Q4 2020 UMB Financial Corp Earnings Call
Good day, and welcome to the U N B financial fourth quarter, and full year, and 'twenty and 'twenty financial results Conference call.
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Please note this event is being recorded.
I would now like to turn the conference over to Kay Gregory. Please go ahead.
Good morning, and welcome to our fourth quarter and year end 2020 call Mariner, Kemper, President and CEO and Ron Shawcor CFO will share a few comments about our results.
Jim Rine CEO of Yum be bank, and Tom Terry Chief Credit Officer will also be available for the question and answer session.
Before we begin let me remind you that today's presentation contains forward looking statements.
All of which are subject to assumptions risks and uncertainties, including the currently unknown potential impacts of the COVID-19 crisis.
Risks are included in our SEC filings and are summarized on page two of our presentation.
Actual results and other future circumstances or aspirations may differ from those set forth and any forward looking statement.
Forward looking statements speak only as of today and we undertake no obligation to update them, except to the extent required by securities laws.
All earnings per share metrics discussed on this call are on a diluted share basis.
Our presentation materials and press release are available online at Investor Relations, Don you wouldn't be dot com.
Now I'll turn the call over to Mariner Kemper.
Thank you Kay and thanks to everyone for joining us today I Hope you and your families are safe and healthy.
2020 was certainly a year unlike any we've experienced.
And for banks, we saw the perfect storm, the timing of implementation and seasonal combined with the economic impact of the pandemic, including a 150 basis point and cut and short term interest rates and uncharacteristically low long term interest rates created additional uncertainty and variability across our industry.
Initially.
We were hopeful that we would see faster resolution, but almost a year later the pandemic along with the political and social concerns persist. Despite all this turmoil the strength of our diversified business model comes to the forefront as evidenced with our strong pre provision results.
Okay.
We have posted solid asset growth, helping drive higher net interest income even as the industry data shows weaker trends in most categories and our strategy to strengthen and build out our varied sources of fee income is paying off.
Operationally it's status quo.
As our systems continue to perform well and most of our associate base remains remote.
Even through the extended period of missing much of the face to face interaction.
And it's so important to our business. Our teams are working together and producing solid results I'm extremely proud of how our associates have adapted during this pandemic.
I'll repeat because it's so important doing what's right to support our workforce is a top priority.
And in turn allows us to maintain our customer relationships and our commitment to high quality underwriting standards and solid capital and liquidity levels.
We do see some bright spots heading into 'twenty and 'twenty, one as our customer sentiment remains cautiously optimistic modified loan balances have dropped significantly and our strong credit metrics are holding steady.
As you've seen in our press release, we had a great fourth quarter with net income of $156 3 million or $3.24 per share.
On page four and the deck. We've included a highlights table with some key points on several line items.
Pretax pre provision income was $196 1 million and for the fourth quarter and.
A quick side note about the metrics.
And it helps and comparing industry trends and highlight and earnings power, we don't want to lose sight of the tax advantage, we enjoy because of the composition of our securities portfolio and the strategic use of municipal securities.
The tax pre provision income on a fully tax equivalent basis was $202 9 million showing that tax benefit of $6 8 million.
The biggest driver of our outperformance for the quarter was the $108 8 million gain on our investment and tattooed chef that we discussed last quarter. This investment is a testament to the variety of capabilities that we have and a capital Finance division.
And we look forward to partnering with our other clients as opportunities arise and the future.
Growing fee income, including Opportunistically, adding income sources remains a key part of our strategy.
Couple of competitive advantages, we have are our lack of reliance on consumer service charges or on mortgage gain on sale income where margins have likely peaked in 2020.
No one knows for sure how long the refinance wave will last for the industry. However, we've capitalized on and opportunity we saw to add new customers through our mortgage platform, particularly in our private banking business.
We've shared in prior quarters about our investment and our retail business, which includes ramping up our mortgage capabilities. We've had a great success and the early stages of our gross building out of retail and private wealth offering as evidenced by our 70 per cent increase and average residential mortgage loans from the year ago quarter.
Which are included in our consumer real estate line on the balance sheet.
On balance sheet mortgages contributed 33 per cent of the year over year growth and average loans.
Food and PPP.
On the expense side, we had a few items and the fourth quarter that are not expected to repeat including approximately $15 million operating losses and other expenses from a few unrelated matters, such as litigation settlements and some fraud losses.
After the initial lull during the early days of the pandemic, we took a proactive approach and the fourth quarter to Opportunistically resolved some outstanding matters that otherwise might have taken place in future quarters, resulting in favorable and expeditious outcomes. While most of these matters are typical to our business the timing and and.
Packed these were outsized and the fourth quarter and.
In addition salary and benefit expense increase from the third quarter, driven by higher incentive compensation accruals based on company and line of business performance as well as a $1 million increase and deferred compensation expense.
As we've shared in prior quarters. This was offset by a similar increase and income from company owned life insurance designed as a hedge to the market fluctuation.
We made $1 2 million and additional charitable contributions and the fourth quarter.
Excluding items that we do not expect to reoccur and the normal course of business, our quarterly expenses were consistent with prior fourth quarter levels.
On the credit front nonperforming loans improved from the third quarter to five 5% of loans net charge offs were just four basis points for the fourth quarter and 30 basis points for the full year of 'twenty and 'twenty better than our long term averages.
I continue to be very proud of our credit performance and in fact since 2000 annual net charge offs to loans have averaged 31 basis points.
2020 was our best year since 2015 with average loan balances were roughly half of what they are today.
The loan risk profile table on slide 27, and the asset quality section shows the quality of our portfolio and contains a detail on the remaining modified loans by category.
On the following slide you'll see that we've seen a reduction of 95 per cent and those balances compared to June 30.
At December 31st loan modification balances had dropped to $68 million or <unk> five per cent of loans down from nine 6% and four 8% and the prior two quarters respectively.
We took a prudent and conservative approach to our reserve build and the prior quarters of 2020 and.
And our fourth quarter provision was $5 million, reflecting the quality of our loan book.
And nearly $400 million increase and non and P. P. P loan balances and the reduction and modified loans. Our quarterly provision represents two eight times net charge offs of just $1 8 million.
We believe a negative provision may be imprudent, given the still uncertain operating environment. However, the impact of more stimulus improved macroeconomic forecasts and our continued improvement and asset quality within our portfolio may make it untenable for us to leave our reserve coverage at current levels and the near future.
The modest edition and the fourth quarter brings our total allowance for credit losses on loans to 216 million at year end with an allowance to loan coverage of 134%.
Excluding PPP loans that coverage is 145 per cent for nearly two times what it was at year end 2019 prior to the adoption Cecil.
Average loans, excluding PPP balances increased 11% on a linked quarter annualized basis.
Led by consumer real estate, which was boosted by the low interest rate environment and the work we've done to build our business that I mentioned earlier.
Loan production is typically strong in the fourth quarter and that continued in 2020 with new originations of $1 1 billion.
Try to PPP balance changes with payoffs and Paydowns of three 8% of loans.
Looking ahead into the first quarter, we see a solid pipeline that looks to continue this growth given what we know today and if history is any guide it's reasonable to expect that our strong momentum and market opportunities should drive relative outperformance and loan growth and differentiated and net interest income growth and the current low interest.
Environment.
Commercial line utilization was 29% returning to its historical levels after the spike earlier and the year.
Our loan portfolio remains diverse and well balanced across several product lines geographies and industries. The total composition is shown on slide 21.
Followed by loan activity during the quarter and breakdowns of our commercial portfolios by asset class.
I'd like to point out that the Minneapolis area, one of our 2019 expansion markets now represents 1% of total loans with just over 200 million and balances. We look forward to continued penetration there.
On slide 25, we updated our exposure to sensitive industries as Youll see we removed multifamily from this list based on the operating environment and characteristics of our portfolio and B, which is comprised largely of class a properties with solid payment trends.
Loans and the remaining five categories totaled 2 billion or 13, 4% of loans. However, after an analysis, we feel that approximately 975 million or six 6% could possibly carry more risk if the crisis is prolonged.
We are closely monitoring these relationships and have regular communication with these borrowers.
To wrap up 2000, and 'twenty was a challenging year for everyone, but for you and B. It was a testament to our resilience and to our priorities, providing unwavering customer service caring for our communities and managing consistently and all operating environments.
My Sincerest gratitude goes out to all the frontline workers across all of the central industries, including the U N V bankers that have risen to the occasion and the challenge.
And to deliver the unparalleled customer experience, which we are known for now I'll turn it over to Rob for a few additional comments Rob.
Good morning, as Mariner noted our pretax pre provision results were impacted this quarter by elevated expenses due to operational losses deferred compensation expenses charitable contributions timing of certain and invoices and higher incentive accruals tied to company and line of business results.
Those items plus the impact of two additional salary days drove the 14, 6% linked quarter increase and non interest expense.
So actually net interest income increased five 6% driven by earning asset growth in both loans and our securities portfolio, along with 6 million from the acceleration of PPP loan fees.
Total, earning asset yields increased four basis points to 295% from the linked quarter due largely to PPP origination fees, which helped drive loan yields to three seven and 8% for the quarter.
Average total deposits increased three 5% on a linked quarter basis, and 22, 5% year over year to 25 billion.
DDA balances grew by $687 million due to the typical year and buildup of cash and corporate trust for municipal payments the ramp up of public funds and by commercial banking as low rates have more customers, leaving balances and DDA.
The total cost of deposits, including free funds was 13 basis points down from 15 basis points and the third quarter.
Both net interest spread and net interest margin expanded by five basis points from the third quarter.
Fourth quarter margin benefit and eight basis points from the acceleration of PPP origination fees and two basis points from deposit mix and rate changes. These were offset by the continued impact of excess liquidity and lower reinvestment rates on cash flows from our bond portfolio.
Excluding the benefit of PPP acceleration this quarter core net interest margin would have compressed approximately three basis points looking forward. The actual trajectory of our net interest margin will depend on multiple factors, including short term and long term interest rates prepayment speeds on agency mortgage backed securities exists.
Quality and the economy and the pace of PPP forgiveness.
Given what we know now we expect some additional margin compression relative to the 2.81% reported net interest margin and calendar year 2020, roughly in line with the current consensus outlook of $2 seven zero percent.
Noninterest income was $228 3 million for the quarter and increase of $115 3 million of which $108 8 million was the gain on our tattooed chef investment.
Because these and other market value adjustments will flow through our income statement and future quarters. We added a new line item called investment security gains and losses included in that category are also gains or losses on the sale of securities as well as on some other equity investments as youll see called out and our slides.
Trading and investment banking income.
Improved on a year over year basis, as excess liquidity and the markets and economic uncertainty has driven more funds into bonds.
Additionally, you may recall that we've been building out our bond sales team over the past few years, adding offices in New York, and Texas, and we're starting to see those investments pay off.
The tax rate was 18, 2% for the quarter and 15, 5% for the full year 2020.
For 2021, we anticipate it will be approximately 15% to 17%.
We continue to maintain strong capital ratios with our total risk based capital at $14, two 6% CET one ratio at $12, one zero percent and leverage ratio at 837% cash.
<unk> common equity to assets was eight 5% trends and our capital ratios are shown on slide 16, our tangible book value per share increased more than 20% during the year to $58.64 at.
At December 31 per.
For comparison, our peers that have reported so far have shown a median increase of eight 1%.
That concludes our prepared remarks, and I'll now turn it back over to the operator to begin the Q&A portion of the call.
Thank you we will now begin the question and answer session.
Ask a question you May press Star then one on your Touchtone phone.
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At this time, well pause momentarily to assemble our roster.
Our first question will come from Ebrahim <unk> with Bank of America. Please go ahead.
Yeah.
Hey, good morning.
Morning Ebrahim.
Well I guess, just first Mariner if you could just touch upon just the growth outlook. I think you had one of the better known and good performance both for the fourth quarter and full year net.
Talk to us in terms of what people have heard from other banks.
A relatively slow first half to half of the yard and then some pickup and the back half.
And just talk to us and dumped of what's your expectations out on loan growth and also tied to that as you think about business development on the fee income side is there anything in particular that you see exciting from a growth opportunity standpoint.
Yes, Thanks Ebrahim.
And as I said in my and my prepared comments.
And as we have historically done and we've given a bit of a look into the first quarter, which.
And so on the first quarter basis, we expect to have the same kind of loan growth via the pipeline that we had have had and had and the fourth quarter as it relates to the remainder of the year. What I would say is all things remain true to that and vendors through before which is we're underpenetrated across our geographic footprint.
And we are under penetrated vertically on and asset class basis related to the maturity and getting our share.
Within the markets that we do business.
And so and then we have.
Again deep deep pipelines uninterrupted sales activity.
No reason to expect anything different than what we've been able to produce for many.
Many many years related to the.
Under penetration and.
And it really exceptional sales force.
On the.
Fee income side, there are several things that.
Continue to look good for us.
Our trading and underwriting business, both on the public private side and just the pure public side continues to look strong as we've built out offices in Dallas and New York.
We expect to continue to see benefit from expanding that business.
Over the last couple of years.
Corporate Trust one of the one of the most exciting opportunities and it's yet to be seen yet, but it looks as the way the way that biden is moving pretty quickly and infrastructure bill would be very meaningful to our corporate trust and public.
And our public underwriting business as we are one of the major players on a national basis and that space. So we're excited about seeing that come to fruition, we stand ready to be a pretty pretty major player when that does happen.
Fund services continues to be.
And well positioned as there's been a lot of consolidation and that business with consolidation that puts the players that have consolidated kind of on the sideline for a while is that.
As potential targets for business development wait to see how that.
Plays out so we've our pipeline continues to grow there we've had and the year over year basis, our businesses grow nicely.
On the back half of the year.
As things progress if the economy continues to go as we all expect it to.
We expect to see our card business, particularly.
Particularly because it's a lot of it is related to.
Commercial spend.
We expect that to perform when that when and if that happens and.
And we agree with.
Most other banks have said the back half of the year that should be.
And at the time, we would see that.
Our Investor solutions business continues to be strong as as we continue to see opportunities for centex.
And and our wire house and brokerage business remains strong and.
And those and with the markets being strong and the way. They are the activity is good there.
And we're investing and our wealth management business.
We've just invested and a brand new reporting and trading system.
And are doing some hiring they're pretty excited about that.
And back to the lending front. We also do have two expansion markets, which I noted and the conference call.
Minneapolis now represent represents.
1% of our total loans and we just expanded into that market just a year ago. So prospects for that are pretty great and.
We've also moved into Salt Lake City and.
Have high hopes for that.
Yeah.
And that will help Ya man and I, Thank you and just Oh.
Uh huh.
Can you talk about margin pressure.
I was wondering if you could help us just in terms of if you talk to us around.
Core NII outlook and can you remind us how much of PPP fees are left.
And do you expect to accrete as these loans are forgiven and sorry, if I missed a day during the call and thank you, yes. So what I said me and bring them on the margin was if you exclude the PPP acceleration that we had in the months of November and December and the fourth quarter. Our margin would have been down about three basis points on a core basis, excluding PPP accelerate.
And now just over half of our P. B P fees were recognized in 2020, so we call.
Call. It 45 per cent of those fees from round one of PPP still remaining to be recognized in our income statement.
And then the core margin I mean, as I said in my prepared prepared comments a lot of these will depend on what's happening with excess liquidity with more stimulus coming our way and more programs and the industry might be and for longer periods of excess liquidity, which will obviously impact net interest margin. The other thing is obviously long term rates as well now with a 10 year having.
Crept up a little bit the mortgage rates haven't reacted so prepayment speeds and what happens with the reinvestment rates on our mortgage backed securities book or totally our bond book will also determine the path of margin. So that's kind of my thought process.
And I would just add that we also do have round two on PPP.
Determine how much more we end up doing with that.
Is that the doors are open for that business and we've been we've been sending.
Applications. This SBA starting last week.
And any sense, how big that could be.
Not yet but are highly likely to be a lot smaller.
Okay, and just to follow up.
And I get what you said on the margin in terms of the core net interest income do you think you bottomed out or do you sense and more pressure on the NII.
No and Mariner said in his prepared comments the same comments that he said on loan growth in terms of you know are outperforming relative outperformance that's still expect it to be true for the net interest income side. So we will certainly grow through the current rate environment, which is obviously not very conducive through our balance sheet growth opportunities. So those comments doesn't matter.
And I'm talking about just now also are pertinent to NII.
Understood. Thanks for taking my questions.
Thanks Ebrahim.
Our next question comes from Chris Mcgratty with <unk>. Please go ahead.
Good morning, everyone.
Morning, Chris.
Ron maybe just start with you on the and the expenses you called out in the and the DAC and you called out some items not expected to recur and you talked about a little bit and your prepared remarks I'm interested in kind of a what you view as kind of the right jumping off point for for 'twenty 'twenty one.
For expenses.
Yeah sure Chris I mean, we don't give any forward guidance like that but I'll go back to what Mariner said in his prepared comments right. If you exclude some of the noise that we talked about and our script.
The fourth quarter of 2020 run rate would have been similar to the $202 million or so that we had and the fourth quarter of <unk> 19, and so that's a good comparison and so a lot of the.
And again, the noise I would say that would be probably the run rate debt.
Jump off from.
Okay, and and the operational expenses and what exactly what exactly is that.
Operational loss at all.
And we.
Not prepared to kind of get into the nuance of it but there.
There are there expenses that would happen normally anyway, and we took advantage of 2020 to get them behind us.
And settle things looks like expeditiously and in our favor.
Okay.
And you had the gain to do that and this quarter.
And in terms of.
Kind of use of capital going forward I hear you on the organic growth.
I'm interested and comments about our.
Resuming the buyback, which is a lot of banks have done and also thoughts on M&A. Thanks.
Sure. These comments so feel a little scale because there are similar to what we said for a long time, obviously the first place we would want to use our capital is to build our business so that would be through the investment.
And people and technology and.
And then and M&A right.
M&A, we continue to look we are spending a lot of energy and time.
So that we sure like to be able to find something.
But yes, so the energy is being spent there.
As far as buybacks and dividend increases.
Side of what we've historically demonstrated.
That will just depend on whether we're successful investing having opportunities to invest and the business first and then kind of where our stock is trading and how we're feeling about that related to.
Market dynamics et cetera.
So I mean, the answer obviously, you've seen our history, we have done buybacks.
We're not opposed to them and we just it's lower down on the on the ranking.
Just to add to that and maybe just to add to that and the fourth quarter, we did buyback.
Buyback about 67000 shares when our stock was.
Down lower than where it's trading now so we will be opportunistic about buybacks and and have commenced the resumption or resumed buybacks.
Okay.
And Rob if I could just on the P. T V. Do you have the total.
And accelerated fees or the fees and the quarter and then what's the what's the 45 per cent represent on a dollar basis going forward.
We disclosed the fees.
Celebration part is about $6 million incremental to our fourth quarter and most of it happened and the month of November and December previously disclosed I think on a 1 billion and a half of PPP loans based on the size of loans and the number of loans. We had the average revenue that we expected was about call. It two 3%.
And kind of can do the math based on that.
Alright, so 45% of that and that's okay got it thanks.
Our next question comes from Nathan race with Piper Jaffray. Please go ahead.
Yeah, Thanks, Hi, guys good morning day.
A question on credit and it looks like most of the items improved and the quarter and theaters were down charge offs were very low deferrals came down to less than 1%.
But I guess.
The ACL increased a little bit and it looks like that was due to portfolio changes. So I guess does that just increases and criticized loans and if so kind of what portfolios are driving those.
Increases and criticize.
Okay I'll take those first I mean part of it is the balance sheet growth. So if you look at our point to point basis, our balances were up about 400 million. So when you look at our allowance coverage ratio. It actually came down a couple of basis points. So that's the primary driver of why we had a reserve build if you will.
Yeah and as far.
And as criticized obviously you won't see that till you see the 10-Q, but nothing nothing will be.
Unusual.
There and.
Really the most important thing to think about.
When he has come out as.
We have very little migration and.
And our criticized from the first category of wash down to doubtful, which has been the same case as long as I've been around 25 years.
Got it that's helpful. And then just changing gears, a little bit and going back to the gross.
Growth in deposits and 2020, just curious if you guys have any updated thoughts and just in terms of the stickiness of that deposit growth and.
Entering 2021, and it was the plan and just from a reinvestment perspective within the Securities book just to continue to reinvest cash flows or do you guys kind of where you see yourselves and some of that excess liquidity to work and the bond book.
And.
The growth opportunities are across loans.
Net I would say all of the about right. Obviously, we are trying to invest it and the market. Obviously as you heard comments from Mariner about the loan pipeline that we see and the first quarter and maybe even into 2021, obviously the first choice is to deploy those deposits into loans. So we will continue to do that and then on the bond portfolio too.
Subject to all the due diligence that we do and municipal securities and what we buy on the mortgage backed side.
We continue to see the portfolio grow and.
And then the rest of it is sitting on our balance sheet and the fed account basically as excess liquidity. So it's gonna be a combination of those and that.
Pink that won't continue into 2021, just because of as I mentioned and all of the stimulus programs and excess liquidity and the economy.
And just as far as the stickiness goes we monitor that pretty closely.
I think the diversity of our deposit base really makes up for any nuance too.
And whether there is excess liquidity on and.
Particular balance sheets, whether it be institutional corporate or.
And the personal categories.
I think we feel pretty comfortable that the diversity of our deposit base really.
Cushions us against.
Whatever excess liquidity and might be and system.
Okay.
And the color. Thank you.
Thanks, Nick.
Our next question comes from Jared Shaw with Wells Fargo Securities. Please go ahead.
Hey, good morning, good morning Jared.
And Im just looking at the ACL.
Yes, great great info and there in terms of how you built that out and about a third of the ACL is due to sort of macroeconomic conditions.
Should we be thinking about that going forward.
And as we're starting to see some modest improvement there you sort of heavily depending on.
Holding on to qualitative overlays and little bit longer or should we think like maybe second half of the year Youll start reevaluating that debt.
Access and we could see that to be back into to earnings or absorption growth.
Well I'll take the first stab at this and our team wants to jump in and help out here and two as I can.
And top of the house related to my comments I already made.
R.
Our thought on that is it.
The original purpose of the additional provision that we did and and the first quarter of last year was tied to the pandemic and.
And as far as I'm concerned, we're still Smith smack in the middle of that so it's premature.
I think that we would.
Do some of the releases that others have announced.
And we don't think Thats prudent however.
Related to your question about when that would change.
That will relate to what happens with the vaccine.
<unk> delivery and how quickly everybody gets it and whether there is what's.
And what's the stimulus and.
All of the extra government programs do and to your point, whether the back half of the year, we really feel like we are out of this thing or not what I'd say about just or.
So that the algorithm is <unk>.
Two two that is complex and it includes things like loan growth old years, rolling off and whatever performance good or bad was in those years.
Macroeconomics and you've got the whole the whole thing and there and we have to kind of live by that algorithm.
And so the news gets better.
And in a material way will be heart Hart will be hard pressed not to do some sort of.
Release of provision at some point and the year.
But we have to watch the data and where you.
And I'll, let the data data dictate what we do there.
And and make sure we feel real comfortable with it.
Okay, Thanks, and then and <unk>.
Spencers, if we use a sort of a tier two.
And the.
Based on our first quarter.
And then some of the growth Youre talking about I mean should we really since 2021 going to be a year of good positive operating leverage.
You should expect to see.
So the decline and the efficiency ratio I guess telecom should we be thinking about operating leverage.
Well I mean improvement for sure, but I think where we come out on operating leverage there are some headwinds related to the operating environment the interest rate environment in particular.
And.
So I think any meaningful improvement in.
And operating leverage.
<unk> will be hard to get to I mean, we will be working at it all year long, but I think the interest rate environment is a pretty.
It's a pretty heavy wind.
And for all of us as an industry. So.
We will be working hard and operating leverage and we may have some nominal improvement and operating leverage, but I wouldnt expect and this and this year to see any meaningful improvement and operating leverage.
Okay. Thank you.
Yeah.
Our next question comes from David Long with Raymond James. Please go ahead.
Good morning, everyone.
Hey, Ron the period, ending deposits were well above the average and the quarter now I know theres some seasonal impact that you have but looking at the first quarter here, how much of that growth and deposits here. It looks like at the end of the quarter is seasonal versus sticky and and how do you expect to defend your NIM.
If you have this excess liquidity.
So, yes, it's really tough to look at our quarter and.
Deposit balances, particularly as you enter public funds business. Obviously, we have a lot of as Mariner talked about we have a lot of diverse businesses that have different seasonal aspects associated with it obviously this growth as well organic growth that we're seeing and and then there's the impact of all the excess liquidity and the economy. So it's really hard to parse it out, especially this year.
But.
And the balance sheet was higher because of public funds season, which usually ramps up in November and goes through the February timeline, so that happens every year and.
And then and the asset servicing or fund services business, there's always some volatility depending on what clients are doing with with cash balances and there as well, but as Mariner said, we feel pretty good debt all of our lines of businesses are provider of funds for us and all the initiatives that we've put in place will help us grow those core deposits. So they.
It will be pretty sticky from that standpoint.
Got it and then and then reinvestment rates and the Securities. What are you looking at right now.
I think you said that the roll off and that quarter was and the one mid 180 range.
That's right and the and the new mortgage backs and municipal depending on the mix can be anywhere from one and a quarter to 140.
Got it.
Okay. Okay and then the second question I had is related to your deferrals and obviously real nice to see those.
<unk> come down there, but the current deferrals, if youre still on deferral have those been downgraded and where do they stand and the risk spectrum at this point.
I'll take that.
Yeah.
And it's case by case some of those deferrals have been downgraded and.
And typically those have been downgraded to a watch.
And those would be as you would expect and the hospitality space.
Other ones that maybe are on a second deferral, we haven't necessarily downgraded if we're of the opinion that it's totally pandemic.
Related and.
The belief that once we come out of this and the economy gets back to a more normal state that the particular borrower gets back into.
The position they were and prior to that so it's case by case as the broad answer.
Yeah.
Got it thanks I appreciate the color thanks, guys.
Thanks, Dave.
Again, if you'd like to ask a question. Please press Star then one.
Our next question is a follow up from Chris Mcgratty with J P. Duffy and please go ahead.
Great Thanks for that and just.
Want to make sure I got a couple of things written down right Rob.
The tax rate guide is that a GAAP or is that and FTE guide.
The GAAP tax rate of 15% to 17% okay.
And then the and thank you referenced that 270 margin.
And in your prepared remarks, I guess I was interested and number one did I catch that right and was that a GAAP NIM or is that excluding the PPP.
That is on a reported basis, so it's fully taxable equal and of $2 70 ish. This is which is.
Your models consensus models are at so that's on a reported basis that assumes a straight line amortization of the PPP fees so to the extent.
And for giving US accelerates then you could see some outperformance to that but that's just on a steady state.
Normal amortization of the PPP balances.
Okay and that was the kind of your velocity and the $2 70 for the 20th of full year 'twenty. One is that alright weighted here yet correct.
Thank you.
This concludes our question and answer session I would like to turn the conference back over to take Gregory for any closing remarks.
Okay. Okay.
I'm going to add something here at the end because nobody asked about this.
And.
No and then.
And I and others.
It's going to add something real quick which is just that.
And the TTC upfront and nobody really asked about that it is a line of business. We do expect to continue to see.
Opportunities and gains and that line of business, so anyway, and nobody really asked about that.
And I expect that to be a onetime opportunity with that I'll turn it over to Kay.
Thanks, Mariner and thanks, everyone for joining us today. This call can be accessed via replay at our website and as always if you have further questions. You can reach us at 8168, and <unk> has a long history of stability no matter the estimate.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Okay.