Q2 2024 Bridgewater Bancshares Inc Earnings Call
Good morning, and welcome to the Bridgewater Bancshares 2024 second quarter earnings call. My name is cole and I'll be your conference operator today, all participants have been placed in a listen only mode. After Bridgewater is opening remarks, there will be a question and answer session to ask a question. Please press Star then one on your touch tone. So.
Justin Horstman: If youre using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two please note that today's call is being recorded at this time I would like to introduce Justin Horstman, Vice President of Investor Relations to begin the conference call. Please go ahead Sir.
Justin Horstman: Thank you Paul and good morning, everyone. Joining me on today's call are Jerry box, Chairman and Chief Executive Officer jokes about E President and Chief Financial Officer, and Nick place Chief lending officer in just a few moments we will provide an overview of our 2024 second quarter financial results, we will be referencing a slide presentation that is available on the investor.
<unk> section of Bridgewater Web site investors that Bridgewater Bank <unk> Dot com following our opening remarks, we'll open it up for questions.
Justin Horstman: During today's presentation, we may make projections or other forward looking statements regarding future events or the future financial performance of the company. We caution that such statements are predictions and that actual results may differ materially. Please see the forward looking statement disclosure in the slide presentation, and our 2024 second quarter earnings release for more information about risks and.
Certainties, which may affect us.
Justin Horstman: The information we will provide today is as of and for the quarter ended June 32024, and we undertake no duty to update the information.
Gerald John Baack: <unk> determined in accordance with GAAP. Please see our slide presentation, and 2024 second quarter earnings release for reconciliations of non-GAAP disclosures to the comparable GAAP measures I would now like to turn the call over to Bridgewater, as chairman and CEO Jerry Bock.
Gerald John Baack: Thank you Justin and thank you everyone for joining us today I'm pleased to share our second quarter results, which showed a stabilized net interest margin our return to revenue growth and continued superb asset quality.
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Speaker Change: As we have said in the past Bridgewater is well positioned to benefit from future interest rate cuts and a normalized yield curve.
Speaker Change: Reaching a point of margin and overall profitability stabilization bodes well for us, especially as we witnessed more encouraging macro data, including the continued slowing of inflation.
Speaker Change: After strong balance sheet growth in the first quarter loan and deposit growth were more muted in the second quarter.
Speaker Change: Loan growth was impacted by higher levels of pay offs, while deposit growth continued to be chunky, given the nature of the deposit base.
Speaker Change: As expected on a year to date basis loan and deposit growth, we're still in the low to mid single digit range.
Speaker Change: The team continues to participate in good conversations with new and existing clients keeping us abreast of.
Speaker Change: Market opportunities.
Speaker Change: Asset quality continued to be very strong in the second quarter with no net charge offs and very low levels of nonperforming assets are.
Speaker Change: Our consistent underwriting standards active credit oversight and experienced lending and credit teams have always been differentiators for us and we're seeing the disciplined pay off in the current environment.
Speaker Change: While CRE and multifamily continued to be a focus across the industry and for us given our high concentrations. We've been pleased with how these portfolios have performed.
Speaker Change: Nick will provide more insight into these portfolios and what we are seeing across the twin cities later in the presentation.
Speaker Change: In the meantime, I think it is worth reminding everyone that our teams are exceptionally talented and making CRE and multifamily loans.
Nick: We have a lot of experience and expertise in the twin cities, which is why we are so comfortable with our current loan mix.
Nick: Finally, this marks the 13th consecutive quarter of tangible book value per share growth up.
Speaker Change: Up nine 8% annualized from the first quarter.
Speaker Change: On slide four you can see our tangible book value is up nearly 200% during those 30 quarters compared to sub 70% median for banks with $3 billion to $10 billion in assets.
Speaker Change: We continue to believe this is a true differentiator for Bridgewater.
Speaker Change: And how we will provide shareholder value going forward.
Speaker Change: Before I turn it over to Joe I wanted to highlight a few other things we've been working on.
Joe: On the client front as part of our commitment to win retain and grow our network, we launched a new CRM platform.
Joe: This will be a game changer for us in terms of how we interact with clients, while also enhancing efficiencies across the bank.
Ulf: Our product team is also working diligently on a new online banking solution for our retail and small business clients Ulf.
Joe: Ultimately enhancing the overall user experience.
Joe: More to come in future updates on this client centric initiative.
Joe: Finally, our culture has always been something we take very seriously.
Joe: And so we are thrilled to be recognized as a top workplace by the star Tribune for the fifth year in a row.
Joe: This further demonstrates how our unconventional corporate culture is appreciated by our diverse employee base and ultimately, allowing us to attract and retain top talent.
Joe: We aim to be unconventional with an inclusive and empowering culture.
Joe: Just a few weeks ago, we hosted an all team happy hour capped off with a meat raffle all proceeds went to support local charities.
Joe: Its activities like this that bring our team together.
Joe: Courage collaboration at every junction.
Joe: We truly have a great team.
Joe: I'll now turn it over to Joe who in addition to being our Chief Financial Officer, We recently elevated to the role of President.
Speaker Change: Joe is well suited for this role and we're excited about what jochen bring in this capacity.
Joe: Joe.
Joe: Thank you Jerry I'm really excited about the new role and it's been great to collaborate with the team so far.
Speaker Change: Turning to slide five you can see the net interest margin held flat at $2 20 for the stabilization during the quarter was driven by a more meaningful increase in the portfolio loan yield, which offset continued deposit pricing pressures as.
Speaker Change: As we mentioned last quarter, we felt like we are reaching an inflection point on net interest income given the stronger balance sheet growth, even if the margin compressed a bit further.
Speaker Change: As it turned out balance sheet growth was a bit weaker than expected in the second quarter, but the margin was stronger ultimately still driving that net interest income inflection up one 5%.
Speaker Change: This was also supported by higher loan fees as we saw an uptick in loan payoffs.
Joe: Slide six provides more visibility into the trends in the margin components the portfolio loan yield increased 12 basis points in the second quarter to $5 50.
Joe: While we expect the loan portfolio to continue repricing higher even a lower rate environment. The pace of the increase may vary based on the loan yields coming off we're coming on and the off down and off the balance sheet in a given quarter.
Joe: During the second quarter, the weighted average yield on new loan originations was in the low sevens, while loans paying off we're in the low sixes.
Joe: The Securities portfolio is also supporting our overall asset yields and securities yields increased another 14 basis points to $4 94.
Joe: Note that our period period end securities balances declined in the second quarter following a security sale.
Joe: While asset yields have picked up deposit costs have continued to increase up 14 basis points in the second quarter.
Joe: This continues to be due to elevated competition and overall mix shifts within the portfolio.
Joe: We would expect to see additional deposit pricing pressures, albeit at a slower pace until we start to see some relief on rates.
Joe: As Jerry mentioned, our balance sheet remains well positioned for a rates down environment and a more normalized yield curve.
Jerry: We have over $1 billion of adjustable funding tied to short term rates and a loan portfolio that is positioned to continue repricing higher even in a lower rate environment.
Speaker Change: While the potential for rate cuts appears more likely today than it did three months ago. We would still expect net interest margin to remain relatively stable near current levels in the near term with expansion coming after we see potential rate cuts take effect.
Speaker Change: Turning to slide seven we saw quarter over quarter revenue growth for the first time in nearly two years.
Speaker Change: Driven by higher net interest income.
Speaker Change: As a result, ROA and pre provision Rah bull stabilized, while Aro TCE increased by 16 basis points.
Speaker Change: Noninterest income grew during the second quarter, primarily due to a $320000 gain on the sale of securities.
Speaker Change: However, total revenue would have grown even when excluding securities gains.
Speaker Change: Turning to slide eight our ability to manage expenses, while making investments in the business continues to be a real strength of the organization.
Speaker Change: Expenses, so far in 2024 have tracked in line with what we expected.
Speaker Change: After a three 5% decrease in expenses in the first quarter, which is typically our low point, we saw a 2% increase in the second quarter.
Speaker Change: The increase was primarily due to higher salary and employee benefits technology and occupancy expenses, partially offset by lower FDIC expense.
Speaker Change: The trajectory is similar to what we saw in 2023, and we would expect that to continue with expenses increasing throughout the back half of the year.
Speaker Change: Overall, we would expect full year expense growth to remain relatively in line with asset growth in 2024.
Speaker Change: With that I'll turn it over to Nick.
Nick: Thanks, Joe turning to slide nine total deposit balances were relatively flat in the second quarter with core deposits down $53 million.
Nick: As we've always said our core deposit growth tends not to be linear due to the nature of our client base, which includes higher balanced client relationships longer acquisition, and Onboarding times and timing of larger inflows and outflows. In addition, the second quarter tends to be seasonally lower for deposits due to tax season and industry cyclicality.
Speaker Change: It's not unusual for us to see larger inflows and outflows from quarter to quarter.
Speaker Change: For example, we generated $90 million of core deposit growth in the first quarter.
Speaker Change: On a year to date basis total deposits are up five 3% annualized while core deposits were up 3% both in line with a four 1% loan growth we have generated so far this year.
Speaker Change: We also continue to see various deposit mix changes, specifically as we leverage more brokered deposits to supplement core deposit growth during the second quarter.
Speaker Change: On the other hand, we are pleased to see noninterest bearing deposits grow at nearly 4% annualized pace.
Speaker Change: These deposit mix changes have contributed to funding costs continuing to slowly move higher.
Speaker Change: However from a broader funding perspective, we have ample repricing opportunities, even if rates move lower.
Speaker Change: With our <unk>.
Speaker Change: Overall, we feel good about our ability to drive core deposit growth and moderate deposit costs over time.
Speaker Change: Turning to slide 10, similar to deposit balances annualized loan growth moderated a bit in the second quarter to one 7% after stronger growth of six 5% in the first quarter.
Speaker Change: Elevated pay offs, which increased nearly $50 million from last quarter contributed to the slower growth.
Speaker Change: On a year to date basis loan balances were up four 1% annualized which is in line with our expectations also our loan to deposit ratio remains just under 100%, which is in the middle of our target range.
Speaker Change: We are continuing to see good loan demand in the twin cities and are getting in front of strong deals. However, the continued high interest rate environment and challenged equity market has caused some borrowers to delay projects, while others deals just haven't penciled out.
Speaker Change: We still expect full year loan growth to be in the low to mid single digit range. However, we are expecting more robust payoff levels to continue into the back half of the year.
Speaker Change: We will continue to be a headwind while other factors, including overall demand economic conditions and core deposit growth will influence the pace of loan growth.
Speaker Change: Overall, we feel like we have the ability to turn on our loan growth engine when appropriate, but we are continuing to take a disciplined approach that said, we've been active in adding new talent to our lending teams to support our long term growth initiatives.
Speaker Change: You can see the increase in loan payoffs on slide 11.
Speaker Change: While higher payoffs may limit our overall loan growth there are potential benefits as well.
Speaker Change: For example, past create liquidity that can we can redeploy into higher yielding loans as the payoffs are generally rolling off below new production yields as Joe mentioned earlier.
Joe: In addition, past can generate loan fees, which support net interest income, which we saw here in the second quarter.
Speaker Change: New loan originations also continued to be strong exceeding loan advances for the second consecutive quarter.
Speaker Change: We do not see any meaningful changes to the loan mix during the quarter construction and development balances continued to decline as deals completed their construction phase while growth came primarily in our C&I CRE and multifamily portfolios.
Speaker Change: Slide 12 shows how our loan portfolio is positioned to reprice higher even if rates decline. This is primarily due to our large fixed rate portfolio, which makes up 69% of total loans and our smaller variable rate portfolio, which makes up just 15% of loans.
Speaker Change: We have $633 million of fixed and adjustable rate loans maturing or repricing over the next 12 months with weighted average yields of five 9% and 475% respectively.
Speaker Change: The repricing impact of our larger fixed and adjustable rate portfolios should outweigh the repricing of our smaller variable rate portfolios as rates come down.
Speaker Change: Also we have been diligent increasing loan floors on very large transactions with over 70% of our floors now being about 5%. This should provide loan yield support if we see a meaningful drop in rates.
Speaker Change: We're confident that our overall portfolio yields should only continue to rise even as rates come down.
Speaker Change: Slide 13 highlights our multifamily and office portfolios over.
Speaker Change: Over 90% of our multifamily loans are in the twin cities and we have only experienced 62000 of net charge offs in the portfolio. Since we started the bank in 2005 to.
Speaker Change: The twin cities multifamily market has historically been a stable market with less volatility than some of the coastal and high growth markets.
Speaker Change: While vacancies increased throughout 2023, we have seen signs of vacancy rates stabilizing and even starting to tick down a bit over the past few months coupled.
Speaker Change: Couple this with absorption levels exceeding deliveries as new construction remains slow and you have a more favorable outlook for occupancy levels and rent growth in the twin cities.
Speaker Change: We have been proactively testing covenants across our multifamily portfolio and have been very pleased with our results for any issues that we have found we have action plans in place, including principal curtailments pledges of additional collateral or other risk mitigates.
Speaker Change: We continue to closely monitor the portfolio as the economic and interest rate environments remain challenging. However, we have been pleased with our performance to date and remain bullish on multifamily over the long term.
Speaker Change: Looking at our non owner occupied CRE office portfolio, our exposure remains quite limited at just 5% of loans. This includes only four loans located in central business districts totaling $35 million.
Speaker Change: As a reminder, in previous quarters, we placed one of these central business District office loans on watch and moved another to substandard.
Speaker Change: Due to potential lease rollover risk, we will continue to monitor these transactions closely given the headwinds facing the sector.
Speaker Change: That said, we feel good about the office portfolio as a whole given the lower average loan amount diversified client base and primarily Midwest suburban office exposure.
Speaker Change: Turning to slide 14, we continue to see strong performance across our entire loan portfolio as we had no net charge offs again in the second quarter and nonperforming assets were just 0.01% of assets.
Speaker Change: We remain well reserved at 137% of gross loans, which is well in excess of peer levels.
Speaker Change: <unk> included 600000 of provision during the quarter, which is generally been tied to loan growth.
Speaker Change: Overall, we continue to feel good about our loan portfolio that said as higher as is higher interest rate environment continues to put pressure on businesses, we still expect to see some credit normalization over time.
Speaker Change: On Slide 15, you can see our watch and substandard loans, both of which remained at very low levels. We.
Speaker Change: We are pleased with the risk profile of the portfolio and believe it is well positioned moving forward.
Nick: Thanks, Nick Slide 16 highlights our strong capital ratios, which have continued to build including CET, one which increased from $9 21 to $9 41.
Nick: In addition, we repurchased nearly 253000 shares during the second quarter at a weighted average price of $11 48 per share for a total of $2 9 million.
Nick: We still have $15 $3 million remaining under our current authorization.
Nick: We will continue to evaluate future repurchases based on a variety of factors, including capital levels growth opportunities and market conditions.
Nick: Share repurchases are just one of our capital priorities. Our primary capital priority remains organic growth beyond that we continue to review and monitor potential M&A opportunities.
Speaker Change: Turning to slide 17, I'll recap, our near term expectations.
Speaker Change: We expect full year loan growth to remain in the low to mid single digit range, although as Nick mentioned anticipated higher levels of loan payoffs will likely be a headwind over the remainder of the year.
Nick: We are pleased to see the margin stabilize in the second quarter, we would expect that stability to continue in the near term until we see some interest rate cuts and a normalized yield curve.
Nick: While the loan book is repricing higher there's still pressure on deposit costs as.
Nick: As we have mentioned, we are well positioned to benefit as rates come down.
Nick: On the expense side, we expect full year noninterest expense in 2024 to track relatively in line with asset growth similar to prior years. This.
Nick: This includes a similar trajectory throughout the year as we saw in 2023 with expenses starting out low in the first quarter in building in subsequent quarters.
Nick: Provision expense will likely be tied to a pace of loan growth in the overall asset quality of the portfolio.
Nick: I'll now turn it over to Gerry.
Gerry: Thanks, Joe finishing up on slide 18, I'll provide a quick update on our 2024 strategic priorities.
Gerry: First as we look to optimize our balance sheet for longer term growth both loan and deposit growth are tracking as expected on a year to date basis.
Speaker Change: Second we continue to focus on expanding our client base through additional affordable housing efforts as well as hosting successful networking events at our corporate office for local women business leaders and entrepreneurs.
Gerry: Third we have continued to invest in the business, including the launch of our new CRM tool, which is creating efficiencies in how we engage with our clients.
Gerry: Finally, our credit teams are working hard to monitor our loan portfolios, especially CRE and multifamily.
Gerry: This has been evident through our continued strong asset quality.
Gerry: With that we'll open it up for questions.
Speaker Change: And as a reminder to ask a question. Please press Star then one on your Touchtone phone.
Speaker Change: If youre using a speakerphone please pick up your handset before pressing the keys.
Gerry: To withdraw your question. Please press Star then two.
Speaker Change: And at this time, we will pause momentarily to assemble our roster.
Brett <unk>: And our first question today will come from Brett <unk> with Hep D Group. Please go ahead.
Brett: Hey, good morning, guys how are you doing.
Brett: Maybe just to start off here on on credit I mean, your asset quality remains completely pristine, but we've been hearing rumblings that regulators are increasingly using tools at their disposal to increase individual capital requirements are pretty heavy banks. So let me just take us through your relationship with your regulators.
Brett: And their understanding of your business model, especially considering how clean credit has been for you historically.
Gerry: Okay.
Gerry: Hey, Brian it's Gerry.
Gerry: I mean, we've had.
Gerry: Basically the same platform since since we started in 2005 we've.
Gerry: We continue to have conversations with our regulators.
Gerry: We have continued to be comfortable with what you know what our overall enterprise risk management system is and how we monitor our concentrations.
Gerry: And although our concentrations have come down and that is certainly not something that they've.
Gerry: Asked us to do so.
Gerry: We continue to feel comfortable we have another exam here in August.
Gerry:
Gerry: At our last exam it was it was.
Gerry: Kind of business as usual, so I don't I don't expect anything different.
Gerry: Okay.
Speaker Change: Great color. Thank you.
Speaker Change: And then maybe can you update us on your appetite to continue repurchasing shares just given the pricing has firmed up above tangible book value.
Speaker Change: Hey, Brendan this is Joe.
Joe: Yes, I think.
Brendan: It's like we always say I mean, there's a variety of factors.
Speaker Change: That we consider.
Speaker Change: Obviously, the share price being one of them, but I think in.
Speaker Change: In the context of everything else, whether it's future growth opportunities.
Speaker Change: The environment itself.
Speaker Change: We consider all of that so I think we're really pleased and happy that we are as active as we were over the last.
Speaker Change: Three quarters.
Speaker Change: Just given the blended cost that we were able to buy back shares and then considering where the stock is today.
Speaker Change: But again, we'll continue to evaluate that going forward.
Speaker Change: And that's kind of a fluid.
Speaker Change: Analysis.
Speaker Change: Yes, yes makes sense.
Speaker Change: One more for me before I step back.
Speaker Change: Really great to see the margin finally level.
Speaker Change: Do you happen to have the spot rates for both deposit cost and the margin at quarter end just to give us a sense of how trends played out across the quarter.
Speaker Change: Yes, So June was $2 20.
Speaker Change: And then on spot rates for deposits were $3 50.
Speaker Change: Thank you for taking the questions.
Jeffrey D. Shellberg: And our next question will come from Jeff <unk> with D. A Davidson. Please go ahead.
Jeff: Thanks, Good morning.
Speaker Change: Just on the.
Speaker Change: I think you were cautious on the acceleration of loan yields.
Speaker Change: And encouraging stat I wanted to kind of see it is that more timing than anything in terms of 12 basis points versus five or kind of expectations for do you expect that to jump around or do you think we could we could see.
Speaker Change: Further acceleration.
Speaker Change: Hey, Jeff This is Joe.
Joe: So I think we are.
Joe: Had really strong growth in the back half of the first quarter really in March, which I think really propelled.
Jeff: The loan yield in the second quarter.
Speaker Change: So I think as we think about growth in the.
Speaker Change: And the overall loan yield is obviously linked together.
Speaker Change: I think as Nick mentioned.
Nick: On the pay off front I mean, I think it's.
Nick: The payoff piece is certainly beneficial on one hand, it obviously allows us to recycle bed.
Nick: And really kind of roll off yields are certainly less than where new money yields are coming on at so it's definitely.
Speaker Change: And not only margin accretive, but certainly beneficial to the overall loan yields. So that's that's helpful.
Nick: So I think.
Nick: It's going to be growth driven.
Nick: And I think in prior quarters, where the growth was was not as strong as it was in first quarter you saw five to seven basis points on a linked quarter basis, and so I think given the strong growth in the first quarter, we do feel like that really propelled the loan yield in the second quarter.
Speaker Change: Got it.
Nick: And then Nick.
Nick: Mentioned.
Speaker Change: Q2, a more of a headwind from business cyclicality from a deposit gathering.
Speaker Change: Now kind of through that.
Speaker Change: And I know you've had a hug and that low mid single digit balance sheet growth, but you feel better about deposit gathering in the second half of the year is that typically.
Speaker Change: Seasonality becomes.
Nick: Tailwind.
Nick: Yeah, Hey, this is Nick.
Nick: Yes, we've seen deposit balances sort of rebuild back up here and it's.
Nick: It's not uncommon for us in Q2 tends to be.
Nick: Low sort of low watermark for for us.
Nick: In the deposit front just as.
Nick: Taxes and other.
Nick: Typical.
Nick: Cyclicality of our business clients.
Speaker Change: It tends to we.
Nick: We tend to see that in the second quarter.
Nick: We feel really good about our.
Nick: Traction that we've had on new client acquisitions.
Nick: And really what we've seen in <unk> and.
Nick: And new hires this year and we've had some great Treasury management hires.
Nick: And feel really good about the bankers that we brought on board so that will pay dividends over the long term and we're starting to see that drive some of our pipeline growth now but.
Speaker Change: Q2 was.
Speaker Change: A bit down for us and that's just not uncommon for us we tend to have.
Nick: Some chunky quarters first quarter, we saw really great.
Nick: Both core and overall deposit growth and then Q2 as we expected was a bit more muted so.
Nick: We expect those sort of inflows and outflows to continue.
Nick: Over the long term.
Speaker Change: Thanks, and last one from me.
Speaker Change: Touch the buyback.
Speaker Change: Area pretty well I guess just.
Speaker Change: Might as well check in on M&A.
Speaker Change: <unk> talked about.
Speaker Change: Share prices run up here.
Speaker Change: And conversations on on that side interested in the.
Nick: The recent updates.
Jeff: I can I can talk a bit about M&A and Jeff.
Nick: Similar to last quarter's loss.
Nick: Years actually I mean, we continue to have.
Nick: Have conversations with the other local banks.
Nick:
Nick: And those conversations are have all those have always been well. So it's really just staying in staying in front of us.
Nick: Potential targets, along the way and so.
Nick: I know I don't know across the country are things are heating up a little bit on the M&A front at least that's what I get from investment bankers, but I would say in the twin cities it's still.
Nick: It will slow, but we'll see.
Speaker Change: Got it thank you.
Nick: Yeah.
Speaker Change: And once again, if you would like to ask a question. Please press Star then one our next question will come from Nathan race with Piper Sandler. Please go ahead.
Nathan James Race: Guys. Good morning, Thanks for taking the questions.
Speaker Change: And then just as just as we think about you know the.
Nathan James Race: Potential increase in deposit costs in the third quarter curious just in terms of the Cds that you are maturing.
Speaker Change: <unk> and <unk>, how that stacks up to kind of your replacement rates today.
Speaker Change: Hey, Dave This is Doug This is Joe Yes, I definitely think we've seen an inflection point.
Speaker Change: I'd say over the last couple of quarters, where we've really been mindful to kind of shortening up.
Speaker Change: The ultimate maturity of those Cds.
Speaker Change: In anticipation for potential rate cuts. So I think really we've seen inflection where the 12 month CD at five and a quarter is now.
Speaker Change: Pricing in the low fives and and.
Speaker Change: And so I think that.
Speaker Change: While we had maybe a longer duration CD portfolio. A couple of years ago is that stuff rolls off and shortens up.
Speaker Change: Certainly provides a lot of repricing opportunities and Theres definitely.
Speaker Change: Collection from that perspective, I'd say the other thing too is just on the on the brokerage front.
Speaker Change: We've really been able to.
Speaker Change: Put on longer term Cds that have optionality in our ability to call. Those Cds. So I think while it might feel like a longer term and certainly disclose that way there's definitely a lot of optionality from our perspective that allows us to call and reissue or supplement with core growth. So feel good about that.
Speaker Change: Time deposit portfolio, and really hitting an inflection point in terms of costs.
Speaker Change: Okay, Great and then.
Speaker Change: I think we touched on it earlier, but just in terms of the elevated.
Speaker Change: Payoffs in the quarter I'm curious if these are kind of as expected and if you have any kind of visibility into potential payoff levels over the course of <unk>.
Speaker Change: <unk> and <unk>.
Speaker Change: A lot of it is stuff that we had originated in 'twenty one and in.
Speaker Change: <unk> 'twenty that it was the intention of those transactions too.
Speaker Change: To pay off a lot of that came within our construction book.
Speaker Change: That had rolled to our multifamily book so.
Speaker Change: It's sort of right within the lifecycle of those transactions.
Speaker Change: That we expected to see it and we've actually seen them even quarter to date.
Speaker Change: Payoffs are really that payout China's continued we've seen almost.
Speaker Change: Two thirds of the level of payoffs that we experienced in all of Q2 already here through July so.
Speaker Change: We're working to dig back out of that and we expect that to.
Speaker Change: To continue to be a headwind here, but overall, we feel good about what that allows us to do it allows us to recycle that cash back into new transactions, which is really.
Speaker Change: Our primary driver of both.
Speaker Change: New loan yields and an increased loan yields and fees.
Speaker Change: And in some cases, its allowing some of those.
Speaker Change: Vintage transactions <unk>.
Speaker Change: In 2021.
Speaker Change: That felt a little bit more pain is as these rate.
Speaker Change: <unk> have come up as they were underwritten into a different rate environment.
Speaker Change: To find the right home with an agency takeout or something like that so ultimately it helps us with some of our our credit risk metrics too so.
Speaker Change: Not something that we're concerned with but it is something that is.
Speaker Change: A headwind to new loan to loan growth as it offset some of that new origination activity that we have.
Speaker Change: Got it very helpful. Mike. Thank you and then maybe just one last housekeeping question.
Speaker Change: Securities yields on the taxable portfolio increased.
Speaker Change: Nicely over the last quarter any repositioning there of note or any other.
Speaker Change: Items to keep in mind there.
Joe: Yes. This is Joe.
Joe: No nothing nothing out of the ordinary more of the same just from a composition standpoint.
Joe: We're definitely inactive.
Joe: Portfolio management from our perspective, we did sell some securities this last quarter.
Joe: Which is more of a floating rate nature.
Joe: Reorienting.
Joe: In conjunction with the rest of the balance sheet. So nothing out of the ordinary there just really ordinary course.
Joe: Similar composition as we've as we've had over the last couple of quarters.
Speaker Change: Okay great.
Speaker Change: I appreciate all the color.
Joe: Thanks.
Joe: And this will conclude our question and answer session I would like to turn the conference back over to Jerry <unk> for any closing remarks.
Jerry: Thanks for joining the call today, we continue to be encouraged by our margin stabilization overall revenue growth are superb asset quality and continued growth in tangible book value.
Speaker Change: And I guess I'd just close by wanted to thank our team members. We have a phenomenal team here were brought on some.
Speaker Change: More real key hires in this last quarter on the Treasury and banking side. So we're excited for that.
Speaker Change: We have a great day.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.
Joe: Okay.
Joe: [music].
Joe: Yeah.
Joe: [music].