First Foundation Inc (FFWM) Q1 2021 Earnings Call Transcript

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First Foundation Inc (FFWM -6.52%)
Q1 2021 Earnings Call
Apr 27, 2021, 11:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Greetings, and welcome to First Foundation's First Quarter 2021 Earnings Conference Call. [Operator Instructions] Speaking today will be Scott Kavanaugh, First Foundation's Chief Executive Officer; Kevin Thompson, Chief Financial Officer; and David DePillo, President of First Foundation.

Before I hand the call over to Scott, please note that management will make certain predictive statements during today's call that reflect their current views and expectations about the Company's performance and financial results. These forward-looking statements are made subject to the Safe Harbor statement included in today's earnings release.

In addition, some of the discussion may include non-GAAP financial measures. For a more complete discussion of the risks and uncertainties that could cause actual results to differ materially from any forward-looking statements and reconciliations of non-GAAP financial measures, see the Company's filings with the Securities and Exchange Commission.

And now I will turn the call over to Scott Kavanaugh.

Scott F. Kavanaugh -- Chief Executive Officer

Hi, good morning, and thank you for joining us. We would like to welcome all of you to our first quarter 2021 earnings conference call. We will be providing some prepared comments regarding our activities and then we will respond to questions.

Our earnings for the first quarter were $22.4 million or $0.50 per share. This represents a 69% increase over the first quarter of 2020. Total revenues were $66.1 million for the quarter, a 19% increase from the first quarter of 2020. Our tangible book value per share ended the quarter higher at $13.84. We declared and paid our first quarter cash dividend of $0.09 per share. As many of you have heard me say, our business model is designed to help clients wherever they are in their financial lives. And today's results indicate that our model is working very well across the diverse and dynamic markets we serve.

During the quarter, as we previously announced, we expanded into taxes, which included the move of our principal executive office, as well as the addition of new employees to our team in the Dallas-Fort Worth Metroplex. We believe this move solidifies our positioning as a regional commercial bank. We are seeking further expansion in the area, including building out our team, having a retail branch presence and eventually adding trust powers in the state. There is an enormous opportunity for growth in Texas and we are excited to be here. Our operations in California, Nevada, and Hawaii will remain unchanged.

We think our regional presence across all four states that we operate in is a great fit for the products and services we offer. We are in the areas that have great opportunities for everything from Wealth Management to lending to business and personal banking. Related specifically to the profile of our bank, we had record loan originations of $765 million for the quarter with 53% of those originations coming from C&I.

NPAs remained low at 24 basis points for the quarter. We continue to have a well-balanced loan portfolio that Dave will touch on in more detail later on in the call. Deposits increased by $322 million for the quarter and our loan to deposit ratio was 90.1% at the end of the quarter, driven in part by our ability to continue to attract high-quality commercial clients. All of this speaks to the strength of our deposit team.

Over the last year, our core funding has increased from 73% to 98%. We continue to reduce our broker deposits and we will not have a need for a home loan bank borrowings for the foreseeable future. Our Wealth Management and Trust business continue to provide meaningful contributions to the success of the firm. The Wealth Management business is continuing to gain scale and the combined pre-tax profit margin for Trust and Wealth Management was 16% for the quarter. We generated $101 million in new assets under management for the quarter and AUM ended at record levels eclipsing $5 billion. Our private wealth management business serves our clients with high touch and sophisticated investment and planning solutions. They along with our Trust department were very instrumental in retaining and attracting new clients during some volatile times last year and have experienced a great start to this year.

Our new business pipelines across our entire platform remain remarkably strong as we continue to attract new clients to all facets of our offering. And with our recently announced strategic investment in the institutional bitcoin provider, NYDIG, we are seeking ways to add bitcoin-related solutions to our platform. In a first such partnership of its kind, this strategic investment helps lay the foundation for building the infrastructure required to offer safe and reliable access to digital assets. We believe cryptocurrencies and blockchain technology will play a critical role in the future of finance, and we are pleased to be the catalyst to bring digital assets in the traditional financial services. There are many ways we can participate in this important asset class and we are very excited about what we will be able to offer our clients. With the support of our partners, NYDIG, and our processing provider, Fiserv, we are looking to bring digital assets into the forefront.

Before I hand the call over, I want to take a moment to thank all of our employees for their extraordinary efforts over the past quarter. We have some of the best employees in the business. And I am also very grateful to our clients who entrust us with their financial needs.

Now let me turn the call over to our CFO, Kevin Thompson.

Kevin Thompson -- Executive Vice President, Chief Financial Officer

Thank you, Scott. Earnings per diluted share of $0.50 in the first quarter is flat to last quarter, and a 47% increase over first quarter 2020. As a result of this momentum, our tangible book value per share increased 3% to $13.84 in the quarter. The return on assets was strong at 1.25% with the return on tangible equity of 14.9%. The net interest margin contracted 3 basis points to 3.16% in the quarter as a result of high average cash balances from the success we have had in increasing core deposit. For the month of March, our NIM increased to 3.24% following the deployment of excess cash through our paydown of higher cost funding sources and growth in loans in the second half of the quarter.

We maintained discipline in loan production with the average yield on loans dropping just 2 basis points to 3.99%, and we continued our efforts to lower deposit pricing, bringing the cost of deposits down from 41 basis points to 31 basis points. With the strong C&I loan production and increasing core deposits over the past several quarters, our balance sheet is trending less liability sensitive. We recognized $1.2 million of PPP fee income, or 20% of the total net PPP fees, bringing the total fees realized to 76% from the $171 million of the first round of PPP loans funded. Excluding the effects of PPP, the NIM would have been 3.13% for the quarter.

Credit metrics remained strong in all our loan portfolios and the allowance for credit losses for loans decreased to 45 basis points of total loans. This was primarily a result of the improvement in the economic scenario we utilize for the CECL calculation. We had net recoveries of 1 basis point and non-performing assets remained low at 24 basis points to total assets. The allowance for credit losses for investments increased by $1.6 million as a result of the lower interest rate environment, and faster-than-expected prepayments that negatively impacted the projected cash flows on our interest-only securities.

Asset management fees were strong with revenues of $8.3 million, and our Advisory and Trust divisions achieved a combined pre-tax profit margin of 16% in the quarter. Assets under management at FFA increased by $5 billion while Trust assets under advisement at FFB increased to $1.2 billion. Our non-interest expense increased due to merit increases that were effective at the beginning of the year, and annual bonus and commission payouts in the first quarter. Efficiency ratio for the quarter was 51.5%. With strong expense management and the investments we have made in our infrastructure, we are seeing growing benefits from operational leverage and efficiencies.

I will now turn the call over to David DePillo.

David DePillo -- President

Thank you, Kevin. It was indeed a very successful start of the year for First Foundation. As Scott mentioned, we originated $765 million of loans in the first quarter, a record for us. Our commercial business lending accounted for over half of our originations in the first three months of the year. We funded $406 million of C&I loans, which was also a record for us. 48% of our C&I loans in the quarter were adjustable revolving lines of credit, which is a strategic move for us, as we look to shift the balance sheet to more rate neutral from liability sensitive. The remaining C&I originations were comprised of $108 million of commercial term loans, $69 million of public finance loans, $24 million of equipment finance loans and $9 million of owner occupied commercial real estate loans. Included in commercial term loan originations is $45.8 million of the second round of PPP fundings. We continue to focus on high-quality loans with solid borrowers.

As a percentage breakdown, the composition of our loan originations during the quarter was as follows: C&I 53%; multifamily 42%; single-family 5%; and 1% in other. We accomplished this without changing our high underwriting standards and the loan pipeline remained strong headed into the second quarter. In addition, it is worth mentioning that even with record loan originations in the first quarter of $765 million, we achieved a weighted average rate of 3.55% on originations, excluding PPP, compared to 3.61% in the fourth quarter, only a 6 basis points decline. This continuous to demonstrate our ability to achieve record volumes while still defending the yield on our portfolio.

As of March 31, our loan portfolio balances consist of 43% multifamily loans, 26% commercial business loans, 5% non-owner occupied CRE, 15% consumer and single-family loans, and 1% land and construction. Of note, our commercial business loan balances increase approximately 25% year-over-year, which reflects our continued focus on commercial banking.

As mentioned, our deposit business also experienced a strong quarter, with an increase of $332 million during the first quarter of 2021 to end the quarter at $6.2 billion, which reflects a 14% increase compared to the first quarter of 2020. Deposit growth during the quarter of 2021 was primarily driven by the -- an increase of $527 million, or 32% in non-interest bearing demand deposits, largely attributed to our commercial deposits services division. An increase of $141 million or 16% in interest bearing demand deposits, primarily driven by our retail branches.

Our non-interest bearing deposits now account for 35% of our total deposit balances. This $332 million growth in deposits during the first quarter of 2021 included increase in our commercial deposit service group of $419 million and retail branch deposits of $45 million. Of the $511 million increase in core deposits, $491 million or 96% were attributed to commercial business deposits from both our commercial deposit channel serving complex treasury management, commercial customers and from our business banking customers served by our retail branches. Commercial deposits were 70% of total core deposits as of March 31. And as Scott mentioned, our core deposits now sit at 98% of total deposits.

All this success in this quarter could not have been achieved without the great team we have in place. I am so grateful for their dedication and hard work. At this time we are ready to take questions. I'll turn it back to the operator.

Questions and Answers:

Operator

The floor is now open for your questions. [Operator Instructions] Our first question is coming from Steve Moss with B. Riley Securities.

Steve Moss -- B. Riley Securities -- Analyst

Hi, good morning.

Scott F. Kavanaugh -- Chief Executive Officer

Hey. Good morning, Steve. How are you doing?

Steve Moss -- B. Riley Securities -- Analyst

Good, good. Thanks. Hope everybody is well. Next quarter here in terms of loan originations and you guys indicated in the release that the pipeline remains strong. Just kind of wondering can you give us an update in terms of your expectations for the full year, and kind of the underlying mix of -- within the pipeline?

Scott F. Kavanaugh -- Chief Executive Officer

Dave?

David DePillo -- President

So I would say, the first quarter will probably -- at this rate, probably be a -- the low point per originations based on current pipelines. So, I would expect growth from here that depends certainly of how the year develops as we go forward, but current pipelines would indicate that we'd have a stronger second quarter than the first. And I would say it's across, again, all books of business. We'll probably have a little more disproportionate in multifamily in the second quarter compared to the first. So I would expect that to probably be over 50% [Indecipherable], but C&I and multifamily are kind of neck and neck.

But again, from just a general trajectory, every aspect of our business pipelines are at levels we haven't seen historically. Part of that, Steve, is we continue to make investments in our sales teams and support for a higher growth level. As we've mentioned in the past, we're trying to step up to a new level going forward. So long story short, I would say first quarter probably would be the low point for the year.

Steve Moss -- B. Riley Securities -- Analyst

Got it. That's helpful. So as we just think about full year originations, I think the previous guide was, call it, $2.9 billion. Kind of curious, it sounds like [Indecipherable] north of $3 billion meaningfully...

David DePillo -- President

I think you could just take the current quarter run rate and extrapolate and you should get a higher number than we previously indicated, but we would be comfortable with that range, $3 billion plus.

Steve Moss -- B. Riley Securities -- Analyst

Okay. And then in terms of just loan yields here, an update on loan pricing and how you're seeing things in the market these days?

David DePillo -- President

It's interesting, [Indecipherable] funded out in the first quarter related to previously quoted loans. It takes a while before they go through the pipeline and most of those have rate locks. We are seeing rates in the markets stabilize, where our expectations are our average loan yield should be approximately the same going into the next quarter. Part of that is mixed too, Steve, since we're doing a lot more adjustable lending on the C&I side, trying to reposition us for potentially a higher short end of the curve over time.

Again, I think the average -- a lot depends on the mix, the relative mix, but pricing seems to be relatively stable since most of us have been pricing on floors and the longer end of the curve is really where we've seen the movement. We don't typically line them at that end of the curve. So, I would say we expect it to be consistent where it's at today.

Steve Moss -- B. Riley Securities -- Analyst

Okay, that's helpful. And then just in terms of funding costs here, we continue to see a good leg down in terms of deposit costs. And since we basically have no borrowings at quarter end, kind of curious as to where deposit pricing is today? And how we should think about that? And maybe any trends you're seeing in April for deposits?

Scott F. Kavanaugh -- Chief Executive Officer

The -- I mean, the pipeline itself remains very, very strong. Frankly, we have to keep it bridled a bit, because as you saw, NIM had a bit of a drag due to the excess cash that we had. And as you also saw, it got deployed or large majority of it got deployed in the month of March. I would say that most of the cost saves that we've seen have been factored in at this point. There is probably some minor adjustments here and there. But if deposit strength continues at the torrid pace it's been, then we will probably have to reduce rates a little bit more.

Kevin Thompson -- Executive Vice President, Chief Financial Officer

Scott, I agree. And I will just add. You saw that our cost of deposits was 31 basis points in the quarter. At the end of the quarter, the last month in March, it dipped down about 26 basis points. So to Scott's point, there is still some room as we're going down now, and probably that trajectory will continue slightly. But at a certain point, I think those will stabilize throughout -- through the year until we start seeing eventually the yield curve change in some deposit beta down the road.

Steve Moss -- B. Riley Securities -- Analyst

Great. All right. Thank you very much. Nice quarter.

Scott F. Kavanaugh -- Chief Executive Officer

Thanks, Steve.

Operator

Our next question is coming from David Feaster with Raymond James.

David Feaster -- Raymond James -- Analyst

Hi, good morning, everybody.

Scott F. Kavanaugh -- Chief Executive Officer

Hi, Dave.

Kevin Thompson -- Executive Vice President, Chief Financial Officer

Good morning.

David Feaster -- Raymond James -- Analyst

I wanted to start on the crypto partnership. I think this is pretty neat. Just hoping you could maybe give us some details on the investment, the timing may be of when you think it could be up and running? And ultimately, what do you expect to see in terms of the benefits from this partnership, whether it'd be AUM growth and wealth management, deposit growth that can help fund the growth engine, fee income opportunities. Just curious what do you expect to see on -- from that partnership?

Scott F. Kavanaugh -- Chief Executive Officer

Kevin, you want to start with that?

Kevin Thompson -- Executive Vice President, Chief Financial Officer

I would say all of the above. Yes and we haven't disclosed the exact amount of the investment that we did make an investment with NYDIG, which you may be familiar with, a really great player in this market that really at the forefront of -- from a regulatory and security perspective. In the bitcoin world, I personally as a bitcoin investor, HODLers[Phonetic] recalled for many years have always been very impressed with this company and we're very excited to work with them and to bring some of these -- this opportunity to bring bitcoin into the traditional banking world.

And yes, all of the above. We are exploring the different opportunities that we could pursue both from an AUM perspective. A lot of this would probably be fee -- increased fee-based income. Again, as someone who holds bitcoin there is an awkward interaction between traditional banking and these bitcoin providers within the economy. And it's getting better over time. But I think a lot of people really want to work with their traditional bank that they have a lot of trust with and operate in that traditional banking environment, and have much more easy access to these types of investments to move between fiat and bitcoin currencies, both within the banking side of the world as well as in the wealth management side of the world.

Your other question is of the timing, we're not exactly sure yet. This will take time to put these rails in place as we work with NYDIG, as we work with Fiserv to build this on our traditional banking model, and do this in a really secure way for our clients.

Scott F. Kavanaugh -- Chief Executive Officer

To be quite honest, we couldn't have two better partners. I'm truly excited.

David Feaster -- Raymond James -- Analyst

That's great. That's pretty exciting. And then maybe could you just give us an update on the Dallas expansion? How hiring is trending[Phonetic]? It sounds like you have already picked up some folks there.

And just how the pipeline has been? Have you started to see any contribution from the region yet? And where are you having early success in-house? Reception has been in the region. Are you seeing more opportunities on the multifamily or the core commercial business banking? Just curious. Any updates there?

Scott F. Kavanaugh -- Chief Executive Officer

Well, initially, the hire was in the commercial real estate side of things. It's a bit early yet, I've only been here for about a month or five weeks, but I would say we've been fortunate and that some of the local periodicals, The Dallas Business Journal, The Dallas Morning News, Houston Business Journal have carried articles. And we've gotten a very warm reception from a lot of people, a lot of curiosity about our expansion plans. So I'm very optimistic about the opportunities here.

I would say that you should probably expect expenses more than a lot of production this quarter. But I think in the outer quarters, you'll start to see some loan production ramping up. Frankly, some of our staff here is just getting their feet grounded and starting to get out there. But in talking to them, we've gotten a very warm reception from some of the borrowers as well.

Kevin Thompson -- Executive Vice President, Chief Financial Officer

The only thing I would add, Scott, is we have had some traction on the C&I side, and we will have fundings in second quarter related to C&I. But from getting our production people in place, we're adding [Indecipherable] underwriting staff around them. And we may want to make sure that we don't have any false starts. So to Scott's point, we're building the infrastructure first, taking a very methodical patient approach and making sure that we can meet the needs of clients out there. But we already do have some C&I business that will -- should fund out in this quarter.

Scott F. Kavanaugh -- Chief Executive Officer

Yeah.

David Feaster -- Raymond James -- Analyst

That's perfect. And then just kind of [Speech Overlap] yeah, go ahead.

Scott F. Kavanaugh -- Chief Executive Officer

No, I would just say I still believe on the M&A front, there is opportunities here. Obviously, it depends on how our stock trades relative to other folks, but we continue to have discussions out there and I'm sure something will come up at some point in time. So I'm still very optimistic about that as well.

David Feaster -- Raymond James -- Analyst

That's great. And just maybe following up on the C&I commentary, it is great to see the growth that you guys put up in the quarter. Just curious if you could give us some commentary on the trends you're seeing and where you're seeing demand on the commercial term loan side, and kind of what's driving the growth that you're seeing?

David DePillo -- President

It's going to be interesting. It's a world that's kind of define what they haves and have nots right now on the C&I side. So what we've typically seen is the smaller companies that may be struggling due to regional COVID constraints or other aspects to their business that I think have affected more small community banks.

We've tended to lean toward mid-market and above companies that have durable balance sheets, diversified business plans, had blocks of liquidity going into the crisis and have done very well through the crisis. So it could be anywhere from food manufacturing to heavy equipment, to you name it. It's been across the board.

We're just seeing very, very, very strong companies come to market to try to take advantage of this environment that we're in today of lower interest rates, and presumably credit spreads on the C&I side have tightened up to the point where it's -- it makes a lot of sense for them to continue to expand their businesses.

So we're tending to look at larger credits for well-diversified companies, many of them are regional as well. Certainly, we've had some regions of Texas for good quality companies. And then we tend to focus on SBA and small balance to kind of bolster the local communities to help on the community development side. And then, quite frankly, the municipal lending space has been very robust. There is a lot of, what we would say, communities that may not have access or need for $100 million of revolving debt and they are really looking for smaller pieces in the $5 million to $10 million range and that's a huge market on the municipal side, not that we don't do some larger ones, but that's tend to where we found the most demand.

And again, our equipment finance group is sort of hitting record levels as well. So it's really been across all channels. It's been now, I think, six years of focused effort to kind of reposition the Company's focus to more diversified lending. We've been very patient in our approach to that. And I think given our metrics through the pandemic in C&I, it's proven that a good diversified book has served us very well. But it's been across, I would say, every aspect of our business.

We've deemphasized a little on the smaller business banking that you typically see in the commercial banking space for community banks, just because the demand there has been for a more distressed [Indecipherable]. We're taking a more patient wait-and-see attitude around the...

Scott F. Kavanaugh -- Chief Executive Officer

Quite honestly, most people like to go through the PPP route than through a traditional bank route.

David DePillo -- President

Well, that's true. If you can give money for free, it's much better than [Speech Overlap].

David Feaster -- Raymond James -- Analyst

Okay, that's great color. Thanks, everybody.

Operator

Our next question is coming from Gary Tenner with D.A. Davidson.

Gary Tenner -- D.A. Davidson -- Analyst

Thanks, good morning.

Scott F. Kavanaugh -- Chief Executive Officer

Hey, Gary.

Gary Tenner -- D.A. Davidson -- Analyst

Wanted to -- hey. Just wanted to ask a little bit more on the kind of expense outlook, plus couple of years, really since 2018, you all done a great job of kind of holding expenses flat if not lowering them, and kind of generating positive operating leverage. Obviously, a bit of a step up this quarter, I'm sure there's obviously a seasonal component there. But as you talk about investing in people and sales teams, plus the Texas expansion, can you talk about maybe just some guide posts in terms of operating expense for the year or for the next quarter or two?

Scott F. Kavanaugh -- Chief Executive Officer

I'll start and then Kevin and Dave, you guys can fill in. But the reality is we were kind of sitting around the table as we were planning for this year. And yes, we decided we were going to step up a little bit. Earlier or late last year, early this year, CPRs were running fairly hard. We feel like that it was time to try to step up on the loan demand. So we've been fortunate. There has been some acquisitions that have taken place or steps that other institutions have done that have created value or opportunities, I should say for us.

So there are a couple of teams that were either currently working on or have already brought on that maybe haven't fully been announced yet, but our goal is to continue to expand. Probably the teams on the expansion side will probably be more on the C&I side than anywhere else. And yes, there were some large bonuses and other things that took place that typically are seasonal. So I'll leave it there, and let Kevin pick up.

Kevin Thompson -- Executive Vice President, Chief Financial Officer

Well, the way I would probably characterize it, Gary, is, this year, as Scott mentioned, we are making some strategic investments, not only on the sales side, but also on the support side to make sure that we've got continued good customer experience through the entire process on all aspects.

What I would expect is, even with a little bit of higher first quarter because of the seasonality, this year it looks like about 50% efficiency overall with those investments quite really looking into next year you'll see that operating leverage really kick in. So it's a little bit again as a front loading for growth, but at 50%, we really feel that's still fairly optimal. But I would expect next period to drop well below.

Scott F. Kavanaugh -- Chief Executive Officer

Yeah. So, our employee count, Gary, has remained at about plus or minus 500 people for the last several years. And I would suspect that it will be closer to 550 or maybe even a little bit more between the operational side that Dave just talked about and the other team. So that -- hopefully, that gives you a little bit of guidance on the employee count.

David DePillo -- President

We're experiencing strong organic growth. We expect to continue that. We'll have to add resources to match that over time, but we'll still be able to add resources at a lesser rate than we're able to take advantage of operational leverage over time.

Gary Tenner -- D.A. Davidson -- Analyst

Okay. I appreciate the color. And then just on PPP, I think you gave pretty much all the numbers needed there other than -- just wondering kind of if you could confirm the average PPP loans outstanding for the quarter. I don't think I have that number.

Kevin Thompson -- Executive Vice President, Chief Financial Officer

It would have been -- so we started the quarter at $145 million and we ended at $136 billion. So we added new PPP and had some payoffs during the quarter as well.

Gary Tenner -- D.A. Davidson -- Analyst

Does that mean for average purposes -- I assume the adds were mostly in March and the payoffs were February and March? Is that a reasonable assumption?

Kevin Thompson -- Executive Vice President, Chief Financial Officer

Adds coming in February time frame. So I've kind of just taken average of those two, it was around $140 million for the quarter, the average.

Gary Tenner -- D.A. Davidson -- Analyst

Okay, fair enough. Thank you. My other questions were answered.

David DePillo -- President

Thank you.

Scott F. Kavanaugh -- Chief Executive Officer

Thank you.

Operator

[Operator Instructions] Our next question is coming from David Chiaverini with Wedbush Securities.

David Chiaverini -- Wedbush Securities -- Analyst

Hi, thanks. Couple of questions for you. Starting with deposits, can you talk about the deposit outlook? Should we assume that deposit flows should be similar to the strong pipelines that you've talked about on the loan side?

Scott F. Kavanaugh -- Chief Executive Officer

Yeah. As I mentioned earlier, I almost feel like we're having to bridle discussions of bringing deposits on too quickly. So we do have a fairly significant round of deposits coming in around March -- or excuse me, May -- May 1st. We've got several relationships that are requesting either new relationships or existing relationships to bring on more. So I'm pretty convinced that we can stay somewhere under 100% loans to deposit ratio, even with our strong funding or loan base.

David Chiaverini -- Wedbush Securities -- Analyst

Great. And then on securities, I see you have a -- you had a pretty strong quarter for loans, and it looks like the securities portfolio came down a little bit sequentially. Can you talk about how we should think about securities -- the securities portfolio on a go-forward basis in light of the strong pipelines on the loan side?

Scott F. Kavanaugh -- Chief Executive Officer

Yeah. We try to average -- and this is always a discussion with our primary regulators, we try to stay somewhere around 12% on balance sheet liquidity. As you suggested, the prepayments on our securities have been a little bit risk. There are slowing down, but we are going to have to add some securities over the next several quarters.

And quite honestly, depending on what we tend to put it into, that might put a little drag on NIM overall, but I would still say our loan fundings are going to be high enough that it won't be that significant. But we are going to have to add to the portfolio. If you just look at the composition of the securities portfolio, we've always been very conservative. So we have relatively few municipal bonds, most are mortgage-backed securities, either our own deals or pass-throughs that we've purchased in the past.

And so, we're going to have to continue to add to that in some form or fashion. We have very little sub-debt, we might buy a little bit of that, but probably not inclined to do much of it.

David Chiaverini -- Wedbush Securities -- Analyst

Got it. That's helpful. And you answered this a little bit, the net interest margin question. You said that it could be the securities purchases, could be a little bit of a drag on NIM. But overall should we -- how should we think about the NIM on a go-forward basis?

Scott F. Kavanaugh -- Chief Executive Officer

I think NIM should stabilize basically as long as we can control the excess liquidity. I think Dave was suggesting that our -- the loans that we're funding out are pretty stable right now and the loan yields should be stable. I think what you're going to -- if you also read between the lines with Dave's comment, our loan fundings for the quarter are going to be higher than what they were in this quarter.

So let's say we add $100 million or so of securities over the next several quarters, it just won't have that much of an impact on NIM. It will have a modest impact, but not much. But between having our funding costs continue to decline just slightly and our yield staying the same, but yet funding more loans on the balance sheet, we believe that NIM should be pretty stable.

David DePillo -- President

Yeah. The securities yield is probably the biggest impact over time. As we grow and we carry more securities in this environment, it will have an impact. But I would say, over time, where we're at, at the end of the quarter is probably a good -- what we've averaged for the quarter, that would give you kind of the effect of a liquidity drag over time versus the...

Scott F. Kavanaugh -- Chief Executive Officer

I mean -- and what was shown or demonstrated on the press release, NIM was what 3.16%, but the month of March was 3.24%. I mean it shows that, I guess, carrying cash is probably the biggest detriment to NIM, otherwise it would have been much stronger than what it was -- what it actually was.

David Chiaverini -- Wedbush Securities -- Analyst

Very helpful. Thanks very much.

Operator

Our next question is coming from Bob Shone with Piper Sandler.

Bob Shone -- Piper Sandler -- Analyst

Good morning.

Scott F. Kavanaugh -- Chief Executive Officer

Good morning, Bob.

Bob Shone -- Piper Sandler -- Analyst

I just wanted to talk about future provisioning and the reserve going forward. I think you did about $1 million in releases for improving economic forecast. Should we kind of see the level of provisioning kind of stay the same as you provide for growth and assume kind of a relatively stable reserve? Or is there room for this to drift lower if we get further improvement in the economic forecast?

Kevin Thompson -- Executive Vice President, Chief Financial Officer

We're modeling the former, which is if you just take our general reserve levels at 45 basis points, add growth to it, that's kind of what we would model as additional reserve requirements. Is there room for improvement? Yes, probably. But it's hard to predict, given the CECL modeling out there, and it could -- depending on the funding mix, more C&I, that's higher reserves in multifamily. So we just kind of forecast 45 basis points to grow.

David DePillo -- President

As you know, CECL is a very sophisticated calculation involving economic scenarios and mixed with the historical view, and so it's hard to know at this point. At this point, we see the economy kind of continuing as is. So the 45 basis points would probably be sufficient over time, but we'll advertise if that changes.

Bob Shone -- Piper Sandler -- Analyst

Okay, thanks for that. And then last one from me. In your prepared remarks, you mentioned about seeking further organic expansion in the Dallas area. Could you maybe give us an update on your appetite for M&A in the area? And maybe any color on how those conversations with potential partners have been going?

Scott F. Kavanaugh -- Chief Executive Officer

In terms of updates with other people, the answer is, I probably can't really speak to that, but I would say that very much so we would like to have an M&A deal in the Texas marketplace. Specifically, the Dallas-Fort Worth Metroplex is where I'm hyper-focused right now.

As you know, there's more banks in Texas with the exception of Illinois. And so, I remain optimistic. And especially if our stock can continue to trade at premium levels, then I feel fairly strongly that something will come up at some point in time.

Bob Shone -- Piper Sandler -- Analyst

Thank you. All my questions have been answered.

Operator

This concludes our allotted time for question-and-answer session. I will now turn the call back over to Mr. Scott Kavanaugh for closing remarks.

Scott F. Kavanaugh -- Chief Executive Officer

Thank you again for participating in today's call. I'm very proud of how we have started the year. All of our business lines are doing exceptionally well as evidenced by the results we reported. There are great opportunities related to our geographic expansion to the Dallas-Fort Worth Metroplex, and I'm very excited about our efforts related to bitcoin and digital assets.

As a reminder, our earnings report and investor presentation can be found on the Investor Relations section of our website. Thank you, and have a great remainder of your day.

Operator

[Operator Closing Remarks]

Duration: 44 minutes

Call participants:

Scott F. Kavanaugh -- Chief Executive Officer

Kevin Thompson -- Executive Vice President, Chief Financial Officer

David DePillo -- President

Steve Moss -- B. Riley Securities -- Analyst

David Feaster -- Raymond James -- Analyst

Gary Tenner -- D.A. Davidson -- Analyst

David Chiaverini -- Wedbush Securities -- Analyst

Bob Shone -- Piper Sandler -- Analyst

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