Greetings, and welcome to the BOK Financial Corporation First Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, today's conference is being recorded. It is now my pleasure to connect you to your host, Ethan Nel, Chief Financial Officer.
Thank you. You may begin.
Good morning. Thanks for joining us. Today, you'll hear from Steve Shradskar, our CEO Stacy Kymes, Executive Vice President of Corporate Banking and Mark Maun, Executive Vice President and Chief Credit Officer. And I'll also provide some remarks about the quarter. PDFs of the slide presentation and Q1 press release are available on our website at www.boks.com.
We refer you to the disclaimers on Slide 2 as it pertains to any forward looking statements we make during the call. I'll now turn the call over to Steve Bradshaw. Good morning. Thanks for joining us to discuss the Q1 2019 financial results. As shown on Slide 4, the Q1 was a great start to 2019 for BOK Financial.
For the quarter, net income was $110,600,000 or $1.54 per diluted share, up 2% from the previous quarter and up 4.8% from the same quarter a year ago. Quarter over quarter growth was driven by a number of key factors. We continue to see loan growth as we build off of outstanding year in 2018. We remain optimistic about achieving our loan growth targets as long as the broader economy continues to remain strong. We did experience lower net interest income and net interest margin this quarter, largely due to a change in deposit mix and increased levels in our trading activities.
We will cover this in more detail momentarily. Fee and commission revenue picked up this quarter in our Brokerage and Trading and Mortgage Banking segment as both reacted increased activity in these business lines was welcome and should help bolster our Increased activity in these business lines was welcome and should help bolster our key revenues this year. The expense management remains the focus and continues to drive earnings leverage within the organization. We successfully completed the CoBiz Systems integration last month, so this quarter will be the last of incremental expenses related to the CoBiz acquisition. CoBiz integration expenses totaled $12,700,000 in the quarter and $26,600,000 of total operating expenses are CoBiz related.
Stephen will speak in more detail about what to expect on expenses going forward. The credit environment continues to be stable, consistent with our results in 2018. The continued loan growth was really the primary driver of our $8,000,000 loan loss provision this quarter. Turning to Slide 5, period end loans were $21,800,000,000 an increase of $102,000,000 for the quarter. Led significantly by our energy and healthcare channels, we continue to grow loans even with the wave of the anticipated paydowns we experienced in our commercial real estate portfolio this quarter.
Stacy will provide more details on the CRE portfolio a bit later. Assets under management or administration were $78,900,000,000 that was up $2,600,000,000 from last quarter as the recovering equity market implemented our strong asset gathering activities during the quarter. All told, we feel very positive about the quarter and our trajectory for 2019. In fact, in this quarter, we bought back over 705,000 GEOKF shares at an average price of $85.85 per share in the open market, mainly consistent with our opportunistic capital deployment strategy. I'll provide some additional perspective on the results at the conclusion of these remarks, But now I'll turn the call back over to Stephen Nell to cover the financial results in more detail.
Stephen? Thanks, Steve. As noted on Slide 7, net interest revenue for the quarter was $278,100,000 a decrease of $7,600,000 from the previous quarter. Net interest margin was 3.30 percent, down 10 basis points from the previous quarter. These decreases were driven primarily the combination of lower average non interest bearing demand deposits and higher average trading activity versus the prior quarter.
Each factor represented approximately 5 basis points of net interest margin decrease. While some of the decrease in non interest bearing demand deposits was seasonal, some appears to be commercial customers putting their cash for use. This decline in non interest bearing balances resulted in slightly lower net interest revenue and margin. Based on activity late in the quarter, we see some recovery of these balances. So hopefully, we'll see a better impact to net interest revenue margin in the second quarter.
Much of the revenue associated with the higher trading activity is recorded in brokerage and trading fees rather than interest income, while all of the related funding costs remain in interest expense, leading to slightly lower net interest revenue and margin. The yield on average earning assets was 4.46%, a 13 basis points increase, and the yield on the loan portfolio was 5.26%, up 17 basis points due to that carryover from the December 2018 rate hike. The yield on the available for sale securities portfolio increased 6 basis points to 2.57%, while the yield on the trading securities portfolio was down increased 24 basis points to 1.66 percent, including a 17 basis point increase in interest bearing deposits to 1.04%. On Slide 8, fees and commissions were $160,600,000 relatively flat on a sequential basis, though there were some bright spots that we think bodes well for key revenues in 2019. Lower mortgage interest rates led to an increase in mortgage applications and commitments, which helped drive higher revenue this quarter.
Mortgage revenues were up nearly 9% and gain on sale margin increased 18 basis points over the previous quarter. As we mentioned in previous calls, our focus during the overall mortgage market slowdown has been to increase efficiency in the space. We have worked the past few quarters to right size expenses and with Greyhocks subsiding, these efforts have been rewarded with better operating leverage. Additional cost saves the mortgage was undertaken this quarter as part of a strategy shift away from the online lead buying business branded HomeDirect. With margin erosion in the industry, we've made the decision to forego the transactional price sensitive nature of lead buying to refocus on our core competency of developing complete long term relationships within our retail mortgage channel.
Brokerage and trading revenue increased 12.5 percent for the quarter, primarily driven by the combination of increased investor demand as market confidence improved as the Fed signaled interest rate stability, as well as our decision in the Q4 to expand the limits for our broker dealer trading desk, resulting mortgage backed securities trade volumes increased approximately 18% linked quarter and the trade mix shifted from TBA derivatives to more specified pool securities, which is a factor in the growth in average and securities sales receivable that lowered our net interest margin. Fiduciary and asset management revenue was down slightly, even with an increase in assets under management. With the market drop off in December, existing balances contracted shrinking the fee base. With increased business and the market recovery this quarter, we expect fee levels in this segment to rebound. Deposit service charges were down nearly 4% this quarter as a result of 2 fewer days in the quarter compared to the 4th quarter.
Other revenue decreased $3,600,000 primarily due to a decrease in revenue earned on certain repossessed assets compared to the Q4 of 2018. I'll also mention that our total economic cost of changes in the fair value of mortgage servicing rights, net of economic hedges, was 5,400,000 dollars This was due primarily to the combination of significant mortgage rate volatility, primarily in March and other unhedgeable factors. Turning to Slide 9, operating expenses were up $4,000,000 excluding CoBiz related integration costs, which I'll talk more about later. The following comments addressing expense fluctuations omit CoBiz one time integration costs. Personnel expense increased $10,900,000 over the prior quarter.
This is largely a result of the equity award reversals in the 4th quarter that we mentioned in January. We've now resumed a more normal level of equity compensation expense recognition in the Q1 of 2019. The remainder is attributable to a $1,900,000 increase in employee benefits due to a seasonal increase in payroll taxes, partially offset by a decrease in healthcare costs. Non personnel expense decreased $6,600,000 over the Q4 of 2018. Last quarter included a $2,800,000 charitable donation to the BOKS Foundation that impacts the comparison.
In addition, business promotion expense decreased $1,700,000 and mortgage shipping costs decreased $1,600,000 both due to seasonality. Professional fees and services decreased $1,000,000 These decreases were partially offset by an increase in data processing communications expense of $3,000,000 Slide 10 has our current outlook for 20 19. We expect mid single digit loan growth for the consolidated DOK Financial and CoBiz entity, the continued strength in energy, healthcare and general C and I business. Loan loss provision levels will be influenced by this loan growth that that will likely run at $200 levels when compared to the past few quarters. We have revised our 20 19 forecast to include 0 interest rate hikes in 2019.
With the changing interest rate outlook, we now see little opportunity to improve net interest margin. Deposit mix as well as the pricing required to gather deposits on future loan growth will determine the level of margin pressure going forward. We expect the revenue from feed generating businesses will be slightly up at current levels as we continue to grow the legacy DLKF portfolio as well as we begin to sell into the CoBiz customer base. CoBiz integration costs totaled $30,000,000 $17,000,000 in 20 $18,000,000 in the Q1 of 2019. This is significantly lower than the $42,000,000 estimate we mentioned last quarter.
We came in under budget in several ways. First, we required less outside temporary help for professional engagements during the conversion than we anticipated, saving 3,000,000 2nd, we saved nearly $2,000,000 in contract buyouts and saved an additional $2,000,000 in personnel costs that some individuals chose to leave before integration was completed or are now part of our ongoing staff. And finally, our budgeted contingency expense of almost $3,000,000 was not needed. We estimate in the second quarter, we'll achieve personnel cost synergies of $4,000,000 per quarter. Additionally, later in the year, we should begin to realize synergies from consolidating 4 downtown Denver facilities into 1.
Except for some additional business promotion spend as a result of our new branding in the Colorado and Arizona markets, we expect the majority of the cost saves initially anticipated should be realized. As a result of these saves, we expect that our efficiency ratio will reach the 60% target in the second half of twenty 19. All told, we had previously guided to 6% EPS accretion from the CoBiz transaction in 2019. And now with a successful integration behind us, it looks like we'll be closer to 7% to EPS accretion this year. Safety Kynes will now review the loan portfolio in more detail.
I'll turn the call over to Stacy.
Thanks, Stephen. As you can see on Slide 12, total loans were $21,800,000,000 up $102,300,000 for the quarter. Normalizing for the COVID portfolio for the annual comparison, total loans were up nearly 9% year over year. Total C and I was up 2.4% for
the quarter. Our portfolio diversification in specialty lines of
business like energy and health care is a key differentiator for us and we're responsible for the bulk of C and I growth this quarter. Energy was up 2.2% for the quarter. Our prominence in this case aided by our 100 year track record continues to pay dividend for us compared to our competitors. We continue to from lower than normal churn in the energy portfolio as well as companies are slower to the best assets to pursue outright in the current market environment. Our Health Care channel was up 4.2% sequentially for the quarter.
This channel remains a growth engine for B2B Financial and is expected continue to be a leader for us. Many large national players in senior housing struggled in 2018, adding some tailwinds in 20 19 for regional players, which constitute our primary customers and prospects. Paydowns in the Commercial Real Estate portfolio left the segment down 3.4% for the quarter, year over year growth is still up over 4%. I'll add that our commitment volume is very strong in this space, but I expect this quarterly trend to be a temporary setback. Broadly, we remain optimistic to see our core loan growth as we begin 2019 as long as the larger economy continues to touch strength.
That said, we will continue to manage our portfolio concentrations in a prudent manner to ensure that we do not become overexposed in any one area. Mark Mahn will now review asset quality in more detail. Thanks, Stacy. On Slide 14, you
can see that credit quality remained strong as it did throughout 2018. Our credit metrics, in particular, associated with our healthcare and energy portfolios are favorable when compared to peers. With regards to leverage lending, there are a lot of definitions. We are not active in the equity sponsored collateral life enterprise value market, which we consider the most risky and have very limited exposure. We continue to follow our playbook, loan growth without underwriting compromise and this strategy continues to pay dividends for us as others in the industry have started to see credit challenges.
Non accruals were down $11,000,000 during the quarter, largely in the energy portfolio. Net charge offs moved to 19 basis points, down from 23 basis points last quarter. Net charge offs for the Q1 were primarily related to a single energy production borrower and a single healthcare borrower, both of which have been previously identified as impaired and appropriately reserved. Potential problem loans, which are defined as performing loans that, based on known information, cause management concern as to the borrower's ability to continue to perform totaled $169,000,000 at March 31st compared to $215,000,000 at December 31st. Based on the evaluation of all credit factors, including overall portfolio growth, changes in non accruing and potential problem loans and net charge off, the company determined that an $8,000,000 provision for credit losses was appropriate for the Q1 of 2019.
We remain appropriately reserved with a combined allowance of 0.95 percent of period end loans and leases. And lastly, a word on CECL. Our credit and finance teams continue to develop our models with our 1st parallel run this quarter. We will continue to fine tune the models and the process during the next two quarters to determine what our expectations are for implementation. I would note that our portfolio is relatively short term due to our commercial orientation, largely precluding us from large impact overhauls to our existing process.
I'll now turn the call back over to Steve Bradshaw for closing commentary. Thanks, Mark. Again, it was a solid start to the year for BFS Financial. I'm optimistic about the outlook for continued loan and fee growth this year and I'm very pleased with what we've been able to achieve on the expense side. We will continue to focus on deposit gathering across all lines of business and as Stephen noted, we see some improvement already in that regard here in the Q2.
It also came in below our guidance on expenses related to the tentative integration. Now, our full focus is on customer experience, the growth strategies in our Colorado and Arizona markets. We expect run rate efficiencies to be fully realized for the rest of the year. Although we did not assume revenue synergies in our acquisition analysis, we expect to gain from our added scale and the capabilities we bring as we welcome former customers of CoBiz to BOK Financial. We continue to carefully monitor credit quality and we remain comfortable that our portfolio is well positioned in the current environment.
I believe the credit metrics that Mark just covered and our credit results in particular associated with our healthcare and energy portfolios are very strong with superior to peers, which is a result of our intentional focus on our time tested conservative underwriting culture, one that has served the Company and shareholders well across a number of credit cycles for the past 27 years. With that, we will take your questions. Operator?
Thank you. Our first question is coming from Ken Zerbe with Morgan Stanley. Please go ahead with your question.
I guess, just starting off in terms of the margin, obviously, you've got down quite a bit this course 3.30. If you I think it was Stephen. You mentioned that you were expecting some of the non interest bearing deposits to come back. Can you just give us or help us quantify, if you do get whatever you expect in terms of non interest bearing coming back, how much does that actually benefit your NIM in 2nd quarter? Because I'm comparing it to your guidance where you state on Slide 10 where basically there's little opportunity to improve NIM.
Okay. Well, the NIM was impacted this quarter by 5 basis points from $660,000,000 of DDA on average runoff. So, so far kind of this through the end of the quarter and then on into the 2nd quarter, we've seen some improvement. I think if you just extrapolate the kind of detriment that it had on this quarter's NIM to some recovery of those balances going forward, you kind of come up with the amount of NIM impact it would have in the second quarter. Got you.
Okay. So if
they all came back, then you get roughly
the 5 basis points benefit? That's correct.
And there's a lot of moving parts embedded in that. I think there's aspects of our liability structure that are more volatile. So for example, on the energy side, we saw declines in our energy balances during the Q1, and we would expect some of that to come back. So for example, when we look at the reason those demand balances decline in energy specifically, those guys are getting checks from their oil and gas revenue roughly 90 days in arrears of when the price occurs. And so you think back 90 days previous to that, you had a lower price.
And so you're using more free cash flow in the operation of the business. As we begin to look forward and to Stephen's point about having a reasonable expectation that some of those demand deposits may come back, you see the recent run up in particularly oil prices. We would have an expectation that if we look forward 90 days, we will see some recovery there as we get higher revenue from oil and gas production. This is one example of the moving part inside of our balance sheet.
Got it. Okay. That sounds helpful. And then I guess sort of on the same topic. In the press release, you do talk about how trading activity, but I'm just trying to make sure I get all the pieces here.
So provision trading was higher from a fee perspective. But you mentioned that the asset or the liabilities are included in interest expense, and it sounded like that was another reason for the NIM and NII being lower. Can you just help us, like, can you just explain that process just a little bit? Yeah. So if you look at our balance sheet, you'll see the receivable on our unsettled maturity sales line item go up on average $425,000,000 We're carrying that non earning asset waiting for that to settle.
But we're picking up the revenue associated with that trading activity, that trade down in the brokerage and trading line item. So we're effectively providing liquidity for our client a little bit longer and carrying that through interest expense, earning that back or a portion of that back through the actual brokerage and trading revenue. So it has a negative impact on NIM, but when you put the pieces together, we're still profitable with that trade. And so if we saw brokerage and trading continuing to be strong or increasing from here on out, is that a permanent downward pressure on your margin or is that more temporary in nature? Well, it could.
I mean, it just depends on the nature of those trades and how long the client wants to wait to settle that trade out and for us to deliver that transaction. So I mean it could. Well, Ken, this is Keith Bradshaw. We actually made the decision going into 'nineteen that we would expand our trading efforts. We've also been opportunistic in terms of bringing some additional resources on.
It's kind of a classic page out of our playbook that when we see a business that's a little bit out of favor, we have the opportunity to pick up some talent and commit to it. So, we expected to increase our trading limits during the Q1 and we did. Steven is right, it could be it kind of depends on what that volume is every quarter, although we're reaching some of those limits that we're comfortable with today. So on a steady state basis, it wouldn't have a continuingly continuous negative impact on the NIM going forward. Okay, perfect.
Thank you very much.
Thank you. Our next question is coming from Brady Gailey of KBW. Please go ahead.
Hey, good morning, guys. Good morning. When
I look at the guidance, the 60% efficiency ratio by the back half of this year. As you look to 2020, do you think there's opportunity for that efficiency ratio to go lower, like into the high fifty percent range? Or do you think that 60% is just a good longer term run rate for you guys? Well, I actually think we will pass through 60% sometime in the second half of the year. So I don't expect this to stop at 60% to answer your question.
I really think we reached that mark and passed through it. Then we'll see what kind of budgets and activity we can put together for 2020, but I would expect us with the level of fee revenue that we have now to operate somewhere in that high TC mark. We're never going to be a bank that gets to straight up 50%, and we have way more fee revenues that drive that efficiency ratio up. But we have operated this company in the past in the high 50s, and so that's kind of where we're hopefully headed. Okay.
And then on the buyback, you repurchased roughly 1% of the company this quarter, close to what you did last quarter in the 4th quarter. So your TCE is now 8.6 percent. I mean the stock is cheaper than where you repurchased it last couple of quarters. And then maybe just talk about how you think about buybacks
as it relates to TCE and if you think buybacks are likely going forward?
Yes. I think buybacks are likely going forward. I mean, I think at this level of the stock price, with the outlook for the success of the Company going forward, you'll see us utilize some of our excess capital in this fashion. Maybe that's a little different in the past, but we feel it's pretty good opportunity to be in the market, and we have in the last couple of quarters, as you noted. 8.6% TCEs, I mean, that's a healthy TCE.
I have no problem moving that down. There's not a target level that I would say we would go to necessarily. I know grading agencies look at that pretty closely. We can evaluate that, but we have room to buy back.
Our next question is coming from Peter Winter of Wedbush.
Good morning. There was a
big increase this quarter on the interest bearing deposit costs. And I'm just wondering what the outlook is for interest bearing deposit costs for kind of the remainder
of the year. Yes. If you look at the Q1, we did have more exception price Sumner Well compared to the 4th quarter. So if you saw that 17 basis point increase in interest bearing deposits, that's up in the 60% or so kind of beta area. With now the outlook of rates flat, you probably don't see that kind of an increase going forward.
You may see a little bit of additional exception pricing, but I wouldn't expect it to elevate to that level. Part of it depends on how much of the loan growth we get in the second in the last three quarters of the year, how much of that we want to fund with deposit growth, what happens on the DDA side. I mean there's a lot of moving parts, as Stacy mentioned earlier. But I wouldn't expect the betas to be this is not going to be a rate move, we don't think now, but I wouldn't expect there to be as much pressure on the deposit pricing as we saw in the Q1, would be my estimation. Okay.
And then just on the if I look at securities
and assets, it's always high. I know you use it to help manage the asset sensitivity on the balance sheet.
But I'm just wondering, any thought on letting securities maybe cut off to fund loan growth and take some pressure off deposit costs? We would look at that in ALCO, but I probably not. I think we like the level of securities that we have. It's all in the context of where we want to position the net interest, the rate risk of the company. It is the primary item we use on the balance sheet to monitor and maintain that around that kind of neutral spot.
I don't know that we have philosophically a change in that approach at this point. Peter, you recall a lot of that is a
safety, a lot of that is a very high quality securities portfolio. So most of that is really self funded. It's not necessarily funded through deposits.
Okay. And just my last question, just on
operating expenses. Given the integration and the cost saves with COVID, would you see
the high watermark for expenses and
do you expect to kind
of trend lower for the remainder of the year? Yes. I think so. I mean, I think if you take out the integration costs that you saw, the $12,700,000 and then if you continue to pick up in your numbers the synergies that we expect or we've really already gotten both on the personnel side and non personnel side, you should see a lower expense base in the second quarter and going further. So we're going to spend a little bit more money, I think, in the second, third quarter on kind of business promotion.
We're doing some branding initiatives with our new BOK Financial brand out west. You'll see a little bit of that. And then we'll continue to gain some synergy in our occupancy space as we continue to consolidate buildings and sublease some of the buildings and get everyone moved over to one spot in Denver. So I think this was a high watermark. Great.
Thanks very much.
Our next question is coming from Derek Turner of D. A. Davidson. Please go ahead.
Thanks. Good morning.
I wanted to ask you about the mortgage strategy just in terms
of continuing the lead buying business. Can you
talk to us about what the what amount of
volume came through that channel, say, in the Q1? And then just maybe quantify the difference between the margins in that versus your retail origination? Yes. This is Steve Ritch. I can speak to that.
I think the high watermark in terms of the percentage of production coming from HomeDirect was somewhere in the 30%, 35% of total production. And that was at a point where the margins were strong enough to really justify that effort and because it was in a heavy refi market where the direct channel really kind of flourishes. As we move to really strong purchase market, really north of 70%, The lead costs have grown pretty substantially, while the margins have come down. It's not a model that we think is particularly sustainable for us in an elongated purchase market, which is where we think we are today. So from our perspective, we are reducing our reliance on external leads and the costs there and we're refocusing that group on internal lead generation inside the organization.
So opportunities to create a really great experience for mortgage leads to come through the branch network, come through our wealth management group, other types of channels. So the expertise that's there, we see is a real advantage. But we're going to focus on internally and that obviously gives us the best opportunity to expand the relationship beyond just a mortgage loan. So it's a little change of philosophy there for us And it is absolutely an expense play. We actually saw margins expand in the Q1, I think 18 basis points.
And a lot of that reflects the fact that we're getting high of that external lead buying and we're ramping up our purchase business out of our retail network. So those combined I think gives us a better operating model for mortgage in today's world going forward. And we've also achieved some cost efficiencies in other areas in that organization. We'll continue to make sure that we've got the right expense base to support. It.
So back to the earlier question of Stephen about efficiency, I think that will be a contributing factor to us moving down below 50% efficiency, just gaining a little more operating leverage in spot mortgage going forward.
Okay. Just again to clarify, so you were at a
high watermark, you said, of 30% to 35% of total production from that panel.
What was it in the Q1?
Yes, I don't recall off the top of my head. It was less than that, but I don't know Jeff. I want to say it's less than 20, but we'll get some information for you.
Okay. I'm just curious what you can maximize on a sequential basis. So, Cole, will
you be completely exited from that business for the Q2?
Will it be or is there a wind down?
No, we won't be. We'll be continuing to wind down kind of the external element as the lead time and kind of the national stuff there that we'll continue to wind that down over the course of the year. But we are substituting the lead generation from all those internal sources. We've been doing some things to increase awareness and referral business inside of our kind of core network. So, in terms of the team that remains in home direct, they've got an awful lot of activity going on and they'll be focused on higher margin business for us within our footprint.
Okay, Great. Thank you for color.
Thank you.
Thank you. Our next question is coming from Jon Arfstrom of RBC Capital Markets. Please go ahead.
Hey, thanks. Good morning.
Good morning.
Hey, just I had some other questions. Just a quick follow-up, a curious question. Do you expect a step down in mortgage revenue in Q2? Are your pipeline such that you might see a typical lift in Q2, Q3 lift? Yes, this is Steve.
I don't believe that. We're actually kind of in the peak season and our application volume has been strengthening kind of throughout the year. And with the higher margin we get from retail, I don't think we would expect to see a significant setback just because we're reducing our reliance on external leads. It will show up in top line mortgage production, but not in the top line revenue number in my opinion. Okay.
All right. That helps. Casey,
on energy lending,
do you need anything different when prices are rising? I mean, we've been through all the ups and downs with the company, and I'm just curious if you've changed your approach at all as particularly crude prices rise?
No, we don't. That's like kind of the beauty of kind of the bad times we're looking at it the same way. If you think about how we value that, we're still working off kind of the end of March forward right deck, because we've had a nice run up here in April. So we're underwriting 2019 at $59 oil, 20.20 at $58 oil, 20.21 at $56 oil, probably because the curve is activated. So when you look at that effect, the near term spot size or prompt month prices run up more significantly than the overall strip has.
But we don't change that in terms of how we look at it. We may get more aggressive with hedging and asking our customers to hedge and understanding their management strategies, but it's beginning to move
up like this because we
see that as an opportunistic way to lock in good margin for our customers. But in terms of underwriting, our standards don't change.
Okay. And then I don't know if this is for Steve or Stephen, but in your guidance, you talked about revenue from fee generating businesses and you have a comment on there as we begin to sell in the CoBiz customer base. Can you talk a little bit about what you expect the magnitude of that to be and how it's probably gone so far generating fees out of the customer base? Yes. This is Steve Bradshaw.
I don't know that I would offer out what we think the magnitude will be, but we're encouraged even throughout the entire integration process, which is by its nature kind of inward focused. You're focused on training and onboarding new employees. You're focused on making sure that customers understand what will change after the data integration. And we're still working through some of that, as you would expect. But we've been encouraged because of the desire that we've seen from our relationship managers that joined us from COVID to go out especially with things like our wealth management business, which is obviously a big strength of the Company.
We're seeing some traction in our treasury group, but we have some capabilities that were stronger in some business segments than what CoBiz had, etcetera. So that sales effort and that kind of going on office, if you will, is already underway. So I'm optimistic about it. I don't know that I would ascribe a dollar amount to it, but it will certainly be something that we'll see grow I think throughout the remainder of the year. Okay.
Thank you for that. And then just the last one in terms of increasing the limits on the trading desk, Not being critical of that, but I'm just curious by increasing your limits, what are the risks that you're accepting by doing that? How should we think about the pros and cons of the decision to increase limits? Yes, I mean, I don't think it's a concern. I think we're just allocating, if you will, a little bit more of the balance sheet towards that business, but to take advantage of it, as Steve mentioned.
So, of course, we've got our risk management team that monitors all of that activity daily. We had daily limits. You see all of that in our asset liability committee meetings. We're not biting off and improving the amount of additional risk by allocating a little bit more of the balance sheet towards that business. I think it's the right thing to do.
Okay. All right. Thanks for the help.
Thank you. This is Tom. I'd like to turn the floor back over to management for closing comments.
Well, we appreciate everyone's questions. Thanks again for joining us this morning. And if you have any additional questions, feel free to call me at 918-595-3030 or you can email us at irbokf.com. Everyone have a great day.
Ladies and gentlemen, thank you for your participation.