Park Sterling Corporation (NASDAQ:PSTB)
Q2 2014 Results Earnings Conference Call
July 24, 2014 08:30 AM ET
Susan Sabo - SVP and Chief Accounting Officer
Jim Cherry - Chief Executive Officer
David Gaines - Chief Financial Officer
Nancy Foster - Chief Risk Officer
Nishal Patel - KBW
Stephen Scouten - Sandler O’Neill
Christopher Marinac - FIG Partners
Good day and welcome to the Park Sterling Corporation’s Second Quarter 2014 Earnings Call and Webcast. All participants will be in a listen-only mode. (Operator Instructions) After today’s presentation, there will be an opportunity to ask questions. (Operator Instructions). Please note this event is being recorded.
I would now like to turn the conference over to Susan Sabo. Please go ahead, ma’am.
Thank you, operator. During this call, forward-looking statements will be made regarding Park Sterling’s future operational and financial performance. The forward-looking statements should be considered within the meaning of the applicable securities laws and regulations regarding the use of such statements.
Many factors could cause results to differ materially from those in the forward-looking statements. We encourage participants to carefully read the section on forward-looking statements incorporated in our press release issued this morning and in all documents Park Sterling has filed with the SEC.
I would now like to turn the meeting over to Jim Cherry, Park Sterling’s Chief Executive Officer.
Thank you, Susan, and good morning to our listeners. We appreciate your joining us this morning. We’re pleased to be presenting Park Sterling second quarter 2014 results which we announced earlier today. In addition to our earnings release you can also find an investor presentation on our website, which gives detailed information about these results and which we’re going to be following during this call.
Joining me this morning are David Gaines, our Chief Financial Officer, and Nancy Foster, our Chief Risk Officer. I am going to begin this morning with some highlights of the quarter and then we’ll turn to David for financial overview and then I’ll close with a few comments before turning to your questions, and David, Nancy and I will all be available to answer.
So if you will, we’ll begin on slide number three, or page three. As an introductory remark we will remind you that for the past several quarters we have shared with you the investments that we’ve been making to take advantage of what we think are extraordinarily attractive market opportunities for organic growth. And these investments have taken a number of different characters. First training, last year we spent a considerable amount of our time working with our retail bankers, what we call Sterling Edge training, which was needs-based selling, both to promote cross-sell activities between our lines of business as well as to increase consumer and small business lending out of our branches.
We’ve also invested new lines of business, builder finance and private banking being two good examples of that and more recently in capital markets were we’re now providing capital market solutions to our promotional customers.
We’ve also invested in new products, mobile banking probably being one of the most notable of those on the retail side, but we’ve also broadened the investment offerings that we have in our trust and wealth management areas. And we've rolled out Sterling network which our retail banking teammates are promoting.
And same time, we've entered new markets, the most recent of those of course being Richmond, which we entered in January. We now actually have 12 folks in that office and still growing, partly about fact that others are now seeking us out and then again an interest in joining our team in Richmond and we’ve invested in new leadership, leadership for mortgage banking, wealth management and private banking being the most recent examples of that.
And then finally, across our lines of business, we’ve been hiring in market strong in market well known bankers, both in commercial banking and trust and private banking as well as mortgage banking. So a number of new folks have joined our team. We told you that we expected the results of these investments would begin to show up in the second half of this year and that we expected to be able to generate double-digit loan growth by year-end. We are very pleased to say that that growth is showing up earlier and stronger than I think we have -- you may have expected and perhaps even we have expected.
During the second quarter of the year, we actually in the space of these significant investments, we still grew our adjusted gross income, still grew our adjusted net income for the quarter, and we had substantial organic growth. As illustrations of that, we grew our loans roughly $71 million or 22% annualized in the second quarter that was result of over $100 million in new production that went through our loan committees and our strongest production quarter ever. And what is really rewarding to us is that it was across all of our lines of businesses and markets. We saw strong production growth in both retail banking and in commercial banking and we saw it in both our community markets and in our metro markets, and Dave will give some more highlights on that in a moment.
Additionally, we saw growth in our discretionary assets under management of almost $41 million or 47% annualized for the quarter. That’s the reflection of both of new leadership and new hires that we have made in the wealth management area. And we -- what’s not noted here on this slide but we also saw significant growth in our retail brokerage revenue and that’s driven by the cross-selling activities that are coming out of our retail bank into the wealth management area.
Our mortgage loan originations grew $31.6 million over a 132% over the prior quarter, clearly there has been some rebound in the market, but it's not, this reflects much more both the leadership and new hires that we've made with the mortgage loan bankers in a number of our markets that we had been looking forward to building that business as we broaden the appropriate leadership to this side.
At the same time that these activities, these significant growth activities were taking place, we continue to improve our asset quality with reductions in non-performing loans to total assets. We maintain very strong capital ratios which allow us to continue to leverage both the organic growth as well as perhaps M&A activities. And we declared a cash dividend of $0.02 per share yesterday by our Board and that's included in our press release.
During the quarter, we also closed the Provident Community acquisition that has significantly enhanced our presence in the greater Charlotte metro area which is where the largest part of our franchise is concentrated. And we did that in a record 57 days from part of announcement to close and we expect to complete the full conversion this quarter.
We continue to be actively looking for strong end market bankers to hire, and while I would expect those investments to trail off in the latter half of the year, as we allow the investments we've already made to season and to enhance the profitability of the company and franchise as a whole.
It is clear that we are becoming an employer of choice meaning that we shared with you in the past examples of bankers calling us seen what we're doing in the market and indicating their interest to join us that has accelerated. And in many of our markets we literally are having bankers reach out to us and express their interest in joining Park Sterling and we will continue where we find extraordinary bankers who can demonstrate the ability to immediately produce for our company. We'll continue to hire those bankers.
We do remain focused principally on leveraging the recent investments that I've described you to demonstrate our ability to grow organically and what we think are extremely attractive markets. And at the same time, we do of course remain active in what we would describe is disciplined M&A discussions.
Turning to the next page on slide four, it will just show you the picture that I think still work for thousand words. You see the concentration in the Greater Charlotte metro market where we have 49% of our deposits in 20 of our 54 branches located. And then you see the upstate South Carolina surrounding the Greenville, the attractive Greenville market. And obviously these have been some our important growth areas for us and important deposit markets.
Additionally, we have a very strong presence in North Georgia which is generating very good deposit -- roughly very good deposits for us as well as growth opportunities primarily in the mortgage banking and wealth areas. And then the metro markets of Charleston, Wilmington, Raleigh and now more recently the Richmond market that we mentioned. We’ve continued to broaden our capabilities our strategy is I think list as on this call has been to be big enough to provide our customers with solutions that they expect from a larger banks but to be small enough to still deliver those in market through seasoned knowledgeable bankers that can get personalized flexible custom tailored service to their customers. We are committed to maintaining strong top quartile asset quality and the liquidity and capital to continue to make these investments going forward.
So with that I will turn to David to give you some more detailed insights into our earnings and performance. David?
Thank you Jim and good morning everyone. I’m now on slide 5, the earnings profile. As Susan mentioned for the three months ended June 30th, adjusted net income which excludes merger related expenses and gain or loss on sale of securities increased 12% to $3.8 million or $0.09 a share which compares to $3.4 million or $0.08 a share last quarter. The results do include two months of activity from Provident Community, but organic growth is really the driving force behind the bottom-line improvement. We would not anticipate the Provident Community would be a significant contributor to net income until the integration is completed this year.
In terms of operating highlights, net interest income increased 10%, as higher earning assets offset a slight narrowing of net interest margin. We did post the $365,000 reversal of provision expense, that was driven by $530,000 that was recovered on a previously impaired covered PCI loan pool that was returned to performing status, meaning we did post provision expense against our core portfolio and loan growth this quarter.
Non-interest income increased 15%, as service charges mortgage banking income and ATM and card income all rose significantly and non-interest expenses of course increased reflecting the merger and the hiring initiatives that Jim mentioned. But frankly probably performing a little bit better than we would have expected.
So let's turn to slide six and take a little deeper look at net interest income. You can see that average earnings assets increased by about 10% to 1.94 billion for the quarter that represented about 7% increase in both average loans and average marketable securities and about a 90% increase in other earning assets. It's not really easy to fully reconcile the impact of an acquisition once you do it, we legally merge these entities we do start commingling cash and investments and other things.
But I think in general, you can think about Provident Community is contributing about 70% of that average loan growth for the period and 90% plus of the cash and marketable securities growth. So which I've seen a second and I will say it another way a large percentage of our organic loan growth really occurred pretty late in the quarter and is therefore really not yet fully reflected in earnings.
Adjusted net interest margin, which excludes accelerated accretion from performing acquired loans held up better than expected decreased modest 4 basis points, the 3.93% for the period. Adjusted yields on loans actually improved from 525 to 535 that reflects several things including continued improvement for the yield on PCI loans and those cash flows just continued outperform model expectations.
We had excellent loan fee income out of builder finance and several all other areas that on exposure inside of the year, so you will recognize that immediately. We did have some slightly high yields on the acquired loans some Provident Community as well. The improvement was offset by a 9 basis points decline in the yield on securities and a 10 basis points decline in the yield another earning assets. And really the other earning assets will probably the bigger drag this quarter, because you can see they doubled as a component of total earning assets from about 3% to 6%. And again it’s the timing issue. We have successfully redeployed those proceeds from cash and liquidated securities from Provident Community but we did that over the course of the quarter and again didn’t get the full benefit of that in this quarter’s earnings.
Finally, you can see the total interest bearing liabilities, the cost declined by about 2 basis points during the period. We did exercise our right to fully redeem $6.9 million in 11% Tier 2 eligible subordinated debt that was held at the bank level but that redemption actually occurred on June 30th. So again another item that is going to benefit us going forward that didn’t really have any impact on the second quarter. Net result of all these changes was the 10% increase in net interest income to 19.1 million for the period. And as we shared during last quarter’s call, we would expect continued improvement in the hard dollar net interest income from organic loan growth and those redeployed assets from Provident Community as well as from the redemption of that high coupon subordinated debt going forward.
If you will turn to slide seven, you can see that our adjusted non-interest income which excludes gain or loss on the sale of securities increased by 26% to $4 million for the quarter. Provident Community and organic growth combined to produced really good growth, a 58% increase in service charges on deposit accounts, a 168% increase in mortgage banking income, 39% increase in ATM and card income. And while you can see the income from wealth management activities is flat, you got to remember this wealth team has done an excellent job replacing revenues in our core brokerage and asset management businesses that have been lost as a result of our exit from the custody business, which we announced last year. And you can look at the bottom of this chart and see just how many non-discretionary assets, custody assets we have run out of here. So great job from the wealth team to hold that flat, really probably ahead of where we would have expected to be at this point.
So results from our core customer activities were very good on all fronts. In terms of what you might consider to be more top health activity, we did have a pretty sharp decline in BOLI income, about $600,000 that's directly related to the absence of last quarter's $651,000 non-taxable debt benefit. We did post a slight loss on the sale of securities, $33,000. What we did is we had a single CLO investment, out of the five we held; it was not Volcker-compliant. Our view this particular manager is not going to amend the documents. So we went ahead and bit the bullet and got that security out of here.
And that compares to $276,000 gain we reported last quarter and you’ll recall, we liquidated some securities at the parent level to generate cash for the Provident Community acquisition and took a again on that.
We did see about a $700,000 increase in other non-interest income. That includes a couple of things. First we had a $936,000 gain from selling our Class A MasterCard shares. These were shares that were inherited through one of the acquisitions, frankly didn't have much value until the company MasterCard went for a 10 for 1 stock split earlier this year.
And we just thought it was a good time to get out the shares, so we took advantage of that. That gain was offset by about $256,000 increase in the amortization of our indemnification assets, which you've seen us ramping that up for several quarters now and that reflects the decrease in expected claims as we moved toward the expiration of those agreements, beginning the first one March of next year.
If you’ll turn to the next page, slide eight, you've got non-interest expenses. You've got a pretty good breakdown here and also in the press release. You can see non-interest expenses as reported, increased about $2.5 million or 16% to $18.3 million and that's again back to Provident Community and the hiring initiatives. If you adjust that merger related expenses, you increase about 2 million or 13% for the period. I am not going to detail those, we’re happy to answer any questions but again it's pretty clearly laid out in the press release.
As Jim mentioned, we do expect to continue investing in organic growth opportunities but really not at the pace we've seen over the first half of 2014. And as we said back in January, we thought we could see a 7% to 10% increase in non-interest expenses from that adjusted base of the fourth quarter which was the 15.3, you can see on this chart for 2013 Q4. That would have equated to about 16.4 million or 17.3 million run-rate. What you see this quarter was a 17.7 million run rate. That actually includes two months of provident. That's why we feel pretty good about where we are in the expense run rate and we think we’re probably going to do a little better than we had originally expected on that front.
If you turn to slide nine, you see our earnings profile versus the peers, very similar story to the first quarter we had told you. These investments, we were going to give up a little bit of earnings growth this year for the long-term growth opportunities but feel very good that we're really going in right at or above the median for our peers at this point in time.
If you turn to slide 10, you will see a balance sheet profile. Total assets increased by 22% for the quarter, again organic growth and Provident driving that, did include $171 million or 13% increase in total loans. We'll talk more about that in a moment; $78 million or 20% increase in securities and that was partially offset by a $36 million or 34% decline in cash and equivalents.
So if you look at the ending balance sheet, go back to some of the average numbers, you will see what I was talking about in terms of a lot of those investments, a lot of that loan growth really happened later in the quarter.
We did add about $6.7 million in intangibles from Provident. So when you take those higher assets and take those intangibles, we were able to leverage capital from an 11.73 TCE to TA ratio, down to 10.35 as we mentioned, when we announced Provident. That was one of the motivations for us. It’s a way for us to profitably leverage our capital so we feel pretty good about that.
Moving on to the key components of the balance sheet if you turn to slide 11, you’ve got an overview of the marketable securities. You might recall that back in the fourth quarter of last year, we initiated a $50 million investment strategy to help offset expenses associated with the hiring initiatives. That drove to total securities to just over $400 million. This quarter with the reinvestment of those cash and liquidated securities from Provident Community, we drove securities up to about $475 million. Those investments have almost all been in very traditional agency mortgage back and CMO paper, heavy cash flow. The portfolio duration actually declined to well inside of four years this quarter. So we think we’ve been pretty prudent in how we put that money out. And frankly we’re working right now to extend the duration out because with the loan book duration that’s just over little over 2 years, we don’t need an investment portfolio duration inside of four years. So we feel like again we’ve been pretty prudent over the last nine months or so, on this front.
Only other item I’d note here on this slide is we did take advantage of different treasury rates last quarter, not knowing that we’re going to dip even more this quarter but took advantage of a dip in treasury rates to move about $58 million of securities from available for sale to held the maturity to manage mark-to-market risk and our OCI account. This is the move we’ve been watching since last October; had no impact on net income and will have de minimis impact on our liquidity management since we utilized these bonds to meet our normal collateral requirements. But it does help sort of manage that book value, reported book value.
I am going to get slide 12, which is one view of the loan portfolio and go right to slide 13 which I think is a little clear.
What you can see is the total loans increased by 13% for 1.47 billion, when you include the fair market value adjustments, a 100 million of this increases is attributable to Provident Community meaning the remaining 71 million as Jim mentioned is that organic growth or 22% annualized growth rate which we feel very good about and as Jim mentioned is very balanced across geography, season and business lines so good contribution across the board.
The metro markets grew to 24% annualized rate for the period, the central business units and that's mortgage in wealth and builder finance some of our specialty things grew to 53% annualized rate. And the community markets which has a lot of the acquired loans significantly improved their run off rate and posted obviously a very manageable 5% annualized decline for us.
We've also, at the request of several analysts, we have included a snapshot in this page now of our loan production over the last six quarters. We did six quarters so you can see first six months to first six months. You can see at the top of the chart that our commercial segments posted about 58 million or 40% increase in net new production that’s funded loans and committed drawdowns, this is not lines of credit or letters of credit or things like that, this is actual funded loans.
Over the first six months of 2014 compared to the six months in 2013. And below that you can see the retail segments which do include small business posted a 19 million or 266% increase in production for the six month period. And again this is really obviously stable economic conditions help us here but it's really more about the organic growth the fact that we get great bankers on the ground the strong risk management team, good business line management and good markets.
The pipelines do remain very strong and we would expect to continue good performance as we move through the year and particularly as recognized, we've got a lot of new bankers that have not seasoned in their portfolios yet. And so we think that they are going to naturally produce well going forward.
If you look at slide 14 provide some detail on our deposit from borrowings I think the notes are fairly self explanatory here and I already mentioned the sub debt redemption. So the only thing I might point out is that core deposits did increase that’s a lot of benefit from Provident Community so just under 90% during the period following the merger and some actions we have paid down some broker deposits we just didn’t need the money.
If you will turn to slide 15 you will see the same peer group comparisons in this case for capital and liquidity you can see we have maintained what we think is comfortable levels to support growth going forward. If you turn to slide 16 you can see the details on some asset quality numbers that Jim mentioned, NPLs down 5 basis points to 65 basis points of total loans NPAs down 9 to 114 of total assets, another quarter of net recoveries.
So as we have said for several quarters feels very good about the quality of our assets and we have pointed out we get about 20% of the NPAs are actually in covered OREO we would hope has limited loss potential in them.
If you turn to slide 17. We have detailed the allowance in the fair market value adjustments by accounting pools. We did have a downtick in the allowance to total loans from 70 to 62 basis points and that’s really a function of bringing in so many acquired loans and the continued asset quality improvements. However we did provision for the allowance, I mentioned that earlier to the core portfolio and if you look at the allowance plus the fair market value adjustments you actually have a slight uptick from 336 to 340 of total loans and we’ve also included the peer end accredible yield increase from 41.1 million to 45.7 million during the quarter obviously a good part of that is the acquisition and then continued improvement in cash flows of those PCI pools. So, still feel very good about the allowance in the fair market value adjustments.
And if you turn to slide 18, you'll again see the peer group numbers on the asset quality ratios which are up pretty favorable.
So, I conclude just by saying, we continue to feel like we're delivering on the soundest commitment we would have to our shareholders as evidenced by our capital, liquidity and asset quality measures. We told you in January that we were going to focus very much this year on organic growth from these internal investments, we think that's evidenced by the strong loan growth, broad increases in key non-interest income categories.
We also told you that we were very focused on effectively balancing the trade-offs between these expense investments and our near term profitability. And we think the fact that adjusted earnings grew 12% this quarter is a good example of that.
I actually think we're really just beginning to hit our strike we’re in no way at full capacity and we're confident in our ability to continue to building a very distinctive regional banking franchise for our customers, shareholders and communities.
And with that I will kick it back to Jim.
I think David has summed up the [feeling] of our management team very well. So, operator we'll go ahead and turn to questions, if there any?
We will now begin the question and answer session. (Operator Instructions). We have a question from Nishal Patel from KBW. Please go ahead.
Nishal Patel - KBW
Hey guys, good morning.
Nishal Patel - KBW
I guess, I just had a question on NIM here. I see deployed some of the excess liquidity from Provident and securities. But could you give us a sense of where we can expect NIM to go over the next few quarters. As you look at both I guess the competitive landscape with the amount of production you guys are doing and also any upward benefit you get from moving some of those securities into higher yielding loans?
Yes it's a fair question and I guess I would to give you the perspective we have said for three years that we think NIM will compress because if you look at a 20 year history the industry NIM has compressed. And it doesn’t really matter what the rate environment is competitive factors seem to continue to pressure that.
Having said that, for three years we've been telling you we did better than we told you we could do. So with that sort of caveat I would tell you clearly new loans come on at lower rates than loans rolling off. We are also more aggressive in trying to put floating rate assets on boats because we do think rates will eventually rise and take hold rising. You are truly a generational loans in where you are and treasury rates and you are virtually generational highs in bond volatility.
So that's not a combination in our mind to put a lot of fixed rate assets on the book. So you have got some natural forces to your point that should put pressure on NIM. We are generally -- it's been at least a date obviously we'll learn with Provident Community but to-date the acquisitions we've been pretty conservative in how we set up the initial yield on those acquired loans and so we've had good carry off the mark it's outperformed expectations.
We didn't do anything differently with Provident Community we've done in the past but obviously we won't know until we see those results. So I think there is a couple of thing and we've got a couple of business lines like a builder finance actually is a heavy fee income activity. And so that actually helps hold that up. So if I wish I had a magic crystal ball, and I can tell you I’ve been wrong every quarter for 12 quarters.
Nishal Patel - KBW
So basically it’s going to continue to compression and you are probably going to be wrong.
I mean I am just being totally honest with you. But I think we have done well relative to our peers and I think we’ll continue to do well relative to our peers, because of some of the conservatism in our accounting and because of some of our diversity of product lines. I think that’s probably the best takeaway I could give.
Dave, this might be a good time to mention the capital markets and the capabilities that we’ve added there that for the most part are not generally available from the smaller banks or if they are, they are outsourced as opposed to be an unable to be done internally.
Yeah. So I mean, we’re obviously trying to work with a broader customer set and a typical $2 billion bank and we feel like we’ve got bankers that are not typical of a bank our size in terms of their experience with true middle market commercial activities. And so the way you’ve got to compete certainly community banks are given an assumption that we provide good service and that's awesome and we never want to lose that at natural advantage that the market assumes. But as Jim says all the time community banks are smaller and large companies are big because people care more about solutions and service customers do. That’s just the reality, I wish it wasn’t true but that’s the reality.
So we’ve got to be very focused on ensuring we’ve got solutions for our customers, having basic capital markets and I am talking baby capital markets, capabilities is important for our commercial customer set. So the ability to do derivatives, foreign exchange, club deals, private placement, permanent placement of financing in the real-estate market, those basic building blocks are very important to our customer set. We’ve been reluctant to push those business lines until we had an internal person to run point on it for us, we don't believe in just outsourcing our customers to a third-party arrangements we don't do it in wealth, we don't do it mortgage, we're not going to do it in commercial.
And so we did hire a team in June, late June to come in here and say point of that and the focus early on is going to be derivatives, that's why we can deliver the fix that rate our customers want but we can keep the floater on our balance sheet, if we can do a two way trade with them, that’s great that’s just going to show the non-interest income. But even if they don't want to do the derivative with this that's okay, we're point they will do it away from them, for on balance sheet as we have in the past.
So that's a fee income opportunity that we would expect to grow over the next couple of years and feel very good about the early traction its got.
And the ability to place loan for our customers is also important a lot of construction many terms on some of the big boxes we've done the (inaudible) et cetera. Once they are completed and they go into permanent market, we're just losing alone in the future we'd like to be able to place those in the permanent market and retain the revenue for having done so. So another example of that where that capability will be important to us.
Nishal Patel - KBW
Okay. I guess how many people did you hire in this new capital markets business?
It's a massive 2% effort.
Nishal Patel - KBW
Alright. Thank you, guys.
Very nice. I mean you got to grow the revenue, I'd love to say tell you two years from now, we've got 10 people in there, because remain we're going to have a lot of revenues, but until we see the revenues I cannot grow a lot of people. And we're not trading, there is no trading, there is no, we're not taking any position, this is all 100% customer flow oriented activity, the stuff that the regional banks were doing 15, 20 years ago in the Southeast, it's a very simple customer oriented stuff.
And our next question is from Stephen Scouten from Sandler O’Neill. Please go ahead, sir.
Stephen Scouten - Sandler O’Neill
Hey, good morning folks, how you doing?
Stephen Scouten - Sandler O’Neill
Good. Hey, thanks for including that production slide in the presentation. I think that’s really helpful. Kind of looking at that production year-over-year is obviously really impressive. Do you expect based on the trends you are seeing and I know you mentioned the pipeline still looks good that that trend can continue even at a greater pace as those Richmond and other new hires continue to come on line?
Yes and no and the no is only that when you talk about the pay, you should be ought to realize, we are setting the bar high already for the next one. So you won’t expect the same percentage increases but yes in terms of pace, our pipelines are strong now after having enjoyed an extraordinarily strong quarter, are strong now as they were at the beginning of last quarter and maybe even stronger. So we feel very good about our ability to continue to produce results. Now, I can’t tell you that it’s going to be straight line and that there will be the -- next quarter will be the same as this quarter in terms of net numbers but we do expect the growth to continue. And we are even more confident obviously about the ability to show you the double-digit growth for the year that we highlighted, actually beginning with the fourth quarter of last year, we told you what happened but just earlier than we shared.
Stephen Scouten - Sandler O’Neill
Okay great. And David I think you made a comment about expenses, I want to make sure I heard it correctly in terms of are you saying that the Provident expense saves were ahead of your previous estimates or just maybe or are you talking about your overall expense base?
Yes, it’s more of the overall expense base. I mean Provident, we really -- we won’t see a lot of expense saves out of there until you complete the core conversion that’s later this quarter. And it’s really more -- people are just doing good blocking and tackling; folks are looking at their businesses and they’re finding a $100,000 here and $200,000 there and they are doing it across the board and that's helping us keep that growth rate little bit tampered relative to what we expected earlier in the year. And frankly, it's exactly the management behavior we need culturally, right? It's just people on their own looking and saying this is not a good use of the shareholders’ expense dollars today.
And I have got a lot of confidence in our management team that they’ll keep surprising us and keep finding some of those things. Because they don't need us to tell us to do it, I think we made that point a year ago. This, it's really, really a pleasure to be in a company where you got a lot of smart leadership about there doing things, they don't need us to tell them to do it, they just go do it and they tell us the result. It's really nice.
Stephen Scouten - Sandler O’Neill
Yes, definitely. And one last question, I just, I noticed there was a little bit of a spike in the 30 to 89 day delinquencies. Anything of note there or is that just that Provident related or what's driving that?
Yes, that's really the law of small numbers more than anything. Our past dues have been so extremely low that anytime we have something pop up, it looks just that, like something popped up.
So, if you look at, as compared to our peers, it's still extremely low. It's really a couple of credits where we don't expect loss, but they are maturing. And so typically when you have more problematic credits that are maturing, you manage it by managing the maturity, if that helps to get it restructured in a way that you want but definitely no signs of trends or credit deterioration in the portfolio.
And we’ve had this before, I can't remember which one it is Stephen, but go back 4 or 5, 6 quarters ago, we had a similar pop.
It was the same quarter a year ago.
Yes, so it's.
Stephen Scouten - Sandler O’Neill
Got you, got you. Okay. Well, thanks guys. Great quarter.
And our next question is from Christopher Marinac from FIG Partners. Please go ahead sir.
Christopher Marinac - FIG Partners
Thanks, good morning. Just want to get back to slide 13 on loan production. So Dave, to what extent I mean is this sustainable pace or how do you think this sort of evolved over time? I am thinking both in terms of dollar as well as sort of percentage range within the portfolio.
It's a great question. And our forward pipelines obviously are only good for a few months. And so it's difficult for us to get much beyond this current quarter; and Jim’s comments that right now the pipeline looks as good as they did last quarter at this time.
I would say what makes me feel good and again it's sort of relative to how where we were, don’t even bring in peer group, just where we were two years ago, we've got a lot of talented bankers we've added in the last six months. We've got some talented bankers we added in the last week and we've got some more coming in at the end of the summer.
I've got a lot of faith in these people to produce what they've told us they are capable of producing. They've aided us as much as we've aided them in terms of what our product capabilities are, what our risk appetite is, what kind of support they're going to get and whether it’s cap markets or treasury services or wealth referrals. I mean these are folks that are -- they're good hires because they take a hard look at you which is what they should do. And I just think given time I can't tell you it's six months or nine months or year but I am just confident given time all of these folks are going to be very good producers, very good for our customers and very good for our shareholders.
And so I feel good about where we are.
I think Dave said it well when and he said we're hitting our stride. It's really about building a culture and processes and bringing in bankers and getting them all acclimated and just fine tuning the machine if you will. And I think that's exactly what’s happened. We've hit our stride and I think it will continue.
As David mentioned adding one illustration of that we have hired two bankers that wanted to just come on and another that will be joining us soon. And in both of their cases, the first they’re going to have was not with our executive management team, they wanted to be with our cash management folks, because they want to know, did we have the cash management capabilities for them to be able to move their customers to our platform many of whom would be coming from some of the larger banks. And after that [meeting] they were obviously encouraged enough that they want to be with senior management and ultimately committed to join our company.
Christopher Marinac - FIG Partners
Great. That’s helpful. Thank you for that. And I guess my follow-up is just related to acquisitions; a, what’s your sort of thought about to a conversations that are out there just kind of possibilities and also what’s realistic in terms of time of close, I notice it’s a very unusual quick closing in a good way. Just curious how you budget that from account perspective?
Yes. Maybe I’ll answer the second one first and that’s time of close. I think what we’ve demonstrated is what is realistic in terms of time of close when it’s needed. And we do enjoy I think extraordinarily good regulatory relations and we also have a team here that is now seasoned in terms of closing transactions. And so the combination of those two allowed us in this instance where there was a significant investment book that we shared with you that had a long duration and in adverse which in this case would have been upward movement and interest rates could have destroyed the value of the transaction so closing it quickly was important to us. And I think we’ve demonstrated the ability to do that when necessary.
But I wouldn’t tell you that we would either ask our regulators or ourselves to go through exercise if you will unless it was necessary. So I think a more normal time to close probably would be…
90 to 120 days that's kind of then where it's been Chris.
So that's probably the more normalized. And then in terms of discussions on M&A, we are as active and engaged in that as we have been, I continue to get a significant part of my account to meeting with other banks and bankers. But we've always been interested in the open bank discussions and as opposed to simply looking at distressed situations and so those conversations typically are more long-term than short-term.
The activity has been as greater, greater than it's ever been. But whether or not those will come to fruition or not, I don't know. What I would tell you is from a mindset standpoint though we are in a different position than we were a year or two ago. A year or two ago clearly we have just raised capital and there was a need to get scale in order to build the infrastructure of a foreign regional bank that had substantial [broad] product in line of business capabilities to serve customer needs. We no longer feel that pressure, we are more focused if anything on building our company and growing organically across our lines of business and what we think are extremely attractive markets that frankly others of our size typically do not enjoy, that footprint is not one that is enjoyed by many of our peers.
So we want to capitalize on those great growth opportunities, but we're going to remain active in M&A discussions and the time plan those opportunities may arise, it would be consummated, just can’t give you more highlight than that.
Christopher Marinac - FIG Partners
That is fine. Thank you Jim, I appreciate it.
Thank you, Chris.
(Operator Instructions). Showing no further questions at this time, I would like to go ahead and conclude the question-and-answer session and turn the call back over to management for closing remarks.
Great, thank you Denise and thank you all again for joining us. Obviously we feel really good not just about our quarter but about the fact that what we have done is across our lines of business and markets and that we feel like there is plenty of leverage opportunity ahead for us. I mean that while we maybe operating across all of those different areas of our company, we don’t feel like we need capacity anywhere with our current team and with some new additions that are still joining us. So, we expect to have more good news to come.
Thank you again for joining us. That concludes our call.
The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect your lines.
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