Q2 2020 Sculptor Capital Management Inc Earnings Call
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Ladies and gentlemen, thank you for standing by and welcome to Valley National Bancorp second quarter earnings call.
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I know it and the conference over to your host today Mr. traditionally head of Investor Relations.
Good morning, and welcome to valleys second quarter 2020, <unk> earnings Conference call.
I think on behalf of valley today, our President and CEO, I Robinson, Chief Financial Officer, Mike Hagadorn, and Chief Banking Officer, Tom I Danza.
Before we begin we'd like to make everyone aware that our quarterly earnings release and supporting documents can be found on our company website at Valley Dotcom.
Discussing our results, we refer to non-GAAP measures, which exclude certain items from reported results. Please refer to today's earnings release for reconciliations of these non-GAAP measures.
Additionally, I would like to highlight slide two of earnings presentation ill remind you that comments made during this call may contain forward looking statements relating to valley National Bank Corp, banking industry and be impacted the cobot 19 pandemic.
Alley encourages all participants to refer to our FCC filings, including those found on form 8-K, 10-Q, and 10-K for complete discussion of forward looking statements with that I'll turn the call over time or Robins.
Thank you Travis and welcome to all the participants on the call.
This morning, I will provide some perspective on valley strong year to date performance in the context of a challenging operating environment.
Mike will offer additional details on the financial results before opening the call to your questions.
On our earnings call in April we outlined organizational efforts to support our employees clients and communities I missed the Kobin 19 pandemic.
Well I will not reiterate each of those efforts this morning.
I will provide an update on a few key highlights that speaks at ice cold true performance and value proposition.
Value originated over 2.2 billion of loans under the Paycheck protection program.
Approximately 85% of these loans were for balances below 250000 in our median originated loan size was just $43000.
Well these numbers reflect the macro overview of the program they only broadly speak to the external community impact.
More specifically, we estimate that loan facilitated by Dally employees help preserve over 170000 jobs within our marketplace.
Equally important nearly 30% of our P.P.P. loads were provided to minority owned businesses.
Nonprofit where women owned small businesses.
With a purposeful direction, our PPP response was differentiated by or high touch service, which leveraged and internally developed digital process made possible by the efforts and commitment of our employees.
As we begin to transition to loan forgiveness more hard work is ahead of us.
We remain committed to helping our clients understand the changing regulations around the program and to easing that forgiveness process for these small businesses.
We believe valuable continues to distinguish ourselves from up here through this process by providing a unique customer experience led by people and supported by best in class technology.
Great data he has granted over 10000 loan deferrals totaling approximately $4.6 billion.
We closely monitor the actions of our borrowers that have reached the end of their first deferral period.
Proximally 5000 loans totaling 1.9 billion has completed their initial deferral period and every turn to regularly scheduled payments.
Meanwhile, only 10% of commercial deferrals scheduled to return to repayment requesting an additional deferral.
Well in New York in New Jersey were at hard very early in the stage of the pandemic. The koby cases trends these markets have improved significantly.
These markets continue to progress towards a more complete reopening earlier than many other markets in the country.
Meanwhile, Florida now faces a deteriorating health crisis similar to that experienced by New York in New Jersey earlier in the year.
After working hard to reopen our branches where be turned our Florida locations back to point minimally status.
Continue to take the necessary steps to protect our employees and all of our clients in Florida.
Well, we cannot control the environment around US valley continues to succeed by focusing on items that we can more actively manage.
In the second quarter up 2020, we reported net income of $96 million and earnings per share of 23 cents.
These results include over $2 million or pre tax expenses associated with cobot 19 pandemic.
On an adjusted basis pre tax provision revenue increased 12% from the first quarter benefiting from aggressive funding cost reductions that began late in the first quarter.
We remain keenly focused on generating positive operating leverage and optimizing performance.
On a year over year basis, we achieved approximately 30% growth in adjusted revenue against just a 12% increase in adjusted expenses.
Our adjusted efficiency ratio was 46.8% in the quarter.
We expect revenue pressure to build across the industry.
We believe that additional expense levers exist at valley to help us mitigate these challenges.
The quarter strong bottom line results include a 41 million dollar loan loss provision, which was more than 20% higher than the first quarters provision.
While our underlying credit trends remain stable the economic outlook related to cobot 19 is absolutely uncertain.
We continue to probably build our loan loss allowance to reflect this uncertainty.
2020 has presented challenges that no one could have predicted at the beginning of the year.
Despite this we are extremely proud of all of our accomplishments in performance year to date.
Funding cost reductions and expense management had accelerated our pre provision profitability gains and enable us to absorb higher loan loss provisions required under Cecil.
We will continue to conserve leave navigate these challenging times.
Well position ourselves for success as the environment normalizes.
Now I'd like to turn the call over to Mike Hagadorn for some of the quarters additional financial highlights.
Thank you I write turning to slide five highlighting our quarterly net interest income and margin trends valleys reported net interest margin was 3% versus 3.07% in the first quarter of 2020.
Our decision to hold the higher cash balance in the quarter impacted our margin by approximately eight basis points.
Exclusive of this our net interest margin would've increased for the third consecutive quarter, reflecting the positive impact of our aggressive funding cost reductions.
On a sequential basis or cost of interest bearing liabilities improved by 54 basis points, 2.96% and our interest expense declined by approximately 33%.
We had previously identified the meaningful and unique funding cost reduction opportunity available to us.
We were able to capitalize on this opportunity, which enabled us to absorb asset yield pressures and drive strong net interest income growth from the prior quarter.
While a significant amount of my repricing opportunity has we've captured already slide six identifies the amount of retail Cds expected to mature in the next 12 months at rates well above current offering rates.
Specifically over the next three quarters, we have roughly $4 billion retail Cds maturing at cost around or above 1.4%.
Slide seven illustrates the significant reduction in deposit costs achieved over the last few months.
On a quarterly basis, our interest bearing deposit costs declined 57 basis points to 0.83%.
All in cost of funds improved 2.73% from 1.2% in the first quarter due to deposit cost reductions and significant noninterest bearing growth.
While CD costs declined 53 basis points sequentially, there maybe room to further reduce those costs.
As illustrated on slide six in the third quarter, we have 1.9 billion of retail Cds maturing at a cost of 1.38%.
From a balance perspective total deposits increased 2.4 billion were approximately 8% sequentially.
Excluding roughly 1.6 billion of P.P.P. related deposits at the end of June sequential deposit growth was 2.5%.
Importantly, noninterest bearing deposits increased 29% in the quarter were approximately 6% exclusive of PPP deposits.
We continue to experience a customer rotation out of Cds and into more flexible and lower cost transaction accounts.
With branches, partially unavailable customers continue to migrate towards our online and mobile banking channels.
The count of new online banking users and the second quarter more than doubled from the first quarter.
In the first quarter, we outlined a variety of steps that we undertook to bolster our liquidity position.
At June Thirtyth, our cash and equivalents totaled 1.9 billion up from 1 billion at March 31st we continue to believe that holding excess liquidity is prudent given the uncertain environment that we currently face.
From an average balance perspective, we held roughly 1 billion of excess liquidity during the quarter.
We estimate this excess liquidity drag on our net interest margin by approximately eight basis points.
Slide eight details our loan portfolio and the asset yield pressure that we had been experiencing along with other banks in the industry.
During the quarter loan yields declined 42 basis points.
We attributed approximately seven basis points, a decline to PPP loans and the normalization of P.C.D. accretion income from an elevated level in the first quarter.
Total loans of 32.3 billion include roughly 2.2 billion about standing PPP loans at the ended the quarter.
Excluding these PPP balances total loans declined approximately 4% on an annualized basis as economic activity has weighed on loan demand in our markets.
On a year to date basis, we have seen solid activity in our commercial real estate segments.
Well nonmortgage consumer balances continue to decline.
Commercial line utilization returned to a more normal 44% following a modest uptick to 46% at the end of the first quarter.
While traditional lending activity in our footprint has slowed we're very active in the SP, a paycheck protection program as outlined on slide nine.
As of mid July we had originated approximately 12800 P.P.P. loans with an aggregate balance of 2.3 billion.
Approximately 85% of the Triple P. loans that we originated were for amounts less than $250000.
Well regulations governing this program had been in flux. We continue to believe that approximately 75 person who loans that we have originated will be forgiven in off our balance sheet by the end of the here.
In total we expect to receive more than $60 million of loan origination fees associated with our triple P. activity.
Slide 10 updates our exposure to industries, which we believe have primary or secondary pandemic exposure.
Approximately 2 billion or 7% of our non PPP loans are the industries that have primary exposure to the pandemic.
These industries include non essential Doctor in surgery centers, the hospital and food service industries and retail companies.
We also have identified our exposure to industries, such as manufacturing in education, which may be less impacted by the virus.
In total we have closely monitored the performance of these lending segments and had been pleased with our borrowers resiliency.
Well approve deferrals in these categories totaled approximately 780 million.
You can see that current active deferrals, we're only 356 million.
This is the result of borrowers and these industries coming off deferral and returning to current we're paying status.
Moving on to slide 12, our noninterest income increased 8% from the linked quarter, driven primarily by strength in loan sale gains and stable swap revenue.
Adjusted fee income ticked up to 13.7% of total revenue from 13.5% in the prior quarter.
Despite strong fee income growth fees as a percentage of revenue remains below our targeted primarily as result of continued strong net interest income growth.
We remain focused on growing diverse revenue streams overtime and enhancing customer adoption of the various financial products that we offer.
Swap fees were nearly 15 million during the quarter as we originated back to back swaps on approximately 390 million of notional loans.
While traditional lending activity slowed in the quarter, our borrowers continue to demand the interest rate protection provided by our swap offerings.
Our net residential mortgage gain on sale income increased approximately 80% sequentially.
The increase included 3 million for the change in fair value of loans held for sale and further reflected both higher loan sale volumes and gain on sale margin expansion.
Residential loans sold totaled $240 million for the period up from 200 million in the linked quarter well the gain on sale margin increased 80 basis points to 3.26%.
Slide 13 provides an overview of our quarterly operating expenses and the continued improvement in our efficiency ratio.
Our expenses in both reported and adjusted basis increased modestly from the prior quarter.
Adjusted expenses exclusive of de Minimis merger charges and $3 million of tax credit amortization totaled 153 million.
This was up 2 million or approximately 1.5% from the prior quarter.
Adjusted expenses include approximately 2.2 million of costs associated with Cobot, 19, and roughly 1.8 million periodic technology costs related to our ongoing core system upgrade.
Our adjusted efficiency ratio continue to improve coming in at 46.8% in the quarter versus 49.3% for the March period.
As I remember fund on a year over year basis, we have generated 31% revenue growth with only a 12% increase and adjusted operating expenses.
We remain focused on expense management and are looking to identify potential opportunities to reduce expenses where possible.
For example, it is possible that changing employee work patterns and customer behaviors may lead to further cost reduction opportunities.
Turning to slide 14, and asset quality, our allowance for credit losses increased 26 million, 2.99% of loans from 0.96% in the first quarter.
The allowance represents 1.06% of non PPP loans, roughly two times higher than our reserve level at the end of 29 team.
The quarters reserve build reflects a $41 million provision and nearly 15 million of net charge offs.
Net charge offs increased 10 million from the prior quarter.
This increase is largely attributable to an 8 million dollar, Florida based restaurant loan they came to valley in a prior acquisition.
This borrower face significant challenges prior to the cobot 19 outbreak it'd be king further stress during the pandemic.
While we have increased our focus on the restaurant exposure within our portfolio. We do not view. This loan is indicative of an outsize stress in our restaurant portfolio or in our Florida loan book.
Taxi medallion loan charge offs also increased to 3.3 million in the quarter reflective of another downward revaluation of medallions.
The taxi loan portfolio stands at 107 million and carries a 58% specific reserve.
The reserve build in excess of net charge offs reflects updated economic forecast within our Cecil model.
Our seasonal model remains conservative we waited towards Moody's adverse and prolonged recession scenarios as a result of the uncertain economic outlook.
Our model reflects some amount of GDP recovery in the third quarter 2020, followed by GDP declines in the beginning of 2021 with the slow recovery throughout that year.
We also expect unemployment to climb above 11% in early 2021 and remain in double digits for the foreseeable future.
Future provisioning activity will be largely dependent on the degree that economic outcomes track our expectations.
Non accrual loans increased 5 million or 2%, reflecting modest increases in the Cree and residential real estate portfolios.
As a percentage of total loans non accruals declined 2.65% from 0.68% in the first quarter.
In addition, we saw a significant improvement in our crewing past due loans, which normalize to 0.29% from 0.52% of total loans in the prior quarter.
You can see the growth in our tangible book value when capital ratios on slide 15.
Tangible book value has increased 8% in the last 12 months.
Our tangible common equity ratio declined to 6.98% from 7.31% at March 30 Onest.
The 2.2 billion of PPP loans, and or excess liquidity position reduced our tangible common equity to total asset ratio by approximately 70 basis points in the quarter.
We continue to feel good about our capital levels and believe that the sequential growth in our risk based capital ratios illustrate our improving ability to increase our capital levels on an organic basis.
With that I'll turn the call back over to Iraq for some closing commentary.
Thanks, Mike.
The headline risk of Cobot 19 has somewhat overshadowed valleys extremely strong year to date performance.
We have produced significant positive operating leverage which has led to a meaningful improvement in our pre provision profitability.
Over the last few years valley has become a more dynamic and nimble institution and we remain well positioned to serve the diverse financial needs of our clients.
Im extremely proud of the immense effort put in by our team I know that this hard work will continue to pay off our company and our shareholders.
With that I'd now like to turn the call back over to the operator to begin queuing day. Thank you.
Ladies and gentlemen, if you'd like to ask a question at this time. Please press. The Star then the number one key on your Touchtone telephone.
To withdraw your question press the pound key.
Please standby, we compiled acuity roster.
Our first question comes from the line of functionality with Piper Sandler Your line is now open.
Good morning.
Frank just wondering why didn't ask on a deferrals I mean looking at the the presentation that it really does seem.
A remarkable looking at sort of thinking about some of the holiday a highly since there has like a hotels and then how much of those different words have come down.
That's the part that those hotels passing from zero to come off on both.
Thanks.
Already but.
Just wanted to ask about Florida, I mean, I've heard I totally a that hotel occupancy rate sounds, Florida were quite high and the early stages of the panned out.
Assuming things and sockets wondering your thoughts about.
Well, you've seen so far in terms of affordable deferral requests.
There and how do you anticipate that might trend.
Sure Frank inside timeline to answer I'll try my best to piece together the question, you're breaking up a little bit.
As slide four pointed out that we had total deferrals a high point of 4.6 billion 3.9 billion of that.
Was commercial related and three and a half billion of that 3.9 is secured by real estate.
There was no significant change by region every region was distributed a third to floater, Alabama, two thirds to New York, New Jersey, which is our distribution of our total loan portfolio.
On the Florida side. It does have the predominant level of leisure and hotel hospitality portfolio, but I will tell you about.
Oh that portfolio, we about a 193 million of deferred loans 138 million met that first 90 day expiration period, and all that amount 133 million went back to full pay that's our hotel experience on our total hotel book is $488 million. So.
96% up of that hotel deferral went back to full pay after 90 days. Okay. So I you know, we're encouraged by the trends and give you little.
A little bit more I highlight because the experience has broad base, we're seeing that within New York, New Jersey Slaughter in Alabama.
Yeah. When you look at that retail book, we have which is another high profile high risk a component of that we can sort of high risk component.
We had 90.
To get to the numbers like 90% of that retail go back to full page 359 million met that 90 day period, and 323 million went back to full pay you said there was a 90% experience again no different in Florida than New York and Alabama.
So even out with south Florida, having talking.
We're going to change.
No no no keep in mind all of it is secured were predominantly slag based on our hotels. We have personal guarantees are these are people, who we've done business with a long time, who have weathered cycles in the past Oh, we conservatively underwrite the average loan to value.
Are you on that portfolio was 56% at origination Andy debt service coverage was 1.7 times pre pandemic. So you know we believed it was a bit of course shouldn't there before we even have to get and rely on the guarantees, but the guarantors are stepping up and they're relatively liquid people. So the most part Frank.
This is I think on an anecdotal basis.
Getting testing the point of your comment is.
And our conversations with many of our bar is down in Florida footprint.
I think some of the the headlines in the newspaper the newspapers are really disconnected with what they're seeing from money from an experienced perspective.
As occupancy rates really havent changed that much.
Okay.
And then just.
Sorry, if I, we don't have the Lord <unk> sentiments, it's mostly around travel and tourism.
Okay, and then just lastly, I'm just the NIM if I if I set aside liquidity it seems like what the CD is coming up for a repricing still are you guys. A competent in core NIM expansion, then and I expansion from here into Threeq you.
Yes, Frank this is Mike.
Well I wouldn't say core NIM expansion necessarily I would say.
NIM protection. So I think as this slide shows that Weve used many times I think its slides six or not mistaken yes.
You know that opportunity to reprice, a lot of our funding sources.
Gives us the ability to offset the reductions that were going to see on the earning asset side.
And don't forget that part of that liquidity build that I referenced in my prepared remarks.
As a result at we're essentially not buying any new fixed and some fixed income securities for our investment portfolio and think of that is basically insurance because I think the cash flows we would buy today are pretty much. The same cash flows we buy in the not too distant future and so we're going to try to stay liquid in the hopes that maybe this co.
Good situation gets better and we'll see some slightly upward tick in interest rates.
Our next question comes from Steven Alexopoulos with JP Morgan. Your line is now open.
Hi, Good morning. This is Alex follow on for Steve.
I just had a question on fee income, so said down a bit from your waived fees for the quarter can you just talk about what you're doing on that front and what you expect for the rest of the year. Thanks.
I think right off the bat or it can consistent with many other banks in the country, we elected to Wade fees for many of our customers that were impacted by coven 19.
That said it is a small component of the entire noninterest income base.
And we have gone back to adjusting fee schedule accordingly.
Thank you.
Our next question comes from Collyn Gilbert with KBW. Your line is now open.
Thanks, Good morning, everyone.
Mike maybe if we could just start on the NIM just to follow up your with your comment about liquidity and just how you're positioning yourself on the on the deposit side. So just to understand the intention is to keep it can maintain that liquidity.
And I'm, just trying to draw that with because I presume a lot of that came from the PTP deposits and how you're thinking of the ultimate outflow on now so just if you could kind of walk through some of the moving parts on how you're seeing.
Some of that looked at the liquidity movements. So on the first part of your question as you might have noticed from the prior comments we made in the first quarter. We have released some of that liquidity already roughly around.
$500 million so far so the goal is into hold onto that kind of indefinitely and I think you'll see us selective we use that where we think it makes sense. So.
Can't promise you that we're going to do that in the third quarter necessarily we may but no we're not going to hold onto those higher levels a longer term and basically when this thing started out liquidity was obviously the biggest risk I think now the liquidity risk relative to the industry has abated quite a bit.
Okay and then the second part of your question Yes.
Yeah I just on the on the PPP side. So we're hearing kind of mix things in terms of what the ultimate borrower pay usage is of those dollars, but how are you sort of expecting kind of that the noninterest bearing deposit flows to go.
As it relates to that the PPP deposits it built this quarter.
Yeah. So we had originally forecasted we'd start to see some of that in the third quarter at least in a meaningful way and I think thats going to be pushed off to maybe fourth quarter to first quarter of next year.
And keep in mind those yields based upon the size of them because the fee income is different in the fee income accretes through there.
Is roughly around 3.26% for us so it's a little bit it's obviously less than the portfolio, but it's getting pretty close to where new loan volume is coming on as well and Collin. It's Tom I just want to add that you know 21% of our PPP loans went to customers previously not Sally.
We generated approximately $150 million in deposits that would not pp loan related deposits with that group and with an opportunity to solicit for even while we have an active program going after that based on what we now have new prospects to generate even more deposits and business from that.
Our next question comes from Stephen do along with RBC capital markets. Your line is now open.
Hi, good morning, guys.
Just a question on your your reserves there the 90 basis points now that's almost double your fourth quarter level, so with Cecil that basically implies that you're looking at about 45 basis points of.
Credit loss through the cycle.
In the assumption is.
Based on a double digit unemployment rate through 2021 is that right.
So I wont, specifically address the 45 basis points, but I'm going to point you back to the fact that the model is incredibly sensitive to the economic forecast, most likely or the most impactful impacts or around GDP and unemployment.
And so.
I'll tell you the percentages that we use you can get a better fuel as to where that comes out on a weighted average basis. So for the second quarter. We use Moody's June estimates and we use 50% for their S. Three scenario, 20% for us for and 30% for baseline and to give you an idea of how the dispersion is different.
Between those baseline had GDP for third quarter coming in at 17.2%.
And as for has it at 1.7% so on a weighted average basis is 9.2 positive.
Now when you look at the forward next seven quarters. It goes negative in the fourth quarter. It goes negative in the first quarter and as I said in my prepared remarks, the unemployment rate is above 11%, whereas in prior estimates that was more around 9%. When you start to look forward. So it's it's gotten worse on the unemployment side and it's gotten less optimistic.
If you will on the GDP side.
Got it and I guess, how would like your reserve level compared to where you guys were in the financial crisis.
This is I think is really got to be aggregated together with even where our capital position was so when we went until last financial crisis, we started with the TC number about 5.75.
5.75.
We're seeing today on an adjusted basis, if you account for liquidity.
As well as the PPP loans as close to 770, so were about 200 basis points more in capital today than when we went into the initial financial crisis.
On a coverage ratio with regard to the overall loan portfolio. We think we're in a real solid position as well so on an aggregate basis. We think we have a lot more reserves from a capital and provision perspective than what we did last time.
Our next question comes from Matthew Breese with Stephens. Your line is now open.
Good morning.
Right just in regards to the a the provision how much of the 40 million was qualitatively driven how does that compare to last quarter and then with more stability in the Moody's forecast should we view the majority of the reserve build in the rearview mirror at this point in provisioning levels should start to just reflect growth and charge offs.
Yeah. So the qualitative part was it was not a large portion of the 41 million.
And as it relates to your second part of your question.
Personally I think you might see people I don't think valleys. The only institution that we'll do this I think there might be some.
Less reliance on the baseline as you can see even from our.
Weightings, when we use 30% for the baseline this time, because I think generally people believe this might last a little bit longer and so to get that economic impact into your model you might heavily weighed so that would be a bigger driver I think of future.
Reserve build as I said earlier than just changes per se to the Moody's estimate that it'll impact it but I think the weightings will be a bigger impact.
Understood and then on the expense front you point to you know 2.2 million of Cobot expenses. This quarter 2.1 million last quarter a lot of that is in regards to readiness should we start to see these figures starts to wind down and therefore expenses can can start to flatten out or come down and then you also mentioned potential life.
<unk> expense saves could you just talk about some of the areas, where you see that's that's possible and to what extent.
So of the 2.2 million to give you some breakdown and that numbers roughly 750000 of that is related to enhance cleaning procedures that we've had to do and that is going to be directly correlated to outbreaks in hot spots within our footprint. So overtime, you would hope that that would.
Come down.
You know, there's some marketing related costs I suppose you could argue where those are kobin related or not but there specifically related to our recovery CD that we have launched and we've also launched a phase two of that as well and then also inside of there that I don't believe will be recurring at least in any material.
Way, our expenses related to getting ourselves opened up through the various wave process that we're using things like decals on the floor of elevators signage in different places.
Plexiglass Sneeze guards in certain locations all of that isn't that number as well and that should over time.
Reduce itself.
And Matt. This is I would just think following up on your second comment we still believe that there's significant opportunity to relook at our business model and improve the operating efficiency further I think as we continue to enhance the technology platform that we sit on there will be operational sages, we continue to move over across all facets of of the organization.
If you recall about two years ago, we presented to you what branch transformation look like at Valley up until this point, we probably exceeded some of them the metrics and numbers that we provided to you.
If you get you'll notice we didn't provide anything this time from an update we think it's prudent for us to really reassess.
The entire platform that we have within the organization when it comes to real estate expenses.
And we continue to look at that and is there more opportunity to look our real estate and not just from a branch perspective, but from a corporate perspective.
As well in addition, there's probably a little bit left on the Orange County.
As a reminder, ladies and gentlemen, if he would like to ask a question at this time that is star then one.
We have a follow up question from the line of Collyn Gilbert with KBW. Your line is now open.
Thanks, guys, sorry, I wasn't a finished I could probably ask questions for three hours, but.
Right.
I'm, just saying so Mike sorry, just to close the loop out in the NIM. So you had indicated that there may be room on the retail deposit side kit to lower again. It just it seems like there's more than maybe what would keep you from being more aggressive and dropping some of those.
Retail CD costs.
If I said.
That were that there maybe some room, that's probably just me doing my normal hedging Conversely, theres, absolutely and that's what slide six shows those rates that you're seeing in the third quarter. As an example, 138 for maturing Cds 65, bips for borrowing and be Cds at 59, we know that at today's rates.
We'll be able to buy those same funding sources at lower rates. So absolutely we're going to continue to see that the the issue around saying a specific number is especially with the CD book It depends on what maturity. We went to the we've been as this whole thing has been going on kind of silently we've been building a nice ladder.
And extending out some of our longer term deposits.
And I think column when you look at the overall deposit book and if we get Criticised up a bit based on the cost of deposits within the organization I know a lot that as a function of the market that we operate within but we were very very aggressive compared to many of our peers and dropping rates I mean, our cost of deposits, including noninterest bearing went to 60 basis points this quarter.
From one to seven in the quarter before and 127, a year ago. So we dropped 44% <unk> percent to just on a linked quarter basis.
We didn't have any account attrition in reality, we increased 6000 units of noninterest bearing accounts during the quarter.
I think it shows the stickiness of the types of deposits we have and.
We're real excited about the opportunity.
Yeah antitrust settlement I would say I would.
Point, you to slide seven and take a look at the savings now in money market accounts and the growth there I think that illustrates what he's talking about.
Okay. Okay. That's helpful. And then just some clarity on the on some of the fee movement. So first in terms of just your outlook on on mortgage banking and where you see that trending kind of in the back half the year. If there was a lot of pull through that that happened in the second quarter.
Or if you will expect activity to sort of remain elevated as we move into the back half of the year.
Hey, Collin, it's Tom Yes, it when you look at our second quarter, 66% of our business was conforming for sale mortgage 34% balance was was John though the refinance market is active is throwing out as you would expect in this interest rate environment, we're pulling through on a similar basis, so far in the sorry.
What are our pipeline remains somewhat elevated from I'd say first quarter similar to where the same line second quarter as we work as we are now.
We have a follow up questions from the line of Matthew Breese with Stephens. Your line is now open.
Just one more from you guys just in terms of the deferrals I think you said 90, there was a 90% cure rate on the commercial loans that came up what was it on the on the consumer side and is there any reason to believe that that that blended cure rate quote unquote is not something we should apply to the remaining 2.7 billion of deferrals.
I'll talk about what's a good bad it's Tom inside we at 525 million on the residential mortgage piece I approximately 300 odd that came due 60% requested second and keep in mind, we do 90, plus 90, so 60% requested a second deferral, 40% want onto a full pay on.
Our auto piece, which is the bulk of other balance of our consumer we had 116 million in total 80 million came up at that meant that first that first stub period 72 million one on full pay so that was 90%. So I think we're gonna be those percentages a again I think are in line.
What we would have expected to see in those two categories.
And Matt I, just think this speaks to the volume as to who valley is and how we underwrite and the real differentiation here of our borrowers versus many of our peers.
Understood.
Thank you very much I appreciate follow up.
Thank you.
That concludes today's question and answer session I'd like to turn the call back to Mr. Robbins for closing remarks.
Thank you so much for all of us joining us today.
You can tell by the tone in our comments today, where we're really excited about there the quarter's performance not just from an earnings perspective, but from a credit quality perspective, as well and we look forward to talking to you next quarter. Thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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