Q4 2020 Trustmark Corp Earnings Call
Yes.
Good morning, ladies and gentlemen, and.
Welcome to your Trustmark Corporation's fourth quarter earnings Conference call.
At this time all participants are in a listen only mode.
Following the presentation. This morning, there will be a question and answer session.
The ask a question you May press Star and then one on the Touchstone telephone.
So all of your questions you May press star and two.
As a reminder, today's conference call is being recorded.
It's now my pleasure to introduce Mr. Joey Rein director of Investor Relations of Trustmark.
Good morning.
I'd like to remind everyone that a copy of our fourth quarter earnings release as well as the slide presentation that will be discussed on our call. This morning is available on the Investor Relations section of our website at Trustmark Dot com. During the course of our call management may make forward looking statements within the meaning of the private Securities Litigation Reform Act.
And 1995.
And would like to caution that these forward looking statements may differ materially from the actual results due to a number of risks and uncertainties, which are outlined in our earnings release and our other filings with the Securities and Exchange Commission at this time I'd like to introduce the Jerry host executive Chairman of the Trustmark Corporation. Thank.
Thank you Joey good morning, everyone and thank you for joining us.
This past year has been and extremely challenging time for everyone.
COVID-19, and the effects of this pandemic significantly impacted the <unk>.
And which was the live work and interact with each other.
And as an essential business and the communities we serve our associates quickly adapted and found new ways to serve our customers and meet their financial needs. During these unprecedented times cut.
Customers embraced our digital banking platforms, and many of associates transitioned to remote work environment.
And not without challenges our associates never missed a beat.
And we leveraged investments and technology and learn lessons and have strengthened our organization.
During the course of the year, we participated and the government's paycheck protection program to help those struggling and our communities pay their employees and sustain their businesses.
We provided nearly $1 billion and PPP funds through more than 9000 loans. That's nearly two years of normal loan production and a period of less than two months.
Our associates went above and beyond to ensure our customers and communities received the assisted and read it.
And I'm extremely proud of their tireless efforts last week, we began processing applications to provide additional support for those and need under the latest round of the Sba's Paycheck protection program.
We also helped our communities and the number of ways, including programs provide meals for first responders and members of the health care industry.
Trustmark also provided funds for school and community based food programs for students and families and.
And in our slide hunger campaign contributing more than a quarter of a million dollars to food banks and pantries across our five state franchise.
As we begin 2021, and Trustmark remains committed to providing solutions for the customers and communities we serve.
Now I'll ask Duane Dewey and Trustmark, President and CEO to share with you our performance for the fourth quarter and 'twenty 'twenty one.
Gary what does this morning and are Louis Greer, our CFO, Barry Harvey, our Chief Credit Officer, Tom Allen.
And her.
We are pleased to announce net income of $51 2 million or <unk> 81 per share and the fourth quarter for the year.
Here the Trustmark net income totaled a record level of $160 million, representing the diluted earnings per share of $2 and 51.
Let's briefly review the Densification of herself, let's start on slide three of our presentation.
Loans held for investment in 'twenty, and 'twenty increased 488 9 million of five 2% from the prior year as Gerry mentioned and protection.
And the SBA Paycheck protection program and originated 972 million and long.
We also had a record level of mortgage production total one 3 billion for the year, which for against non interest income of 125 8 million.
Total deposits increased $2 8 billion or 24, 9% on the.
Prior year, reflecting the additional customer liquidity total revenue in 'twenty and 'twenty was $701 1 million.
And 14, 3% increase from the previous year.
Pre tax pre provision net revenue totaled $239 2 million and increase of 29, 6% for this time last year.
The very solid results, particularly in light of the operating environment.
Adjusted noninterest expense for the year total $455 4 million.
And since the ratio improved to 60 335 per share.
Credit quality continues to remain solid for 'twenty and 'twenty as nonperforming assets declined one 3% from the prior year and net charge offs represented point and figure out of two.
The percentage of average loans.
We maintained strong capital levels and for body consistent cash dividend.
The board declared a quarterly cash dividend of 23 cents per share payable March 15 to shareholders of record on March 1st.
And you May recall, we suspended our share repurchase program during the first quarter of 'twenty and 'twenty, given the economic uncertainties related to the paying debt as well.
And we now expect the regime and the share repurchase program through open market for private transactions, depending on market conditions and management's discretion.
We have authorization to repurchase up to one hundreds of millions of Trustmark outstanding common shares through December 31 of 'twenty one.
At this time I'd like to ask Barry Harvey and provide color a lot of growth credit quality.
Thank you the wife, but kind of on the slide for you can see our held for investments and excluding PPP loans totaled nine $8 million as of.
At December 31st of all.
The decrease of two.
And 2% from the prior quarter, and an increase of $489 million or two four of five 2% year over year CRE. Once the driver of the majority of our loan growth during 2020.
The loan portfolio and remains well diversified base both of them product type as well as geography moving.
Moving onto slide five Trustmark CRE portfolio of 66% existing 44% construction of mine development simple.
And of note that the construction of mine development is the 80% construction, 87% of our total CRE book is vertical in nature and the bank's owner occupied portfolio has a good mix between real estate types as well as industries.
Okay on the slide six the bunch of commercial loan portfolio is well diversified.
Across numerous industries and typically these loans are well secured and governed by a formulaic borrowing bases and with covenants to protect both of the income statement and the balance sheet.
On slide seven.
We have of minimum exposure as you can see the restaurants and energy Trustmark has never been and the high risk of C&I lending business and currently only has one customer of $11 million outstanding the.
The bank has always underwritten and both hotel and retail CRE and of conservative manner and our exposure of these industries is being monitored.
Carefully.
I only point for 45 per cent of our total loan book remains.
And on some type of Covid concession plan as of year end.
That's down from a peak of roughly 12% earlier in the Q2 of this year of 'twenty and 'twenty.
I'm looking at slide eight.
When conducted of fall off review during the fourth quarter of 2020 of our COVID-19 portfolio that has potentially been impacted by the the economic environment, resulting from the virus that was approximately $1 $8 billion worth of loans and we consider it.
And this category. These are loans that have had one of more payment extensions are of payment deferrals as a result of the impact of COVID-19 on the on the business and all of those debt had been better in the industry's better have been greatly impacted such as hotels restaurants et cetera.
We reviewed roughly $970 million of that one 8 billion dollar book during Q4, which gave US the coverage of about 54% we focused on the low pass credits and the non pass graded credits within that book.
Approximately 47 per cent of the laws reviewed did have one of more concessions granted to them. We also got coverage and our hotel portfolio of about 93 per cent and our restaurant portfolio and we looked and about 40% of it and then of our retail CRE book, we loved and about $4 41 per cent of that so.
Out of all of that we've reviewed and $970 million worth of credits we ended up downgrading charge.
Non past $32 million. So we felt good about the fact that we only moved $32 million into the criticized category doing as part of this review.
Nothing on the slide nine our allowance for credit losses decreased.
For the $7 million from the prior quarter.
Our our reserve calculation included increases and the qualitative changes due to the efforts to.
Fully address and recognize the impact of the COVID-19, pandemic and also reflected decreases and our quantitative reserve as a result of and the fact that our economic forecast continues to improve and it has throughout the second half of 'twenty and 'twenty at the.
And for 31, and 2020 of the allowance for credit losses on loans held for investments totaled 107 to $117 3 million.
Looking out on the slide 10, and we continue to maintain solid asset quality metrics.
The allowance for credit losses represents one nine.
Excuse me of the allowance for credit losses represents 119% of volumes held for investment that's 573 per cent of.
Nonperforming loans, excluding those that are individually evaluated and.
During Q4 net charge offs totaled only $291000 or point of 1% of average loans other real estate declined 28% linked quarter and and 60% from this time last year.
Looking at slide 11.
As Gerry indicated earlier and Duane as well of the bank actively participated in the first couple of rounds of the Paycheck protection program.
And successfully assisted a significant number of local businesses that had been negatively impacted by the COVID-19 pandemic.
Our PPP loans totaled $610 million at 12, 31, and 2020 net of the deferred loan fees and cost of $12 $9 billion Duane.
Meanwhile, very turning now for the liability side of the balance sheet I'd like to ask Tom to discuss our deposit base and net interest margin.
Thanks Duane.
Turning to slide 12.
The deposits totaled $14 billion of December 31st of.
826 million or six 2% from the prior quarter.
And up $2 8 billion for almost 25% year over year.
Average balances were essentially unchanged linked quarter, and 13 5 billion and up $2 2 billion year over year.
Primarily reflecting additional customer liquidity associated with the PPP loan program and government stimulus payments.
Our cost of interest bearing deposits declined four basis points and the third quarter to total 27 basis points.
We continued to maintain a favorable deposit mix at year end with 31% and noninterest bearing deposits and 64 per cent of deposits and checking accounts.
Our liquidity remains strong and the loan to deposit ratio of 74% of year end and reliance on wholesale funding of 3% of assets.
Turning our attention to revenue on page 13 net.
Net interest income FTE totaled $114 3 million quarter, representing a linked quarter increase of $5 million.
Interest and fees on P. P. P loans totaled $14 9 million, which was an increase of $8 1 million from the prior quarter driven by the accelerated recognition of previously deferred loan origination fees and the portion of the PPP loan portfolio of paying down.
Core net interest income of FTE was $99 4 million, which was the decline of 3 million from the prior quarter as the reduction of $3 6 million and core interest income more than offset a decline of 600000 and interest expense.
About $2 6 million of the linked quarter decline and interest income was driven by a decline and securities yield to 165, 165%, representing a linked quarter decline of 40 basis points.
The decline and the security of the yield was driven by higher residential mortgage.
The.
Lower and reinvestment yields and a reduction and yield maintenance payment receipts.
Net interest margin and the fourth quarter of $3 15 increased 12 basis points from the third quarter driven by the accelerated recognition of PPP loan origination fees.
While the core NIM, excluding PPP loans of $2 91, and the fourth quarter declined by 14 basis points from the third quarter.
Average other earning assets remained elevated during the quarter as the.
The anticipated reversal and the public fun as well of certain other deposit balances have yet to begin in earnest.
We continue to anticipate a reversal in 2021, but given the uncertainty around the magnitude and timing also expect to continue carrying significantly elevated excess fed reserve for some period of time.
And now Duane will continue with an update on noninterest income.
Looking at Slide 14, non interest income for the fourth quarter totaled $66 one of the.
A decrease of seven 6 million for the prior quarter. The linked quarter change reflects increases in service charges on deposit accounts and bank card and other fees, which were offset by seasonal decreases in mortgage banking and insurance revenue.
The 87 5 million of increase from 2000, 1940, and 20 was mainly due to increased mortgage banking revenue.
As noted the mortgage banking group reported solid for Docs say for 2020, and we will discuss this results in more detail of a minute and.
Service revenue for 2020 total of $45 2 million a high watermark.
And $2 8 million from the prior year and wealth management revenue for the year was 31 6 million and $946000 of increase over this time last year.
For the year end of 'twenty 'twenty non interest income totaled 274 6 million the increase of $87 5 million for the prior year for the fourth quarter noninterest income represented 37, three percentage of Trustmark revenue and reflected a strong and diversified revenue stream.
Turning to slide 15, our mortgage banking group had a record year of 2020 with the loan production totaled $3 billion and increase of 69, 4% for the prior year.
For the fourth quarter mortgage loan production and had a seasonal decline of 11% from the prior quarter and an increase of 58, 1% year over year.
And the fourth quarter rig count production represented 73, four percentage of the volume of 579 million of there.
Strong year for our mortgage group for sure.
Louis will now cover non interest expense and capital management.
Thank you to why we can turn to slide 16, now and as you can see we have a detail of our non interest expenses broken out between the adjusted which I'll call core other than sort of core expenses for quarter were 119 for $6 million.
For each of the five.
Linked quarter.
That increase can be it through the work of three things first and the proof of salaries and benefits represent representing additional performance based incentives of crude and the core of about two and a half million dollars.
Also increased service fee of 1.3 for technology.
For the best and technology and professional services related to that and third the increase and other expenses of about 1.3 of them and think it's a degree of niches earlier, we've made significant contributions and the fourth quarter to a non.
And on the profits of about $300000 of of the other expenses.
In addition to that.
For 2000, Twenty's Dwayne mentioned non interest expenses total $455 million and increase of $34 million and 2020 of them like tea.
For the year salary and employee benefits and reached $20 million and were due to several items, which are of weeds.
Mortgage commissions were up $10 million, which is a positive.
Cause of the revenues generated as well.
So 50% the with the commissions of.
Moving to production.
Other increases in salaries and benefits you can 0.5 and then.
Louis and explain the slack slack six day, well services and babies and increased $10 5 million for the year and again and continue to our continued investment in technology as well as professional services for 'twenty and 'twenty credit loss expense related to off balance sheet credit exposures increased about nine.
The balance as a result of our implementation of Cecil and 'twenty truly all of the real estate expenses declined about 2 million for the year as there were fewer right now and some other real estate and we've had the increased gains on the disposition of those properties also in 'twenty and 'twenty Trustmark had one.
Town charge of about four points for millions of dollars of voluntary.
Arm of program of the curve in the first Corp.
And now.
Got it for the first quarter, we would expect that our non interest expenses Cold War.
Our adjusted as we refer to all of our XI and are going to be approximately 114 to 116.
Theres a few dependence on debt primarily related to the mortgage it really depends on what that production would be and the first quarter. It seems to be relatively strong at this point, but again the guidance for the first quarters of other faiths of 116 the.
And that's the only for the first quarter of 'twenty and 'twenty.
Now moving to capital as you can sales slide 17, Trustmark and things will cause the seem from a capital perspective during the fourth quarter Trustmark and she issued the 125 million bottlers and the nice rate of three for 65 the blending.
Subordinated holding company debt.
Dancing Trustmark for England for tier two capital.
Capital ratio.
The proceeds from this issuance are intended for general corporate purposes.
As a result, Trustmark capital ratios remained solid tier.
Common tier one and 11 and 62 total risk based capital of 14 for.
From 13.25.
2019 and the.
Dwayne mentioned the board declared a quarterly dividend of 23 cents per share for March 15th to shareholders of record of Hartford.
And also Blaine mentioned weakness and our shelf and pose suspension of our repurchase program and of authorized the repurchase of the hundred maybe of a common stock.
Well of 31 2021.
And I'll mixing and our share repurchase program. They take place through open market of private transactions and dependent on what market conditions allow and and solve some of the management's discretion. So the way and with that I'll turn it back over to you.
Thank you Louis and I Trust this discussion of our fourth quarter for the interim yourself and insightful and helpful.
At this time, we do up and the floor for any questions that we've made.
Yeah.
And ladies and gentlemen at this time, we'll begin the question and answer session.
Ask a question you May press Star and then one on your Touchtone telephone if you are using a speaker phone and we do ask you. Please pick up your handset before pressing the keys and.
And then anytime of your question has been addressed you would like to withdraw. Your question you May press star and two.
Once again that the star and then one to ask a question.
Our first question today comes from Jennifer <unk> from curious Securities. Please go ahead with your question.
Okay.
Thank you and good morning.
Morning.
So just a question about what you're expecting in terms of.
Loan growth this year it would be my first question and then secondly can you talk about your interest and M&A right now you have a pretty robust capital levels.
Yes.
Very good.
For glad to twice and Jennifer I think what we're looking at this year is probably going be low single digit loan growth I think as we've.
Got it and the street last year, our 2020 to mid single digits and and that's exactly where we ended up I think for this year, where we'd be.
<unk> low single digits at this point, obviously as the year goes along and we'll have a better feel for that bank of the biggest headwind we have for 'twenty and 'twenty, one versus 'twenty and 'twenty, it's going to be we have about half a billion dollars worth of of CRE projects that are scheduled to move out Alex.
Any of those get delayed and obviously that would impact that would positively impact our loan growth and then we do anticipate as we plan out the year and anticipate and budget out of our loan growth. We do anticipate a certain amount of unexpected pay offs coming from that CRE book and we've been pretty much in line with that so we do plan for.
For the unexpected we do put it in our forecast and and our budget, but we do have scheduled debt. We believe will happen by the additional half a billion dollars worth of pay offs that we've not had that headwind and previous years, it's kind of just something of the cycles through most of the days are about 40 and 48 months' process.
This is and it just so happens we have with b of a larger number than normal better slated to leave us during 2021, the production coming out of the CRE portfolio of extremely strong and it's good now and as it's ever been and so it's not a matter of production. There. It's just a matter of some of it for some pay offs that are.
Better kind of an aberration for 'twenty and 'twenty, one versus what we experienced in 'twenty and 'twenty and 'twenty nine train and there might be what we'll see in 'twenty and 'twenty. Two so for that reason, we do we have lowered our expectations to low single digits as far as loan growth for 2021.
Duane.
How are you.
Yes.
And thank you for that question Jennifer.
And as far as the M&A as you mentioned, we're positioned well, we feel from a capital perspective.
Also feel like over the last several years, we've done some things to strengthen and improve our internal structure as it relates to our compliance related and risk management issues. Some of the restructuring Wayne did last year and the company and his role as Chief operating officer.
Sure and allowed us to grow the company and a way that we think we could take kind of sizable.
The organization.
In terms of an acquisition of our focus remains.
Within the south eastern part of the United States, we'd like to do something of.
Debt, either complements our existing footprint and would allow for us and improvement.
The improvement in our overall.
And concentration level and in certain markets or to enter some new markets and the south east that were not yet and and <unk>.
<unk> heard from from Barry and the past, we are doing business with some existing customers and some of the larger markets like Atlanta, or a nashville, or Dallas, we'd like to remain focused and pockets that we've operated in.
And entered the.
The Birmingham market.
And as you know we'd like the look at expanding further in the Houston market. If there is an opportunity there and certainly along the I 10, and I 20 corridor.
Our next question comes from Brad Millsaps from Piper Sandler. Please go ahead with your question.
Hey, good morning.
Hey, Brad.
Maybe wanted to start with the balance sheet and the margin width with Tom.
Well, obviously of a lot of a lot of moving parts.
With the particularly with some of the municipal inflows that you guys see at the end of the year. It looks like you finished or during the quarter out of just under $900 million of average liquidity total cash balances were closer to 2 billion and I'm not sure how much of that actually interest, earning cash, but could you give us a sense of kind of how you're thinking about that liquidity I know you mentioned you expect it to.
Flow out.
Kind of and the first part of the year, but kind of how that how that and kind of dovetails with kind of how youre thinking about the margin.
In 'twenty and 'twenty one.
Sure Brian This is Tom.
So as you said and we ended the year in the neighborhood of 2 billion.
Which is primarily of excess reserves at the fed earning.
Earning 10 basis points.
And just stay in very round numbers, there's about 1 billion of that but we think we've identified with large deposit of birth.
It is likely to attrite over the course of 2021.
The other billion is much more granular and much more widely distributed.
It remains to be seen what the effect of duration of those deposits is.
Certainly we would like to.
Deploy.
A portion of those and that they do have any effect of duration.
I think it's reasonable to assume that we will grow the securities portfolio somewhat we've been running with the target of about two and a $5 billion.
We'll probably grow that by about 10% for so.
But as I'm sure you've heard here during earning season and not a lot of great alternatives out there and the world in terms of.
Securities growth.
And you do a total return analysis and it's just it's not very compelling.
So we may go slow on that.
It obviously distorts.
The net interest margin.
The only good news I suppose is it's not as if we're paying.
Paying any meaningful rate.
Right on the deposits. So in other words, it's kind of of push even with the large depositors, where maybe the slight net positive to us as it was compared to a net negative.
Yeah.
Got it that's helpful and I guess, I mean that and kind of accounts for the liquidity you have now and you know, presumably you'll be getting more and as the P. P P loans and forgive him as well.
Yeah, you know, but again that that liquidity with the that's the kind of goes out of one pocket and and the other and right I mean, effectively what you end up giving up it is the run rate yield on it.
So that is a headwind to our total net interest income.
And again the square it gets tricky right at what point at what 0.2 of those balances. Yeah, you could think of P. P. P. The PPP program of wounds as being non core.
And the loans pay down and for card forgiving for the most part of what.
At what point do you start to consider the excess liquidity and non core versus core and so it's it's challenging too.
It's challenging to talk about the way, we used to talk about dynamics and net interest margin.
Totally understand and then and yeah. Thank you that's helpful. Though.
And as my follow up question.
Lewis and I appreciate the guidance around expenses.
And the first quarter I know, it's very tricky with kind of how mortgage cannot fluctuate, but just kind of curious any bigger picture kind of expense plans or initiatives regarding branch closures and you're in.
Anything else that might be on the table to kind of combat the the tough for revenue environment.
Well, Brad as you are aware of Ive announced my retirement of the bars for some town and that baton over the Tom Owens sort of across me and Mr. Duan who has been turned over from Jerry is C. E O. So I'm going to let those two Jim the comments about that.
And I wonder if there's a lot of the shop.
Yeah.
For these gentlemen.
Thank you for the question Brad.
And we are very very classy of some expenses.
Obviously in a and a challenging remedy and grass environment hits the top top line issue for us across the organization. We've challenged every executive and the company to rationalize and focus on expenses and their business units.
In terms of you mentioned branch optimization, we did close six branches in 'twenty.
Another 10 to 13 identified for 'twenty, one and.
That's part of the branch optimization program that we've been and we've had in place for 10 years of war.
So we are we are very focused on our branch system and how we serve customers. We have a number of markets where we're doing.
Doing two for ones, where we are closing two opening one and a better location and better serve our customers.
We're still getting our arms around adoption of digital platform itself.
And and how our customers are interacting with us we have.
Introduced a pretty significant number of ICANN and throughout our system and so we are very focused on the branch optimization.
Additionally, we've challenged our executive team, we've got a internal head Count management initiative every open position every.
The mid year raise every every item in terms of salary and benefit of this is being analyzed and focused on for our expense management purposes and in the.
And as Louis I think mentioned in his comments for utilizing technology and we are investing in technology, but we are utilizing that and become more efficient across the across the core company and so I would say.
Louis Day first quarter guidance, but I would say, we're laser focused on expenses for 'twenty and 'twenty, one and beyond.
And.
E Commerce and the additions.
Oh.
Okay. Thank you guys.
[noise] once again, if you would like to ask a question and please press star and then one to withdraw yourself on the question for you you May press Star and two.
Our next question comes from Catherine Mealor from <unk>. Please go ahead with your question.
Thanks, Good morning.
All right.
For what it's all about the margin and see if you could talk a little bit about your outlook for loan yields and where you were and production is coming on today and then on the other side of the balance sheet, where do you think deposit costs, well and the bottoming out later this year.
Sure Catherine this is Tom Thank you for the question.
So again, you know per the earlier discussion with Brad It's it's tough to tell.
Talk about the margin the net interest parts of the aggregate, but certainly we can provide some guidance on the primary components of core net interest income and thereby the core net interest margin and so.
And what we're currently modeling for full year 'twenty, one compared to full year 'twenty is about a 60 basis point decline in the securities yield.
About 40 basis point decline in loan yield.
Offset by about a 20 basis point decline in interest bearing deposit cost.
And so if you do the math on that that would give you a headwind.
In terms of core net interest income year over year, and 21 of high single digit percentage.
But then on the other side, you've got growth in earning assets.
And we discussed earlier when you consider the growth achieved in 2020.
When you consider the growth plan for 'twenty one.
That would provide the.
Mid single digit lift year over year core net interest income and so the net of the two you wind up and the load.
And.
A single digit percentage decline and core net interest income year over year.
And then with respect to P. P. P taken this to the total net interest income.
And we're looking at approximately the right now we're modeling about an 8 million dollar decline year over year.
'twenty one versus 'twenty.
And so again that gets you to mid single digit ish.
Percentage wise, it's declined year over year and total net interest income.
Got it and the.
Is that 8 million the criteria include and assumption for the second round of the P. P P or just the first round.
Just the for Katherine just the existing loans.
Loans on the books from the first and second round not for the current.
Current round again, it's very early days there.
And maybe I'll have buried away and with kind of the start that we're off to there and maybe any outlook on.
The volume and economics associated with that I'd be glad to Tom.
And I think we've been very pleased with the volume thus far it's been very.
Steadied the through last Friday, and send it's begun to slow down a little bit, but you know as you can imagine there's a lot of people spit and already and then and as it was and the previous two round and we had if you consider for when we ran out of money and then they replenish the money the second round. So from our point of view the the volumes have been.
And Ben good and solid as you'd expect it's a ha ha percentage of second Drawls and and and that's good for Trustmark. So we know we're helping our first round customers are first of all customers come through again and get that second trial I think that overall we've been.
Very pleased with the program we would if we do expect for the continue to be volume as the program continues to move along but we did we did expect and we did see a heavy volume of the first three to four days and then it's forgot the taper off after that the edge.
And you know the fee program for the third round, if you will and so it is a.
The more attractive for the banks, especially when you get down into the smaller loans.
And it becomes more attractive and it was previously we're averaging about $100000 per loan and that's where we were and the prior two programs as well.
Okay great.
And from the tie back how how aggressive do you think you have you have.
How soon do you feel like you you'll tend to buyback on.
And is it your and kitchen to try to.
Repurchase the entire authorization or do you look at this more as opportunistic and if there's more volatility and exactly.
Hey, Catherine this is Tom so I'll take that one.
So definitely in the in the camp of opportunistic as compared to programmatic I would describe it.
You know.
I would say that you know, we're reactivating and there's no change and in our practices in other words, we have a pretty disciplined.
Disciplined framework for comparing the returns available on deployment and via share repurchase versus other forms of deployment and.
And I think as you've seen and the path.
And that results in you know that will result in a quarter or court birds, where there's no repurchase activity.
And then it will result in a quarter, where there's substantially more repurchase activity and we feel good about the value that we've been able to add over the years by.
Conducting it in that manner. So I would say that we will continue with that practice and their you know theres not a target in terms of redeployment are relative to the sub debt issuance for example.
It is more opportunistic as we see.
Set and the past are our regulatory capital ratios are above our operating targets.
And so we do have operating target range is that we're trying to manage two with them. So you can expect the.
You will see repurchase activities and as soon as here in the first quarter depending.
And depending on what type of opportunity the market presents as to the stub.
Great. Thank you so much of the house.
Thank you.
And our next question comes from Joe You and Ken.
And this is from Raymond <unk>. Please go ahead with your question.
The other guys I appreciate taking my questions I guess as a follow up to the last question. What are your operating target range is for your capital ratios.
Well. So this is Tom Joe we've not we have not disclosed those in the past as I said, where we're above the range is and when you look at our capital ratios are I mean, and it's fair to infer that our target ranges are hundreds of basis points above well capitalized.
So we have okay.
And we certainly have room to to deploy via share repurchase.
Understood for sure.
And then and then.
What is your sense on how the mortgage business will perform in 'twenty and 'twenty, one and how do you view the gain on sale March and.
So what other fee businesses.
Burk will be of partial offsets.
Yeah.
And this is the way of I'll take the staff.
And the mortgage business, it's very difficult to forecast as you know the stated multiple times, the 2020 and was a phenomenal year and in many ways. The large and know there is seasonality first quarter of fourth quarter are usually slower quarters.
The fourth quarter was dramatically higher than what we experienced in the prior year first quarter, a similar compared to 19, albeit down from.
From the fourth quarter and.
In terms of volume.
Industry is forecasting 30 per cent or higher declines in volumes.
And you pointed out and and as you know.
Volume of production volume is one part of the equation and the other part of the gain on sales we sweep the 'twenty and 'twenty. The gain on sale margin was extremely strong for burford virtually the entire year.
And we started to see sort of pulled back in the fourth quarter and that margin.
It's really difficult to forecast and for Jack what we're going to see in 2021 it is fully.
Tom do you have any further comments on the gain on sale margin, we do see I mean, maybe not for the.
Norm loans, but we do see of tightening and some in 'twenty and 'twenty one.
And then the other offset Lewis mentioned debt when he talked about expenses.
But as the mortgage production volume goes down provision.
And the expenses go down and likewise, I think in 'twenty and 'twenty, we experienced about a $10 million of increase and our commissions are related to the mortgage production itself, we see mortgage production normalized and 'twenty, one and there's an offset on the expense side as well so.
Yeah.
Okay.
Got it and then just one more quick housekeeping question and in the slide deck. It looks like there's about a $12 9 million of fees left to be recognized under round, one and two of the PPP program is that correct.
That's roughly correct.
No.
Alright, well, thank you very much.
And ladies and gentlemen, and that will conclude today's question and answer session. At this time I'd like to turn the conference call back over to Duane Dewey for any closing remarks.
We we appreciate.
Everybody participating on today's call are we had of a very fantastic year under.
Under very challenging and difficult circumstances, we do appreciate you listening and and we appreciate your interest and our company and look forward to getting back together at the end of the first quarter. Thank you.
Yeah.
Ladies and gentlemen that does conclude today's conference call. We do thank you for attending you may now disconnect your lines.