Q4 2020 Fulton Financial Corp Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the Fulton Financial fourth quarter 2020 results Conference call. At this time all participant lines are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone.
Phone. Please be advised that today's conference is being recorded if you require any further assistance. Please press star zero I would now like to have a conference on what your speaker today, Matt chose what director of Investor Relations. Thank you. Please go ahead Sir.
Good morning, and thanks for joining us per Fulton Financial's conference call and webcast to discuss earnings for the fourth quarter of 2020.
Our host for today's conference call is Phil Wenger, Chairman and Chief Executive Officer, joining Phil or Curt Myers, President and Chief operating Officer, and Mark Mccollom Chief Financial Officer.
Our comments today will refer to the financial information and related slide presentation included with our earnings announcement, which we released yesterday afternoon.
The documents can be found on our website at <unk> dot com by clicking on Investor Relations and then on news. The slides can also be found on the presentations page under Investor Relations on our website.
On this call Representatives of Fulton May make forward looking statements with respect to Fulton financial condition results of operations and business day.
These statements are not guarantees of future performance and are subject to risks uncertainties and other factors and actual results could differ materially.
Please refer to the Safe Harbor statement on forward looking statements in our earnings release and on slide two of todays presentation for additional information regarding these risks uncertainties and other factors.
<unk> undertakes no obligation other than as required by law to update or revise any forward looking statements and.
In discussing Fulton's performance Representatives of Fulton may refer to certain non-GAAP financial measures. Please refer to the supplemental financial information included with Fulton's earnings announcement, released yesterday and slides 11, and 12 in todays presentation for a reconciliation of these non-GAAP financial measures to the most.
Comparable GAAP measures.
Now I would like to turn the call over to your host Phil Wenger.
Thanks, Matt and good morning, everyone and thanks for joining us today.
Today, we will follow our usual format I'll provide a high level overview on the quarter and the year.
Then Kirk will share some thoughts on our business performance.
And Mark will discuss the details of our financial performance.
After that we would be happy to take your questions.
We were pleased with what was able to achieve in the fourth quarter of 2020 and for the year as a whole given the environment in which we have been on operating.
The prolonged presence COVID-19, and the extended low interest rate environment have made.
We're a very challenging year.
But to me the word that best describes 2020 is resilience.
And by working together on a company or.
Our customers and our communities have withstood nearly a year ex.
Drilling challenges.
Thanks to the creativity of the Falcon tier the partnership of our customers.
And the support of our shareholders.
Fulton has continued to fulfill our purpose to change lives for the better.
Even in these most trying times.
Overall, many of our customers have managed to hold their own and we were pleased that nearly 10000 small business and nonprofit organizations called on us.
For approximately $2 billion in loans through the small business administration Paycheck protection program.
PPP.
We administered round one of that program in 2020, and we began helping our customers through round two earlier this week.
In 2020, there were other signs of customer resilience as we saw significant deposit growth and diversified fee income for the year.
Our mortgage business had a historically strong year and loans grew in both our consumer and commercial lines of business when excluding the PPP loans, our wealth management business also performed beyond our expectations.
Our asset quality remains stable.
And Mark will discuss this in more detail on a few minutes.
And we successfully access the capital markets with our subordinated debt offering in March.
And the preferred stock offering in October of 2020.
Enabling us to continue to build our capital position.
Despite the challenges of the low interest rate environment.
And the effects of COVID-19.
We were able to make progress toward achieving our strategic priorities.
We continued on our branch optimization activities in.
In the fourth quarter 50 of our financial centers changed formats to better meet their customers' needs and.
And on January eight.
2021, we consolidated 21 financial centers into nearby offices.
Since 2014, we have consolidated 58 offices or approximately 23% of our total locations.
Continuing to make our retail system more efficient.
We continued our focus on growing our presence in the urban markets of Philadelphia Baltimore in June 2020, we opened our new yarn 56 financial center in Baltimore.
And we have announced plans to open a new financial Center and University City Philadelphia.
We are planning to open additional branches in both Philadelphia and Baltimore later in 2021 or early 'twenty 'twenty two.
Over the past 18 months, we have been recognized in both Philadelphia and Baltimore for our revitalization in support of those communities.
We are pleased that we are increasingly viewed as a contributing member of these vibrant and historic cities.
Some of this community support is now coming from our newly created Fulton forward Foundation and.
On the independent private foundation funded by Fulton Bank that makes donations to nonprofit organizations.
Net share our vision of advancing economic empowerment, particularly in underserved communities.
Last year the foundation made special grants to support organizations that were addressing COVID-19, and the communities we serve.
In 2020, we work to deliver an appropriate return to our shareholders.
Maintaining our quarterly cash dividend of <unk> 13 per share throughout all four quarters and declaring a special cash dividend of <unk> <unk> per share in November.
Okay.
Doing these things help us demonstrate to our shareholders how much we appreciate their investment in Fulton financial.
And 2019, you may remember that we purchased two wealth management businesses and in November 2020, Fulton Bank acquired the outstanding stock of benefit works, Inc. A registered investment adviser and retirement services for Central Pennsylvania.
This acquisition is helpful financial advisors accelerate its growth rate.
So now I'll turn things over to Kirk for more detail on our business results Kurt.
Thanks, Bill and good morning, everyone.
As Phil noted our fourth quarter performance produced solid results and I'd like to share some more detail on several key areas.
Overall loan growth trends for the quarter were solid excluding the impact of PPP loans, we continued to generate relatively consistent amount of commercial loan originations and we saw continued residential loan growth.
Commercial loan balances, excluding the PPP loans increased $190 million for the quarter on an ending balance basis.
Looking forward our commercial loan pipeline at December 31, 2020 is down only one 3% from a year ago, we expect that loan originations in the first quarter will be adequate to support our annual net interest income guidance in our outlook.
In consumer lending our loan balances grew $58 million linked quarter on an ending balance basis more specifically residential mortgage results continued to be solid producing linked quarter ending balance loan growth of approximately two 6% or $80 million. This growth is in spite of significant refinance.
Activity.
Given our asset sensitive balance sheet and the high quality nature of these residential borrowers we have room to continue growing this segment on our balance sheet for next several quarters and we expect to continue to do so.
Deposit growth far exceeded our expectations for the quarter as noninterest bearing demand deposit balances grew two 4% despite experiencing some seasonal outflow on municipal deposits during the quarter.
Overall deposits grew $109 million on an ending balance basis with growth in checking and savings deposits offset by planned run off of higher cost certificates of deposit.
We continue to actively manage our deposit portfolio and deposit costs declined six basis points during the quarter down from 29 basis points to 23 basis points.
Moving on to fee income our fee based revenues decreased overall during the quarter. As a reminder, the third quarter was very strong in terms of fee income in.
In the fourth quarter, we experienced declines in certain areas offset by growth in others.
First mortgage banking revenues declined $7 million after a record third quarter. These.
These results were still $4 million higher than a year ago. These results were fueled by both strong originations and historically strong gain on sales spreads.
Total residential mortgage originations for the fourth quarter of 2020, we're just over $807 million, an increase of 59% from the same period last year and our purchase activity is 57% of total originations.
Our mortgage pipeline currently sits at 737 million at year and seasonally lower than the third quarter, but continuing to be elevated.
Debt, we've seen in recent quarters year over year, our mortgage pipeline is almost three times debt of the prior year.
Next our wealth management business performed better than we anticipated as the stock market edged higher for most of the quarter and we continued to benefit from a high level of recurring fee business.
Our assets under management and administration grew to $12 8 billion at quarter end from 11 8 billion last quarter.
Capital markets revenues, which are primarily commercial loan swap fees declined in the fourth quarter. This decline came on the heels of several very strong quarters.
Moving to credit overall, we are pleased with where we are given COVID-19, using the seasonal methodology. We feel we are properly provided for potential losses in terms of delinquency. We saw an increase linked quarter, but delinquency remained stable year over year.
In terms of net charge offs, we actually had net recoveries of $3 3 million further improving from a net recovery of $2 4 million last year or last quarter. We're very pleased with these results in consecutive quarters as.
As we experienced very low charge offs in the current environment and we continue to work hard to obtain recoveries.
Slide 14, we have provided updated loan referral trends through December 31, 2000 points commercial loan deferrals are down significantly to approximately $200 million or 202% of the commercial portfolio.
Slide 15 provides a summary of the segments. We believe may be more at risk due to COVID-19, our special mentioned designation has increased over the past quarters. As a result of continued monitoring of the commercial portfolio is specifically the greater than $5 million relationships and the relationships.
Industries that were highly affected by COVID-19.
In our consumer portfolio. The total loan total amount of consumer loans under Covid deferral decreased 56% down to $130 million or 3% debt portfolio.
Despite these very positive near term credit trends our outlook remains cautious for the next few quarters, while our loan deferral trends have been favorable to date certain segments of our portfolio may be affected by the second wave of COVID-19 that continues to lengthen the full reopening of the markets we serve.
Now I'll turn the call over to Mark to discuss our financial results in a little more detail.
Okay.
Thank you Kurt and good morning to everyone on the call.
Unless I note otherwise the quarterly comparisons I will discuss are with third quarter of 2020.
Starting on slide three earnings per diluted share this quarter were <unk> 30.
On net income available to common shareholders of $48 7 million.
This is <unk> <unk> lower than the third quarter included in these results were $15 4 million of expenses recognized as part of our cost savings initiatives previously announced.
Our fourth quarter performance included a lower provision for credit losses, and higher net interest income.
Offset by lower non interest income and higher noninterest expense due to the charges related to the cost savings initiatives I just mentioned.
Compared to our quarterly guidance loan growths on operating expenses were in line and deposit growth net interest income on our tax rate all exceeded expectations.
Our noninterest income came in just a little bit below our guidance.
Moving to slide four our net interest income was $161 6 million, a $7 $5 million increase linked quarter, mainly due to fees earned on PPP loans forgiven during the period.
Our net interest margin for the fourth quarter was 275% versus $2 seven zero in the third quarter.
Five basis points of the linked quarter increase largely resulted from PPP loan forgiveness and related fee income recognition.
Without the $6 $4 million of accelerated PPP fee income during the quarter. Our net interest margin would have been $2 six 5% in the fourth quarter.
As Phil and Curt mentioned deposit growth and retention continues to be stronger than we anticipated and our fourth quarter average deposits grew by approximately $400 million.
We also grew our investment portfolio during the quarter as we invested the net proceeds of our $200 million preferred stock offering.
And we also selectively deployed some of our excess cash into mortgage backed securities as the yield curve steepened in the fourth quarter.
Our average loan to deposit ratio declined slightly during the quarter 92, 6% to 91, 4%.
Turning to credit our fourth quarter provision for credit losses was $6 million versus $7 million in the third quarter and $20 million a year ago.
As you know COVID-19 had a significant impact on our allowance for credit losses in the first half of 2020.
But as economic forecasts have eased in the second half of the year. So have the needs for our allowance for credit loss.
Of course, this can change in future periods based on new loan origination volumes low mix net charge off activity and economic projections.
Nonperforming loans as a percentage of total loans, excluding PPP loans were 85 basis points for the quarter up from 83 basis points linked quarter, and 84 basis points a year ago.
Including PPP loans nonperforming loans to loans were 78 basis points up three basis points on a linked quarter basis.
The allowance for credit losses, as a percentage of loans at year end was $1 six zero percent, excluding PPP loans, an increase of four basis points from the prior quarter.
The allowance for credit loss as a percentage of nonperforming loans was 189% at December 31.
An increase from 188% last quarter.
Moving to slide six noninterest income excluding securities gains was $56 million down approximately $8 million from $63 million last quarter and in line with $55 million a year ago.
This was slightly lower than our guidance as a result of lower mortgage sale gains.
Mortgage banking revenues were also impacted by $1 $3 million impairment on our mortgage servicing rights during the quarter compared to $1 5 million in the prior quarter.
This brings our total MSR impairment for the year to $10 5 million.
Wealth management revenues were $16 million for the quarter on increase of 5% from the third quarter and an increase of 9% from the prior year cash.
Capital markets revenues.
Declined linked quarter after a very strong performance for the prior four quarters.
Moving to slide seven our noninterest expenses were $155 million in the fourth quarter up $16 million linked quarter.
However, as I previously noted in the fourth quarter, we incurred $15 4 million of expenses related to cost savings initiatives. Excluding these expenses. We came in at the low end of our guidance range.
Slide eight provides detail on the special charges recognized in 2020 related to these cost savings initiatives.
In total we expect this initiative will reduce our operating expenses by $25 million on an annual basis.
We anticipate reinvesting a portion of these savings in 2021 in order to accelerate the digital transformation of our company.
We also plan to continue making normal ongoing investments into our franchise in 2021.
However on an overall basis. We expect this expense initiative will result in 2021 core operating expenses lower than our 2020 core expenses.
Our effective tax rate was 95% for the quarter compared to 13, 4% in the.
Third quarter of 2020, primarily due to lower pre tax earnings.
Slide nine gives you more detail on our capital ratios during the quarter, we raised $200 million of tier one qualified preferred stock, which increased tier one capital and related ratio.
We continue to maintain solid capital and liquidity.
Our previous share repurchase program expired on December 31 of last year, and we are considering a new repurchase program for 2021.
Lastly, we would like to provide our thoughts about forward guidance for 2021.
We are streamlining our guidance for 2021 to the following areas.
We expect our annual net interest income to be in the range of $620 million to $640 million.
We expect our provision for credit losses to be in the range of $30 million to $50 million for the full year.
We expect our annual non interest income to be in the range of $210 million to $220 million.
And lastly, we expect our core operating expenses to be in the range of $550 million to $570 million for the year.
And with that I will now turn the call over to the operator for questions D. G.
As a reminder to ask a question you will need to press star one on your telephone.
Sorry, Your question press the pound key please standby, while we compile the Q&A roster.
Our first question comes from the line of Frank share All day from Piper Sandler Your line is now open.
Good morning, Rick Good morning, Dan.
Just a question on Mark you just mentioned are buybacks and you know.
Kurt I know you talked about credit and you said I think optimistic on no outlook remains cautious for the next couple of quarters. So I just wonder if.
When you talk about buybacks is that more so.
After in the back half on a year or are you comfortable enough with the.
The outlook to maybe institute something earlier.
Yes, I think Frank we continue to.
<unk>, whether or not that would make sense.
I think it would be.
Likely that that would occur anytime in the next next month or two.
But I think as the year goes on.
I think.
It would it would make sense for us too.
Consider deploying some of our capital on that one.
Okay, and just on the heels of that.
You know given the guidance.
You provided.
And on the.
Obviously the preferred raise.
Boosted your tier one.
Just curious if any if the guide includes or you could share any sort of target on tier one or TCE ratio.
At year end 2021.
Yes.
Our capital guidance for our internal minimums.
<unk> to be what they've been in prior quarters.
And so on so nothing has changed with respect to our our capital targets.
Okay, and then just finally on non Triple P.
You know I I E.
I know, it's very early days for the second round, but.
Just curious your thoughts.
Compared to the.
The rush.
On the first round just just wanted your thoughts.
How large you think the opportunity.
For the second round could be for Fulton.
Yes, Frank it's Curt So we have more application alive as of $3 30 on Monday, and we do have pretty significant application.
Volume is a little too early to tell the average loan amount appears to be less than on round, one, but we do think it's.
Potentially a significant opportunity again.
Okay, great. Thank you that's all I had.
Thank you. Our next question comes from the line of Chris Mcgratty from Kv that William Your line is now open.
Good morning, good morning, everybody.
Hey, Chris.
I wanted to start on the guide if I could.
The one that was materially different from what we were thinking about was the noninterest income.
I'm interested in kind of other pressure points.
That you see on the horizon from noninterest income is it simply.
Mortgage normalizing or are there other kind of structural issues with service charges given liquidity levels with some of your borrowers.
Yes, Chris.
It's predominantly mortgage share we had such a great year.
This past year.
It's a little difficult to project, how thats all going to work out so.
Did the best we could.
It is a mortgage.
And how much of that like what is it what is the base case for mortgage and that tended to 'twenty, what's the contribution.
Well this year Krishna that we were north of $40 million.
But with that $40 million.
Average the last three quarters.
3% gain on sales spreads they came off just slightly in the fourth quarter third quarter. They were $3 20 to fourth quarter, there were 312, but.
I mean that that can't sustain itself and I think with the.
With the increase in the 10 year recently.
That will have some downward pressure on gain on sales spreads going forward. So if you normalize back more to where gain on sales spreads were in 2019.
Which is like on the $1 $51 60 range.
If you normalize back down on a day or even somewhere in the middle it's easy to see where you would get to our overall guidance.
Great. That's helpful. Thanks, Thanks, Mark on.
On the credit guidance.
I guess I guess, most peers are kind of refraining from giving specific or a target I guess could you speak to the visibility that you have with that 30% to 50 million provisions. It seems fairly optimistic but obviously, we all know there's a quite a bit of uncertainty that's out there.
Well I think when you look at.
When you look at what our trends have been and when you know again, we use Moody's for our economic forecast. So if you believe in their base forecast, which will be a gradual reopening of the economy.
And understanding how that seasonal standard works.
Largely built our reserves to account for future losses that may come on as a result of.
COVID-19, and the effects of that over over the prior three quarters.
So then going forward.
Our reserve needs would be primarily growth.
And then replenishing.
To some extent net charge offs, but based on the economic outlook you could see that one 6% ACL to loans decline over the next couple of quarters and be totally appropriate.
Okay. Thanks, and then maybe one last housekeeping if I could I think you mentioned $6 $4 million.
On the fees I guess, what was the total fees of Pvp in the quarter on.
I guess, what's left to be to be realized.
Yes. It was it was just under $14 million per quarter. So if you recall, we had $60 million roughly of fees in round one.
We had just under $14 million in the fourth quarter what remains.
For 2021 is about $33 million.
From from round one.
Got it thank you.
Thank you. Our next question comes from the line of Daniel Tamayo from Raymond James Your line is now open.
Good morning, guys. Thanks for taking my question day, and then again.
Yeah.
Maybe just.
Looking at the add on.
On the capital discussion, we talked about repurchases.
Asked the question last quarter.
What would it take to.
You get more active in M&A discussions.
Maybe just following up on that what your current thoughts are there.
If you're having any if you're having any discussions what.
Those other banks are sounding like it's more likely less likely to sell at this point just kind of what's your take on the environment.
Well.
We're anticipating in the second half of this year that M&A activity is going to start increasing.
And we're having some.
Some discussions but.
I think.
Once we get to the middle of the year.
Folks are vaccinated economy starts moving back to normal.
I think youre going to see an increase in activity.
Okay.
And then switching gears here.
Following up on on Mark's discussion of net interest margin.
You had some nice growth on deposits you've got some some additional excess liquidity now.
What is how are you thinking about the deployment of that excess liquidity as it relates to your deposit portfolio and how quickly.
You can do that and then how does that play into the net interest income forecast for 2021 per guidance.
Danny.
I think the whole industry has expected in 2020.
The more of the PPP funds that were in bank deposit accounts would be used.
In combination of that and just other deposit growth.
Ben I am pleasantly surprised at the level of deposit growth, we have seen all year, which has created in excess.
Excess liquidity situation.
We continue to believe.
But at some point when the economy does reopen that some of those deposits then will be used business deposits used to restore inventories and restart capex.
But.
And I would expect at least for the first half of 2021 that we would continue to have elevated.
Elevated excess liquidity and we deployed a little bit of that in the fourth quarter, but I think youll continue to see elevated liquidity remain until the back half of the year.
Okay and then.
So I guess I can I can play with that and what kind of ex everything else you would expect to see.
Perhaps some acceleration in net interest income growth on the back half of the year as you might see some some margin on sponsor them based off of that deployment.
Yes, and again and again a lot of that deployment is based off of assumptions on what the reopening of the economy looks like we've seen declines since COVID-19 hit on line utilization.
So without net line utilization goes back to historic levels.
Pre COVID-19 levels.
That would translate into commercial and a little bit of consumer growth in the back half of the year on into 2022.
Okay, great. Thanks for answering my questions that's all out.
Thank you. Our next question comes from the line of Erik Zwick from Boenning and Scattergood. Your line is now open.
Good morning, guys.
Thank you Eric.
I wanted to first just start with a follow up to I think it was something about curt's commentary about the loan pipeline on the commercial on pipeline I think down just about 1% year over year and feeling confident that what you would pull through in <unk> would be adequate to support.
The full year.
Net interest income outlook curious I guess first in terms of what industries are you seeing strength in demand from your customers and then <unk>.
Secondarily, just thinking about loan growth for the full year, you've got the if I kind of assume that the expectation that the remainder of the first round on PPP.
It's gone by midyear in terms of forgiveness and things of that nature, I guess theres about $1 8 billion.
To come off there.
Outlook for organic growth.
A positive enough to offset that headwind for the whole year or is that likely a drag in terms of kind of what the net growth will be for the year.
Eric just to clarify my comment that yes that was excluding PPP originations.
Originations of our core consumer and commercial.
Business the commercial pipeline is essentially at levels pre COVID-19.
So we do think that.
We will allow us to continue on origination pace.
That would be consistent with what we are.
Putting in the <unk>.
<unk> forecast for NII.
And then Youre questioning industries that are go ahead, yes, I was going to answer your question on types of business and the pipeline remains very diversified.
And.
Is picking up market share and growing with with current customers. So we work really hard to continue to have a very diversified portfolio. So there's not really any specific.
<unk> debt.
<unk> is more heavily weighted there than historical.
Thanks for the color there and then Mark maybe just curious.
In terms of the effective tax rate for 2021, and I think I've been using something in the 15% range is that still good or bad.
Should we expect something potentially difference.
Yes, I think thats, a good thing to start and less unless Washington tells us something different.
Okay, and then last one for me.
Looking back to 2018 in 2019.
Fulton is generating an ROA in excess of one person that came down in 2020, given the reserve build and some other factors just curious looking at 2021 and your outlook.
About 1%.
Kind of hurdle will be achievable at this point I guess, what is the path back at this point and what else what other levers do you potentially have.
At your disposal to to improve profitability at this point.
Well I think I think when you look we continue to be an asset sensitive bank. So obviously getting to a fully reopening the economy getting back to the E <unk>.
Feds target rate of kind of 2% for inflation and then and then having an increase in short term interest rates would certainly help but we don't expect debt until 2023. When you look to 2021, and maybe then going from there to 2022. It will be continued we can get continued positive operating leverage through just.
Loan pricing.
Continuing to really keep a lid on expenses.
We obviously went out with our expense initiative and I think that's going to allow year over year decline in expenses. So we can have a two year stretch where you have very low kind of core expense growth.
On over a two year period of time.
Which then doesn't require a whole lot of earning asset growth to generate that positive leverage.
Thanks for taking my questions today.
Thank you. Our next question comes on the line of Russell Gunther from D. A Davidson your line is now open.
Hey, good morning, guys moving.
Hey morning Russell.
Interest.
Part with a clarifying question on the NII guide is that.
On an FTE basis number one and then number two does that include yards.
Remaining PPP fee recognition assumptions.
That is that is it is not on a fully tax equivalent so that is our GAAP number.
And it does include our assumption of what percent of that remaining $33 million will be recognized during the year. While we think the majority of it will be.
Some portion of those customers will stay and convert to a full term loans.
Okay I appreciate the color there and then.
Do you guys have the criticized classified number for this quarter.
If so can you talk about how it compares linked quarter and then in the context of your provision outlook.
Being.
The fairly benign do you think that number has peaked.
Yes, Russell it's Curt.
So we do have the numbers on linked quarter, we did provide some detail on the.
On the <unk>.
Covid risk go on page 15 in the Investor deck, you can see specifics there that also gives you.
The total special mentioned substandard.
That trending E continues to trend.
<unk>.
Specifically in special mention substandard is.
Pretty much flat year over year.
And we are seeing that in the affected industries predominantly debt contributes to most of that increase.
In special mention that we've been working through.
All year. So we continue to continuously monitor the portfolio make sure our risk ratings are accurate given the.
Current circumstances, but we do have an increasing trend in special mention specific loans.
Okay, and then I guess as you monitor and we move out of deferrals I mean is there the potential that that continues to trend higher.
Do you think we're through the bulk of that negative credit migration at the end of 2020.
We continue to monitor customer performance I think it depends on how the economy.
Opens up and recovers again most of the increase is from heavily COVID-19 impacted customers.
Customers so with the we have them rated appropriately we feel right now based on the outlook.
Debt.
As evident in the in the modeling.
Okay.
Got it alright, guys Thats. It for me. Thank you so much thank you.
Thank you. Our next question comes from the line of Matt Breese from Stephens, Inc. Your line is now open hey, good.
Good morning.
Good morning.
I wanted to go back to Mark's comment on the on the core NIM ex PPP I think you said $2 65.
Yes that sounds fairly stable quarter over quarter.
Just curious about your expectations for the core NIM trajectory through throughout 2021.
On whether or not we trough tier or stabilized tier and then perhaps core NIM upside based on liquidity deployment.
Or is there still more pressure on loan yields and margin expansion and expect that yet.
We think on a core basis.
If you stripped out the full effects of PPP not just the fee income acceleration.
We think that.
Approached or are in the trough here in the fourth quarter.
That's going to be masked a little bit in the first half of 'twenty, one because youre going to continue to have no acceleration of that remaining $33 million of unencrypted fee income.
A good chunk of that May come through in the first half of the year.
So you may see on a quarterly basis, our net interest margin go up the first half of the year and then the third quarter fourth quarter. It may optically then come back down a little bit, but we think on a core basis, we're approaching the floor now.
We still have a CD book.
Over the first three quarters of 2021, Thats about $1 2 billion.
Combined in those three quarters still to come due.
As those have been repricing, they've been repricing lower by over 120 basis points. So.
So we think there's still opportunity there too.
<unk> put our push our deposit costs down a little bit lower.
And then as you know, we'll see what the effects of the steeper yield curve or in this other pricing discipline that we have throughout our throughout our other loan segments.
Understood maybe just a follow up there. So you think about the NII guidance less.
On the majority of PPP.
Fee being recognized lets call the mid point, roughly $600 million in core NII or $150 million in core NII per quarter.
Wanted to get a sense for how you feel about the fourth quarter of 2021, the exit quarter and Ware and core NII might might fall and expect it sounds like you expect it to be north of 150 and on an upward trajectory is that debt correct.
Yes, Yes, I think that's fair, although keep in mind the numbers in the back half of the year are then going to be further clouded by round to PPP.
So we're going to be we're going to be talking about PPP going into going into 2022.
With me on film.
Okay and then just just wanted to follow up here what are in fact, new C&I and CRE loan yield coming on the books at.
Yes.
Yes.
Good day.
Yes.
Come on this as total commercial total commercial was a shade over 3%.
Okay.
Okay last one from me is just.
You mentioned a bit of a cautious outlook on the credit front given the <unk>.
Ongoing second wave can you just provide a little bit color. There in terms of what you. What you expect to happen as a result of that is are you, suggesting that there's a second wave of higher deferrals coming or NPA formation that we should.
Expect or higher charge offs, just just a little bit more detail there.
Yes, Kurt just to clarify.
Second wave, we feel we're in the middle of the second wave. So we're not thinking of ways beyond this and really we're looking here in the northeast at getting through the winter and getting through the current wave that we have now that is not force.
I think waived.
On debt.
Okay.
Great. That's all I had thanks for taking my questions.
Thanks, Brad and thanks, Matt.
Thank you at this time I am showing no further questions I would like to turn the call back over to Phil Wenger CEO for closing remarks.
Well. Thank you again for joining us today, and we hope youll be able to be with us when we discuss our first quarter results.
In April.
Yes.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
Yes.
[music] business.