Q1 2021 Hancock Whitney Corp Earnings Call
Good day, ladies and gentlemen, and welcome to Hancock Whitney Corporation's first quarter 2021 earnings conference call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time.
As a reminder, this call may be recorded I went.
Now I'd like to introduce your host for today's call Ms. Trisha Carlson Investor Relations manager you may begin.
Thank you and good afternoon Ian.
During today's call. We may make forward looking statements, we would like to remind everyone to carefully review the safe Harbor language that was published with the earnings release and presentation and in the company's most recent 10-K and 10-Q, including the risks and uncertainties identified there in you should keep in mind that any forward looking statements made by Hancock.
He speak only as of the day on which they were made.
One understands the current economic environment is rapidly evolving and changing.
Hancock Whitney's ability to accurately project results or predict the fact that eat your plans or strategy or predict market or economic developments is inherently limited.
We believe that the expectations reflected or implied by any forward looking statement on based on reasonable assumptions, but are not guarantees of performance or results and our actual results and performance could differ materially from those set forth in our for E statement.
Hancock Whitney undertakes no obligation to update or revise any forward looking statements and you are cautioned not to place undue reliance on such forward looking statements.
In addition from other remarks. This afternoon may contain non-GAAP financial measures you can find reconciliation for the most comparable GAAP measures in our earnings release and financial table.
Reservations for its included in our 8-K are also posted with the conference call webcast link on the Investor Relations website, we will reference some of these slides in today's call for.
Dissipating in todays call on John Harrington, President and CEO, Mike Agri, CFM and Crystal Luca Chief Credit Officer, I will now turn the call over to John here.
Thank you Tricia and good afternoon, everyone. Thank you for joining us today's operating environment is headed in a decidedly more positive direction compared to the end of last year and as such 2021 has started off on an encouraging net earnings for the first quarter of the year on $107 million or $1 21 up almost.
For me or for linked quarter during the quarter, we began to see signs of cautious optimism across our footprint is vaccinations ramped up markets began reopening restrictions were decreased or eliminated and businesses were allowed to increase capacity fees slide eight in our investor day for information specific to each of our major.
Regions that outlook, coupled with declines in criticized and nonperforming loans of 11% and 20%, respectively, and a 30% drop in loans, making up our sectors under focus on slide 10 allowed us to release, a modest amount for 23 million of loan loss reserves in the quarter.
We did report 18 million of net charge offs, mostly from one long term energy credit net of that one loss Ncos, where a well controlled for many overall our provision for credit losses was a negative for 9 million as a result, and we expect similar or better quarterly provision levels as we move through 2021 based on what we know.
Now our ACL remained strong at over 2%.
Despite this new level of optimism loan growth remains limited net a P. P. P core loans declined 465 million linked quarter as indirect loans continue to run off with no new production plan residential mortgage payoffs actually increase thanks to a strong surge in March 2021 secondary mortgage transactions.
Line utilization flow to be at normal pay offs and elevated paydowns, coupled with slower levels of loan production altogether led to declines in some of our regions see slide seven and the debt for details you may note on slide seven net loan growth is now differentiating across the footprint with the eastern franchise actually showing growth.
Even as our central area, primarily New Orleans remains under pressure, but thankfully green shoots on a period even there.
One bright spot for losses from P. P. P. During the first quarter, we originated over 800 million and U P. P. P loves what a substantially lower pace for forgiveness.
As you all probably remember midway through the quarter the SBA protocols on forgiveness as the new P. P. P. Portal was put in place we expect for good news to substantially increase in pace led by smaller loans in the second quarter. We're also seeing continued solid results in fee income slide 18 shows several categories.
Our performance in the quarter, we are continuing our focus on expansion efficiency initiatives with the most recent piece of the program early retirement wrapping up this week and with positive expense run rate impact in May we maintain solid capital ratios with common tier one up 41 basis points to an estimated 11 point O 2% opera.
Getting leverage improve with pre provision net revenue up linked quarter overall with the quarters results and with asset quality expense and revenue initiatives underway and depending on the success of vaccination programs underway throughout the U S and the world. We are cautiously optimistic about 2021 and be on I'll now turn the call.
To Mike for further comments.
Thanks, John and good afternoon, everyone as John noted first quarter's resolved for a great start to 2021 of net income and P. P N or were up linked quarter and for a variety of reasons exceeded street expectations.
John has already talked about loans I'll jump over to deposits for the expansion of PPP and a new round of stimulus on you along with many in the industry. Once again flushed with new deposits. This quarter I E. L. D deposits grew over 1.5 billion during the quarter and combined with nearly five.
500 million a forgiveness was the source of over $2 billion for fresh liquid.
Compared to what would be normal levels, we're calling out on March 31 level of excess liquidity at about two and a half.
So the question for Tom what do you do with all this liquidity in an environment, where there's little opportunity for loan growth.
The chart at the bottom right of slide 13 in our earnings deck shows part of the store.
We typically like to keep our securities and short term investments at around 20 to 25 per cent of our average earning assets you can see we were able to maintain that rough mix for most of the 2021 over the last few quarters and increased on Nick's bonds and fed deposits by a third.
So by the first quarter of 2021 over 30% other.
Earning assets were comprised of bonds and fed deposits with that kind of in the earning asset mix change NIM compression is unfortunately inevitable.
Our NIM for the quarter was three on Zillow nine per se. So it was down 13 basis points on quarter.
Our guidance was to be down about 10 basis points, unless we can deploy some of this excess liquidity into loans or until it starts to leave the bank. We expect on NIM could compress a similar level in the second quarter that does assume no interest recovered on the quarter.
We do see the second quarter level as a floor for NAV, but look for to a more normal operating environment with organic loan growth in the second half of 2021.
Despite the compression in NIM on actual level of net interest income was relatively stable as the linked quarter decline was entirely due to two fewer accrual days in the quarter.
Noninterest expense was flat linked quarter at 193 million and we remain focused on efficiency and managing expenses.
Last quarter, we discussed the initiatives we have in place for closing branches attrition levels and also announced an early retirement program.
The deadline for posting stuff that early retirement incentive for zinc.
Okay.
Eliminated results were very encouraging with 260 647 eligible associates electing to staffing and other retirement offer.
Most of those associates will depart April 30, we.
We will embarrass you need to replace some of those leading and have made a conservative estimate of that back to a level.
Our estimate of the ongoing impact on the program, which includes estimates for incentives benefits and backfill is 19 million annualized or about 4.8 million per quarter.
And is included in our expense guidance on slide 22.
You'll note that we've included an expense run rate estimate for the fourth quarter of 2021 of 187 net.
The $4 8 million for expense reduction related to the early retirement program.
A significant part of the problem is that expense targets.
Our expense guidance on slide 22 on 2021 points to a year over year reduction in expenses on <unk>.
Just 24 million with another reduction of close to $25 million in 2022, we get thereby annualize into guided fourth quarter run rate of 187 known for.
'twenty 'twenty two expense level. We believe provides a foundation for a much improved deficiency ratio of potentially around 55 per cent for next year.
With that I'll turn the call back over to John.
Thanks, Mike and let's open the call for questions.
Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
If youre using a speakerphone please pick up your handset before pressing the keys for.
Withdraw your question. Please press Star then two and at this time, we'll pause momentarily to assemble our roster.
Oh.
And the first question will come from Abraham Poon of Wala with Bank of America. Please go ahead.
Good afternoon.
Hi, Brian.
Hi, I guess, just first on Mike in terms of some clarity on the margin outlook as we think about.
The decline in the second quarter and then some stabilization.
Is that stabilization essentially dependent on loan growth picking up as you look into the back half of the year, just give us a sense of what the puts and takes off for the margin.
As we look beyond the liquidity impact into kiln.
Oh sure Abraham be glad too so it really the start point is you know again, the the three O nine that our NIM came in in the first quarter.
Right off the bat, we have about seven basis points or so of interest recoveries that were assuming won't repeat in the second quarter and then from there the remaining half dozen basis points or so really I guess as a result of our results from the continuation of the impact of excess liquidity. So again you know this.
What are as you can tell from our comments and certainly on financials, and we had another pretty big surge of excess liquidity and certainly if you look at the end of period numbers. They were about 1 billion was higher than the average so you'll have a carryover into the second quarter related to that.
You know as far as the things you asked about specifically.
The level of excess liquidity and how soon that buildup begins to subside.
And even go down it certainly will have an impact on our NIM going forward for the year and inherently.
The fact that we've guided to a pickup in loan growth for the second half for the year is a big factor moving.
Very very helpful to our NAV, so overall related to them.
We're calling for as much as you know another 13 basis points or so compression on the second quarter, and then kind of flattening out for the balance of the year.
Got it.
It was just tied to that in terms of loan growth like on the comments you have in the press release and just listening it doesn't sound like you're seeing any growth green shoots on an on demand at the moment can.
Can you just talk about that in terms of what needs to happen before we start picking seeing from loan demand or am I thinking about it the right way.
On that Youre, not seeing demand right now.
I think for him. It if you know the pipeline builds up over time and then on the results of that pipeline will follow a quarter or two in the future. So the the loan demand numbers in the green shoots to use your price really began to show up towards the beginning of Q1.
And and that was in central and western and eastern on what's happened in Q4, and a quarter ago. One of the comments I gave was that I think I used the phrase a beachy communities. Those that are on the coastal err on the eastern part of our footprint on a really hard to begin to show signs of growth and that happened in this quarter.
We see the same sort of impact coming to the positive.
On the western and central parts of the franchise and it may take a quarter or two for that to completely overwhelms other.
Contrast, but that's really where we got it to flat for the second quarter, and then 800 million of growth in the back two quarters of the year. So the green shoots are definitely there the pipeline is firmed up a great deal.
It's a it's actually about I would say a factor of 30 per cent or so a better pipeline than I would've expected to say three months ago. So it's a lot more positive than I would've anticipated our challenge has been and our larger C&I lines of credit, particularly in the C&I.
C&I concentrated central and western parts of the footprint.
Those clients, while feeling better some of that better sentiment has led to then taken down revolving debt for some of the cash they have stockpiled for a maybe a worse environment than it's turned out to day and so as a result, those revolvers for taken down. So it was really a combination of the pipeline just beginning to build up to something impressive.
And the take down the revolver simply because people began to use that excess cash. So you know while the quarter is unimpressive in terms of long term for pipeline has become more impressive which is leading to total rose your assessment of our growth.
Got it thank you.
Thank you.
The next question will come from Michael Rose with Raymond James. Please go ahead.
Hey, good afternoon, and hope you're doing well just wanted to ask around capital return. So you guys are off the restriction for the for the dividend I'm understanding that that capital here TCE at least was a little depressed because of PPP loans, but should we expect a buyback at some point in the near future.
<unk> is the is the P. P P loans come off because it seems like capital formation or build what's going to really accelerate them as those loans are forgiven.
Yeah, Michael This is Mike so I, absolutely agree with that statement.
Certainly as we go for it will be building capital I think at it on a pretty good right.
And level. So now that we are out of a consult consultation process with the federal reserve things like buybacks or dividend increase for other capital measures are things that we've already kind of talked about.
Wanting to look at really from the second half of this year. So really for now we're evaluating those options and again in the meantime building capital So I think more to come.
On that topic as we moved through the quarter.
Okay. That's helpful and maybe just as.
A follow up you know the expense expense guide is certainly I think better than a lot of us on consensus where we're hoping for and yet the fees.
It is a little bit stronger do you guys feel like you've made enough investments over the years, where the investment you know pace slows down and you can you can really generate positive operating leverage for the next couple of years is that the way we should kind of think about it in the intermediate term because you guys have obviously done a lot of work over the years kind of fine tuning the businesses investing in the business.
Et cetera. Thanks.
Yeah, Michael Thanks for that the Oh. This is John I would I would add a little bit more to your assertion and say, yes, we agree with you but at the same time some of the technology investment.
Facilitating as it rolls out a little bit more effectiveness in the front office, a better digital a job adoption for for servicing.
Turning to be a better digital adoption for gathering accounts and then also a lesser of an expense spend on the back office for him.
Servicing on both sides of the balance sheet. So there's technology investment that is continuing.
And we're beginning to see the impact of that and and as Mike mentioned. The early retirement effort was really the beginning of that exercise and I think we will see better improvement as we go through the year, leading to that fourth quarter run rate that Mike mentioned earlier.
Great. Thanks for taking my questions.
You bet.
The next question will come from Brad Millsaps with Piper Sandler. Please go ahead.
Hey, good afternoon.
Hi, Brad.
I appreciate all the guidance you guys included I did want to follow up on the expense narrative on.
Understand you expect for <unk> 'twenty one.
To approximate a run rate of $187 million mm, Mike I think you said.
That would imply maybe a an additional.
25 million dollar reduction expenses in 'twenty, two but that would assume that you would stay at that kind of 187 million run rate. It did I understand that correctly would would there be some natural growth that you would expect on top of that.
Yeah, there's certainly there's going to be some natural growth with respect to the 187 run rate for the fourth quarter.
But for 2022 again are we really are kind of Ami net debt roughly $750 million range. So certainly that would mean that that there would be additional reductions to really kind of offset any growth otherwise in that expense base.
Okay. Thanks for that clarity and I think I think last quarter, you mentioned that.
You you thought you were sort of in the third or fourth inning of what you could do on the expense side of the equation for you to use that same analogy now you know with the guidance that you've given inclusive of 'twenty, two where would you where would you sort of put you know Hancock Whitney and sort of your.
You know expense right sizing journey.
I guess, maybe this other thing and stuff right.
Okay, Okay, so still potentially moving just to use that analogy and and and.
But what that means really is I mean, obviously, we've set up on a lot of work ahead of us for the balance for this year, but then also went to 'twenty two as well.
But we're confident of the things that we've accomplished thus far certainly as John just mentioned the early retirement program has proven to be very successful in giving us I think a pretty good head start towards hitting that 187 number one instead of putting on 87 million dollar number in the fourth quarter of this year. So we feel good about the <unk>.
Things we've done so far from feel good about the things I think for kind of yet to come.
Okay, Great I appreciate the color. Thank you.
Sure.
The next question will come from Kevin Fitzsimmons with D. A Davidson. Please go ahead.
Hey, good afternoon, everyone.
Hi, Kevin.
Mike You mentioned earlier.
Earlier about the taking up the level of securities and I'm, just curious with the with where it is right. Now is is this kind of a level.
At the top of your comfort level or could you continue taking that even higher in coming quarters securities levels as a percentage of earning assets and also are there just I'm curious if you know I know loan growth is are hard to come by these days and.
Curious if you guys have looked into other kinds of alternatives like purchasing loans or whether those are options are considered thanks.
Sure as far as the other the bond portfolio and I guess, how do we think about.
This notion of where to kind of put this excess liquidity really over the course of the first quarter. We kept about two thirds of it at the fed, earning 10 basis points from the other one third or so are we deployed into the bond portfolio. So on a go forward basis, we'd like to not deploy as much in the bond portfolio.
I think but a lot of that's going to depend on the pace of excess liquidity on whether that begins to slow down and then certainly loan growth. We are kind of guiding for the numbers that are in the earnings deck on slide 22 for the second half for the year, but certainly if we can get some degree of loan growth and when I say loan growth on the core loan growth.
So excluding PPP, but if we can get there sooner rather than later and certainly that's very helpful. You know from.
This overall kind of dilemma of what to do with all this excess liquidity on the impact that has on the earning asset mix.
So that's kind of how we think about that and you know going forward you know, we'll walk that balance between against the deposits in the bond portfolio.
Kevin This is John I'll, just to add to that when you mentioned the loan co purchase thought.
If we look at sort of the journey, we're on and that leads us to where we are now in terms of what the balance sheet looks like.
For the pandemic, we had a pretty doggone good day.
A positive book right in terms of mix.
And growth trajectory.
So it's something that we're good at in this part of the country and we have a good branch franchise with a terrific people and they've got product offerings. So deposit mix was very good before liquidity was sort of a dripping in every direction imaginable and so then the pandemic hits on liquidity is very available on our team didn't stop working on that right.
On the amount of deposits that has come in that we call excess liquidity.
I don't want to say that it's a bad thing. It's just it's tough on our NIM because the deployment options are limited, but it's just something that we're particularly good at and you know when things are easier for you to do when you're good at them you see those types of results that excess liquidity now hopefully here forever and it will turn into something more offensive to our NAV.
Down the road, but we certainly aren't getting paid for that today and so when we start thinking about the outlook on what do you do with it one of those options is to ease the portfolio on the bonds that up a bit and I guess mark it's been a lot of years since we had a number like we have right now and turn on of a percentage of assets in the securities portfolio.
But you don't want to leave it all sitting at 10 basis points and so we took a measured view towards deploying some of it.
Keep some available for demand that we thought would materialize and we thought when it did materialize at what happened somewhat aggressively and so we've avoided due on the loan for a purchase.
For two reasons, one because as a company looking to to allow for the quality of its portfolio with energy removed finally, let it shine a bit the the risk of taking on portfolio that might have problems in a day, we didn't originate.
With the you know the damage wouldn't be limited just to measure would be more of a you know.
Opposite direction on where we're trying to head and then the second reason is because we wanted to have that liquidity to deploy aggressively in the event that things became competitive on price and we wanted to make sure we could compete.
With with suppliers across the street and so that's really why we havent done on the loan pool on discussion they've been out there, but it's indirect auto and things that we were getting rid of not trying to to add more off so if the pipeline pull through rate delivers asked when we would expect it to then by the time, we get to the end of this.
<unk> and have something closer to a push.
Then we had in Q1 I think all the conversation and it's about how much faster can we make it actually get deployed so for that reason I think it's worthy of keeping the more liquid avoids doing the full purchase for now and devote all of our attention to ensuring that we're very competitive in terms of our calling efforts to acquire more credit business as it becomes more of on.
Total.
Yeah. So I guess I guess, what one thing I just wanted to frame a different way is that is the.
Mike What you what Mike had said earlier about maybe putting less in the bond portfolio going forward is that more about just reaching sort of a comfort ceiling or is it more about seeing those green shoots for loan growth and feeling more comfortable that that's coming sooner or a little bit of both.
Yeah, that's a little bit about and it really is saying I think a combination of those things, especially the green shoots on core loan growth.
But also being mindful of things like duration risk and investing so much money.
Yield co does today, although it has improved but still you know what we would call historically low.
Okay.
All of those factors.
Alright, Mike and and one thing I just wanted to.
To clarify on the margin guidance was that's inclusive of all the P. P. P accelerated forgiveness fees right flowing through as well.
Is that yes in there as well, but but I got you absolutely get that but you, but you lose you lose the ongoing coupon of just having the loans I guess correct, that's correct and hence the importance of being able to get to a push as quickly as we can on <unk>.
Core loan growth.
Right.
Okay. Thanks, guys.
Okay. Thank you for the questions.
The next question will come from Jennifer Dimber with Truest. Please go ahead.
Thank you good afternoon.
Hi, Jennifer.
John there's been a lot of high profile on M&A.
M&A over recent months I'm just wondering.
Management is thinking about acquisitions or combinations at this point in and if they make sense for Hancock or don't make sense.
Well thanks for the question, we obviously pay attention to it you know it's been a lot more chatter in the past few weeks than it had been a month or two before that but we pay attention to it we studied the data points in the market reaction to it and all of that plays into our thinking about the future and I mentioned, a little earlier on about the technology.
Plenty of work going on when we set out to do all that technology work are the drivers for effectiveness and efficiency, but also scalability and so after a number of years of hard work. We are deploying all of those toolkits, which allow us I think to improve upon the expense Takeouts, we do when we acquire when that time comes.
We really haven't changed our M&A focus in terms of digestible deals.
I think we know as a as well as anyone else does the complexities of an MLA and how you have to be prepared for it but the one lesson we learned above all wasn't being scalable before the deal happens is important in terms of Derisking. The deal and also making sure you get your expense take out without a contra or things you have to invest in and so.
Or tactic is to be sure that when many acquisitive opportunity comes up and as our currency improves that we don't have to rigs terribly hard to make it actually at work and so that's really the direction of our investment.
Okay and second question on your voluntary retirement program did that.
Did those elections come out much higher than you expected, but what are you modeling in terms of John the number of employees has elected to retire.
Yeah, I'll start and Mike might want to add color to it we said bookends around you know what the definition of success would be for that acceptance rate and it was right at the upper end of that boundary on what we hope to receive but as you know when you're doing on early retirement program. You know the measure of success is that you don't.
Did you get as many positions as you can and that acceptance right that you were able to absorb as much of that work as you can without a very high backfill percentage. So we were pleased very pleased with the acceptance rate. We're pleased for the associates, who took it because it means they can move on to the stage of your life that they've been anxious to begin.
After a really tough couple of years with the pandemic, but we're equally pleased about the folks who didn't accept it and we're in key positions and he is not going to create any risk or a higher cost of backfill. So overall I really couldn't be more happy with the weighted it turned out both for the company and for the team.
Absolutely kind of win win situations, so as John mentioned the 40%.
That's in charge offs was probably a little bit on the car and with many of you were expecting but we're very very pleased with it.
The other thing that I would add is that the the annualized estimate of $19 million does include what we think is a pretty conservative assumption around back sales. So.
Was that because we get more clarity on exactly what those back sales would be well level share kind of a final result, so I think for a little bit low during the quarter.
Uh huh.
Okay, and John can you comment on any green shoots you're seeing in tourism in New Orleans I know you gave a lot of detail on that on the last earnings call.
Yeah. Thanks for the question.
The first quarter.
What's probably the most positive changes that we saw in the hospitality outlook for our entire footprint and I believe it's slide eight is that right and I guess on slide eight in the deck.
As a as a gathering of a lot of information that we got from the tourism leadership organizations across our footprint and so all of that was literally coming from other organizations that are planning for particularly the middle of the year. So three months ago I didn't expect to hear.
Terrorism leaders project and some of them for coastal communities things like better than 2019 performance. When 2019 was a record year.
That's what we're hearing and we're seeing evidence that evidence of that already they're getting to for them up.
In New Orleans, specifically.
That was such a dependent market on convention and trade show, which is still a good bit handicapped, it's getting better, but it's still handicap, New Orleans had to pivot back to leisure tourism, because obviously international convention and trade show was gonna be diminished for some time in the month of March was one of the best months that we've ever seen.
In terms of additional leisure tourists coming to the Citi. So it almost looked normal even though the convention business was significantly down compared to what it would've been two years ago. So I think what we'll see in New Orleans based on the gathering all the data that we've already received is leisure will be a big winner.
For the second and and early parts of the third quarter and New Orleans were seeing a a firming up of the convention trade show and festival business for the third and fourth quarter for the city, we're seeing much more positive commentary from senior leadership and state leadership around the.
Our concentration of people out of sporting events, which is important to the new Orleans market. So all of those signs are really had been much more positive than in March really was a really really surprisingly positive month and that's carried into on into April. So on so we feel a lot better about it and the reason for.
Put all that commentary in there was to give a real time shot of the basis for our confidence with hospitality improvement across our footprint.
Thanks, a lot.
You bet. Thank you for the question.
The next question will come from Katherine Miller with K B W. Please go ahead.
Thanks, Good evening.
Hey, good evening.
Mm three margin questions here relative to your guys on the throw all through yet at you and you can just kind of go through your mindset. So number one is how much P. P. P is included in your second quarter NII Guy that's down two to 4 million just trying to think of.
How much of how much this kind of P. P. P. M for next quarter and then question. Two is I look at loan yields X P. P P and accretable yield you're at about 395 today.
Just thinking how are you thinking about.
Where loan yields may bottom and then my third question is just also how do you think about the trajectory of premium amortization.
On book books.
Okay. So last question first so our premium amortization on the bond portfolio.
Well it was actually less this quarter than the previous quarter and actually contributed about three basis points or so to the overall bond yields so on a go forward basis, assuming there.
The 10 year stays where it is or continues to go up we would expect debt prepayments would continue to ease and certainly could get I guess, a little bit of a tailwind related to the bond portfolio premium amortization.
To your first question around P. P. P balances include even in the second quarter.
We're assuming about a.
A billion or so maybe a little bit less I think 800 billion of PPP loans forgiven in the second quarter. So we'd have about 800 million less than we have now without really much of an increase related to the second round of new PPP loans and then Katherine Your middle question I think had to do with the.
The loan portfolio.
Yes.
Yeah colonial and certainly this assumption is baked into the second quarter guidance, but we do see debt loan yields coming down a little bit in the second quarter again, we had kind of an outsized level of interest for properties.
In the in the first quarter that impacted the NIM by seven basis points and in the loan yield by about eight basis points, but again, all things equal I think we do see the loan yields coming down overall.
Okay, Great very helpful. We get asked for.
We get all the questions.
You didn't get free into one great. Thank you.
Perfect. Thank you.
You bet. Thank you.
The next question will come from Matt Olney with Stephens. Please go ahead.
Hey, Thank you good evening I wanted to circle back on on loan growth and it looks like one of the headwinds for <unk> was the pay downs on single family mortgage loans.
What's the appetite to refill that bucket for.
I'm here I'm, just trying to appreciate it that could be a driver of future growth.
Yeah, It's a good question Matt.
Right now the you know when the rates began to move up a little bit in March we initially thought that the surge in application volume.
And remember, we're more of a purchase money shop, and a refi shop.
But we thought that that might have been a a knee jerk reaction from.
The client book to jump in a grab for cheap rates for fear that they're going to go up a lot in the next couple of months, but is that concern as Easter volume maintained and so I think there's just a really strong appetite for for home changes, which is which is creating.
On the new money purchase volume that we're seeing so so that will continue to keep pressure on the mortgage book It may not be what it was in the fourth quarter of last year, the first quarter we'd.
We'd expect that to ease, but we really at this point.
Don't plan on filling that bucket so to speak until the rate environment is such that the benefit is a little bit better right now the fee income right back to catheter was a little bit more attractive to us than the than the other interest income. So I think it will stabilize but I don't think we will see precipitous growth there.
And then on at least not in the near future.
Did I answer your question.
Yeah, so that that helps definitely on and I guess within the loan pipelines that you talked about or building. It sounds like its day eastern region and the bank debt, that's leading that charge.
If I think about the pipelines by by loan type or by for type of borrower any color you can give us that would.
That would help kind of clarify what types of portfolio goods could show growth initially.
It's a blend and it really comes in.
On may probably break it down this way maybe as you understand it the east was the least damaged part of the franchise in terms of a pandemic effect a wallet was a somewhat hospitality impacted area of our franchise.
The the beach going community really responded back in the summertime there was less damage. So line utilization and other types of things weren't as impacted there and frankly sentiment wasn't impacted as negatively there restrictions there we're not we're not as significant as they were in the western and central part of our franchise. So if it's not.
A mystery why people there felt better because they never did feel quite as badly as other places in our market. So they rebounded much quicker so I.
I don't know that that day that the eastern region will continue to lead the rest of the company as we get back to normal in growth, but certainly they have this quarter and maybe the next quarter or two but the biggest change quarter to quarter is really more of the diminishment of the outflows.
Because we saw a lot of very large lines pay down debt that there were no lost clients in fact zero lost clients among the ones on I'm highlighting.
They just simply decided to take excess liquidity and pay down debt and debt pay seems to be slowing. So I mean, we're a month in to the second quarter and those trends are part of the basis for the guidance for Q2 are leading to flat.
Which is an unbelievable for $60 million improvement from the prior quarter, but that's exactly where the book seems to be headed.
But it's an EBIT blend over over CRA certain types.
In our consumer beginning did not believe in growth and so overall I don't think there's really one or two areas of point to with one exception being equipment finance that we do expect outperformance from because of the pent up desire for purchasing.
He has gotten more state because of a lack of equipment and items to purchase I mean, you've heard that the microchip story for equipment that Oh, I mean automobiles and such and that's certainly exacerbated into other types of equipment that those pipeline seem to be filling for inventory to purchase and sale of equipment finance numbers and the pipeline.
But pretty impressive so without exception.
A little bit faster head start on the east I think it's going to be fairly blended.
Okay. Thank you that's helpful.
Okay.
This.
Our question and answer session I would like to turn the conference back over to John Harrison for any closing remarks. Please go ahead Sir.
Thank you Chuck and we appreciate you moderating today, thanks for everything attending the call and I know, it's been a long day of earnings releases to cover and we appreciate you hanging in there to attend our call and we look forward to talking to you soon.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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Okay.
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