Q2 2020 Horizon Bancorp Inc Earnings Call
It's actually quite prepping darkie color I see.
After today's presentation, there will be an opportunity to ask a question.
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Before turning the call over to management I would like to remind everyone that today's call may contain forward looking statements related to horizon and they generally be identified as describing the company's future plans.
Yes, Okay. All such forward looking statements are subject to risks and uncertainties that could cause actual results or outcomes to differ materially from those currently anticipated.
These forward looking statements are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995 for further information about the factors that could affect horizon future results. Please see the company's most recent annual and quarterly reports filed on form 10-K and 10-Q.
You should keep in mind that any forward looking statements made by horizon speak only as of the date on which they were made new risks and uncertainties come up from time to time and management cannot predict either bad or how they may affect the company horizon has no duty to and does not intend to update or revise forward looking statements. After the game.
On which they aren't they.
He expects non-GAAP financial measures are discussed in this call comparable GAAP measures and reconciliations can be found in horizon April 29 news release, which is available on its website at horizon Bank Dot com.
Horizon also published an investor presentation on Wednesday afternoon, and it is available on the company's website with information that will be addressed this morning.
My first any horizon today is chairman and CEO, Craig Dwight as well as executive Vice President and CFO, Mark C Corps, President, Jim and Executive Vice President and Chief Commercial banking Officer, Dennis can at this time I would like to turn the conference over to Mr. twice.
Thank you cage and good morning. Thank you for participating at Horizon Bank Corp. earnings Conference call. Our comments today will follow or Investor presentation that was publish after the close and trading on July 29.
So starting on slide four we summarized in Hawaii, but we believe was very solid quarter. During these on a cross a dozen times as evidenced by a 26.9% increase or would the first quarter's earnings per share.
These results were supported by good loan and deposit growth of eight and 7% respectably.
Excellent expense management and record residential mortgage loan volume.
In addition, during the quarter, we demonstrated our ability to effectively access the capital markets through the issuance of $60 million and subordinated debentures.
Capital raise provider are holding company with a considerable cash cushion to protect the dividend to its common shareholders and provides us with the optionality on how to deploy capital in the future.
Slide five titled Seasoned management team, we're very proud of our entire Grayson Bank gene and what they've accomplished.
Slide six reflects our accomplishments inexact and excellent history of financial performance over the past 17 years.
Slide seven powerful diversified the tractor, what Brad I'm going to spend a little more time on the next two slides you have a better understanding of our footprint.
What's taking place in the markets, we do business.
Raisins focus has been consistent over a long period of time to grow for revenue streams, which diversifies risks in stabilizes earnings in varying economic cycles.
Example, today, our mortgage teams are doing very well, which offset slow growth in other business lines.
The map celebrity flux, right and 73 locations right, that's a great footprint with our loans distributed throughout the states of Indiana in Michigan, which represents good geographic diversity.
As of June Thirtyth, Indiana's unemployment rate was approximately 11% and Michigan's was approximately 14.
Most they saw considerable dropped unemployment rates from their peak in April and May.
Currently we are experiencing a slight increase in unemployment claims in Michigan, well, Indiana claims continue to decline.
Horizons expansion and growth is occurring primarily in cities and towns with colleges.
Universities in state or KONI governmental seats, there for a majority of our footprint has an economic base that is traditionally more stable than other areas of Indiana and Michigan.
Not to give you a current status the coal that 19 by state Indiana's positive Kobin 18 cases, Pete on April 26, and then again on July 23rd and over the past we've seen the number of pieces start to decline.
The utilization rate Indiana's intensive care units is below 60% with a substantial the kite decline in kobin patient hospitalization rates since its peak in April.
Surely Michigan is eight counties reporting an increase in Corbett 19 cases, however, their accounts treated in the more populous Detroit Metro area in the South East portion of the state.
Well horizon banks branches and customers are concentrated in western and central Michigan over all the states. Recent total confirmed cases are down considerably from the peak periods in April and May.
As many as you know <unk> as many of you know we bank customers and the number of college towns all major universities in both Indiana, and Michigan plan to open in the fall under certain safety protocols, which include.
In order for all semesters.
Lastly, what the mixture virtual and then classroom in reporting you were occupancy and student housing. Most universities are recording single occupancy unless you priest luck a roommate.
The New college student housing occupancy standards will bode well for horizons multifamily loans located in your college campuses.
Slide eight talks about our attractive and stable Midwest markets Horizons focus has been a midsized cities as we've grown or footprint through webinar organic expansions in 14 mergers and acquisitions no plans to be Chicago Bank. However, we do enjoy the benefits of consumers and businesses escaping is higher cost of living Hi Tech.
This is in dense population.
Our legacy market. It is in the Michigan City report earlier, where we have approximately 60% market share has historically been slow growth market over with recent and pending investments by the Chicago metric commuter rail line. This mark is positioned well for future growth.
The greater Indianapolis or is well diversified economy with strong growth large employers and putting fortune 500 companies state government and universities.
Northwest, Indiana has considerable appeal in Chicago companies and residents due to its close proximity with short commute times as well as several multi school systems.
Southwest, Michigan is not as volatile as the other parts of the state.
Do you have an excellent business climate good owner operators has less automotive influence in considerable first personal will this are you also includes several college towns.
Finally, the grid won't be area.
Well, we're pretty University has established incredible partnerships with local cities for infrastructure and quality of life improvements Purdue recently announced record freshman enrollment for the fall of 2020.
Just last week, Subaru raw and major expansion of its only U.S. Assembly plant, which Ics plans to add 350 jobs in this market.
That's a slide nine exhibits rises response to the cobot 19 pandemic is most greedy banks resident bank is very proud of our employees and how they manage through this pandemic and providing assistance to our customers and communities. There in these unique times.
Slide 10 talks with our digital transformation.
Brendan was well on its way to transform and our customer base to our digital platform as evidenced by the chart in the World title actor Bottomline banked users as more than 98000 were 71% of walbert checking accounts are active users.
As expected during this pandemic in presented on the church the right Horizon digital transactions increased in branch tragic transactions decline due to limiting office traffic to appoint only until June 15th.
Fortunately horizon was well prepared for this increase in digital transactions.
Now it's my privilege it turned over to Mark C Corps, CFO, who will give you the financial thick mark.
Thank you Craig.
I will briefly summarize the second quarter results, which we believe continues to demonstrate the strong position. We're in as we navigate the current environment.
Starting with slide 12, you'll recall that in the first quarter. Our results reflected I really three times increase in our allowance. After we implemented Cecil on January 1st and built general reserves in the early days and the pandemic driven economic emergency.
We continue to provide for growing reserves in the second quarter, but at a slower rate than in the first three months of the year.
We believe we are appropriately reserved given the current state of our portfolio and our Cecil modeling.
Our profitability metrics, including pretax pre provision earnings also benefited from growth in net interest income supported by higher average balances of interest, earning assets, resulting from the TPP program participation.
Linked quarter net interest income.
5% allowed us to outpace net interest margin compression nine basis points during the quarter.
Slide 13, the nine basis point decline in margin during the quarter with relatively modest with approximately three basis points attributed to lower yielding PPP loans.
In addition, as customers deposited PBB loan proceeds and other stimulus funds, we sold excess cash at very low rates impacting the margin by approximately four basis points.
Our ability to quickly and decisively lower funding costs in March has helped to keep pace with lower asset yield.
Slide 14.
Loan yields were reduced during the quarter as variable rate loans repriced lower.
TPP loans contributed approximately 10 basis points to this reduction.
36% of our commercial loans are variable and the vast majority repriced.
21% of our bear variable rate commercial loans have floors and 67.
Not at the airport, six 7% or not at their floors.
74% of our mortgage loans are variable and it just over a longer period of time, 98% of variable rate mortgages have floors with 5% of them at their floor.
As loans continue to reprice and new product is originated at lower rates.
Additional downward pressure on asset yield is expected.
Slide 15, our strong core deposits were key in the second quarter.
Further bolstered two by customer deposits stimulus funding.
29% of noninterest bearing 29% growth in noninterest bearing deposits in the interest bearing deposit cost lowered to 15 basis points significantly contributed to stabilizing the margin during the volatile rate moves.
The CD portfolio also help reduce funding cost is high cost Cds mature during the quarter.
To provide an offset to the expected asset yield pressure over the next two quarters $40 million of Cds will mature with a weighted average rate of 1.64%.
The duration of the entire CD portfolio is just over 10 months with a weighted average rate of 1.55%.
The continued repricing of the CD portfolio and the expected shift in CD balances to transactional account should provide support to the margin.
Slide 16.
The two biggest drivers of noninterest income in the second quarter are both related to the mortgage business.
To the downside national increases in prepayment speeds and passed new levels, where a significant factor in our third party valuation of horizons mortgage servicing asset requiring us to accrue at 2.9 million dollar noncash impairment charge in the second quarter.
Additional impairment would be expected for service mortgages that refinance and if the national prepayment speeds in delinquency percentages increase.
Even with the MSR impairment in the second quarter mortgage related revenues grew on a record gains from the sale of mortgage loans.
The continued refinancing activity and strong percentage gain we are receiving on the sale of mortgage loans is providing revenue to help offset lower non sufficient on fees and lower fiduciary income.
Based on local and national refinancing activity, we we expect strong topline contributions to continue from this business through the ended the year.
During the second quarter, we continue to manage operating expenses.
Sorry usual discipline even.
Even adding back in the 1.1 million of deferred PPP loans loans originated.
Origination cost to salaries and benefits annualized noninterest expense was still 2.26% of average assets in the second quarter.
You fit just efficiency ratio of 56.2% was lower than the previous two quarters due to both higher revenue and lower expenses during the second quarter.
This is a very positive trend in this environment and demonstrates the strong core results for the company.
We will continue to focus on expense control by ongoing rationalization of our retail location looking for discretionary spending cuts and leveraging the current infrastructure.
Slide 18.
We discussed last quarter, we did adopt Ses on January 1st and we believe this is allowing us to make more relevant reserve build based on the current economic conditions impacting our loan portfolios.
This quarter, we added weekly indicators to our economic forecast to assist in capturing the volatility we're seeing in the economy.
The 6.7 million dollar reserve build in the second quarter was primarily driven by allocations made from continuing to analyze sectors alone that potentially have a higher risk of loss.
Greg will provide more details on these sectors later in the presentation.
The percentage of allowance to loan total loans was 1.3% at June 30, or 1.49% when excluding PPP loans.
The balance of $14.5 million remains for discount on acquired loans.
Slide 19.
Horizon continues to maintain a strong capital position in these uncertain times.
Management has been diligent in performing capital stress testing to ensure horizon maintains adequate capital in a range of scenarios from mild to extreme.
This is done in order to determine what action plan would need to be taken in these scenarios.
Added to the capital position during the second quarter, the company issued $60 million in subordinated debt at a rate of 5.6 to five.
This debt raise was to provide additional capital support and Optionality as we navigate through and out of this economic downturn.
Also during the quarter the bank provided a $34 million dividend to the holding company do even better prepare prepare team be better prepared for the uncertainties still facing the economy in the months ahead.
Accordingly at June 30, the holding company had just over $125 million in cash representing nearly 18 quarters of fixed cost which include interest on all of that.
Operating expenses at the holding company and the current shareholder dividend level, which we are committed to maintaining.
Now for some additional comments on our loan portfolios I'll turn it back over to Craig.
Thank you Mark and looking at EUR 4 billion in total loans on Slide 21, you will see a diversified portfolio with 58% in commercial loans and 42% in residential mortgage and consumer loans, we like this loan mix as it diversifies, our credit risk and provide the advantages to managing.
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This slide also details granularity in our commercial portfolio, which itself is well diversified our single largest sectors. The residential multifamily loans at less than 6% of total loans in this portfolio continues to perform well.
Our key points to make rises and manages capital at risk by maintaining an in house legal lending limit 30 million in our legal limit 76 million.
Our granularity as further enhancement affect our average commercial loan is only 366000.
Now moving to slide 22 loan deferrals peaked in mid May in have started to level off.
Total deferred loans were 14.3% at quarter end in overall horizons referral rates are in line with peer banks.
Next we are seeing a decline in mortgage deferrals in horizons mortgaged referral rate continues to fall below the national average, which is well over 7.5%.
Right and consumer loan deferrals range between 1.3, and 5.1% of total consumer loans by segment.
Right and consumer loan deferral rates compare well to Moody's analytics report as of May 30, Onest, which reported consumer loan referral rates running at approximately 6.5% <unk>.
Consumable owned deferrals are starting to decline with exception of the indirect auto loan portfolio.
Horizons commercial loan referral.
Make up 80% of total loans in deferral.
59% of our commercial loans on a payment deferral continue to make monthly interest payments.
74% of rises commercial loans with payment deferrals were for a period of 90 days or less we expect most of these loans that commenced the regular payments in the third quarter.
Right and has only 53 commercial loans for 120 million with payment deferrals between four and six months. Most of these are in the hotel sector.
Next slide 23 talks about our payroll protection program Horizon was very active participant with 308 million PBP loans in our total fees Releven point 1 million, which mark as we discussed.
Moving to slide 24 horizon has a seasoned team of consumer underwriters and a long history of prudent consumer loan underwriting our consumer loan portfolio is predominately secured credit with 99.2 personal loans backed by collateral of some type and the vast majority of our consumer loans are made in market.
Our consumer loan mix consists of 53% indirect auto all end market in 40% Helocs and home equity terminals.
The consumer loan portfolios excellent credit quality as evidenced by high priced scores low delinquency with 30 days or more past due at 33 basis points and low nonperforming loans at 59 basis points of total consumer loans.
Next our prime mortgage loan portfolio right. There is a seasoned team of mortgage underwriters processors in mortgage loan originators, we have been in the business for a long time, the majority of our mortgage production sold and secondary market with your day sales running at 71% of total production.
Horizons mortgage loan quality remains strong at quarter end as evidenced by low delinquency delinquency with past due loans of 30 days or more at 22 basis points.
Next slide 26 to talk about a diversified commercial loan portfolio horizon has there been traditional regional bank offering to standard lineup of commercial products through an experienced and seasoned team blenders credit administration. So we have a history in culture prudent commercial loan underwriting were primarily in market lenders required.
Worsen most real loans from owners of the business.
Commercial and asset quality metrics continue to be bear at quarter end with nonperforming commercial loans at 61 basis points of total commercial loans. This does represent an increase over the 47 basis points.
Quarter end March 30 Onest.
During the quarter, we had one egg credit go non accrual, which contribute to the bulk of this increase this AG credits, partially backed by government guaranteed as well secured by farmland, we do not anticipate a loss.
Commercial delinquency at quarter end was very low two basis points.
Slide 27 talks what the sectors with escalating monitoring.
We have elevated monitoring and those loan categories that exhibit the most duress as evidenced by high payment deferrals. Most of the referrals were made United Central businesses or real estate loans that have tenants were primarily non essential businesses. The portfolio segments with elevated monitoring include hotels restaurants, non owner occupied retail leisure and hospitality.
Right.
Well, Joe payment modifications are the highest percentage of any sector with 105 million in modified loans were 75% of this sector.
Hello, All hotel loans in our portfolio, our open for business with occupancy rates ranging from 20% to 70% we continue to see improvement in monthly occupancy rates.
A majority of our hotel loans are located near major Interstate highways or resort communities, which are rebounded faster than hotels located in metropolitan areas. The cover we have with this portfolio is that our borrowers are long time operators have managed through multiple economic cycles, most have liquid resources to fall back upon and they're adopting the new norm for hotel operations.
[music].
Next our restaurant loans.
We have 37 million in full service restaurants, one relationship of this 37 consists of over $10 billion and Outstandings in is with a very strong operator with considerable liquid assets very short term amortization on the real see portion of their debt.
Our limited service restaurants totaled 29.2 million most consist of good franchises, such as Mcdonald's Culberson Burger King and our was long time owner operators.
Fast food revenues are down year to date between 20, and 30%, which places them close to their historical breakeven point. However, some entities are actually reporting an increase in net profits for the prior year due to low lower overhead and good drive through revenue.
Early customer contacts in this portfolio indicate good performance by limited service restaurants in our full service restaurants were able to maintain cash flow well with the combination of curio and in dining room service, the smaller independent operators and non resort towns appear to be struggling the most.
Our copper in this portfolio is due to the fact that the average loan amount is low at 467000, we have good year to date performance in long time owner operators with good franchises.
Next to non owner occupied retail.
Space early borrower feedback is that this portfolio is holding up well due to stable markets and strong sponsors. In addition to low every zone evaluation. This portfolio does provide horizon cushion against any potential future loss, our copper and this loan portfolios do the fact, we have good sponsors low average loan amount.
Low loan to value ratios in diverse and stable markets.
Next leisure and hospitality. This industry segment consists of a diverse group of borrowers including golf courses.
Bowling centers movie theater fitness establishment into zoo, all entities with exception of the movie Theater opened and have seen increasing customer tenants in general we have strong uncooperative borrowers or we may need to increase allocation. This portfolio in the future. If the cobot 19 challenges continue interstates add additional cobot related restrictions.
Moving to slide 28.
Even with the stress of Coven 19 Horizon continues report strong asset quality metrics in the second quarter, which can see on these four church.
And then finally conclusion.
Right and key highlights we have a seasoned management team has managed through multiple economic cycles strong credit culture, we have good geographic diversification well capitalized historical earnings run rate even during the great recession.
Service of cash holding requirements at the holding company and finally, the fact that management is aligned with shareholders interest management has a considerable ownership stake in horizon, we have a policy since 2003 of not paying executive bonuses if earnings due to exceed one and half times are holding companies fixed cost plus common dividends.
We are aligned with shareholders interest.
That concludes our comments and presentation. We are now open for questions. Thank you.
Yes.
We will now begin the question and answer session to ask a question can you make star then one on your today.
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My first question is from Terry Mcevoy Stephens. Please go ahead.
Good morning, everyone.
Turning to Eric.
Justin.
Segment to make sure I understand your comments on the payment deferrals a lot of them were 90 days from a lot of occurred in the second quarter. So it really didn't show up here in the June Thirtyth data.
Are you, saying that most of these deferrals will resume their normal normal payment schedules.
Outside of the hotel portfolio was that to take away the message.
We're getting out.
Yes, that's a fair comment is reason for the whole till they were extended for four to six months and so they will not roll off until really the into the third quarter first for the fourth quarter. So that would be the quick comment.
Okay. Thank you and then.
Mark maybe a question for you on the ERP program.
Kind of maybe thinking about.
The forgiveness period.
Most of those loans will go through that forgivable by the end of this year.
Yes, we think that.
The ones that are going to be forgiving will be through the ended the year some might trickle into the first quarter, just depending on how how quickly the participant.
Follows through.
Great. Thanks, so much.
Thanks, Eric.
The next question is from David Wong of Raymond James. Please go ahead.
Good morning, everyone.
Thanks, I wanted to ask about the size of the balance sheet. Obviously, the PTC program helped to your your deposit growth pretty nicely.
But even when you when you look in excess of the deposit.
Of the PPP the the deposit growth was very strong as that can you maintain then.
All of your expectations I guess overall with the with the deposit base share in the next couple of quarters.
During the last recession I know the recession, you do see deposit balances grow as cash it's held.
So reflecting back on previous history, we would we could expect to see deposit balances maintaining now they are benefiting from these funds that have been from the stimulus.
And you would expect those two bbten getting used over time also.
So.
I guess the answer would be.
Just based on history, I think we will be able to maintain the deposit balances, but we're not sure what would happen how much of that will come be used from the stimulus money that then given to the customers.
Sure got it and.
Being here in Chicago. Thank you once again for your reminder, about the relative attractiveness of my home market compared to here in your marketplace.
Just wanted to get a better sense.
Expectations for loan growth.
Side of the obviously the PPC programming and how is this sentiment amongst your power commercial borrowers at this point.
Did you want to add to that Dennis can sure.
The.
Outside of PPP, we were down slightly year to date much of that was related to.
The lack of line usage actually pay downs in lines related to probably PPP funds for the most part but.
So from a standpoint of loan growth.
Obviously very modest overall, we are seeing some additional activity at this point, but with the continued limit restrictions you know our lenders have not returned to the norm.
Of being out in front of clients regularly. So we think it's going to be tepid, I guess I would say over the balance of the year. So.
And we think we've we've seen that pretty much.
Across our peer group as well.
And David we've got it right and our underwriting standards somewhat requiring more down payments on real estate et cetera.
Fannie Mae has tightened underwriting standards for mortgages so.
Just because the trader standards I would not expect growth.
Oil.
Got it thank you.
Your next question is from Nathan race of Piper Sandler. Please go ahead.
Hi, guys good morning.
Morning.
Well along the lines the last question and thinking about the core margin outlook going forward and trying to isolate impact or exclude the impact of up.
Your loans going forward and accretion.
I think if we add back three basis point.
Ken relief from the Oh, ppt impact that could maybe a core margin of 38.
Sounds like excess deposit levels and liquidity levels may be somewhat elevated near term and so just trying to think about those dynamics with ongoing funding cost leverage and then it sounds like.
A good chunk alone or so just trying to correct the thing about the core margin.
Into Threeq you at this point.
Yes.
No I think.
Well weve overseeing happening with the ability to reprice, the CD portfolio, the 400 million it still coming due yet this this year.
That's going to that's going at a pretty good save impact on deposit costs. So.
Thats going to help to offset the asset pressure.
With that Pvp loans come out like you said thats going to be able to help.
Hello.
Increase the asset yield just because they're lower yielding.
The challenge is going to speed and managed margins, we're going to have a lot of excess liquidity as you indicated that we're going to have to do something with which most likely will be in the investment portfolio and would be at lower yields just to generate the income.
We need so I think the investment portfolio is probably what will be.
Be the challenge to being able to maintain the margin, but it'll be incremental it'll be an interim incremental gross and net interest income.
Okay got it so maybe a little bit of additional near term pressure just given that dynamic with securities reinvestment rates relative to the portfolio yield if I'm hearing your mark yes.
Okay.
21.
Yeah.
Okay got it and then just changing gears being about.
The income into third quarter.
Mortgage banking, obviously really strong this quarter.
Yes, so margin came down a little bit theme. So just curious on.
Some takes within income as you guys are kind of looking out to a threeq you run rate and then obviously MSR doesn't that we had in the quarter.
Yes.
We are continuing to see very strong refinancing activity.
Which is benefiting both the MSR gain.
And with the mortgage servicing gain but also in the warehousing line mailing to maintain the balances.
Continuing to be asked for a larger line limits for the warehousing side as their business is continuing to see the refinance activity. So we see we see the refinancing driving this especially through the third quarter and into the fourth of though it's.
It depends some on what rate to do with gain percentages.
Some of coming in at close to 4%, there's lots of room at the refinance activity, we could slow to bring rates down yet if the treasury stays in that area, where it that so you could continue to see volume if rates come down as we get into into the fourth in the first quarter of next year.
Okay great.
I appreciate the color thanks, guys.
Thank you.
As a reminder, if you would like to ask a question. Please press Star then one on your Touchtone phone.
We ask that you do limit yourself to one question and one follow up and you can re entered the question Q4 additional question.
The next question is from Damon del Mar of KBW. Please go ahead.
Hey, good morning, guys. Thanks for taking my question today.
My first question, probably directed to Mark on the outlook for expenses.
I know you had mentioned that you had some deferred comp costs related to PPP. So as we try to normalize.
That run rate going forward, how are you looking at the overall expense base for the back after the.
I think overall, it's fairly stable.
Obviously, we had the deferred cost that benefited but we also had higher loan origination cost.
And some of the or loan yellow unrelated <unk> some of the loan costs, though as we get into later in the year and into next year, I think you're going to see collection cost increasing as we as we start to determine who.
Who's coming out of the.
Downturn.
And who isn't.
The.
The other area that might have will have some increase is we we if we continue to operate at the level that we are we will need to start accruing for bonuses more than what we have in the first half of the year. So.
I think that would be the one area that we could see some some increase.
So then.
Dollar amount would you say something close to a.
The 31.
Below 31, the 31 and a half range is reasonable.
I'm not sure that we can.
David as well.
[laughter] Alright fair enough.
And I guess it as my as my follow up looked like nonperforming loans went up a little bit during the quarter can you talk about love it but the migration there and what led to that uptick.
Sure over the first half the year, we have seen an uptick it was on the commercial side and it was related to specific credits.
Unrelated industries, one as Craig mentioned earlier in the AG industry.
The other service.
And.
So we don't believe it or.
Indication of the overall health of the portfolio, although we have covert obviously impacting going forward, but but.
Again it was they were two isolated instances that had been identified the by the bank previously.
But saw some additional deterioration.
Got it Okay. That's helpful. Thank you for taking my question.
David just to add one more comment to that in the fourth quarter. We had three large jumbo mortgages to the non accrual was two of which properties of so.
And one has reaffirmed payments with us or.
So that would show the continuation so it's not all just commercial thank you.
Thanks.
Your next question is from Brian Martin of Janney Montgomery. Please go ahead Janney Montgomery Scott.
The next question is from Brian Martin of Janney Montgomery. Please go ahead.
Hello, Good morning, guys.
Morning, Brian Brian.
I, just I joined the call, but late so I apologize.
Mark could you just give any comments or just directionally, how you're thinking about the core margin as you go forward here with the what's the rate environments. You kind of most of these are the impact from the fed cuts now and it's just kind of the coal market ex the accretion ppt, just how you're thinking about that directionally going forward.
Yes, Brian.
The core margin is that'd be so much noise as we know.
In there the core of just our loan specifically loan yields and deposit yield.
We think we see through the next couple of quarters that the.
The ability to reprice, the CD portfolio will help offset.
The asset pressure in the loan side since we've already seen most of the variable rate loans reprice in the a in the second quarter on the commercial side.
The.
The area, that's going to have the pressure that we.
I have to do something with the liquidity most likely going to the basketball I think that will.
Have more pressure on the asset yields side.
And then obviously that PPP.
The income that will come in probably into the fourth quarter.
Primarily and some maybe going out into the first quarter.
[music].
There are no additional questions. This concludes our question and answer session I would like to turn the conference back over to Mr. twice for closing remark.
Okay. Thank all those for calling in to our second quarter conference call and we look forward to talk too soon in the near future without Corbett 19 that you'd have a great day that concludes today's conference brighter.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.