Q1 2021 Trustmark Corp Earnings Call
Good morning, ladies and gentlemen, and welcome to Trustmark Corporation's first quarter earnings Conference call. At this time, all participants are in a listen only mode.
Following the presentation. This morning, there will be a question and answer session to ask a question you May Press Star then one on your telephone keypad to withdraw your question. Please press Star then two as a reminder, this call is being recorded.
It is now my pleasure to introduce Mr. Joey Rein director of Investor Relations at Trustmark. Please go ahead.
Good morning.
I would like to remind everyone on a copy of our first quarter earnings release as well as the slide presentation that will be discussed on our call. This morning is available on the Investor Relations section on our website at Trustmark Dot Com <unk>.
During the course of our call management May make forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995, we would like to caution you that these forward looking statements may differ materially from actual results due to a number of risk and uncertainties, which are outlined in our earnings release.
Other filings with the Securities Exchange Commission at this time I'd like to introduce Duane Dewey President and CEO of Trustmark Corporation.
Thank you Joey good morning, everyone and thanks for joining US with me. This morning talks on that once our Chief Financial Officer, Barry Harvey, Our Chief Credit Officer, and Tom Chambers, Our Chief Accounting Officer.
Trustmark was pleased to report net income of about 52 million or <unk> 82 cents per diluted share for the first quarter of 2021.
Well briefly review these financial results by turning to slide three.
Loans held for investment excluding PPP loans increased to 159 2 million or one.
One 6% from the prior quarter and $415 8 million on for 3% year over year.
During the quarter, we originated 4770 for loans through the Sba's Paycheck protection program, which totaled $301 5 million net on 16 $45 million in deferred fees and other costs.
That was on insurance and wealth management businesses experienced revenue growth linked quarter.
Europe's revenue, increasing 22, 1% for wealth management revenue growing seven four per se.
Adjusted non interest expenses totaled $122 million for the first quarter they put it on.
Zero five per cent increase from the prior quarter.
We continue to focus on efficiency enhancements throughout the organization.
Including investments in technology to gain efficiencies and better serve customers as well as rationalization of the branch network.
Our credit quality remained solid as recoveries exceeded charge offs by $2 4 million.
Provision for credit losses was a negative $10 5 million driven by decreases in the quantitative reserve, resulting from an improving economic forecasts.
We maintained strong capital levels with a common equity tier one ratio of $11 71 per fan and a total risk based capital ratio of 14.07 per cent.
During the first quarter Trustmark repurchased $4 2 million for approximately 145000 of its outstanding common shares.
As of March 31, Trustmark at 95 8 million for remaining authority under its existing repurchase program, which was filed on December 31 of this year.
The board of Directors Corp.
Declared a quarterly cash dividend <unk> 23 per share payable June 15th to shareholders of record on first at this time I'd like to ask Barry to provide some color on loan growth and credit quality, the glad to Duane I'm looking over to slide four on.
Our loans held for investment excluding PPP loans totaled $10 million as of March 31.
That's an increase of $159 million from the prior quarter and $416 million from this time last year, our loan growth came in CRE with both public finance and so you're not getting some positive traction there.
The loan portfolio remains well diversified base from both product types and geography looking on to slide five Trustmark CRE portfolio is approximately 67% existing and 33% construction land development or construction land development book is 79% construction.
The bank's owner occupied portfolio Hasnt has a nice mix between real estate types as well as industries.
Looking on to slide six.
The bank's commercial portfolio is well diversified as you can see across numerous industry segments with no single category.
10% typically these loans are well secured and governed by a formulaic borrowing bases covenant debt to protect both the income statement and the balance sheet.
On slide seven you can see we have a minimum exposure to restaurants and energy credits Trustmark has never been in the high risk C&I lending business and currently we only have one customer totaling $11 million worth from Outstandings in that category the bad.
As always underwritten, both hotels and retail CRE loans in a conservative manner.
Looking at slide eight.
Our allowance for funded credit losses decreased $8 $1 million from the prior quarter are low.
On loss reserve levels decreased primarily due on.
The decrease was primarily due to continued improvement in the economic forecast along with some improvement in our COVID-19 qualitative factor.
At March 31, 2021, the allowance for funded credit losses on loans held for investment was $109 million.
Looking at Slide nine you will see we continue to post solid credit quality metrics at March 31, our allowance for credit losses represented 437% of nonperforming loans, including those that are individually assessed.
Other real estate.
Slide eight 6% from the previous quarter and 57% from one year ago level recoveries exceeded charge offs this quarter by $2 $4 million looking on to slide 10.
The bank actively participated as you know in the pretty big paint protection programs. Both in 2020 as well as 2021, we successfully assisted.
Significant number of local businesses that have been negatively impacted by the COVID-19 pandemic during the first quarter. We originated as Dwayne mentioned 4770 for PPP loans totaling $301 million net of deferred fees and costs at.
At March 31, 2021, our PPP loans totaled $680 million net of deferred loan fees and cost of $22 million.
Duane.
Thank you Barry now turning to the liability side of the balance sheet I'd like to ask Tom Owens to discuss our deposit base net interest margin.
Thanks, Duane turning to slide 11 deposits totaled $14 for bill even at March 31st up for.
335 million or two 4% from the prior quarter and.
And up $2 8 billion or 24, 3% year over year.
Average balances increased 600 million or for 4% linked quarter, primarily reflecting additional customer liquidity associated with the PPP loan program and government stimulus payments.
Our cost of interest bearing deposits declined five basis points from the prior quarter to total 22 basis points. We continued to maintain a favorable deposit mix with 33% and noninterest bearing deposits and our liquidity range remains strong with a loan to deposit ratio of 74%.
Okay.
Turning our attention to revenue on slide 12, net interest income FTE totaled $105 2 million in the first quarter, representing a linked quarter decrease of $9 1 million.
Interest and fees on PPP loans totaled $9 2 million, which was a decrease of $5 6 million from the prior quarter, reflecting a linked quarter decline in pay off activity.
Core net interest income FTE was $96 million.
It was a decline of $3 5 million from the prior quarter as a reduction to three 9 million on in core interest income more than offset a decline of 400000 in interest expense.
About 2 million per linked quarter decline in interest income was driven by an eight basis point decline in loans held for investment yield while the remaining $1 5 million linked quarter decline in interest income was driven by a 22 basis point decline in securities yield.
Of which about half the decline for the securities yield was driven by continuing high residential mortgage prepayment speeds and relatively lower reinvestment yields.
While the remainder was driven by the $301 million increase in the size of the investment portfolio during the quarter.
Okay.
Net interest margin in the first quarter of $2 eight 1% decreased by 34 basis points from the fourth quarter.
Driven by an approximate doubling for her.
Capex from $860 million in the fourth quarter to $1 6 billion number for the first.
First quarter, resulting from continued strong deposit growth.
Core NIM ex PPP loans, and fed balances of $2, 99% in the first quarter declined by 10 basis points from the fourth quarter.
I do want to point out that one of them refer to core NIM. We're now excluding fed balance from the calculation and in note five of our consolidated financial information, we have recast historical accordingly.
I've talked in prior calls about the distortion to our core net interest margin from the excess fed balances.
And we felt that excluding them from calculate core NIM is a practice, we've seen others in the industry adopt and we've decided to do so as well. We think this helps clarify for the reader the true fundamental dynamics of our core net interest margin.
And now Duane will continue with an update on noninterest income.
Thanks, Tom well now with the foreign interest income by turning to slide 13.
Non interest income for the first quarter totaled 66 million a 5.5.
$5 million decrease from the prior quarter and a four $7 million decreased year over year for Lear.
Quarter change reflects increases in insurance wealth management and bank card revenues, which were more than offset by decreases in mortgage banking revenue and service charges on deposit accounts.
For the quarter noninterest income represented 37, two percentage trustmark revenue continuing to demonstrate a solid diversified revenue stream.
Now looking at slide 14 will cover mortgage banking revenue.
For the first quarter mortgage banking revenues totaled 28 million, a $7 $4 million decrease linked quarter.
A fixed for $7 million decrease from the prior year mortgage loan production had a decline of two eight per share from the prior quarter, Although it's still very for the first quarter production and an increase of 67 seven per se it year over year.
For the first quarter retail production represented 75.
Zero percent of volume and $575 million on.
I'll now ask Tom Owens to cover non interest expense and capital management.
Thank you Duane.
Turning to slide 15, noninterest expenses broken out between adjusted other and total.
Adjusted noninterest expense totaled $122 million in the first quarter, an increase of 0.5% from the prior quarter.
This increase was mainly due to the $1 $5 million increase in salaries and benefits related to increased payroll taxes in performance based commissions.
Credit loss expense related to off balance sheet credit exposures on was negative $9 4 million in the first quarter.
Other real estate expense totaled 324000 in the first quarter compared to a negative 812000 in the prior quarter, reflecting gains on sales of other real estate in the fourth quarter.
As noted on slide 16.
Trustmark remains well positioned from a capital perspective, with a common equity tier one capital ratio of 11.71% and a total risk based capital of 14.07% as of March 31st.
During the first quarter, we deployed $4 2 million.
Good day via the repurchase of approximately 145000 common shares at.
At March 31st we have remaining authorization of 90, $495 8 million under our existing stock repurchase plan.
Right.
Thanks, Tom.
For this.
The discussion has been helpful and insightful for everyone. At this time weighted up into <unk> question.
We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.
If you are using a speakerphone please pick up your handset before pressing the keys.
If at any time. Your question has been addressed and you would like to withdraw. Your question. Please press Star then two at this time, we will pause momentarily to assemble our roster.
Yeah.
Our first question comes from Jennifer them, but with truly securities. Please go ahead.
Okay.
Thank you good morning.
Good morning, Jennifer.
Just wondering if you could talk about the major levers you feel like you have to offset it.
Net revenue growth challenges on.
Mortgage comparison challenges this year.
And what we should expect in terms of kind of near term securities portfolio growth I Trust my strength.
Jennifer I'm going to ask you to repeat the question, we got bits and pieces it was a bit of jumbo.
I missed the first part of your question I apologize for that I'm.
I'm, sorry can you give any day now.
Yes, a little bit it's still a little bit jumbled.
Okay.
Ill talk louder here hopefully it'll work.
Let's talk about the major levers trustmark has to kind of offset spread revenue.
Growth challenges in a difficult mortgage book.
Lending comparison this year.
Such securities growth, you're willing to put on one day industries waiting for for low demand for you to get better.
Okay. I think we got most of that there's a couple of different questions I'll start out and Tom and others can add in.
First of all as we reported in our last call. We continue to remain very very focused on expense controls and efficiency.
Measures across the organization, we're doing extensive work in our branch system Lucky.
There's every opportunity to deploy itm's another means to serve customer needs and reduce the overall for.
<unk> networks as well as head count.
So continued focus there I think.
In our prior call, we guided to and to 13 closures.
In the year.
In the first quarter, we had a net closure of five seven closures in two new ads.
On the closer level could get as high as 16 and 17 for the year with several new additions.
So that 14 10 to 14 net closure levels about right for the year, but we're intently focused on the branch system. We are continuing to invest in technology, We announced a major digital program kicked off actually this month that we.
Well, we think serves customer he's very well, but also is a digital marketing enhancement, which over time will gain significant efficiencies as well as a better insight into serving customer needs and then we are as a leadership and management team or.
Intently focused on head count.
Have a program in place.
Every replacement or new out of pet count, we're focused on reducing headcount across the organization where appropriate.
And we are intently focused on that topic on that issue moving forward.
On the water.
Pick up from there in short survey.
Sure Good morning, Jennifer Thank you for the question so.
Regarding the securities portfolio and the excess liquidity.
As we said.
During the first quarter, we averaged about 1 billion and a half dollars of excess fed balances.
So if you think about the driver obviously is the deposit surge.
$2 8 billion year over year, we're up $300 million just in the first quarter and deposits.
We did grow securities by 300 million in the investment portfolio of about $300 million.
In the first quarter and if you think about the.
For $2 8 billion of deposit surge year over year. If you look at la <unk> growth year over your for about $400 million and securities growth of about 300 million, that's about $700 million, we've deployed about 25% of that deposit growth.
Year over year.
And in terms of managing it going forward I would think that.
We will continue to Opportunistically increase the size of the portfolio I think in the second quarter you know.
Something in the neighborhood of $150 million or so depending on what happens on deposits, but I'll just say in terms of managing that liquidity.
When you think about what we're trying to do we're triangulating between assessing what the effective duration of the deposits Serge will really ended up being and you're trying to balance that against your outlook for the economy and interest rate while at the same time, maintaining a competitive.
Interest rate risk profile.
And so you think about trustmark.
We have a very powerful counter cyclical.
Non interest revenue engine with mortgage banking, which is kicked in here with historically low interest rates.
We want to make sure that we have a competitively positioned to asset sensitivity as we come out of the Panther.
Pandemic and as market interest rates begin to rise from the fed eventually normalize as monetary policy.
And so we.
We look at it we think we'll probably underinvested in securities relative to the peer group by a bit.
There is the opportunity to do more but we're trying to balance those things I mean, if you think about it.
1 billion on a half sitting at the fed.
If we deployed that and picked up a 100 basis points today, that's added about $15 million tangible net stemmed from.
But then you think about well if you do that you put on putting on four to five year duration assets the opportunity costs going forward when market interest rates rise from the fed begins to normalize monetary policy. It can be enormous and we don't want to put ourselves in a competitive disadvantage for those of US those are our considerations.
And again in summary, I would say that we will continue to opportunistically.
Increase the size on the portfolio.
[noise] Jennifer day, winning answer every part of your question.
I think so.
And for a limit.
Securities to assets.
That you would target.
Yeah.
No not a limit I mean again historically, we've looked to be in the neighborhood of 20% of earning assets.
You know and I think at this point that would put us close to in the in round numbers in the neighborhood of $3 billion.
We're currently at $2 8 billion and as I said.
<unk>.
You can absolutely see us increasing the size of the portfolio or something on the order of $200 million here in the second quarter.
But again we.
When you balance those things out for the time being our view is that we don't want to run a little bit light in terms of the securities portfolio net Jennifer and that could change Brian.
Interest rates are low the yield curve is flat spreads are tight.
And so those three variables when you think about it if they start to move in a direction that becomes more attractive.
You could see us deploy some of that liquidity more rapidly.
Rapidly again, we're also keeping an eye on deposits demand dynamics, we would have thought and I think a lot of folks in the industry would have thought that by now we would have started to see some rollover we hit that inflection point.
In terms of deposit balances now nobody necessarily anticipated the additional stimulus coming from the American rescue plan, so on and so forth. So but as you can as you can imagine we diligently monitor each month those trends on the balances and so that's going to be part of the calculation as well is how much do those balances in those.
Docs demonstrate an effective duration that looks like.
You know something consistent with the back book so to speak.
First is how much of it demonstrates effectively shorter duration and we want at the end of the day, we want to maintain a competitive edge.
Asset sensitivity to our interest rate risk profile.
Thank you.
The next question is from Catherine Mealor with K B W. Please go ahead.
MS Mealor use utilize the morning.
Florida.
Can you hear me.
I just wanted to follow up on just your run rate outlook, it looks like last quarter.
On a little bit more cautious on Wednesday fifth tier versus last but had really nice momentum this quarter and just curious how you're thinking about what loan growth could look like in 2021.
Catherine This is Barry I'll go ahead and address that.
During Q1, our growth was actually meant.
And we had a good bit of funding and our other construction book and some of that was for where we continue to those type of credits on the books that we felt good about during Q2, three and four of last year and so we would anticipate that those fundings to continue to be strong throughout the year.
Here, we have seen a little bit of improvement in our growth in the public finance area. This quarter, we expect that trend to continue I think we are where we're really focused on making sure. We don't Miss those opportunities and making sure. We're prudent about how we approach that process than on the C&I side.
We didn't have a little bit of forward momentum this quarter.
It's a very competitive environment, but we are continuing to look at different alternatives.
Going forward I think were still our guidance is still low single digits.
Mainly because of the expected payoffs that we see coming in two to three and for on our commercial construction book.
Which obviously would be coming out of the existing categories. As these projects stabilize and move in move out to the permanent market or so if for some reason on that is delayed and you could definitely see that being late in Q4 as things tend sometimes slide back a quarter, we could see us we could see our loan growth being Morris Moore.
Single digits than low single digits, but that would be the reason is because there is a delay that pushes them out of the fourth quarter into the first quarter those.
Those things that are just moving within the year I think we would those would all be accounted for within the low single digits guidance, but it's more a function of.
From some scheduled pay offs, we do expect to happen as well as the unexpected which were which we are seeing coming through as we've got a forecast.
Much more about that than it is about the production engine because we're still having good activity looking at a lot of deals putting them on our books as you know in that particular.
And the construction mini Perm area. There they've you know you're getting a nice fee, but it is they are slowed up on typically because of how much equity is going on and then there they'll stay on the books as long as it's attractive to the so once they stabilize for as long as that's attractive to the for the ball or in terms of what they can do with it in the permanent market.
As for our so the product the cap rates remain low and the permanent market is definitely open and ready for business. So we would expect those projects don't leave us as anticipated, but if some reason we are able to allow them to stay with us on a longer for us to vote for stabilization or something of that nature. Then you could see us generally.
More of a mid single digit loan growth in the low singles interest debt, we're guiding to.
And so that makes sense.
How do you think about where.
He believed there was there was a bottom do you think we're headed toward that.
For the day, one he saw reserve to loan ratio on.
Could you see that.
That ratio falling below one or just how do you kind of think about where we're headed.
Yeah.
And this is Barry again Kathryn.
You know our challenge and I think everybody is challenging to forecast.
And our forecast continues to improve as you know we use Moody's baseline.
And we forecast for quarters, then we revert to the main over four quarters, which you know in today's world. That's a positive because the the main is higher than any of the four quarters in our forecast in terms of higher unemployment, whether it be national southern So that's actually beginning to work to our advantage.
I think we've we looked at on April's.
Numbers coming out of Moody's baseline or their S. One.
And they did they did improve slightly when southern unemployment non and national on a formal for two of our bigger drivers.
But not for the same extent that we've seen them over the past several quarters. So we're cautiously optimistic that debt continuing improving forecast will continue to be.
Much true to a lesser degree than we've seen previously that would be a headwind that would help us not be moving back toward where we were a day, one which for trustmark just for reference purposes from Saudi eight basis points on funded debt. So obviously, we're one on non today on funded debt versus the 88, it's not ours.
Intention at all to be moving back that direction, Although I will say, we also have a qualitative reserve for COVID-19 loans and as you can imagine over time those loans will either get upgraded if they're in a non pass category or will decide we don't need the reserves the additional reserves.
Our attitude the pass category and if that does occur then that will be another headwind, we will need to deal with but I think that's a little more controllable by Trustmark in terms of how we see the economy on unfolding when we see the vaccine fully distributed for everybody who wanted availabilities on unlimited all of those things and then we can.
<unk> began to determine do we think we don't need that COVID-19 reserve and if we don't then we can in a systematic manner will began to release those reserves absolutely should I think it's a combination of that as well as the forecast not continuing to have the large improvements in unemployment both national and sell.
Other than that we've seen previously those are the two things that are going to drive us lower with arm with our reserving levels and so as long as we can have some moderation in the forecast from the economic side of it and then B b patient, which we intend to be on the relaxing of the COVID-19 reserve.
On the qualitative side to make sure we really see the lights on their eyes on every everything is on moving forward on the the economic engine is turned back around in the hotels for restaurants to the retails are all back on solid footing than we can begin to release some of those reserves that were specifically assigned to those credits.
Were most impacted by the COVID-19.
Okay very helpful. Thank you.
Okay.
The next question is from Brad Milsap with Piper Sandler. Please go ahead.
Hey, good morning, guys.
Good morning, Brad.
Thanks for taking my question just wanted to quickly go back to the mortgage business.
If my calculations are correct.
Looks like your gain on loan sale margin was down maybe more than I expected linked quarter. Obviously, you understand that there's pressure across the industry, but it doesn't look like your mix in terms of retail wholesale was all that different.
Just kind of curious kind of what trends you're seeing you know or are we getting close to a bottom in terms of that gain on loan sale margin.
Or if you continue to kind of see weakness.
As you moved into the second quarter.
Yeah, I think I'll start and Tom can add if needed.
So first of all on the mortgage business as noted earlier for production in the business remains very solid very strong.
$767 million in the first quarter is.
70% higher than any prior first quarter, we've ever had so it's still a volumes remain strong I think in the last call and toward the end of the year. The industry was forecasting volumes to be down 30 ish for 35% across the industry. We were in that same kind of.
Lori, we're seeing more like a 10% decline now over the year in terms of overall volumes.
So that's what we're expecting moving forward, especially in the same quarters next quarter and be on it.
In that 10 ish range of volume decline.
We are still seeing that gain on sale margin tightening for sure that one it's much more difficult to forecast much more dependent on a lot of other factors.
Factors and the like and <unk>.
To your point.
On your question, we've not necessarily seen it.
Stabilized or bottomed, yet we do see it.
<unk> decline.
On the down another 25 or more per cent.
In the second quarter from what we're seeing now farther into the year, it's much more difficult.
Are you getting any visibility there.
So.
That'd be my any further comments from them on what you're seeing economically because.
That's helpful Brad.
Yeah, No that's great and just maybe on the on the flip side of that I mean, I know you debt mortgage lenders are paid on production and not you know profitability.
So based on your you know if you think volumes are going to be down 10% I mean, it doesn't seem like youre going to have you.
Maybe a lot of expense leverage even though the revenue is going to come down.
At a faster clip is that is that a fair assessment.
I'd say that's fair yes.
That's right on the button, we can pay on production and.
So if you look at the first quarter expenses totals in the 'twenty 'twenty expense totals that was it.
Included higher commissions than normal and as we see that production come down that'll come down proportionately in that range. So I think you've hit it you've hit it right on the expense side.
And just that COVID-19 Jennifer's question, I mean, I mean, obviously it sounds like Youre working on some things.
Related.
In terms of expense levers are those.
You're still you're looking like you're running at kind of a high single digit kind of expense growth run rate, which seems a little bit higher than maybe what trustmark has done historically I mean is there.
Do you think those branch rationalization efforts are enough to kind of bring that run rate down.
You know to something less.
So Brad this is Tom.
I'll take a stab at that.
It depends on how you look at it in terms of the expenses right. If you if you look at adjusted non interest expense.
We think we're tracking year over year full year 'twenty, one versus 'twenty in the low single digit range. So just to give you an idea so.
So full year 'twenty adjusted noninterest expense was $455 4 million.
And so we.
It is very much depends.
Mortgage origination production in commissions is a swing factor.
We think that excluding that sort of elevated expenses will probably be in the 1% to 2% increase year over year in terms of adjusted noninterest expense.
If mortgage origination volume continues continues to remain somewhat elevated for.
For the remainder of the year, you'd probably be closer to 3%.
In terms of that metric for about year over year.
Great. That's helpful. I appreciate it.
Yes.
Again, if you have a question. Please press Star then one.
The next question is from Michael Rose with Raymond James. Please go ahead.
Yeah.
Hi, This is Carl Darwin for Michael Rose.
Good morning, I appreciate all the color on the loan growth.
Is that the thinking.
Back on that question.
I believe are in addition to the E. R E.
Real losses, you had guided to on the also mentioned elevated pay downs.
Were also a factor for the lower loan.
Our loan growth just want to see you previously you just noted a pickup in C&I activity.
Wanted to see if we're.
Where our pay downs relative to what you expected.
And then.
And I didn't quite catch the name, but that is it Carl.
Yeah. Carl This is Barry let me, let me speak to some of that.
It's it's a funny thing when you when you look at what we anticipated for payoffs in Q1.
They are pretty close to it and spot on.
But I will say that some of the ones that we had scheduled for pay off in Q1 moved down into Q2 or Q3, and some of the ones that probably were slated for 2022 moved into Q1 of 2020. One. So it's it's a it's a fluid situation because of the opportunities all ball.
Ours have from time to time to be able to move a project out through a sale, especially where they're getting paid based upon the velocity of lease up as opposed to the stability being achieved so we do we do get surprised.
Every quarter, Bob some that move from one year into this year and some that were scheduled for this year.
<unk> down to another quarter, probably still then this year are for the most part we do we do budget.
Get them out when we're trying to forecast or plan for when we're trying to forecast a significant number of unexpected pay offs just because of the uncertainty around when things are going to leave us. We do we do survey our customers quarterly on.
Our relationship managers due to make sure they know exactly when they would expect the project to leave our relationship managers to do a good job on that because they understand that we have limits on things and then the better we can forecast when things are going to leave us for the better off we are in terms of not shutting off the spigot on something that we're good.
To have a lot of pay offs on if we don't know about them, we can't plan for them and if we think were filling up on a bucket. Then then we will end up stopping or slowing down production. When it was unnecessary we'd only had the best information from the customer. So are our folks do a good job of assessing that on a quarterly basis, we rate forecast.
For every quarter, our CRE in every category to make sure we were anticipating with the best information possible, what's going to transpire and so the answer to your question, we wait for about where we expect it to be from a payout standpoint in Q1, we do anticipate.
The scheduled pay offs for Q2, three and for being heavier, but as I mentioned earlier on Catherine's question that fourth quarter is a heavy pay off quarter for us historically, you will see things slide from quarter to quarter, either because you know the things that the stabilization is just not quite where they wanted to be.
Well they'd rather wait a couple more months and get the maximum amount of value out of the project when they sell what are the are there still need to have a little more little more funding that they can do them before they actually move to the permanent market depending on what stage. It is whether you think whether it's coming just out of construction on whether it's just about stabilized so for all those reasons.
Is it does vary but I think we felt comfortable with our forecasting process and we feel comfortable that we do have heavier volumes from payoffs coming in the remainder of the year than we experienced in Q1 for Q1 was in line with what we expected.
Got it.
Thanks for the color and then I can touch on the M&A versus buyback.
Study using the repurchase program so far in <unk>.
Just in terms of the M&A and I know you also you can see noted debt.
You are looking to.
And then just in terms of debt how should we.
Just in terms of the interactions and calls in our activity.
Just can we expect.
Whether you're doing about equal impact how much share your buyback going forward.
Well this is Duane I'll start.
There's a tremendous amount of activity and discussion in the M&A world going on.
There's.
Is there a whole lot of activity really.
We are approached with lots of different opportunities of all different shapes and sizes. So there is a lot of talk and discussion out there in the marketplace. Our position really in M&A hasn't changed we're still very interested in the southeast region of the U S.
We're looking to be opportunistic were looking for lead growth markets for looking for expertise and talent that supplements our team as it stands today we're.
We're looking for product or product additions or additional product and category from known understand and.
Again, our capabilities for growth and then finally.
It is important to us would be efficiencies that.
We can gain through Oh.
Addition, one way or the other we stated it still continues to be thinking in the range of 500 million for $5 billion in terms of.
Partners debt that we would look at acquiring and so.
So that's kind of the view.
I'll close by saying, yes, it is a very active.
Right down with lots of different discussions.
Across the industry.
And then in terms of buyback.
We have a detailed.
We have low capital planning committee that meets as needed or at least on a regular basis debt.
Looks at and considers our opportunities we still have most of our allocated a buyback program in place.
When you look at that.
On the same way to be opportunistic and take advantage of market conditions and will continue to do so as the market allows.
But we do have 90 day or $5 million available approved expenses are.
Capital available for buyback at this time.
Okay.
Alright. Thank you very much. Thank you all for me.
This concludes our question and answer session I would like to turn on the conference back over to Duane Dewey for any closing remarks.
Thank you again for joining us for our first quarter call. We hope we answered your questions and.
We appreciate you being on the call and look forward to getting back together at the end of the second quarter have a great rest of the weighted thank you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Okay.
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