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spk04: Good day, and thank you for standing by. Welcome to the Allegiance Bank Shares first quarter 2021 earnings conference call. At this time, all participants are in a responding mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I will now attend the conference over to your speaker today, Courtney Theriault, Executive Vice President and Chief Accounting Officer. Please proceed.
spk01: Thank you to all who have joined our call today. This morning's earnings call will be led by Steve Retzlaff, CEO of the company, Ray Vitulli, President of the company and CEO of Allegiance Bank, Paul Ege, Executive Vice President and CFO, Okon Akin, Executive Vice President and Chief Risk Officer of the company and President of Allegiance Bank, and Shanna Kerbel, Executive Vice President and General Counsel. Before we begin today, I need to remind everyone that some of the remarks made today constitute forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995 as amended. We intend all such statements to be covered by the safe harbor provisions for forward-looking statements contained in the Act. Also note that if we give guidance about future results, That guidance is only a reflection of management's beliefs at the time the statement is made, and such beliefs are subject to change. We disclaim any obligation to publicly update any forward-looking statements, except as may be required by law. Please see the last page of the text in this morning's earnings release, which is available on our website at allegiancebank.com, for additional information about the risk factors associated with forward-looking statements. We also have provided an investor presentation on our website. Although it is not being used as a guide for today's comments, it is available for review at this time. At the conclusion of our remarks, we will open the line and allow time for questions. I now turn the call over to our CEO, Steve Redfield.
spk02: Thank you, Courtney. We welcome everyone to our conference call and thank you for your attendance. The first quarter represented a very productive start for the year, highlighted by record earnings per share of 89 cents plus significant deposit growth of $386 million during the quarter, bringing our total deposit growth over the past 12 months to $1.42 billion or 30.9%. Assets increased to $6.43 billion as we have now funded over $1.04 billion of PPP loans, with over $332 million being funded during the last quarter. All in, we remain in a strong position relating to capital and liquidity, and we increased our dividend to 12 cents per share of common stock in the first quarter. Our record earnings was aided by the accelerated recognition of PPP fees during the quarter and by the low provision number that came from having very little in the way of net charge-offs and an improving economy. That said, we absorbed added costs in the quarter, due to asset write-downs, as Paul will describe, and incurred increased overtime and third-party staff augmentation expenses, totaling approximately $400,000 in the quarter, which furthered our PPP production. Our stakeholders benefited from the continued extraordinary outpouring of effort from our staff as we not only booked the large number of PPP loans, but also originated $325 million of core loans during the quarter for a total new loan production of $657 million in the quarter. With the PPP now moving into the file completion and forgiveness phase, our production staff will be able to redirect their entire focus to generating traditional core lending and depository relationships for which our pipelines are already solidly established and will be further enhanced as we use our proven relationship building muscle to deepen the connection to the approximately 4,000 new customers who we assisted with our PPP efforts. We are pleased with our overall asset quality and we're able to significantly reduce our ORE. We continue to remain alert to the impact of the pandemic has had on our community and our customers, particularly those in the higher risk sectors. But the streets of Houston are showing signs of broader economic activity as heavy traffic, which used to be cursed, is now an everyday welcome sight. Although with a sense of steadily growing optimism, we remain cautious as to the timing of a full and complete rebound for all sectors. Given our growing market penetration and size, and while we continue to focus on high service levels to smaller commercial customers and the market differentiation this strategy affords us, we are beginning to attract and retain larger lending relationships. That said, our average loan size is not expected to appreciably change, but we believe that a marginal well-managed debt in this direction is not only warranted, but provides incremental quality growth opportunities. From an operational perspective, we have acquired a more robust and more integrated loan origination system, which we deployed quite effectively as a platform and workflow for handling our PPP loans. And we are now beginning to implement this new system for our entire lending platform. Finally, Allegiance has built and continues to add to the value of our brand and has evolved into an extraordinary franchise value by accelerating our penetration into the market with more and more customers who have now had firsthand experience and appreciation of what our service-level commitment can bring to their table. Given how we responded to the needs of this community over the past year, I believe that we are the clear, proven bank of choice in the Houston region, and we will be deepening our position even further over the coming year. Next, Ray will describe our loan and deposit production results as well as an outlook on credit, followed by Paul, who will cover our financial results. We will then open the call for questions.
spk11: Thanks, Steve. The first quarter of 2021 saw our bankers back in the PPP origination business. as we work with our customers, both existing and new, through the second round of the program, while assisting first round borrowers with the forgiveness process. As mentioned last quarter, we designed the second round effort in a way for our bankers to meet PPP demand, while allowing capacity to generate and expand customer relationships. As a result, we're extremely pleased to report core loan originations of $325 million, the second highest level in the history of the bank, driven by improving economic conditions, market share gains, and continued conversion of the nearly 4,000 new customers from our PPP effort. And in addition to our new customers from PPP, we also attracted 1,800 new non-PPP customers over the past 12 months, bringing total customer acquisition to 5,800, representing 19% growth over the past year. We have also seen increased adoption and utilization of nearly every electronic banking service from mobile remote deposit capture to ACH originations to wire transfers. We continue to review our electronic banking product offerings to meet customer demands and expectations, and also monitor our brick and mortar footprint to optimize how we deliver service and position ourselves to execute on what we believe to be an extraordinary market share growth opportunity. With regards to PPP forgiveness, as of March 31, we received forgiveness applications for 4,103 loans, totaling over $505 million, or about half of the $1 billion in PPP loans originated. Of those, 3,324 have been submitted to the SBA, totaling over $433 million, with 2,973 loans having been approved and funds received of over $364 million. In early March, we incorporated into our platform the new simple forgiveness application for loans up to $150,000, which was welcome news since the majority of our PPP borrowers are able to use this form. In addition to helping our customers through the PPP process, we also provided assistance to eligible borrowers with payment deferrals on outstanding loan balances of $1.15 billion, or 30% of core loans. Of this amount, approximately $62.1 million of core loans remain on deferral at March 31, 2021, further reduced to $54.9 million as of April 22. Moving now to our quarterly operating results, total core loans, which excludes PPP loans, ended the first quarter at $3.93 billion, an increase of $8.9 million during the quarter. During the first quarter, our staff and lending team booked $325 million of new core loans that funded to a level of $203 million by March 31, compared to the fourth quarter when 311 million of new core loans were generated, which funded to a level of 220 million by December 31. Paid-off core loans were 180 million in the first quarter, compared to 195 million in the fourth quarter of 2020. The 180 million of paid-off core loans during the quarter had a weighted average rate of 5.15%. Carried core loans experienced advances of 97 million at a weighted average rate of 4.93%, and pay downs of 105 million, which were at a weighted average rate of 5.11%. We are pleased to report the weighted average interest rate charge on our new first quarter core loans was 4.63%, which is just below the fourth quarter 2020 weighted average rate of 4.64%, and equal to the third quarter 2020 weighted rate. All in, the overall period end weighted average rate charge on our funded core loans decreased six basis points ending the quarter at 5.02% compared to 5.08% as of December 31, 2020. Over the past few quarters, we have provided information on several loan categories that could have heightened risk due to energy prices and or the COVID pandemic, those being our oil and gas portfolio, our hotel portfolio, and our restaurant and bar portfolio. As of March 31, our oil and gas portfolio totaled $72 million, or 1.6% of our funded loans, with an average LTV of 53.8% on the CRE portion. The hotel portfolio totaled 125 million, or 2.78% of our funded loans, with an average LTV of 60.8% on the CRE portion. And the restaurant and bar portfolio totaled 116 million, or 2.58% of total loans, with an average LTV of 59.2% on the CRE portion. In aggregate, asset quality at quarter end continued to remain in a manageable position. Non-performing assets, including both non-accrual loans and ORE, ended the first quarter down from 63 to 55 basis points of total assets, primarily due to the sale of 8.6 million of other real estate owned during the quarter. Non-accrual loans increased a net of 6.2 million during the quarter from 28.9 million to 35.1 million primarily due to $15.1 million in additions that were partially offset by $4.7 million in payoffs, $2.7 million in payments, and $1.5 million in upgrades placed back on accrual. The largest addition was a $4.9 million hospitality property. The additional $10.2 million increase in non-accruals was from 13 relationships, two of which totaled $6.1 million, and the remaining $4.1 million was from 11 smaller relationships. ORE decreased to $576,000 during the quarter, compared to $9.2 million for the fourth quarter, primarily due to the $8.6 million of ORE sales. Our ORE is now comprised of one residential property. Charge-offs for the quarter were minimal at an annualized rate of three basis points. In terms of our broader watch list, our classified loans as a percentage of total loans increased to 3.91% of total loans as of March 31 compared to 3.61% as of December 31. Criticized loans increased to 5.98% at March 31 from 5.95% at December 31. Specific reserves for individually evaluated loans ended the quarter at 14% compared to 12% at December 31. On the deposit front, we saw an increase in total deposits in the first quarter by $385.7 million from the fourth quarter and up $1.42 billion over the year-ago quarter. The increase during the first quarter was primarily in the non-interest-bearing deposit category, which increased $209.6 million over the fourth quarter and $696.6 million over the prior year as a result of new accounts associated with PPP customers, as well as higher balances in our carried accounts. With that, our non-interest-bearing deposits to total deposit ratio was 35.6% for March 31 compared to 34.2% for December 31 and 30.8% for the year-ago quarter. As previously mentioned, we are seeing signs of economic recovery that is reflected in our level of new core loan originations, downward trend of loan deferrals, and loan payment performance. Recent data from the Texas Workforce Commission shows the Houston area to have created 34,000 jobs in the month of March, well above the historical monthly average of 13,100 jobs. And through March, Houston has recovered 168,400 jobs, or 47% of the jobs lost last March and April. With a healthy loan pipeline, customer acquisition and conversion opportunities in front of us, increased disruption in the banking industry for both business owners and bankers, and an ever-strengthening market position in the eastern region, we are poised to start referring to our organic loan growth prospects with a word that has been used to describe our PPP success, that being outsized. I now turn it over to our CFO, Paul.
spk05: Thanks, Ray. We are very proud to be posting record first quarter net income of $18 million, or $0.89 per diluted share, as compared to $15.9 million, or $0.77 per diluted share in the fourth quarter, and $3.5 million or 17 cents per diluted share in the first quarter of 2020. Our record earnings were despite elevated expenses in the quarter, the most significant of which were approximately $1.5 million in non-recurring asset write-down expenses, most of which relating to a branch closure during the quarter. Pre-tax, pre-provision income for the first quarter was $22.5 million as compared to $24.2 million in the fourth quarter and $15.3 million for the year-ago quarter. Adding back $1.5 million in non-occurring expenses, an adjusted measure for pre-tax pre-vision income would have been approximately $24 million. Net interest income was the key driver to our pre-tax pre-vision earnings power during the quarter, where we saw an increase of $796,000, or 1.4%, to $55.7 million from $54.9 million in the fourth quarter. primarily due to lower interest expense in the quarter and higher revenue recognized on PPP loans, partially offset by lower core loan income. Interest expense decreased by $1 million in the first quarter compared to the prior quarter, and total fee revenue related to PPP loans, which were recognized into interest income during the quarter, was $6.9 million, an increase from $6 million in the fourth quarter. Yield on loans in the first quarter was 5.15% as compared to 5.09% for the fourth quarter and 5.59% for the year-ago quarter. Excluding PPP loans and related revenue, yield on loans would have been 5.06% for the first quarter, 5.07% in the fourth quarter, and 5.59% in the year-ago quarter. Total yield on interest-earning assets was 4.67% for the first quarter down from 4.71% in the fourth quarter and 5.28% in the year-ago quarter, reflecting a changing earning asset mix that includes a higher proportion of securities as well as significant PPP loans within the loan totals. Excluding PPP loans and related revenue, total yield on earning assets would have been 4.54% for the first quarter versus 4.67% in the fourth quarter. Before I move on, I should note that as of quarter end, we had approximately $22 million of net deferred fee income remaining relating to PPP loans. With respect to interest expense, our cost of interest-bearing liabilities continued to decrease in the first quarter to 80 basis points from 93 basis points for the fourth quarter and 168 basis points for the year-ago quarter. The overall cost of funds for the first quarter was 54 basis points versus 62 basis points in the fourth quarter. We expect to see continued improvement in our funding costs going forward, particularly as the CD book continues to reprice lower. So with the help of lower interest expense in Q1, PPP net fee income recognition offsetting a significant shift in the composition of our earning assets, our taxable equivalent net interest margin was 4.19% for the quarter, as compared to 4.14% in the fourth quarter and 4.15% in the year-ago quarter. Excluding PPP loan balances and related revenue, net interest margin would have been 3.95% for the first quarter. Going forward, we feel well-positioned to maintain a relatively strong core net interest margin through optimizing our funding mix and maintaining discipline on loan pricing. That said, excess liquidity and changes to our earning asset composition have potential to be a drag on NIMS, depending on how our core loan growth story plays out. Non-interest income was lower quarter over quarter, decreasing to $1.7 million for the first quarter from $2 million for the fourth quarter, primarily due to a $176,000 loss on the sale of OREA assets. Total non-interest expense increased in the first quarter to $34.9 million compared to $32.7 million in the fourth quarter. The difference is primarily due to increases in the salary and benefits line and the other expenses line. Other expenses include the aforementioned $1.5 million in non-recurring asset write-downs. The efficiency ratio for the first quarter increased to 60.85% compared to the 57.53% from the fourth quarter and decreased from the 68.13% for the prior year quarter. Excluding the asset write-downs, the efficiency ratio for the first quarter would have been 58.29%. The provision for credit losses was $639,000 for the first quarter, and our allowance for loan losses ended the quarter at $52.8 million, representing 113 basis points of total loans and 134 basis points on core or non-PPP loan balances. Bottom line, our first quarter produced an RAA and RATCE of 1.18% and 14.03% respectively. both representing all-time highs. Quarter-end tandem book value per share was $25.75, which makes for an increase of approximately 13.5% since the year-ago quarter, which is something we are proud of as well. All in all, we feel very well positioned to continue to drive franchise and shareholder value in 2021 and beyond. To that end, the company declared another dividend of $0.12 for diluted share on common stock, and re-upped a 1 million share repurchase authorization to replace the authorization that expired at March 31 of 2021. And on the topic of share repurchases, I should note that during the first quarter, we did repurchase 161,000 shares at a weighted average price of $35.11. Reflecting on over a year in a COVID-impacted operating environment, We are very proud to be bigger and better than ever at over $6.4 billion in assets and with capital reserves and liquidity levels at or near all-time highs. Thanks to tremendous PPP success driven by the amazing dedication of the Allegiance team, we've been successful in adding to our market share as Houston's largest regionally dedicated bank. I will now turn the call back over to Steve.
spk02: Thanks, Paul. With that, I will now turn the call over to the operators to open the line for questions.
spk04: Thank you. As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. Our first question comes from David Feaster with Raymond James. Your line is open.
spk08: Hey, good morning, everybody. Good morning, David. Good morning. It sounds like originations were really strong despite distraction from the PPP. Just curious kind of how the pipeline is shaping up and maybe what you're hearing from customers. How much of the production is kind of coming from existing clients that are more confident and willing to invest versus new client acquisition from either new lender hires or the PPP program? I guess the pulse of your clients.
spk11: Hey, thanks, David. Good morning. Yeah, so it was strong that first quarter. You know, I'd say that while we would really like to target maybe a 50-50 of that growth coming from new versus existing, it's probably a little bit more of existing as we work with our established customers. We're still doing this customer acquisition on the PPP side. But the mood is very good, and the pipeline, it levels perfectly. pre-pandemic type pipeline levels. And, you know, when the pipeline grows, that's coming from our field saying, you know, obviously these are the requests that we have in place and the deals that we're talking about. So feel good about that and what the future prospects are for more originations.
spk08: Okay. That's encouraging. And then just how are new hires turning? You guys have always done a great job picking up new lenders, just I guess with bonuses being paid and some disruption in the market, have you seen an increase in conversations and maybe how's the pipeline for new hires?
spk11: Yeah, conversations have picked up. You're right. First quarter is usually a little light because of that, because of the bonus. We did have one lender hire in the first quarter. And if you look back over the past four quarters in a COVID environment, we had six producer hires and one, you know, out of our homegrown, out of our analyst pools for a total of seven. So, you know, given the circumstances over the past four quarters, we feel pretty good about being, making those additions. But yeah, the conversations are picking up and we do see some disruption and we'll, you know, there's kind of two forms of disruption. One is the, what happens in the M&A world. The other one is as our, you know, in our space, kind of in that business banking space, as the competition continues to to change their rules of what business banking means those that's disruption for customers and bankers. And we, we, we have those conversations and hang around the hoop for that. Okay. That's great.
spk08: And then, you know, it's encouraging to hear the new loan yields in, in the originations. It sounds like pricing might be dropping in here. I guess, do you think that's a function of mix or just how is pricing trended more recently? Has the steepening of the curve, allowed for better pricing at all, and do you think maybe this shift towards larger credits that you talked about may impact new loan yields, or do you think you'll still be able to get these premium levels of rate despite going upstream a bit?
spk11: Well, I mean, we feel good about the past three quarters of that rate on the new production hanging around this 463, 464, but it's still very competitive. So, you know, I... Not sure about hitting the floor there, but we're really pleased with the last three quarters and where things landed.
spk02: Yeah, and this is Stephen. In terms of the larger loans, it's really we're looking at larger loan relationships. We have a number of – a lot of customers that have multiple loans, multiple projects, and if you restrict that to a certain – maximum relationship size, then you're going to, you know, miss the next deal. So we're just kind of opening up that door a little bit. It's not appreciably larger loans so much as it's more opening the door for bigger relationships. Okay.
spk08: That's great, Colin. Thanks, everybody.
spk04: Thank you. Our next question comes from Brad Millsaps with Piper Sandler. Your line is open.
spk09: Hey, good morning. Good morning. Good morning. Ray, I think I heard you correctly say you've added 5,800 customers over the last 12 months, which is a tremendous number. It looks like thus far, those have really translated in to deposit balances. I know this is probably tough to handicap, but how much loan growth do you think you've pulled forward with your guys' participation in the PPP program? Just trying to get a sense of when some of this production you're seeing can actually you know, translate into, you know, actual loans outstanding on the books?
spk11: Yeah, great question. You know, when you look at the 4,000 of the PPP, I mean, as we try to penetrate that and what we call convert those to full customers, I mean, we're seeing, you know, low, you know, maybe a quarter of that at this moment has something other than the PPP loan. So, I mean, it's a process to work through and generate additional business, and we're working on that. So, I mean, I think it's, we'll pick up gains every quarter. And as we, you know, we have several touches with these customers, not only on the origination side, but on the forgiveness side. And then a number of the second round were to our existing customers from the first round. So we have a number of touch points plus an effort to convert these. So I think it's just going to be incremental over the next few quarters. But we have, you know, optimistic about what's ahead of us with that conversion. opportunity.
spk05: And I'd like to note, PPP customers are getting liquidity through the PPP loan program, which stands recent, has an impact on their loan demand and how they may be positioning. So when they're ready for their next loan, it could involve some lag time, being that they're the beneficiary of this PPP program in the near term and in the recent past. Yeah, for incremental loans.
spk09: Sure, sure. And so, Ray, would you say that, you know, maybe, you know, growth's kind of low single-digit type rate kind of in the near term, and then hopefully maybe by next year you guys can start ramping back up closer to what you've done historically?
spk11: Talking all in on the whole growth on the entire loan?
spk09: Yeah, XPPP. Yes.
spk11: Yeah, core loans. Yeah, I think that. Okay. Okay.
spk09: And then just curious kind of, you know, how you guys, you know, are thinking about, you know, resolution on, you know, some of the loans that are still having issues coming out of the pandemic. I think it sounded like kind of criticized, classified, and stabilized just under 6%. Just kind of wanted to get a sense of kind of how you guys are thinking about, you know, potential losses as you kind of get in the back half of the year and how that might relate to, you know, your, you know, how you're approaching, you know, the level of reserve and the provision going forward?
spk02: Well, we obviously feel like, you know, we've got, we have them all identified properly and we assess them every quarter. You know, we've experienced very good low charge-offs at this point. And we, again, they're probably not a, a way to extrapolate that out into a quarter-by-quarter projection. But we feel like we're in the right place, you know, with those that were participating with, you know, deferrals and their underlying business model getting better over time, such as, you know, like local hotels and so forth. So I think we feel pretty good that it shouldn't be outsized in terms of any kind of experience for, you know, problem assets getting worse. I really feel like it's actually more on the getting better from here. Obviously, a lot depends on the pandemic and so forth.
spk05: And I might note that anything that merits individual evaluation under CECL, we have evaluated and considered in our provision and allowance credit loss.
spk03: Yeah. In addition to that, this is Okan, I'll add the fact that we're seeing a deceleration, significant deceleration of downgrades in our portfolio and actually also experiencing in a number of instances upgrades. And that's very pronounced with our high-risk portfolio as well where the That portfolio is hanging on better than expected originally.
spk09: Great. And just a final question for Paul. Excluding the branch write-down, that's $33 million or so of expenses this quarter. Would you think that's a pretty good run rate, or was there anything else that you may have benefited from, maybe FAS91-related? from PPP in one queue that might cause that to go up appreciably, or is 33 million or so a decent run rate?
spk05: I think 33 handle is a decent run rate. I might hedge to say 33 and a half, give or take a half is where you'll see things. There's some level of noise in the second quarter. We'll still be paying for some of the staff augmentation. that was used to kind of really put our shoulder into the PPP effort, and we'll now pivot a little bit more into the forgiveness effort. So there's still some things hanging out there, but nothing, I think, here in the zone.
spk02: Yeah, and, you know, things like record earnings bring record bonus, kind of profit-sharing accruals, things of that nature as well. Great. Thank you.
spk04: Thank you. Our next question comes from Brady Gailey with KBW. Your line is open.
spk06: Hey, thank you. Good morning, guys. Morning. So I know a creatable yield has been a fairly small number for you guys recently. I think last quarter it was only about $300,000. Did that remain fairly small and immaterial this quarter?
spk05: Yes, getting more immaterial every quarter, which is really why we thought we might economize
spk06: here in our first uh first quarter of 2021 um it's it's weaning up weaning away uh towards nothing okay great um and then when you look at the buyback it was great to see y'all active in the quarter it looks like you bought stock at around 135 times tangible um you know if you look at the stock now it's now you know 1.5 to 1.6 times tangible so it's not as cheap so you still have a pretty good appetite to execute on the buyback despite the stock price being a little higher?
spk05: Price is one of many considerations that we look into when we're evaluating the share repurchases, but more so than ever, our number one use of excess capital is core loan growth. Secondary to that, we want to maintain a high level of flexibility for potential M&A activity. And then, of course, there's pricing dynamics that drive a little bit of the volume-based appetite around the share repurchases. So a lot of moving parts, not intimidated too much by the current share price, but more focused on executing on the most accretive ways for us to put that capital to work.
spk06: And then lastly for me is just on, you know, how Allegiance fits into the M&A landscape. You know, it's been a little quieter recently, in Texas than I would have thought. I know we saw Bancorp South and Cadence, which was a big deal in Neil's backyard. But how do you think Allegiance fits into M&A? Is it you guys would consider acquiring some smaller, more downstream targets? Or do you think it's more something either transformational like an MOE type of transaction?
spk02: Well, it's good to see the larger transactions out there. And, of course, inside the pandemic, it's probably been more appropriate to do a life-size transaction like that because of the kind of the risk profile of the uncertainties. Coming out of the uncertainties, though, I think it opens the door for smaller transactions. You have better currency. So I'd say that we're actively assertive right now in terms of an M&A profile or posture. We are probably still thinking, you know, we would think across the board, but acquisitions would be certainly welcomed around here, smaller, medium-sized. I think it could make a difference. We're working hard on the organic side, but we're also – Stay in touch with the community, bankers around, and probably know that community as well as anybody through all of our contacts. Great. Thanks, guys.
spk04: Thank you. Once again, ladies and gentlemen, if you wish to ask a question at this time, please press star then 1 on your touchtone telephone. Our next question comes from Matt Olney with Stevens. Your line is open.
spk10: Thank you. Good morning. PPP, I want to circle back on that, $22 million of unamortized net fees still as of March 31st. I'm curious kind of what the crystal ball says about how those will be recognized over the next few quarters.
spk05: As are we. Predicting the future is one of those things. We think the second round is going to go faster than the first, but we do believe recognize that there's potential for stragglers as it relates to the way the forgiveness process is ultimately going to play out. So tentatively, the way we modeled it for our own purposes is around 70% or so being forgiven by the end of the year. It could be higher, but we feel that it's probably right for us to think about it in that context.
spk10: Okay. And then circling back on some commentary that Steve made earlier, you mentioned a few times some larger loans. I'm curious, I mean, it's all relative, I guess, in terms of, you know, larger to Allegiance wouldn't be larger to other banks, but is that more of a, would you call it a traditional middle market strategy or is it just, you know, a little bit larger on the small business loan side? Any, any numbers you can put behind that? Thanks.
spk02: I'd say larger on the small business side is, is the, uh, kind of the right way to put that. You know, we just, we just don't have, uh, loan relationships that exceed 20 million, uh, very few over 10. Uh, And, you know, given our asset size and loan footings, I think it's time that we're willing to take a look at that more closely. A lot of opportunity there. You know, gradually, I think it just gives us a little bit more raw material to look at that number one use of capital, and that's loan growth. And we're really focused there.
spk10: And to clarify on that, is it, going to be new producers and new individuals that are doing this, or is it just looking at the existing team and existing customers that you were willing to grow at larger than before?
spk02: Well, you know, our existing team has, and we can calculate it different ways, but, you know, close to 800 million of capacity. And when you look at the lenders that are below our kind of average norm, so we've got a lot of capacity in our current lending staff to build portfolios, We have a lot of growth continuing, though, on those 85 or so percent of our lending staff that are at or above our normal portfolio size. And they continue to grow their portfolios. But when we tell them that we don't want larger loan relationships, their customers go other places because they're continuing to do projects. And this is historic. So... we're just kind of giving them an opportunity to go back to those customers that they can actually add another loan or take another loan back, that type of thing. So it's still smaller loans, but we believe that it just gives the entire lending staff the opportunity to grow that book. It's not so much for new lenders or certainly don't want it to be interpreted as us going to the middle market.
spk10: Got it. Okay. Thanks for the clarification. That's all from me.
spk04: Thank you. Our next question comes from John Rodas with Jamie. Your line is open.
spk07: Good morning, guys. Good morning. Paul, maybe just, I guess I missed this, but on the PPP loans, you said $22 million remaining. What was in the first quarter?
spk05: We recognized in fee income approximately $6.9 million in into yields during the first quarter. That's net fee income. We've got a slide on PPP that details this in the investor presentation. Total revenue is a little higher if you include the interest.
spk07: That's it for me. Thank you, guys. Nice quarter.
spk04: Thank you, and I'm currently showing no further questions at this time. I'd like to turn the call back over to Steve Retzel for closing remarks.
spk02: Very good. Well, again, thank you, everybody. I appreciate your time and interest in the bank, and we look forward to speaking to you again next quarter, and thank you very much.
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