HMST
#Hey, <UNK>.
Yes.
We do, internally.
I think it's safe to assume that, given our guidance on loan growth, that that needs to be supported primarily with deposit growth.
Right.
We are right around 100% loan-to-deposits and we don't intend to go too far over that.
It's important that we grow our deposits, consistent with our loan growth.
Obviously, we have to be focused on funding, when you look at our strategy for growth.
Part of that funding strategy will have to be made up with time deposits.
We are seeking to keep that composition from rising much, though, that assumes that, as the total grows, the absolute total of time deposits, as well, will grow.
More importantly, though, our branch-opening activity and retail strategy, along with our commercial banking strategies, expected to grow the lion's share of the deposits, going forward.
We may add to that with acquisitions; we have in the past, of branches and deposits, and it's an opportunistic activity.
Obviously, M&A can help that funding equation, as well and, we continue to look at deals that exist in the marketplaces in which we are interested, and so, I would expect that the answer to that lies both in organic growth and in M&A.
It was ---+ there was a retail component.
There was ---+ what would I call this one.
It was an institutional component.
There's an institution of peer-to-peer market for CDs that was a substantial part and then about $100 million of it was brokered.
It's all in-house, directly originated.
I'm sorry what.
Right.
I was excluding that.
Our strategy does not include, nor need, secondary-market purchases of any loan type.
It will be, but let me say about syndicated loans, at some point we will have some syndicated lending activity.
To date, I think, now that I think about it, we did do one small syndicated participation.
I think that will be opportunistic when really attractive deals come across the bow.
Our business is primarily direct to the customer.
That is purely commercial real estate; permanent commercial real estate lending in, primarily, multifamily.
It's a local originator.
But ---+ local originator, but with a Western States book of business.
Good morning <UNK>.
Thank you for asking that.
I have been beating up my internal people about how we report.
If you look at our core-efficiency ratio I think we quoted it ---+
It's on page 17 on the earnings release.
So, this ratio excludes M&A-related expenses.
It is more core.
There are some others, sort of nonrecurring things, even things like intangibles amortization, that other people do not include in their calculation of operating efficiency, that we still do.
But, we are expecting this ratio, the core ratio, to fall to the low 60% range by the fourth quarter of this year, mid to low 60%.
Yes.
So, keep in mind, in this quarter, we had the overhang still from the remaining OCBB expenses that we will bring out.
I should say this quarter, being the first quarter, relative to this quarter that will come out.
We also had five new office openings in the quarter, so that impacted it.
And, additional FICA expenses, seasonally.
And additional FICA expenses.
Now, you will see, in the second quarter, obviously, the full quarter impact of some of those additional offices from the first quarter, but as <UNK> mentioned, as we move throughout the course of the year we anticipate the efficiency ratio improving quite a bit.
Correct.
No, I take that back.
The other significant item in the quarter was, really, the absence of any material loan sales or securities gains.
If you look at the fourth quarter, as an example, we had eight-point-some million dollars of non-interest income, most of which $7 million or so, which was related to sales of Fannie Mae DUS loans, or SBA loans.
We had very little of that activity in the first quarter, but we expect to have a substantial amount of that activity over the remainder of the year.
So, you have two affects, both a change in operating expenses and a pretty substantial increase in revenue driving that change, that expected change in the operating-efficiency ratio.
Consolidations, no.
We have not ---+ we don't expect to acquire any that would be consolidatable.
And those that we open are in new markets.
It will, but not as quickly as revenue.
So, we expect that operating leverage to not only improve earnings, but the ratios related to them, like operating efficiency.
Yes.
We are expecting somewhere in excess of $200 million.
Obviously, it depends on the market and market timing.
We have seen premiums run from, let's say, 2% to 3%-plus.
So, when you look at our net-interest-income sensitivity, we do see that we have more liabilities refunding and repricing in zero to three months than we do assets.
A number of that is our federal home loan bank advances repricing, and then, the remainder would be to higher cost of deposits.
Thanks, <UNK>.
That's going to be ---+ it could be lumpy.
The timing of not just the origination but the sale of loans may not be really even.
I would say ---+ so, <UNK> mentioned, as well, that last quarter was a high-water mark, with respect to that non-interest income coming through that segment and the first quarter is a low-water mark, so, I think it's fair and reasonable to take the average of the two quarters, in terms of expectations, going forward.
In total, in addition to the DUS sales, the other multifamily sales, as well.
Right.
So, depending upon the level of activity, that number could range from $2 million-$5 million, depending on the quarter.
Including multi, right - sort of all in - and, including SBA, actually.
Sure.
It's a little bit typical seasonality.
The fourth quarter, typically, has a lot of activity, loans that investors or buyers of property, or people refinancing, want to get concluded by year end, so there is always a rush to close as much of the pipeline as possible for customer purposes, as well as our own.
And, typically, in the first quarter, there are not as many sales transactions.
People are just starting the year and activity is seasonally slower.
So, we expect the remainder of the year to be more typical, seasonally, with higher activity.
But the fourth quarter is always busier, and the first quarter is typically slower.
So, for the Orange County Business Bank acquisition, we are still expecting that acquisition to be accretive this year.
Some 3%.
We will have some transition expenses in the second quarter, but by the end of the second quarter, all of the expense savings will have been realized.
So, from third quarter forward, we should be at the run rate we expect out of that acquisition.
With respect to de nova branch openings, that occurs over a more lengthy time frame, because it's related to the acquisition of deposits in the marketplace.
Typically, we expect branches to be breaking even, depending on how you calculate the interest rate associated with the deposit, at about two years.
Fully-funded, or fully grown, I guess, in about five years.
Our branch has been running ahead of that number, typically, I think all but two cases are well ahead of the deposit acquisition pace that we expect.
So, with respect to new branches, that is the timeframe.
With respect to other positions that may relate to corporate infrastructure, they may not be revenue-producing positions, but they may have to be added as consequence of our growth, so those ads are related to current growth in other areas.
It might be in compliance or legal or county finance, some of these areas ---+ Human Resources ---+ that ultimately become sort of size denominated.
Our lending centers, however, are expected to be profitable within a couple of months of opening, so any of our expansion expenses invested in new lending centers, whether it be single-family, homebuilding or commercial real estate, are expected to be profitable in a relatively short period of time.
Thank you.
Again, we appreciate your patience your attention this morning.
All of the great questions.
We look forward to talking to you again next quarter.
Thank you.
