Q2 2020 Old National Bancorp Earnings Call
[music].
Welcome to the old National Bancorp second quarter 2020 earnings Conference call. This call is being recorded and has been made accessible to the public in accordance with the Fccs regulation FD corresponding presentation slides can be found on the Investor relations page at old National Dot.
Calm and will be archived there for 12 months.
Before turning the call over management would like to remind everyone that as noted on slide two certain statements on today's call maybe forward looking in nature and are subject to certain risks uncertainties and other factors that could cause actual results to differ from those disgusting.
The company's risk [laughter] discussed within its FCC filing.
In addition starts and slides contain non-GAAP measures, which management believes provide more appropriate comparison.
These non-GAAP measures are intended to assist investors understand it up performance trends.
Reconciliations for these numbers are contained within the appendix other presentation I would now like to turn the conference over to Jim Ryan for opening remarks Mr. Ryan.
Hey, good morning, I Hope this call points all of you and your families shaped unhealthy.
We're pleased with our second quarter results and the ongoing implementation of the old be way strategic initiatives, including our recent announcement regarding our technology partnership with emphasis we have begun our transition to return to the workplace, including reopened airwatch hobbies, and bringing our team members back to the office, but admittedly, we are slowing down or transitions or the number of positive cases or.
Increasing across our footprint.
Oh lobbies remain open and we are committed and focused on the health and safety her team members client securities.
I'd also like to thank her team members for their hard work and dedication to serving our clients securities in this challenging environment.
Starting with slide three our second quarter net income was $51.7 million, including 3.7 million an after tax I wouldn't be way charges. Adjusted net income was higher at 55.1 million, which includes 22 and a half million in provision for expected credit losses, and 2.1 million any provision for uncollectible.
Mitch.
These provisions are consistent with the most recent Moody's economic forecast Brendan will fill you in and all the details.
End of period total loans increased by $1.3 billion, primarily due to PPP loan funding and commercial real estate grow our commercial production, excluding PPP loan production was $658 million slightly higher than the first quarter.
Why utilization dropped to 26% due to line pay offs and an increase the new unused lines of credit.
Core deposit growth of $1.9 billion funded by PPP proceeds in higher savings rates were a bright spot.
Net interest income was higher from P.P. income, which offset the impact of lower interest rates.
Mortgage in capital markets revenue continued to be exceptionally strong and offset coded related lower deposit service charge interchange income.
We continue to achieve lower expenses as we execute on the only be way initiatives, our adjusted efficiency ratio for the quarter was under 54%.
Year over year operating leverage improved by almost 600 basis points.
Our credit quality metrics improved during the quarter, but we expect that losses will ultimately materialize once the stimulus a deferral programs run their course, we still don't completely appreciate the definitely crisis, but we believe our historically strong underwriting practices diverse in greater loan portfolios and Midwest footprint.
With us whether the impact better than most.
We continue to share with our board of directors multiple economic forecast in various stress test.
As a result, we don't anticipate any other capital actions and we expect to maintain our current dividend.
We're still open for business and we're extending new credit we managed for the long term, our balance sheet and capital markets or our balance sheet capital markets markets are strong our markets adverse and our spirits team will help us manage through this challenging time.
I'm confident that we will merge even stronger on the other side.
Moving to slide four I want to update you on our recently announced technology partnership with emphasis.
As a part of the only way we hired outside experts to help us examine our current technology infrastructure investments in talent.
The technology investments required for financial services are only accelerating and we recognize the need for a strong partner to help us maximize the benefits from those increased investments.
This multiyear technology partnership will fund those accelerate investments in technology infrastructure, and prove our training and development opportunities and increase our innovation.
We are confident that overtime. This partnership will significantly enhance our client experiences and provide even greater scale to grow our bank efficiently and effectively.
Not only that was just a leading global information technology company, They're also making a 245 million dollar investment in the state of Indiana with plans to higher 3000 workers and they're building their U.S. training center in Indianapolis.
I'll now turn the call over to Darryl Thank you Jim.
I'll begin my portion of this mornings presentation on the top half of slide five where we lay out for you our exposure to what we believe be the most vulnerable segments of our commercial portfolio.
With regard to the particular industries noted you can see that none of the six identified vulnerable segments exceeds 2.3% of total loans and the total exposure of all of these identified segments or 7% total loans.
We believe that a critical factor in determining the staying power of our borrowers in this very challenging economic environment is not only the level of capital each of these borrowers brought into this downturn, but also the ability to raise additional capital if needed.
That regard to the extent that they are forgiven PPP loans represent outside equity contributions to our borrowers and especially with respect to these vocal industries. We imagine that these capital injections are going to be instrumental and assisting our borrowers and navigating through the current crisis.
Correct in our assessment of the criticality of having access as outside capital sources is interesting to note that we approved over $203 million in PPP loans to borrowers in the six vulnerable industry segments, which represent just shy of 25% of the total pre TPP loan Outstandings of these industries.
We continue to work through the portfolio to read our borrowers on their pre covert strength in areas of liquidity capital the ability to service debt obligations and loan structure as a baseline for understanding to what extent the current pandemic could impact it was borrowers.
We began to receive interim financial results from our borrowers we will use that information to further and form on our understanding of the underlying strengths or weaknesses in each individual relationship and take actions as appropriate.
With respect to the retail side of the loan portfolio. The chart at the bottom slide five provide some information around retail product exposures and a proxy of credit quality based on average FICO scores delinquencies and losses in these portfolios as a whole are performing better than they did through the first half of last year, but we're very guarded in our view of those trade.
Given the level of payment deferrals granted in the fact that we have had a moratorium on most repossessions for four months.
Moving to slide six we provide more information on deferrals showing that we have booked deferrals on 14% of our commercial book and roughly 3% on each of the consumer and residential mortgage portfolios.
Waiting to an 11% deferral rate on the entire portfolio.
First time to for a request have slowed to a critical and we're just now beginning to consider request of extensions of any first round 90 days deferrals to the extent.
Requesting deferral period extensions, we have had the up or we will have the opportunity to spend a bit more time analyzing extension request and we did on the front end and we'll use the baseline information on liquidity capital debt service ability and loan structure that I mentioned earlier to assure that we use this window of opportunity to strengthen credits where we can you.
So duration of any further concessions.
Moving to the bottom half a slide six were pleased to report that we have extended in excess of $1.5 billion you Paycheck protection program loans over 9200 borrowers as you can see from the chart almost 80% of loans extended were to entities or individuals who PPP loan size fell in $150000 were less category.
Affirming our position as a large bank with the community focus.
There has been a team of individuals that have spent significant hours and building out that forgiveness process for these loans, which we will be ready to be utilized by our clients. Once the ASP is open to receiving those requests.
On slide seven we provide an overview of credit quality measures.
30, plus day delinquencies at 17 basis points belt the levels not seen for at least 20 years in this organization as I mentioned earlier. It is critically important to keep in mind that borrower assistance in the former PPP loan payment deferrals and SP a loan payments supplements have certainly helped a damper any increasing in delinquency.
As we might have seen absent. This assistance it is yet to be seen what impact any whine down of these programs might have on delinquency rates going forward.
Net charge offs in the quarter fell to more historically normal levels and charge offs in the period were slightly more than half a million dollars or two basis points of average loans.
Nonperforming loans fell 12 basis points in the quarter in small part due to a slight decline in nonperforming balances, but mostly as a result of increased loan balances associated with paycheck protection program.
In the final section of this slide seven we look at the historical relationship of net charge off to nonperforming loans, while on a somewhat increasing trend due to higher fourth quarter 2019 in first quarter 2020 losses, you can see the significant difference between old national and our peers. When it comes to this particular metric.
With that I'll turn the call over to Brendan.
Thank you Carol.
Before turning to the quarterly financials, we would like to provide an overview of our allowance for credit losses are Cecil model assumptions were again to arrive in the Moody's baseline forecast, which is now projecting higher prolonged unemployment any sharper initial decline in GDP compared to our first quarter assumption.
This updated economic outlook at the primary driver of the 22 million dollar reserve increase this quarter, our current hcl to loan ratio, including PTP loan stands at 94 basis points, excluding PPP loans, our allowance for loan ratio would be 105 basis points.
I would also like to remind you that we continued to carry $62 million in unamortized credit marks from our acquired portfolio. In addition to the allowance held on these loans.
All these mark will not directly offset charge off any remaining mark will accrete through margin upon resolution.
The fiscal stimulus and relief programs have been an effective mitigant to credit losses in the near term. However, there is still a great deal of uncertainty regarding the path of the virus future government actions and the long term health of the economy, all of which could impact future reserve needs.
That said a reserve levels reflect the current economic outlook and is our best estimate of the credit losses in the portfolio today.
Turning to quarter on slide nine our GAAP earnings per share was 32 cents and our adjusted earning per share was 33 cents adjusted earnings per share excludes $4.9 million new on the way related charges.
Moving to slide 10, we're pleased with our quarterly adjusted pretax pre provision net revenue, which was 7.6% higher year over year and 19% higher over prior quarter. This improvement was driven by increased fee income led by our mortgage and capital markets businesses as well as a reduction in adjusted operating expenses, resulting from good execution of our own be.
Initiatives.
Despite the challenging interest rate environment, we improved operating leverage by 576 basis points year over year.
Slide 11 shows the trend in outstanding loans, and earning asset mix and a theory loans increased $1.3 billion quarter over quarter due to $1.5 billion in PPP lungs.
Commercial real estate loan through at a 9% annualized rate well see an eye loans, excluding PBP were down $201 million due to decreases in revolving line utilization.
Commercial activity continued to be strong with total production, excluding CPE of $658 million, an end of period pipeline totaling $2.7 billion.
Loan yields excluding PPP were 3.96% for the quarter, reflecting the full impact of the decline in short term rates, coupled with lower new business rates, which averaged 3.09%.
You bet portfolio yield was down eight basis points quarter over quarter to 2.63% with new purchases yielding 1.56%.
Moving to slide 12, both period and an average deposits increased during the quarter as a significant amount of ERP loan funds, where deposited and remain on the books at quarter end.
Hi. This also benefited from a broad increase in savings rates as well as seasonal increases in public funds.
Our total cost of deposits declined from 34 basis points in the first quarter, two a low 17 basis points in Q2.
While we continue to look for opportunities to reduce funding cost most of our planned rate actions are now complete.
Deposit costs fell 24 basis points to 1.1% and we expect this trend to continue for several quarters at the majority of our CD book Reprices within the next 12 months.
Overall, we are pleased with the results of our deposit pricing strategy has resulted in a meaningful reduction and deposit costs, while maintaining our for client base.
Next on Slide 13, you will see the detailed changes in our second quarter net interest income in corresponding margin.
Net interest margin declined 17 basis points quarter over quarter and was generally in line with our expectations PPP last contributed approximately $7 million to net interest income, but heading negative five basis point impact on interest margin, excluding the impact of both PPP loans and accretion net interest margin was 3.07% compared to 3.1.
6% in Q1.
The reduction in core, earning asset yields which were down 22 basis points was only partially offset by 13 basis point reduction in funding costs. This trend in our margin will likely continue as our earning assets repriced and this lower long term rate environment.
Slide 14 shows trends in adjusted noninterest income our second quarter adjusted noninterest income was $58 million and represents a 6 million dollar increase over prior quarter. The primary driver. This improvement came from our mortgage business mortgage revenue was $17 million in Q2, which represent a 6 million dollar increase over prior quarter and a 10 million.
The dollar increase over Q2 2019.
Mortgage production with a record $656 million, but 34% coming from the purchase category.
The pipeline also remained a strong $567 million heading into the third quarter.
Please note we did take an 800000 dollar impairment charge to our MSR portfolio in Q2 that is netted against our mortgage revenue.
The capital markets My business remains a bright spot as interest rate swaps continued to be very attracted to clients.
Our wealth business benefited from seasonal tax prep fees this quarter, a lower equity market values did have a modest negative impact on both investment and for us revenues.
As expected bank fees were down $3 million compared to prior quarter driven by significant decrease in overdraft presents.
Interchange income.
Also came under pressure in Q2, but it rebounded nicely from its mid quarter locally at spending patterns slowly returned to normal with our local economies reopened.
Next slide that teachers, the trend and adjusted noninterest expenses, which reflects our ongoing focus on expense management.
And de weight charges were $4.9 million this quarter, which is slightly better than the $6 million we projected.
Adjusting for these only be weight charges and tax credit amortization noninterest expense was down $7 million quarter over quarter.
Our own be way expense initiatives have resulted in a 16% year over year reduction in branches and 11% year over year reduction in FTD.
Also worth noting that our second quarter noninterest expenses included an increase in our allowance rent unfunded commitments of $2.1 billion.
Our adjusted efficiency ratio for the quarter with a low 53.8% and represents a 552 basis point improvement over Q1.
As a wrap up my discussion on the quarter, Here's some key takeaways.
We're pleased with our overall performance at the fundamentals of our core business were strong commercial production with solid our fee businesses continued to perform well, particularly our mortgage and capital markets lines and we delivered on the promised expense savings we outlined in our own be way strategic plan.
Slide 16 includes starts in our outlook for the remainder of 2020.
We ended the quarter with a healthy 2.7 billion dollar commercial pipeline, but economic uncertainty may impact pull through rates and use loan growth in the near term.
The impact on our net interest margin to the shortens. The curve is now largely behind us, but historically low long term rates will continue to put pressure on asset yields as our loan investment portfolio reprice at lower coupons.
Funding costs will move marginally lower as borrowings and Cds repricing maturity, but we do not expect this will be sufficient to offset declines in asset yields.
Ppt loans will also impact our margin going forward. These loan carry a 1% coupon and an average fee of approximately 3% and we'll continue to be accretive through margin on a level yield over two year terms as.
As long as ever given any remaining fee will be accreted to income immediately the timing of loan forgiveness, it's still uncertain, but we don't expect significant payoffs to begin until late this year.
Several key items will also likely come under pressure for the economic slowdown our wealth management and investment businesses have seen a decline in the valuation of our assets under management that will impact revenue in the near term.
Overdraft fees were down sharply in the quarter and May take some time to recover to pre crisis levels.
The mortgage marketing proven more resilient than we expected, but we'll still be subject to the typical seasonal declines in the back half of the year.
We are slightly ahead of our plan 2020, Onee way expense initiatives and have now realize a large portion of the savings promised this year.
The Infosys partnership is expected to generate approximately $5 million in onetime charges associated with upgrading our infrastructure and will be recognized over the next several quarters.
We would also like to give you an update on our current capital position and outlook, we accreted additional 30 basis points of Cetone capital ending the quarter at a healthy 11.7%.
I would also reiterate that based on current capital levels and our outlook on earnings. We believe we will continue to out earned our dividend.
We've also recently updated our stress test model and under the SEC are severely adverse scenario, we remain well capitalized at the lowest point in the nine quarter horizon.
Our liquidity position also remained very strong, but our low loan to deposit ratio of 84% strong cash and unencumbered security position and various sources of liquidity, we have plenty of flexibility to respond to future funding needs.
Lastly, we provide some guidance our full year 2020 tax rate, which is expected to be approximately 20.5% on an equity basis and 16% on a GAAP basis.
As we previously reported project delays caused by Coven 19 have impacted the timing of our other historic tax credit projects that we anticipated will be completed this year that projects have recently restarted and borrowing addition delays the project could be placed and serviced by year end.
These projects are completed in Q4, we will take the full tax credit amortization and corresponding tax benefit in that quarter.
With that we're happy to answer any questions that you may have and we do have the full team here, including Jim. Thanks.
At this time, if you would like to ask your question. Please press Star then the number one on your telephone keypad that is star one to ask a question, we'll pause for just a moment took about M&A roster.
Well first question comes from the line of Scott Siefers with Piper Sandler.
What a shock good morning, guys got.
Hey, Good morning, I Hope you guys are going well and appreciate you taking my question.
Just wanted to ask one one question on the reserve I mean, the credit numbers are are excellent of course, and you guys have such a solid history, but the only area where old national looks light is just on the reserve to loan ratio I feel like I know you guys well enough to understand the nuance, but just any any thought you might have had.
To perhaps say ramping up the qualitative reserve just given the.
Uncertainty in the outlook or who sort of what were the factors that that got to do this is the appropriate level.
Sure. So obviously, Scott we build our models.
Based on historical results and we run the Moody's baseline forecast through and trust that the models are accurate and appropriate given the economic outlook I will say that we we also did add some additional qualitative reserve to onto the model this year.
But we feel really really comfortable with where our reserve level stand given the economic forecast that Moody's provided.
Yes, Scott.
It's hard to know exactly what the right answer is and this kind of environment and we think we.
Provided an appropriate a mile given our history of our portfolio and our granular green or nature of the portfolio. The diverse nature of the portfolio. So the board and management, a very comfortable with where our reserve stands today.
Okay perfect I appreciate that color and then Brendan just maybe I think since none of US has really gone through a credit cycle with.
Sorry credit marks the way. They are you guys 62 million dollar credit Mark to what extend is that indeed available to absorb loss I think you touched on it in your and your proper March but just any additional color you could add would be great. Yeah. The accounting the accounting want allied to specifically offset a charge off but that that those credit marks our new are on the books.
And we will accrete through earnings and available to to help fund provisions in the in the amount we needed as we go forward.
And if alone is resolved and alone is charged off we will accrete that credit mark straight to earnings in that period.
Although the geography will be different.
Yeah.
Got it alright, perfect. Thank you guys very much.
Thanks Scott.
Your next question comes from a line of Chris Mcgratty with KBW.
Good morning gross.
Good morning, everybody.
Brent if I could start with you on the Cherokee program.
I can for a couple numbers and then a couple of questions.
I think you said in your prepared remarks, a 3% average fee. What's the total what's the total fees that are yet to be realized aside from the 1%.
So it's just shy of $44 million left to be accreted taken about 3 million okay.
And so any average balance of the pvp loans in the quarter to Havent.
The average balances.
Don't have that.
Oh average for the balance of the the comparability 1.1 billion sorry, Okay average.
So if I think of the.
Roughly I think he's had 6 million in in the quarter of total revenues from the triple pay.
Most of that would be the 1%.
What do you I guess, how do we think about the cadence of that 44.
[laughter] Yeah, the 6.6 million that we took in the quarter was roughly split between fees and coupon.
And we love to get as much of this into 2020 as we can were Jim Sandgren as a a process to be proactive with a borrowers I think they're anxious to get this behind them as well.
Until the FDA gives us a way too.
Submit fees.
We're all little uncertain, obviously, there's been extension to the ability of at a time to to allocate eligible expenses and so if we're not sure but our best thought is that this is more a fourth quarter and beyond.
Income event.
Okay.
And then last question on the TPV.
The deposits that are associated with it can you just speak to the ticket the trajectory of stickiness of those deposits and do we assume as the loans run its kind of a one for one or how are you doing those the surgeon deposits.
Yeah, Chris This is Jeff it's hard to say, but I would assume certainly in the quarter that you'll start to see some of those balances.
Run down as they are being used for.
You know the reasons they've been provided so I hard to say, what one but I would think we'd start seeing those balances reducing the quarter.
Okay, and then my last one I'll jump out.
Brendan you talked about the margin just the long end being just the environment not great fit for the group.
If I take the core core margin I think it was around nine basis points a compression.
Do we assume a lesser degree of pressure because of because we've now felt the short end or is it are you messaging that we should see similar pressure in the back half of their for quarter.
Yes, I think for the in the near term less next several next couple of quarters I think it's similar trend downward as probably appropriate. But then we will will begin to flatten from there, but the longer this where this curve exists.
I think we'll continue to see some pressure for some time going forward and Chris maybe just one other point to your your prior question. The the build up in deposits. Since you with PPP was roughly half of the 1.9 billion dollar increase came from PDP. Okay. That's helpful. Thanks a lot.
Okay.
Your next question comes from the line of Terry Mcevoy with Stephen.
Good morning, Terry.
Maybe start with a question on slide five the vulnerable industries as you guys.
Described them changed from the first quarter. The second quarter. If you kind of came out and in a few new ones were put in like like scenery kind of senior housing could you just talked about over the last three months, how you've looked at those loan portfolios and why you made the decision to say remove transportation and add senior housing.
Yes, Gary this is Darryl.
The transportation segment, we put that on because right out of the box there seemed to be a lot of talk about transportation as we went back and looked at our portfolio most of that transportation exposure is in.
Hauling either short term Pauline or low hauling within an individual regions. So we just didn't see much deterioration there as we pull that out we also looked at our senior housing portfolio, which up before the cobot price. Our crisis had shown in just a little bit a weakness in so we thought if you think about that particular in.
History, I'm, it's a difficult to bring new clients into the assisted living just because of the coated and there's been lots of different protocols. They were struggling with finding employees before the crisis.
It's just difficult increased costs as costs associated with this industry. So we thought you know what we just really need to be keeping our eyes on that and so we thought it was more appropriate to swap those two out I'm just to give you better picture, where our vulnerabilities might be going forward.
Terry I tell you the entire leadership team goes through this portfolio. These portfolios credit by credit you know looking at the current disposition any potential future downgrades and so we spent an awful lot of time focused in on it and.
We'll go to as good as we can today about those credits.
But we do spend an awful lot of time, making sure that were managed this portfolio appropriately.
Thanks, and then as a follow up maybe I mean, we're seeing weakness in service charges interchange revenue just to across the industry anyway to put some numbers behind maybe when and how much it bottomed out.
The recovery through kind of the second quarter is it progressed and what your thoughts are now that theres been some.
Let me kind of taking some steps back on the opening and some closures in some of your core markets and what that could mean to this this fee line.
Hi, Kerry this is branded I can't I can help you with a with the with the service charges. So overdraft really drove most of our service charge decline and we have not seen meaningful rebounded spend down as.
Basically remained down and thats approximately $2 million to that shortfall, we felt in Q1 Q2.
Don't expect that to change as far as interchange income is probably.
Quarter half a million dollars worth of of headwind in Q2, but that it rebounded really back to fairly normal level. So I don't think that will be a concern going forward for us.
I think the service charges observing impacted by the stimulus programs and the extended benefits so to the extent that those continue on into the future, you'll probably still see that line item under pressure, but to the extent that they'll start winding down I think you'd probably see if a return to normal.
Great. Thanks, everyone.
Thanks Derek.
Your next question comes from the line of Jon Arfstrom with RBC capital markets.
Good morning, John.
Hey, good morning.
Mr and maybe a question for you on slide six.
You talked about.
Second round of deferral discussions.
Just starting to occur.
Give us an idea of what you're thinking in terms of what the slide might look like a quarter from now.
You said that.
You know the activity has slowed pretty dramatically, but talk a little bit about what you're seeing.
And in terms of the flow.
Coming in for a second round.
John a great question.
If you feel kind of recall our last call. We basically split about 50 50 on deferrals greater than 90 days and deferrals less than 90 days, we've got about half the deferrals that are coming back in and.
It is a little slower than I had thought maybe on the front end, although I don't know that I would extend kind of that thinking to.
The fact that may be a lot of those 90 days don't ask for extensions. So it's it's yet to be seen there I think new extension or new deferral requests if based upon the last 30 or 60 days I. Just don't think we're going to see significantly higher request. So I don't know that you're going to see higher percentages.
These portfolios and what we have now hit that answers. Your question John I would also had as we've gone through these you know we've seen many of these early requests were planning for the worst.
Case scenario you know the worst case in terms of rent collection, whether it be commercial or or.
Individual rents and we are you know if we go through these loans one by one we're hearing pretty positive things about their ability.
So so as these I'm hopeful that as we go through these renewals are hesitant mature that will go back to a normal occasions with our borrowers.
And then another challenging question I guess as well but.
That's kind of alluded to earlier in terms of the reserves and provision outlook are you, saying that.
Your reserves today.
Reflect.
Some of the individual stresses that you're seeing in the portfolio was well.
Or is it just more of using the Moody's overlay and making some modest adjustments to that so it's more of a macro approach.
It makes sense as a Mac or loan by loan so.
Certainly we are using the Moody's at the macroeconomic factor overlay that we use all of our individual asset quality ratings ltvs.
All the individual borrow characteristics, which generally the migration patterns have been very strong even through this crisis. So.
We are using granular loan portfolio data in our assumptions.
Okay. So a chance the provision backs off a bit.
For a lot of those movies numbers is we're in the ballpark.
It's a moody's at the Moody's scenario plays out I think I don't think we'll see a meaningful reduction of the reserve, but it should be should prove out the reserve is adequate for the losses in our portfolio.
And then I guess one more.
In a positive where the pipeline.
And then there.
Curious on the dynamics in the drivers of that raw, we're obviously focused on credit, but just curious on the new business pipeline at that one kind of peak, yes, yes. John This is Jim I will I'll take that one really encouraged by but the size of the pipeline, but maybe more encouraged by the category. So the accepted category, which traditionally.
We can't 90, 95% of those loans across the finish line that have stayed stable quarter over quarter.
Where we did see some growth in the pipeline was in the proposal stage. So you know anecdotal feedback from from our borrowers through our commercial our EMS is that folks have a little bit more clarity they are optimistic.
For the second half of the year, our pull through rates were down a little bit and certainly in the second quarter I'm. So we'll see if projects continue but people are talking about acquisitions still talking about some growth.
So we'll see a very encouraged about what could happen in the third quarter, but we'll have to just wait and see how things things play out, but pretty pretty well split between commercial real estate and seen I.
So.
John I'd also add you know all three segments leaders had been really focusing on what can they do to help our clients.
And what can we do continue to grow each one of those businesses. So a wireless while the second quarter. You know early purchase second quarter, probably distracted with PPP production and things like that we're really focusing on kind of coming back and working hard making sure we're serving our clients and and looking for opportunities to grow each one of those segments.
Alright, thank you.
Your next question comes from the line.
David long with Raymond James.
Good morning, David.
Good morning, everyone. Thanks for taking my call.
As it relates to the P.P. the the duration of those on the you amortizing. The fees you know assuming you don't get forgiveness over two years or do you have some that are in the five year category.
We are amortizing these all over the two years.
Okay.
Got it kind of thank you and then the just the overall deposit trends if I get a little bit more color. There obviously, the PPP, maybe a little bit of a headwind the public funds, maybe in a little bit of a headwind here in the third quarter can you can you grow deposits in the third quarter, maybe just talk about broader trends.
Yes, I think that trend so we'll be fairly stable with what you've seen in the past that we just saw increased savings rate across every category every product type business personal and public in the quarter and I think Jim alluded. These comments earlier as stimulus payments sort of draw down and PPP funds hit kind of forgiven in redeployed, we'll start to see that comes.
Down and then we'll probably returned back to normal normal deposit trend growth.
Got it thanks for taking my questions.
And there are no further questions at this time.
Great well, we appreciate you all joining us today, we hope you have a great day and as usual we are available for any follow ups, but please don't hesitate to reach out. Thank you very much.
This concludes old nationals call once again, a replay along with the presentation slides will be available for 12 months on Investor Relations page, Oh National website that old National Dot com.
A replay of the call will also be available by dialing 1855859 to narrow Fivesix conference I'd code 797341 for this replay will be available through August 2nd if anyone has any additional questions. Please contact well now Walt.
At a one to.
Boy six for 136 takes thank you for your participation in today's conference call.
[music].