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spk00: Good morning and welcome to the Origin Bank Corp, Inc. First Quarter 2022 Earnings Conference Call. Please note this event is being recorded. I would now like to turn the conference over to Chris Riegelman, Head of Investor Relations. Please go ahead.
spk05: Good morning and thank you for joining us today. We issued our earnings press release yesterday afternoon, a copy of which is available on our website along with a slide presentation that we will refer to during this presentation. Please refer to slide two of our slide presentation, which includes our safe harbor statements regarding forward-looking statements and use of non-GAAP financial measures. For those joining by phone, please note the slide presentation is available on our website at www.origin.bank. Please also note that our safe harbor statements are available on page six of our earnings press release filed with the SEC yesterday. All comments made during today's call are subject to the safe harbor statement in our slide presentation and earnings release. I'm joined this morning by Ordnance Bank Corp's Chairman, President, and CEO, Drake Mills. our Chief Financial Officer, Steve Brawley, President and CEO of Origin Bank, Lance Hall, our Chief Risk Officer, Jim Crotwell, and our Chief Credit and Banking Officer, Preston Moore. After the presentation, we'll be happy to address any questions you may have. Now, I'll turn the call over to you, Dre.
spk07: Thank you, Chris, and good morning. Looking at the start of 2022 and how we are positioned moving forward, I am pleased with the fundamentals of our core business. Despite the external factors that are affecting the broader economy, I am proud of how we performed in the first quarter and how our teams drove significant growth by adding long-term relationships. This continued organic growth reflects our strategy and focus on building value through our clients. Total loans held for investment, excluding PPP and mortgage warehouse, were $4.66 billion, which is a 3.6% increase compared to last quarter and a 14.5% increase on an annualized basis and puts us in a great position to meet our expectations. Total deposits grew $196.5 million, or 3%, compared to last quarter, and 12.1% annualized. Lance will get into more detail on our loan deposit growth, but I would add that our growth in loans, and specifically non-interest-bearing deposits, is a reflection of our strategy and focus on profitable relationships throughout our markets. Looking at the income statement, we reported $20.7 million of net income, $25.6 million of pre-tax, pre-provision earnings, and a diluted EPS of 87 cents. We released $327,000 in credit reserves. Jim will provide more color on our credit portfolio, but I am pleased with our overall credit performance. Most of you are familiar with the origin story and you know that we are an organization who takes great pride in our corporate culture. It's not something we just talk about, but we build on it every day. It is truly a competitive advantage for us in our markets as we attract new customers and equally as important as we attract new bankers. During the first quarter, We added seven new producers, primarily in our Texas markets. We continue to capitalize on opportunities in Dallas, Fort Worth, and Houston. Slide 8 shows the consistent growth we've experienced in Texas from the standpoint of loans and deposits. I am optimistic that our new bankers, as well as our existing teams, will continue to drive meaningful growth. Now I'll turn it over to Lance.
spk03: Thanks, Drake. Origin is incredibly fortunate to have an amazing team of bankers who share a vision and a purpose to build the best bank in America with a unique approach to corporate culture, serving clients, and growing communities. We strongly feel that our award-winning culture and geographic management model create a significant competitive advantage in hiring and retaining the best bankers in our markets. This strategy, combined with our drive to expand our business in Texas, creates a platform that should allow Origin to consistently drive double-digit growth. As I share with you often, we spend a great deal of time talking with our teams about the concept of being a trusted advisor and the process we go through to manage and build meaningful long-term relationships. Our consistent growth in our core business is a reflection of our bankers putting that philosophy into action. For the first quarter, total loans held for investment, excluding mortgage, warehouse, and PPP, increased $160.5 million, or 3.6%. As Drake mentioned, this is a 14.5% annualized growth rate and puts us in a strong position as we begin the year. As planned, we saw the majority of this growth in our Texas market. We also continue to add experienced bankers and mortgage loan officers to an already impressive team of high performers throughout our markets. On slide 10, you can see a breakdown of our loan portfolio. I'm pleased with our diversification and the growth we are seeing. We have come down from our historic high levels in our mortgage warehouse book, but we remain in our expected range for 2022 of 8% to 10% of total loans held for investments. Our commitment to building meaningful, long-term relationships is also evident in our deposit growth for the quarter. Total deposits grew $196.5 million, or 3% compared to last quarter, and of that growth, total non-interest-bearing deposits grew $132.2 million, or 6.1% compared to Q4 21. I'm very pleased that our non-interest-bearing deposits currently represent 34% of our deposit mix. We have confidence that our strategic plan and talented bankers will continue to drive results and build loyalty throughout our markets. Now, I'll turn it over to Jim to go through our credit quality metrics.
spk04: Thanks, Lance. As you can see on slide 13, there are many reasons to be pleased with our credit quality. Past two loans held for investment to total loans held for investment net of PPP loans ended the quarter at 0.42%, which favorably compares to the 0.5% level reported over the past year. Classified loans held for investment was stable, coming in at 1.36% of total loans held for investment net of PPP, which compares to a level of 1.35% as of Q4 2021. This is a 25% reduction from the level of a year ago, and we are very pleased with the trend of our classified loans. Non-performing loans held for investment to total loans held for investment net of PPP reduced, coming in at 0.41%. down from a level of 0.63% a year ago. Lastly, annualized net charge-offs for the quarter to average loans held for investment came in at 0.14%, reducing eight basis points from the last quarter levels. It was a solid quarter from a credit perspective, reflecting reduced levels of past dues, stable levels of classified loans, reduced levels of non-performing loans, and reduced levels of net charge-offs. The stability and resiliency of our portfolio continues to be driven by our focus on relationship banking, as well as our unwavering focus on sound underwriting and credit structure. We decreased our allowance for credit losses to $62.2 million, a $2.4 million reduction from the year end 2021. As of 3-31-2022, our reserve represented 1.2% of loans held for investment, and 1.33 percent of loans held for investment, net of PPP, and mortgage warehouse loans, reducing from levels of 1.23 percent and 1.43 percent, respectively. The decrease in the reserve was driven by the continued improving credit metrics discussed previously with no material adjustments to our ACL model assumptions based upon economic forecast. As it pertains to economic forecast, Uncertainty remains due to risks related to rising inflation, labor pressures, continued global supply chain disruptions, as well as increased geopolitical risk. As we have shared on our recent calls, we are very pleased with the overall performance and stability of our loan portfolio. I'll now turn it over to Steve.
spk06: Thanks, Jim. Slide 14 is our yields, costs, and loans held for investment portfolio slide. During the first quarter, our total yield on loans held for investment decreased three basis points, which includes the impact of PPP loan forgiveness quarter over quarter. Excluding the impact of PPP loans, our yield on loans held for investment increased one basis point in quarter one, as the Fed didn't raise interest rates until later in the quarter. We anticipate our loan yields will increase as the Fed is expected to continue their interest rate increases. The top right graph shows the continued decrease of our cost of funds. as our total cost of deposits decreased two basis points to 17 basis points per the quarter. Through our relationship-focused approach, our bankers have done a great job managing deposit rates, and we will continue to remain focused on this strategy. On the bottom left graph, you can see our fixed and variable loan composition. As an asset-sensitive bank, increased interest rates will be beneficial for Origin. If a 100 basis point parallel shift in interest rates were to occur, we would expect to generate an incremental $18.4 million or 8.1% in net interest income. The bottom right graph shows that March 31st, 68% or $1.3 billion of our prime and one-month LIBOR index loans have a current interest rate at or above the floor interest rate. Therefore, these loans have a 100% beta to interest rate increases. This amount increased approximately $339 million from Q4 2021. With an interest rate increase of 50 basis points, 85.4 percent of our loans will have a note interest rate above their floor interest rate and will receive the benefit of the interest rate increase. With a total of 100 basis point increase, 94 percent of our loans will receive this benefit. Slide 15 shows a recent net interest income and NIM trends. The graph on the left shows a five-quarter trend of income and NIM. Our total net interest income decreased $1.7 million during the quarter, driven primarily by the decrease in PPP fees and mortgage warehouse average balances. Excluding PPP and mortgage warehouse loans, our net interest income increased from $45 million to $46.2 million, or 2.6% quarter over quarter. We believe that our net interest income will continue to improve throughout 2022. The graph on the top right shows a change in net interest income, excluding PPP and mortgage warehouse loans. Every component improved compared to the prior quarter, with the exception of an annual dividend received in the fourth quarter from one of our non-marketable equity securities. The bottom graph shows our NIM quarterly changes, excluding PPP and mortgage warehouse loans, with excess liquidity contributing to the largest impact, as our average cash balance increased from $442 million in the fourth quarter to $746 million in the first quarter. Slide 16, investment securities, is a new slide. The top left graph shows the five-quarter trend of investment average balance and yield. The growth in balance is due to excess liquidity during the periods presented. The bottom left graph is a five-quarter trend of accumulated other comprehensive income, or AOCI. As a short end of the yield curve steepened at the end of the first quarter, the net tax effect of the changes in unrealized loss and the fair values of available for sale securities was reported through AOCI. To fund future loan growth, we do not intend to sell any securities with unrealized losses as we have adequate one-hand liquidity in addition to approximately $50 million a quarter of expected cash flows from these securities and the proven ability to grow our deposit base. Slide 17 is our net revenue distribution. The top left graph shows our net revenue growth since our IPO. During the first quarter, non-interest income represented 23% of our net revenue. The bottom left graph details our non-interest income lines. Mortgage banking revenues increased 43% from the fourth quarter to the first quarter, driven by the increased market rates improving the fair values of our pipeline and MSR. Insurance commission and fee income, which is a seasonal revenue producer, increased to $6.5 million in the first quarter of 2022 from $3.8 million in the first quarter of 2021 and $2.8 million in the fourth quarter of 2021. The insurance agency acquisition that closed on December 31st, 2021 contributed an additional $1.5 million this quarter. The top right graph details the components of other non-interest income, contributing to the $363 thousand-dollar loss of limited partnership income was a $2.2 million decline in fair value from one investment. This represents a reversal of fair value gain from the investment in the third quarter of 2021. Slide 18, our nine inches expense analysis. We reported total nine inches expense of $42.7 million, an increase of $2.4 million, and in line with our expected $43 million quarterly run rate. including $346,000 of intangible amortization. Insurance agency acquisitions mentioned earlier added $1.2 million of non-interest expense. Moving to the next slide, similar to the change in NIM, our excess liquidity and growth of investment securities were the primary contributors to the lower leverage ratio. The bottom right graph reports the details of the change in our leverage ratio. Overall, as you can see, referencing the trends in our regulatory capital ratios, we continue to be well-capitalized. Now I'll turn it over to Drake.
spk07: Thanks, Steve. We have a lot to be excited about this quarter. Even in this competitive environment, our bankers were able to drive strong growth. Orange remains focused on building meaningful relationships that drive long-term value. Because of our strategic investment in Dallas, Fort Worth, and Houston, we have the luxury of not having to chase deals at the expense of yield, duration, and credit quality for the sake of growth. This is a strategy that our entire team is committed to, and we are proving that we can execute on that strategy while achieving our targeted low double-digit loan growth. Origin is positioned to capitalize on the opportunities in our market and will benefit from a rising rate environment. We benefit from the new lift-outs over the past year. We benefit from the impressive teams who create value through our culture and our trusted advisor philosophy. We also believe we benefit significantly through our partnership with BTH Bank. I'm very pleased with where we are in the process. And as I said on our announcement call, this partnership gives Origin meaningful expansion across the I-20 corridor in East Texas and strengthens us in Dallas and Fort Worth. We have an incredible opportunity to add to what BTH has built in the attractive East Texas market. In closing, we did announce the increase of our quarterly dividend, which signifies our continued belief that we are in a strong position to consistently execute at a high level and provide value to our employees, customers, communities, and shareholders. Thank you for being on the call today. Now we'll open it up for questions.
spk00: Thank you. The floor is now open for questions. If you do have a question, you may press star 1 on your telephone keypad at this time. If you're using a speakerphone, we ask that while posing your question, you pick up your handset to provide the best sound quality. Again, if you have a question or comment, please press star 1 on your telephone keypad at this time. Please hold a moment while we poll for questions. We'll take our first question today from Matt Olney with Stevens. Stevens, please go ahead, sir.
spk01: Hey, thanks. Good morning, everybody.
spk07: Good morning, Matt.
spk01: I want to dig in on deposit growth, really strong numbers in 1Q. Anything particularly driving this growth? strong growth of deposits, anything chunky? It seems like lots of your peers are seeing more moderate deposit growth at this point. And then kind of part two of the question that's related is around deployment of excess liquidity. We saw some of that in the first quarter. We'd love to hear updated plans about further deployment of liquidity throughout the year, thanks.
spk07: Yeah, Matt, first I'll start off on we have to recognize that adding nine team members in the fourth quarter, seven in the first quarter, these people have been extremely productive moving over their relationships, relationships they've dealt with for years. And the deposit side, that was a significant impact for us. So this is core growth. You saw the core deposit growth. You saw the increase in non-interest-bearing deposit growth, which is meaningful here. And you've heard me for years say, I'm never going to take my foot off the gas on growing core deposits. Liquidity obviously is strong. And for us, it was impactful, not only negatively in them, but giving us opportunities for deployment. So we feel very good about, obviously we see a slowdown in this growth, but this is production from these relationship managers. And I feel like it's sticky production. So From there, obviously, we are getting busy trying to deploy some of that cash, and it's difficult to get super aggressive with that. And you saw the impact of that cash in them because of the potential interest rate increases and, you know, what we're having to deal with there. But we were able to put some of that to work in our investment portfolio. We feel pretty good using, you know, some SBAs and things like that that – have been impactful and given us a little bit more yield. But the other side of the deployment of cash is we saw significant tax payments and a reduction of cash in the last few months. And so with that reduction, I think we're seeing that across. For instance, we're sitting here today. I know there's a big concern about 10B and managing that position. I feel... very good about our strategies and how we're managing it. And I will tell you, because of tax payments, because of chasing off some higher cost deposits that, you know, because of these relationships that we're bringing over in their deposits, now we're chasing off higher cost deposits. We're sitting here at $7.7 billion today and continuing to reduce those high cost deposits, putting us in a very good position to be able to manage that 10B project going into the end of the year. We also have relationships that we will be able to overnight, you know, at the end of the year. So we have a tremendous amount of work internally going on to manage that process. So we're going to try to reduce cash today. Cash is somewhere around $290 million, so we're in a better position. But we have a number of levers to pull to continue to manage this 10B project, and I feel very good about where we are.
spk01: Okay, that's great, Dre. Thanks for the color there. And then I guess switching gears a little bit, with the Fed about to raise rates again and probably a lot more aggressively the next few meetings, we'd love to hear about expectations you have for the bank with respect to both loan betas, deposit betas that you're anticipating. And I think we can go back and look at the bank's sensitivity to the last rate cycle in 2015 to 2018. So we'd love to hear how you view the bank's positioning to higher rates today compared to maybe back in that 2015, 2016 timeframe before the Fed raised rates last cycle. Thanks.
spk07: Yeah, I think on the deposit basis, Steve's done a tremendous amount of work. understanding because we wanted to get a grasp on really what the percentage of total index deposits were and the impact that was going to have. So 7% of our deposits are indexed and these are relationships we have that we've had for a number of years that are meaningful. So that number came in more favorably than I thought it would. So we at this point are projecting betas in that 50 to 60 range on the deposit side. We feel that That's probably a little higher, but that's what we're basing on from the standpoint of being able to offset that on the betas on the loan side, because obviously being as sensitive as we are, these increases are going to be favorable. We're seeing yields on loans pick up in each one of our markets, and I suspect going into midpoint of the second quarter, that we'll start to see low four handles on our new deals, which will start to help us in that range. So, you know, loan betas, you know, Steve, I don't know if you've had a good feel for loan betas overall, but we certainly think that we're at the bottom or we've basically gone through with the next 25 basis points. all our floors, and so we'll have a full impact of the next rise, raise, depending on whether it's 25 or 50. Go ahead, Steve.
spk06: And Matt, just when Drake said 50 to 60% beta, that is after a total of 150 basis points increase. So we do have a lag. So for this quarter, we're not expecting anything close to 60%. As we said last quarter, the first 100 basis points, we are going to keep as much as we can to a 0% beta. And we can't do that to 7% of our deposits, but for the other 93%, we really think we're going to be able to lag that. However, after May, if there's another 50 basis points, that cumulative is 75, and that's when you may be able to see June, July. That's when you may be able to see the 60% total beta, but not until then.
spk01: Okay, that's good commentary. Just following up on that point, you mentioned index deposits just 7% currently. Any guesses or estimates of what this would compare to a few years ago back in that 2015 timeframe?
spk07: I think in 2015 we probably were somewhat short of 7% because of recent relationships that we've used to – to manage those rates as they went down. So I would probably say that, Matt, and this is a guess, I'll go back and do a little work on this, but I'm gonna say we were in the four to 5% range potentially versus where we are at seven today.
spk01: Okay, thanks guys. I'll hop back in the queue.
spk07: Thank you, Matt.
spk00: As a reminder, ladies and gentlemen, if you do have a question or comment, you may press star one on your telephone keypad at this time. Again, that's star one if you'd like to queue up for a question. We'll take our next question from Kevin Fitzsimmons with DA Davidson. Sir, the floor is yours.
spk02: Hey, good morning, guys. Good morning, Kevin. Hey, just a question on the pace of hiring, Drake. So you mentioned how adding nine members in fourth quarter and seven in first quarter, and now you've got BTH coming on board. I'm just wondering – And at the same time, there's large mergers that are going on or have gone on in or around your footprint. I'm just curious how you weigh that maybe ongoing opportunity of being able to hire producers like that versus the, well, maybe with all this movement we've had, taking the foot, not taking the foot off the gas, but taking the foot off the gas a bit on hiring to allow some of their progress and their results on the top line to, to come through and to show on core profitability. I'm just wondering how, how you weigh that or, or do you not, do you just kind of, when the, when the opportunities come, you just, you take them and, and you know, and sometimes you get more during certain times than others. Just, just curious. Thanks.
spk07: Yeah, Kevin, this is, this is what we've built this institution on, this strategy and how we've managed this. Now, the opportunity comes in different forms. Obviously, the dislocation in the market and the activity that we're seeing is providing some significant opportunities for us. But on the other side, our strategy is to maintain our portfolio mix. So what that means is we can't bring on, let's say, 10 real estate producers. We are C&I focused and we'll continue to do that. We happen to have what I think is a very good opportunity to add C&I producers. For instance, even though you think that C&I looked flat this past quarter, 50% almost of our real estate production was owner-occupied, which is categorized and should be as C&I. So in reality, we had strong C&I growth because of the type of relationship people were putting on. So we have passed in the last three quarters a couple of big-time real estate producers because they just did. They were what I would say, you know, giant killers on those type of deals. So, you know, in our world, we're going to continue to build the CNI presence through these lenders as we have the opportunity to do that. I don't know that this opportunity will continue because of the potential markets, but right now we have opportunity. We're going to take advantage of it because that's how we continue to build this organization. Got it. Thank you.
spk02: And, and just wanted to ask about warehouse. So warehouse, I think, I think I heard earlier in the call about the, the outlook for keeping that to eight to 10% of the, of the loans in 2022. So is that, I think it's a 10% today. So does that imply we might have a little more room to go down in terms of, of, of the volume, but then we're getting close to a bottom?
spk07: Well, I'll remind everyone that Right Size and Mortgage Warehouse has been a project for the last several months because of the activity and the bulge lines and the number of things that we did. Our outlook for Q2 and Q3 is somewhere around that $500 million mark, maybe slightly lower than that. But we feel that we can keep that in that 9% to 10% range. And that's where traditionally we would like to run Mortgage Warehouse. So I feel good about where we are. And based on the projections that's coming out of that team, they're saying Q2, Q3, $500 million plus or minus, and Q4 is a little difficult to plan at this point. But historically, and the reason I say that is historically we get a lift in the fourth quarter. But I'm extremely concerned about inventory, what we're seeing in mortgage production, even though we have a significant number of applications to be able to fill those through because of lack of inventory, I think will have maybe a negative impact in the fourth quarter mortgage warehouse. But that's where we stand today.
spk02: Okay. One last one for me on credit. I mean, credit, the trends appear solid and they're all moving in the right direction. And you guys appear to have a very healthy reserve, especially when you're backing out the warehouse and PPP, which I think is the right way to look at it. And Drake, you've been very forward looking in terms of like telling us sectors that you wanted to kind of avoid or you've had this very proactive client selection process over the past few years too. So I'm wondering how you're feeling right now. On one hand, credit's great. On the other hand, There's this increased concern about the economy, just given the things you guys mentioned earlier. So I'm wondering how you're feeling just generally and if there's any specific types of loans or areas you'd be avoiding. Thanks.
spk07: Kevin, I think you might have this room mic'd because the last couple of weeks we've been doing a tremendous amount of work around understanding, you know, it's easy to run an institution like this when times are good. When you understand that because of potential recession, the aggressiveness of the Fed, a number of different things, and certainly what we saw today with a decline in productivity, you start to look at really where are the holes? Where do you plan? Where do you manage that process? And as I've told our team, we're not going through a negative credit cycle. And I'll go back to 8, 9, and 10 when we have strong production with an average loss of 12 basis points per year during those years. So we are identifying areas as we have through the pandemic and other areas. For instance, we've had significant conversations around areas that when consumer spending slows and when those type of things around hotels and a number of different retail environments that we saw in eight and nine and 10 decline, how does that impact our portfolio? I will say the team that we have today with Jim Crockwell and Preston Moore and what they're doing is so significant from a risk management standpoint and how they look at this that, for instance, we will continue to reduce assisted living. We'll continue to reduce and look very closely at retail. We have worked diligently on office, and I know that People aren't as concerned with office. I still remain concerned with office, and this is an area that we're doing deep dives in. We've had some great gifts recently of some of those leaving that we wanted to chase off. So even though things are good, we see good growth. Our credit metrics and our profile is better than it's ever been. We're looking at exactly where those concerns are. So our CNI, for instance, I have worked the last two weeks to understand exactly where how the diversification of that portfolio works and where the real concentrations are. And it is meaningful to sit here and look at a detailed list of aspects of those industries and know that our concentrations are in that 3% and 4% of the portfolio. So to be able to do that type of work and understand it, and I am pretty Even though we know that there's issues coming, I feel still very good about the strength of this portfolio. So I'm still bullish on what we're being able to accomplish. Go ahead, Lance.
spk03: Yeah. Hey, Kevin, this is Lance. Good morning. I want to go back and actually talk about when you asked the lift-out question. For us, the lift-out strategy is just as much about credit quality as it is about production. So for us, with the luxury of the dynamic markets we're in plus the ability to continue to bring over experienced production individuals, we feel like we don't have to reach as much into new loan opportunities that we may not be knowledgeable about, have to cold call, have to bid against others. We are dragging over relationships that have long-term history with these production managers and RMs, which gives us tremendous insight. So for us, the strategy is around high-quality vetting on the front end of these production individuals to make sure that they fit our culture, make sure our credit quality The portfolios that they're going to be bringing over fit what we want from a strategy perspective. So, you know, you go back to the strategic plan and you talk about lift outs. Yes, it's production, but it's also heavily about credit. Yeah, Lance, that's a great point.
spk02: A loan moving over to you can be a lower risk loan than a new one to make. Yeah, that's a great point. Thank you guys very much.
spk07: Kevin, thank you.
spk00: Once more, if you do have a question or comment, you may press star 1 on your telephone keypad at this time. For our next question, we'll return to Matt Olney with Stevens. Sir, the floor is yours.
spk01: Thanks for taking the follow-up. On the insurance side, some really nice growth in the first quarter. I think you disclosed a chunk of that was from the acquisitions that you closed in one queue. But just curious if there's anything else driving that higher insurance number whether it's contingent commissions, higher renewals, just trying to appreciate where that insurance revenue could be over the next few quarters.
spk07: Thanks. Matt, it's a three-legged stool at this point with growth, client growth. Contingent income is strong because of profit sharing and market outlook on losses, so we're in a very good position there. We've seen a slight tick on commission levels, but Overall, and then obviously the hard market is certainly we're seeing some increase in premiums, so that's what's driving it. We're sitting at the beginning of the year thinking that insurance is going to produce around $20 million of revenue. We're probably sitting here today at $21 million of revenue and outlook, so feeling very good about that, looking for opportunities to enhance those opportunities. those revenues through footprint acquisitions and still remaining active there. Okay, great.
spk01: I guess switching gears on the expense side, Steve, where would you point us to as far as a starting point for the 2Q earnings run rate?
spk06: Hey, Matt, as we said last time, quarter, we expect about $43 million for the next three quarters. And so we're slightly under that this quarter, and we feel that the next three quarters will have approximately a $43 million run rate.
spk01: Okay, good. And then BTH, I guess since we last spoke on the deal announcement, we'd love to hear any other updates on their first quarter or any updates on how you see that coming together.
spk07: As I said in my comments, I am tickled with the integration process we're going through. One of the real surprises, and I shouldn't say surprise, but one of the aspects that continues to make me feel just really good about this partnership and this opportunity is the quality of people they have and how they manage risk and how they think about client selection and a number of the things they do. has just been so impressive. And getting to know them and getting to know more of their people and how they think, this has been rewarding. And when I tell you that we joked a little bit about this being a unicorn, but when I tell you they truly are amazing what these people have been able to do from a growth perspective with efficiency, I think we need to take some lessons from them and see if we can pick up some of those things. But I am impressed. tickled where we are i'm tickled with um the regulatory outlook on this and and and and how we're dealing with our regulators and and how they feel so a number of positive things that uh going in and obviously um as you know we hired um derrick mcgee and and what a fine that's been for us so he's made that process more efficient and certainly um more enjoyable so you know outside of you know, putting up with him a little bit, but he, this has been a great opportunity for us. So I am tickled where we are with BTH and feel like the integration process, we have our conversion date set. We just need to get that regulatory approval and get going down the road. But I think they are excited. I know we are, and we're going to continue to do the things that's going to make this a very successful integration process.
spk01: Wow. Great. And then on the lift-out strategy, you've already disclosed some of the new team members from last quarter and from this quarter and how you're thinking about the operating leverage. I guess I'm kind of curious of where some of these team members, these newer team members are coming from. And I guess from our side, we see three or four larger M&A deals in Texas that have been announced and some of them have been closed over the last, year or so. I'm curious if you're benefiting directly from some of that disruption, or are the recruiting efforts that are successful in Texas just more broad and not really specific to those institutions?
spk03: Yeah, hey, Matt, this is Lance. I would say last year it was a little more concentrated around BBVA and a few others. Q1 this year, we have three in Dallas, one in Frisco, a couple in Houston. And then we have two strong mortgage loan officers. We're excited about one in Oxford, Mississippi, one in Houston. Those are really more spread out of, you know, sort of ones and twos versus larger teams. That strategy has been working for us. And I think it's opportunity to kind of keep coming to us as we grow larger and people get to understand our culture better. So obviously we're mindful of the disruption and we're watching it closely. We have a, a strategic board of talent in our markets of understanding who we want to attract and who we want to actively go after. This quarter, I would say it was spread out.
spk01: Okay. Thanks for that, Lance. And then just last question for me is around the core loan yields. If I back out PPP, it looks like the core loan yields improve this quarter and are kind of sitting there in that low, 4% range. I think, Drake, maybe in your opening comments, you mentioned expectations for some of the newer loans to have a low four handle on them as well. Just want to clarify that and just any general commentary as far as expectations and curious how much pressure you're seeing on overall loan yields at this point, if any. Thanks.
spk07: Yeah, I'm going to let Steve answer the question, but Matt, I don't want to mislead anyone and say there's not pressure on loan yields. We passed up, I think, Lance, six deals in this past couple of months that were significant rate issues. So duration and rate have been a problem. And as I said in my opening comments, we weren't going to do deals at the expense of rate, duration, and quality.
spk03: Yeah, Matt, I'll just tell you anecdotally from what we're putting on the books, what we're seeing come through loan committee, I'm, I'm honestly surprised at the, the rates that we're seeing from the rates and the duration that we're seeing in competition right now. We have, we have let multiple things walk. We've passed on opportunities where we're just still seeing a lot of competition doing seven and 10 year fix in the low threes. And I just think that's a, a long-term mistake that some of our competitors are making. We feel like we have the luxury of the production teams, the lift-out teams we're adding, the market of Dallas and Houston, that we don't have to get trapped in those mistakes. And so we're being mindful. So even though we grew 14.5% annualized, it could have been a lot more than that. But we're going to stick to our guns on what we think are long-term right decisions around pricing and duration.
spk07: Steve, I want to go ahead and talk about loan yields.
spk06: Two things, Matt. If you remember, the Fed increased on March 17th, but most of our contracts are end of the month. And so we won't have anything in the first quarter of that 25 basis points. So we expect that full 25 basis points in the second quarter. If you look at just the coupons, this is not the fees or anything else. Our coupons for the last four quarters are Overall, 363 in Q2, 373 Q3, 376 Q4, and then this past quarter, 384. So you see that our coupons are definitely increasing. And once we only had like 20 million left of PPP loans, once that goes, we'll be better. And the warehouse has come down to a more normalized level. So I think you're going to see those rates continue to increase.
spk03: Yeah. Hey, Matt, maybe last comment. And this is sort of overarching when it comes to lift outs and production. Really excited when I looked at Q1 of 22 versus Q1 of 21. Our new loan and line production was up 22% over that period. Loan fee income, that'd be loans, letter of credits, and swaps was up 38% this quarter compared to a quarter a year ago. and treasury management fees are up 24%. And that is simply continuing to put on quality relationships based from these quality bankers. And so on the production side, I'm extremely pleased.
spk01: All right, guys. Well, thanks for taking all the follow-ups, and congrats on the quarter.
spk07: Thank you, Matt.
spk00: There appear to be no further questions at this time. I would now like to turn the call back over for closing remarks. Mr. Mills?
spk07: Yes, thank you. Thank each one of you for being online. I want to make this point. I am so proud of this team because we are staying, we are focused on what we really do well. As our chief risk officer says, we're sticking to our knitting. We are staying very focused on quality, pricing, duration, true relationships, passing on deals. I mean, we just have this unwavering focus on sound underwriting and structure, and it is paying off. So when you look at 14.5% annualized growth, that is growth that we think is sustainable and growth that we feel is going to be profitable in the long haul. So thank you for listening today. Thank you for your partnership and your investment, and we look forward to seeing you in the future.
spk00: This does conclude today's teleconference. We thank you again for your participation. You may disconnect your lines at this time and have a great day.
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