Q2 2020 CBTX Inc Earnings Call
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This time all participants are in the listen only mode Theater, we welcomed off my question answer session and instructions will follow by that time, if anyone should require assistance. During the conference. Please press Star then zero on your touched on telephone.
As a reminder, this conference call is being recorded.
I wouldn't like to turn the conference over to your Speaker today, Justin Long General Counsel you may begin.
Thank you good morning, I'm, Justin long General Counsel, CTX, and our management team would like to welcome you.
The earnings call for the second quarter 2020, we appreciate you joining us.
We should or earnings press release yesterday afternoon copy of which is available on our website. We also filed or quarterly report on form 10-Q for the second quarter yesterday afternoon.
And at least a slide presentation. This morning that will refer to during this presentation before we begin I'd like to remind you that during this presentation. We may make forward looking statements regarding future events, our financial performance for our business process.
Forward looking statements are subject to risks and uncertainties that could cause actual results could differ materially.
Additional information concerning factors that could cause actual results could differ.
It is available in our earnings release, and then the risk factor section of our annual report on form 10-Q.
Quarterly report on form 10-Q, excuse me our annual report on form 10-K, and our quarterly report on form 10-Q.
For the second quarter in or other filings with the FCC, which can all be accessed on our Investor Relations website at <unk> IR got Cdps dotcom.
Any forward looking statements were made only as of the date of this call we assume no obligation to update any such statements.
We should also be aware the during this call will reference certain non-GAAP financial information a reconciliation of these financial measures to the most directly comparable GAAP financial measures is included in our earnings release and Investor presentation.
Im joined this morning by Robert Our Franklin Junior, our Chairman President and CEO 10 target, our Chief Financial Officer.
Joe West, our Chief Credit Officer, and Joseph Macmall in our controller.
At the end of their remarks, we will open the call to question without a turn it over to our chairman President and CEO Bob Franklin.
Thank you Justin and welcome to the earnings call PCB, TX for the second quarter 2020.
Second quarter remained a challenging and uncertain environment.
We continue to deal with the impact of the pandemic on the communities and customers that we serve and continued instability in the oil and gas industry, along with an extraordinarily low interest rate environment.
Im very happy of the war I'm very proud of the work that our team did this quarter.
We were able to fund 2010, PPP loans totaling approximately $336 million during the quarter, while we continue to work with our customers to structure deferral arrangements to assess them and these uncertain times.
Our team has been actively reaching out to our customers to understand their positions.
Stresses and to maintain contact with them.
We have found that many of them are back to work and finding their own solutions to their current challenges.
As to provision.
For the second quarter, we took a provision of approximately $9.9 million dictated by the uncertainties associated with the covered 19 pandemic sustained instability in oil and gas and the resultant economic conditions.
These uncertainties resulted in our adjusting several qualitative factors utilized in the estimate for the allowance for credit losses.
Our allowance for credit losses at the end of the quarter was 1.35% or one five too when we remove the PPP loans.
Our capital ratios remained very strong with our second quarter see 81, and tier one capital ratios each at 15.3% to go along with our total risk based capital of 16.56% and a leverage ratio of 11.96%.
During the second quarter, we continued to pay our quarterly dividend and do not expect to change a change in that philosophy going forward.
We believe that our strong capital position Conservative credit philosophy will allow us to flexibility to work with our customers through these troubled times, while continuing to look for opportunities in the sense uncertain environment.
As to deferrals, while Joe will provide some more information regarding our loans and deferrals later in the call I want to touch from several points and I noted in last quarters earnings call I spoke last quarter about how we will think about our deferrals in three general categories are buckets as we got to the end of the deferred.
Period.
The first category consists of those customers who were impacted by the virus, but who are back off and running again. The second category are those customers that may be struggling a bit but 90 days was not quite enough to resume of full payment schedule.
The third category is the highly stressed customer category those customers, whose businesses were not helped by the deferral are on the wrong track and which remain highly stressed.
These customers will require more active management and ultimately may end in foreclosure or potential loss.
We have also asks chosen to take and an actively manage our process for early detection and identified TD ours on a very conservative basis.
The pandemic has created a fog over our economies and current outlook as we get to the end of the initial deferral period in July early indications are that the majority of our customers are comfortable and continuing their previous repayment schedule.
We are seeing very few new requests for a deferral.
Our total deferrals at June Thirtyth 2020 consisted of 689 loans the principal amounts totaling $544.9 million are approximately 18.5% of our gross loans at June Thirtyth 2020.
Those loans, approximately 454 loans, but the principal amount of 356 million revert to their original payment schedule, starting with dose with this month of July.
We are reviewing our loans, a daily and continuing to reach out to our customers as of July 20 of 2020, we had entered entered into second deferral arrangements for only 16 loans with the principal amount totaling approximately $23.7 million.
We continue to gain clarity as we move through the end of July August and September.
Today, we are encouraged by the much slower pace of initial deferrals and request for second deferrals, we continue to work with our customers and these troubled times and a cooperative but prudent manner.
As to the formal agreement during during June community Bank of Texas and.
The most cc entered into a formal agreement with regard to banks Bank secrecy Act and anti money money laundering compliance matters.
The agreement recall generally requires that the bank enhance its policies and procedures to ensure compliance with PPSA AML laws and regulations, although the agreement does not resolve the investigation by themselves.
We view the agreement as a positive step as it gives us the ability to focus on specific steps with specific specific time frames to enhance our be essay AML compliance program.
We think that identifying and completing those enhancements will positively impact our negotiations to resolve our offense and matter.
We have commenced actions to meet the terms of the agreement and are making progress as we have completed certain steps already.
We are committed to taking the necessary actions to fully address the provisions of the agreement within the time frames identified in the agreement.
We believe that our efforts to comply will only strengthen our program and the bank also.
Our efforts are targeted to achieve full compliance by the end of this year and then we'll work with the FCC to lift the agreement by the first part of 2021.
We consistently work to have open lines of communications with our regulators regarding our operations on a regular basis and we'll continue to do so including with respect to our BSA AML compliance program and the actions required under the agreement.
Our team is focused on our customers our regulators and our shareholders. During these uncertain times.
We are supported by a strong capital base and experienced staff and loyal customer base I'll now turn it over to our Chief Financial Officer Test positive.
Thank you Bob.
In terms of financial highlights, which begins on slide four of them.
Investor Day.
We will review our second quarter results.
Net income was $2.2 million or nine cents per diluted share for the quarter ended June thirtyth between 20, compared to 7.5 million or 30 cents per diluted share for the quarter ended March 31 2020.
And also comparing to 14.3 million or 57 point.
57, two cents per diluted share for the quarter ended June 32019.
Returns on our average assets and never shareholders' equity were.
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Point to 3% and 1.60% respectively for the second quarter.
This compares.
To the first quarter of 20 to 40.
This was 80.87% and 5.64% respectively.
And.
For the.
Prior year quarter.
1.72% and 11.3% respectively for that period.
Turning to the six month period.
In June June Thirtyth.
Net income was $9.7 million.
Or 41 cents per share compared to 24.8 million or 99 cents per share.
For the prior period, the decreases of 12.2 million 15.1, the during the three and six months period ended June 20 at June Thirtyth 2020.
Compared to the three and six months.
Ended June 32019, respectively were primarily due to the increase in the provisions for credit losses during the first and second quarter and decreases in net interest income.
Non interest income.
Tax expense during such periods.
Our pre provision net revenue was 12.6 million for the second quarter.
Down 1.9 million or 13% compared to 14.5, the as reported in the first quarter of 20 Tony.
Non interest income declined 1.4 million from the prior quarter. This resulted from the non the current interest rate swap fee of $965000 recording first quarter and $390000.
In decreased UNICEF overdraft fees noninterest expense increased $406000 due to higher legal fees related to the regulatory matters and the non recurrent FDIC assessment credit of $199000 recorded in the first quarter 2020.
Moving to net interest income it was 32.2 million for the second quarter. This was in line with the preceding quarter.
The compared to second quarter 2019 at $34.3 million.
Net interest income decreased 2.1 million during the second quarter.
2020, compared to the second quarter 2090, primarily due to lower rates in loans and other interest earning assets.
Partially offset by the impact of increased average loans at lower rates and interest bearing deposits.
Our net interest margin with tax equivalent basis was 3.68%. This was 38 basis points.
Below the full frontal 6%.
Reported in the first quarter 2020.
Same period right on the interest bearing deposits decreased 44 basis points to.
For 8%.
For the current quarter.
Net interest margin in Texas equivalent basis.
Increased 85 basis points from the prior year period.
For the second quarter 2000, Twentys the provision for credit losses related loans was $8.5 million.
Compared to only $53000 that charge offs.
This compares with 4.7 million in credit expense and 301000 net recoveries for the first quarter 2020.
And.
$807000 in credit loss expense.
And 108000 net charge offs in the second quarter of 2019.
The increasing the provision for credit losses in 2020 was primarily due to the impact of coated 19.
The sustained instability of the.
Hi, oil and gas industry on local and national economy, and and current Unforecasted expected losses.
The credit loss related to off balance sheet credit exposure was $1.3 million in the second quarter.
The increase was impact as a token 19 sustained instability of oil and gas as we've discussed above.
Non interest income was 2.9 million from the second quarter. This was down 1.4 million.
4.3 million reported first quarter.
Primarily the.
To a $960000 interest rate swap fee realized in the preceding quarter.
In the $390000 decrease.
In this fees, which reflected lower transaction fees.
Noninterest income decreased 4.4 million from the prior period prior year period.
Primarily due to a death benefit received under a bank owned life insurance policy, which resulted in a gain of 3.3 million over the carrying value during the second quarter of 2019.
Non interest expense was 22.5 needs for the for the second quarter. This was up $400000 from prior quarter.
Of 22.1 million.
Non interest expense decreased 900.
1000, $900000 compared to the prior year period, primarily due.
To one point to a $1.1 million reduction in fees related to regulatory matters.
Moving to the balance sheet.
Total assets were 3.9 vein at June Thirtyth, 22000, compared to three and a half the at December 31.
The 19 this was an increase of 423.
Point 2 million, primarily due to the increase in loans, excluding loans held for sale.
Of $295.8 million.
And then 120.3 million increase in cash and cash equivalents, partially offset.
Allowance for credit losses.
Total full 14.4 million.
Total liabilities were 3.4 billion.
And at the end of June June Thirtyth 2020.
As compared to 2.9 billion as of December 31, 2019, Danny increase of 421.5 million.
This is strongly due to an increase in deposits.
Which increased 401 million six month period.
The allowance for credit losses, as a percentage loans was 1.35 at the into the quarter.
Fair to 1.17 at the end to.
March 31, 2000, 20.96% at the.
End of last year December 31, 2019.
Nonperforming assets were 11.2 million.
0.29% of total assets at June Thirtyth compared to 977000.
3% of total assets.
At December 31, 2019.
Nonaccrual loans outstanding at June Thirtyth include $9.9 million of loans that were placed on nonaccrual, while subject to deferral arrangements.
As of June Thirtyth.
The company entered into deferral arrangements and 689 loans with an outstanding principal of $545 million. These arrangements have resulted in deferred payments, including principally interest totaling $17 million, which includes all payments on loans that are deemed differ in accordance with a deferral arrangement.
The capital.
Capital ratios, the common equity tier one tier one risk based.
The total risk based in tier one leverage capital ratios at the ended the quarter with 15.3%.
15.2%, 16.6% and 11.96% respectively.
These all continue to be.
Well, we assess of well capitalized levels and exceed the Basel III.
Three minimum requirements.
And the new tornado which is over.
Thank you Ted I'll speak a bit to our loan portfolio beginning with slide non from the investor presentation for the second quarter. Our loans were 2.9 billion versus 2.6 billion at the end of the first quarter. This year for the increase approximately 295.8 million.
Our portfolio yield was down from the three months ended.
Q2, 2020, with a yield of five keys at 4.54%.
It was 5.13% for first three most of this year largely the result of the drop in prime rate over the prior 12 loss and it was impacted by our PPP loans major the second quarter, which I'll discuss a bit later, our average yield or lows for Q2, when excluding the PPP lows was 4.75 per se.
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For the quarter CNR was up 37% largely as a result of a PPP lows are made during the second quarter.
Sorry was up 0.8%.
Construction and development was up 4.7%.
For the for family was down 2.8% and multifamily was down 8%.
As you turn to slide 11, you will see our construction and development loans were up $25 million at the end of the second quarter compared with 12 31 night team.
Slide 12 sets forth, our oil and gas exposure, including how we quantify.
Our direct and indirect exposure.
Outstanding balances of oil and gas wells continue to downward trend from Q1 last year.
Q to Q1.
Before last year Q1, this year to Q2 this year with a total falling from March 31 by approximately 14.1 day, largely because of low pay also pay downs.
Slide 13 shows a breakout of our oil and gas exposure across the components of our portfolio, which remained relatively consistent compared to Q1 of this year.
Slide 14 sets forth information around our PPP lows during the second quarter as Bob noted we originated.
336.1 day, and Pvp rose during the quarter.
It had approximately 5.6 million or personal tyvaso, there, which were largely payoffs.
Our average PPP low size was 167000.
And 1799 of the PPP levels were under 350000 principal network.
The table at the bottom of slide 14 sets forth our average yield on our port loan portfolio. However, as Youre PPP loads and the average yield on our loan portfolio when taking out the PPP loans.
Our team did a great job working over program and we have been preparing for the forgiveness application process.
As a program has continued to evolve we think that we will start seeing applications will forgive us in the coming weeks.
Slide six say sets forth information regarding deferral arrangements that we have entered into with our customers. As a result of the covert 19 pandemic largest category of our deferred lowes is that our commercial real estate portfolio.
And our total deferred principal interest as of June 32020 was slightly over 17 million.
We have seen a very steady decline in their request for deferrals over the course of second quarter.
Having entered into first deferral arrangements with two customers during the first three weeks of July following the quarter end.
We also have had non lows previously subject to deferral arrangements with the.
Pretty reluctant or there was a referral arrangements.
We saw a quarter in Cuba, we have had donald's proof, whether it's subject to deferral ranges for the core principle amount of 2.4 million that paid off during the second quarter.
If you turn to slide 17, you'll see a breakout of what we think are the elements of our portfolio that are both sensitive to the coven 19, borrowers retails theory oil and gas convenience stores hotels and restaurants.
Those higher risk elements comprised approximately 24.3% of our total loans at June 30.
For this group the deferred loan totals were at the end of second quarter Retails theory, 145.9 million oil and gas 5 million.
The new store $17.6 million.
Hotels 47.3 million restaurants 31.3 million.
Essex 30, we had approximately.
49.5% of our low portfolio with variable rates of approximately 77% of our variable rate.
Variable rate low portfolio have floors, all of our variable rate loan portfolio very few et cetera that are right floor.
Maturity distribution of fixed rate low other fixed rate loan portfolio provides for.
80% luxury auto before December 31, 2025.
Credit quality remained strong through the second quarter Slide 20 shows information regarding our charge off history and our net charge offs that averaged close for Q2 was 0.01%. Similarly slide 21 reflects our nonperforming assets to our total assets over the last four years as for Q2 are right.
Asia was 0.29%.
For passengers and classifies the past dues were.
5.4 million at Q2, 20 versus 6.2 million at Q1 20.
Classified credits right at sub standard or worse increase but remain low compared to the total portfolio moving to 70 million at Q2 20 versus 51 million at Q1 20.
Versus 29 million at Q4 19.
Troubled debt restructurings increased 26 million over Q4, 19, and 21.6 million over Q1 2020, largely as a result of five credits that move to substandard and receive deferrals.
The increase in TD ours over Q1, 2020 included 32 loans totaling 26.3 million that had potential credit issues not related to coated and that entered into deferral rates for us because positively lows predated cobot.
We would have added consider these two yards in connection with the deferral rate.
So with that I'll turn it back over Bob.
Thanks, Joe.
There are still unknowns in front of the comp our company, we feel what the reserve build and the capital position, we're well prepared to deal with the impacts of the pandemic at the end and stability and the oil and gas industry and the low rate environment Weve that persist our markets and our customers are resilient and our team has experience.
We are well positioned to work with our customers and communities to take advantage of opportunities as they may present themselves, but that we're going to open it up for questions.
All right, ladies and gentlemen, if you would like to asked a question.
Start presented a number one on your touched on top of tower.
If your questions has been answered arguably still remove yourself from the Q.
Express the pound key.
Your first question comes from the line as Brad Milsaps from Piper Sandler Your line is now open.
Hey, good morning, guys.
Mark Brad.
Thanks for taking questions and for all the color on just wanted to follow up on the deferral discussion.
Sounds like.
We had about 545 million deferral to June 30.
356 million has.
Reverted to the original payment schedule, which is good roughly 24 million I've taken a second deferral the remaining.
165 million can you kind of talk about those are those just in kind of various stages of discussion or those deferrals, maybe don't expire until a little bit later, just kind of curious on on kind of that the unaccounted for amount. They are kind of what what the color would be.
It's really timing, we expect the same sort a skew as we dead.
In July for for those credits I was just that's when we basically gave out 90 day deferrals and so that's when those will be maturing so.
Our expectation is to see the same type results.
We are going back through this month talking to every single deferral.
That we've had and it seems like Thats, where the expectation is ever going to have the same type of results.
But thats subject to change over time, but it looks like.
People are getting back on schedule again.
And made a lot of these guys took deferrals just a defensive measure.
So it's it looks like.
People people are getting back to work.
Got it so that that would imply maybe roughly 5% of that remaining amount with would take a second deferral.
Hi, it's sort of depends if you say if you think about it in the higher stress where.
Like we've seen a day daycare Center for example, whose.
Trying to get back to when we go back to school a lot of these guys are stressed haven't been able to open.
Those are the types of industries.
There may be some some motels is still have a little stress around.
People, although occupancy starting to build across that portfolio.
But a little bits and pieces here and there there are really co good related.
That that are continue to be somewhat stressed out there.
Got it and then as you look at and think about the you are at risk industries on slide 17.
What areas at this point are you most concerned about a new it seem that.
Your deferral numbers are going to go down.
Pretty substantially if if if the pattern holds.
Just you noted that you built the reserve again because of stress and instability in the oil and gas sector, but just kind of curious your thoughts around some of those categories on slide 17, how that might lead into additional reserve building because it seems like you're deferral numbers are going to be pretty pretty low at the once we kind of getting.
At the end of this month.
Yes, I think if you think about.
The oil and gas pace, we haven't seen much unaware deferrals and it seems like at least the things that we've done.
Havent been quite a stressed as where maybe some others convenience stores. These guys are doing really well.
Hotels.
Thank our are certainly under stress but.
Occupancy seems to be coming back at least to.
Of relatively decent level and and typically on our second deferrals, we've been we've been collecting interest so.
We are doing very little in the way of full second deferrals.
Restaurants, I think are going to be still subject to what goes on out their maintenance the city of Houston for example, kind of goes in and out of opening these things up and.
Although they continue to operate fairly well with takeout services people have adjusted.
Retail centers, we've actually seen those come back pretty well.
They are still subject to some of the tenants that they have and will continue to see how that performs but.
Really across those cobot at risk loans.
We see people adapting and we haven't seen probably the stress that we even expected to see at this point.
But I think we're we're a bit worried about.
What the fourth quarter this year might look like.
If for some reason this country wants to shut shut us down again.
But for now.
It seems like our customers are coming back pretty well.
That's great and maybe just just one final question for me on on the margin.
Even excluding the impact of PDP Vonage is still down maybe more than.
You guys were thinking in the quarter.
So you've got a fair amount of your variable rate loans at floors, but.
Continued repricing on the fixed rate side, we'll obviously have an impact.
Got some room on the deposit side potentially but that just kind of curious Bob how you're thinking about the margin as you as you move into the back half the year.
I know there lot of moving parts with liquidity and.
Probably not a total loan growth, but just kind of curious what you're thinking.
Yes, I think there continues to be some stress on on.
The margin, although less side I don't think we'll see a lot of movement.
We took we saw a lot of benefit from what we did with deposit rates.
This quarter, but it didn't offset what we saw in the loan side.
New loans going on the books are definitely going on at a lower right.
Although we're not doing a ton of new stuff.
They are definitely going on at a lower right.
We've also been willing to help people through this.
This downturn.
And covance situation by lowering some folks rights to help them out so we have done a little bit of that.
So there continue to be a little pressure on.
The loan yield side.
Although if you take out the PPP loans.
We did see some decline in loan yield, but not nearly as much and I think we're going to content will probably hold that I think for the most park.
Through the rest of the year.
Hum.
We've got a lot of cash that we don't make any money on.
So.
I think I think all of us in our industry are trying to figure out what archer liquidity as weve.
Well I'll speak to our case, where we saw a tremendous amount of influx of deposits as a result of doing these PPP loans, but by now a lot of these guys have spent the PPP money.
Our deposits continue to set at a pretty high level.
We think of Congress gets us one pager done we're going to see a tremendous amount of these PPP lines roll out.
We have spread to the fees on that over the life of allowance we.
We've again the benefit of that in this quarter this coming quarter, if that's what happens.
But it's a it's affected our margin at on both sides of the of the margin. So.
It's hard to make money on all those cash fed denmar pay anything and we don't know how long it's kind of stay so we satisfied here with them a lot of cash on our balance sheet.
Great. That's helpful. Thank you guys.
Thank you.
Your next question comes from the line of Threed Gailey from KBW.
Let's now open.
Hey, Thanks, good progress.
Great. Thanks.
So I wanted to start just with.
The need for additional provisioning.
Bill.
Hcl again, as you said X PPP, it's over one of the half percent.
Your provisions about double this quarter versus last quarter.
Think about the need for additional reserve building and provisioning.
I think to some extent were all getting used to Cecil Brady.
Seasonal drop was really the primary driver for most of that build as we adjusted qualitative factors.
Two pretty high levels.
Given the unknown in and we're in such a fluid.
Environment, It's hard it's hard to know and I think as we were making these provisions and we still.
We're in the middle of trying to understand.
What what stresses remain Howard deferrals are our deferred loan for one to.
To be impacted.
But we're starting to see a much better pattern than what we may have thought.
I don't see significant bills through the end of the year.
But we continue to watch economic conditions of economic conditions deteriorated I guess, we would have to move with that.
We haven't seen in particular loan driving needs for that.
But as time goes on.
We will continue to to watch that and make sure that were recovering what we need but.
We feel pretty good about where the where the loan loss reserve is right now.
And we'll just have to.
It's really based on what conditions do going forward.
Uh huh.
Then if you set the.
Very low free all for a while they still are low this quarter, but they are up about $10 million I think I think I heard and your comments some of those are our.
Charles can you just comment on the $10 million increase in how the deferrals played into that.
That was a.
One of particular loan customer.
That was severely affected by cobot.
Revenue off about 80%.
And we would ahead and moved to non accrual.
And we're in the process.
It also requested a 90 day deferral for private deferral backend.
Early April ability.
And so.
We got more information on that during the quarter as we downgraded the credit we're in the process of negotiating a forbearance agreement right now so it will become a TDR.
On a per forbearance agreement.
So that was one particular recovery that Heather revenue impacted about 80%.
What type of company it was up.
So it's a transportation company.
I want to too much detail to.
For confidentiality reasons, but as a involved in transportation.
But not not oil related or is it.
No it's not all related they do have smaller gas clients that they work for but is it mainly non oil and gas with what they do.
Okay and at school schools hard schools hurt these guys are pretty well too and I will say.
About 70% of that loan.
I'm doing my math right.
Okay.
Actually real estate secured.
Well, the Lloyd 60, but particularly.
On that but yes, so we're trying to its equipment lot of credit.
For will fade.
All right. That's that's helpful. Then finally from me just on the.
Regulatory order the BSA AML issue.
I realize its cost for you guys a lot of money, which is very unfortunate but.
Outside of the cost is this.
Order really holding you back from doing anything that you want to be doing right now.
Well not right now.
I don't think it's holding us back.
It's.
Yes.
We ended up with us formal agreement, but I think it's the gives us a roadmap and we think it's a positive thing gives us a roadmap to get ourselves.
Moving up out of this thing and that.
We think pretty clearly as we as we work with the FCC.
Our regular exam schedule is February.
And where is our expectation as it were were complete by 12 31.
It gives them the opportunity to check all of that as I do their exam.
And.
Our expectation is that we're we're out from under this thing.
And it's.
Yes, So we think it's a positive step it doesnt resolve fence and.
And we think it helps tremendously.
And getting them to understand kind of where we are in this time.
Okay, great. Thanks for the color guys.
Thank you.
I'm going to some gentlemen, if you have question at this time. Please press the star and then the number one key on your touched on telephone.
Your next question comes from the line US not only from Stephens Inc. Your line is now open.
Hey, Thanks, good morning, guys.
Hi, Matt.
You've already addressed.
Most of my questions I wanted to circle back to to loan balances and why take out the impact of PPP loan balances were down a little bit and that's something we're certainly seeing amongst many many of your peers to right now.
What's your expectations of when we should expect us to stabilize.
Well tell me, what we're going to quit have uncovered.
No I think it's difficult, we're still doing some new loans mad but.
We think it's very difficult to assess risk today and so we are very cautious about new new credits.
It's interesting that we have seen.
Some new stuff come out.
We've actually been able to get extremely enhanced.
Sort of.
Loan covenants and.
Additional equity and a lot of things and.
In the form of covering.
Cash flows and there's just a lot of things that if we do alone today, there that really strong.
So we're seeing some but we also see a run off of.
2000, $25 million and just paydowns as on a regular payment cycle on a monthly basis, we do have some construction loans funding and some other things happening. So we're we're kind of covering that as sort of.
But if this trend is to its going to still be down a little debt because we're not generating a lot of new stuff.
Although we are generating some so I.
I would say that we're going to continue to see a little bit of deterioration there.
But.
We're not in a position to want to reach for credits today.
That helps you at all.
Yes, that's that's helpful and then on the deposit side did a really nice job, bringing down deposit cost this quarter.
How much more room is there to bring down deposit costs after seeing twoq.
There's not there's not much Matt I think.
We can tweak it maybe a little bit but.
I mean, we're not paying much and we got.
Q.
Almost almost half of our deposits or demand deposits already so that's not.
Yes.
The funny parties.
All those PPP at all this stimulus remain art.
NSF fees are down so you don't have people overdrawn their accounts they got money into account.
The sat bar for us if they don't have anything to do at that and it's hard to count on that cash being there.
We did see a bills as people.
As we always do right before people paid their taxes this year so.
Bank deposit or down a little bit.
As we are going forward as people pay their taxes in July which was deferred for pick profile. So.
But we still have a lot of liquidity and as we as we get rid of the PPP loans that they get forgiven I think we'll have a better understanding of what our real liquidity is.
And just try to understand what.
How many of these people are actually going to get forgiveness, and we suspect it's a lot.
Is that the government a quick fooling around with this thing.
But.
Thats kind of where we are a mad.
I don't think there's a lot more room to move deposit rates now.
Okay.
And then on the fees, Bob you mentioned that customers have lots of liquidity right now.
Which is slowing down overall fees were there any kind of fee.
Our fee waivers during Twoq that you guys implemented I'm just trying to see.
If fees could rebound a little bit more the next few quarters, but still I assume remained depressed from where they were previously.
Now the over the last year to the biggest fluctuation in that as Ben.
Swap fees.
And we did have a big one earlier this year and that's going to be a difference for us, but we've never been a big fee bank.
Service charges are down sound, just because people are balancing out of the service charges.
With our earnings credits so.
NSF fees are down I mean that the typical fees that we do get.
Our down a little bit.
During all of this as people have accumulated a lot of cash or kind of sitting on that cash.
But.
What is.
I think it's pretty well played itself out so.
As people start to re imply that that money.
Okay.
Okay Thats all from me. Thank you guys.
Thank you Matt.
Yeah.
I'm showing no further questions at this time. This concludes todays conference call. Thank you and have a great Dane.
Thank you very much.
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