Glacier Bancorp Inc (GBCI) 2015 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to Glacier Bancorp first-quarter earnings conference call. (Operator Instructions) As a reminder, this conference call is being recorded.

I would like to turn the conference over to Mick Blodnick, President and CEO. You may begin.

Thank you. Welcome and appreciate you joining us today. With me this morning is Ron Copher, our Chief Financial Officer; Barry Johnston, our Chief Credit Administrator; Angela Dose, our Principal Accounting Officer; and Don McCarthy, our Controller.

Yesterday we reported earnings for the first quarter of 2015. For the quarter we earned net income of $27.7 million; that's an increase of 4% compared to the $26.7 million earned in last year's quarter. We produced diluted earnings per share for the quarter of $0.37. That compares to $0.36 in the prior year's quarter, a 3% increase.

As we assessed our first-quarter performance, a couple of things stood out. It was the best first quarter we have ever had in regards to loan growth. Our net interest margin moved back above 4% as our Banks continued to do a good job maintaining a stable margin. And mortgage origination fees were much higher than we projected for this time of year -- although, like many institutions, we benefited from a drop in rates in the early part of the quarter.

The quarter's results did contain one-time acquisition and conversion expenses totaling $675,000. However, they were partially offset with proceeds we received from a bank-owned life insurance policy totaling $336,000. Aside from these two figures, the quarter was void of anything else unusual.

We again generated a very respectable return on assets for the quarter of 1.36% and return on tangible equity of 12.59%. For the past five quarters our earnings have consistently been in that range. We are very proud of our ability to consistently deliver this high level of performance to our shareholders.

On February 28, we closed on the Montana Community Banks, Inc., transaction and its subsidiary, Community Bank, Inc. We expect this will be a very good addition to our Company. As we welcome the staff of Community, they are already busy working on integration and platform conversions that are scheduled for this June. The Olsson family and the entire bank staff have been wonderful to work with as we completed the transaction. With the level of cooperation we've experienced throughout this process, we can't help but to think the rest of the integration will go smoothly and be done by the end of the second quarter.

Loans grew by 18% on an annualized basis in the first quarter. If we exclude the acquisition, we generated organic loan growth of 10% annualized, which was well beyond expectations and a strong start to the year. As stated on last quarter's earnings call, it appeared we were carrying more loan momentum than usual into the first quarter of this year.

In addition, we had a relatively mild winter, which certainly was another plus. With the amount of loans generated so far this year, achieving our goal of 6% loan growth in 2015 is definitely doable. It appears our loan volume is continuing to maintain the pace and momentum of the first quarter, and the banks are working hard to further build upon the great start to the year as we now enter what historically has been our two best quarters for loan production.

Excluding the loans acquired from Community Bank, this past quarter the largest increase in loan dollars came from commercial and industrial loans. However, we also had nice increases in multifamily and 1 to 4 family residential loans, commercial real estate, and ag loans. Not only did we see increases in both loan categories, but it was evenly distributed among our banks. Although it's not always possible, we strive to achieve diversification not only in business lines, but also among our many locations and different economies, and that was definitely the case in the most recent quarter.

One area we hoped would continue to grow was our residential construction portfolio. Unfortunately, this past quarter we experienced a 7% decline in this loan type. We hope this was more a function of the time of year. And even though we had a mild winter throughout most of our footprint, it was still winter. Now that spring has arrived, we should begin to see a pickup in construction activity, and with it, an increase in residential construction lines.

Two other loan sectors that saw decreases in the quarter were consumer lot loans and unimproved land loans. But again, this is probably more a function of the time of year rather than an ongoing slowdown. In fact, we are expecting a strong construction and building season this year.

Again, this quarter we continued to reposition our balance sheet by changing the mix of our earning assets. At the beginning of the quarter, we had a significant amount of cash that had built up throughout the fourth quarter of last year. This quarter we were able to use that cash to not only fund the growth in loans, but for the first time in 18 months, reallocate some of that cash to the investment portfolio.

Most of the increase in investments this past quarter can be directly attributed to our decision to redeploy that excess cash from last quarter. These moves increased our overall investments to 37% of total assets, an increase of 2% from last quarter, but still below the 40% at this time last year. Overall, even though we had good organic loan growth and we grew the investment portfolio, those were funded entirely by the reallocation of cash. The only net growth to our total asset base came from the addition of Community Bank.

Moving to the liability sections of the balance sheet, excluding the acquisition of Community Bank, both noninterest and interest-bearing accounts were basically flat for the quarter. Although we continued to add new business and retail customer accounts at a nice clip, it did not carry over this past quarter to increased dollars on deposit.

For some time we have been stating and aware that some of our customers have had excess deposits parked in their accounts that could be withdrawn if the right investment or business opportunity arose. As the economy continues to improve, I believe we are starting to see some of that take place. Nevertheless, we are constantly running various scenarios and formulating strategies to offset the impact of this reduction in deposits if it was to occur in the future.

One offset is the continued focus on growing our base of checking account customers. Here we continue to have great results. In addition, we have added a number of deposit-rich franchises the past two years to our Company that will also help maintain adequate funding as we move forward.

Credit quality this quarter was basically unchanged from the prior quarter. If you exclude the addition of Community Bank, we did have a slight reduction in nonperforming assets during the quarter. But for the most part, credit quality didn't move much.

Nonperforming assets ended the quarter at $91 million -- $87 million excluding government guaranteed loans. Community Bank added approximately $2.5 million to those numbers this quarter. We continue to work on a couple of larger nonperforming loans that, if they tier, will help us move closer to our goal this year of reducing nonperforming assets below $70 million.

Our NPAs ended the quarter at 1.07% of total assets. That compares to 1.37% a year earlier. It's definitely getting more difficult to lower nonperforming assets, but the banks continue to work these problem assets hard. So we remain hopeful by year-end to have worked the number down below the $70 million goal we set.

Net charge-offs continue to be a real bright spot, as once again we wrote off a very low dollar amount of loans. Net charge-offs of $662,000 or 4 basis points annualized is probably about as low of a number as we can reasonably expect. Our goal for the years to keep our net charge-offs under 15 basis points, so we are off to a good start in that regard.

Not only were our overall charge-offs much lower this quarter, but we continue to recover substantial amounts of dollars on loans that were previously charged off. Hopefully, we will continue to see this trend of recoveries through the rest of the year.

As expected, early-stage delinquencies was one area where we did see an increase from the previous quarter, as the dollar amount of 30- to 89-day past-due loans increased by $7.5 million during the quarter to $33 million. However, compared to the same quarter last year, delinquencies decreased by $10 million. Considering the time of year and the large seasonal employment base, I think the banks continue to do a good job controlling their delinquencies.

Our allowance for loan and lease loss ended the quarter at 2.77%, down from the prior quarter's 2.89%, the result of our own organic loan growth plus adding Community Bank's loan portfolio without an accompanying loan-loss reserve. Although our allowance for loan-loss decreased slightly as a percentage of loans this past quarter, our coverage ratio of the ALLL as a percentage of nonperforming loans increased to 207% versus 164% in last year's first quarter.

In the most recent quarter we provisioned $765,000, which exceeded net charge-offs by just over $100,000 and was above the $191,000 provisioned last quarter -- but not as much as what we had provisioned in the same quarter last year, where that number was $1.1 million. If credit quality trends continue to remain stable or improve further, we wouldn't expect the loan-loss provision to deviate much from what we did this recent quarter.

Turning our attention to the income statement, net interest income increased $2.7 million or 4% from the same quarter last year as interest income increased by $3.4 million and interest expense increased by $742,000. Growth in the loan portfolio has been the main catalyst that has led to a higher level of both interest income and net interest income. Interest income from investment securities, on the other hand, decreased 6% from last year's quarter as a result of a drop in the balance of investments compared to last year's quarter. The increase in interest expense was driven primarily by a 34% increase in the cost of deposits as a result of much higher balances from the prior year's quarter.

On a linked-quarter basis, interest income increased $1.3 million or 2%. However, most of increase in both our loan and investment balances came in the back half of the quarter, which should bode well for this quarter, as we will have the opportunity to earn on these higher balances for a full quarter.

For the quarter our net interest margin increased 11 basis points from 3.92% the prior quarter to 4.03% in the most recent quarter. This compares to a net interest margin of 4.02% in last year's first quarter. So for the most part, we've been able to maintain a stable margin near or above 4% for the past year.

Increased yield on loans accounted for 7 of the 11 basis point increase during the quarter to the margin, with the remaining 4 basis points coming from purchase accounting adjustments. Now, hopefully, we can hold the margin in this 4% range, at least until such time when increasing interest rates would allow it to move higher.

At quarter-end our cost on total paying liabilities was 42 basis points. That's unchanged from the prior quarter and up 2 basis points compared to last year's first quarter. It is unlikely we will see much further change in our funding costs this rate cycle. With that said, as previously mentioned, we continue to work very hard to increase our transaction account base. Although currently this may not have an immediate impact our cost of funds, we believe attracting a greater percentage of these low-cost deposits will have a positive effect on funding costs in a higher interest rate environment.

For the first quarter of the year, we were happy with the amount of noninterest income we produced. Because of the time of year and less number of days in the quarter, we traditionally see a slowdown in fee income. This year, however, noninterest income got a boost from higher mortgage fee income.

Noninterest income increased by $3.3 million or 17% from the prior-year quarter, as mortgage origination fees were up by $1.8 million or 51%. This was definitely above what we projected for this income category. As we enter the second quarter, barring any unforeseen interest rate surprises, we should see better mortgage volume from both purchase transactions and new construction. The mortgage pipeline right now looks good.

In addition to the increase in mortgage origination fees was an improvement in service charge income of $800,000 as our basic customers continues to expand, providing additional opportunities to grow this income stream. Even though we experienced a nice increase from the same quarter of last year, on a linked-quarter basis we were down $1 million.

Again, due primarily to the fewer number of days in the first quarter each year, we at best experience modest reductions in service charge income compared to the other three quarters. With that said, as we enter the next two quarters, if account growth maintains its current pace, we should see increased fee income in this area.

Although service charge fee income was down from the always strong third and fourth quarters, we were pleased at just how well this revenue source held up during the quarter. Our banks continued to generate a larger and larger base of customers, especially those banks that have joined the Company the past two years, as they have implemented and are beginning to benefit from our customer acquisition strategies.

So far through the first quarter of the year, our checking account base, which contributes most of the service charge income, grew at a pace consistent with what we achieved in 2014. I thought we did a pretty good job of managing noninterest expense during the quarter as the banks continued to hold the line on those expenses they have control over. Sequentially, our expenses decreased by $200,000 from the prior quarter.

However, noninterest expense was up $5.4 million compared to the first quarter of last year. Compensation and benefits made up $3.6 million of that amount as the addition of First National Bank of the Rockies and Community Bank, along with normal salary and benefit increases, accounted for the greater expense.

Our efficiency ratio for the quarter came in at 55%, the same as the prior quarter, but up from 53% in the same quarter last year. Our efficiency goal for the year is 53%, so we have some work to do the next three quarters. Although it will be a challenge to lower our efficiency ratio to that level, I believe our best revenue quarters are still ahead of us. So if we can hold the line on our expenses the rest of the year, we should be able to achieve our target.

In summary, 2015 has gotten off to a good start. If loan growth maintains the pace we set in the first quarter through the remaining three quarters, we should be in a position to hit both our balance sheet goals and earnings targets for the year. Our net interest margin remains stable; asset quality is still improving; and so far our operating expenses, although elevated somewhat, remain in check. If we can maintain these trends and improve upon a couple of others, we should deliver another very good year.

And those are my formal remarks. And we will now open up the line for questions.

(Operator Instructions) Jacque Chimera, KBW.

I wonder if you can touch on the loan yield expansion of the quarter? I know you gave a little bit of color in your prepared remarks, but I was just curious what the absolute amount basis of points of accretion was this quarter versus last quarter -- if maybe there were some interest reversals or interest recoveries in there; maybe if the loan mix contributed? Just any color you have would be great.

You bet. As I mentioned in my formal remarks, of the increase -- you know, there was a 12 basis point increase in loan yields during the quarter. Four of those came from purchase accounting adjustments. The other eight was really primarily just a change in mix.

I think the banks did a very good job. I think Barry was telling me that he was very pleased at how the banks were able to take the loan volume we had, and maintain those yields, and in some cases improve them, Jacque. And then we did benefit about -- the overall margin benefited about 2 basis points from Community Bank. And as Angela and myself dug into that number, it appeared that probably about 2 of the 12 basis points was a function of Community Bank and a little bit higher overall loan yield that we brought over for them.

So in essence, to give you even more color, there's probably four things that led to it: mix change, Community Bank, a little bit better pricing this quarter from our banks, and then purchase accounting adjustments.

So given the movement that we had in rates this quarter, how were your banks able to achieve better pricing?

You want to take that, Barry?

Yes, I will take that. Basically, we had an outstanding quarter in loan growth -- which, especially for this time of year, it's even more impressive. And frankly, a little surprised by it. But what ultimately I think led to a lot of it is just the mix of loans that we brought in. I don't know if you know. We brought in some C&I loans, which traditionally have a little better yields than some of our commercial real estate and some of our single-family residential. And we have some draws on some existing lines that also had some yields up, were above the mix. So that's the bulk of it right there.

Okay. So increased utilization contributed to some of the C&I growth in the quarter?

Yes.

And do you know what utilization was this quarter versus last quarter?

I don't have that exact number in those exact product lines, but -- we have some draws on some lines that -- and we had a fairly nice spring and weather conditions here that we haven't seen. We had some draws on some agricultural credits during the quarter that we saw. So that's basically -- some of those lines are priced better than the average. So that's where we saw the yield mix.

We could sure get that for you, Jacque. I know in my comments, I didn't mention that C&I was the highest-dollar increase within the portfolio that we saw in the past quarter. And as Barry laid out, there's three or four benefits in that regard. But as far as the utilization, we could certainly get you --.

Our C&I went up $40 million, which -- the bulk of that is revolving lines of credit. And most of that is priced at prime plus 1/2, prime plus 1. So it is in that ballpark. So that was a big part of it.

Wouldn't some of those also, Barry, have floors on them?

Yes, some of them have floors. But also the other part of it is agricultural credits went up close to $30 million, and almost all of that is variable-rate. It's annual operating lines of credit. And for the most part those probably do not have floors on them. But we did see an increase there, too. So those usually have some pretty good rates on them. So that's the bulk of it.

Okay. Okay, so is it safe to say, then, that in addition to the benefit of the loan growth that you had in the quarter, you also improved your interest rate position a little bit with the line drawdown?

Yes, I think that would be accurate.

Yes, I think that would be a good assessment, Jacque.

Okay, great.

And then as I mentioned, I don't -- it's always hard to say, and I hate to project and get too excited about some of these things, but we do know for fact that, as I mentioned, most of the growth in the loan portfolio and in the investment portfolio, too -- most of those investments that I talked about were primarily all added in the second half of the quarter.

So as I look at the kind of loan growth and investment growth we saw, and then you look at interest income that we achieved, both on a sequential and a year-ago period basis, it seems like it maybe could have -- at least I thought it maybe could have been a little bit higher. But when I looked at the timing of when those loans came on the books and when those investments were booked, we at best got 1/2 a quarter out of that, and in some cases, only 1/3 of a quarter. So I think that should help as we move into the second quarter, entering that quarter with much higher balances now.

Okay, so outside of the possibility of continued downward pressure on rates, the loan yield expansion that we saw in the quarter doesn't accurately reflect the actual loan yield expansion at quarter-end?

Come again, now?

So because of the -- some of the loans were only on the books for 1/2 quarter, maybe even 1/3 quarter, even though loan yields were up significantly in the quarter, there's likely still more expansion to come?

Definitely. And not so much on the yield side, but definitely on the absolute dollar side is the way I'm looking at that.

Okay. Why not as much on the -- so is it the new generation didn't impact the yield in the quarter?

The new generation --

I guess I'm trying to understand how it would impact the dollar, but not necessarily -- there wouldn't be any further benefit to the yield.

Well, I'm just looking in general terms, that the yields are the yields. But we only had, let's just say, 45 days to earn on these balances.

Right, yes.

In the second quarter, we should have 90 days or 91 days to earn on those balances. Even if the yields don't change much at all, I'm just saying that we will have a full quarter now of having a little bit over $100 million inorganic loans and $200 million in investments that were not on the balance sheet the first half of the quarter that now will be. So just the fact that those balances have grown, we will be earning on a higher balance of dollars in the second quarter.

Okay. Fair enough. That makes sense. Okay, thanks very much for all the color. I appreciate it.

Joe Morford, RBC Capital Markets.

I guess just, first, following up on Jacque's line of questioning it, just to clarify on the loan yields: it's not that you are suggesting that the competitive environment has lightened up at all; it's just more the mix of credits that you were booking in the quarter?

Absolutely. Because I would argue that the competitive environment has maybe even gotten a little bit more challenging than it was last quarter or the quarter before. So yes, you're absolutely right. Most of what we perceive as -- and what we've analyzed as the increase is more coming from the change of mix that we have generated. And as Barry pointed out, the advances that we got in the quarter in the C&I portfolio as well as the ag portfolio probably definitely helped that yield. So, no, I don't want anyone to think that the competition is allowing us to price higher and higher. I don't believe that to be the case at all, Joe.

Okay. And I was just curious on that, too. What sectors within C&I were you seeing some of these better drawdowns, or what parts of that portfolio?

I just don't have that detail, Joe, in front of me. I could probably dig it out, but --.

No, that's okay, no worries.

But you know, Joe, the thing is that we just aren't seeing -- we are seeing -- where we are really seeing the competitive pressures is on the commercial real estate side. There's no doubt that there's some kind of pressures in the C&I portfolio, but especially on the commercial real estate side, and probably the term.

I mean, those --- you know, we're seeing some of our competitors going longer out on the curve than we've seen historically. Whether or not we go there, we look at individual relationships to see if we want to follow the crowd. But that's where the real pressure is. And overall, those rates -- the new rates coming on just aren't where we were at historically.

Okay. That's much more consistent with what we're hearing from others. The other question is that -- obviously, you did a lot to deploy excess liquidity in the quarter. Is there still some more work to do there? Or cash balance is now down to what you would consider more normalized levels, where you would like to see them?

Yes, most definitely, they are more normalized now. I think we did what we set out to do, Joe, during the quarter.

Obviously, like I said, we -- and it probably hurt our margin. There's no doubt it did in the fourth quarter, carrying those kinds of balances in cash. Something we had never really seen to that level before. Once we recognized that those balances were not going away, towards the end of January, early February, we made the conscious decision that we needed to do something different; that holding these -- it seemed like they were not going to roll out the door like we were worried about in the fourth quarter. One of the reasons we did not invest it in the fourth quarter is we just didn't know how stable some of these deposits were, coming from various municipalities, title companies, some of our larger customers.

But as we started getting into the first quarter, Joe, those balances just stayed very, very steady and solid. So we made the decision. We have gone about as far as we feel comfortable going as far as investing that cash. Again, it was to the tune of about $200 million, which is still nowhere near where the balances were. But at least we are more comfortable now, Joe, that we've taken a portion of that cash and redeployed it into better earning assets.

Okay. That's great. Thanks so much.

Matthew Forgotson, Sandler O'Neill.

So the liquidity has been redeployed, but how about cash flow from the securities portfolio going forward? Do you think that 37% securities to assets is where you expect to run as we move through the year? Or do you still see that coming down in the periods ahead, ultimately towards that 20% you have laid out for us in the past?

You know, Matthew, now that we redeployed that cash -- and, of course, we didn't expect that run-up in cash -- and that was not necessarily a function of us getting a bunch of prepayments that we just stored on the balance sheet. In the fourth quarter that was truly more a function of our customer base adding deposits to the Company. We have made that shift now. We've adjusted our cash positions, redeployed those dollars.

Now it's all going to be dependent, Matthew, on the kind of loan growth we see the rest of the year. If loans grow at the kind of pace we saw in the first quarter throughout the rest of the year, there's a good chance you could see that investment portfolio start to decline again. If, by some chance, the loan spigot shuts off, my guess is that the reduction in investments will probably not take place or not take place in any great percentage amount.

So if we were to just assume that loan growth remains strong in the second quarter and through the back half of the year, where would you like to see that securities to assets ratio be by the time we step into 2016?

Then you would almost hope that it would be somewhere in that 30% to 35% range, because it's more difficult without just selling securities, which we are not -- that's just not our MO. We never have been a big buyer. I mean, we buy a lot of securities; we just don't sell them.

And now that prepayment speeds some of those have slowed down -- it's not like it was two or three years ago, where in the course of one month you could let $200 million run off the investment portfolio just from CMO prepayments. Those have slowed way down. Of course, the portfolio is nowhere near the same size as it was, either.

So from that perspective, we just don't have the same opportunities that we had a year or two ago, Matthew, to really make those major reductions, unless we were going to, again, sell pieces of the portfolio. And that's never been -- even these last two or three years, as we've taken that investment portfolio from 48%, 49% of assets down to 35% at the end of last year, we never did that through the sale. We did that just through normal amortization, prepayments, payoffs, calls, those kinds of things.

And it would be my expectation we would continue to do that going forward. It's just that we do have some hardwired securities with fixed maturities, not spinning off any cash flow or anything each quarter, that when they come due, yes, there's always that opportunity to let those move off of the books. But even there it was always about CMO and mortgage-backed security cash flow. And we just don't have that same amount of dollars coming due anymore.

Okay, okay. Transitioning to expansion, then I will hop out -- I know we're going to absorb a full quarter's worth of Montana Community Banks in the second quarter. But given this dynamic and the conversion, which I expect to still schedule for June, how should we be thinking about the expense trajectory as we move through the year?

That's a great question, and I wish I had a really great answer. I think that we've got a couple initiatives internally to -- among all 13 of the bank divisions -- to hold the line on expenses. But at that same time, it takes resources to get through these platform conversions. We've got a couple of other internal projects that we are working on right now that, long-term, we think are going to have tremendous benefits to the entire Company. But those kinds of projects -- they take additional resources right now to get them completed.

So it's a very good question. All I can say is that we've laid out a goal out there of 53% efficiency for this year. That's what we are targeting. That's what we have budgeted for. We think we've got some good revenue quarters in front of us, at least if history is any indicator.

And then, as I said in my remarks, I think it's up to us to try -- and all the banks -- to really try to hold the line on the expense side. But we've got to be realistic. Some of these initiatives that we have underway, in the near term, they are going to come with some additional costs, and that's just -- there's just no way of getting around it.

And if we're going to do them right, if we're going to get them completed on time, some of these things just take more resources and more dollars. But overall, you're doing it for only one reason: that is to make the entire Company more efficient, more productive, more streamlined going forward.

Thank you very much.

Jeff Rulis, D.A. Davidson.

Not to belabor the loan yield discussion, but I guess that was -- a lot of that was just Q1 alone. I guess I'd be interested in Q2 the first several weeks here: how that loan mix and loan yields has transitioned. You said there's some carryforward benefit, but I guess production so far in the quarter -- has that continued on to where you could see continued loan yield increase?

Well, I guess, Jeff, where we are coming from there is if we could have a replication of what we did in the first quarter volume-wise in the second quarter, we would be ecstatic. Now, I will say that -- and I mentioned this in my formal marks -- we carried a fair amount of momentum. And I mentioned that at last quarter's call in January, that we knew we were carrying a fair amount of momentum. There was a couple of larger deals that got closed in this quarter that we knew about last quarter. We just knew they weren't going to close until the first quarter. But we were confident that they were going to close.

That obviously helped the numbers. It wasn't the whole reason, though. Like Barry said, we still had -- and I certainly believe we had -- an exceptional quarter from the loan growth perspective, even excluding a couple of those larger transactions that we kind of knew about last quarter.

As we enter this quarter, we don't have as many of those to look forward to. But at the same time, it is the second and third quarter of the year. Like Barry said, we will start to see ag lines being advanced upon. There wasn't -- there was some of that, as Barry said, in the first quarter, but right at the very tail end. I think for the most part, most of those advances are going to be a second-quarter event.

You know -- and yet the activity level -- I think, Barry, you would say the activity level stays pretty solid. It's not a runaway. We're not seeing -- you know, just being flooded with requests, but I think the activity level that we are seeing right now, as we are, like you said, Jeff, three weeks into the second quarter, is still good volume.

As I mentioned in my formal marks, we actually had a decrease in resi construction, and lot land loans, and raw land loans during the first quarter. We would certainly -- as spring and the summer months come, we would certainly expect those trends to turn around. So we could get a little bit more lift there that we didn't get in the first quarter.

So all in all, I think we're feeling pretty good about the opportunities to keep loans going. It would be fantastic if we could produce another 10% annualized organic loan growth this quarter. Maybe we do; maybe we don't. Maybe it's less than that. If everything came out right, it could be a little bit more. There's always deals that have been done and approved in the past that are still at bat. We're still advancing on those, especially on the construction side and the commercial real estate side. Those can certainly help us.

We get into the spring and summer months, some of our larger contractors, whether that's road contractors, highway, those kinds of people -- they certainly get much busier and start to draw down. So, anyway, that's kind of where we are at there.

Right, so I get you on the volume side. I guess specific to the loan yield, it was -- relative to Q1, so far in Q2, how has the loan yield changed, if at all?

Yes, I don't think there's been too much. I'm not saying that this quarter -- I wouldn't -- not necessarily expect that we're going to generate 12 basis points of additional loan yield in the second quarter. No. That probably -- if I was a betting person, I would say, no, that's not going to happen. Can we hold the yields?

We are always looking -- when we have a quarter like we did, we sit back and say, wow, that was great. Now, can we hold it? Or is there something this quarter that's going to cause a 6 or 7 basis point reduction in yield?

I don't think we're seeing anything like that yet. Certainly it's early in the quarter, Jeff, but I don't believe that anything has come to our attention. I wouldn't say that. But right now, if we finished this second quarter in loan yields that we delivered -- the increase we delivered in the first quarter stays constant, we would be happy with that. Very happy.

Sure, okay. Thanks, Mick.

(Operator Instructions) Daniel Cardenas, Raymond James.

Just changing subjects here just little bit -- maybe if you could give us an update on the CEO search, and whether or not you think an announcement will still be a Q2 event.

Yes, the announcement -- I am confident the announcement is going to be a Q2 event, Dan. And right now the expectation is that in August we would have my successor on board and working. So we see no reason to deviate from what I've been mentioning in the past. The second quarter, we will have that individual named and hopefully by early to mid third-quarter have the person on the ground.

Excellent. And then maybe just some color on M&A environment, whether there's been any big changes from when we last spoke?

No, not really. There's still things that we are definitely looking at. We put in a bid a couple weeks ago on one. Don't think that's going to happen. That's fine. There's other things that we're certainly constantly working on.

I would say that from this -- for the first quarter this year versus, as I remember, back the first quarter of last year, seems like it's not quite that frothy. It seemed like last year about this time, it was hard to even keep track of all the requests, inquiries that were coming in. I would certainly say it's not like that anymore.

But once a month, there seems like there's another opportunity that is being presented to us. And for us, we're still keeping our fingers crossed. We are still certainly hoping that we can announce two more deals yet in 2015. But we will see.

They've got to be good for everyone concerned. And we'll see if we can put a couple of these together. We certainly hope we can. But only time will tell. But I would -- getting back to your question, Dan, I just sense that there's things that we are currently working on, but it's not like there's eight or nine things that have been presented to us within the last quarter. That's not the case.

Then on the loan growth side, maybe some color as to what percentage of the first-quarter growth was market share grab versus maybe just people coming off the sidelines and starting to invest for future growth?

We had some -- I had an interesting discussion with one of our bank presidents just yesterday that -- they commented that it was very, very -- this was one of -- this was in Colorado. So Art was the one who was telling me that he thought it was refreshing that mainstream businesses -- he was seeing a bigger and bigger increase in mainstream businesses coming to the Bank and looking to do something. Something that, he says, it's been a number of years since -- even during the downturn, where a lot of those mainstream businesses had pulled in their horns, Dan, didn't do a lot. He says he is seeing more and more of that.

So he's feeling that they are getting a little bit more confident. They are getting a little more comfortable. They are seeing some opportunities to expand their businesses. And he's seeing opportunities from our perspective to lend them more money. Now, that was just one bank -- one bank president that commented.

But, Barry, are you seeing that? Do you feel that that's happening across the footprint, or --?

No, not really. It's kind of hit-and-miss, but nothing steady.

So here again, maybe that's just a function of that market, that economy. So there again, Dan, I guess you can't assume that that is taking place in all the other states, in all the other communities. That was just a comment that -- we were having that discussion yesterday, and he was pretty upbeat about the fact that mainstream businesses in his markets were coming back to borrowing more money. So -- but it sounds like from what Barry is seeing, it's certainly not systemic. And we are not seeing it across the footprint.

Our existing borrowers -- what we're seeing is better performance. But I would -- you know, it's probably based on coming out of a down cycle. So are they back to hitting the cover off the ball? I'm not sure, but they are definitely back from when times were tough.

Okay, great. Thanks for the color. Good quarter, guys.

Jacque Chimera, KBW.

I just have one quick follow-up. Excuse me. Mick, I wondered if you could shed a little bit of color on if there was any change in premium amortization between 4Q and 1Q? And then just your expectations for 2Q?

No, there really wasn't in the first quarter, Jacque. That's a great question. You know, whether there could be a slight uptick in the second quarter -- that could be possible, because obviously we did see a little bit better refinance volume in the middle part of the first quarter. And, as you know, once those refinances take place, it's usually 6 or 8 weeks before the flow through the security portfolio.

But the two things there that probably, based on our analysis, are not going to move the needle much one way or another is: our CMO portfolio is -- number one, it's smaller; much, much smaller than it was a couple years ago, first and foremost. Number two, the premiums that we purchased some of these CMOs are not the same as they were two or three years ago. So you don't have that same dollar amount of premiums to amortize.

And then it just appears as though, as we look at the numbers every week, that we are not seeing any kind of real spike up in prepayment speeds. Now, were the prepayment speeds in March a little bit higher than they were in January? Yes, but it's probably insignificant.

So we are not expecting that premium amortization is going to be much of a story for us anytime soon and forever. Because, like I say, that portfolio continues to get smaller and smaller. Certainly not the story it was for us in 2012 and 2013.

Okay, great. Thanks, Mick. That's very helpful.

Thank you. And I'm showing no further questions at this time.

Okay. Well, thank you all very much for joining us today. As I said, I think we are off to a good start for 2015. We are excited thinking that, at least historically, the three best quarters for us lie ahead of us. So I certainly hope that history in that respect repeats itself this year.

And I hope everyone has a great weekend. And thank you very much again for joining us this morning. Goodbye now.

Ladies and gentlemen, thank you for participating in today's conference. That does conclude today's program. You may all disconnect. Have a great day, everyone.