Q1 2021 BancorpSouth Bank Earnings Call
Yeah.
So the pipeline continues to be.
Doing well its just we continue to get get payoffs.
And that's a mixed message that you hear from them from a lot of our peers. We hear some peers that have been saying they don't know when loan growth is going to happen. We've got other peers, saying that they expect significant loan growth in the back half of 2021 and I think the answer for US is probably some of both I think its part footprint driven.
And parts of our footprint, we're seeing lots of business activity and potential opportunity to grow some loans and in other parts of our footprint you know still relatively slow Chris you want to talk about pipeline.
I'll jump in there. So you know I have not been through a pandemic before nor have they had a triple T. A PPP program and our per.
Process, but I'll make a couple of comments, there and you're talking about loan and the energy. It takes to originate loans. We did 7527 lines on the quarter that were PPP transactions. Those don't just happen by themselves. So that's almost one location one loan per location per day, when you look at it that way.
So PPP is also.
Eating away at some of the community bank demand for loans, so if you're a customer that needs a mounting youre getting in PPP loan on how many loans are you going to get.
In addition to that and Windy circle back into the loan market.
So can I answer. Your question is if you look at the second half of the year, we're seeing businesses open as the as the communities open we're seeing.
Trade in some business practices normalizing.
More you know theyre going to come in different stages, obviously, we're seeing slowness in hospitality large CRE retail type our lease type commercial and health care, but we're starting to see opening up in the commercial and C&I world, especially transportation and industrial C stores and those type of things. So I think it's going on.
On a mixed bag as PPP rolls off and then other business segments open at different times going forward. So.
We're in the same general economic environment and are part of the World. As you are there are parts of the country that are still relatively close you still parts of the country that have got limits on Aki.
Occupancy in different facilities.
Most of the limits across our entire footprint have been removed so theres no limits on indoor.
Into our restaurants, there's no limits on pretty much anything you heard me say a few minutes ago, where we're in the process of Reintegrating, our folks back into their office. So we're lucky to be on a footprint. That's ahead on that obviously, we're watching to make sure. We don't have a relapsed back with the with.
With the.
The virus, but we certainly are encouraging our folks to get back from that as soon as they can.
My follow up is on.
Our residential mortgage.
Obviously with incredibly strong last year.
Still relatively strong this year are you thinking.
Spring and summer selling season.
Based on what you're seeing right now.
Yes on the problem is product there's not anything for sale are things that are for sale on our footprint are being moved very fast. So certainly there is opportunity out there people are hungry for residential properties.
Theres just not enough product on the market for sale to keep us at the same levels, where we were before on the refi business has slowed down so I think our normal spring summer time, we'll be good I don't know that it's going to be as good as it was last year.
Thanks, so much.
Thank you.
The next question will come from Kevin Fitzsimmons with D. A Davidson. Please go ahead.
Hey, good morning, everyone.
Kevin.
Hey, Dan.
With the cadence transaction I was wondering you know theres a lot of focus obviously on Texas.
On a bigger presence there, but you also.
Inherit this or add this presence in metro Atlanta, Middle, Georgia, and Florida Gulf Coast surround around Metro Tampa and I'm just curious what.
Where you see.
You.
The combined bank going from those positions in terms of.
Do you take those and expand further or maybe you don't need to expand metro Atlanta on any further than where it is and you just ride the growth in that market.
But maybe more specifically in Florida. That's just I know you were already on the Pan handle but now you got you.
Gain a big position in that market do you have any interest longer term and are expanding throughout the state.
Yes, Greg Kevin I think.
Those are two great growth markets that we have not been in before so we certainly are looking forward to.
Continuing to grow in those markets. The teams that are there I've been able to talk to some of the folks on those teams great teams of people.
In those markets and frankly, the opportunity to continue to expand to the team and expand within those markets is very important to us, Florida as a whole.
We can now connect the dots from the Panhandle presence that we have down to the Tampa.
St. Pete presence that is already there the risk.
Great opportunity across the state of Florida for Us.
And when we when we can find good bankers to join our team we're putting them on our team and we will not stop doing that because we are in the middle of our merger process, we want to continue to grow.
Both of US both the both the cadence team and our team have both been been able to continue to attract producers over the last several months and I think we will be able to continue to attract producers going forward to help us grow not only on those two markets because they are very important but in all of our markets.
Okay, Great and just.
Yeah.
This is.
When other banks here about a large transaction like this they always are quick and probably you guys as well when there were other transactions among your neighbors that point to the opportunity for.
Taking business and taking talent and so obviously it wouldn't be a surprised at some of your competitors will be.
Talking about that opportunity and so how do you being on the other side of that now how do you.
Ensure that you keep the folks in the business you want to keep.
When folks are trying to poach that thanks.
Yeah, we've been on it we've been on both sides of that that game also Kevin we certainly want to take advantage of opportunity when opportunity presents itself.
Our business is all about people. So that's how you treat people.
How you take care of your folks and if we keep doing what we need to do to take care of our people and keep them engaged and enrolled and feeling good about what we're doing we certainly want to make sure that they feel are needed we want to make sure theres retention incentives.
For our teams and I think we're doing that today and I think you know again as I've made the rounds, you heard me say a little while ago.
Been able to make it around Chris Chris actually jumped into Florida jumped into GA for a little bit I've been able to travel a couple of our other states and we're traveling again later today everybody.
Everybody, we're talking to seems to be really excited.
Cause we have just not a whole lot of direct overlap. So it so it's not as much stress on any of the teams because the lack of book direct overlap.
Okay, and just just very quickly on that same topic.
You guys are changing the branding named on the bank and maybe you could just go into a little detail on that from what I understand maybe the word south and Bancorp South you felt might be a little limiting in Texas, and maybe not fly as well, even though you guys are in Texas or or maybe its just one of those negotiating things that you're feeling.
Got you.
Wrote to the the selling bank, but it does present, you have a pretty expansive footprint and you're going out of your way to change the name of the bank, which presents.
Not confusion, but its going to presented an event for your customers. So I'm just curious how you approach that decision and what factors you weighed in changing the name of the bank and maybe why you don't think it would be.
Such a big deal at the end of day day.
Sure. Our name has been a question Mark for for many years, our board has looked at our name multiple times.
As we move up north into Missouri, some of those folks.
As we get further north into Missouri, where we are in St. Louis today are Clayton.
Not sure. They really think they are in the south on the rest of our footprint today is as the south but we've got we've had geographically limiting names now going back from <unk>.
Most of the beginning of our company 140, some odd years ago.
We were the bank of Tupelo, we became to bank of Mississippi, and then we became Bancorp south and so those geographically limiting names has been on our board of directors concern list. Since I came here eight years ago, we came close to making a change several years back and didn't and this gives us opportunity to take a claim brand that has a fantastic reputation in the mall.
<unk> that they currently serve and make it what we want it to be on a go forward basis. So we saw this as a real opportunity to to help us and in line us up for future growth.
As we continue to look forward and you are right. It certainly is.
When you've been on the same team for a long time and you have to change jerseys that is hard and so we're going to spend a lot of time and effort talking about that we're certainly going to spend time and effort in the markets with our customers, making sure. They understand what we're doing and why we're doing it and frankly this isn't going to happen for the next 12 13 14 15 months, while we go through the approval process now close and then we.
Got to get to full integration before we actually start changing the name on some of our buildings. So there's plenty of time to make sure that we're communicating this to our customers on a way where they understand what's happening.
Okay very helpful. Thanks, Dan.
Okay.
The next question will come from John <unk> with RBC capital markets. Please go ahead.
Hey, good morning.
Uh huh.
The name wasn't watch it on was it that youre going to change it too.
That's a good one John that one that one was the limiting also in the spelling category [laughter]. Okay. We're a long way from that clearly but.
Quick question for you on.
Mortgage.
What do you think the number of producers.
Looks like in a year I guess I'm curious about.
Plans for expanding that business and does the larger footprint.
But you need to have a larger presence on your hiring producers kind of walk us through debt.
Yeah, I think that the cadence mortgage team has a great group of producers. So I think if you're talking about post closing they've got a great group of producers that will we're looking forward to plugging in and making sure that we can all be on the same team and produce mortgages together. We're at 160, some odd people today book, but frankly, when you look at the foot that expanded footprint.
Theres, great opportunity for us to even expand further than the current cadence producers by making sure. We've got good presence in Georgia in the southwest.
Florida side.
So I would expect to see that those numbers go up clearly the mortgage business is a question Mark as you look forward as to what happens to US if rates start moving in the refi business stops. So clearly people want to make a good living in the mortgage business and I think theres great opportunity for us because people are going to continue to need to buy and sell the homes that they've got so on.
Envision growth in that area, Chris do you want to jump on that average.
I would agree I think we have a great platform and a great mortgage team with strong leadership. So you know in.
In a cyclical industry that can bounce around a little bit I think that gives us an advantage and I think we you know producers would want to join a stable.
Production company going forward and <unk> per footprint, a footprint is expanding so I would see upward pressure on number of producers as Scott.
Scott, it's taken care of leading our team is doing a great job. There Sharon is doing a great job for the cadence payments. So I think when you put those two leaders together and you put the two teams together I think we've got tremendous opportunity to continue to expand.
And then sticking with this maybe this is Chris but cadence with some decent fee businesses as well on treasury products, but.
It's your call here and I guess I'm interested in insurance as well.
How would you grade yourself, how do you think you've done and somebody in the insurance products into the commercial customers from acquisitions that you've done on was that going yes. So remember our commercial insurance brokerage as a bigger ticket commercial business and we've done a community bank model. So when you talk about forcing those cross sells.
Our lines, we have not done that we've referred we've done okay, it referring business to insurance, but coming back the other way.
Most of our small business customers are not the same type of customer that the big.
P&C brokers are looking for on the other hand, as we've grown our C&I book ourselves and so we've got it on 25 or 30 people on our C&I team today that relationship back and forth with insurance has been very good. The insurance team has been very pleased our bankers are pleased to go with them and so as we've been out.
Talking to the cadence team I think they see that as a positive piece, Chris you had some conversations directly about that yeah, just to emphasize that the connection between our insurance team and the community Bank side of the house is not that strong because it's just the size of the transaction. It will never be strong will never be that way. So what you're seeing here is a.
A better alignment of our business and cross selling opportunities to the corporate C&I space clearly cadence has a big book there and those are experience has been and are rolling out of our corporate and C&I.
Initiative over the last 24 months that that's a great alignment they work really well together the introduction to the Cfos to the large corporate space is a perfect alignment for employee benefits in our P&C.
Sales force and insurance professionals.
Good day.
That's helpful. It makes sense and then maybe one for you John I know Youre.
You're not alone in lower net interest income for the quarter on I know, there's a day count issues, but.
How do you feel about.
Second quarter net interest income growth is that possible given some of the dynamics that youre seeing today.
How do I feel about that you're very faint John was that how do I feel about.
The second quarter second quarter NII.
We feel better already because we have more days in the quarter job [laughter].
Well.
Let's frame it in the context of.
The possibility of continued low.
<unk>.
Growth in the loan portfolio or even flat growth in the loan portfolio.
What's the liquidity going to do whats all this excess cash in the system is going to do that.
Is the main driver.
The margin squeeze is.
Putting another three or $4 billion in the investment portfolio.
Debt, we would have rather be in the loan portfolio.
At 100 at 100 bps.
That's what squeeze in the margin.
So if the cash.
It's going to slow down as deposit growth kind of slow down.
If it does slow down.
We see.
Seem to be exercising pretty good discipline in our loan pricing.
Not chasing net chasing deals.
So our loan yields are holding up pretty well plus the rate protection that ive always talked about every quarter, where we had about 50% of our.
Variable rate loan portfolio at floors already so the loan yields are holding up.
Pretty well.
Going forward I think we should continue that.
Deposit costs is kind of the bogey here.
With the deposit growth.
I think that the opportunities in the deposit book.
Revolve around our CD.
Book about two and a half day in Cds.
Net of repricing.
Lola.
And in public funds, we got public funds.
Mid 70 bit.
Cost debt.
On a roll off of we can reprice those as well. So we do have some levers to pull on the deposit repricing thats going to have the margin. So is the cash going to start rolling in.
We're always go on John I mean, if you'd ask us on our call three months ago. We thought we were going to grow deposits at a 30% clip in the quarter I, probably would've said no. There's no way, we're going to grow deposits at a 30% clip.
Here, we are and we're not alone I know others are doing it too so the liquidity that's flowing in it's just very damaging on the net interest margin side.
Alright, thanks for the help.
Thanks, John appreciate your time.
Again, if you have a question. Please press Star then one our next question will come from Katherine Miller with <unk>. Please go ahead.
Thanks, Good morning.
Catherine.
If I look at on margin and I apologize if this was discussed.
And your lenders have been really stable over the past couple of quarters.
How much more downside do you think you may see that especially as loan growth starts to pick up on the back half of the year.
Yeah cause loan growth happens then you know clearly that can change some things too depends upon what types of loans are coming in.
If we're able to growth C&I credits, you know, sometimes those risk any of your price, but we're also seeing opportunities in other credit. So we've been able to hold loan right. John do you want to jump in on on them.
What's happening there Chris either one.
I mentioned pricing discipline, and I think we've been very disciplined in the pricing on loans.
And there's a lot of.
A lot of moving parts to that we've talked about deposit rates and the opportunities low deposit rates as well.
And the price protection on the on that.
Rate floors, so I'm optimistic.
I'll just repeat the question I ended my last.
<unk> comments on when is the liquidity going to slowdown.
Putting in extra.
Gosh.
5 billion 4 billion actually $4 billion in the investment portfolio over the last year and a half yes over the last year and a half.
Especially ramping up last year beginning early in the year.
Going great and straight into the loan portfolio just to put it to work that's what so that's what's diluting the margin.
I'll just jump in an average it's competitive so were seeing loan rates out there in that range. We've seen a few with tears in front of it to handle so.
Keeping John's right, we just have to stay disciplined and compete on.
You know, where we can and when we when we need to to protect relationships, but I think just remaining disciplined on our loan pricing hopefully we will get some upward pressure on the yield curve and be able to support higher rates from our fixed rate perspective going forward.
And that the a year and a half ago.
Our investment portfolio was about 2 billion eight.
Which was 16% of our earning <expletive>ets.
At the end of the quarter. It was $6 6 billion, which is 30% of our earning <expletive>ets that sort of tells the tale right there.
Yeah Yeah.
In the midst of it our share is the driver on that I'm just.
I'm looking at just loan yields and I'm trying to compare that to.
I think one one check on I haven't I'm going back to kind of 2015 16 levels, we've seen where loan yields were there in <unk>.
Comparing that to where you.
You could bottom and youre at like 460, now, but even maybe from like 420 back then but you've also done a lot of acquisition between now and then so I'm not sure it's totally totally comparable.
I would not I would not think thats totally comparable but we're currently paying attention to what's happening on the on the loan pricing side today I do the same thing can do the same exercise it and when I look back at that time rates had been low for a long long long period of time, they dropped off the cliff here and it looks like going forward as the quake and so what does all this liquidity data.
Makes a lot of questions I can't answer, but I don't know exactly the same apples to apples is $15 16, because you're saying profit.
Prime has been that way for years, you know it would be yeah.
Yeah that makes sense that makes sense.
Just on the reserve.
How much further reserve release do you feel like you've got you.
You go back to day, one so I'll just kind of thinking excluding cadence with Sanchez Your analyst day on what day you go back to day one essentially.
Or.
Flexibility within fees filter to kind of give yourself, a little bit of wiggle room for.
For growth question is coming from.
Yeah cadence is clearly going to change that hopefully before we get to the end of the year, but our seasonal model as our seasonal model and so we're going to do what it tells us to do the answer to your question about where we are from a from an opportunity standpoint can we go back to where we were I think that's really dependent upon the forward looking economic.
Environment, that's out there because that's really what's driving driving the model. So on a forward looking economic environment coming into last year. When we change the seasonal things were looking pretty good until about 30 days or 45 days into the year when things all of a sudden changed pretty pretty dramatically and.
And we could get back to that looking pretty good situation. So you know I think that you're I don't know that I have a direct answer for you, but there is opportunity there for us I would like to grow into what we have but you know clearly we're going to follow what the model tells us to do.
Makes sense great. Thank you.
Thank you Catherine.
This concludes our question and answer session I would like to turn the conference back over to Dan Rollins for any closing remarks. Please go ahead Sir.
Thank you all for joining us today.
You need any additional information or have further questions. Please don't hesitate to call us otherwise we look forward to speaking with you again soon have a good day.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
[music].