ViewPoint Financial Group Management Discusses Q1 2013 Results - Earnings Call Transcript

Apr.25.13 | About: LegacyTexas Financial (LTXB)

ViewPoint Financial Group (VPFG) Q1 2013 Earnings Call April 25, 2013 3:00 PM ET

Executives

Scott A. Almy - Chief Risk Officer, Executive Vice President and General Counsel

Kevin J. Hanigan - Chief Executive Officer, President, Director, Member of Lending Committee, Chief Executive Officer of Viewpoint Bank, President of Viewpoint Bank and Director of Viewpoint Bank

Pathie E. McKee - Chief Financial Officer, Principal Accounting Officer, Executive Vice President, Treasurer, Chief Financial Officer of Viewpoint Bank, Principal Accounting Officer of Viewpoint Bank, Executive Vice President of Viewpoint Bank and Treasurer of Viewpoint Bank

Analysts

Michael Rose - Raymond James & Associates, Inc., Research Division

Brady Gailey - Keefe, Bruyette, & Woods, Inc., Research Division

Brad J. Milsaps - Sandler O'Neill + Partners, L.P., Research Division

Brett D. Rabatin - Sterne Agee & Leach Inc., Research Division

Scott Valentin - FBR Capital Markets & Co., Research Division

Donald D. Destino - Harvest Capital Strategies LLC

Operator

Welcome, everyone, to the ViewPoint Financial Group's First Quarter 2013 Earnings Conference Call and Webcast. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Scott Almy. Please go ahead.

Scott A. Almy

Thank you, and good afternoon, everyone. Welcome to the ViewPoint Financial Group First Quarter 2013 Earnings Call.

At this time, if you're logged in to our webcast, please refer to the slide presentation available online, including our Safe Harbor statement on Slide 2. For those joining by phone, please note that the Safe Harbor statement and presentation are available on our website at viewpointfinancialgroup.com.

I'm joined today by ViewPoint's President and CEO, Kevin Hanigan; and Chief Financial Officer, Pathie McKee. After the presentation, we'll be happy to answer questions that you may have as time permits.

And with that, I'll turn it over to Kevin.

Kevin J. Hanigan

Great. Thanks, Scott, and thank you, all, for joining us on the call this afternoon. I will cover the high-level results for the first quarter, and then Pathie will walk us through the remainder of the slide deck. Thereafter, as Scott mentioned, and time permitting, we will be happy to field any questions you may have.

By way of recap, it has been a little over a year since we announced our strategy to transition to a more commercially oriented bank. The 2 major initiatives that began the process was our move to a national bank charter in December of 2011, and the closing of our acquisition with the commercially oriented Highlands Bank on April 2 of last year. In the first quarter of 2013, we continued to successfully execute on our commercial bank transition strategy, driven by another quarter of strong growth in C&I and commercial real estate lending, as well as improvements in our deposit mix.

Despite the growth in these key areas, our first quarter earnings were soft. The softness was primarily due to traditionally weak mortgage warehouse volumes that we and others experienced in the first quarter. As we look specifically at loan portfolios, our loans held for investment increased by $54.3 million or 3.2% on a linked-quarter basis. Our C&I and CRE portfolios grew by $81.5 million or 7.3% on a linked-quarter basis. It is worth noting that about $73 million of our C&I and CRE volume was booked in the last week of March. As such, we did not get much revenue growth from these new loan volumes. In fact, with the way we post provisions on new loan volumes, the increases caused us to book loan loss provisions related to the loans in March as well.

Turnings to our loans held for sale or our mortgage warehouse division. Our average loan balances were down $170.4 million or almost 19% from the prior quarter. Net income for the quarter totaled $8.1 million or $0.21 a share. Net income was up 14% over the first quarter of last year. And on a linked-quarter basis, our basic earnings per share were down $0.07.

Our net interest margin for the quarter stood at 3.64%, up 34 basis points from the same period last year but down from 3.77% last quarter. Our tangible common equity closed the quarter right at $500 million or 14.95% of tangible assets. Finally, our asset quality continues to compare favorably with the industry with NPAs to loans and our OREO standing right at 1.67%.

With that, let me turn the call over to Pathie.

Pathie E. McKee

Great. Thanks, Kevin. Turning to Slide 4. It shows our commercial bank transformation that he was speaking of. We have 3 pie charts starting out with 2007. You can see in the yellow slice, C&I is only 1% of the portfolio, with commercial real estate being at 28%. So our commercial book was about 29% as of 2007. The transformation as we move forward to the end of the year of 2012, we've increased the C&I portfolio now to 16% of the loans held for investment mix and commercial real estate at 50%, making the loan book be 66% more commercial. Fast forward now to the first quarter of 2013, continued improvement has been seen, with C&I being at 17% and commercial real estate at 51%, now 68% in the commercial portfolio in the book.

Turning to Slide 5. It shows the improvement in earning asset mix. The company's strategy has long been to move out of lower-yielding securities and overnight loans into higher-yielding loans. On a year-over-year basis, the company has improved its mix from securities and overnight from 35%, now down to 23%. And the loans held for investment mix has gone from 42% to 53%, with loans held for sale staying pretty much flat, 23% to 24%.

Let's turn to Slide 6. It shows our strong loan growth. The quarter was marked with very strong commercial loan growth. These 2 charts shows the trends in the portfolios that the company has been focusing on growing. You can look to the C&I lending growth on the left. The outstanding balances were at $70.3 million at the first quarter of 2012 compared $302.5 million at the first quarter of 2013. We had linked-quarter growth of $24 million in this portfolio.

Turning to commercial real estate. It's grown from $624.1 million now to $897.5 million, with the linked-quarter growth of close to $58 million. These 2 portfolios combined grew a combined linked quarter of 7.3% or close to 29% on an annualized basis.

Now let's turn to Slide 7. This is our Warehouse Purchase Program. It shows the trends from 2010 to 2013. This is a program that shows up in our loans held for sale in our balance sheet. We began the program in July of 2008. It is a national program and represents 49 states. It has been successful at growing year-over-year. I'd point you to the first quarter of 2011. The average outstanding balance is $274 million. If you look fast forward to the first quarter of 2012, that grew to $638 million, now up to $738 million on an average balance outstanding in the first quarter of 2013. As you can tell by this graph, there is seasonality to the first quarter of every year. And likewise, we had $170 million decline, almost 19% from fourth quarter of 2012.

Turning to Slide 8. This chart shows our mix of deposits, as well as our improvement in the cost of deposits year-over-year. If you look to the first quarter of 2011, we had cost of deposits of about 1.22%, down by 0.67 basis points in the first quarter of '12 and now at 0.45% in the first quarter 2013. The improvement in deposit costs can be attributed to reduction in rates across all interest-bearing accounts, as well as the improvement in the mix of our non-interest-bearing deposits. Non-interest-bearing deposits now represent 17% of the mix. As of fourth quarter, it's 16%. If you go back just a year ago, it was 12%. And if you look to 2011, it was at 9%. So you can see the continued improvement of the mix of non-interest-bearing deposits, which have contributed to the improvement. 70% of our times are expected to mature within the next 12 months, so we should see continued slight improvement in this cost of deposits.

Turning to Slide 9, the financial comparison of the quarterly average balance sheet. As you can see, the loans held for sale has declined $170 million or 19% from the same time last -- or from the fourth quarter, but yet it's up 12% over the same time last year. Loans held for investment is up $19 million, and as Kevin mentioned, that is due from an average balance because the commercial loan growth also contributed to the last part of week of the March about $72.6 million. The earnings on that portfolio will probably be more in the second quarter than what we were seeing in the first quarter. Non-interest-bearing demand continued to improve year-over-year, showing the improvement on average balance from $358 million to $367 million.

And then looking down to the borrowings. You can see that the borrowings have declined $180 million from $770 million to $590 million, showing the strategy of matching our borrowings to our loans held for sale. The remaining balance of the $590 million, there are some long-term borrowings in there. About $283 million of the $590 million are long term. Therefore, the rates from the borrowings did go up as the mix of the shorter-term borrowings came down.

Turning to Slide 10. It shows our financial review and performance metrics year-over-year. As you can see, there's been some vast improvements in all of the metrics. Tangible common equity has improved from 13.5% to now close to 15%, 14.95%. Net interest margin improvement from 3.30% to 3.64%. The yield on earning assets has improved from 4.13% to 4.27%. Cost of funding is down from 1.02% to 0.82%. And return on assets at 0.97% compared to 0.95% the same time last year. And as Kevin mentioned, we still compare very favorably to industry with our nonperforming assets to the loans held for investment plus OREO at 1.67%, down from 1.94% the same time last year.

Turning to Slide 11. It shows our strong credit quality. This is a strength of the organization. As you can see on the chart here, from 2009, 2012 trending, that we compare favorably to all of the period indexes that we compare ourselves to, the Small Cap U.S. Bank Index represented in red, and the Regional Southwest U.S. Bank Index represented in green.

Turning to the nonperforming assets and loans to OREO chart. You can see that the bank at the end of the year was at 1.72 compared to 2.42 of the Regional Southwest and 3.29 of the Small Cap. And as of the first quarter, we are down now to 0.167.

Our net charge-offs, you can see we're at 0.11 at the end of the year, compared to the Regional Southwest of about 0.40 and Small Cap U.S. Bank Index of 0.73. We ended the first quarter at net charge-offs at 0.07. Nonperforming assets to equity, likewise, are still below what peers are at 5.59 at the end of the year. First quarter came in at 5.50 compared to the Southwest U.S. Bank Index of 12.48 and the Small Cap U.S. Bank Index of 20.18.

Turning to Slide 12. It shows our robust capital. ViewPoint remains among the strongest capitalized institutions in the industry. The Tier 1 capital at the first quarter 2013 is at 19.6%, and it does reflect a change in the risk weighting of our Warehouse Purchase Program from 50% to 100%. Still remains well capitalized as an organization.

Our tangible common equity is at 15%. And as we work to deploy the capital, there is still the strategies of organic growth, paying dividends, share repurchases and a disciplined M&A. It should be noted that the company did announce a $0.10 dividend for the quarter.

Now I'll turn it over to Kevin for final comments.

Kevin J. Hanigan

Sure. Thanks, Pathie. I would characterize the quarter again, very good progress in our core loan growth, particularly in the areas of C&I and CRE. Credit quality continues to outpace our peers. We are in the extremely favorable capital position, which gives us much optionality. Finally, we are executing on our plan to become a premier Texas community bank.

With that, we'd like to open it up to questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from Michael Rose at Raymond James.

Michael Rose - Raymond James & Associates, Inc., Research Division

I obviously want to start on the Warehouse. I think it obviously caught some people by surprise. How do you expect balances to trend through the year? Do you expect that same sort of seasonality and kind of ramp through the year? And it looks like maybe you signed up 1 or 2 more mortgage companies this year. Should we expect kind of the same pattern? And kind of do you have an outlook for average balances for the year relative to maybe last year?

Kevin J. Hanigan

Sure. I certainly anticipated that question, and settle in because the answer might be a little longer than I normally give you. So I'm going to set some data points. First of all, I'm going to remind everybody what we have said for the last year about the mortgage business. I have a personal love-hate relationship with the business. I love the earnings and the earnings cover. We think it's the best way to play the mortgage business. You get floating rate paper versus fixed rate paper, which is priced way low these days on a fixed rate side, 17- to 19-day turn time, so the durations are very short and very low risk. And it's been a great source of earnings. The thing I don't like about it is it introduces volatility to earnings, particularly in the first quarter. It's been a great business and will continue to be a great business for us. And it's also allowed some earnings cover for us to diversify our balance sheet by building out C&I. If you remember, a year ago at this time, we reported -- we hadn't done the Highlands deal yet, so we had a whopping $71 million in C&I. We did Highlands April 2. That added another $80 million. So we have $150 million, and we are today over $300 million. So in a year's worth of time, some pretty good progress in C&I. And we continue to be very active and very successful in the real estate market. So going back to our strategy in the warehouse. We've talked many times about how we try to focus on people who have more of a purchase model. And once again, this quarter reflected that. 52% of our volume was in purchase, 48% in refi. And turn times came down a little bit. They were closer to 17 or 18 days, and last quarter, they were just shy of 20, I think. And that's just there are some -- with less volume within the system, it's more efficient processing paper, and it just tends to flow through the system better. So let me give you some background on some prior years just to put the business in context for you. If we go back to the fourth quarter of '10 and the first quarter of '11 and just go peak to trough, and this is not information we provided before, you've got quarter end to quarter end. But the high point in 2010 to the low point in the first quarter of 2011, there was a 67% drop, peak to trough, okay? In '12, the drop, peak to trough was 38%. And this year, '12 to '13 was 44% peak to trough. So we peaked at $0.93 billion in the trough that we hit in the first quarter was $616 million. If we just think about the business -- let's think about it this way. Last year, for the year, we averaged $772 million in fundings. That's for the whole year of 2012. And let's just say half of that volume was purchased and half was refi. It was better than that. It was closer to 52-48 for the whole year. But just to make this math easy, so out of that $772 million, half and half, so $386 million in refi, $386 million in purchase. As you know, we don't give forward-looking statements, but I can point everybody to what we do now is the Mortgage Bankers Association puts a forecast out there, admittedly, hadn't been a good forecast the last couple of years. They've been predicting a decline and decline, and we've had massive upticks in volumes for the last couple of years. Let's say this is the year they are right. All right. So if you went to their webpage today and pull down their forecast, they think the refi volume from 2012 to 2013 is going to drop 29%, from a $1.247 trillion to $886 billion. And they think the purchase volume is going to increase 17.5% from $503 billion to $592 billion. So let's just apply that to our average volumes for the last year. So if we had $386 million, half of our volume in refi, and the refi volume declined by 30%, slightly more than the MBA forecast, that would be at -- we would lose $116 million of volume. So our refi volume, if we match the MBA forecast, we would end up with $270 million of refi volume on average this year versus $386 million last year. Switch over to purchase and take the same $386 million and add 17.5% to that, that's $67 million, or would yield us a purchase volume on average for the year of $453 million. So simple math here, not a forecast, just math. $270 million of refi, $453 million of purchase would give us, on average, $723 million versus last year's $772 million, up $49 million shortfall. All right? If the MBA is right and this math is right, and I take it I got the math right, we'd come up, on average, $49 million short. So how we will we plug the gap of $49 million would be the next question. I would tell you, we will do it through new volume. We did add some clients. In the first quarter, we approved 4 new clients, and we have approved one in this quarter so far. Out of those 4 new clients in the first quarter, only one of them was actively funding. And they weren't really funding until the last part of March. In the last week of March, they added about $4 million in volumes. So really had no meaningful impact on the average volume for the first quarter at all. Since then, they have been more active in funding. And we have a second one of those 4 clients that we approved in the first quarter begin funding, I think it was April -- mid-April, some time, 16th or 17th, somewhere along there. So we have 2 of those funding. One is in training, making sure systems and processes and everything are going quite well. So we're testing and training with one. And the fourth one is shortly behind them in the training. Those 4 clients, commitment-wise, totaled $95 million. And we're confident all 4 of those will be active during the second quarter. The one we added so far this quarter is a $10 million, so we got $105 million of new volume that's approved and in the process of moving through either documentation, training or funding. So if we had a low usage factor, and even in this market, a low usage factor would be 50%, figure half of that, $105 million starts funding, and that's $52.5 million, it kind of makes up for the $49 million. In addition, we're out there calling on clients and we have an active pipeline. I will tell you the pipeline -- and this is like a real pipeline, not -- things were really working. There are 5 deals in the pipeline. I looked at them pretty hard, and we talked about them all this morning. I think there's 3 that are more likely than not to pull through, and I think there's 2 that might be iffy. Those 3 commitments or facility size -- I hesitate to call them commitments. Facility size for those 3 is $85 million. We're reasonably confident that those 3 will get approved in the second quarter here and at least one of them will get to the point where there's some funding volume out of them. The rest of them probably really don't produce funding volume until the very early part of the third quarter. So I know this quarter sounds bad, but it is not too atypical. The only thing that's atypical was last year. It held -- the first quarter held up a little better on an average funding. Peak to trough was still bad, but the average funding was about flat for the first quarter. Just there was an aberration in the market place last year. We had so much dislocation with BMA, MetLife and a bunch of others exiting the business and looking for new homes. Volumes kind of were different than normal last year.

Michael Rose - Raymond James & Associates, Inc., Research Division

Okay, that's really helpful, Kevin. And if I could just ask one follow-up. Can you attribute a certain amount of basis points in the margin compression this quarter to the decline in the Warehouse balances?

Kevin J. Hanigan

I really...

Pathie E. McKee

More of the asset yield compression and the loans held for investment was the primary reason for that.

Kevin J. Hanigan

We think of that business as a roughly 4% gross business at the revenue line, and we fund it with the [indiscernible] 15 to 20 basis points, so it's a 3.80% or a 3.75% margin business. So it accretes to margin when your margin is below that, and it's dilutive to margin when your margin is above that.

Operator

The next question comes from Brady Gailey at KBW.

Brady Gailey - Keefe, Bruyette, & Woods, Inc., Research Division

So I was a little surprised to see the cost of time deposits go up. I mean it's ticked down every quarter for the last couple of years. If I'm looking at this right, it went from 1.03% up to 1.22%, 4Q on top of -- or 1Q on top of 4Q. Any reason why the time deposits ticked up there?

Pathie E. McKee

Yes, Brady, I'll answer that question. We actually had a jumbo CD purchase accounting mark from the Highlands acquisition that expired in the quarter, leaving a little tail of some certificates that were out there. It was being amortized over the average of those certificates. And so it did spike the cost of CDs there. That was the primary reason.

Brady Gailey - Keefe, Bruyette, & Woods, Inc., Research Division

Okay. So from here on out, that should continue to tick down modestly?

Pathie E. McKee

Modestly.

Brady Gailey - Keefe, Bruyette, & Woods, Inc., Research Division

Okay. And then how much benefit is in the margin from the Highlands accretable yield? I think last quarter, it was around 12 basis points. What is that number for 1Q?

Pathie E. McKee

It dropped down to 11 basis points in the first quarter.

Brady Gailey - Keefe, Bruyette, & Woods, Inc., Research Division

11, okay. And then finally, the increase in the risk weighting on the Warehouse from 50 to 100, is that something you all did proactively? Or is that something that you got urged to do or why the change there?

Kevin J. Hanigan

We can call it proactive. We can call it a lot of things. We can give you a sequence of events.

Pathie E. McKee

On April 2...

Kevin J. Hanigan

Yes. On April 2, which was the anniversary of the Highlands deal, we received an e-mail that was forwarded to us by our primary regulator that came from the FDIC, which changed some call report...

Pathie E. McKee

It gave supplemental instructions to the call report.

Kevin J. Hanigan

The call report, which basically was guiding to put it in different lines and do essentially risk weighted it at 100%. So we went ahead and did it, and our call report will reflect that as well. We'll file that here in the next couple of days. So I can't say we've had a long conversation about doing that with the OCC. We've had a long conversation about how we feel about it and why we feel as though a 50% risk weighting is more appropriate, and we will continue to have that discussion. And if you ask me today, do we know exactly why it's 100% risk weighting? I don't even -- it's hard to have a discussion until we know exactly what factors they believe caused it to be 100% risk weighted.

Brady Gailey - Keefe, Bruyette, & Woods, Inc., Research Division

Okay. And then finally on a separate topic. Kevin, can you just update us on your thoughts on capital return or capital deployment, whether it's a dividend hike or a special dividend or buybacks or whether it's deployment through acquisition of another bank? What are your updated thoughts on that?

Kevin J. Hanigan

Yes. And I would -- just as a reminder, in this whole process, reminder everybody, we do have a share repurchase authorized for 5% of the shares out. That's a little over 1.9 million shares. Our thought on capital deployment is pretty much the same as it's been. Organic growth followed by M&A, and M&A focused in Texas and particularly in Dallas, Fort Worth, and the size range, as we've talked about in the past. We're not interested in $200 million banks. We're interested in banks of $500 million and up to maybe $1.5 billion or so. And then third is it's the repatriation of capital in one form or another, and by that, I mean, dividends, share repurchases or special dividends. We're very cognizant that capital levels have grown again, as the balance sheet shrunk a little bit, and we earned some money and now we're sitting at almost a 15% TCE ratio. And we've talked in the past, the organic growth alone is not going to get that deployed in any timeframe that's reasonable. So I would tell you, in all 3 areas, we're going to be opportunistic. If we see dislocations in the loan market, we're going to go attack them. If we see an opportunity to make an accretive, sensible acquisition, one of those names -- or one of the 12 that we tell everybody we're kind of targeting, we're going to go after it and hurry. And if we can't make that happen, we will repatriate capital.

Operator

The next question comes from Brad Milsaps, Sandler O'Neill.

Brad J. Milsaps - Sandler O'Neill + Partners, L.P., Research Division

Kevin, just can you talk a little bit more about the held for investment growth, kind of what you saw during the quarter in terms of client demand and what -- if you hired any teams and sort of plan to hire additional teams here in the second quarter, how that might affect the loan growth issue move throughout the year?

Kevin J. Hanigan

Sure. Let's cover C&I first. So we reported -- the net increase in C&I for the quarter was, I think, $23.9 million, let's just call it 24. That consisted of $63 million of new credit commitments, okay? And 50 of that was brand new, brand-new clients, that was 8 new clients and $15 million of commitments on those 8 new clients. We had 10 existing clients who asked for us to upsize credit facilities in one form or another, representing the other $13 million in commitments. New fundings out of that $50 million of 8 new clients, 29 was funded at the end of the quarter. And there was about $8 million funded on the 13 from the clients who are existing clients. So that was $37 million of new fundings. And then throughout the quarter, just to make that all balance out, the lines of credit are up and down. And on balance, they were down $14 million over the prior quarter. That's lines of credit and then some permanent reductions on any kind of equipment or equipment financing we may have out there, just the regular amortization. So weighted average coupon on that volume, that's the whole funding of the $37 million of new fundings. It was 4.24%. So I hold my own, if we go back to the last couple of quarters, it was actually slightly lower than that. I think we have a -- last quarter, it might have been 4.10% or 4.11% on the coupon side. So coupons held up pretty well, although I would tell you, still pretty competitive out there. Just to head off somebody's next question, let me cover syndications of the $37 million in fundings. $12.5 million of those came from syndicated loan facilities where we bought in to somebody else's deal. $5 million of that was funding into an existing deal, previously approved syndication with just upside, and 7 was a brand-new deal. So there was one new syndicated deal. On the sell side of syndications, we sold out $20 million in the quarter ended. $10 million real estate deal, and actually, $21 million. It was $11 million C&I deal and a $10 million real estate deal. So we actually sold out more than we bought in, in terms of syndication. If we turn to real estate, $58 million net increase, total approved volume. Big number for the quarter was $141 million worth of deals. That was $104 million of new stuff and just renewals for the other $37 million. So the weighted average coupon on the $141 million was 5.29%. And the new volume was really at a 4.90%, brought down by one large deal, 20-some -- $27 million that had a 4.75% coupon on it. So that drag down the WACC on the new volume. So with all that activity, you'd say, well, how did we only end up with $58 million? Here is a big part of the story and a big part of some margin compression. We had in the CRE business $46 million worth of paydowns with a weighted average coupon of 5.99%. So one of the things that's happening to us perhaps that isn't happening to a lot of the other banks is not a whole lot of folks had 6 and 6.25 handle on real estate deals. They might be refinancing deals that were in the high 4s and in the lower 4s or something along those lines, but we have some vintages where we had 6 handles. Let me tell you what's remaining there, just sort of I can think about this and think about what this means for us. If we just look at our CRE balances that have coupons in excess of 6%, there is $271 million of our roughly $900 million in total volume. They have coupons over 6%. $79 million of those are subject to prepayment penalties, which means there was $192 million out there that can prepay without penalty. So that's the one thing that's hard for us to predict. We had 46 of that prepay in this quarter. We had roughly 48, I think, last quarter. So what we're doing with those clients is we're getting in front of them and we're asking them about what they're thinking about doing. Most of them were saying, "We're thinking about refi." And then we're saying, "How about we blend and extend? Why don't we give you 5.25 and run you out for another 5 years, save you the cost of the appraisal, getting new environmental studies done, legal documentation, an upfront fee from a new lender, on and on and on," and we're having some success in doing that. So that doesn't mean we still don't suffer spread compression, but we don't lose the volume, as well as the spread compression. And we control the spread compression at being at closer to 5.25.

Brady Gailey - Keefe, Bruyette, & Woods, Inc., Research Division

That's great. That's great, Kevin. And just anything on any new lenders hired in the quarter or...

Kevin J. Hanigan

Yes. We have 3 new production oriented people. One is an underwriter. But it makes our other lenders more efficient, kind of underwriting portfolio management. Much like the other hires we've made, big bank trained, one of the big 4, 19 years with one of the big banks, and most recently, out of a bank in Texas. And I think they've been here a total of 3 -- no, 4, 5 weeks, and they've done their first deal already. And it was a really nice deal. The good news about this quarter is we're seeing fundings early. It was really unusual at the end of the first quarter to have the bulk of our fundings come in the last week of the quarter. I did the math on it, I don't know, several weeks ago, and I think we collected interest income off of that $71 million or $72 million with the volume of less than $50,000. And we put up provision that typically on that kind of volume, depending upon what asset class it's in and how the loan rate is, you're going to put up a provision of $300,000 to $600,000. So the good news is we funded a bunch of loans and bad news is we lost money for the quarter on the funding. The story will be different. This quarter, we get 91 days worth of interest income and we're not putting up any provision on it. I haven't seen that happen, by the way, since 1987, a volume that was all skewed to the last week in the quarter. Yes, I will only to add to that, since I brought up new volume this quarter. The pipelines look good. We have funded so far in April $10 million worth of new commercial real estate deals and $22 million worth of new C&I deals, and the pipeline looks as good or better as it did last quarter.

Operator

Our next question comes from Brett Rabatin of Sterne Agee.

Brett D. Rabatin - Sterne Agee & Leach Inc., Research Division

I wanted to follow up a little bit just on yields. Kevin, you've given a lot of great color and I appreciate that. I was hoping to get maybe a little more color around the loans held for sale. And just the linked-quarter average yield declined about 13 basis points to 3.92%. I was curious if you had any thoughts on floors and just if you might see some more pressure in that portfolio kind of given what's happening with the industry from a Warehouse perspective.

Kevin J. Hanigan

Yes. I think we may still get pressure, although in many respects, we're reaching my choke point on how low we will go. But there is still pressure out there and it's -- I think with all the worries, whether justified or not, for the first quarter, everybody's in the business that's going to scramble harder to make sure they get what volume is out there. And I think that's going to put pressure on margin. If you ask me today, I don't think it will be kind of to the extent it's been in the past because it's been -- if you go back a year ago, we're probably getting 4.11% or 4.12%, and it's been a steady decline. And there's -- I think we all have a point at which we say nuanced. Some of the things we're doing there, in addition to just going out and getting new clients, is that we're seeing some rebound in a little more fluidity in the jumbo market. And I think there's a way for us to capture some more of that jumbo volume from our clients. And for competitive reasons, I won't go into the how's and why's of that. Having said that, don't look for that to be huge volume increase as a result of it. Well, I'm talking about increases at the margin. Our volume increases are going to be driven by new clients.

Brett D. Rabatin - Sterne Agee & Leach Inc., Research Division

Okay. And then as a follow-up, I was hoping to get a little more color around just -- you're having really strong growth in commercial real estate. Can you talk maybe a little bit about property type and what you're seeing in 2Q? And just kind of given your funding rates are pretty healthy, I was just curious what kind of industries you were seeing.

Kevin J. Hanigan

On the real estate side, I'm going to say 90% of what we're doing is multi-tentative properties. And if there's been a few groups more than any others, that's been office. So multi-family, multi-family is coming in a little cheaper. That's the stuff that we did at 4.75%. And then third in line was probably retail. But it will -- a lot of office deals. And we're talking about stuff, for the most part, that is either in our backyard or with a client who's in our backyard who might have talked us into going to a different area of the country with them.

Brett D. Rabatin - Sterne Agee & Leach Inc., Research Division

Okay. Any idea how -- given that comment, any idea how much will be outside the state of Texas?

Kevin J. Hanigan

None of the volume in the first quarter was outside of the state of Texas. We have one deal in the pipeline for this quarter that is outside of the state of Texas, and that's the only one I'm aware of. And we had a long discussion about that one, and we only would have done that for a really good local client who we have a full relationship with. We do most of their banking, and we'd like to keep it that way. And one of the ways to keep it that way was to follow them in this rare circumstance outside of the state.

Operator

Next question comes from Scott Valentin at FBR Capital Markets.

Scott Valentin - FBR Capital Markets & Co., Research Division

Just with regard to the margin looking forward, there's kind of 2 dynamics, I guess, taking place. One is the downward repricing of loans in the existing book, putting pressure on asset yields, but yet you have the mix shift on asset side that maybe is helping asset yields overall. Just wondering how we should think about the margin going forward, maybe if this is kind of varying effects between the 2. And this margin, is it relatively stable? Is it kind of just downward? I'm just talking about core margin x the accretable yield. I know it's hard to predict on accretable. Just the core margin.

Kevin J. Hanigan

Yes. And it's -- I wish I could give you a better color on it. It's so dependent upon prepays and commercial real estate. We're holding our own. If we just kind of look at the volume we're putting on, on CRE and C&I, on average, I think if we go over the last 3 quarters, and this has been -- I haven't calculated this number, but if we did, I wouldn't suspect it to be off of 4.5%. We're getting close to 5%, 4.95% on most of our real estate stuff. And we're holding it 4.10% to 4.25% on the C&I stuff. And given the mix of those 2, putting some stuff on today's market, 4.5% is not all that bad. Where we get clipped is if we get some of those 6%-ers to go away, and I wish we could predict them better, and we're fighting to make sure that we get out in front of people and blend and extend. It's just so hard to say.

Scott Valentin - FBR Capital Markets & Co., Research Division

Okay. All right. And then I thought I saw in the press release that securities yields ticked up a little bit linked quarter, not a lot, just a little bit. I was wondering if that maybe is just an accounting issue there, if that's just the mix change or maybe duration extended a little bit.

Pathie E. McKee

What we actually did, we did sell some securities during the quarter at a loss, as you can tell, for about $177,000. We sold those securities because they were prepaying and they're prepaying in their premium class. And so we took those off and replaced them higher-yielding securities, 10-year, 15-year MBS, not for long durations. That did improve the yield on that time.

Scott Valentin - FBR Capital Markets & Co., Research Division

Okay. And do you have kind of a duration estimate for the securities book overall, maybe how that's changed from the last quarter?

Pathie E. McKee

It really hasn't changed much from last quarter, and it's about 1.5.

Operator

Our next question comes from Don Destino with Harvest Capital.

Donald D. Destino - Harvest Capital Strategies LLC

Just I hate to do it, but a little more color on warehouse lending. Just kind of looking at ViewPoint and a few of the other smaller banks that have significant warehouse lending businesses, and we looked at kind of the historical drop-off from Q4 to Q1, I appreciated all the details, and looked at kind of year-over-year and then looked at mortgage volumes, and just couldn't quite square the circle unless there was somebody new taking some market share. And so I guess my question is, I mean, year-over-year or June 30 to March 31, are you seeing any of the other kind of maybe the money centers or any other big banks really getting aggressive? And do you think there's been a market share shift, at least in the kind of fourth quarter, first quarter?

Kevin J. Hanigan

Yes. I really don't think that's it. From time to time, we get the opportunity to talk to people who run origination platforms, I mean, the optimal blue and some of these guys. And when I talk to them, they would indicate their quarter-over-quarter volumes were down 22% to 23%, which is fairly consistent with where we were, a little bit less than that. I think our friends down the street did better than that, and I herald them for doing so. And then we have some other folks who I've heard of 25% or 30% decline. And some of that's kind of mix between purchase of refi and a few of those things. Here's what I think may be different this year, is I just think about the business without digging into the details of our business or giving any forward-looking statements. If volumes come down like the MBA expects, and would, we should all realize the refi movement is coming to an end, there's going to be a volume decline and purchase is going to make up for some of it. And it will be what it will be, and we'll all have to deal with it and we'll race to get other clients. But as volume decline and you're a -- let's say, you're a big warehouse client and you got 5 or 6 banks and you've got a couple hundred million dollars worth of credit capacity, as you look at your volume, it's inefficient for your shop to deal with 5 or 6 banks. So you're going to start consolidating some banking relationships. You might go down to 4, and it's just a lot easier for your back office to deal with 4 banks versus 6. So I think what we'll see in the course of this year, to the extent volumes do decline, is there will be some consolidation. And I mean consolidation of a number of bank lines they have. And they'll drop out the little guy or the last guy who got in or the guy whose back office isn't as efficient. And I think we'll do fine in that regard. It's not to say we won't lose some to that, but we'll gain some as a result of it. And I think the other thing that's going to happen is volume declines, particularly for the shops that are big refi shops. There may be industry consolidation where some of the -- some of our clients are buying other clients, and that will result in requests for increases in credit facilities. One of the other pieces of color I can tell you, we have loan committee this morning and we were walking our loan committee, one of our really good mortgage warehouse clients had called why we're in there and requested a temporary $15 million increase to a $35 million credit facility because they are just choking a level of volume for the remainder of this month. They just said, "We're not sure if we need it for more than 30 days, but can you help us out for an extra $15 million for 30 days?" We haven't had many of those requests in the last few months. So that was relatively encouraging, and it's probably the market they're in. But it was -- again, that was relatively encouraging. And they promised that they were going to use the bulk of it. They were wanting to know if they could start funding as early as tomorrow.

Operator

At this time, we show no further questions. And I would like to turn the conference back over to Kevin Hanigan for closing remarks.

Kevin J. Hanigan

Great. Again, thank you, all, for joining us. And I know it was a difficult quarter, a little soft. I don't get to the point of Pathie bringing me numbers and feeling like throwing up, but I almost did when she brought me the first quarter numbers and the first time I saw them and then we dug into it. But I would tell you, we are executing our strategy, and the Warehouse is going to be whatever it is. We are adding clients. I think we have a strategy here to fend off volume declines to the extent that the MBA is right and that we will fight back by getting more new clients. We got plenty of them in the pipeline. And the earnings cover from that business is allowing us to grow, what I would call, higher-value businesses in terms of multiples we apply to them. We're doing okay and we're doing better than okay at growing organically in C&I and CRE. So there is no change in strategy here. If somebody is looking for this call, oh, my gosh, we've got to change strategy. Our strategy is working in our opinion, and we intend to stick to it. So thank you, all, and we'll talk to you next quarter.

Operator

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

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ViewPoint Financial (VPFG): Q1 EPS of $0.21 misses by $0.05. (PR)