I know the currency is not where we want it to be but.
When you build partnerships and you take opportunities there are opportunities, even where the market is today.
Outside down the road.
We will.
I think that's partially job one for me is to continue to.
The look through those opportunities and hopefully something comes to the forefront thats meaningful, but if we do something.
This is our best utilization of capital at this point it will be meaningful and it will be what I think our investors would expect in this type of market.
Great I'll step back thanks for taking my questions.
Thank you.
Our next question comes from Brady at Keefe, Bruyette <unk> Woods Brady Your line is open.
Hey, Thank you good morning, guys.
Good morning, Brian how are you today.
Alright.
Just wanted to clarify the expense guidance of stable in the back half of this year, if I look at the <unk>.
As in the first half.
It was about $57 million and then about $59 million in <unk> is it based on the <unk> level or kind of on average over the first half of the year.
Okay. Thanks, Barry that's a good point, our expectation is that it'll be flattish from the second quarter number.
Okay, Alright, and then so back under $10 billion by the end of this year, you'll most certainly probably cross next year I think.
In the past you guys have talked about durbin impact of about $5 million is that still the right way to think about it and is there anything you can do to offset that revenue headwind.
Yes that durbin impact is about $5 million that will hit us mid.
Mid year 'twenty five.
Yes.
We're successful this year, which I think will be.
We have talked about non interest income opportunity that we will continue to.
I think drive and be successful at them not only insurance, but some other opportunities that we have.
Unfortunately for us multiples as we've talked about in the past and Lisa.
Agencies have gotten a little bit out of paying in a market, where I think is the top of the market from how hard the market is even though we feel like that'll be extended for a little bit longer period of time.
Just not a good time to be there, but I do think mid year next year.
We should be able to see some opportunities up and hopefully get back in there, but we do feel that there is an opportunity to replace that revenue with non interest income it makes tremendous medicines.
Okay, and then finally for me so low to mid single digit loan growth I think in the past you guys have talked about.
You're hoping that deposit growth would be even above loan growth. So is that does that.
The goal of the right way to think about it for the rest of the year.
It is and as we said in opening remarks.
It's interesting as you know this institution has always focused on core deposit growth, we have been sending core deposit growth for years, but the some of the activities that we have going on and programs, we have going on entirely to incent.
Significant deposit growth and when I say deposit growth within core deposit growth I think we will see some success there in.
We're starting to see stabilization in lot of areas and historically and I always want to make this point. If you go back for the last seven years, the second quarter for us has been that.
A tough deposit quarter because of the outflows not only public bonds, but the utilization.
Noninterest bearing deposits and they.
There are companies that we typically see.
Strong move in the third and fourth quarter. So we're expecting that in the third quarter, we're expecting a lot of stabilization in the third quarter for a couple of areas.
I am hopeful.
I do feel that we're in market with inward migration that will give us the opportunity to see positive deposit growth, but that is a challenge for us at this point, we've been dedicated committed to <unk>.
Maintaining lower than traditional loan deposit ratios and that's what's driving our loan growth at this point, but it's also given us an opportunity to.
Focus on.
Profitable pricing and to make sure that we're being highly selective in the credit and credit quality. The client selection process for both the right now I couldnt be more pleased with relationship.
Relationship manager to do an awesome job.
<unk> focus on deposit growth I think we will see some successes.
Alright, great. Thanks, guys.
Thank you.
Thank you.
And next question comes from Kevin at D. A Davidson Kevin Your line is open.
Hey, good morning, everyone.
Good morning, Kevin.
Hey, Greg just a follow up on M&A I know this is a longer term thing, but just given.
The focus on deposits today.
You've obviously built up the company.
Ainley organically and become a Texas growth story, but do you see your deals if there are deals and I'm talking two or three years down the line are.
<unk>.
Is it going to be more front of mind.
Loan growth opportunities deeper in Texas that may be more opportunities in east, Texas or will you be looking more slower growth states.
<unk>.
Good basis of core deposits or is it both I'm just trying to get a sense for where those rank.
In terms of opportunities.
Our primary focus and we.
Have at this point.
I would say two to three <unk>.
The relationships that we continue to build on that I think could be highly productive for this company.
It would be great partnerships those are focused in.
Geographies that we're currently in and growth areas.
The upside of these opportunities as they have.
<unk> rule deposit franchises that are meaningful and always have been meaningful to us.
We understand how to build.
Those type of markets and we do feel that there is a strong need for us to continue to focus on rural deposit franchises. So.
That's what we're looking at now and I hope, it's not two to three years I hope that there is opportunities for these partnerships to form in and worked for the upside.
That's the approach, we're taking but it's currently focused in footprint.
<unk> is focused on continuing to Texas growth story.
Core deposit rule core deposit opportunities that mean that makes sense for us. So that's the focus and that's the opportunity that we have at this point.
Great. Thank you very much but I would say that.
For us.
Some of this cycles impact to earnings.
Those are highlighted more and so earnings and their ability to earn it.
Is going to be another driver for those decisions.
Got it.
Makes sense.
One quick question I know the low to mid single digit growth for loan outlook is most likely ex warehouse I'm, just curious where you see.
Warehouse going from here I know it had a big.
Bump this quarter, but where you see those balances go.
Yeah, I think we will be down.
Let's say.
Yes.
$30 million to $40 million in the third quarter, and probably finish up the end of the year around $300 million.
Got it okay. Thanks very much that's all thank you Kevin.
Thank you once again, ladies and gentlemen, if you would like to ask a question. Please press star one on your telephone keypad to enter the queue.
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We will pause here briefly to allow any questions generate.
Our next question comes from Stefan <unk> from Piper Sandler.
Your line is open you May proceed.
Great. Thanks, so much good morning, everyone.
Greg I just wanted to follow up you said any potential M&A would be meaningful I guess I'm. Just curious what you mean by that explicitly is that a is that a comment on what the size of a potential deal could be and if so do you have a kind of size range that you'd think about what what becomes meaningful or impactful for you guys at this point.
Yes meaningful to me is that it'll be.
It'll hit the metrics that.
I think investors and myself would like to see from the standpoint are back in the <unk>.
Nature of it the impact it has on the deposit franchise as a whole the ability to grow that deposit franchise. The people that are behind those M&A and relationships that are I would say partnerships in those relationships that we bring in that that's meaningful to me, but from a size perspective, it's just getting difficult.
With the expense and the stress it has all the organizations everything for.
US to look at a deal.
Less than a $1 billion and I think that's where we.
We try to focus that and above.
Okay Super Thats very helpful.
Curious how you guys are thinking about.
Balance sheet mix composition from this point forward, how you can make the balance sheet.
More efficient I guess, maybe somebody said a little bit earlier and within that how you think about your securities balances. If we would expect those to continue to run down and repurpose those funds into loan growth or otherwise.
Yes, Stephen So we definitely anticipate that we will continue to let the securities portfolio pay off and being replaced with.
Either fund.
Funding loan growth or.
Paying down.
Borrowings.
That comment is outside of any potential opportunity we have to.
To accelerate that that mix.
I think that our ideal.
Balance sheet kind of securities mix from an optimization standpoint would be in the 12% to 15%.
Range and I think we think that gives us the proper mix of liquidity to fund loan growth.
And the ability to.
Provide.
Submit some some yield for the liquidity on the liquidity that we're holding.
Okay perfect. Thanks, and then maybe just last thing for me really interested in kind of these digital initiatives and the strength in new customer acquisition that seems to be coming out of that.
Is there any kind of specific.
Wins or specific benefit that you could reference thats really driving that or is it is it more just an increased focus blocking and tackling and I'm. Just curious if you can dig down into those digital initiatives that all of the kind of the.
Are the benefits.
Yes. Thanks. So this is lance good good question couple of things there maybe I'll start with.
Really for US we went through the data cleanse last year that was incredibly helpful. So we talk about.
Better insights into trends and behaviors.
What that showed us this year that maybe we didn't have the ability to see clearly before was.
The new client acquisition that we've obtained this year.
So that's not a.
Because of the digital but it's what the data has been able to kind of.
With our ability to call in a more meaningful way and understand why clients are moving to us. So.
Had significant new client acquisition through the first half of the year.
Dramatically more than we did the first half of last year.
And it's really a function of.
Really good job from our bankers from calling efforts, but also we've talked a lot historically about our incentive plans are incentive plans have always been deposit eccentric and driven historically for us a dollar in deposits has been equal to a dollar and loans and so you create a mentality of not having lenders, but having true <unk>.
Chip bankers.
In 2023, a dollar deposits is more incentive than a dollar of loans and so our bankers understand kind of what we're trying to accomplish.
At the same time, we are doing a lot on the digital and technology side as we've talked about.
We continue to enhance our robot processes and automation, we have a goal of 8000 manual hours. This year to reduce what are being burdened on our on our people. So that we can create and drive more efficiency.
We're excited to partner with a firm called <unk>, which is going to be coming in the second half of this year, which is going to be.
A much more robust and dynamic experience for our clients when it comes to chat and call services.
And we'll continue to kind of try to find best in class when it comes to mobile and a lot of other areas. I mean, we feel for us the technology needs to be a dramatic driver as we as an industry I think ultimately we need to get our efficiency ratio down in the <unk> and I think technology is the way to do it.
Yes hard to disagree with that I appreciate all the color and thanks for the time today.
David Thank you.
Thank you.
How much more if you would like to ask a question. Please press star one on your telephone keypad to enter the queue.
And if you join fight with please press the raise hand icon on the right hand side of your Dr. Richard <unk>.
The polls briefly to allow any questions Jared.
It appears there are currently no further questions kind of get back to Drake Mills with origin Bancorp for any final remarks.
Yeah. Thanks, Thanks for everyone for being on the call today, and I will close with saying that.
Certainly there are opportunities for us to look at the challenges in the markets. We're in but I cannot be more proud of this organization and the standpoint of the positives that we're dealing with every day, our geography, we have a stronger economy.
Our active demographics, and where migration our teams are experienced they are cohesive.
Profile was stronger than it's ever been our client selection process through our relationship managers has never been better and stronger and we're talking to the right type of clients our deposit base deep.
Deep relationships rule backgrounds, and a lot of areas. We continue to see growth new account openings, new clients and the type of accounts were bringing over in line with our C&I profiles and last thing the opportunities in our geography as we go through the next two years are strong we are building relationships.
That are meaningful that will be impactful and they will change the outlook of this organization moving forward. So very proud of our banker activity the client relationships, we have the position we're in.
Very proud to be a part of this organization I appreciate each of you being on the call and I. Appreciate your support so we will see you next time.
This concludes today's ethical a replay will be made available shortly thank.
Thank you and have a great day.
The House has ended this call good.