Welcome to the Triumph Bancorp first quarter 2019 earnings conference call and webcast. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Luke Wyse, Senior Vice President of Finance and Investor Relations. Please go ahead.
Good morning. Welcome to the Triumph Bancorp conference call to discuss our first quarter 2019 financial results. Before we get started, I'd like to remind you that this presentation may include forward-looking statements. Those statements are subject to risks and uncertainties that could cause actual and anticipated results to differ. The company undertakes no obligation to publicly revise any forward-looking statement. If you're logged into our webcast, please refer to the slide presentation available online, including our safe harbor statement on slide two. For those joining by phone, please note that the safe harbor statement and presentation are available on our website at www.triumphbancorp.com. All comments made during today's call are subject to that safe harbor statement. I'm joined this morning by Triumph Vice Chairman and CEO, Aaron Graft, our Chief Financial Officer, Bryce Fowler, and Dan Karas, our Chief Lending Officer.
After the presentation, we'll be happy to address any questions you may have. At this time, I would like to turn the call over to Aaron. Aaron?
Good morning. For the first quarter, we earned net income to common stockholders of $14.8 million or $0.55 per diluted share. Return on average assets for the quarter was 1.33%. First quarter net interest income was down $3.6 million from Q4. Loan yield declined 15 basis points to 7.99%, and the cost of total deposits increased eight basis points to 99 basis points. Net interest margin declined 19 basis points to 6.15%. We accreted $1.6 million of loan discount in Q1. Our first quarter loan growth was very soft, and the drop-off in factoring caused our net interest margin to compress. This has been consistent over the last five years, and it was especially so this year. Our factoring portfolio shrunk due to reduced individual invoice sizes and reduced utilization.
Our ABL portfolio also shrunk due to payoffs. Neither of these were surprising occurrences, but it was a bit surprising by the order of magnitude. On the positive side, our commercial real estate portfolio grew by 10% in Q1 and continues to perform exceptionally well. A second positive note is that our current loan pipeline for Q2 closings is between $300 million-$400 million, which will be our largest organic growth quarter ever. That growth is showing up in multiple lines of business, which is encouraging. As a result of that growth, much of which will come towards the end of the quarter, our provision expense for loan growth will be a drag on earnings per share in Q2. In Q1, total factoring revenue at Triumph Business Capital decreased $4 million quarter-over-quarter, or 13%, to a total of $25 million.
The decrease in revenue was driven by a 14% decline in purchases to $1.3 billion during Q1. The number of invoices purchased decreased 92,000 from Q4. We purchased 790,000 invoices total in Q1. This is illustrative of the drop in utilization as many of our clients parked their trucks for part of the quarter due to non-compelling prices, bad weather, and vacations. None of this is new or unusual, but it is exacerbated this year coming off the record year we had in 2018. Average transportation invoices decreased $84 to $1,541, or 5%. This contributed to a $54 million decline in receivables factored at Triumph Business Capital for the quarter.
We can't control either invoice sizes or utilization, but with respect to what we can control, I am encouraged that the number of active clients increased by 191 clients to a total of 6,382 clients during the first quarter. Not all clients generate the same amount of revenue. Our smallest clients generate, on average, less than $500 a month in revenue, although the yields are very high. Some of our largest clients generate monthly revenues well into the five figures with yields in the high single digits. Net client growth matters, but it also matters that we grow the right mix of clients, which will translate to a greater volume of purchased invoices. I expect us to continue to perform well this year on these controllable variables, which will create value for the long term.
Perhaps the biggest news for Triumph Business Capital this quarter was the hiring of Geoffrey Brenner as CEO. Geoffrey will join our other senior leadership team, including George Thorson and Steve Hausman. In addition to being a great cultural leader, Geoffrey is going to bring greater discipline and metric-based performance analysis into this business. Given that we expect to purchase approximately 4 million invoices this year, even small efficiency improvements in each part of the invoice purchasing and collection process can have a material impact on our overall profitability and customer experience. For TriumphPay, we have 130 clients utilizing the TriumphPay system, up from 113 clients last quarter. During the first quarter, TriumphPay processed 114,000 invoices, paying 23,000 distinct carriers approximately $141 million. We continue to believe everything we have said about this business for the past several quarters.
We have a pipeline of freight brokers in the queue to join the system, and we continue to work with some of the largest third-party logistics companies in the country to become TriumphPay customers. We also continue to develop the technology to provide more flexibility and features to third-party logistics users and truckers utilizing the system. Our asset quality remains solid. All of our reported asset quality metrics were flat or down versus December 31st, and net charge-offs to average loans for the quarter were three basis points. Our loan-to-deposit ratio at quarter end increased to 109%. This ratio is inflated approximately 9% by our use of Federal Home Loan Bank advances to fund our mortgage warehouse lines. Total deposits declined by $136 million in the first quarter. Over $100 million of this decline was event-driven or intentional, which we do not foresee repeating.
That being said, we have work to do on the deposit front. We are in the process of overhauling our retail product offerings and sales efforts. We have recently launched a major upgrade to our treasury management capabilities, which we expect to start growing balances this quarter and throughout the remainder of the year. Finally, we have broken ground on our new banking center in the heart of Dallas, which we hope to open by the end of this year. We expect this to be our largest branch shortly after opening. First quarter expenses were slightly better than the $49.5 million estimate we provided in our last earnings call. We estimate that non-interest expense will increase to $51.5 million for the second quarter of 2019. We now expect full year expenses of $202 million, about 1% above our projection given last quarter.
For non-interest income, we had approximately $400,000 of other non-interest income in the quarter that we do not expect to be recurring. During the quarter, we purchased 247,312 shares into treasury stock at an average price of $30.51, for a total of $7.6 million. We believe our shares are a good value at these prices. However, we must balance that opportunity to buy back our shares versus making investments to grow our business, particularly on the deposit front. In the absence of a transaction, I suspect we will continue to repurchase our shares throughout the year, if in our view, the stock remains undervalued. A 1.33% return on average assets is not a bad start relative to our peers, but it is not where we intend to be. We have a long ways to go to achieve our goal for Q4.
A 1.8% return on average assets is where we believe we can run our business annually once we are fully optimized. Once we arrive at that optimization, we will still experience the seasonal variances we have historically encountered. We continue to work towards achieving a 1.8% ROA by Q4 of this year. We will need the transportation market to rebound in order to achieve that goal. In the past few years, that rebound has been strong. It remains to be seen how this year will unfold. Whatever the case, we won't compromise on credit quality in order to make a short-term gain that could lead to long-term consequences. More importantly than what we do in Q4 of this year, is where do we think we can run the business for the long term?
As I said, we believe that we can run a full year 1.8% ROA once the initiatives like treasury management and other retail programs are fully functional, and with TriumphPay becoming a net contributor, which we expect late this year or early next year. My goal for 2020 is for us to achieve a minimum of a 1.65% full year return on average assets, which will likely include a few quarters at 1.8% or better, and for 2021 to achieve a full year 1.8% return on average assets. With that, I'll turn the call back over to the operator for any questions.
We will now begin the question and answer session. To ask a question, you may press star then one on your touch tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question comes from Matt Olney of Stephens. Please go ahead.
Hey, thanks. Good morning, guys.
Good morning, Matt. Good morning.
I want to start in the factoring segment. I think you guys added 191 new clients in the business, which is good growth, but still a slowdown from the pace that you guys experienced in 2018 that was closer to around 300. Can you talk about that slowdown? Is this a reflection of market saturation, seasonality, or what do you think it is, and what would you expect this number to be for the rest of the year? Matt, as far as what it will end up being for the rest of the year, I hesitate to make a specific projection. I will say that the pipeline is still very full. I don't view that the onboarding of 191 net new clients, that doesn't feel like a material deviation from last year.
I will just say that everything this year so far feels a lot more like 2017 did than 2018. 2018 was the high water mark for the spot market for a variety of reasons. What we're feeling now is still better than the historical averages, but more like 2017, and I think that holds true with average invoice sizes. I also think that holds true with how much of the market Triumph Business Capital continues to capture. I suspect we will have a year of net client growth that won't materially deviate from what we've done in the past, on absolute numbers. On percentages, of course, as we grow, the percentage gets smaller.
Sure. Okay. That's helpful. Aaron, you mentioned that the long-term ROA for the full year remains that 180 range, but that would assume a full optimization. Can you just kind of clarify full optimization? I think you mentioned treasury management fully on board, as well as more contribution from TriumphPay. Can you put some more numbers around what that could mean for TriumphPay?
We're not going to break out TriumphPay at this time for competitive reasons, other than to say that by the end of this year, it will be very close to breakeven, if not swinging above that number. It depends upon some large customers who we are in dialogue with. Once it swings, it starts to swing pretty dramatically. You're just talking about a long sales cycle with some of these very large freight brokers that we're now coming into the later innings with. I think TriumphPay, what you'll end up seeing there, Matt, is if you take our Triumph Business Capital, our factoring business, as we've said many times before, is between a 5%-6% pre-tax ROA line of business. We think TriumphPay is probably more like a 3.5%-4% pre-tax ROA business.
As you start to see scale come in that business, it's obviously going to have the same or similar effect on our overall net interest margin and revenue growth that Triumph Business Capital has had in that it's very different than our other lines of business as far as yields and margins. As far as for a full year of 1.8% ROA, what we need in the relative size of where this organization sits is we're going to have loan growth this year between $500 million-$700 million. That incremental funding cost to deliver that, we need to be getting through channels other than just the highest-rate market, being the highest advertised rates in the market.
One of the things we need to help with the 1.8% ROA is generating up to $100 million through our treasury management and retail offerings at prices that are very different than the highest dollar incremental time deposits you can go out and get right now. With that, which we think will continually get better as we slowly compel existing clients onto our treasury management platform and do a better job of marketing throughout our retail network, we think you'll see improvement there. Because without doing that, you're going to see deposit costs creep six to seven basis points a quarter for the foreseeable future. We need to have that in place to protect our net interest margin above 6%, which we think we can do. Fully optimized for a full year, Matt, which I'm saying is 2021.
To be at a 1.8% ROA for a full year, you're going to have some quarters in there that are probably more like a 1.6%, and you're going to have some quarters that are like a 2% ROA. That is just by virtue of the fact that 25% of our revenue, more or less, is tied to the spot freight market, and we can't control that. All we can do is efficiently serve that market. Even with the volatility in that market, it remains by a wide margin, our most profitable business.
Okay. Yeah, that's helpful. You guys have been pretty clear about the seasonality there for a while now. I'll hop back in the queue. Thank you.
The next question comes from Brady Gailey of KBW. Please go ahead.
Hey, good morning, guys.
Morning.
I know last quarter we talked about the net interest margin possibly seeing some mild expansion year-over-year, 2019 versus 2018. I know the outlook on rates has changed pretty dramatically. The yield curve has flattened. How are you all thinking about the margin for 2019?
I think, Brady, we're going to finish the year with a net interest margin of around 6%, unless we see unusual or outsized growth in Triumph Business Capital. That would be a very slight contraction over where we sit now. I think you will see it probably contract a little more in Q2 and then start to expand towards the latter part of the year. What the actual number ends up being relative to that 6% mark, I don't know. If factoring stays where it is now, I think you're looking at something right around a 6% number.
Okay. You repurchased about 1% of the company this quarter. It sounds like you'll continue to be active on that front. How do you think about the magnitude of how much stock you want to buy at this level?
Well, we live this company day in and day out, the opportunity to buy our stock back at less than 10 times forward earnings remains compelling to me every day. It's not about the order of magnitude of what we buy back because we think we have the capital to support that. It's more about, Brady, as we think about what our next M&A transaction might be, those dollars that we spend to buy back our stock, if you end up chewing through a lot of your excess capital and liquidity by buying back your own stock, you don't have that same currency to use in a transaction. We remain very interested in doing branch deals or deposit-rich acquisitions.
I think the answer on how much stock would we buy back in the absence of a deal would be whatever we could buy that would still keep us above the capital ratios that we've told the market we intend to run this organization at. We're not going to race to that number as we evaluate a few things that are in our M&A pipeline.
All right. You mentioned M&A, maybe just a little more color. The stock price is down. You don't have as much power as you once had on the M&A front. Do you think M&A is likely in the near term, or is it something that may happen, it may not happen?
It's hard for me to distinguish between likely versus may or may not happen. If it happens, what I can tell you, Brady, is it's not going to be a large, pristine organization in the middle of a major metro market. That's never been our maneuver, and especially not our maneuver now, given that where we trade relative to tangible book and what we think it would take to do a deal like that. I think it's probable this year that we will announce either a branch transaction or the acquisition of an institution that has a favorable deposit profile that's within or adjacent to the markets that we currently operate. I still think that that's more likely than not, there's nothing imminent.
All right, great. Thanks guys.
The next question comes from Brad Milsaps of Sandler O'Neill. Please go ahead.
Hey, good morning, Aaron.
Morning.
Hey, I was writing quickly. I think you mentioned you expected your pipeline was $300 million-$400 million for the second quarter. A lot of that might close toward the end. I was just kind of curious the pull-through rate on that, and how that impacts your annual guidance and what the mix of that pipeline would look like. Is it more community bank assets or more your kind of specialty finance type loans that would have higher yields?
Yeah, I think it's probably safe to say, Brad, that a third of it would be commercial finance and two-thirds would be community bank profile. Fairly similar to where the portfolio is situated now. It's impossible to predict with total accuracy where and when all this stuff will close. Bryce, I don't know if you have anything you want to add about the pull-through rate or averages versus end of period.
It is a very chattery thing from period to period on what actually is in the pipeline and closes through. I think his proportions he talked about there are right. There's a lot in the pipeline, and it's looking pretty good. I think that mix is about right. I would expect that range of $300 million-$400 million to be a reasonable estimate.
Brad, one other thing to add, when it doesn't get talked about, or hasn't been talked about as much, that I think you'll start to see this quarter, is you'll start to see ABL go the other way, meaning that I think you're going to see us start to return to growth. I have hopes for what that group under Dan's leadership is going to accomplish through the remainder of the year. We've spent the last few quarters doing a very deep dive into that portfolio to make sure that we're comfortable with the credits that are there. We've exited through payoffs and otherwise the credits we weren't comfortable with. We now feel like we have that firm foundation to move forward. I think that's important because the blended yield on an ABL relationship is around 8.5%.
Next to factoring, it's among the highest yielding products that we do. To have that back growing again this quarter and on through the rest of the year alongside of recovery and transportation invoice sizes and utilization, those are things that are going to help us achieve our goals.
Great. You still feel comfortable, obviously the timing can change, but the kind of 15% ish growth for the year in total loans?
Absolutely.
Okay. I appreciate the additional color on expenses for the second quarter and the year. I know it's a subtle change, but just kind of curious of the drivers and if you've been able to realize kind of all the cost savings from the deals that you completed last year. I know you were working through a few things in the factoring business in the fourth quarter that may have hurt you on the revenue side with some operational changes, but just kind of curious, have you worked through everything else and any other levers on the expense side that you see out there that could be pulled?
The $202 million number we gave you, Brad, includes most of those levers. I can't tell you that I have any degree of confidence it will drop below that. That number that I'm giving you still includes some initiatives, which is going to reduce expense line items in certain areas of our business from where they are currently. On the other hand, we've done things like add a CEO for Triumph Business Capital. We've got a couple other senior hires around here that we think are necessary to run this institution the way it needs to be run that offset some of those savings. The bottom line answer, Brad, if revenue slows dramatically, yes, there are probably some things we can do to freeze expenses, that would be prudent to do if that's what we find.
If the economy reacts like we think it will, which is where you start to see some growth and once we figure out what we're doing with China and things normalize, then I'm pretty confident that that $202 million number is where we're going to land.
Great. Thanks, Aaron.
The next question comes from Jared Shaw of Wells Fargo Securities. Please go ahead.
Hi, good morning.
Morning, Jared.
I think we hit on most things. I guess just on the factoring, with the growth rate, are you still seeing any pressure from the integration of Interstate, or is that fully integrated? When you look at the quarter-over-quarter growth and even given the seasonality, it seems like the slowdown is a little more noticeable than we were expecting. Are you getting the full benefit of that acquisition yet, or is there still some integration opportunity there that could help boost growth in the future?
Yeah. Let me answer the first question. On the integration of ICC, we are not done with that yet, and there are some things that we're working on to really streamline that and to make sure we've eliminated all duplicative functions, and that we have our colleagues down in El Paso working on the customer base that they're best at serving, and that what we're doing in Coppell, in the Dallas market, is serving the customer base it's best at serving, and that we're all marching together and in sync and have achieved those efficiencies. That is not done yet, I think we are coming into the late innings of that.
That being said, no matter how efficient we run the back office of our factoring operation, it's like pushing on a string when you run into the time in the market, which is generally the first quarter, where freight slows down. When the spot market falls dramatically below the contractual rate market, we have customers who are going to say, "It's not worth it for me to drive." They'll just park their truck and wait until the spot market rebounds, which can happen very quickly and depends on a lot of factors like weather and things that move very fast. We want to be always prepared and as efficient as we can to capture the market opportunity in front of us, because it's so important to our bottom line.
Being efficient on the back end has nothing to do with. We can only buy the invoices that are presented to us, and we can't control that piece of it.
I guess, though, but you're not losing customers that were Interstate customers that aren't making a transition onto the Triumph system?
Yeah, that's correct. Look, we lose customers every month for a variety of reasons. I think the number to look at is that we are adding more and retaining more than we're losing. I have no doubt there have been some ICC customers that, as a result of the transition, have chosen to go elsewhere, but it hasn't risen to a statistically significant number.
Okay. Then on the ROA targets, understand the desire and the target to grow at the treasury management. Did the other component, did you say that you're looking to transition more of the deposit base to overall commercial as well? Was that the second component of reaching the 1.8 ROA target? If that's the case, do you have any other investments that need to happen to build out that commercial funding base?
No. The answer to the first question is yes, because the incremental cost of funds, new dollars in at any scale is starting to get close to 3%, and I think that's that way for everyone. If you're bringing in time deposits without a commercial relationship, well, that certainly is going to put pressure on your margins. We don't want to depend on that channel to be our primary channel. On the commercial deposit side, the technology is built. The conversion happened last month. As with any conversion, you spend a few days fielding phone calls from all your customers, which our team did admirably. Now we have five salespeople going out to lean on the customer base we have and the communities we serve to market this new service offering.
We've had many commercial finance clients who have never historically been deposit clients of this institution because they're not located in our geography, and we didn't have the digital tools and robust things they needed to meet their needs. Well, we now do. You're going to start to see those deposits show up this quarter. Yeah, I believe to achieve a 1.8 ROA, the journey from here to where we hit that number at $5 billion in assets or $6 billion in assets, can't just be funded with expensive CDs. It's going to have to be a mix, and I think we're positioned for that, but we got to go execute on it.
Okay, thanks. Just finally for me on the TriumphPay, I understand you don't want to give a lot of the details around numbers, but when you look at that growth from 113 clients to 130 clients, and then you're talking about it being breakeven or profitable, call it in a year or so, is that more incrementally growth along those lines? Or do we start seeing hockey stick growth at some point in TriumphPay to transition it to a profitable contributor?
Yeah. I think it will most likely be hockey stick with some of the larger customers that we have focused a lot of our attention on. Here's how I think that will play out, because real life is always more complicated and takes a little longer than it does in a pure Excel model. The first hockey stick you will see is the number of invoices flowing through the system and the amount of carriers we're paying through the system, which we're disclosing to you every quarter. When you see that, I think within a 90-day lag of that, and it will continue to get better, is you'll start to see the quick pay adoption ratio.
In other words, transitioning from just paying all these carriers on behalf of our freight broker clients to actually having a significant portion of these carriers adopting the quick pay, which in effect is like a factored receivable for us. Those are going to very closely correlate with one another because in our testing and analysis, we know what the quick pay adoption ratio is relative to the total universe of payments we're making. I think we're going to breadcrumb that for you all. It was 15% quarter-over-quarter growth as far as number of clients, and we have a lot in the queue and some large ones in the pipeline. As you see that number go up, you'll start to see the net funds employed relative to the TriumphPay channel go up, which will become a more and more meaningful contributor.
Great. Thank you.
The next question comes from Steve Moss of B. Riley FBR. Please go ahead.
Good morning.
Morning.
I guess one thing on the provision cost for the quarter, should we think about the reserve ratio basically staying stable or maybe ticking up a little bit given the late quarter growth that you anticipate?
Hey, this is Bryce. I would expect it to be pretty stable from here. I think the mix of product coming on is going to be similar to what we have today. If we have a big jump in Triumph Business Capital there, it could go up a little bit, but I wouldn't expect that to be measurable.
Okay. That's helpful. On the margin, Aaron, you talked about a 6% margin. I was wondering, this quarter looks like the yield on factory receivables came down a little bit, still up versus a year ago levels. Are you seeing some extension of the terms when it comes to receivables? Is that an impact on your margin guidance?
No. You're not seeing the contractual, or let me say it another way. The overall portfolio is still turning in just over 30 days. That hasn't changed. There are certainly customers, shippers that negotiate longer payment terms with carriers, which of course affects our yield on those. That's been going on since we've been in this business. I think there's a couple things at play if you take a longer look at Triumph Business Capital. The first would be, as we've grown and become more sophisticated and able to serve larger and larger clients, we have some factoring clients now who have the yield profile on their portfolios in the single digits, which was unheard of when we started in this business. On the other hand, they're selling us a significant scale of receivables on a monthly basis, we can service those more efficiently.
That'd be number one. Number two is it's just a very competitive market. The technology has leveled the playing field a bit, that's why we continue to invest to stay ahead. You've seen that your smallest customers go from a 4.99, or just call it a 5% discount per purchased invoice to a 3%-3.5%. When you do that on a growing sample size, of course, the yields come down. I'm actually very proud of the fact that yields still hang in around 20% in this business given just those two factors. Beyond that, what we see for the rest of the year, I don't think you're going to see the yield profile change. What we're all hoping for, I think you're starting to see, although it has not, let me be clear to everyone, it has not snapped back dramatically.
What we are starting to see is the slightly increased utilization and average invoice size is slightly better. Now, we're hopeful that due to a variety of factors, as we get later on into the spring and into the summer, it will come back more strongly. I don't believe, at this point I think it is unlikely we will get back to the $1,800+ invoice sizes we saw last year. Now, we can still make a lot of money in this business between $1,600-$1,700 average invoice sizes. It does not appear to us at this point that we will get back to those high water marks of last year.
Okay, thank you very much. That's helpful.
Again, if you have a question, please press star then one on a touch tone phone. The next question comes from Gary Tenner of D.A. Davidson. Please go ahead.
Thanks. Good morning, guys.
Morning.
First, just a point of clarification on your margin commentary. Were you suggesting a 6% margin by the end of the year, or 6% for the full year if there was no pickup in spot rates?
I think full year.
Okay. For the full year. Thank you. As it relates to spot rates, and you just sort of alluded to this a bit, Aaron, but we've not really seen a pickup yet kind of early in the second quarter. Oil prices are certainly higher now than they were in the first quarter and at the tail end of the fourth quarter. Can you talk about any underlying dynamics other than the fact that we had some weather issues in the first quarter that might preclude spot rates from moving higher? Any changes in sort of transportation volumes? Anything that would be indicative of a broader sort of economic slowdown?
Right. We spend a lot of time thinking about this, Gary. The first thing is you got to make sure that our comparative set is based on. We got to set the comparison group right. I think last year, and I don't think I'm alone in this. In fact, I know I'm not. Last year, you had some artificial inflation in the spot markets due to the looming tariff issue with China. That pulled through a lot of freight. When, of course, when you pull through a lot of freight like that, the spot market's naturally going to go up because it's got nowhere to go. That may have artificially inflated where we were last year. With the start of this year, there's still some of that uncertainty. You've got the weather disruptions have been pretty dramatic for several of our customers.
When they're already running thin margins, a lot of them will just, if they believe there's a potential for a weather delay, they just won't drive the truck because they're not going to make any money on that haul, or they're concerned they won't be able to find a profitable back haul after they drop the existing load. Those are some factors away and apart, I think, from what the overall health of the economy. What we're seeing, and we're not economists, but what we're seeing is, like I said, something that looks more like 2017 than 2018, which is not indicative to us of a recession in the next 12 months. It feels like there's going to be growth. It may not just be growth at quite the same pace we saw last year. That's as clear as our crystal ball is at this time.
All right. Thank you for that. Just last question. As it relates to the growth in the community banking segment, good growth in the first quarter. You talked about the pipeline going into the second quarter. Have you guys put your foot down on the gas at all in that business because of maybe slower pace of growth in the commercial finance business, or is it just timing of kind of some success there?
I think a lot of it is timing. A lot of it continues to be performance in our commercial real estate group. They built a reputation for being easy to deal with and good partners. We're seeing a lot of very successful developers become repeat clients because we treat them the way we would want to be treated. We are pushing for growth in our community bank, but like the discussion I had with our team yesterday, you can't just have in the community bank loan growth. You've got to have total relationship growth. We're not going to just go out and grow loans without paying attention to whether these customers have deposit balances with us, because you can't get to the sort of numbers we have set for ourselves as a goal with growing one without a relationship on the other side.
I would say on the whole, the reason you're seeing so much more growth in the second quarter is just some stuff that we had hoped might happen in the first quarter slid to the second quarter. Just, I think business is building a little for us.
In the commercial real estate segment, is there a particular geography that you've had outside success in?
No. We don't do a lot of construction. You're talking about we're doing multi-family, industrial, some office. We have a group of, as I said before, customers who we've now done multiple deals with who we're comfortable with the leverage ratio they apply to projects they're doing. They're comfortable with us. It's just like anything in life, it's getting connected with the right people doing the right things. It's as much relationship as it is a single product type.
Great. Thank you.
This concludes our question and answer session. I would like to turn the conference back over to Aaron Graft for any closing remarks.
Thank you all for joining us today. We look forward to speaking with you again soon.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.