Q4 2020 Bryn Mawr Bank Corp Earnings Call
Good morning, ladies and gentlemen, and welcome to the Bryn Mawr Bank Corp, fourth quarter 2020 earnings Conference call.
All participants will be in a listen only mode.
So do you need assistance. Please signal a conference specialist by pressing the star followed by zero.
After todays presentation, there will be an opportunity to ask questions.
I asked the question you May Press Star then one on your Touchtone phone.
To withdraw your question. Please press Star then two.
Please note this event is being recorded.
On the call today, we have Frank Leto, President and Chief Executive Officer, Mike Harrington, Chief Financial Officer, and Liam Brickley, Chief Credit Officer.
Before we begin please be advised that during this conference call management may make forward looking statements.
Please refer to the disclaimer labeled forward looking statements and safe Harbor and the earnings release and presentation for more information regarding what constitutes a forward looking statement.
All forward looking statements discussed during this call are based on management's current beliefs and assumptions and speak only as of the day in time. They are made the corp does not undertake to update forward looking statements.
For a more complete discussion of the assumptions risks and uncertainties related to the business. You are encouraged to review the corporation's filings with the Securities and Exchange Commission located on their website at Www Dot P. M. T Dot com I would now like to turn the call over to Frank. Please go ahead.
Thanks for lithium and I'd like to thank you all for joining our call today.
While 2020 was a year full of unimaginable challenges, it's been affirmed what we've always believed at Bryn Mawr Trust.
We can survive and thrive in the most difficult circumstances.
We all went through very difficult times in 2020, but I'm hopeful we're headed toward recovery and that all of us will come together as a nation United in a common purpose to deal with all of the challenges of the current environment.
And Furthermore, we focused our attention on our core strength.
Providing exceptional service to our clients.
Our past successes, our index is indicative of our perseverance and the perseverance of our per employee.
Not only met but exceeded expectations time and time again.
We look forward to better days ahead, but acknowledged that these days may be proceeded by more challenges and therefore, we continue.
To be prepared for such.
We ended the year on a positive note reporting fourth quarter net income of $15 $5 million or <unk> 78 cents per diluted earnings per share for the.
Full year 2020, we reported net income of $32 $6 million or $1 63 diluted earnings per share.
In a year in which we experienced unparalleled uncertainty around credit liquidity interest rate the economy, and our personal well being we're very pleased with our performance.
While the loan portfolio shrunk modestly year over year due to lower demand in the marketplace, coupled with a more conservative approach in light of economic uncertainty.
Our diversified business model.
For the Jackfish free.
Typically our wealth group set a new record high.
The end of 2020 assets under management grew to $19 billion under Gen boxes leadership.
This represents growth of 10% from the third quarter and 15% from the end of 2019, nearly all of our wealth business lines grew quarter over quarter and year over year, a remark Trust company of Delaware Group has done, particularly well increasing assets under management by over 26 per cent from last year.
Just again speaks to the importance of our diversified businesses in times, such as we are experiencing.
Other core fundamentals that for Mark remained strong cash.
Total when liquidity have grown throughout 2020 credit quality continues to improve and we completed several initiatives as discussed earlier this year.
As William will discuss in more detail momentarily loan deferrals were just above 2% at the end of the year from a peak of over 20% in June and I'm proud of our credit teams work in helping our clients through this pandemic.
Yeah.
One initiative I'd like to highlight includes the ongoing investments in technology.
Investments in periods past allowed the majority of our employees quickly and effectively transition to a remote working environment.
Because of the success of our remote working environment, we made the decision to make working from home permanent and subsequently actually exited a substantial portion of our office space and for more.
Further our ongoing reviews of our branch locations and customer behavior led to the announcement of additional planned branch closure.
<unk> in April.
We remain committed to the ongoing review of our branch network, but have elected to take a measured approach to ensure we align our physical distribution in a way that is consistent with our customers' needs post pandemic.
That said the likely outcome of this alignment will be fewer branches over the next few years.
Heading into 2021, we're cautiously optimistic as it pertains to the general economy, and our ability to grow organically.
Other examples of our FERC focus towards organic growth as the announced hiring of George ROE for Stella.
It will serve as our managing director of commercial banking in the southern New Jersey market.
South Jersey as a natural extension of our current markets and George will work to accelerate our commercial client acquisition in this region.
While we believe uncertainties will persist.
We have positioned ourselves accordingly, and identify opportunities with our market in order to drive shareholder returns are.
Our markets remain competitive from high levels of liquidity within the industry. However, we're confident in our team's ability to capture our market share with our one BMT approach.
Finally, I'm proud to announce the board of directors approved 27% share dividend. This marks our 10th consecutive year.
Full year dividends for can increase.
I'd like to now turn it over be called for Mike to discuss the fourth quarter results Mike.
Thank you Frank and good morning, everyone.
As Frank noted for the fourth quarter 2020, we posted GAAP income of $15 $5 million or 78 cents per diluted share.
The fourth quarter included several nonrecurring items that nearly offset one another.
Our recurring items related to the downsizing of our real estate portfolio.
Thank you you may recall included the sales one back office building.
The early lease termination of chew bags.
Okay.
Cash.
Savings related to the closures will begin to be realized from the first quarter of 2021.
For the fourth quarter net interest income was flat.
A lack of loan growth coupled with a stable net interest margin contributed to this outcome.
While we continue to see pressure on loan yields.
We're able to offset this lower yields by reducing rates paid on deposits.
Related to the provision for credit losses.
<unk> to the current and forward looking economic conditions, specifically, Pennsylvania unemployment.
But for the release of the allowance for credit losses during the quarter of $1 $2 million.
Non interest income was up 4% quarter over quarter.
This was primarily a result.
Of a sale of a building has discussed a moment ago.
Nonetheless during the fourth quarter and throughout 2020, our fee income held up extremely well.
With wealth of particular note as overall revenue was up almost 8% relative to the same quarter last year.
Noninterest expenses increased 10% during the quarter.
The increase was primarily a result of expenses related to the downsizing of the bank facilities portfolio.
Incentives related to the sales activity in the wealth Division.
And an increase in our deferred compensation liability a function of the strong gains from the stock market during the quarter.
Expenses would've been essentially flat quarter over quarter, if not for these three items.
Further a portion of the incentives paid during the fourth quarter rate.
It relates to revenue that will be recognized in 2021.
Turning to the for your results.
Net interest income for the for your.
2020 decreased 3% to the significant drop in yields that impacted both our loan portfolio and deposit pricing.
Can be seen in our tax equivalent net interest margin, which decreased 39 basis points during the year.
Provision for credit losses nearly <unk>.
Increased fourfold from 2019, the primary driver of the increase was the adoption of Cecil coupled with the deterioration in the economy.
Related to the pandemic following our day one adjustment.
Yeah.
Non interest income year over year was nearly flat and held up very well in light of the pandemic.
As Frank discussed the wealth Division had a great year in terms of assets under management growth and year over year revenue growth.
Which was over 5% when adjusted to.
To exclude the mitigation payments.
Related to the unwinding of the mutual fund.
A particular note is that our trust business, which grew assets 26%.
And revenue by 29% year over year.
Noninterest expenses decreased 3% from 2019.
Some of you may recall last year, we mentioned, we were taking a more diligent and proactive approach towards expense control even prior to the pandemic.
When the pandemic cat for accelerated several of our expense savings initiatives.
As a result of these initiatives help support our ongoing investment in technology.
While allowing us to keep the accident expense was essentially flat versus the same quarter last year.
When adjusted for the cost of downsizing our facilities portfolio in this quarter.
At the end of 2020 or our balance sheet was positioned to handle the challenges and opportunities heading into 2021.
We have ample liquidity.
And a strong capital position.
As depicted on slide seven asset quality has improved effort the deterioration earlier in the pandemic.
We have seen the vast majority of our asset quality indicators improved and stabilized from the high points.
As we sit here today, we're confident with the level of our allowance for credit losses.
Yeah.
Looking ahead, we anticipate continued uncertainty and the potential for ongoing volatility as it pertains to the overall economy and markets.
As for the net interest margin, we believe it could come under renewed pressure.
If the overabundance of liquidity in the marketplace causes additional compression of loan spreads.
As a potential counter to the net interest margin pressure, if the yield curve kind of hold onto its recent steepening, we could see modest improvement in the margin.
Regarding loan growth or stroke rate uncertainty as it relates to the direction of the economy.
Areas like the speed of the vaccine rollout government stimulus and the resumption of pre pandemic economic activity are variables that will influence the demand for credit.
Given these unknowns loan growth is likely to be muted in the first half of the year and rebound thereafter.
Similar to the past year, we remain committed for thoughtful expense control.
We'll continue to execute our technology plan and hire talent to expand our business that said given the actions we took in 'twenty 'twenty, we expect expense for it to be minimal in 2021.
That I will turn it over to Lance to discuss credit.
Thanks, Mike.
Overall loan portfolio, so a slight shift in composition during the third quarter.
Experienced solid growth in the commercial real estate.
Specifically.
Right.
Decreases in residential construction and commercial.
Alright.
Looking closer.
Slide 10.
Some of the main.
Real estate segments within the portfolio, which we consider more susceptible in the current environment, we saw for stabilized to improving conditions and outlook from our clients.
We work very closely with our clients and there has been a growing positive sentiment around the future operating environment.
Building to manage through the uncertainties going into the first half of 2021.
While we believe it will still take some time to fully rebound from the difficulties of 2020. We are we are noticing improving client confidence since the last quarter.
We reported a modest reduction in hotel exposure at year end.
A substantial number of borrowers in this sector went into the crisis with modest leverage other fared better than expected.
Overall, our commercial real estate portfolio remains strong.
The strong underlying fundamentals, including stable.
Yes.
Flipping to slide 11, we are pleased to report the boroughs declined approximately 2% of the total portfolio in Europe.
Significantly lower approximately 21% high point at the end of the second quarter of 2020.
Our largest loans segment or.
Which is R crede non owner occupied.
Accretion from a high of 28 per Se in June two 4% at year end.
We saw a significant decrease of deferrals in the Cree owner occupied portfolio from a high of 29% down to 2% Europe.
The hard work of the team working closely alongside our clients yields confidence in the improvements.
During the fourth quarter overall criticized loans decreased.
It's been a substantial reduction in classified loans as we successfully reduced our exposure or exited several transactions.
This was partially offset by net new downgrades to the special mentioned category for a number of clients whose business models.
Such as commercial real estate operators in the retail space and for.
Outpatient surgical centers.
<unk> been impacted by Covid.
Despite the increase in special mention credits for the reduction in NPA and.
Classified exposure is a positive sign however.
However, it remains too early to tell if this is the beginning of a trend.
We will have a clearer view of the new normal trading conditions as the Covid vaccine rolls out over the next few quarters.
Economic conditions continue to improve.
Along with an increase to our customer sentiment, we would expect that these portfolios.
Could show further improvement.
Slides 12, and 13 provide a more granular view laborde for oral history and future expectations as of 12 31 'twenty.
We see on slide 12, a portion of the create non owner occupied concentrated in hospitality and restaurant borrowers.
Continued deferments into this year.
The vast majority.
Approximately 87% of these commercial deferrals are currently on an interest only payment schedule.
These deferred loans are expected to return to regular P&I schedules in the second quarter of 2021.
We remain committed to working alongside Covid impacted clients to assess where prudent and necessary.
Slide 13 details the breakout between first second and third term deferrals as seen in this slide third deferrals are continuing into 2021 and are expected to reduce to near zero for the second half for the year.
Slide 14 breaks out.
So for all the information for our largest loans segment, the crede non owner occupied segment.
As mentioned a moment ago. This segment represents the bulk of the third time deferrals, but.
But we are confident that the majority of these borrowers will resume full payments later this year.
As Frank and Mike touched on the 2021 out book earlier I wanted to add a few comments after working with many of our customers during the pandemic over the last 10 months, we have managed through a wide range of unknown and uncertainties some of which persist to this day.
We all have considered worst case scenarios at one point or another but at the end of the day, we relied on our sound underwriting practices.
Periods end.
And patients to overcome these obstacles from where.
We were at the Middle of 2020 to now I can say the customer sentiment has improved and there was improving clarity and enhanced confidence with respect to the prospects of a continuing economic recovery.
If we continue on the path of improving economic conditions, I believe or credit quality measures will improve.
Prospect for loan growth as well.
With that I will turn the call back to Frank.
Thanks Liam.
And operator, we will open up the line for questions. Please.
We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone. If you are using a speakerphone. Please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then two at this time, we will pause momentarily to assemble our roster.
The first question today comes from Casey Whitman of Piper Sandler. Please go ahead.
Hey, good morning.
Good morning, Jason.
So congrats on the success and the wealth business just last year. So just wondering it's been awhile since you did.
The acquisitions in the wealth space. So I was just curious as to what your guys' appetite was for wealth acquisitions. This year.
No Casey.
You know, we're always looking at things and opportunities.
Nothing's come across are you now.
It made sense for us.
Generally there are other acquisitions acquisitions that banks have done if you look around the country. They haven't all been that successful.
I think probably our most successful acquisitions in the past had been of trust companies of a similar structure and model to what we've had.
So we don't need to stretch, we're not trying to take any unnecessary risk with these types of acquisitions, because we've had such success with your organic loan growth I think we'll continue to look at opportunities as they cause like I say as they as they develop and if there's something that makes sense and it is strategic to what we're doing you know obviously <unk>.
Execute on it but for.
For the time being we'll continue our focus on organic growth.
Yeah.
Makes sense I guess, while we're on the topic any updated thoughts on just how.
How are you looking at bank M&A this year as well.
Pretty much did always uptake out wealth and <unk>.
I mean, just we haven't seen anything really.
T J for us and that really is going on there wouldn't be franchise dilutive for example, or that would be.
That will really be additive.
Our markets. So again, we're just we've been spending the last couple of years building up the infrastructure for growth building up technology for growth, putting a really I think one of the best teams in community banking in place and I think that'll be continue to be our focus as we go forward unless something pops up that that'll that'll make sense for us to jump into maybe I think.
Our market pretty well, there's a lot of opportunity here on the organic side. So we think we can keep that growth trajectory going.
Once this pandemic settles down we'll keep it going in the right direction.
Understood makes sense. Thanks, I'll just ask one more maybe on the margin.
All it stabilized this quarter I appreciate the outlook you gave just wondering if you could give us some details on <unk>.
Where new production yields are coming on relative to the portfolio yield and just whether there's still any pressure there for GAAP is kind of narrowed enough yeah.
Yes, I'll take that cash and good morning.
Yes, I mean, new yields are.
Coming on lower than I'd say on average than the actual yield but it's there.
They are pretty close to one another so that the overall yield in the book is about $390 for 89090 <unk>.
For profit putting on new business just below that at this point.
What I alluded to in the prepared commentary is that there's so much liquidity out there and then there is a.
Theres not as much demand for credit so.
Two things are working against each other to potentially drive spreads lower.
But the good news is the curve steepen, a little bit so that might offset some of that bad debt downside pressure on net new yields.
Thank you.
Oh.
Thanks Louise.
The next question today comes from Michael Perito, K B W. Please go ahead.
Okay.
Hey, guys good morning.
Alright.
Thanks for the color on the call and on the outlook for 'twenty 'twenty, one I had a.
Question on expenses I want to get a little bit more clarification on that in the on the slides slide our apologies slide eight you guys mentioned net expense growth is expected to be minimal versus prior year.
If I'm looking at the prior year I have oh.
A core number of about $141 million for for 2020 I'm. Just curious I guess is is that how you're thinking about the the number for 2020, when you talk about minimal growth or or are there. Some mcdonalds for those items in the fourth quarter debt that you alluded to in your prepared remarks, Mike I tried to keep it simple and just use the GAAP.
GAAP numbers because the.
So I think its share we're just stopped where want to hold it flat relative to those the actual reported number not tried to do all the ins and outs.
That's too complicated.
To explain and dissect so we're just seeing a normalized number for <unk>.
Q4 in particular, just because there was a lot of expense related to that so.
Normalized number for Q4 in years.
<unk> 35 that would have taken a number down to about $35 million.
And then we just expect that number a day kind of hold.
On a relative basis going forward and that should be pretty close to.
Got it okay. So so you know I mean you guys.
Yeah, right right, but you you you mean, when you say minimal versus prior year. It sounds more so like you all that fourth quarter.
Run rate you guys are hoping that will hold but there could be some upward pressure to it depending on the pay for your investments and your growth or opportunity. Yeah. I mean, so the occupancy expense coming down will be lower year over year that money's getting redeployed into technology and people basically.
But again, we expect the expense growth number to be very.
Minimal so for even low single digits, if zero that's not chiro.
Got it.
That's helpful. Thanks, and then.
Micro Frank I was wondering if you guys could maybe.
Hum.
Walk us through a little bit you know the kind of updated technology Road map for the next year or two which is as you guys see it I mean I know you guys are pretty advanced in your rollout of encino across the platform at this point just curious if there's any other kind of specifics that you can share that that you guys are looking at debt you think could be impactful and we should be mindful of as well.
You know as we begin 2021 here.
Sure.
It really is.
The story for the first half of this year for sure was launched three modules encino between the end of 19 through 20.
And the commercial piece, which is the largest piece and probably the most complicated of law is would bring the throws up right now should we should be done hopefully.
Close to the end of the second quarter net that's the goal. So I don't want to say, we're not doing anything in the interim but that is really prime focus for everybody to get that completed and try to get the efficiency start to get the efficiency sort of system like that.
We're also in the in the throes of a technology transformation internally and hopefully maybe next quarter, we'll have Adam on the call and he can give you a little bit more color like you did it on our last Investor day, but we're moving a lot of our technology into the clouds are getting out of it.
Management, managing hardware business literally getting out of that so that's a big focus going forward. Some of our subsidiaries. We're looking at a platform changes and some upgrades and additions to their platforms and as always just like any street.
I think appropriate strategic planning.
Adam has done a really nice job of putting together a plan for us over the next two to three years. So.
It'll be a continued investment in upgrading our technology, hopefully, resulting in continued efficiencies and I think part of what you're hearing from Mike.
Keeping expenses flat and one of the reasons, we're able to do that is because of what we've invested in over the last couple of years.
I think everything we do going forward is with an eye towards that kind of efficiency built.
Does that help share of helpful. Yeah, No I got it thanks, Brian and.
Our debt. It does thank you and then just just lastly, you know as we did.
Little bit of a two part question here, but just you know it sounds like the credit environment is fairly stable and the optimism other clients is improving although you guys are still remaining a little cautious and just making sure that it doesn't go the other way and you know, we'll see what the stimulus from the vaccine looks like but for the most but it seems like it's fair to think that you know.
Certainly provision expense in 2021 could be lower than than what it was in 'twenty 'twenty, but as I think about profitability overall, obviously, the somewhat more normalized credit costs will help but.
But how do you guys think about I mean, it is there.
Room with kind of that expense outlook that you laid out to improve the pre provision.
Earnings profile of the bank in 2021 or does the low rate environment.
Make that kind of a challenging endeavor and end and likely may be more of a 'twenty 'twenty two environment. If we get some steepness at that point or any kind of color on how you got from thinking about that over the next 12 months or so.
I'm going to take that Frank.
Oh I'm sorry.
Go ahead.
So Mike I think that's the latter so I think the idea around holding expenses flat as a function of just the pressure on the day.
The earning side of the house and growing that year over year, you know as we mentioned I think the long for us probably a.
Loaded on the back end of the year so.
So you end up with.
A modest.
Increase in average balances year over year, and then you get the full effect of the decrease from the margin from the prior year.
So we you know we're gonna for an endeavor to grow we think we can grow our fee income business offset some of that so and that leaves you with the with the situation you described.
Second part of your your second scenario, which is its difficult until until we should average current average loan growth start to materialize on the balance sheet and net debt really surgery into 2022.
Okay.
What we're hearing with respect to the <unk> rollout.
We're just trying to be cautious about.
How we looked at the environment really prior to getting back to some kind of a normalized.
Lights that we barely.
Yeah makes sense and I lied I got one more follow up as you brought something up Mike I just want to clarify what you know if I look at the earning asset base today right Theres still probably like year on year up maybe three or 400 million Bucks right with some of the liquidity that came in from P. P P and and just the environment itself. I mean at this point is it still safe to assume near term that a lot of that liquidity in that.
Balance sheet size is probably going to stick around or or are you seeing any updated thoughts around kind of liquidity normalizing from from some of your customer base.
Well, we haven't seen it normalize yet so in fact that at the end of the year was sort of saw a liquidity in Washington as a bank. That's some of that's some of that's gone back out but we.
We don't feel like there is for me a big change in the liquidity profile and again it goes back to.
That's one other constraints, we believe in terms of loan growth, especially in the first half is there. So much liquidity that is for when does the uptick kind of be there to.
Use that liquidity and then.
Subsequent to that and when will the credit demand.
Turn to where it was pre pandemic so.
No no real change, Mike I think we're still going to see us sitting on a decent amount of excess liquidity.
When I say that the balance sheet will be liquid from a deposit standpoint.
We're trying to run that out where we can where it doesn't make sense to hold it and put it in overnight and then we've also done some things in the investment portfolio to try to get some of those dollars invested.
It was a little bit better yields and then overnight cash than.
<unk> been successful there and you can see we've had a if you wanted to take a deeper look at the at the information.
<unk> L series from Brian put a credit book of about $100 million of.
Clo's and some sub debt and things like that to supplement the for lack of loan growth.
Really helpful. Thank you guys.
Appreciate the update and stay well.
Thanks, Thanks for the question.
The next question comes from Erik Zwick of Boenning and Scattergood. Please go ahead.
Hey, good morning, guys good morning.
I just wanted to start on non interest income in the capital markets.
Revenue specifically that obviously.
From quarter to quarter based on a certain activity I guess, if I look at it from a full year perspective from the level of about $9 5 million in 2020.
Any thoughts on how that trends going forward here in 2021.
Mike do you want to take that for yeah, I think the.
That numbers are good that's a good way to think about it Eric So we're just going to have volatility.
A lot of that revenue is dependent on when we close loans access two are linked.
So in some of what we might have expected and cure for some of that.
Activity rolled into Q1 of this year.
But that nine and a half number $10 million number we think a good number for thinking about it on a go forward basis and.
For all that land at least land there.
2021.
Got it and then switching gears to the newly authorized round dose a P. P. P. Just curious you know how much demand are you seeing how active do you intend to be and do you anticipate selling again as you did the first time around.
For me to take off line.
Wherever you go ahead, Mike if you want or not or if I'm correct. Yeah, I mean, that's great.
All right well, great anecdotally I mean, we're not seeing as nearly as much demand as we saw the first time through per Se. There is I mean, we've got some some requests.
We are not going to participate in round two.
We sold the portfolio too.
The very large servicer of loans, we worked out an arrangement, where we were referring our customers to them.
You know at the end of the day, it's there's so much operational risk for a bank like Bryn Mawr, who's not an SBA shop and it doesn't have.
Extra 100 people in the loan operations group to manage the credits.
As you know as we if you look back I mean, everybody thought everything was going to run off real quickly and.
Forgiveness has taken a lot longer so that there is still a process you have to go through with those loans and I think it served us really well due to exit the portfolio back in June because we've been able to devote really 100% of our attention to the customers with world, which is what we wanted to do I think that's how we got our deferrals down.
To be there going forward for the customers and you know for.
Their needs going into 'twenty, one 'twenty two.
Yes.
Got it thanks, and yeah I agree you guys had a lot of good and accurate for site to anticipate some of the difficulties and the extension in the whole process and then lastly, Eric Eric just to add.
Just to add to France. So.
It's really the first step and I guess, just the first week. The it's been opened so we will be getting.
We'll be getting a report we actually get a later today to see what's coming into our partner company.
Company, we partnered with that it'll be handling it.
The second request will go to that partner company in and we will share in some other revenue related to the second requests as they come out, but we haven't gotten any data yet at this point, we'll actually get that later today will be our first report.
Yeah, great look for it to that.
Last one from me pivoting off the expense discussion and Mike you mentioned that you know any of the savings that you generate from the branch closures will likely be reinvested in CAC and I'm, calling I guess on that latter front in terms of the talent you guys had previously talked about wanting to add to the ranks of the commercial lenders and it sounds like you have done so recently with the.
Additionally, the new director and Southern New Jersey, you know how how do you think about the rest of 2021, what is the market like out there and I guess other specific individuals that you target or just look for opportunities to arise naturally over time.
I think it's it's.
So it's all the above I mean, I think we obviously know.
Some key players in the marketplace and are always tried to keep the channel of communication open with them and then opportunities just pop up referrals come through we got wind of somebody's moving on an unhappy or wants to move on it the unhappy and.
We'll try to take advantage of those and it's not just for commercial lending I know that you know in our wealth group tends always looking for a lift out opportunities for just talent anywhere we can find it that makes sense and really fits with our culture at the bank. So.
It's I mean, it's.
So perhaps a broad answer, but it's really pretty broad question about how we get people in that but I think you can look at it across the entire enterprise not just in commercial lending.
I appreciate the color there thanks for taking my questions. This morning.
Yeah.
Your next question comes from Matthew Breese of Stephens, Inc.
Please go ahead.
Good morning.
Good morning, Matt Good morning.
Two questions. So sorry to go back to expenses I, just got a little bit confused there on the on one hand, Mike you said hold the full year GAAP number trying to target that flat, but then I also heard you talk about the core for Q4 Q number of $35 million can you just clarify for me what the what the base.
Yeah, just show us.
2020.
As your flat number the GAAP 100 and for guidance number, yes, $1 42 for it.
Okay.
Yeah. Okay. Thank you. Thank you for having me.
And then on loan growth.
I know, it's I know, it's been a challenge I was hoping you could talk a little bit about the interplay between originations and payoffs and what the pipeline looks like.
[noise].
Well the pipeline is building.
Some of the activity as I noted earlier, just relates to my comment around capital markets some of that activity.
We expected that we might have close in Q4 moved in the tier one.
We just had a board meeting yesterday in a for a bunch of credit share.
On the construction size for there's activity.
And but again I think just adding incremental growth I think in the first half are at risk.
Gonna be like besides what we think the growth will be muted in the first half and then.
It's actually a pickup in the second half.
Okay.
Alright.
And then.
Turning to BMT Delaware.
A lot of growth there it seems like it's doing quite well I was hoping you could give us an update in terms of where AUM actually stands today. I was also curious in terms of business line efficiency and how the pipeline for new business looks given the new administration.
Well.
Yeah, I mean, I don't I don't know that we're putting out a mid quarter updates on AUM, but it continues to grow I mean, I can say that and grow nicely.
We finished the year extraordinary there it was really an extraordinary year for BMT, Delaware and that momentum has been carried into the certainly the first part of glass for as part of this month. It appears to continue forward I think we will see you know as.
I guess tax reform develops we're gonna see more probably more opportunity than I, usually what happens that's usually what happens we saw a lot of that buildup at the end of last year.
But you know our business is so broad and in our debt.
I don't it's not just going to be driven by tax law changes and interest.
This is driven in large part by a lot of just.
Fundamental a state planning people execute.
So I think I think theres, a great still great opportunity great growth opportunity in that business and we haven't really really I think an exceptional team down there.
Here at current consistently and constantly from our clients. So I expect the momentum to continue really through most of this year.
Got it.
Only thing I can answer your question, specifically that business was about $11 billion at the end of the.
The end of the year.
Just under that and then as Frank noted I mean, they the momentum in that business, especially at the end of the year and just kind of goes back to my comment around.
When I was normalizing expenses a lot of incentives for paying were related to the new business that was being written.
And Bryn Mawr Trust, a dollar where all the way up til.
The December 31.
One other things that sets us apart as a.
We keep but we stay open and continue to do business right up until the end of the year in that area and it's really.
Early benefited options for customer service.
I actually I think Bob was a bump actually closed early on on New year's Eve about 830, New year's Eve evening.
Literally so that's that's just debt just speaks to the level of service and to why I think this becomes a choice for most of the year.
A lot of a lot of our rate.
Referral sources.
I appreciate that.
Next one is just in the deck. There is a mention of the share repurchase authorization can you just talk a little bit about willingness ability or what are the circumstances, where you would repurchase.
Well, we had yes, we had paused it.
When we first went into this and that the pandemic I think that.
Pause is off now so.
We have a capacity we have authorization from them for us you've got a seven.
$700000 of share authorization still remaining on the original authorization that we went to them with.
And then we've got as we noted also in the same slides kind of.
A lot of cash at the holding company were sitting on their own for $100 million of cash or so we'll definitely be evaluating it.
And looking for opportunities potentially to buy our stock back in the future.
Okay.
Just the last one for me.
In regards to the new regional President in South Jersey could you just frame for us what what specific markets within South Jersey, you're looking to target.
Yeah, and what business line CRE C&I, a little bit of both curious.
But George I think he knows his background is in C&I.
So I mean, I think that'll obviously be his sweet spot, but as he builds his team I mean, there's so many opportunities on the CRE front, its really an extension of the Philadelphia market.
No debt in the South Jersey, So we get a lot of opportunities on the CRE front as a result, and its a natural outgrowth of what Kevin.
Your line for us.
<unk>, which is ties up in Princeton in that Central New Jersey area, just a natural extension of what we've been doing there. So I think youll see a broad.
Our broad base of business coming out of George and his team.
That's all I had thank you so much for taking my questions. Thanks a lot.
Thanks, Matt.
Oh for a reminder, if you have a question. Please press Star then one the next question comes from Christopher Merrimack of Janney Montgomery Scott. Please go ahead.
Hey, Thanks, Good morning, I wanted to circle back on the criticized and classified assets. We saw some movement in the retail area and just a little bit in hospitality interest just curious kind of what the path to either further upgrades or downgrades that you see the next couple of quarters.
Ma'am.
Sure.
We.
Look at our our Crit class book.
Detailed monthly.
Or.
Our last review was actually yesterday, so I think the ultimate trajectory is tight.
Two the pace of economic recovery and the rollout, which in turn is tied to the rollout of the vaccine.
Uh huh.
Folks are stable right now so we're not looking at.
A lot of people, earning through cash.
But the triggers for upgrades are really going to be kind of a return to normalized trading activities.
So.
All things being equal.
It looks like a pretty.
A reasonable upward trajectory.
The economic.
Conditions hold and continue to accelerate and if.
The impact.
Public health initiatives.
Two meaningful way.
Q2, Q3 kind of context.
Okay, Great. That's helpful. And then just a follow up on the utilization data that you that you would share the last couple of quarters. How does this decline we've seen utilization.
Pare back 10, 12 years ago. The last crisis I mean is it normal to see this or is it somewhat unusual what we've seen this past year.
Well I think.
The last crisis was fundamentally different business for in that it was.
Driven by.
An imbalance.
Speculative.
Real estate boom on the residential and the commercial side.
Crashing down.
This.
Net.
For this recession is clearly driven by.
Covid impact.
Business managers are are not making.
Unnecessary investments.
Inventory your expansion and have been frankly, holding a little bit of cash to weather the storm and I think thats what debt.
What's driving the utilization for the for the most part it is.
Good prudent balance sheet management by our Counterparties.
And that extends into the HELOC world in the consumer land.
Usages.
Typically a confidence issue.
So.
Oops.
Going crazy there.
Also get a lot of that's been refinancing away into long term.
30 year paper with a two handle because the market has provided an opportunity for book.
Yeah.
Comparing this recession with 10 years ago is apples and oranges I don't think.
Saracens.
Really tell us anything.
Got it no I don't disagree I just appreciate the background in comparison, so thanks very much guys.
Yeah.
Our next question comes from Bernard Horn of Polaris Capital markets. Please go ahead.
Yes. Good morning, I just had a forward looking question with respect to the commercial.
Real estate and I know you've given some good color on that earlier, but I guess my question is more focused on what could happen as the.
Post Covid World changes, especially you know you hear a lot of.
Our company is talking about reducing space by 25% and so forth and I know there may be.
Situations, where people are going to need more space, but you don't hear people, saying, we need 25 per cent more space because we're gonna distance people you only the other thing on a net basis, we need 25% less space. So if.
If you.
Do you have any kind of early.
Signals are anecdotal evidence from.
It sounds like you've been very active with your customers both on the hotel side as well as the real estate side that might suggest people are beginning to prepare for lower real estate and you know if you take vacancy rates up on your portfolio what happens.
You know to the.
Obviously, the ltvs could be low but.
That doesn't help with rents all get ratcheted down and so forth I know, it's a long winded question, but.
I think you get the point.
Okay, great wanted to take that.
Starting oh.
Our guidance.
Sure.
Well first and foremost all real estate is local and we have the benefit of sitting in.
No.
Not an overbuilt non op.
For the kind of commercial real estate market in southeastern Pennsylvania, South Jersey.
So.
The supply and demand dynamics were pretty well matched up going into this.
Prices.
We have not.
I've heard.
Anything about.
Right.
Space reductions in our office with our office customers.
It's early days in those leases roll off one Walter schedule. So it's not like there is an issue at least in our book.
Book.
And longer term.
I think there are puts and takes social distancing requires more space for same number of FTE debt.
<unk> is a long term trend the number of FTE and the building will probably reduce.
That's helpful.
Uh huh.
He is a great question, but I think it's it's too early to tell.
Hospitality space.
Our folks anticipate kind of concur with their assessment debt.
Uh huh.
No.
Leisure oriented travel go into your Kid's soccer tournament or whatever that's going to bounce back relatively strongly with.
Oh.
With the medical condition getting under control.
That's vaccine stuff.
Those are those hospitality properties, which are more dependent on business travel probably have a longer road to recovery.
Just.
Corporate treasurers or learning to operate.
In budgets certain amount of that business will probably take years to bounce back. So it's very different property by properties are sponsored by sponsor but.
We're cautiously optimistic.
Debt.
Trading conditions, just bouncing modestly off the bottom.
Leave us with a pretty good portfolio.
Right.
Okay. Thanks.
I don't know if anybody else was good with you and other.
Somebody who's got a comment but that's fine that's certainly it covers it.
The only follow up with its Frank ill just make one quick comment because you'd asked about anecdotal.
Heard anything anecdotally and just very anecdotally and I'm not saying this is even occurring in our portfolio, but I have spoken to some operators who are looking to repurpose space and I think it's no different than what you heard it at a much broader level with you know Amazon jumping into retail space in malls and people are looking at can they do something different.
With office space, whether it be residential or something else. So I know those conversations are going on I know people are looking at things but.
We don't have any particular evidence in our portfolio.
Right.
Okay. Thanks very much.
This concludes our question and answer session I would like to turn the conference back over to Frank Leto for any closing remarks.
Well after a very difficult year I think we're happy to have that one behind us. We're looking forward to 2021 and again, we thank you for I. Thank our shareholders for your confidence in us and thank everybody else on the call for your interest in Burma or trust.
Sure.
The conference is now concluded. Thank you for attending today's presentation you may now disconnect.