Q4 2020 Eagle Bancorp Inc Earnings Call
Yeah.
Ladies and gentlemen, thank you for standing by and welcome to the Eagle Bancorp, Inc. Fourth quarter and year end 2020 earnings conference call. At this time, all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session to ask a question. During this session you will need to press star one on your telephone.
Please be advised that today's conference is being recorded.
If you require any further assistance please press star zero.
I'd like to hand, the conference over to your Speaker today, Charles Levingston, Chief Financial Officer. Thank you. Please go ahead Sir.
Thank you Rebecca good morning. This is Charles Levingston, Chief Financial Officer of Eagle Bancorp before we begin the presentation I would like to remind everyone that some of the comments made during this call maybe considered forward looking statements.
Our form 10-K for the 2019 fiscal year, our quarterly reports on form 10-Q, and current reports on form 8-K identify certain factors that could cause the company's actual results to differ materially from those projected in any forward looking statements made this morning.
Eagle Bancorp does not undertake to update any forward looking statements as a result of new information or future events or developments unless required by law. This morning's commentary will include non-GAAP financial information the earnings release, which is posted in the Investor Relations section of our website and filed with the SEC.
<unk> contains reconciliations of this information to the most <unk>.
Directly comparable GAAP information.
Our periodic reports are available from from Eagle or online on our website or the SEC's website I would like to remind you that while we think that our prospects for continued growth and performance are good. It is our policy not to establish with the markets any earnings margin or balance sheet guidance now I would like to introduce.
The president and CEO of Eagle Bancorp.
Thank you Charles Good morning, and welcome to our earnings call for the fourth quarter of 2000 and twice on.
This morning, I'd like to start off at a high level overview of the quarter and the year and also make a few comments on 2021, then Jan Williams, our Chief Credit Officer will discuss her thoughts on loans and credit quality matters, and Charles who kicked off the call.
Discuss our financials in more detail for three of US will be available later in the call for questions.
Looking back at 2020, it is impossible to overstate the commitment and resiliency of our Eagle team to adapt to a totally new environment. It is true. They are efforts that eagle SaaS, that's reached $11 $1 billion and finished the back half of it.
2020 with renewed strength.
In the second half of 2020, our fourth quarter earnings for $38 9 million or $1 21 per diluted share and our third quarter earnings for $41 3 million or $1 28 per share.
At $80.2 million for the two quarters combined these were our highest ever level for earnings and linked quarters, just above our earnings in the second half of 2018.
For the fourth quarter, our return on average tangible common equity was $13 six 9%. This return continues to outperform others in the industry and it's notable as our tangible common equity to tangible assets was relatively high.
10.31% at year end.
Similar to the third quarter, our residential mortgage division continued to remain very active the fourth quarter alone flopped, a $427 million and gain on sale of $5 9 million for the year.
I'm, sorry, $5 9 million for the year locked loans for 1.9 billion with a gain on sale of 21 8 million with market interest rates expected to remain low in 2021, we anticipate that the residential mortgage division.
We will continue to contribute meaningfully to the bottom line.
We also saw some gains from our FHA group in 2020, FHA trade premiums origination fees and related servicing revenues was slightly less than $4 million during the year.
While our traditionally strong loan growth has been impacted in 2020 with the COVID-19 pandemic. It was also impacted by our efforts to reduce the overall mix of construction lending in the first half of 2020.
In the latter half of the year lower rates, sometimes forced us to say no. Rather then match the price signals others.
Heading into 2021, we expect that the Washington D. C market will continue to improve as the vaccine rollout continues and that our loan teams will continue to get its share of loans as the pace of economic recovery accelerate.
Jan will be speaking to both the improvement of the local economy as well as highlight.
Highlight our continued focus on loan quality.
In terms of deposits corporate deposits continue to flow into the bank as we said in the past we will continue to support our clients by holding their deposits while.
We have historically operated at an average loan to deposit ratio closer to 100%. We average just 86% in the fourth quarter of 2020.
Carrying mismatch liquidity contributed to net interest margin falling to not to nine 8%. However, the additional earning assets offset some of the margin compression and contributed additional net interest income and earnings to the company.
Charles will have some comments on the NIM later in the call.
Expense control has been an important financial metric for us our efficiency ratio at 38, 3% with quarter remains among the best in the industry underlying this is our focus on commercial lending with a streamlined branch network, which has.
Has been our trademark since the bank launched in 1998 over.
Over the past decade, we have seen other banks slowly begin to reduce their expensive branch footprint.
More recently the pace has increased early on we saw the value of being less reliant on branches and putting more emphasis on commercial relationships and technology. We see this as a validation of our banking model.
With deposits, averaging nine 2 billion in the fourth quarter, and just 20 branch offices, our deposits per branch of 460 million is much higher than our peers on the lending side. In addition to our 'twenty, Brian banking offices.
We also have one loan production office.
Our on the ground philosophy has always been and.
To remain light and adaptable on.
All of our locations are leased that includes our headquarters branches. The loan production office and back office locations. This may change, if we see property that warrants purchasing but that has not been our normal practice.
In February and March as leases expire, we plan to relocate our Bethesda and gallery place branches to newer better locations and combine our two back office locations into one newer location as we move through 2021, we.
<unk> to continue to focus on ways to maintain our efficiency.
In sum, we believe we will take a share our share of the loans as the market improves continue to be laser focused on credit quality and continue our longstanding practice of strong expense control before.
Before before handing it over to Jan I'd like to address our efforts to increase shareholder value. The recently announced stipulation of settlement and our efforts on diversity and inclusion.
For our shareholders our earnings combined with stock repurchases and dividends are three ways, we seek to increase shareholder value at the end of September we reinstituted.
Our 2019 stock repurchase plan and by mid December we completed share repurchases under that plan in late December the board authorized a new stock repurchase plan for 2021 for up to 5% of outstanding shares or <unk>.
Similarly, one 6 million shares.
One of the factors behind authorizing a new stock repurchase plan is our strong capital position.
For the year, we repurchased stock valued at 61 $4 million and declared dividends of $28 3 million, returning almost $90 million directly to our shareholders.
Also during the year of tangible book value grew nine 4%.
I think 235.
74 cents per share shares outstanding were reduced by four 4% and we paid out 21, 4% of earnings and cash dividends.
On Monday, we filed an 8-K announcing that we had entered into a stipulation of settlement subject to court approval in connection with the previously disclosed shareholder demands letter.
We are glad to put this particular matter behind us and look forward to implementing the agreed upon governance and control enhancements many of which as you know are already underway.
We are not going to address any of the specifics of the stipulation of settlement and we'll let the publicly filed stipulation papers speak for themselves.
As disclosed in our earnings release, the payment of attorney's fees in connection with the stipulation of settlement was accrued for in the fourth quarter of 2020 and is expected to be fully recovered from our insurance carriers. The previously disclosed securities class.
Action against the company and several of its current and former officers and directors remains outstanding.
Lastly in 2021, we will continue our focus on diversity and inclusion we have a diverse board with for women, including myself. We've recently added two new board members, one of whom identifies that some minority last year, we formed a diverse.
City and inclusion council comprised of 16 employees and conducted an employee engagement survey the council will be working on identifying areas of opportunity to focus on and programs to support those areas for opportunity.
This is an initiative that is very important to the continued success of the bank and has the full support of the senior staff and the board with that I would like to turn the speaking duties over to Jan Williams, Our Chief Credit Officer. Thank you Susan Good morning, everyone I speak.
Again by reiterating Susan's comments as we continue to focus on credit quality of revenue came from.
By our math.
Asset quality and closed out the year strong and steady which enabled the bank to lower it force provision in the fourth quarter and maintain reserve levels, comparing linked quarters, and tas for assets or 59 basis points down slightly from 62 basis points.
Life net charge offs to average loans for 28 basis points up slightly from 26 basis points in the prior quarter charge offs in the fourth quarter were primarily attributable to a single restaurant relationships amounting to $4 1 million.
Provision to the allowance was $4 9 million down from $6 6 million and the allowance for credit losses to total loans was one for fun up one basis point from one one for zero in the prior quarter. The allowance was determined in accordance with seasonal methods.
<unk> adopted at the beginning of the year.
While we noted that several banks reporting fourth quarter results have reduced or reversed the allowance for credit losses, we believe it's prudent to be cautious in this area. Our coverage of problem loans remains strong at 180% as of year end.
During all risk factors in our conservatively underwritten loan to value and loan to cost policies. We believe our reserves are adequate Inc.
Including qualitative factors associated with the hospitality and food service industries and our cash.
Qualitative overlay for loans that had a second deferral for.
Quantitative measures the unemployment forecast as sales a driving factor.
During the fourth quarter, our COVID-19, deferrals dropped significantly as the second 90 day deferral period expired prior to year end for most customers.
As of year end deferrals consisted of nine customer relationships totaling $72 4 million or 1% of gross loans. The table on our press release shows the migration of the third quarter as deferrals of $851 million approximately $16 million were paid down or paid.
It off during the fourth quarter of the remaining $791 million.
8% or 698 million for classified as current of this amount all loans that had a second deferral.
For automatically placed on the watch list. This was done to raise the visibility of these loans within our portfolio and monitor their progress post deferral, another 73 million or 30 to 89 days past due and $20 million for nonperforming.
The N P as for a mixed bag and included several owner occupied restaurant properties.
Our largest exposure.
Continues to be.
Our largest vulnerable exposed for continues to be in the hospitality industry as.
As a percent of our portfolio the accommodation and food service industries comprised of nine 9% of our portfolio down from 10, 2% last quarter.
Outstanding PPP balances at the end of the year were $455 million down only $1 million from the end of the third quarter in total only about a dozen loans were forgiven prior to year end as borrowers and the bank for waiting for more guidance from the SBA with additional guy.
<unk> received from the SBA earlier this month the process has begun to ask Valerie.
In regard to the current round of PPP, we began taking applications for this week. We are primarily focusing last week sorry, we are primarily focusing on current clients and will assist them with the first or second draws.
Our land team continues to originate loans and loan closings in the fourth quarter were higher than they were in the third quarter as our focus has always been on CRE, it's not surprising that CRE accounted for the bulk of the loan closings.
Ni closings were also strong in the fourth quarter, the small decline of loan balances period to period in the fourth quarter was attributable to more.
Hi, more to higher loan payoffs and a lack of originations, including a $78 million payoff of one loan on December 30th.
While we have talked a lot about our focus on credit quality. We're also focused on maintaining loan yields as Susan said earlier, we sometimes pass on credit sometimes because of risk sometimes because of rate in the fourth quarter our yield on loans.
For <unk>, 5% up four basis points from for 46% in the third quarter apps.
Absent PPP loans, yielding 255% yield on loans would have been 12 basis points higher.
Looking at our market, while D C, Maryland, and Virginia have stepped up COVID-19 related restrictions. The local economy has been recovering unemployment and the Washington MSA fell to five 7% in November down from six 9% in September.
Demand for cosmic contracting and professional services sectors continued to show strength construction contractors continue to move forward with projects throughout the region with both commercial projects and residential construction.
We expect to continue to remain cautious on new construction projects as we have for the past 18 months.
With a new administration in place there tends to be more on loan activity with new government contracts being awarded on a rise in a variety of professional services, we anticipate that our see him I team will pick up some of that activity.
And that the overall increase in activity will benefit per region.
Based on the strength of the local economy in December the fifth of Columbia reversed its budget production projections for the current year and the coming year.
Upwards and project revenue in 2022 to exceed revenue on 2019.
The basis of the upward revision was in part because individual and business tax income revenue was stronger than expected and in part because of the vaccine rollout.
The vaccine continues to be distributed it is expected to have an outsized positive impact on the restaurant and hospitality businesses in our market area later in the year, we see that Washington D. C return to being a major tourist destination as well as a major hub for Gov.
For me from private enterprise with that I'd like to turn it over to Charles <unk>, Our Chief Financial Officer. Thank.
Thank you Jan comparing our performance over the linked quarters net interest income was up $2 $4 million on a much larger asset base. The provision for credit losses was down $1 $7 million, while the provision for unfunded commitments was up about $2 5 million.
The largest change was in noninterest income, which was lower by almost $8 million, primarily from lower gains on sales from residential mortgage division from the residential mortgage division.
As you May recall third quarter locked loans were at record levels and are typically higher than in the fourth quarter, yes.
The other notable changes were lower noninterest expenses with premises and equipment lower by $1 $8 million, but the prior quarter had a nonrecurring expense of $1 $7 million to properly value a lease extension.
And legal fees were lower by 750 $755000 net of estimated insurance receivables under our view D&O policies.
Bottom line on a linked quarter basis earnings were lower by $2 $5 million I would like to point out debt.
I would like to point out, though that our third quarter was the highest level of quarterly reported earnings.
Our year end 2020 assets were $11 1 billion up $2 $1 billion from the.
For the year and up $1 billion for the quarter balance sheet growth in the fourth quarter in the third quarter were primarily driven by corporate deposits.
Overall as a result of the deposit inflows average assets for the fourth quarter were up $668 million from the prior quarter. These inflows continued to put pressure on the NIM.
Was 290% down from three 8% the prior quarter.
For the NIM was down the increase in assets kept net interest income from falling net interest income was $81 4 million for the fourth quarter up from $79 million the prior quarter.
A large portion of the deposit inflows were noninterest bearing which keeps the deposit mix very favorable.
In the fourth quarter, 33% of average deposits were noninterest bearing and the cost of interest bearing deposits declined to 61 basis points down from 75 basis points. The prior quarter and the cost of funds was 48 basis points down from 58 basis points for the prior quarter.
Bulk of this new funding went into overnight funds overnight.
Overnight fed funds as a result interest bearing deposits with other banks increased to an average of $175 billion up $476 million from the prior quarter. The average yield on this line item was just 11 basis points the balance sheet of the deposit in the balance on the deposit inflows.
Were invested in securities, which averaged $1 1 billion up $215 million from the prior quarter. The average yield on the investment portfolio was 152%.
Looking at items that impacted them on December 15th we lowered deposit rates across the board by five basis points going forward. We expect to continue to see higher cost time deposits roll off at year end, we had loans of $2 9 billion with floors of which $2 8 billion are already at the for.
Sure.
In terms of the deployment of excess liquidity, we will continue to judiciously deploy the funds into securities and loans, but remain cognizant of the need to remain flexible to serve our clients deposit needs and not overcommit in such a low rate environment.
With that I'll hand, it back to Susan for a short wrap up.
Thanks Charles.
As we move into 2021, I'm confident that Eagle is well positioned to continue to deliver industry, leading results our earnings credit quality and capitalization remained strong our employees are committed and resilient the Washington market.
Remains a premier business center, and the hospitality and food accommodation industries, which are which are an area of focus for the bank are the most visible economic beneficiary of this vaccine rollout.
Thanks again for joining us this quarter, we will now open up the call for questions.
As a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound key please standby, while we compile the Q&A roster.
And your first question comes from Casey Whitman from Piper Sandler.
Hey, good morning.
Hi, Casey.
Hey, so maybe I'll start off with just some questions for Jan and congrats to you on navigating through 2020 I'm. So just looking at the disclosures. It seems like a lot of the remaining deferrals are in the transportation and warehousing industry. So can you maybe tell.
Tell us a little bit about the makeup of that book on the types of collateral support et cetera. Thanks.
Yes, you are speaking about the 72 million still in a deferral of phase.
That's right yes.
I can tell you that yes.
Although technically.
Okay as opposed to transportation.
The largest segment is really associated with tourism.
We do have a free.
Ran in place for the.
These folks.
Deferred here is really.
Equipment leases predominantly.
Would you have real estate collateral.
Covers most of the debt that's involved.
Inc were in good shape based on the cash flow provisions that have been providing to us and the liquidity on the books for this company. So I'm feeling pretty good about that I think.
Assuming the vaccine rollout happens and tourism ramps back up again later on this summer I think we're going to be in fine shape on this I don't have.
<unk> concerns the.
The non performing concern would come up if there wasn't it.
New strain of virus that hit that vaccines for an effective against and prolong the.
Downturn in.
Really what I'll call Paul.
Heart of that.
Travel and entertainment.
Area.
I think.
Other than that we've got a property that is.
Owner occupied real estate that.
Is.
A facility for them.
Adult care.
It is one that has had an outbreak of COVID-19 that temporarily reduce the census level.
We are in with them and I do expect that they will continue to perform.
During the deferral period, which is an interest only deferrals not a complete payment deferral.
And that is true.
The customer I spoke about earlier that is in that.
Travel Tourism Entertainment business day.
You also have.
Hotel that is still involved in a deferral I'm sorry, an office building that is still involved in a deferral debt.
Paul graph.
Within the next 30 days, we are monitoring all of the other.
Other than that there's nothing of significant size on this list.
That would really have a material impact on the balance sheet or on our income statement. We are staying close to everyone on these credits.
Sure.
Covid Task Force Task Force has worked hard to develop remediation plans that will put us into a better position and put the company into a better position to continue to perform.
Is that kind of got it thanks.
It does thank you for all that detail I guess another question for you would be well. Thank you for the additional.
Color on the watch list this quarter I was wondering first it looks like you've got about 632 million.
Within those sort of at risk segments is that when is that going to comprise the majority of what's on watch or just a portion of it. So then we can assume there wasn't much okay got it so it wasn't much moving the watch list this quarter.
And then Inc.
I guess was there any migration that we should know about into the substandard or special mention this quarter are those pretty pretty stable from the from last quarter.
Pretty stable, although I will tell you that there are occasional moving into.
Special mention there may be one or two credits that will be migrating their or that have migrated I think we're doing a good job of staying on top of fees and making sure that.
Things come out but for example, as a result of.
Changes in a way that various jurisdictions have enforced.
Indoor dining.
Prohibitions on bars on limited hours that we would put folks perhaps.
Migrating from launch to special mention we expect to see those changes rolled back as the vaccine is distributed and we're all hopeful that distributions happening with Amazon like true precision, but that remains to be seen at this point.
Got it very helpful I'll, let someone else hop on thanks.
Uh-huh.
Your next question comes from the line of Steve Comrie with G Research.
Hey, good morning.
Morning.
Okay.
I'm wondering if we could start with the loan yields we appreciated the for six 2% during the quarter ex PPP I was wondering if you had the number for Q3.
I don't have that off hand, but that's something I can I can certainly get back to you on Steve.
Steve.
Yes.
<unk> likely be.
Somewhat of a similar similar shifts.
Given the static balance of of the PPP.
Loans as well as.
Fairly flat average.
Loan balance quarter to quarter.
I think in that.
Third quarter.
We were looking at.
For <unk> six.
Without the PPP impact since PPP loans, Didnt move significantly, it's probably pretty close to the same level of impact.
I can keep it.
In general carryover the up four basis point number I think Thats a fair day.
Yes.
Okay, Okay fair enough.
Maybe moving on to the the construction projects from the payoffs.
Is that something that at this point it looks like it's probably behind the bank and you would expect lower payoff levels going forward or is this kind of an ongoing thing and they kind of happen when they happen.
Well I think in construction in general you would expect debt when projects are completed.
In the instance of a commercial property, they're going to be looking for permanent financing to the extent that we can do that we certainly try to get the first shot at keeping our performing property on the portfolio to the extent that we don't want to dip down to the rates that are being offered on from.
On properties long term now we would expect to see that roll off.
For for scale projects in the residential area Youre naturally going to see those dropdown as units are sold.
Our bookings from new carefully selected construction projects.
Overall, it's going to be a timing issue not necessarily an abatement.
Of the level of construction overall.
And I would just add debt.
That's been part of the Eagle story for for some time and we do see.
Some.
Some large quarters with larger payoffs and others.
And we see that as successful and these construction projects are are being.
Our.
<unk> are being completed and they are clearing the market in terms of permanent financing so on.
It is something that I would expect that we would we.
We would see continue given the nature of our business.
Okay, and then maybe one more on the construction topics. So construction balances on a period end basis. It looks like the mix was more owner occupied versus commercial and residential versus last quarter is that part of an active active risk related strata.
Or is that just reflecting the demand that was out there.
I think it's a combination of things I do think on the owner occupied side.
The fact that they're not.
Supposed to be included in concentrations is certainly a factor.
I think the.
Underlying business that supports those particular properties effective for factor on.
And I also think some of it is just.
Yeah, the demand and where things are going at this point in time.
Okay. Thanks I appreciate it.
Okay.
Your next question comes from the line of Stuart Lotz from K B W.
Hey, guys good morning.
Good morning Stuart.
Charles if we could you know.
Starting on the buyback real quick.
To see.
When you've got when you guys going to reinstate of that in the fourth quarter.
What is your expectation for the cadence of buybacks. This year and do you currently anticipate using utilizing that for $1 6 million.
Tier authorization.
Yes.
We are going to.
Continue to.
Evaluate debt on.
On a.
Essentially.
Their basis, but.
Okay.
To the extent that the share price run.
<unk> is up to a point, where we don't feel it.
On prudent.
To continue.
To purchase at certain levels, we will be active.
But so it's really going to depend on the volatility in the share price.
Throughout the year as to whether or not.
We see we see.
All of those shares repurchased over the course of the year.
Can't give you a.
A specific number unfortunately.
Okay.
Helpful.
And maybe maybe turning to the balance sheet I think this quarter's deposit growth was.
It was pretty pretty static.
What is your anticipation for some of those deposits as we work in.
How has that trended so far in the first quarter as we kind of taken the dynamics of PPP round, two as well as from the.
On the round one.
Well on is running off do you anticipate your deposit book kind of holding this 11 billion for for the.
10 billion level, we're on.
Do you see that trending back lower.
Yes for IV. The expectation is that liquidity will remain strong all things equal this year I mean.
Yes.
We will need to see some kind of a catalyst for change, which obviously is the vaccine rollout, giving to that herd immunity you returning to normal on having the FMC make a change.
And their policy posture.
And to stop buying bonds.
For other firms to see opportunities for investment.
Elsewhere, so that their funds arent sitting idle.
Which.
It seems to be the nature of things these days.
I think theres a lot that goes into that but our expectation now appears to be status quo for the for the.
The majority of the year.
Sure.
You think.
Is your current anticipation is for that kind of that core margin.
To stay around 3% or do you see any near term blip.
Yes.
PPP fees and.
Some of the excess liquidity.
<unk>.
Yes.
All things equal and within some reasonable.
Some.
Reasonable standard deviation my expectation was that we would see a relatively stable margin.
Throughout the year.
Okay got it great.
Great well, thanks for taking my questions.
Your next question comes from the line of Dave Bishop with Seaport Global.
Hey, good morning, guys. How are you good.
How are you.
Good good hey, quick sort of staying on that topic Charles on.
Obviously with the sort of influx of liquidity.
Even despite a little bit build here in this fourth quarter investment Securities, obviously have trended down as a percentage of assets to below sub 10% you'll see that.
Maybe tipping up over the course of 2021 was maybe some opportunity to sort of improve the yield spread between that.
Sort of surge funding and short term liquidity and investments.
Yes so.
Good point I mean again, we mentioned in the comments, we do want to be judicious about how we deploy those funds don't want to overcommit to a single point in the market.
Mike.
If I were a betting person I would I would say that.
Couple of years from now we might not like the securities we're buying today.
Thats provided on everything.
Starts to improve but then again at that point in time, hopefully, there's a better opportunity to deploy funds into two or more active loan market.
So.
We want to be cautious and that the tide can go out as quickly as it came in.
So.
But at the same time.
We're going to be looking to.
Two.
B.
Again be careful about how we are.
For how we're deploying those funds, but make sure that we are making some money today to the extent, we can still manage the risk associated with all of that excess liquidity. So yes, I would I would anticipate continued growth in the investment portfolio.
Again to.
Put higher on the assets on the book.
Got it and I think that the.
The narrative mentioned in terms of the deposit flows this quarter, maybe some flight I guess liquidity.
From certain fiduciary clients.
The way to ring fence. The dollar amount that was raised related to that and flow.
Yes, I mean that was.
That was a healthy.
Help me.
Balance.
A portion of the balance of funds brought in.
I'd say.
Around $550 million or so.
Okay.
Got it and then.
And in terms of I think Charles you mentioned.
Sort of the opportunity from the.
The repricing from the time deposit Cvs just curious true.
Just maybe what the current on board are great for your Cds are and what the sort of the roll off calendar looks like for the maturity calendar looks like from the first half of the year.
Yes, our current our current rate sheet has one year Cds at 12 basis points.
Sure.
Looking at five year Cds at 40 basis points.
And you can interpret late.
Whats between that Theres, not a lot of appetite at those levels, obviously and certainly not on a lot of appetite up further than that.
On.
But yes, we expect to continue to see those.
Hi.
Higher rate Cds roll off here.
Hopefully continue to help support our lowering funding costs.
The course of the year and some of that is a little bit frontloaded, but it's.
There is.
There is still some some of those time deposits to roll off.
Got it appreciate the color and then maybe one final one maybe for Jan approve.
I appreciate the continued color in the disclosure in terms of the.
The loan deferral migration just curious.
The improvement from the third quarter the decline in the loans on deferral.
The loans that are off to for others or are they now making full P&I payments are there still some sort of obligation.
Or is there some sort of form of like Io or PEO and Theyre just curious.
Some color in terms of the improvement in terms of the deferrals on how they're paying.
Yeah.
If they were on interest on late before the pandemic. They are still going to be on interest only so there will be a fair sized chunk on that are interest only if they were amortizing pre pandemic when they return to amortization.
Yeah.
Return on position great. Thank you.
Mhm.
Your next question comes from the line of finished strictly on with Janney Montgomery.
Hi, good morning.
Good morning.
I'm, just wondering what youre seeing so far.
This month on peak fee forgiveness, another balances didn't really change that much on the fourth quarter and just kind of how you see that playing out over the next couple of quarters.
You know I think.
The SBA has.
Ben.
Expeditious in.
Bringing out final.
Rules and regs on that so I think thats impacted the process and delayed considerably.
Do you think.
We're going to see more progress going forward and it probably will be at an accelerating rate.
Personally I think a big driver of that is for them.
Folks that are looking at second draws.
Draw situations, they're more motivated to get through that forgiveness process.
Especially the larger customers.
I do think that that's going to accelerate but then you also have to consider.
Whether the SBA has adequate staffing to handle that.
That's sort of the big unknown right now.
Other than things that will be quote unquote automatically forgiven.
Sure.
I would imagine there are definite human resources challenges at SBA.
And I would add I mean.
My expectation is just one man's opinion is sometime in the second or third quarter that you see the lion's share of those come in on.
The.
The weighted the SBA as is.
Handling those pvp forgiveness loan forgiveness.
Forgive this process for those loans that are under $150000 given the recently.
Past stimulus.
On should expedite a good number of the volume of our loans, although it's not the largest.
Dollar amount.
Amount.
Of those loans.
But I do think that debt at that point hopefully the.
The process will be a little bit better oiled.
And we will be able to get some more of those through but its been modest so far at best.
Gotcha and Carl on that same line I know, it's only been like a week or two weeks so but.
How is demand locked for the second round I know it just started but I'm just curious what the interest level is relative to Ralph one.
It's definitely not at the level that it was the first round, we have seen significant decreases in that level.
I would estimate.
No.
Don't have a clear.
Number on that but maybe 600 of them have been applied for now in the first round or in the second part of the first round, we did 1400 to over 1400 loans.
So it definitely has set a slower pace from what I understand that's true with what other banks are feeling too.
And again, Thats really got at our customer base, which limits the population on them.
Got it awesome. Thanks, guys I appreciate the additional color.
Sure.
Thank you. Thank you.
And at this time there are no further questions I would now like to turn the conference over to Susan Riel for closing remarks.
Okay I want to thank you for being with US today, and we look forward to speaking with you again at the end of the first quarter of 2021.
Yeah.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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