This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk01: Greetings and welcome to FIRST Foundation's first quarter 2021 earnings conference call. Today's call is being recorded. At this time, all participants have been placed in a listen-only mode and the floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press star 1 on your touchstone phone. If at any point your question has been answered, you may remove yourself from the queue by pressing the pound key. We ask that you please pick up your handset to allow optimal sound quality. Speaking today will be Scott Kavanaugh, First Foundation's Chief Executive Officer, Kevin Thompson, Chief Financial Officer, and David DiPello, President of First Foundation. Before I hand the call over to Scott, please note that management will make certain predictive statements during today's call that reflect their current views and expectations about the company's performance and financial results. These forward-looking statements are made subject to the Safe Harbor Statement included in today's earnings release. In addition, some of the discussion may include non-GAAP financial measures. For more complete discussion of the risks and uncertainties that could cause actual results to differ materially from any forward-looking statements and reconciliations of non-GAAP financial measures, see the company's filings with the Securities and Exchange Commission. And now I will turn the call over to Scott Cavanaugh.
spk04: Hi, good morning and thank you for joining us. We would like to welcome all of you to our first quarter 2021 earnings conference call. We will be providing some prepared comments regarding our activities, and then we will respond to questions. Our earnings for the first quarter were 22.4 million or 50 cents per share. This represents a 69% increase over the first quarter of 2020. Total revenues were $66.1 million for the quarter, a 19% increase from the first quarter of 2020. Our tangible book value per share ended the quarter higher at $13.84. We declared and paid our first quarter cash dividend of 9 cents per share. As many of you have heard me say, our business model is designed to help clients wherever they are in their financial lives. And today's results indicate that our model is working very well across the diverse and dynamic markets we serve. During the quarter, as we previously announced, we expanded into Texas, which included the move of our principal executive office, as well as the addition of new employees to our team in the Dallas-Fort Worth Metroplex. We believe this move solidifies our positioning as a regional commercial bank. We are seeking further expansion in the area, including building out our team, having a retail branch presence, and eventually adding trust powers in the state. There is an enormous opportunity for growth in Texas, and we are excited to be here. Our operations in California, Nevada, and Hawaii will remain unchanged. We think our regional presence across all four states that we operate in is a great fit for the products and services we offer. We are in areas that have great opportunities for everything from wealth management to lending to business and personal banking. Related specifically to the profile of our bank, We had record loan originations of $765 million for the quarter, with 53% of those originations coming from CNI. MPAs remained low at 24 basis points for the quarter. We continue to have a well-balanced loan portfolio that Dave will touch on in more detail later on in the call. Deposits increased by $322 million for the quarter and our loan to deposit ratio was 90.1% at the end of the quarter, driven in part by our ability to continue to attract high quality commercial clients. All of this speaks to the strength of our deposit team. Over the last year, our core funding has increased from 73% to 98%. We continue to reduce our broker deposits and we will not have a need for a home loan bank borrowings for the foreseeable future. Our wealth management and trust business continue to provide meaningful contributions to the success of the firm. The wealth management business is continuing to gain scale and the combined pre-tax profit margin for trust and wealth management was 16% for the quarter. We generated 101 million in new assets under management for the quarter, and Om ended at record levels, eclipsing $5 billion. Our private wealth management business serves our clients with high touch and sophisticated investment and planning solutions. They, along with our trust department, were very instrumental in retaining and attracting new clients during some volatile times last year and have experienced a great start to this year. our new business pipelines across our entire platform remain remarkably strong as we continue to attract new clients to all facets of our offering. And with our recently announced strategic investment in the institutional Bitcoin provider, NYDIG, we are seeking ways to add Bitcoin-related solutions to our platform. And a first such partnership of its kind, this strategic investment helps lay the foundation for building the infrastructure required to offer safe and reliable access to digital assets. We believe cryptocurrencies and blockchain technology will play a critical role in the future of finance, and we are pleased to be the catalyst to bring digital assets into traditional financial services. There are many ways we can participate in this important asset class, and we are very excited about what we will be able to offer our clients. With the support of our partners, NYDIG, and our processing provider, Fiserv, we are looking to bring digital assets into the forefront. Before I hand the call over, I want to take a moment to thank all of our employees for their extraordinary efforts over the past quarter. We have some of the best employees in the business, And I am also very grateful to our clients who entrust us with their financial needs. Now, let me turn the call over to our CFO, Kevin Thompson.
spk06: Thank you, Scott. Earnings per diluted share of 50 cents in the first quarter is flat to last quarter and a 47% increase over first quarter 2020. As a result of this momentum, our tangible book value per share increased 3% to $13.84 in the quarter, The return on assets was strong at 1.25% with a return on tangible equity of 14.9%. The net interest margin contracted three basis points to 3.16% in the quarter as a result of high average cash balances from the success we have had in increasing core deposits. For the month of March, our NIM increased to 3.24% following the deployment of excess cash through our pay down of higher cost funding sources and growth in loans in the second half of the quarter. We maintain discipline in loan production, with the average yield on loans dropping just two basis points to 3.99%. And we continue our efforts to lower deposit pricing, bringing the cost of deposits down from 41 to 31 basis points. With the strong C&I loan production and increasing core deposits over the past several quarters, our balance sheet is trending less liability-sensitive. We recognized 1.2 million of PPP fee income, or 20% of the total net PPP fees, bringing the total fees realized to 76% from the 171 million of the first round of PPP loans funded. Excluding the effects of PPP, the NIM would have been 3.13% for the quarter. Credit metrics remain strong in all our loan portfolios, and the allowance for credit losses for loans decreased to 45 basis points of total loans. This was primarily a result of the improvement in the economic scenario we utilized for the CECL calculation. We had net recoveries of one basis point, and non-performing assets remained low at 24 basis points to total assets. The allowance for credit losses for investments increased by $1.6 million as a result of the lower interest rate environment and faster-than-expected prepayments that negatively impacted the projected cash flows on our interest-only securities. Asset management fees were strong with revenues of $8.3 million, and our advisory and trust divisions achieved a combined pre-tax profit margin of 16% in the quarter. Assets under management at FFA increased to $5 billion, while trust assets under advisement at FFB increased to $1.2 billion. Our non-interest expense increased due to merit increases that were effective at the beginning of the year and annual bonus and commission payouts in the first quarter. The efficiency ratio for the quarter was 51.5%. With strong expense management and the investments we have made in our infrastructure, we are seeing growing benefits from operational leverage and efficiencies. I will now turn the call over to David DePille.
spk05: Thank you, Kevin. It was indeed a very successful start of the year for First Foundation. As Scott mentioned, we originated $765 million of loans in the first quarter, a record for us. Our commercial business lending accounted for over half of our originations in the first three months of the year. We funded $406 million of CNI loans, which was also a record for us. Forty-eight percent of our CNI loans in the quarter were adjustable revolving lines of credit, which is a strategic move for us. As we look to shift the balance sheet to more rate-neutral from liability-sensitive, the remaining CNI originations were comprised of $108 million of commercial term loans, $69 million of public finance loans, $24 million of equipment finance loans, and $9 million of owner-occupied commercial real estate loans. Included in commercial term loan originations is $45.8 million of the second round of PPP fundings. we continue to focus on high-quality loans with solid borrowers. As a percentage breakdown, the composition of our loan originations during the quarter was as follows. C&I, 53%, multifamily, 42%, single-family, 5%, and 1% and other. We accomplished this without changing our high underwriting standards, and the loan pipeline remains strong headed into the second quarter. In addition, it is worth mentioning that even with record loan originations in the first quarter of $765 million, we achieved a weighted average rate of $355 on originations, excluding PPP compared to $361 in the fourth quarter, only a six basis points to point. This continues to demonstrate our ability to achieve record volumes while still defending the yield on our portfolio. As of March 31st, Our loan portfolio balances consist of 43% multifamily loans, 26% commercial business loans, 5% non-owner-occupied CRE, 15% consumer and single-family loans, and 1% land and construction. Of note, our commercial business loan balances increased approximately 25% year-over-year, which reflects our continued focus on commercial banking. As mentioned, our deposit business also experienced a strong quarter. with an increase of $332 million during the first quarter of 2021 to end the quarter at $6.2 billion, which reflects a 14% increase compared to the first quarter of 2020. Supposit growth during the quarter of 2021 was primarily driven by an increase of $527 million, or 32%, in non-interest-bearing demand deposits, largely attributed to our Commercial Deposit Services Division. an increase of $141 million, or 16%, in interest-bearing demand deposits primarily driven by our retail branches. Our non-interest-bearing deposits now account for 35% of our total deposit balances. The $332 million growth in deposits during the first quarter of 2021 included increase in our commercial deposit service group of $419 million and retail branch deposits of $45 million. Of the $500 million 11 increase in core deposits, $491 million, or 96%, were attributed to commercial business deposits from both our commercial deposit channel, serving complex treasury management, commercial customers, and from our business banking customers served by our retail branches. Commercial deposits were 70% of total core deposits as of March 31st, and as Scott mentioned, our core deposits now sit at 98% of total deposits. All the success in this quarter could not have been achieved without the great team we have in place. I am so grateful for their dedication and hard work. At this time, we're ready to take questions. I'll turn it back to the operator.
spk01: The floor is now open for your questions. 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. Thank you. Our first question is coming from Steve Moth with B. Reilly Security.
spk04: Good morning. Hey. How are you doing?
spk03: Doing good. Thanks. Hope everybody's well. You know, nice quarter here in terms of loan originations. And you guys indicated in the release that the pipeline remains strong. Just kind of wondering if you'd give us an update in terms of your expectations for the full year and kind of, you know, the underlying mix. within the pipeline.
spk04: Dave?
spk05: So I would say the first quarter will probably, at this rate, probably be a low point for originations based on current pipelines. So I would expect growth from here. That depends certainly on how the year develops as we go forward. But current pipelines would indicate that we'd have a stronger second quarter than the first. And I would say it's across, again, all books of business. We'll probably have a little more disproportionate in multifamily in the second quarter compared to the first. So I would expect that to probably be over 50% as it traditionally has been. But CNI and multifamily are kind of neck and neck. But again, from... Just a general trajectory, every aspect of our business pipelines are at levels we haven't seen historically. Part of that, Steve, is we continue to make investments in our sales teams and support for a higher growth level. As we've mentioned in the past, we're trying to step up to a new level going forward. long story short, I would say first quarter, uh, probably would be the low point for the year.
spk04: Yeah. Yeah. That's helpful. So then as we just think about full year origination, I think the previous guy was caught 2.9 billion. It's kind of curious, you know, it sounds like going to be North of 3 billion. Yeah.
spk05: I think you could just take the current quarter run rate and extrapolate and you should get a higher number than we previously indicated. But, uh, we would be comfortable with that range in the $3 billion plus. Okay.
spk04: And then in terms of just low yields here, an update on loan pricing and how you're seeing things in the market these days.
spk05: It's interesting. A lot of what we funded out in the first quarter related to previously quoted loans, you know, it takes a while before they – go through the pipeline, and most of those have rate locks. We are seeing rates in the market stabilize. Our expectations are our average loan yield should be approximately the same going into the next quarter. Part of that is mixed, too, Steve. Since we're doing a lot more adjustable-barrier lending on the CNI side, trying to reposition us for potentially a higher short end of the curve over time. Again, I think the average a lot depends on the mix, the relative mix. But pricing seems to be relatively stable since most of us have been pricing on floors. And, you know, the longer end of the curve is really where we've seen the movement. We don't typically land on that end of the curve. So, you know, I would say we expect it to be consistent where it's at today.
spk04: Okay, that's helpful. And then just in terms of funding costs here, you know, we continue to see a good leg down in terms of deposit costs.
spk03: And since you basically have no borrowings at quarter end, kind of curious as to where deposit pricing is today and how we should think about that. And maybe any trends you're seeing in April for deposits.
spk04: I mean, the pipeline itself remains very, very strong. Frankly, we have to keep it bridled a bit because, as you saw, NEM had a bit of a drag due to the excess cash that we had. And as you also saw, it got deployed or a large majority of it got deployed in the month of March. I would say that most of the call saves that we've seen, you know, have been factored in at this point. There's probably some minor adjustments here and there. But if deposit strength continues at the toward pace it's been, then we will probably have to reduce rates a little bit more.
spk06: Scott, I agree. And I'll just add, you saw that our cost of deposits was 31 basis points in the quarter. At the end of the quarter, the last month in March, it dipped down to about 26 basis points. So to Scott's point, there is still some room as they're going down now. And probably that trajectory will continue slightly. But at a certain point, I think those will stabilize throughout through the year until we start seeing eventually a the yield curve change and some deposit beta down the road.
spk04: Great. All right. Thank you very much. Next quarter. Thanks, Steve.
spk01: Our next question is coming from David Feaster with Raymond James.
spk03: Hey, good morning, everybody. Hi, David. Good morning. I wanted to start on the crypto partnership. I think this is pretty neat. Just hoping you could maybe give us some details on the investment, the timing maybe of when you think it could be up and running. And ultimately, what do you expect to see in terms of the benefits from this partnership, whether it be AUM growth and wealth management, deposit growth that can help fund the growth engine, fee income opportunities? Just curious what you expect to see from that partnership.
spk05: Kevin, you want to start with that? We would say all of the above.
spk06: Yes, and we haven't disclosed the exact amount of the investment, but we did make an investment with NYDIG, which you may be familiar with, a really great player in this market. They're really at the forefront from a regulatory and security perspective. in the Bitcoin world. I personally, as a Bitcoin investor, a hodler, as we're called for many years, have always been very impressed with this company. We're very excited to work with them and to bring some of these, this opportunity to bring Bitcoin into the traditional banking world. And yes, all of the above, we're exploring the different opportunities that we could pursue, both from an AUM perspective. A lot of this would probably be increased fee-based income, Again, as someone who holds Bitcoin, there's an awkward interaction between traditional banking and these Bitcoin providers within the economy. And it's getting better over time. But I think a lot of people really want to work with their traditional bank that they have a lot of trust with and operate in that traditional banking environment. and have much more easy access to these types of investments to move between fiat and Bitcoin currencies, both within the banking side of the world as well as in the wealth management side of the world. Your other question is the timing. We're not exactly sure yet. This will take time to put these rails in place as we work with NYDIG, as we work with Fiserv to build this on our traditional banking model and do this in a really secure way for our clients.
spk04: To be quite honest, we couldn't have two better partners. I'm truly excited.
spk03: That's great. Yeah, it's pretty exciting. And then, Moby, could you just give us an update on the Dallas expansion? How hiring's trended? It sounded like you've already picked up some folks there. And just how the pipeline's been. Have you started to see any contribution from the region yet? And where are you having early success and how's reception been in the region? Are you seeing more opportunities on the multifamily or the core commercial business banking? Just curious, any updates there?
spk04: Well, initially, the hire was in the commercial real estate side of things. It's a bit early yet. I've only been here for about a month or five weeks. But I would say, you know, we've been fortunate in that some of the local periodicals, the Dallas Business Journal, the Dallas Morning News, Houston Business Journal have carried articles, and we've gotten a very warm reception. from a lot of people, a lot of curiosity about our expansion plans. So I'm very optimistic about the opportunities here. I would say that you should probably expect expenses more than a lot of production this quarter. But I think in the outer quarters, you'll start to see some loan production ramping up. You know, frankly, some of our staff here is just getting their feet grounded and starting to get out there. But, you know, in talking to them, we've gotten a very warm reception from some of the borrowers as well.
spk05: The only thing I would add, Scott, is, you know, we have had some traction on the CNI side, and we will have – fundings in the second quarter related to CNI. But from getting our production people in place, we're adding underwriting staff around them. We want to make sure that we don't have any false starts. So to Scott's point, we're building the infrastructure first, taking a very methodical patient approach and making sure that we can meet the needs of clients out there. But we already do have some CNI business that should fund out in this quarter. Yeah. Go ahead.
spk04: No, I was just going to say, I still believe on the M&A front there's opportunities here. Obviously, it depends on how our stock trades relative to other folks, but we continue to have you know, discussions out there, and I'm sure something will come up at some point in time. So I'm still very optimistic about that as well.
spk07: That's great.
spk03: And just maybe following up on the CNI commentary, it was great to see the growth that you guys put up in the quarter. Just curious if you could give us some commentary on the trends you're seeing and where you're seeing demand on the commercial term loan side and, you know, kind of what's driving that growth that you're seeing.
spk05: It's kind of interesting. It's a world that's kind of defined with the haves and have-nots right now on the CNI side. So, What we've typically seen is the smaller companies that may be struggling due to regional COVID constraints or other aspects to their business that I think have affected more small community banks. We've tended to lean towards mid-market and above, or companies that have durable balance sheets, diversified business plans, had lots of liquidity going into the crisis and have done very well through the crisis. So it could be anywhere from, you know, food manufacturing to heavy equipment to you name it. It's been across the board. We're just seeing, you know, very, very, very strong companies come to market to try to take advantage of you know, this environment that we're in today of lower interest rates and seemingly credit spreads on the C&I side have tightened up to the point where it makes a lot of sense for them to continue to expand their businesses. So, you know, we're tending to look at larger credits for well-diversified companies. Many of them are regional as well. You know, certainly we've had some reach into Texas for good quality companies. And then we tend to focus on SBA and small balance to kind of bolster the local communities to help on the community development side. And then, quite frankly, the municipal lending space has been very robust. There's a lot of, what we would say, communities that may not have access or need for, you know, $100 million of revolving debt, and they're really looking for, you know, smaller pieces in the $5 million to $10 million range. And that's a huge market on the municipal side. Not that we don't do some larger ones, but that's tend to where we found the most demand. And again, our equipment finance group is, you know, hitting record levels as well. You know, it's really been across all channels. It's been now, I think, six years of a focused effort to kind of reposition the company's focus to more diversified lending. We've been very patient in our approach to that. And I think given our metrics through the pandemic in CNI, it's proven that you know, a good diversified book has served us very well. But it's been across, I would say, every aspect of our business. We've de-emphasized a little on the smaller business banking that you typically see in the commercial banking space for community banks, just because the demand there has been for more distressed companies. And we're taking a more patient latency attitude around
spk04: Well, quite honestly, most people elect to go through the PPP route than through a traditional bank route.
spk05: Well, that's true. If you can get money for free, it's much better than paying us for them.
spk06: Okay. That's a great call. Thanks, everybody.
spk01: Our next question is coming from Gary Tenner with DA Davidson.
spk04: Thanks. Good morning. Um, Hey Gary. Hey Gary. Just wanted to ask a little bit more on the kind of expense outlook. The last couple of years, early since 2018, you all have done a great job of kind of holding expenses flat, if not lowering them, you know, and kind of generating positive operating leverage. Obviously a bit of a step up this quarter. I'm sure, you know, there's obviously a seasonal component there, but as you, you know, talk about investing, you know, people and sales teams, plus the Texas expansion, can you talk about maybe just some guideposts in terms of,
spk03: operating expense for the year or for the next quarter or two?
spk04: I'll start, and then Kevin and Dave, you guys can fill in. But the reality is we were kind of sitting around the table as we were, you know, planning for this year, and, yes, we decided we were going to step up a little bit. Earlier or late last year, early this year, CPRs were running fairly hot. We feel like that it was time to try to step up on the loan demand. So we've been fortunate. There's been some acquisitions that have taken place or steps that other institutions have done that have created value or opportunities, I should say, for us. So, you know, there are a couple of teams that we're either currently working on or have already brought on that maybe haven't fully been announced yet. But our goal is to continue to expand. Probably the teams on the expansion side will probably be more on the CNI side than anywhere else. And, yes, there was some large bonuses and other things that took place that typically are seasonal. So I'll leave it there and let Kevin pick up.
spk05: Well, the way I would probably characterize it, Gary, is this year, as Scott mentioned, we are making some strategic investments not only on the sales side but also on the support side to make sure that we've got continued good customer experience through the entire process on all aspects. What I would expect is even with a little bit of higher first quarter because of the seasonality, you know, this year looks like about 50% percent efficiency overall with those investments. But really looking into next year, you'll see that operating leverage really kick in. So, you know, it's a little bit, again, of a front loading for growth. But at 50 percent, we really feel that's, you know, still fairly optimal. But I would expect next year to drop, you know, a level up.
spk04: So our employee count Our employee count, Gary, has remained at about plus or minus 500 people for the last several years. And I would suspect that we'll be closer to 550 or maybe even a little bit more between the operational side that Dave just talked about and the other teams. So hopefully that gives you a little bit of guidance on the employee count.
spk06: You know, we're experiencing strong organic growth. We expect to continue that. We'll have to add resources to match that over time, but we'll still be able to add resources at a lesser rate than we're able to take advantage of operational leverage over time.
spk04: Okay. I appreciate the caller. And then just on PPP, I think you gave pretty much all the numbers needed there, other than just wondering if you could – confirm the average PPP loans outstanding for the quarter? I don't think I had that number.
spk06: It would have been, so we started the quarter at $145 million, and we ended at $136 billion. So we added new PPP and had some payoffs during the quarter as well.
spk04: Okay. I mean, for average purposes, I've seen the ads were mostly in March and the payoffs were February and March. Is that reasonable assumption?
spk06: Ads come in February timeframe. So I'd kind of just take an average of those two. It was around 140 million for the quarter.
spk00: Okay.
spk06: The average.
spk07: Okay. Fair enough. Thank you. Other questions were answered. Thank you.
spk01: And again, if you would like to ask a question at this time, simply press star, then the number one on your telephone keypad. Our next question is coming from David Chiaverini with Wedbush Securities.
spk07: Hi, thanks. A couple questions for you. Starting with deposits, can you talk about the deposit outlook? Should we assume that deposit flows should be similar to the strong pipelines that you've talked about on the loan side?
spk04: Yes. As I mentioned earlier, I almost feel like we're having to bridle discussions of bringing deposits on too quickly. So we do have a fairly significant round of deposits coming in around March or excuse me, May 1st. You know, we've got several relationships that are requesting either new relationships or existing relationships to bring on more. So I'm pretty convinced that we can stay somewhere under 100% loans to deposit ratio, even with our strong funding or loan base.
spk07: Great. And then on securities, I see how – You know, you had a pretty strong quarter for loans, and it looks like the securities portfolio came down a little bit sequentially. Can you talk about how we should think about securities, the securities portfolio, on a go-forward basis in light of the strong pipelines on the loan side?
spk04: Yeah, we try to average, and this is, you know, always a discussion with our primary regulators, We try to stay somewhere around 12% on balance sheet liquidity. You know, as you suggested, the prepayments on our securities have been, you know, a little bit brisk. They're slowing down. But we are going to have to add some securities over the next several quarters. And, you know, quite honestly, depending on what we tend to put it into, That might put a little drag on NIM overall. But I would still say our loan fundings are going to be high enough that it won't be that significant. But we are going to have to add to the portfolio. If you just look at the composition of the securities portfolio, we've always been very conservative. So we have relatively few municipal bonds. Most are mortgage-backed securities, either our own bills or pass-throughs that we've purchased in the past. And so we're going to have to continue to add to that and in some form or fashion. You know, we have very little sub debt. We might buy a little bit of that, but probably not inclined to do much of it.
spk07: Got it. That's helpful. And you answered this a little bit, the net interest margin question. You said that, you know, it could be these securities purchases could be a little bit of a drag on NIM, but overall, how should we think about the NIM on a go-forward basis?
spk04: I think NIM should stabilize basically as long as we can control the excess liquidity. I think Dave was suggesting that the loans that we're funding out are pretty stable right now, and the loan yields should be stable. I think what you're going to, if you also read between the lines with Dave's comments, Our loan fundings for the quarter are going to be higher than what they were this quarter. So, you know, let's say we add $100 million or so of securities over, you know, the next several quarters. It just won't have that much of an impact on them. It will have a modest impact, but not much. But, you know, between having our funding costs continue to decline just slightly and and our yields staying the same, but yet funding more loans on the balance sheet, you know, we believe that NIM should be pretty stable.
spk05: Yeah, the securities yield is probably the biggest impact over time. As we grow and we carry more securities in this environment, it will have an impact. But, you know, I would say over time where we're at at the end of the quarter is probably a good –
spk04: you know, what we've averaged for the quarter, that would give you kind of the effect of a liquidity drag over time versus... I mean, in what was, you know, shown or demonstrated on the press release, you know, NIM was, what, 316, but the month of March was 324. I mean, it shows that, you know, I guess carrying cash is probably the biggest detriment to NIM. Otherwise, it would have been much stronger than... what it was, what it actually was.
spk07: Very helpful. Thanks very much.
spk01: Our next question is coming from Bob Schoen with Piper Sandler.
spk02: Good morning. Hi, Bob. I just wanted to talk about future provisioning and reserve going forward. I think you did about a million in releases for improving economic forecasts. Should we kind of see the level of provisioning kind of stay the same as you provide for growth and assume kind of a relatively stable reserve? Or is there room for this to drift lower if we get further improvement in the economic forecast?
spk05: We're modeling the former, which is if you just take our general forecast, Reserve levels at 45 add growth to it. That's kind of what we would model as additional reserve requirements. Is there room for improvement? Yes, probably. But it's hard to predict given the CECL modeling out there. And it could, you know, depending on the funding mix, more C&I has higher reserves than multifamily. So we just kind of forecast 45 base points against the growth.
spk06: As you know, you know, CECL is a very sophisticated calculation involving economic scenarios and mixed with a historical view. And so it's hard to know at this point. At this point, we see the economy kind of continuing as is. So the 45 basis point would probably be sufficient over time. But we'll advertise as that changes.
spk02: Okay, thanks for that. And then last one for me. In your prepared remarks, you mentioned about seeking further organic expansion in the Dallas area. Could you maybe give us an update on your appetite for M&A in the area and maybe any color on how those conversations with potential partners have been going?
spk04: In terms of, you know, updates with other people, the answer is I probably, you know, can't really speak to that. But I would say that very much so. We would like to have an M&A deal in the Texas marketplace, specifically the Dallas-Fort Worth Metroplex is where I'm hyper-focused right now. As you know, there's more banks in Texas with the exception of Illinois, and so I remain optimistic, and especially if our stock can continue to trade at you know, premium levels, then I feel fairly strongly that, you know, something will come up at some point in time.
spk02: Thank you. All my questions have been answered.
spk01: This concludes our allotted time for question and answer session. I will now turn the call back over to Mr. Scott Cavanaugh for closing remarks.
spk04: Thank you again for participating in today's call. I'm very proud of how we have started the year. All of our business lines are doing exceptionally well, as evidenced by the results we reported. There are great opportunities related to our geographic expansion to the Dallas-Fort Worth Metroplex, and I'm very excited about our efforts related to Bitcoin and digital assets. As a reminder, our earnings report and investor presentation can be found on the investor relations section of our website. Thank you and have a great remainder of your day.
spk01: This concludes today's conference call. Thank you for participating. You may now disconnect.
Disclaimer