Q4 2020 WesBanco Inc Earnings Call
[music].
Good morning, and welcome to the West Banco fourth quarter 2020 earnings Conference call, all participants will be in listen only mode.
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I would now like to turn the conference over to John Ione.
On your Vice President Investor Relations. Please go ahead.
Thank you Ali good morning, and welcome to Watch Banco Inc. 's fourth quarter 2020 earnings Conference call.
Leading the call because I heard Todd Austin, President and Chief Executive Officer, and Bob Young Senior Executive Vice President and Chief Financial Officer.
Todays call, an archive of which will be available on our website for one year.
These forward looking information.
Cautionary statements about this information and reconciliations of non-GAAP measures are included in our earnings related materials issued yesterday afternoon.
As well as our other SEC filings and Investor materials.
These materials are available on the Investor Relations section of our website on Dot com.
All statements speak only as of January 27, 2021 at Wesbanco undertakes no obligation to update them.
I would now you'd kind of call over to Todd Todd.
Thanks, John and good morning, everyone, I hope everyone's doing well and staying safe.
On today's call, we're going to review our results for the fourth quarter up 2020.
And provide an update on our operations and 'twenty 'twenty one outlook.
Key takeaways from the call today are.
We delivered record pretax pre provision earnings during 2020, driven by our diversified growth engines and companywide commitment to expense management.
We are focused on the continued successful execution of our long term growth strategies.
Which have positioned us well for both the current operating environment and future opportunities.
And west Banco remains a well capitalized financial institution with solid liquidity, a strong balance sheet and solid credit quality.
We're pleased with our performance during the fourth quarter as we reported net income available to common shareholders of $50 6 million and diluted earnings per share of <unk> 76, when excluding merger and restructuring charges.
On the same basis pretax pre provision income of $64 8 million grew 14, 2% year over year, driven by strong fee income growth and disciplined cost control and.
And we reported strong pretax pre provision return on average assets and average tangible equity of 1.56% and 17% respectively.
Reflecting our strong legacy of credit and risk management are key credit quality ratios remained at low levels and our regulatory capital ratios remained well above the applicable well capitalized standards.
Furthermore, as can be seen on slides nine and 11 of our earnings presentation. Our key ratios also remained favorable to peer bank averages.
In addition to being a 150th anniversary 'twenty 'twenty was another successful year for our company.
From a financial standpoint, we remain committed to returning value to our shareholders. So on.
All of the execution of our well defined strategies allowed us to generate record annual pretax pre provision earnings of $263 million.
When excluding restructuring and merger related costs.
We expanded into the mid Atlantic region through our merger with Old line Bank, which we closed and converted just prior to the early stages of the pandemic.
In fact, the conversion and integration went so well we realized positive net checking account flow in our mid Atlantic market through the air.
Furthermore, we remain a well capitalized financial institution, we completed a preferred stock offering during August of 2020 that was oversubscribed and we increased our allowance for credit losses, all of which position us well for 2021, where they're defensively or offensive way.
We also continue to receive national accolades and I'm, just going to highlight a few.
Last January for the 10th time since the list inception in 2010.
<unk> Bank was named to the Forbes list of the best Banks in America coming in as the seventh Best Bank.
Next during June.
West Bank a bank was again named to the second annual Forbes list of the world's best banks, which was based on customer satisfaction and consumer feedback with solid scores across the survey.
We received very high scores for customer services.
Shall advice satisfaction and digital services.
Then during October was Banco Bank was named to Newsweek magazine's inaugural ranking of America's best banks, which recognize those banks that best serve their customer needs as well as being named the best Big Bank in the state of West Virginia.
But most importantly, the year was successful when measured from our community action standpoint for many years West Bank, who has been a leader in its communities and we continue to look for ways to expand our outreach and involvement.
During 2020, we directly assisted more than 10000 individuals families businesses and nonprofits as they navigated through the pandemic.
I'm extremely proud of how our employees responded this past year from keeping our financial centers open throughout.
Working around the clock closing P. P P loans to our commercial customers and providing charitable donations to support those in needs.
These actions speak loudly to our community bank routes.
As I mentioned this past summer to effect change we must lead by example in addition to our existing women's symposium events. We have recently launched a diversity and inclusion initiative that is focused on building and growing a culture of inclusion and equality.
The committee has identified several initiatives for the coming year, including community outreach leadership development and career Pathing and employee education.
Our hope is that this not only helps us evolve and grow as a company, but does it also spreads to all of our other community efforts.
With.
Hard to 'twenty 'twenty, one first and foremost I want to reaffirm our commitment to expense control and the strength of our underlying operating fundamentals as we remain well positioned for success in a variety of operating environments.
As I mentioned, our peer leading capital on reserve levels provide both protection, if the credit cycle worsens and shareholder enhancing opportunities when there is more economic certainty.
We believe organic growth opportunities will occur during the second half of the year as more people are immunized and localities begin to fully reopen.
We expect to rebound in areas more impacted by branch lobby limitations like small business lending and securities brokerage.
And anticipate commercial loan growth to return cash businesses take advantage of revived economies.
During the past year, we diligently managed discretionary spending.
Implemented a hiring freeze on.
On store core system conversion project.
And accelerated our financial center optimization strategy.
On January 22nd of this year, we completed the optimization strategy, we announced this past August through the consolidation of 'twenty, one financial centers into nearby locations and continue to anticipate approximately half of the expected gross cost savings to be phased in during the first half of 'twenty 'twenty one.
While we completed this main phase we will continue to review our footprint for additional opportunities. These efforts have resulted in a more streamlined organization as evidenced by our year to date efficiency ratio of 56%.
I'd like to turn the call over to Bob Young our CFO for an update on our fourth quarter financial results and our current outlook for 'twenty 'twenty one.
Thanks, Todd and good morning, everyone during the fourth quarter.
Of 2020, we experienced a continuation of the low interest rate environment and concerns about the pace of rebounding economic growth.
Which were mitigated somewhat by continued strong residential mortgage origination volumes.
Our robust stock market strong expense control and an improvement in the macroeconomic forecasts utilized under the current expected credit losses accounting standard.
As a result on higher net interest income and a lower provision for credit losses as compared to the prior year's fourth quarter. We reported improved GAAP net income available to common shareholders of $50 2 million and earnings per diluted share of <unk> 75 for the three months ended December 31 2002.
'twenty.
GAAP net income available to common shareholders for the 12 month period was $119 4 million and earnings per diluted share were $1 77.
Reflecting the adoption of Cecil as of January one 2020.
And the effect of the pandemic induced recession upon macroeconomic forecasts used to calculate prior quarters provisions for credit losses.
Excluding restructuring and merger related charges results were <unk> 76 per share for the quarter as compared to 75 cents last year.
On a dollar on 88 cents per share year to day versus $3.06 last year.
As a result fourth quarter core returns on average assets on average tangible equity improved to one point to 2% and $13 two 8% respectively.
In order to provide better comparability to prior year periods as well as to demonstrate the strength of our underlying financial performance. We believe it is important to evaluate pretax pre provision income excluding restructuring and merger related costs.
For the fourth quarter, we reported $64 8 million in pretax pre provision income, which increased 14, 2% compared to the prior year period.
In addition on a similar basis, we reported strong pretax pre provision returns on average assets on average tangible equity of 1.56% and 17% from the fourth quarter.
And 1.61% and 18 point to 8% on a year to date basis, respectively.
We believe our strong balance sheet remains well positioned for the near term operating environment total assets of $16 4 billion and portfolio loans of $10 8 billion as of December 31st.
Increased four 5% and five 1% five 1%, respectively, when compared to the prior year period.
Due primarily to participation in the SBA payroll protection program.
During the fourth quarter, approximately 331 customers applied for and received forgiveness on their SBA PPP loans totaling some 113 million, leaving a balance remaining of $726 3 million at year end.
And subsequent to year end, an additional 573 customers with SBA PPP loans totaling $75 3 million have applied for and received loan forgiveness.
We've also reshaped second draw on funding requests as authorized under the recently enacted economic aid Act from 'twenty 130 borrowers to date for approximately $264 million. During the first few days on the programs availability for larger banks.
Strong deposit growth remains a key story for 2020 as total deposits increased 13% year over year to $12 4 billion due primarily to cares act stimulus and SBA PPP alone funds received.
And deposited.
Increased personal savings and lower personal discretionary spending.
Total deposit growth, excluding certificates of deposits increased 28% year over year, driven by a 25, 8% increase in total demand deposits.
Which now represent approximately 56% of our total deposits.
Furthermore, reflecting the strong growth and resulting available excess liquidity, we continue to strengthen our balance sheet by reducing higher cost certificates of deposits and federal home loan bank borrowings, which declined five 2% and 39% quarter over quarter respectively.
And 21, 3% and 61, 2% year over year, respectively.
Key credit quality metrics, such as nonperforming assets past due loans and net loan charge offs as percentages of total portfolio loans remained at low levels and favorable to peer bank averages.
Measured against our banks with total assets between 10 and 25 billion.
For the prior four quarters and consistent with prior years.
In addition, reflecting our strong loan underwriting and credit processes annualized net loan charge offs to average loans continued to remain very low for both the quarter and year to date periods at two basis points from six basis points respectively.
During the fourth quarter, we reviewed all hospitality loans greater than $1 million or roughly 97% of such portfolio as.
As a result of this review we recorded hospitality loan net downgrades of $133 3 million as a result of reduced occupancy and debt service coverage from the current pandemic driven environment.
These net downgrades were the primary driver for the increase in criticized and classified loan balances.
138 million quarter over quarter to 4.59% of total portfolio loans.
Which was comparable to the peer group average reported for the third quarter.
We continue to stay in close contact with them closely monitor our hospitality borrowers.
As we mentioned last quarter, we granted additional deferrals during the fourth quarter to select hotel operators after appropriate credit review and approval to assist in their recovery through 2021.
As of December 31st loan deferrals within our hospitality portfolio represented about 20% of total hotel loan Outstandings, which were completed under cares Act loan deferral guidelines that excluded them from.
T D our classification.
Further the economic aid Act added second draw S. P. A P. P. P lounge to provide additional assistance to certain eligible borrowers who previously received a PPP loan, including hotels, which may be eligible for a forgivable loan up to three and one half times their average monthly payroll we.
We do expect a number of our hotel operators to take advantage of this opportunity.
Our hospitality portfolio with an average loan to value of approximately 67% based mostly on pre pandemic appraisals.
As well as strong guarantor support and a reasonable level of loan deferrals combined with the new P. P. P authorization provides us with relative confidence that most of our borrowers should be able to weather the remainder of the pandemic.
However, we will await additional economic and operational clarity before beginning to release specific reserves assigned to this portion of the loan portfolio.
Reflecting improved macroeconomic factors and the seasonal calculation the allowance for credit losses specific to total portfolio loans at December 31st was $185 8 million or $1, 72% of total loans or when excluding SBA PPP loans, 1.85% of total portfolio loans.
These metrics are relatively consistent with those from the third quarter and the provision for credit losses under Cecil totaled a negative point 2 million for the fourth quarter as compared to $16 3 million last quarter.
Excluded from the allowance for credit losses and related coverage ratio, our fair market value adjustments on previously acquired loans, representing a 37 basis points of total loans.
Key information on measures affecting this quarters provision can be viewed on slide 10 of the earnings presentation.
Reflecting the significantly lower interest rate environment, we aggressively reduced our deposit rates and overall funding cost throughout the year, partially offsetting lower earning asset yields which reflect materially lower yields on new or repriced commercial loans the.
The effect of these efforts helped to lower our fourth quarter total deposit funding cost 40 basis points year over year to 23 basis points, while our cost of borrowings dropped 29 basis points year over year as we reduced federal home loan bank borrowings by $866 6 billion or 61, 2%.
Two $549 million.
Reflecting solid pricing management efforts, our reported net interest margin for the fourth quarter was 331% the same as for the third quarter. This is further evident when excluding the purchase accounting accretion benefit of 16 basis points and 18 basis points, respectively. As our core net interest margin of 3.15.
5% actually increased two basis points as compared to 3.13% during the third quarter.
Primarily due to deferred fee recognition from PPP loan forgiveness as I discussed earlier on.
Also included in the purchase accounting accretion benefit was two basis point benefit.
From a two paid off P. C D loans from a prior acquisition.
Noninterest income for the quarter ended December 31 for.
<unk> 2020 was $32 7 million, an increase of six 1% year over year, primarily due to mortgage banking fees, partially offset by lower service charges on deposits reflecting.
Reflecting the current low interest rate environment, and organic growth mortgage banking income increased 84% year over year to $5 4 million as one to four family residential mortgage origination dollar volume increased approximately 75%.
Fourth quarter originations volume half of which were related to home purchase or construction lending total some $351 million.
About 65% of total residential lending volume was sold into the secondary market, which compares to our historical range, averaging between 40 and 50%.
And gain on sale income net of hedging gains or losses averaged approximately three 6% per loan sold.
During 2020.
Total operating expenses continue to be well controlled through company wide efforts to effectively manage discretionary costs employee head count and marketing expenses, excluding restructuring and merger related expenses total operating expenses for the fourth quarter increased eight 1% year over year to $87 6 million primarily due to addition.
Staffing and financial center locations from the old line acquisition as well as the mid year annual salary increases, partially offset by discretionary cost control and the planned cost savings from the old line merger.
Despite an approximate 25% increase in size due to the acquisition of old line. Our company wide efforts are demonstrated by a 30 basis point year over year decline in our efficiency ratio of $56 three 8% for the 12 month period, ending December 31, 2020, and similar quarter over quarter.
Total core expenses.
For 150 years, the bank's management is focused on being a strong on sound financial institution for our shareholders as of December 31st we reported a tier one risk based capital ratio of 14.72% tier one leverage at 10, five 1% and a total tangible equity to tangible asset.
Ratio of 10 five 2%.
These ratios enhanced by the issuance of 150 million of preferred stock on August 11th continue to provide us significant capital strength, both for the remainder of the pandemic and from potential capital maximization opportunities in the future.
With an unprecedented operating environment that continues to evolve daily.
Let me now provide some limited thoughts on our current outlook for 2021.
As an asset sensitive bank remains subject to factors expected to affect industry wide and interest margins in there in the near term, including a relatively flat spread between the three month and five year Treasury yields and a continued overall lower long term rate environment expected to last for at least the next couple of years on.
Our GAAP net interest margin may continue to decrease a few basis points throughout this year due to lower purchase accounting accretion and lower earning asset yields partially offset by the aggressive actions, we have taken on our deposit and borrowing costs.
Currently anticipate our net interest margin excluding accretion from both purchase accounting on PPP loans to be down a few basis points.
During the fourth quarters or from the fourth quarter, 3.15%.
On an expectation of lower total, earning assets net of SBA PPP loan forgiveness that is expected to be greater than new loan originations and new P. P. P loans.
We anticipate margin accretion in the next two quarters from PPP loan forgiveness, as net deferred fees or accreted into income with the new P. P. P loans that we're booking now expected to be slightly dilutive to the margin due to their longer contractual lives.
In general we can currently anticipate similar trends in non interest.
Revenue as we experienced during 2020 on residential mortgage generation and associated gains on sales should remain strong, albeit at somewhat lower levels in the record volumes realized during 2020.
Reflecting the current interest rate environment commercial loan swap fee income, which totaled roughly $6 million during 2020.
Should continue to be relatively strong.
[noise] tronic banking fees continue to rebound and follow a more normal quarterly Pat patterns as economies reopen.
Trust fees, which were influenced by trends in the equity and debt markets should benefit from organic growth as they did in the back half of 2020.
Securities brokerage revenue will still be impacted in the near term until we are able to loosen the access restrictions to the lobbies of our financial centers.
Service charges on deposits will most likely remain weak due to the recent and potentially additional stimulus this year.
We will continue to maintain our diligent focus on expense management throughout 2021, while positioning ourselves for organic growth once the economy starts to pick back up.
As a reminder, our long term efficiency ratio charge continues to be in the mid 50% range, which is also subject to the future shape of the yield curve.
We are still planning for our annual midyear Merit increases and currently also anticipate somewhat higher marketing spend this year as a result of reduced brand and image campaign costs during 2020.
Particularly on our new mid Atlantic market.
Regarding the benefits from our financial center optimization plant, we expect cost savings net of employees filling open positions in other locations and expected digital and technology spending of approximately 3 million to be phased in during the first half of 2021 and to be fully realized by the third quarter.
As Todd mentioned, we will also continue to review our footprint for additional optimization opportunities this year.
Relative to our provision for credit losses under Cecil the provision will depend upon changes to the macroeconomic forecast as well as various credit quality metrics, including potential charge offs criticized and classified loan increases and other portfolio changes.
In General continued economic recovery should bode well for the director for the direction on.
Future provisioning.
Since our evaluation at December 31st macroeconomic factors have continued to improve and absent charge offs. We should experience reserve releases at some point during 2021.
Dependent upon continued improvement in the noted parameters.
Lastly, we continue to anticipate.
Or are we currently anticipate our effective full year tax rate to be between 17, and 19% subject to any changes in tax policy nationally as well as certain taxable income strategies.
And with that we're now ready to take your questions. Operator would you. Please review the instructions.
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Our first question today will come from Steven Duong with RBC capital markets.
Good morning, Steven.
Hi, good morning, guys.
A couple of things so just first on the margin on.
You have a decent amount of extra.
Excess liquidity.
On your balance sheet I guess, what are your plans for the next few quarters.
With that liquidity.
But on a bunch of that I'd take that.
So excess liquidity on the on the.
Our balance sheet affected our margin by about six basis points for the year and about 10 basis points for the quarter.
Imagine it against a base of some 250 to 300 million Steven.
So indeed that for the industry as well as for US does have an impact.
Our current projections are that we'll see somewhere between 80 and 100 million of maturing.
Maturities and cash flows in the investment portfolio on a monthly basis, depending upon prepayments speeds, obviously and other factors.
And so we will be adding that back into the portfolio as well as recognizing we have additional liquidity that we received at the end of the year on the first part of January from the new stimulus in the economic aid Act and potentially more this year.
So we'll be reinvesting that as well currently we're targeting in the first quarter, an additional $300 million into the portfolio now that'll take 10 basis point yields and move them to around 1% or so.
Got it so just to be clear youre looking to move that $300 million in the first quarter to the securities portfolio is that right correct.
Okay great.
And then just on your.
Your <unk> borrowings.
You brought that down pretty considerably this year what are your intentions with the borrowings for the remainder of the year.
So about two thirds of those will come due this year.
In 2021, we've seen anywhere between 100 and 200 million per quarter. The last three quarters, which we've just paid off we haven't replaced Stephen will continue with that in.
In 2021 until we get down to a level of liquidity that.
We're going to have more liquidity than in the past given the larger size of the balance sheet, but we do intend to gravitate to a lower level as I mentioned earlier.
And so about two thirds of those that remaining 550 net at the end of the year will come due this year and I would think at this point for the first half of the year at least that.
We probably wont be replacing those.
As we continue to experience increases in deposits.
Back half of the year, we'll see but anything youre, bringing on the balance sheets at 50 to 75 basis points. The most so significantly lower than.
Where those are price today at between two and two on a quarter.
Oh, so the two thirds thats coming off there there are around two two on a quarter is that right that's correct.
Okay great.
And then just lastly.
Yeah.
You talked about reserve on leasing.
I guess you know.
What is the normalized reserve level for you guys with now that you're doing Cecil.
Yeah, I think I'll start with that Bob can add some color if he'd like.
When we went through that process really.
It really during the first quarter of last year, obviously that was all pre pre pandemic everything I think we brought the number up to a point, 95% to 1% or so was the reserve level and again that excludes.
On either the Mark on on acquired portfolios. So you know that may be a decent proxy you know around the 1% range, but it'll all depend on the shape of the recovery and how long it takes to get back down to that level, but.
I wouldn't expect.
Banks getting back down to 50 to 60 basis points again.
Based upon the new CCL calculations, Bob what would you add to that.
Yeah, I don't think we'll get there by the end of this year, Todd and of course it depends upon the pace of charge offs on how the recovery goes I would tend to agree that you're looking at a percentage with three digits starting with 100.
It's amazing even under the occurred methodology that was that was viewed as a pretty decent allowance.
10, 15 years ago.
I think in the near term, you're probably going to see that in the mid ones.
One on a quarter to one and a half for the industry and for us and reflective of the fact that.
You know the pandemic impacted.
Hospitality credits to a greater degree than some other portions of commercial real estate or C&I and so I think versus our peers. You can see that currently were a little bit higher than peers and as they come down and we come down I would think that GAAP might might remain for at least this year Stephen.
Got it and if I could just squeeze one more in I'm, sorry, if I missed this but just on buybacks or are you looking to jump back in this quarter.
I think with regard to buybacks, we just want to make sure that we've got clarity on.
Obviously, the credit going going forward feel good about where we're at cautiously optimistic about things with the hospitality.
Portfolio. So we're not seeing anything there that it's terribly concerning or anything, but I think we'd just like to be to be cautious on that so we just wanted to see more clarity on my expectation would be that we will reenter the buyback.
Plan that we that we had before.
But I think it's a quarter or two away before we really get the kind of clarity that I I'd like to be able to see.
Got it alright I appreciate it thank you.
And our next question comes from Casey Whitman with Piper Sandler.
Casey.
Hey, good morning.
I guess would just continue with the conversation around capital maybe I'm just thinking about M&A.
Vaccines as you get more comfortable with with credit on maybe maybe mid year. We commenced for GAAP and then what is your appetite for additional M&A are there particular markets that interest you more than others I guess, just kind of hoping for an update on how you guys are thinking about M&A.
Sure sure sure, but we don't feel a compelling need to do anything like obviously, if there are opportunities that present themselves.
You want to be smart about what you are doing but we had said even before the pandemic. After we completed the old line bank merger that.
On the 20th last year was going to be all about integrating old line bank.
In 'twenty and 'twenty one this year.
It's really all about focusing on our own core conversion, where upgrading from banquet ibs stainless F. I S, but were upgrading the core.
And we're excited about that it's going well and it's going to provide a lot of additional advantages to our customers and make us more efficient and automated so.
That's a big part of our effort. This year is to focus on that and that's really where we're energies are.
<unk> stayed very consistent I think with what we've said in the past quarters.
On on that just so happens we're in a pandemic now so it's hard to get clarity on other people's balance sheets.
But I think that is becoming clearer and clearer each quarter that goes by so we would not anticipate.
Closing anything in 2021.
That's again does it focuses on our on our core conversion could close something in 2022.
No not not actively looking at anything.
Understood. Thank you.
And maybe just circling back to some of your commentary around loan growth.
From the attorney.
As you think about the back half of the year on maybe can you help quantify you know what.
Sort of a reasonable expectation might be for growth.
Yeah, I think when you look at the last start with the last year, obviously, you know our our loan growth and our soldiers.
That was excluding PPP was down about 2%.
About half of that 87% of that 2% was related to an increase in the secondary market sales on the residential side, but net of that we were still down about it about a percent C&I was up 2%, which was nice to see so as we roll forward. There there is a.
I think the caution that's out there on the part of commercial borrowers are starting to lift a little bit, but there's a lot of liquidity out there and you see it on our balance sheet and other balance sheets on our customers' balance sheets. So.
I think they're going to they're going to work through that first you know for for a quarter or two.
Do we see the you know the advance rates on the lines of credit are still mid to upper Thirty's.
And they were mid mid to upper Forty's I think before that so I think we'll see the cash draw down and maybe some usage on on lines it'll start and then our expectation would be that we may start to see some.
More organic growth in the in the second half of the second half of the year I'd like to see you getting back to that.
Low to mid and primarily mid <unk>.
Single digit loan loan growth, but I think for this year. The next couple of quarters are going to be pretty pretty flat.
And I think the growth will be towards the end of this year and into next year.
Got it and then maybe just lastly from me just a couple of housekeeping questions on PPP, probably for you Bob but can you just from round. One can you tell us how many how much remaining PV P fees. There are and then also what the average.
A P. P. P loans was in the fourth quarter that'd be helpful. Thanks, I don't know if I have the average balance we ended the year at.
726 net of the remainder of the fees, which are about 13 at million.
You have to recognize I would say that from a modeling perspective, we're currently anticipating a greater amount of that will be recognized in the first two quarters of this year than our last modeling exercise earlier in the fourth quarter.
So a basis point or two of improvement.
Here in the first quarter and probably the second before it wanes away. If you will towards the end of the year and we had previously anticipated there might've been a residual 15% of the original $850 million.
By the end of this year and now thinking less than 10%.
So we really didn't experience much in the way of.
Forgiveness until the last two to three weeks of December.
And and as I said that was $113 million the difference between eight 850 and 726 on it in the $1 13 is just net deferred fees. So a total net deferred fees as I recall Casey were about 28 $29 million originally.
We recognized a $17 million of that 16, and a half million of that in 2020 and as I said the rest of that 13% to 13 to have expected for the most part this year end.
Mostly in the first half is that responsive.
It is very helpful. Thank you I'll, let someone else I'll hop on thanks.
And our next question comes from Stuart Lotz with K B W.
Good morning, Stuart Hey, guys good morning.
Congrats on surviving a 150 this year.
Tremendous milestone obviously.
Last year was probably one of the most interesting years on your long history.
But Paul if we.
If we could just go back to the capital. So let me tell you stand with just under 15% tier one.
Close to 18% and total risk base and you've got a 2% ACL kind of ex the P. P. P. What is you know.
If we if we do see some reserve release throughout 2021.
Why doesn't gauge kind of a buyback.
You saw some believes this quarter I'm just curious, what's what's kind of keeping on the sidelines until the back half of the year on the buyback.
Yeah. That's a good question I think we're just being cautious and that's just our nature as a company.
I think different banks have kind of different views rote looking at the same same economics.
But I think from from our perspective.
That's kind of been our reputation is to be conservative, but when we do see clarity on what I'll tell you is that we.
We would be pretty aggressive with regard to the things that we need to do obviously reserve releases are based upon seasonal which is very formulaic driven model and it's got to be substantiated and everything so you know those.
Those models will run as those models run, but as we get more clarity on is the <unk>.
Say, particularly the hospitality portfolio, which again feel really good about where we're at right now.
As you just get more clarity on that with the vaccine.
And another related related industries, then I think at that point in time, we would move pretty pretty quickly and on a same thing on the capital side as well too we know we're carrying a lot of capital.
And.
My expectation would be is that that would be returned if we don't see the kind of losses that Cecil would be would be driving and right now I'm just I'm not expecting that.
Same as a lot of other bank Ceos have said, but you know where our position is to just to be you know.
Wait another quarter or two until you really get the clarity behind it make sure the vaccines doing what it's supposed to be doing and I think we're not too far from that I think if we get.
On the herd immunity and.
The death rates continue to drop in the therapeutics and everything that are out there. They were all really good signs.
Or that are taking place so I'd be really surprised if we weren't in a in a position later this year to be really constructive on on something like that.
I would also imagine.
The work that we have $60 million of sub debt.
That re prices.
This year.
Starting with our in December.
Pricing.
The <unk> inherited that from a few years ago. So it reached its five year.
Timeframe and we'll be looking at both of those issues.
Using our proceeds from preferred.
To be able to pay those down either.
This year or early next year so.
Would match on that as well.
Okay.
Awesome.
And then Bob maybe if we could turn to expenses I appreciate all the detail on kind of what you expect this year.
You know given the puts and takes with.
The branch closures last or this week and then also with the core conversion, where do you see that run rate shaking out in the first quarter are really kind of in the back half of the year given some of the planned technology investments.
Offsetting the cost saves.
Todd do you want to start that and I'll jump in or you want me to take it yeah.
I'd be glad to start.
I think the number that we saw on the fourth quarter, you know last last quarter.
It's really the culmination of a lot of work on a lot of effort aided by the pandemic probably to some degree because of the travel and everything else that was that was restricted as.
As we head into a into 'twenty 'twenty one the focus continues to be very much on an expense.
We're looking beyond 'twenty, one into 'twenty two 'twenty three and you know if you don't get a.
The big improvement in yield curve shape, I mean expenses really are the big thing that organizations really need to have already addressed quite frankly, so we're continuing to be proactive on that we have a hiring freeze thats been in place. So any new positions you know, there's there's a freeze their knee replacement positions you really need to get approved by my HR director on me.
So for our size organization that that's a pretty big step.
But it just shows you our level of focus on the expense side of things.
We continue to effect that we're gonna be more efficient as we go forward I think the course change core upgrade is going to help a lot.
Because it's going to be less people dependent so to speak in more based upon.
On the technology and automation and we're going to continue to review the branch network across our footprint. There are parts of the footprint. We didn't look at because they were newly acquired.
But we're going to continue to address that as well too because.
Because I think even with the 212 or so branches that we have given our asset size, there's still opportunities. There. So we're going on we're going to focus on all of that and then we've got the traditional merit increases and things like that going forward, but don't see any huge huge tech investments are tech spends or anything like that we've been doing that over the last number of years.
And then the marketing side you know, we did really suspend some of the marketing spend last year because of the pandemic and we really do want to get out there, particularly with the branding side that Bob mentioned in the mid Atlantic markets. So that people know we're there.
So they can see us and that we can really be on the offensive with regard to growth. There. So that overall, we would tell you that as you kind of look at the.
On the expense plan for next year.
We would we would expect you're looking at consensus that's out there for the banks right now and for us in particular.
We're not terribly uncomfortable with the consensus.
Consensus numbers that are that are out there maybe you know puts or takes.
Takes a couple of million each quarter here are there one way or the other but overall, we think that will be consistent with what we've done in the in the fourth quarter.
Bob.
Yeah, and you know, we've really run 80, 680, 787, and a half million throughout the year. This year when our early in the year guidance as some of you may recall was for a higher pace.
Yes, some of that was pandemic induced but a lot of it was also discretionary spend control and indeed, we got our cost savings out of our out of the old line acquisition as we had promised about a million two of difference.
In terms of an increase between the third and fourth quarter.
Of that related to a period end our incentive comp adjustments.
Don't know that you want to call that one time, but a true up there for better performance and as well.
Hum.
We did an employee appreciation bonus if you will at the end of the year. So that would have been one time in the fourth quarter.
Some of you pick up the securities gains and I like to remind you that our.
Securities gains were offset in employee benefits.
It's a it's part of securities gains for deferred compensation, which also is offset in employee benefits. So that's really.
It doesn't affect the bottom line, but it does impact both fees as well as expenses. So that was a little bit higher in the fourth quarter as the markets recovered as well and some additional technology spend.
To the core conversion, but but otherwise kind of holding flat right around that 80 787 $5 million Mark now we.
It started the year, you always see payroll tax increases and some other changes Todd mentioned marketing.
We were pleased that we saw on FDIC insurance reduction as some of our risk factors improved not the least of which is because of the higher capital base. So that impacts that so a couple of moving parts there, but hopefully that's helpful.
Yes very helpful.
And I guess, just maybe one more on.
On the hospitality book.
In terms of PPP route to have you reached out to those clients and are all of them. They all kind.
Kind of seeking to get the raunchy PPP in.
<unk>.
At a 60% 67% LTV.
Thank you.
That pre pandemic or any of you guys got on any new appraisals in recent quarters with regards to some of those credits.
And in answer to you that as.
It is pre pandemic, yes.
Answer your questions on P. P. P. We did reach out to our hospitality customer because they were already reaching out to us it was more around timing.
So we were able to put that in place for the great. Great majority of we got.
Just a couple of specifics as of the end of last year about $725 million in hotel loans and about.
$12 million in the in PPP loans again that was from the first the first round, so it'd be a little bit more here in the second round the LTV was 67%.
And that's on a pre pandemic base.
Basis, one of the reasons why we had more migrate into the criticized primarily criticized category was putting a heavier focus on debt service coverage I think I'd mentioned you guys in the past we did about a third.
Debt service of third liquidity and kind of third flagging location, we altered that during the fourth quarter to make it 50% debt service related and 40% based upon the liquidity of the borrower.
And about 10% based upon the flag and location so a more stringent.
Requirement.
There, but you know we're only dealing with with main flags seasoned operators Intercontinental Hilton Marriott.
<unk> Wyndham those types of organizations <unk> 72 per cent limited service, 24% extended stay 4% full service.
The significant majority of them are located in suburban areas and near highways, so not things that.
You know it would be would be terribly terribly challenged it should come back pretty quick.
About 41% of the portfolio is in Maryland, and about 25% in Kentucky, Indiana, 20%, Ohio.
Per cent, Pennsylvania, and by 7% West Virginia.
And in our occupancy rates, we get star reports on the portfolio every every month.
November was just just under 47% occupancy.
Compared to the prior months I think October was 55 September 55 August 53, so down a little bit in November as you would expect.
But much above the you know the numbers back in April and May which were in the 20% 30% range. So we're seeing some nice.
Yes, I would say trends prior to the winter months, we expected the winter months to slow down a little bit and as we as we set this up it's structured this with these deferrals.
Deferrals to the hospitality portfolio there.
Theyre Springer language in there that would return them to payment status.
Full payment status all of them are interest only but we return to full payment status, if they reach a certain occupancy level or.
Or if they've got a certain liquidity number which the PPP, obviously I'd still liquidity, so I would expect.
Those whose hospitality loans that are deferred.
For a period of time that they will be returning to payment status well before the end of the deferral time period.
Because of the language that we have in there. So the expectation would be is that that deferral number would come down through the spring late spring early summer months as things return to.
Normal, but the LTV is pre pandemic.
Make your guesses to what you think the values are today, you're seeing some portfolio sold out there.
In different in different markets.
But I haven't seen anything with two terrible on hair cut on it.
But we feel pretty confident about our hotel customers and the actions they've taken and the steps that they've taken.
You'll get it will see clarity on this I think by the time you get into the third quarter and late third quarter, but they're well positioned they're good operators, they're pretty strong.
Pretty strong operators and we think the vast majority of them should be should be okay.
So you don't anticipate any further downgrades criticized or classified from that from that book I think will continue to keep the same ratios in place.
In terms of the.
How we grade with the debt service and liquidity and everything else. So I think the third and fourth quarters, where the big quarters and.
And movements soda so to speak I'm not sure you're going to see a whole lot in the first quarter.
On the hospitality industry, because it's kind of a soft quarter anyway for hotels.
And a lot of the banks have these on deferral right. So I just didn't haven't think youre going to see much going on with the occupancy on the star reports.
So I just I can't anticipate a lot of change in the first quarter, one way or the other but I think if you get in the second quarter and definitely the third quarter. I mean, that's that's where you'll really start to see the the clarity on it.
Yeah.
Awesome well.
Thanks for taking my questions sure.
Our next question comes from Russell Gunther with D. A Davidson.
A rough morning, guys, Hey, Todd I just have two quick follow ups from prior lines of discussion the first on the organic growth outlook and.
Hear you loud and clear in terms of near term expectations, but.
Looking back to the time of the old line announcement I think the goal is to have that prove accretive to the growth rate. So trying to move from a low to mid to mid to high single digits now a lot has changed but is.
Is that still the ultimate goal and is that something that as you look to 2022 might be achievable.
Yes.
You're right on the Mark with the plan there. It wasn't just the old line Bank acquisition, but your community Bank acquisition, a couple of years before that and also the F. F. K T acquisition, and then the Frankfurt Lexington area, Northern Kentucky area, those were all to get us into a.
Higher growth markets, and then changed the growth rate of the bank from historically.
Low to mid single digit loan growth to mid to high single digit loan growth. So it's still very much.
The plan that's why we went to those markets and I think we got the lending teams I think we've got the right positions in place.
We did some pruning prior to the pandemic on on some things we've pruned some hotels, we prune prune to consumer portfolio, we prune to multifamily. So we did a number of those type of things.
That's behind Us so I really don't see a lot of.
Loan growth headwinds so to speak coming out of the <unk>.
Out of the pandemic, so we should be able to keep that story intact in terms of what we were trying to do whether that's 2022 or not I mean, let's see.
I would hope so based upon the pace of the recovery, we should be through all this and back to more normal.
This is in 2022, but we'll have to wait and see.
Got it okay. Thanks for your thoughts on that one Todd true and then just lastly, if you guys are able to share following up on the hospitality discussion.
Increased internal.
Waiting on the debt service coverage can you share where that debt service coverage ratio shakes out today versus pre pandemic within the hospitality loans that were reviewed.
I don't have I don't have that in front of me, but I would think that.
Don't see anything different than anything in our portfolio that would be.
An outlier to maybe other others banks that have reported on the hospitality side I think the portfolios are pretty well underwritten I mean it was we were we were.
But 1516 I think prior to the pandemic and old line Bank was as well too today.
Today, though if you know if you're running 50% occupancy you know there'd be a lot of borrowers that wouldn't be at that level obviously.
That was really one of the things that we did early in the pandemic was you.
You know when you look back to last March April may.
I mean people weren't allowed to go to hotels. They were told to stay on the house on that and that leaves. So I'm just kind of hard to wait debt service coverage on on businesses when they've been that disrupted. So we went to other means and that's what we.
Started looking more heavily on liquidity and things like that and flagging guarantor support, but as we rolled through in subsequent quarters. After the pandemic started.
To get a little more clarity on things and you did have a little bit of recovery last summer and late last summer and fall with regard to occupancy. So we just thought it was appropriate to shift more toward debt service debt service coverage, which caused the portfolio to be to be downgraded, though a little bit.
But I don't have a specific debt service coverage ratio on on.
Parts of the parts of the portfolio I would imagine it would be below one and a lot of cases.
But that.
That's just based upon the current occupancy occupancy level, some banks have gone out and sold parts of that portfolio already and kind of taken here.
Haircuts on values.
We've chosen not to do that at this point just simply because we think there's value. There. We think the great majority of these are going to return to paying status and there will be there will be value there, but we're protected from an LTV perspective, if theres a few that arent that really get challenged challenged by that but I would expect the majority of them will be back to covering.
Debt service and be over one.
Back when you get into the late part of the second quarter and into the third quarter I would expect that to be the case and seen them return to to payment status.
I appreciate your thoughts on that Todd.
That's it from me guys. Thank you for my questions, but please yeah for the ones that were downgraded it was averaging between <unk> six and <unk> seven through 930.
Back at the end of June what we had was really.
An estimate.
That took into account where they were in 19 and first quarter of 2020, and then estimated beyond that so.
With that lower number there were more classifications and.
On a goodly amount the macroeconomic factors improved relative to unemployment so.
You see that on page 10 of the deck.
So that would have caused the allowance to come down by a greater amount, but basically we're adding that back into the.
Hospitality reserve, which which went to between.
Between seven and seven 5% on the whole on the whole hospitality portfolio here.
Here at the end of the quarter.
Yeah. Thanks for the clarity on Great service.
Yeah I appreciate that I appreciate it from both you guys. Thank you very much.
And our next question comes from Steve Moss with B Riley Securities.
Hey, Steve Good morning.
Just following up on the hospitality for a moment just with regard to the loan to value, 67% I believe in prior quarters. It was in the mid fifties. It just kind of curious as to.
What drove the increase in LTV.
Yeah, well, we've had a we've had some activity with regard to the hospitality portfolio. Some properties are sold.
The.
Property owners have decided to sell on it if taken care of and have done that we haven't had any credit impacts from any of that.
But that had an impact to it as well too and I believe we're also including.
PPP loans, so hotel operators are going in there as well too so that may have impacted it by a couple of percentage points.
So Todd we looked at all loans down to a million dollars. So.
On the earlier estimate would've been on on a smaller group. This includes 123.
Loans and comprises 96% of the total $750 million.
Portfolio by looking at all loans down to $1 million.
Steve.
Okay.
That's helpful. Thanks for that and then.
One question for you Bob.
Housekeeping, just kind of curious as to what Youre thinking.
For purchase accounting accretion on a full year 'twenty one basis.
So what we have said in prior quarters and what I would continue to say is a couple of basis points a quarter. We will continue to come down we're pretty much true the liability accretion, which was mostly Cds a little bit of sub debt.
And you noted that I said that there was a couple of basis points of additional accretion this quarter on two P. C. D loans that paid off from actually it was the old F. F G.
Acquisition so.
That took us up to 16 basis points for the quarter.
You should anticipate that without that it would've been 14, and so then drag it down from there is as you move forward in 2021.
Okay.
Perfect.
Thank you very much appreciate all the color.
Our next question comes from Brody Preston with Stephens, Inc.
Hey, good morning, everyone.
Hey, Todd I wanted to circle back on on the hiring freeze that you mentioned that's still in place.
So there's been some disruption in the Baltimore D C corridor.
Truest and Wells Fargo recently kind of a bunch of folks as well and so on.
So are you trying to be prudent on expenses, but do you think theres going to be any opportunities to make new hires in this market and kind of maybe help accelerate.
Building, the Wesbanco brand within within the legacy old non marketplace.
Yes definitely.
And I'm reviewing those so that I know I know, what's going on but we are we are hiring new people on open hiring new people, but it's got to be approved by me and my HR director. So it just puts a tighter.
Tighter focus on it we've got some areas, where we had some open positions backroom staff type things that.
Quite frankly would be going away during the core conversion anyway.
And I just wanted to make sure we had a real tight handle on that in some cases in our branch network. Those branches that we are that we have.
It could have been overstaffed in some cases, a half a person or a person here or there and we wanted to do is be able to take advantage of some of those.
Some of those savings in and not replace certain people. So that's the whole idea behind us just to have a higher level of focus to it I've seen some banks that have gone out and.
You know announced.
Reductions in force of 510% things like that and sometimes even put names on it.
But I think from our perspective that we can get there through attrition.
But also taking a close eye on where we are where we are growing on an approved a couple positions yesterday and some of the growth areas from a.
Revenue production standpoint, so we're not going to be bullish about what we're doing on the expense side, because we are going to come out of this pretty quick this year and we want to be positioned for growth right and Theres got to be a growth story. There you could only save on expenses for so long so we'll be judicious about it but I.
I, just I want to make sure that I got a good I got a good handle on it because we don't want to Miss on the expense side, but at the same time, we want to invest in the right areas. So that we hit the revenue side of things later in the year.
Understood and I guess, maybe on the growth just sticking with the growth excluding PPP actually thought.
Commercial loan growth this quarter.
It was pretty solid.
So I wanted to get a sense for what drove that was it was it a tick up in mind utilizations or was it something else.
We can see continued to see really good usage on warehouse lines, because that's obviously the residential mortgage.
Business is doing very very well and growing but.
I think just in general we saw customers getting more confidence.
I think I reported in the third quarter into the third quarter that our pipelines on our commercial banking pipelines in particular.
We're up a little bit from the third quarter, but down from the prior year or pretty much in line with the prior year, but were 20, 25% bigger because of old line bank. So I guess down relatively speaking, but in the fourth quarter.
Pipelines firmed up and we were seeing.
More growth in the pipeline and Jay Z or head of commercial banking Chief Banking Officer mentioned to me a couple of weeks ago that the pipelines are really starting to grow so not just residential but the.
The commercial side. So we are seeing some nice trends there and I think that flowed through in terms of what you saw on the balance sheet in the fourth quarter.
Okay understood So mentioned funding of construction loans.
The LCD book was down $25 million to $30 million all of that rolled into the CRE is as funded product.
We still have a fair amount in construction loans.
Line utilization there as those projects complete.
And the bulk of the runoff in the fourth quarter was as Todd indicated earlier related to the residential portfolio.
And the refi market certainly we participated in that to a great degree, but mostly it was gain on sale.
So I went to the secondary market.
But that would be just a couple of other comments on utilization Todd mentioned mortgage warehouse, but net net line utilization around 34, 5% to 35% the three months ended.
In the fourth quarter net down about 10 10, 5% over the line utilization that we experienced in the fourth quarter of 2019.
Okay. Thank you for that extra detail Bob.
Maybe just wanted to get a sense for what new loan yields looks like right now versus what's rolling off the book.
Yes, we actually have.
John I know what page is that on.
Sure.
We have that in the tier four.
Slide four of the deck yeah, Okay, alright, so you don't have to.
Don't have to repeat yourself then Bob I can just go got the day right there on the top top.
Of the deck.
In terms of the waterfall.
But we're trying to hold minimum rates floor rates on new loans at 3%.
And then depending upon the risk grade are getting a little bit more than that in certain situations.
In some cases below but that's.
That's where you can see it again I want to point out, though that as compared to some other banks.
Our reduction in loan yield occurs over time, because we have a higher average life portfolio.
We have a lot of five year repricing loans.
On that.
Have floors in them.
So even when they do re price they might not reprice below 3.5% to 4% again, depending upon where that floor level is set.
And we also inherited as I mentioned relative to asset sensitivity earlier this year inherited a fair amount of that longer term book from old line.
Which at the time, we thought would be a detriment to margin, but it turns out to be.
<unk> and again, the $3 30 to $3 31 $3 31.
On a GAAP margin for the last three quarters indicative of that that book holding our overall margin flat as we continued to adjust our cost of deposits and borrowings on the other side to offset our investment in loan yields coming down at it.
At a reasonable pace.
Okay, and then one last one from me I just wanted to I understand that your it looks like youre going to have the opportunity to work down borrowings throughout the year, but you've also had a nice mix shift on the CD side.
On deposits as well and so I wanted to get a sense for it.
If we should expect to continue to see that run off at a similar pace that we've seen.
Throughout 2020.
Or if that would be different and then what.
What the what the new.
Offering rates are on the on your on your Cds.
We've got about two thirds of the Cds that are renewing or single service Cds that are renewing are staying with US obviously were got a strategy in place there to run off as those higher cost one site I don't anticipate that changing at least not for the next couple of quarters as we've got quite a bit of liquidity and funding.
<unk> with our loan to deposit ratio below 90%.
Mhm.
Yes.
Particularly in the mid Atlantic market, we inherited a fair amount of higher cost Cds talked about that at the time of the acquisition.
That was a benefit we werent going to have to be as high.
High priced on those days.
Given our overall cost of funds advantage and lower loan to deposit ratio than many of the D C banks, including old line ran and.
And of course, the pandemic came along and the fed reduced rates. So they are helping us but.
Sickly, new Cds going on at 50 basis points 60 basis points at the most.
And would you still expect the kind of run off maybe to a slightly lesser degree in 2021 that we saw this past year, but all of that will end up going back into.
It's not going to be loss for the most part I'll just go back into interest bearing.
<unk> accounts.
Got it. Thank you all for taking my questions I appreciate the time this morning.
Our next question comes from Joe Club village with spending and Scattergood.
Good morning, just a real quick one on the mortgage banking side any any thoughts on how the first quarter might shape up relative to the fourth quarter and then overall for the year from mortgage banking versus a 2020.
Yeah, we're still seeing nice nice trends there.
We're expecting you know we don't give guidance obviously it depends on what it's going up on the right, but right now as we kind of look at it.
We expect another strong year next year not as strong as obviously 2020.
Just another really very very good solid.
Solid year for us so hard to see which quarter is going to shake out where but.
I think overall when you look throughout the course of the year.
Specced it to be another very solid year for us.
Yeah, and I would mention that we ended up with a bit of a negative.
Hedge adjustment on TBA hedges, which we used to.
Hedged on the commitment portfolio that was negative in the at the end of the quarter.
So we would expect that to turn around and you would see a little bit more visibility on the gain on sale and in the first quarter.
Joe.
Do you have a number on how much that wasn't a fourth quarter.
$1 9 million.
Got it thank you.
Our next question comes from William Wallace with Raymond James.
Yes.
Hello, Thank you.
Hum.
I Wonder if we could further the conversation just a little bit around loan growth growth as you look at your pipelines and your return of loan demand in your markets I'm wondering if you're seeing.
Any variation of demand returning and your metro markets, you're more growth markets and then also if youre seeing pipelines rebound quicker and the more rural markets.
No I would tell you its across across the board.
Is it.
We're hearing.
Similar things in our metro markets versus our non non metro markets.
I think we expect it to be more growth opportunities in our metro markets, because that tends to be higher growth from cities than maybe some of the rural market. We've done the loan side, we benefit a lot on deposits in our in our rural markets that are important to us.
Right now, we're really not seeing any differences between any of the markets you read a very detailed synopsis each month of each of our markets that we have and they're all seen about the about the same thing same tenor.
Okay alright, thank you.
And then on the second round or a third round of guests.
P. P P. What's the if he if he might have given this but I apologize, but what's the dollar amount of the applications you all have taken to date and then.
What do you think.
He might shake out for that program all in.
264 is what we have funded.
Theres more on applications, but thats whats been funded so far Wally.
On 20 130 borrowers.
And has the pace of applications remained.
Relatively.
Similar or is it starting to flow already.
But.
Yeah, it's it's slowing a little bit obviously, you had a big big push at the at the beginning.
I think right now and this is just a.
That's an estimate but we did $853 million in the first round and our thought is we might we might do have as much of that again in the second round here. So if you are in that four $4 50 range.
Would be my expectation when we're through it could be a little higher it could be a little low but it got so we've been kind of thinking about it is we may we may end up about about half but.
Primarily it's for existing.
Customers, but as we typically would do once we've taken care of existing customers then.
We're open to doing some things for prospective customers as well too and that really benefited us in round one.
One because we picked up some new relationships as a result of that we want to make sure. We're supporting our current customer base first.
Okay. Thank you very much for that and.
Bob you.
On the same probably on understanding what you were saying did you say earlier that you had been anticipating that 85% of the round one loans not being forgiven and now you think it's 90% is that what I heard you say it'll end up at 90% now.
Said that relative to 12 31 21.
We're not making a call on what would not be forgiven at all and would go to.
In the case of the first program the end of the two year timeframe I think that'll be very minimal.
Of all day, but I don't have a number on that.
I just was commenting about the pace of forgiveness in 2021, and what we expect to be lapped.
At the end of 'twenty, one that hasnt paid off from round one okay.
Okay. That's helpful. Thank you and then last question just housekeeping what was the average loan balance of PPP in the fourth quarter.
Well I think that question was asked earlier.
Okay I'll.
No that's all right I think.
I think I got a I got a jabber on pack from my folks 822.
Remember that the bulk of that forgiveness occurred as I said to I think Casey It was in the last two to three weeks of the year.
Okay. Thanks, guys appreciate the time.
And our last question today is a follow up from Steven Duong with RBC capital market.
Hi, just a quick one again on just the buybacks.
I think you guys mentioned before that Youre looking to catch up to your peers.
Around 5% of the shares is that still.
The guide that you are looking at once you get back into it and also is there a an overall payout philosophy that the tier twos and then we get a sense of the pace.
Well I'd say with regard to your ultimate.
Ultimate capital levels, and where we kind of decided to be in target. That's obviously things we got to decide.
On a board level going forward and we just know we've got we prepared for a really significant downturn, it's not materializing. So we know we've got some day return I would tell you wanting to go back to 2019.
That we started buying back in the fourth quarter and a lot of our peers started buying back about a year or so earlier than that and they they had bought back about six 5% of their stock by the time. The pandemic hit we had bought back about one 5%. So there was about a 5% delta between us and our peer group in terms of the pace of buyback.
My expectation would be is coming out of this pandemic, we would keep pace.
Probably with what Youre going to see with our peer group, but the plan would be to be.
A laggard.
On that side, because we start with such a very high level of capital relative to our to our peer group but.
We had that been a conservative company, we want to carry a decent amount of capital and be well above the well capitalized levels, but we also realize there's a cost to keeping too much capital and we went to work on that on net balance and I think we were getting there prior to the pandemic hitting I think we would have probably gotten up to that.
That number I, probably have used our authorization by now but.
But because of the delay.
We're just going to pick that back up again, but I would expect us to be.
<unk> able to get.
In line with our peers, if not slightly ahead of them.
And just finer detail we were buying between 202 hundred 50000 shares of monitoring that.
Three to four month time frame, Steven and would remind.
Our view that we have one 7 million shares remaining on our current authorization.
Got it.
I guess during that period than you were generally.
Below a 100% payout is that a day.
General guide that we can look at as well.
In terms of a combination of dividends and capital.
Yeah correct.
Yeah, No I would defer that to our board level discussions.
I think youre on a pretty volatile environment right now it's hard to it's hard to peg what kind of percentage and ratios I think if you go back and look at us on the floor.
Five years prior to the pandemic with regard to payout ratios that that's probably a good a good look going forward, maybe a little bit higher because we're starting with a higher capital capital position. This this time, but that that would be our expectation.
Understood I appreciate it thank you sure.
Okay and question and answer session and I would like to turn the call back to Todd Kauffman for any closing remarks.
Just like to thank everybody for the thorough conversation a thorough discussion got any additional questions. Please follow up with me and Bob and John I known as well I look forward to speaking with you at one of our upcoming virtual investor events and I think you have a good day and please stay safe.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.