Q1 2021 County Bancorp Inc Earnings Call
Good day and welcome to the County Bancorp, Inc. Q1, 2021 to earnings call. All participants will be on listen only mode should you need assistance. Please signal conference specialist by pressing the star key followed by share.
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I'd like to turn the conference or an attempt to Strider President. Please go ahead.
Thanks Grant.
Welcome everyone. Thanks for joining us today for our first quarter 2021 earnings call.
As a reminder, we have our disclaimer on the use of forward looking statements on slide two of our presentation.
Yeah.
I'll do an overview of.
Quarter, four 2020 moving.
Moving to slide three quarter, one excuse me moving to slide three there were several positive trends to our financials this quarter, which resulted in net income of $3 9 billion or.
Or 62 cents per diluted share.
Those included.
Net interest income decreased $10 2 million, primarily driven by less lawn fees from P. P. P forgiveness compared to the second sequential quarter.
Loans sold and serviced increased 29 3 million with resulting increases in both loan servicing and loan origination rate income.
Loan loss provision was <unk> 2 million, which was well within expectations and speaks to our improving credit quality metrics.
Watch and worse loans decreased during the quarter, which we expect similar.
Similar positive credit migration throughout the balance of 2021.
At our adversely classified asset ratio remained stable at 30, 961%.
And lastly, we repurchased 109862 common shares during the quarter.
Uh huh.
Now I'll move into a printed update.
The overall portfolio has fared well in response to the COVID-19, cope COVID-19 impact at 331 21.
Only one AG customer and three commercial customers remain on interest only payment relief.
These four customers account for less than 1% of our total loans.
Moving to slide five.
I want to highlight some of our key credit metrics or adverse classified ratio held steady at 30 961 at $3 31 21.
Watch credits decreased by $24 2 million as a result of upgrades on our dairy portfolio in connection with the beginning of our 2020 annual review process. We expect these positive trends to continue during the balance of 2021.
Or are you all totaled 738000 at 331 'twenty one as we continued to market acquired properties.
We continue to monitor the high concern watch and substandard credits on a quarterly basis to ensure proper monitoring and follow up on these accounts.
We have completed the 'twenty 'twenty dairy stress test for the 2019 operating year and the results were improved over the 2018 operating year and reflect more than adequate levels of capital and reserves given the extraordinary stress is utilized in the test.
I'll give a commercial credit update moving to slide six.
We continue to monitor the industries, we consider high risk is detailed on the bottom of the slide.
As you will see the loans in these categories are supported by satisfactory loan to values on risk ratings.
The wholesale launch we're proactively moved to the watch bucket as their occupancy rates were negatively impacted by the pandemic.
We did receive a $4 $1 million payoff from one of our per hotel rated sub standard credits shortly after quarter, one 2021.
Moving to slide seven provided net credit update.
Overall, we remain optimistic with the quality of our dairy portfolio and continue to anticipate several upgrades in connection with the 2020 annual review process.
Early reviews of the watch and worse rated credits from already shown a significant improvement on the watch bucket.
And there are several anticipated upgrades in the balance of quarter two in the substandard bucket.
We're also encouraged by the impact on <unk>.
Our new AG lenders have made by diversifying our customer base with the addition of several large potato growers and cash grain operations.
You can see that the majority of our AG exposure is to the dairy industry. We should also highlight that 72 per cent of our dairy relationships and.
65% of our total AG relationships are supported by FSA guarantees.
Since our inception, only $5 $9 million in charge offs have been incurred on our $1 $4 billion gross portfolio.
At this time I'd like to turn over to Dave Coggins, Chief Banking officer to give an update on the overall AG environment day.
Thanks, Tim.
Moving to slide eight as you see the we've got it broken down into two bullet points on your AG tailwind from AG headwinds and I'd like to give some narrative that will help explain those bullet points class III milk prices for the three months of quarter, one of 2021 average $15.98.
However, as of 331 2021 the combination of the first quarter actual price along with the class III futures price for the remaining nine months of 2021 average $18.16.
This is about $1 50 per hundred weight above most dairy producers breakeven projections for 2021.
With class III prices more in line with other classes of milk negative producer price differential or P. P. D have been nominal and are expected to remain substantially below those experienced in 2020 for most producers.
Government assistance provided a significant boost to the incomes of most dairy producers in 2020. This allowed farmers to improve their working capital and pay down debt as well as take care of from deferred maintenance.
While the last round of stimulus is expected to have some amount directed towards the dairy industry in the form of additional seat that dollars.
Or Corona virus food assistance program dollars, it's not expected to be a per levels experienced in 2020.
Heading into the 2021 cropping season expectations are from an early spring planting season was from emerging concern about soil moisture levels in some areas of the state.
It's too early to tell if this is likely to create any growing season concerns, but it bears watching.
Cash grain prices for both cash and futures markets are stronger than they've been in some time and this bodes well from a cash grain producers, but as a growing concern for dairy producers who need to purchase substantial amounts of their feed.
Other farm in input costs, such as fuel and chemicals are also elevated and putting margin pressure on some firms given the current environment margin protection programs like livestock gross margin dairy and dairy margin coverage or DMC are important risk mitigation tools available to dairy producers.
Predict protect the margin between milk prices and feed costs.
On the export from the outlook is for strong economic global growth as COVID-19 vaccination program implementations are starting to impact the economic outlook for most dairy trading partners. The U S needs to export between 15, and 17, 17% of its dairy production to keep milk prices in the current range.
Asia's demand is expected to be strong and combine this with the weaker dollar.
Expectations for strong U S dairy export activity is realistic.
USDA earlier forecasts for global dairy supply and demand indicators, all dairy product consumption is expected to grow and this continues to be supported through the first quarter.
Dairy powder demand will continue to be a major driver of growth in 2021.
<unk> of our products and the global global marketplace have been volatile, but are currently quite competitive and that should help us maintain needed export volumes.
We contract with an egg economics for them to give us weekly outlook information and following as an interesting quote.
From a recent report and I quote the U S and World Energy outlook is bullish the speed and intensity of future rallies is now in the hands of mother nature.
Yet rural income over the next two to three years will be elevated due to the need to rebuild U S and world stocks.
The AG Bowl is a multi year process and that's kind of a wrap up of the outlook as we see it.
And now I'd like to turn it over to Matt Lemke for updating us on our funding Matt.
Thanks, Dave.
Moving to slide nine Youll see that we continue to stick to our strategy of altering the composition of the right side of our balance sheet.
In terms of financials, you will note from March of 2020 to March of 2021, we increased transaction account balances by 54% or $234 million of debt increased 27% or approximately $63 million was related to PPP funding.
From March of 2020 to March of 2021. This shift in balances took our cost of funds on transaction accounts from 0.92% to 0.32% cash.
Cost of funds, including Cds for the same period decreased from 183% to <unk> 91 per cent.
In Q1, 2021, we increased transaction account balances by $3 six per cent or $23 2 million.
We net it on 16, new transaction accounts, increasing the number of open and active accounts on our books by one 7%.
Additionally, in Q1, we ran on $34 7 million of our consumer CD portfolio further shedding high rate single service households clients to improve our overall cost of funds.
Strategically we remain focused on people infrastructure and services talent wise Q1 thought adding expert talent in both Treasury management and mortgage on the.
The Treasury management side, we added an individual debt in conjunction with our AG lenders is dedicated to managing and growing our deposit portfolio.
On the mortgage side, we continued to take advantage of a low rate environment by providing a complete mortgage solution to our customers and prospects. We hired on export expert mortgage originator for our Appleton market. We continue to believe this market presents us great growth opportunity and with our new location scheduled to be complete later this year. We believe this individual will be able to drive new consumer relationship.
And brand recognition for the organization.
In terms of infrastructure, we are working through implementation of an internal account analysis system that will continue to provide us the insight and detail necessary to manage the commercial and AG deposit balances and non interest income opportunities more effectively.
Commercial on Treasury management are actively managing a robust deposit pipeline with Q1 thing. The team has been successful with rfps and lending separate sizable deposit opportunities.
From a service perspective, the Treasury management team enhanced our suite of services available by adding a lockbox solution.
With our lobbies now open a branch network continues to work on deepening client relationships maximizing opportunities in person online and over the phone.
The team remains dedicated to educating our clients on all the ways ICB can assist them in managing their funds.
Focusing on people infrastructure and services led to the results from produced in 2020 and these areas have been instrumental to our start to 'twenty 'twenty. One we continue to work to drive franchise value through deposit growth and effective cost of funds management. We will use these priorities other basis for decision, making and driving business throughout the year.
Now I'd like to turn it over to Glen slightly Chief Financial Officer for an update on the remainder of our financial performance Glen.
Thanks, Matt turning to slide 10, we continue to see strong growth alone Fulton serviced and continued with our investment wholesale funding leverage strategy.
Our strategy is designed to complement the asset sensitive aggregate balance sheet that we have.
The strategy is being funded with four year callable brokered to your <unk> advances as well as core funding when you're mixing the core funding the assets are very close to being match funded on a duration basis.
Yes, the true mixes gmos Muni and bank subordinated debt and Theres totaled a $100 million in started in November 2020, overall spread to date is 192% and has added $1 $9 million on net interest income and $1 4 million on a net basis to date.
As with every quarter, we will be evaluating the leverage strategy at an upcoming Alco meeting to determine next steps.
Turning to slide 11, net interest margin, excluding PPP improved from 2.49% to $2, 74%, which includes the 15 basis points related to the recovery.
Zero point $5 million in interest income on a non accrual loan participation.
And continued improvement in overall cost of funds.
Due to term funding repricing, which we expect to continue during 2021.
Turning to slide 12, you'll see the breakout of our allowance for the quarter, which was overall flat from this from the sequential quarter.
Yeah.
Turning to slide 13 loans sold and serviced increased $29 3 million during the quarter and a five basis point increase in average servicing fees in the quarter.
Contributing to the increase in non interest income.
Turning to slide 14 in Q1, 'twenty, one we accelerated a technology project into the first quarter day, where you originally budgeted for the entirety of 2021. So those expenses will be nonrecurring for the remainder of 2021.
Moving to slide 15, as Tim noted earlier, we continue to be very pleased with the results of our buyback program. In 2021, we purchased 109862 shares at a weighted average price of $22 82.
Which is under tangible book value during the current quarter and extended our repurchase program by an additional 609000 shares during the quarter as well.
And now I'd like to open up to questions.
We will now begin the question and answer session.
Question limit plus Star then one on your Touchtone phone.
Youre using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two at this time, a little pause momentarily to assemble our roster.
Okay.
Our first question will come from relative Nosal with Piper Sandler. Please go ahead.
Hey, good morning, everybody how are you.
Good morning, Brendon good morning.
Brendan.
Just to start off here I'm glad I appreciate all the detail you added on the leverage strategy just true.
Thoughts there.
I know, it's kind of under review each quarter, but just any thoughts on how much larger you could potentially see the trade getting and over what time period.
Yes, you know, we initially set out Brennan to do $200 million over a year. So we started that in the fourth quarter of 2020, and we've been spaced on about 50 million per quarter.
We will continue to evaluate every quarter. So we're not putting it all to work at one time and almost $1 average.
Averaging concept so again, what we're going to look at here coming up here sometime in May and we will decide then kind of what we wanted to do so.
Got it that's helpful. Thanks, and then.
Maybe moving on to the loan growth side of things I think this is the first quarter outside of the PPP loans have grown since 2018. So just talk about your appetite and ability to grow the loan portfolio in today's environment versus selling any production and then also why your average was there any impact to loan demand from round two of PPP for Ya.
Customers.
I guess I'll I'll tackle that day.
Follow up on the call on day to maybe speak to the AG PPP volume because he is closest to that.
Yes, Tim I wouldn't.
I wouldn't attribute much growth potential to that on the AG side, I think a lot of our.
We did add some non customer PPP.
On loans, but.
The majority of our most of our AG customers that the heavy volte.
Volume of people.
From.
From a play.
Yeah.
Right.
Alright.
Okay.
Oh.
D.
Okay.
We were able to to service their PPP.
I think where we.
We're continuing to see growth in the AG space from the debt.
The three bankers that we added in 2019 and 2020, so that's where and we're seeing opportunities.
From the rest of our team as well as well as the non dairy.
<unk> focus that we've been able to see so that's where most of the AG growth is likely to come from.
And Brendan to respond to the rest of your question pipelines on both the house are actually very.
Just right now.
One of the challenges we are foreseeing here in the next.
30 to 60 days is we do have a couple of unexpected.
Potential payoffs on the commercial side.
Which is which is I guess.
<unk> is a bit of a surprise to us so that may be a little bit more muted on the commercial side. This next quarter, but.
Again, the pipeline is very strong and on the AG side will continue to utilize our participation network and in the interest rates. The long term fixed interest rates that some of our participants provided our customers. Although I would say we've started to keep a little bit more of that on balance sheet, probably right now given our our <unk>.
<unk> liquidity position and as well our pipeline for four noninterest.
Non interest bearing deposits has been really strong lately. So we're feeling good about debt helping.
Our overall.
Composition of the right side on the balance sheet as well as hopefully some some benefit to them.
Fantastic Thanks for taking my questions.
Yes.
Okay.
Last question will come from Joshua <unk> with D. A Davidson. Please go ahead.
Thanks, Good morning.
Good morning percentage.
The dairy are viewed that you've completed its debt.
Is there a portion of it it's already.
Done.
Yeah.
Yeah, I would say, we're probably Dave you can correct me if I'm wrong. Unfortunately, John Fillingim, our Chief Credit Officer was unable to join today I think we're maybe about 20% of the way through our AG reviews. So we've got.
Quite a slot.
Credits to get through yet so hopefully the majority of those at least the ones that we're anticipating any kind of migration.
In credit metrics will be done before the end of the second quarter.
And so.
It sounds like some early some positive returns I think you mentioned 7 million anticipated move to non or excuse me out of non accrual.
So I mean I don't.
Want to rush the process here, but.
I guess, that's the underlying.
Confidence of continued good news in terms of.
Positive credit migration as you get through the review and.
Entirety.
Yeah, and I think you'll see some continued movement here in second quarter as we move through the balance of those those credits included in the one you just mentioned.
Jeff.
Okay.
Excellent.
Yeah, I wanted to circle back to the kind of the liquidity management.
A broader margin question it looks like if.
You've got a larger bucket of Cds and wholesale.
Funding maturing in the second quarter, a little over $80 million.
I guess the plan for those funds and then ultimately I don't know if it's a question for Glenn just on.
It gives a sense of where do you think that core margin. If we if we kind of take that account for the the boost from the the interest recovery, but kind of where you see core margin settling in.
Yes, Thanks, Jeff.
I mean margins just all over the place that <unk>, probably seen that I'll, probably every bank.
And we're no different.
I think we're still going to see some squeeze on the margin throughout this year I mean, even though we've got quite a bit of.
Cds and wholesale funding repricing our loan book is really short too. So there's still quite a decent amount, that's still where pricing down. So I think theres still going to be a little bit of downward pressure going forward.
I think we will have that another piece of debt interest recovery, we mentioned from the first quarter, that's going on in the second quarter, So thats going on.
That's going to help offset some of that pressure, but I think we're still going to see a little bit of pressure on the margin going down so.
Alright.
And maybe just one last one kind of a housekeeping just noted the the.
Two board seats retiring.
Any thoughts on on <unk>.
Size of the board and you got to replace that or any any.
The expectation.
On that day.
Yeah. This is Tim.
At this point, we're going to we're going to sit status quo, but we do have.
Short list of potential candidates that we could look to join our board and will be contemplating that as.
As well we've got a couple more I think actually three more retirements in the next two years so.
We've sort of got the prospect list created and ready to pull the trigger when we need to.
Great. Thanks, that's it from me.
Yes.
The next question will come from Terry Mcevoy with Stephens. Please go ahead.
Good morning, everyone.
Good morning, Jerry.
A question that the technology strategy project My gut tells me its probably in the areas that Matt talked about but where are you investing across the bank and then.
As it relates to expenses Glenn what are your thoughts on on the expense run rate over the next couple of quarters.
Yes Terry.
In relation to the technology projects, we really wanted to take a step back and I.
I think as you're aware you know technology is just.
It's changing every day and we just decided to take a real step back.
Develop a really.
Robust strategy around technology.
And our overall strategic plan as well as the digital road map. So we had planned to do that kind of spaced out throughout the year, but we decided to get it done on the first quarter.
So that's why it's non recurring going forward. So that's what that's related to.
On the on the expense run rate I turn you back to the comments we made.
In the fourth quarter call kind of talked about the overall expense levels other.
On the technology project I think we're still kind of on on track for what we thought we'd be expense wise. So.
Yeah.
And then.
Just as a follow up the crop insurance commissions not something I've.
<unk> spent a lot of time tracking and can you just maybe walk through what drives.
Any volatility growth is there seasonality and just kind of educate me if you can on on how that business is.
Structured.
I think maybe I can take that one.
Or Tim Dave.
A debut on sure.
Sure I don't believe we can do there is to antelope.
With your your volume day, if youre going in.
Okay are we good now.
Yep sounds better now.
Okay, I'll put the phone a little closer.
There's there's kind of there's two elements of the crop and share our three actually there's the federal crop insurance multi peril crop insurance program, which is kind of a cornerstone of that division of the bank.
And that's.
Every year, our farmers sign up for and take out crop insurance to protect both the the yield and price.
It's become a very common and well used program for most farmers that that are growing the crop. There is a hail insurance component that's a supplement to that debt also.
We use and then and both of those programs.
Don't tend to have a lot of volatility.
Prices go up and down and that does drive the commission levels, but they tend to get managed by the federal crop insurance program. So those don't change there just on on they've been on a steady upward growth trajectory because we've added.
Agents and in opportunities to grow our book there.
The one that's a little more volatility is is the.
On margin insurance debt. Some Oscar also by USDA risk management agency on that.
In the foreign primarily dairy insurance that allows our farmers to protect the margin and they tend to use that program more heavily in times when the market dictates that that those kind of protections are appropriate and they can buy more of it in certain time.
And then when the futures and the outlook doesn't warrant use of that tool as much as maybe some other tools or maybe they're just not in the marketing game.
Uh huh.
To be sure.
Ben Your line is cutting out again.
Yeah.
Tim do you want to you on a wrap it up.
Yeah, I think David touched on the components of it I guess from our income statement standpoint.
You know I think you you've seen if you can parse that out from some of our information we've seen some pretty nice probably 10% to 20% a year growth in commissions, there and we anticipate that to continue.
From a budget perspective, we just estimate of what the total commissions are going to be for the year end debt.
Kind of flatline that throughout the year and then.
Just probably in the last quarter as we see things materialize, but overall, it's been a real solid.
Non interest income source for us as Dave mentioned.
Nearly all of our producers do you.
By crop insurance and many of them and we've continued to penetrate our book even better.
You buy it from us so.
So on a nice supplement and and a great group of agents, who are doing a nice job out in the field.
Okay I appreciate that thanks, everyone.
Thanks Sterling story.
Okay.
Our next question will come from Bryce Rowe with Husky. Please go ahead.
Yeah.
Thanks, Good morning, and I appreciate you taking the questions here.
Wanted to wanted to kind of talk about the funding side of things.
You all mentioned the deposit opportunity within the AG space.
Wanted to kind of get a feel for.
What that might look like what the scale of that opportunity is and then any any update you guys can provide on the the new office there in Appleton, and what what debt debt debt better location and larger larger building.
Translating into or could translate into from a deposit growth perspective.
Yes.
So I'll start with the Appleton location in terms of visibility. Our current location is like a joke its strategically hidden it's not easy to get to it's not easy to find it didnt really set up a big full service location. This one however is right on Interstate 41, which is the main thoroughfare in and around this area and it's set up with it.
Full service institution as well as our office space for future expansion and growth for us.
In terms of what that translates to into deposit growth any sort of visibility any sort of brand recognition that we can get in and around this area. When we haven't been as well known I think is automatically going to help us.
And as I alluded to in some of my comments with the addition of a very seasoned veteran mortgage originator out of this area.
Moving to drive those low cost consumer deposits. It will be a full service solutions like the mortgage is going to be a tremendous opportunity. We've got a very strong commercial team in and around that area as well and having a location that allows them to be more visible on the wealth team is going on.
Having an immediate impact in terms of quantifying exactly what that means and you know that's that's a that's a bogey that's hard to guesstimate, but we do certainly expect this as one of our most opportunistic areas for growth for us on the deposit side.
And in terms of the AG piece.
The Treasury management individual that we added.
We've not really had a dedicated treasury rep historically to the AG portfolio.
And so as we talk about gathering deposits, having a treasury management experts and partners throughout the state with our AG lenders on can do some of their own business, calling both on the argument agribusiness space is going to allow us to get more of those low cost transaction accounts as well.
That's great Matt I appreciate I appreciate the detail there.
Wanted to kind of jump over to credit now.
Okay.
Get a get a feel for number one.
How do you think about the day reviews and.
Obviously, we've seen some good positive credit migration, but but but curious how they how they could kind of play out in terms of numbers and then from a sub standard loan perspective.
Just curious how chunky.
Those buckets of loans are there certain larger loans debt.
Mike My might migrate out and it really helped the.
Healthy outlook from a from a credit perspective.
Yes, I'd say.
On the substandard bucket, it's all over the board from a size perspective, but there are some some larger relationships in that sub standard performing and sub standard impaired.
Buckets that we do think we'll migrate out of sub standard based on some of the preliminary information that we've seen.
And we continue to remain optimistic that those numbers will continue to move down.
As alluded to in my comments I mean, we've seen as we've started the review price process. It seems like every every Monday at loan Committee, we're seeing a handful of deals that are getting at least raised up one notch based on performance from last year and projected performance moving forward. So overall I think our our AG portfolio is healing.
Very nicely.
I'm very optimistic that.
When we released earnings in the second quarter Youre going to see some improved metrics there.
Yeah.
That's great that's great Tim I appreciate it.
And then when.
I think I think you guys have kind of talked through here recently about.
The allowance and provisioning levels.
As we move through the balance of the year on the possibility that debt the absolute allowance may.
May actually get smaller so when you when you think about the positive credit migration do you think about.
COVID-19 some of the impact of COVID-19 going away.
How do you how do you see the allowance trending with those factors.
At least what you can tell right now.
This factor is kind of that play.
Tim you want me to take that one.
I'll go ahead, Glen and I was just going to call on you.
Yes, Bryce you know order, we're pretty optimistic about the overall allowance on provision levels through this year I think we talked.
In the first quarter, you know, we budgeted pretty low six digit provision for the year, but honestly, we think it could be.
Zero or it could be a credit credit to loan loss provision at some point during the year.
That's really just a matter.
As you see the buildup from our allowance.
We build up our qualitative reserves for watching worst loans, where we allocate our SM.
Essentially a flat percentage to those.
So once you see those dollars kind of go down its going to attribute to lower lower.
More allowance needed and you know again very low low low low low loss for this year or so.
Okay, that's great and maybe one more on the credit front.
You talked about some recoveries not only in the in the first quarter, but subsequent to the quarter on any any any thoughts on how to how to think about what those mean from a financial perspective in terms of dollars.
Yeah.
<unk>.
We received a pay off you know.
Almost a day after quarter end, so we couldnt really take it back into the end of the first quarter, but.
The money sitting in escrow right now, we should be able to apply it to the loan balance here sometime in.
April or may.
And we anticipate there's going to be a recovery of a previous charge off so.
It's tough to tell what exactly thats going on due to the overall provision levels, but obviously, it's going to have a positive impact because its recovery. So.
And any further impact to the margin Glenn.
We talked about the recovery on that participation deal its on non accrual.
Yep.
That will happen probably same levels in the second quarter would you just kind of got to review it.
And that's the one thing we didn't really touch on just yet price, but you know.
We haven't really predicted what exactly is going to happen when we had the credit migration improvement because we've got several we've got a very sizable non accrual on that we anticipate is going to go on accrual here probably towards the end of the second quarter. So that's going to definitely impact Q3, and Q4. So we have not baked that into the comments I made.
Earlier on the margin squeeze just yet so.
Okay, Alright, that's good.
Good detail Glen appreciate it thanks for the interest.
Absolutely.
Okay she'd like to ask a question. It is started on one starts on what to ask your question.
Our next question will come from Brian Martin with Janney Montgomery. Please go ahead.
Hey, guys good morning.
Hey, Brian Hey, most part Brian Yeah. Most of my question's been answered just a couple maybe housekeeping questions just the forgiveness on the PPP I guess.
Appreciate the color on the balance is left and just how are you guys thinking about that getting accreted back to earning share over the balance of the year. I guess is most of it coming in would your expectation be.
This year does some of it bleed into next year, just big picture I know, there's a lot of uncertainty on it but how are you thinking about that today.
Yes, I think my margin comments on the squeezes. That's included in there Brian So we're anticipating.
Well quite quite a bit of the the old dollars being forgiven here and this year should be it should be all in by the end of the year or so.
So any comments I made on the margin are really tight on the kind of our thoughts on where we think the forgiveness is going to be so.
Okay I got you, Okay, and then how about just on Glen on the on the fee income side, just kind of the level of sustainability going forward or just kind of how we think about you know.
That that line item prospectively.
You're talking about the loan servicing fees, Brian Yeah, just kind of on fee income in total, but however, you. However, you want to frame it.
Yeah, You know Inc.
Q1 was we had quite a bit held for sale that we held at the end of the year. So when we sold those pretty quickly in January so that helped boost.
Q1 a bit.
We are planning to continue to grow that it maybe a little bit more muted in the second quarter, but we anticipate it growing probably overall kind of mid single digits for the year.
Gotcha Okay.
Alright, and then how about just.
The comments on the deposit transformation and kind of trends there just where do you guys see funding costs or cost of deposits trending too.
As you kind of continue to work on the on that side of the balance sheet.
[laughter].
Lower.
[laughter].
Again, it's it's baked on that margin projection I'm talking about so.
We are being able to offset we are being able to offset the repricing on our loans with you know, we're not being we're not being the top rate payer on our markets right now.
We're letting.
I mentioned earlier, we're letting kind of CD only clients you know, we're not going on we're not going to pay up and the market for those things so.
Right I was just trying to get a sense for how low you know if you continue on the strategy kind of where we think that could maybe and as you get later in the year as far as what the cost of deposits actually it looked like and do you have any type of target on what you think is reasonable where you could get to.
Are you going on it's kind of really price into my margin for my margin comments earlier. So you know we're.
We're going to we're going to see maybe a 10 to 20 basis point squeeze going down but again.
I said, the non accrual activity, we haven't really baked that all in.
What could happen kind of in the second half of the year. So we're hoping that's going to have some some nice positive impacts to us. So gotcha. Okay, alright, yes, I don't I don't have a per I don't have I don't I don't have a perfect number Brian free on the cost Yeah, we're really as Matt talked about we're really focused on transforming the right side of the balance sheet.
On the cost is what it is but we're really focused on on the mix of deposits continue to improve that so yeah understood I got it.
Alright, and then maybe just last one on this was on the on.
On the buyback.
Just extending the buyback just how are you thinking about the share repurchase it as you go forward here.
You know where we are.
You know, we've we were looking at were going on.
Like last year, almost totally fulfilled that hold 10% this year or so.
Volumes have been a little bit muted I think in the banking space Theyre trading at at least ours are.
So it's been on probably a little bit less but you know I'm, hoping that that continues to pick up throughout the year or so.
He can execute okay perfect. Okay. That's all I had guys I appreciate it thank you.
Yes.
Thanks, Brian.
Yes.
Next question will come from Ross Haberman with Arledge. Please go ahead.
Good morning, guys nice quarter I have a quick.
Question most of them have been answered.
Are you are you in the Russell and will you be deleted probably at the end of June like them a lot of Bank School day. Thank you.
Yes, we are.
Do you see the same information you see from the projected market cap to be included in the Russell and at this point, we're anticipating we're going to fall out again Unfortunately.
And will that be good.
Give you on an added opportunity to I guess to buy back shares if you see a lot of jobs.
Jostling around on all these.
I sit on it.
With that.
Will that help you with your with your buyback endeavor.
Yeah, Yeah, we continue.
Yeah.
Yes, we hope to take advantage of the Russell Reconstitution, you know with with the increase in volume because we think that that's going on a crucial.
Okay that was said most of my questions have been answered.
Stay well thank you guys.
Thanks Ross.
This concludes our question and answer session I would like to turn the conference back over to Tim Schneider for any closing remarks.
Again, I want to thank everybody for joining us we had a very solid quarter on nearly all fronts and we expect credit quality to continue to improve over the next quarter as we mentioned so hopefully some continued solid news to come.
Speak to you at the end of the second quarter, Thanks for joining us.
Yeah.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.