Q1 2021 Great Western Bancorp Inc Earnings Call
Good morning, and welcome to the Great Western Bancorp first quarter fiscal year, 'twenty 'twenty, one earnings announcement and call of.
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I would now like to turn the conference over to Seth Artz head of Investor Relations. Please go ahead.
Thank you Andrew and good morning, Joe.
Joining us for today's presentation and discussion we have Mark Bracco, President and Chief Executive Officer, Pete Chapman, Chief Financial Officer, Steve Yost, Chief Credit Officer, and Carlin scenario Chief risk Officer.
As usual we have prepared a presentation for today's earnings review, which is available for webcast can also for download through our Investor Relations website at IR day, Great Western Bank Dot com.
We'd like to remind you that today. The presentation may contain forward looking statements that are subject to risks and uncertainty, which may cause actual future results to materially differ from those discussed.
Please refer to the forward looking statement disclosures contained in the earnings materials on the website, along with periodic SEC filings for an outline of the company's risk factors.
Additionally, any non-GAAP financial measures presented are provided to further assist you in understanding results and performance trends and should not be relied upon as a financial measure of actual results reconciliations for such non-GAAP measures are appropriately referenced and included within the presentation and our SEC filings.
I will now turn the call over to Mark Breco Mark. Please go ahead. Thank you Seth and good morning. Thank you for joining us the joining the call and I hope that you remain safe and healthy during these continued.
The times before we share our results for the quarter I want to first thank our employees for their continued efforts in supporting the great Western Bank mission to make life, great like strengthening of our customers and enriching our communities.
For the first quarter of fiscal year 'twenty 'twenty, one we reported net income of $41 3 million.
Pete will walk through the specifics on our financial shortly I am pleased with our progress on our current financial performance, but I'm also excited about the progress on our priorities to better position great western for the future.
With regard to our top priorities after ensuring the safety of our employees and customers credit risk management remains priority number one.
We made progress with our asset quality of this quarter, particularly as successful loan workouts and upgrades helped support a 10 per cent decrease in non accrual loans and a 7% decrease in classified loans.
We made progress in Derisking of the bank's balance sheet by completing the sale of $209 million of hotel loans at a 12% discount.
We made progress in working with our customers regarding COVID-19 payment deferrals we.
We decreased our referrals to $113 million or 1.29% of total loans. Excluding P. P. P. As of January 13th down from a peak of 1.69 billion that was on deferral in round one.
Agricultural commodity prices, specifically soybean and corn continue to improve which will likely result in future upgrades over the next few quarters.
From a measured as actions perspective, <unk> perspective on slide two we made progress managing our net interest margin, resulting in a seven basis point decrease in our deposit costs.
In addition, our NIM benefited from recoveries, resulting from focused loan workouts.
We made progress in strengthening our capital position with 40 basis points of improvement through earnings.
Since great Western has a september of fiscal year end, we adopted seasonal this quarter our quarter end allowance for credit loss ratio was 3.5% of total loans, excluding P. P P and our comprehensive coverage of $3 eight 4%, which Pete will expand on later.
From an organizational standpoint, we continue to make progress of the top attracting top talent for our senior roles with the recent hire of Rick Robinson as our president of wealth management.
Rick comes to Great Western bank with the extensive wealth of experience and it reinforces our commitment to growing revenue in this important non interest income category.
We are making progress in the implementation of our small business center with our pilot launching in 20 markets. This March.
With this addition, we will improve the way that we originate decision and manage our smaller commercial relationships.
This will significantly improve the client experience and allow us to capture more small business opportunities in our footprint.
And lastly, this initiative will also free up our commercial banking team to allow them more time to pursue larger relationships and are underway segments and market.
I am now directly leading our business lines and I'm excited to get closer to our customers and to understand how our key business segments can leverage our bankers technology and processes to fuel for future growth.
Our company culture continues to evolve with the renewed focus on accountability commitment teamwork serviced and trustworthiness.
Now for a review of our financial results I will turn the call over to our Chief Financial Officer, Pete Chapman, Pete Thanks, Mark and good morning, everybody just looking at slide three you'll see we had a strong quarter of earnings with net income of $41 million, an increase from $11 million in the prior quarter with pre tax pre provision income of $66 million and inquiries.
From $52 million from the prior quarter as well.
Net interest income did benefit this quarter from net interest recoveries of $2 $9 million driven by payoffs of non accrual loans and from the $1 $7 million of accretion income of all the loan payoffs strong mortgage revenues and swap fees helped support noninterest income and expenses, which tend to track lower in fiscal Q1 with further assisted by lower Oreo.
<unk> and troubled spin.
Turning to revenue on slide four adjusted net interest income was $106 million of $2 million increase from the prior quarter adjusted NIM of 352% increased 12 basis points from the prior quarter and when excluding an 80 basis point lift from nonaccrual interest recoveries and lower loan accretion underlying NIM declined by six.
Basis points for the quarter to $3 three 4%.
Securities and loan yields declined by 11 basis points from were offset by decreased funding costs that excess liquidity reflected in the $630 million increase in cash assets to $1.1 billion contributed to seven basis points of additional NIM decline.
On slide five we show P. P. P. Total line income was $5 $5 million of the quarter is approximately $12 million more the P. P. P fees remaining to be amortized as one of those loans are forgiven, we price is $28 million of lunch. It's just the given us out of the $727 million originated during the quarter. We're also.
Participating in this current round of PPP lending had been accepting applications since mid last week.
Our loan portfolio yield continues to be supported by $4 $2 billion of fixed rate loans, yielding 434% 1.9 billion of loans that reached force, yielding four 2% of $1 $2 billion. The variable loans repriced beyond 90 days, yielding 445 per cent together these make up more of 90% of bad loan.
Oh excuse excluding PPP.
Looking at slide six total noninterest income was $14 $1 million, an improvement from the $4 million loss in the prior quarter, excluding the fair value adjustments that go through noninterest income core income was $19 $4 million supported by another strong quarter of mortgage revenue of $4 million slight increase in service charges to $9 6 million.
From increased customer transactions, and a $1 $2 million increase in swap sales revenue.
On slide seven noninterest expenses of $57 million, but down significantly from the $75 million in the prior quarter and were up only slightly from a year ago. The decrease was largely related to several one off items occurred in the prior quarter such as the FHL be prepayment expense FDIC loss.
Loss sharing.
Expense on closeout of that agreement Oreo provisioning and other severance and branch college of costs first quarter expense is typically track lower in this quarter is the result was further driven by low the normal Oreo costs and by lower professional fees, reflecting lower FDIC insurance and lower consulting spend we would expect expenses to pick back up in March in the March quarter is annual.
Salary and merit.
Increases kicking in that quarter and also the consulting spend is expected to increase.
Provisions for credit loss of some lines was $11 $9 million for the quarter, a decrease of $5 million from the prior quarter, driven primarily by $7 million of losses on the hotel sales that mark referred to earlier.
Moving to slide eight we have a summary of showing the allowance impact from adopting seasonal the day, one increase was $177 million, resulting in an ICL of $327 million to begin the quarter a quarter in the ACL decreased to $309 million due to $30 million of net charge offs and improved unemployment assumptions.
The offset by qualitative adjustments related to the concentration risk in certain segments of the hood of the loan portfolio such as hotels.
In addition to the 309 million dollar of ICL, we have of $28 million of fair value Mark against the $612 million of long term fixed rate loans. We also have of $2 3 million dollar unfunded commitment reserve, which all in aggregate could sell total credit coverage to $3 eight 4% excluding out of PPP loans.
On slide nine we see current capital ratio is made well in excess of well capitalized levels total capital increased by 100 basis points to 14, 3% tier one capital increased 90 basis points to 12, 7% common equity tier one increase of 100 basis points of 12%.
The tangible common equity ratio decreased to eight 3% largely driven by the adoption of Cecil and excluding the P. P. P loans debt ratio is actually eight 8%.
Cecil also contributed to a net decrease net tangible book value per share, which was 19 point $19.28 per the quarter compared to just over $21 in the prior quarter.
Positive earnings reduced risk weighted assets and reduce reduce dividends of helping support at our capital levels and will continue which we continue to believe it is prudent to pre.
The capital given our asset quality combined with the current environment. Consequently, once again of declared a dividend of one cent per share for the quarter ended December 31 2020.
We will continue to elevate to evaluate capital management in close conjunction with the level of classified assets, which has shown good Inc.
Improvement for the quarter, but remain more elevated than we would like.
Deposits increased $365 million for the quarter to $11 4 billion, while average balances were up $103 million from the prior quarter and mix continued to improve as average time deposits decreased by $184 million the average.
Of the lower cost of interest bearing deposits increased $200 million and the average noninterest bearing deposits increased $89 million.
Total deposit costs of 20 to 21 basis points was down seven basis points from the prior quarter and 75 basis points from point at 6% of year ago.
Loans of period end with non <unk> 5 billion, including 700 million of PPP loans, a decrease of $558 million with 75% of this decrease coming from intentional and measured actions to improve that credit quality. This included the $209 million of host hotel loan sales and the repayment of approximately.
Currently 70 $175 million of higher.
Credit rated and Covid sensitive loans in the portfolio. In addition of $27 million of PPP loans forgiven during the period I will now hand over the quota of Chief Credit Officer, Steve Yes to provide you an update on key credit metrics and asset quality metrics of it you used to.
Thank you Pete.
And good morning, everyone.
We've been heavily focused on improving our asset quality of the past few quarters, and we are showing progress on that commitment.
Looking at Slide 12, Youll see the three pillars of our focus fall into effect of credit risk management portfolio management and specialized credit administration.
First effect of credit risk management.
Our approach to identifying and managing risk in the portfolio is more consistent in spite of of challenging backdrop, and that's driven by the new risk rating system and by cultural alignment on Bruce based Decisioning.
We saw improvements from our non accrual and classified metrics was success of exiting problem loans, along with a few upgrades.
In portfolio management.
Marc and Pete touched on earlier, we made significant progress in improving our portfolio risk by completing the sale of $209 million of of hotel loans of three separate transactions loan deferrals were now 129% of total loans excluding PPP.
Third specialized credit administration of.
As Mark touched on earlier of the small business initiative will allow us to be much more efficient with the administration of our smaller credits are commercial loan workout groups are making progress on workout of criticized loans on assessing ways to further optimize our hotel concentration.
I am pleased with our progress on asset quality and credit management, particularly and how much of what we're doing of strengthening our position long term.
We have more work to do but tactically and culturally we are making headway.
On slide 13, we have further details on the hotel loan sales completed in the quarter.
The sales impact of $209 million of loans across 27 properties with proceeds of $183 million, reflecting a 12% discount.
That discount led to a charge off of $26 million for the quarter.
The sales involve the combination of pass rated and criticized loans ultimately leading to a decrease in criticized loans of $131 million. The locations of the properties were spread out across the footprint and help reduce market concentrations.
Sales reduce the hotel, excluding casino hotel segment by 22%, which ended the quarter at $823 million.
Also on slide 13, you'll see updated information on loans on deferral, which are now down to $113 million or 1.29% of total loans, excluding PPP hotel loan deferrals decreased to $70 million or 7% of the remaining balance of spread across several other segments.
We have given just five deferrals in the latest round for a total of $23 million and we would expect the decline in request going forward.
On slide 14, we have the summary of our asset quality of matrix.
Metrics net charge offs, excluding the $25.6 million charge off from the hotel loan sales.
Just for point of $8 million or one 9% of total loans of annualized the <unk>.
Classified loans were $717 million, a decrease of 7% from the prior quarter.
Suffice the AG loans were $321 million in the 18% decrease from the prior quarter driven by pay downs on a few upgrades classified non AG loans were $396 million, an increase of 4% mostly related to $54 million of of hotel loans moved to <unk>.
Sub standard in the quarter, partially offset by the hotel loan sales.
Non accrual loans decreased by 10% to $292 million largely related to a number of payoffs in both AG of non AG relationships driven by our commercial work out group.
On slide 15, and 16, we continued to provide an overview of key loan segments in our portfolio.
On slide 15, Youll see our total accommodation book of $972 million consists of $823 million of hotels, excluding casino hotels $118 million of casino hotels and $31 million of PPP loans.
88% of the portfolio was in footprint with out of footprint loans generally associated with the experienced and footprint developers.
The hotel properties diversified across more than 100 cities with most of small to midsized locations and the largest concentration still in Colorado Springs, Colorado Rapid City, South Dakota des Moines, Iowa, Omaha, Nebraska, Denver, Colorado in Sioux Falls South Dakota.
Following the loan sales certain payoffs and a number of downgrades of the combined hotel portfolio has $246 million of of criticized loans of $142 million of those is classified.
$725 million, our past rated including the casino hotels.
On slide 16, you'll see we remain well diversified across various AG segments and that the.
The AG conditions.
Proving constructive for the near to medium term high.
The.
<unk> estimates from the USDA indicate depleted inventories of both corn and soybeans as a result general farm price projection strengthen to $4 20, bushel for corn and $11 15, since the bushel for soybeans, which indicate potential for higher margins in the near term.
Milk prices have leveled off at $15 72 per hundred weight in December after a strong $23.34 in November and $21.61 in October of 2021 futures of tracking 2% higher.
The health care portfolio remains in stable condition with minimal movement in risk rating from the Covid cycle the.
Mix of the portfolio of cross senior care assisted living and retirement communities skilled nursing hospitals, and other health services and social assistance.
US in a comfortable position and we remain highly engaged with our customers to stay on top of any early indicators.
That wraps up my commentary I'll now hand, the call back tomorrow. Thanks, Steve I am proud of our team's continued focus on improving performance of dressing asset quality concerns and implementing our win big initiatives all the while dealing with the emerging business needs such as PPP origination and forgiveness stimulus payment processing and branch law.
The decisions as it relates to the pandemic, we made good progress in Q1 and I look forward to continued progress in the quarters to come with that I will turn the call back to the operator, and we will begin the question and answer session.
We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad. If you are using a speaker phone. Please pick up your handset before pressing the keys.
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At this time, we will pause momentarily to assemble our roster.
The first question comes from Terry Mcevoy of Stephens. Please go ahead.
Hey, guys good morning.
Good morning, Eric.
Maybe Steve if we could start with you could you just talk.
Talk about the loan sale of of the hotel loans.
The level of interest from buyers I'm, just curious how did pricing change or could you comment on any pricing change before and maybe after the vaccine and when these transaction that occurred.
And then maybe the last part is if you think about the quality spectrum of.
Your hotel portfolio, where these more distressed type type properties middle of the road any color there would be helpful. Thank you.
Well I would say in the last part of your question, we focused on those debt, where either criticize classified or or or detour declining trends. So we did focus on more they were non non accrual, but they were more of our distressed properties. We also focused on end market concentrations.
So anywhere where we felt we had a higher concentration of the hospitality loans, we focused on seeing if we can sell some of those and the.
And the loan buyers that we went to where we're really focused on not distressed properties as much as performing loans. So they were not on non accrual of performing well.
When we when pursuing this for well over 90 days to look at a.
The hotel loan sell to see if we have the potential and if we did not need to take too big of a discount and I will say after the vaccine was announced.
We found that.
The things accelerated much more quickly as far as being able to consummate the sales. So I do think the vaccine announcement did help us.
I don't know if it helps significantly on the pricing because the pricing discussion prior to the vaccine was bad.
And the different really but but of that accelerated the sale I believe because of the interest in <unk>.
Some of those particular properties.
Thanks for that Steve and then maybe a question for Mark or Pete just thinking about the operational alignment.
And how that relates to spending in 2021.
A couple of quarters, we've heard about some hires and some specialization and focus on things like small business is there more to come and then how is that going to impact the spending and expenses in 2021.
Yeah look I think you'll see a little tick up the Terry as I said, we usually a little slower in Q1, just as a as people finalized budgets and get spending lined up for the year. So looking at I'd still expect the tick up but I think previously with soda said low sixty's sort of 62 to 64, the sort of a run rate. So we feel the investment will go to make it sort of.
Manageable within that range for.
For the year, but certainly got some projects up and running that will come.
Come on in the next couple of quarters, but we still feel it's a manageable run rate.
Yeah, and I think from me Terry the things of that comes back into into focus is as we make some of these investments as we improve the technology is the rework some of our processes I do feel comfortable that not only will we be able to.
The improved the client experience make it easier for our employees to do their jobs, but also we can start to do more with what we have and so that will help fuel that future growth and that'll help us to do more with those investments without having to again see a massive increase in overall spending.
Great. Thank you.
The next question comes from Jeff rulers of D. A Davidson. Please go ahead.
Thanks, Good morning.
Good morning, maybe a question for Pete.
On the.
On the margin it looks like if you ex the recoveries.
And accretion down six basis points linked quarter.
Is.
Maybe speak to.
More recoveries are anticipated in that figure of indoor just the core margin outlook.
Yes.
Not a state Jeff sorry.
In terms of coverage recoveries of our obviously hard to predict so I certainly hope we get some but the pretty hard to put in our forecast I would think and then just in terms of margin I would see a just the general ticked down trend there.
I think once again part of that will be driven by mix just as this quarter of the assumption is we will see more of those PPP loans for given the.
The way of the balance sheets at the moment I would expect sort of cash and investment levels to to continue to tick up here in the next quarter, which I think will drive sort of out of softer a slightly softer margin in the next quarter as well.
Okay, great and on the switching gears on the just interested in the reserve balance at this level of.
A pretty healthy number in and I guess as you know.
Some of the volatility here, but looking at for the balance of the fiscal year kind of net charge offs versus provision.
Do you think those track.
Relatively in check do you start to release those reserves any thoughts there. Thanks.
Look I'll get Steve to jump in and help with this one but obviously, we need to get Npa's down Jeff that'll be a big driver as well of of provisioning levels over the course of the year I'd think of it Steve.
I believe what we looked at as you look at our portfolio of our mix is there still uncertainty of where we're at in the economy of this part of the cycle. So we definitely looked at that in our qualitative factors within the seasonal reserve, but the point if you look at our level of non accrual loans on our coverage of the allowance as we are able to improve in the.
Non accrual loans, we will hopefully be able to look at where we go with the allowance.
Great. Thanks.
Thanks to the net.
The next question comes from John Armstrong of RBC Capital markets. Please go ahead.
Thanks, Good morning.
Good morning.
Steve.
So the question for you maybe.
More of an emotional touchy feely question to start I guess before we get into the meat of it but how do you generally feel about.
Credit.
This follows up on Jeff's question, but kind of the timing and magnitude of when we can see these non performers come down you know I'm thinking about your comment.
The comments on the loan sales and the deep dives that you guys have done in it it has to be better.
But it's just kind of the one thing that I think still Mag that your stocks I'm just curious how you feel about all of it you know kind of off script if he can.
Well as the Chief Credit Officer, it's always fun to get a touchy feely question I don't give those too often but when it comes to I believe.
I believe one of the big things that I feel very comfortable with some positive is the cultural change we have as an institutional as the way of how we look at credit risk and how we look at risk adjusted returns and as we look at future growth.
I always look at not just loan growth, but as of the right risk and are we bringing putting the right loans on so it's not just loan growth for loan growth, but and we definitely are focusing on how we grow the book of business going forward to make sure that we continue to retain a consistent credit risk culture select full we've made huge strides in the <unk>.
Six months culturally.
I think also.
Cuz of our mix of agribusiness, we do anticipate we've seen stable to improving trends, we saw improving asset quality of this quarter, we anticipate that in the next two quarters as well so I'm very encouraged on our agribusiness book.
As we look at our hotel portfolio.
It is an area of that because of the vaccine and the other things.
Im much more encouraged as we looked at the next six months and I feel very good about the loan so I'm trying to Derisk, our hotel portfolio, but we're really not looking at future portfolio sales, we're looking at more of strategic focused.
How can we.
Right size of that portfolio over time, rather than another big portfolios. So like we did this last quarter. We felt it was necessary to get to derisk. It but that is not of strategy going forward. So at this point.
I feel very comfortable and and the positive about our cultural change now we just need to continue to stay focused and improve quarter by quarter.
Okay.
That helps and then.
Another maybe bigger picture question for you longer term.
What's an acceptable.
Reserve in performing level for a bank like yours.
The rise I know, it's a difficult question of Cecil complicates, it, but where would you like to be longer term.
Well if you look at.
I came from of similar sized mid tier bank.
At my prior institution, and we moved the non accrual loans, they're down to 50 basis points.
And I think that's a good non accrual balance so I mean, we have a long ways to go to go there. If you look at us close to 3% of today, but if we can keep focused.
And the way we've looked at the when we say of risk focused decisioning, we looked at those by risk rating, we've changed our hold limits. We've done a lot of things to some of the going forward that we have of different risks in our portfolio of what I would like to see us consistently be definitely less of 1% on non accrual and long term 50 basis points of non accrual.
And I think.
Like we've arrived what we showed on the asset quality and then your questions will all be about loan growth after that.
Was just kind of pivot to mark.
That's the other part of this mark because I think you know expenses in Steve's work on credit and fees. The all kind of line up with the one thing is growth and I know you've done a lot to kind of.
Change things, but when do you think we might see some resumption in growth and are there any signs of life.
In your markets.
Sure I think from a I'll answer the second part first so from a signs of life in our market I would say that I feel good and every day getting better as it relates to the activity levels in our markets.
We see the number of Covid cases, coming down we see it in many ways the businesses getting back to kind of some sense of normalcy normalcy is different then obviously it was a year ago, but still things are resuming.
I know that I'm, having a chance to go to have dinner with the with the client Tomorrow night here in Sioux Falls, and so from that standpoint of I am seeing and we are seeing activity levels.
Start to come back to it I think very reasonable.
Levels as far as loan growth I would say that for the next two quarters I would expect to see us to continue to have.
The continued erosion in our overall loan balances as we continue to have focused workouts as we continued to derisk the balance sheet as it relates to our hotel portfolio and so I would say for the next two quarters I would expect those numbers to go down and then I would expect after those two quarters for things to get back in the sea us start to have the the.
Asset generation that we need to have to grow this organization I see pipelines today are improving and so I'm encouraged by that and we've had an internal focus of back to business, we have been playing defense.
Over the last nine months and that was a necessary evil given our asset quality, but that is now changing and we are pivoting the organization to be more focused on asset generation. We have some some I think very aggressive offers in the market and we have a very focused.
Set of commercial bankers and so from that standpoint, I would think that we would see those pipelines grow then net asset growth to follow two quarters from now.
Great. Thanks.
And congrats on the hopefully seeing some of this credit credit issues, Chris. Thank you. Thank you.
The next question comes from Andrew Liesch of Piper Sandler. Please go.
Hey, everyone.
Good morning, nice to see some of the this derisking here.
Because one of them kind of continue on the same theme here just with the the hotel and the casino loans now down to about 10 per cent of the portfolio.
Where do you think of as a good level a good concentration mix of that for that book as we move through the year.
So so in the longer term I would like to see that portfolio under $500 million.
So as we and that wouldn't be like overnight over the next few quarters, but over a period of time, we would like to long term have that portfolio would be under $500 million basically.
Got it and it sounds like.
Might be massed by continued.
Runoff of that book in the next couple of quarters, but it sounds like there's some good optimism and other.
In other loan types of where should we see what portfolio.
The growth here in the next couple of quarters.
Well IRA business is still a continued focus of great Western bank and I wouldn't say, we'd have a lot of growth of of what we've got continued focus in agribusiness and we also anticipate improved asset quality and agribusiness. So I think that will be a place that we will continue to focus and then of course.
Our initiatives on small business, we're hopeful that we will focus more on small business and other areas of the portfolio, but mark of some other views on growth as well.
Steve mentioned, the focus on AG and I would expect that to be a focus and to see some moderate growth there nothing to overwhelm, but again consistent growth I look at the C&I sector and I look at some of the initiatives that we have as it relates to growing the C&I book of great Western and so I would expect growth in that and then overall just more owner occupied.
Real estate as well, so that's where I want to see US continue to again get back the business and start to see those three sectors of those three segments helped fuel fuel our future growth.
Okay. That's helpful. And then I guess, just going back to the reserve ratio.
All of it from one of the highest in the industry right now.
And I recognize that there's still from credit uncertainty out there and that the level of non performers need to be worked down, but you guys seem pretty well reserves I'm just.
Any commentary on why the provision would be the need to stay near this $12 million level going forward.
Oh as in the P&L charge Andrea Yeah. It seems like there is opportunities for much smaller provisioning in the coming quarters.
Although too early to declare victory on that would certainly hope so.
I still think we're a few quarters away from the will of getting back to normal so.
Little early to declare that obviously, we have quite so Andrew but maybe.
Maybe a few quarters on we can revisit that one.
Alright, thanks for taking the question both cut back.
Thanks, Andrew.
The next question comes from Damon Delmonte of K B W. Please go ahead.
Hey, good morning, guys of everybody's doing well today.
So my first question just kind of curious on year of PPP loan forgiveness process.
Thank you guys noted like $28 million of the loans forgiven during the quarter, which.
The kind of as a percentage of your overall PPP loans with a lot lower than what we're seeing with others. So just kind of curious on what some of your experiences where with that during the last quarter.
Yeah look just a little slow to get going if you look of that loan.
Balancing that category, though diamond about 80% is below 150000, and so the feedback we've got from a lot of customers. The CPA firms and the like are advising just to hold off until that the the lower level of forgiveness documentation was required. So I think that drove quite a lot of it to be honest with the diamond So hopefully picks up here a little bit this quarter.
Got it okay that makes sense, thanks and then.
Pete can you just give a little of a perspective on any of your expectations for fee income as we go through the next few quarters.
Look I think it will hold up diamond mortgage volume is still.
Unseasonably strong just due to low right. So maybe not the pickup was saying the last couple of quarters, but I think that that will at least hold in as well as the other the fee income line items. So look I don't think you'll see huge growth. It just seasonally it gets a little bit slower here in this quarter.
But certainly I think it will hold in pretty well.
Alright, great. Thank you very much.
Okay. Thank you. The next question. The next question comes from Janet Lee of Jpmorgan. Please go ahead.
Good morning.
On reserves.
Asking that question.
Other people have asked in a different way so apologize for that day.
On the reserve today, it sounds like it might be.
There is a wave of why we see release of reserve.
Yes.
With the steeper step down in NPA.
Do you see that well, what kind of NPA stepped out or levels.
Yeah.
With that the.
Yeah, it should be.
More comfortable releasing reserves.
Well we have.
If you look at our non accruals are coverage of those as of about one point of all five.
I think the if were successful in reducing the non accrual loans I think the reserve would go in concert with that we will look at other issues too like for examples of improvement in the economy in relationship to hotel loans and others will also impact of that.
But.
We just are taking a careful approach to just see what happens in the next two quarters, but I think it really is driven by those non accruals.
The.
The non accruals, we do have we have.
Four of five that are larger non accruals. So if we can make success on those loans. They are well secured we have.
Eight of the appraisals. So we are encouraged that we do not see a lot of loss exposure. There. So our hope is is that as we reduce those and show improvement of in the hotel portfolio of that that's where we'll fulfill we've turned the corner.
Great, Thanks, and I'll share a long growth some of it appears that the loan growth of over the near term well the value.
Okay.
What more upside over the intermediate term can you just provide more color around what's your plan.
Around the deployment of excess of liquidity.
Yes, certainly from a balance sheet perspective, generally I expect us to be elevated here for the next couple of quarters as well.
We've got a little bit of time FHL, the borrowings of lift but it doesn't really make a lot of sense to prepay. Those so really will carry more elevated levels of liquidity certainly write off any higher cost deposits that we've got.
And really just carry that here for the next couple of quarters as loan volumes as Mark said are expected to be a little soft the heat before redeploying net and a couple of quarters Tom.
Great. Thanks, just one follow up for me so debt.
The.
The outlook on credit for the industry and for you guys and skol.
Can you just elaborate more on your capital deployment plans, including potential operating on.
Debit and again are our share.
Share repurchases.
Yes look no plans at this stage Janet.
I said in my comments, the NPA, just still more elevated than we'd like and substandard, so probably consistent with the provisioning discussion, let's say those metrics improve before we.
We move forward on any sort of capital capital actions here.
Great. Thank you.
Thank you.
This concludes our question and answer session I would like to turn the conference back over to Mark <unk> for any closing remarks.
Thank you operator and again, thank you everyone today for joining us.
If you do have any follow up questions. Please do reach out to us stay safe and have a great week. Thank you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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