Q1 2021 Fulton Financial Corp Earnings Call
Yeah.
Good morning, ladies and gentlemen, and welcome to the Fulton financial first quarter 2021 of the results at this time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time.
And one should require assistance during the conference. Please press Star then zero on your Touchtone telephone.
No lack of turning the conference over to your host net Charles <unk> Director of Investor Relations. Thank you. Sir. Please go ahead.
Good morning, and thanks for joining us per Fulton Financial's conference call and webcast to discuss our earnings for the first quarter of 2021.
Your host for today's conference call is Phil Wenger, Chairman and Chief Executive Officer, joining Phil or Curt Myers, President and Chief operating Officer, and Mark Mccollum Chief Financial Officer.
Our comments today will refer to the financial information and related slide presentation included with our earnings announcement, which we released yesterday afternoon and.
These documents can be found on our website at F. U L. T dot com by clicking on Investor Relations and then on news. The slides can also be found and the presentation page under our investor under the Investor Relations website.
On this call Representatives of Fulton May make forward looking statements with respect to Fulton financial condition results of operation and business.
These statements are not guarantees of future performance and are subject to risks uncertainties and other factors and actual results could differ materially.
Please refer to the Safe Harbor statement on forward looking statements and our earnings release and on <unk>.
<unk> two of today's presentation for additional information regarding these risks uncertainties and other factors.
<unk> undertakes no obligation other than as required by law to update or revise any forward looking statements.
In discussing Fulton's performance Representatives of Fulton may refer to certain non-GAAP financial measures. Please refer to the supplemental financial information included with Fulton's earnings announcement released yesterday and slides 11 and 12 today's presentation for a reconciliation of those non-GAAP financial measures to the.
The most comparable GAAP measures.
And I would like to turn the call over to your host Phil Wenger.
Thanks, Matt and good morning, everyone.
I'll begin today's call by sharing of high level overview of the quarter.
And then we will hear encourage thoughts on our business performance and Mark will follow Kurt and he'll discuss the details of our financial performance.
And after that we will be happy to take your questions.
The Fulton's performance was solid and the first quarter 2020 one in fact, our earnings per share of <unk> 43.
And the first quarter was a quarterly record for us surpassing our previous record of 38 per share which was in the third quarter 2000 and important.
The last thing the presence of COVID-19, and the prolonged low interest rate environment have brought some challenges our customers and our team members continue to meet those challenges.
Throughout the past year.
<unk> continuously work to serve our customers, while keeping everyone safe.
Our financial centers remained accessible and customers' escalated their use of our telephone and digital and online platforms. So our banking and financial services delivery remained largely uninterrupted.
In terms of our back office and operations staff and team members, whose rules could be performed the Offsite work group work remotely whenever possible to reduce the direct current tax that could potentially spread the virus.
Now as the vaccine rollout continues throughout the world. We are seeing our communities planned and more fully open and we are cautiously optimistic.
And the reopening of the economy and the markets we serve.
As we look forward, we have been carefully developing our own plans to bring more employees back to our offices.
And last week, we shared our timetable for doing this with our team members.
Letting them know we plan to bring more people back on site and September.
This is the first time, we've offered a specific timetable of returning more of the team to all of our offices and it is contingent upon the continued successful vaccine rollout the loosening of government requirements and the communities we serve.
And the advice of health experts at the national and local levels.
We plan to use the months between now and September to clearly communicate how the return process will work.
And most of our employees will perform some amount of on site work on the site work.
And we will continue to work remotely for the longer term.
We want to do our part to enable every team member to achieve peak performance no matter, where they sit.
Last quarter I shared some updates on the small business administration paycheck protection program or PPP.
And I'm pleased to report we continued to realize volume that it has exceeded our expectations.
And we also continue to support all carriers ex initiatives.
In terms of other highlights and the first quarter quarter loans grew modestly because of the impact of the wave three PPP loans.
Deposit growth continues to be extraordinarily strong.
And we continue to be encouraged by our asset quality performance through the pandemic as Curt and Mark will discuss in a few minutes.
Our mortgage business continues to be of strong performer and the price pipeline remains elevated.
Our wealth management business also continues to be growing and.
And a significant contributor to non interest income.
This line of business delivered record income during the quarter on an all time high and the assets under management and administration.
And in March we announced the restructuring of our balance sheet and that will help manage our interest rate risk profile.
This had a minimal impact to earnings in the first quarter. However, however, it will meaningfully enhance net interest income as we move forward.
Mark will discuss this.
And further detail on a few minutes.
Despite the pandemic related challenges, we remain fully focused on our strategic priorities.
And include achieving growth.
Chancing, our technology and increasing our efficiency.
One way and which we are growing is by moving forward with plans to open additional financial centers and our two priority urban markets, Philadelphia and Baltimore.
And 2021, we remain focused on efficiency and investment and technology.
We believe are closely linked.
We currently have a number of technology system replacements, and upgrades and price and progress.
These include new platforms for consumer loan origination and mortgage servicing.
And in addition, we're making a significant upgrade to a new customer relationship management or CRM system.
And we are fully integrating that system and our sales and service processes.
Now I'll turn things over to Kirk for more detail on our business results.
Thank you, Phil and good morning, everyone and it.
As Phil noted our first quarter performance produced solid results and I'd like to share some detail on several key areas.
Loan growth for the quarter was modest as we experienced strong growth in residential mortgage originations and generated PPP wave three performance that exceeded our expectation.
These results were offset by continued line of credit utilization headwinds and greater than expected residential mortgage prepayments.
First let me touch on PPP, we continue to support our small business customers by both satisfying forgiveness requests and processing wave III applications.
As I mentioned on last quarter's call, we anticipated between 500 $600 million and total week three PPP funding.
As of the end of the first quarter, we were at $685 million and we expect to modestly exceed $700 million when the program before it expires the.
This is well beyond our expectations at this point applications continue to come in but at a significantly reduced the pace.
We continue to also work diligently to support our wave one and two customers with their forgiveness requests and the first quarter, we successfully processed $579 million of PPP forgiveness requests.
And every remaining wave one and two outstanding balance of approximately $1 billion.
Turning to commercial loans balances declined $48 million or 4% on a linked quarter basis, excluding PPP loans.
Originations were down modestly from the fourth quarter as we and we experienced continued decline in line utilization. These factors combined.
To contribute to the slight pullback and the overall commercial balances.
Looking forward, our commercial loan pipeline at March 31 was up approximately 9% versus year end 2020.
However, it was down 10% year over year.
In consumer lending, our loan balances grew $45 million or 9% linked quarter on and ending balance basis.
This growth was driven primarily by growth in residential mortgages in spite of the elevated refinance activity.
Our mortgage pipeline remains very strong and we continue to be optimistic about our growth targets as we enter the traditional home buying season.
As we mentioned in prior quarters, our asset sensitive balance sheet provides room to continue growing this segment of high quality and market residential mortgages.
Overall, we anticipate loan origination levels to continue at a rate that is adequate to support the annual net interest income guidance and our outlook.
Well discussed and a few minutes.
Turning to deposits growth for the quarter far exceeded our expectations, we had anticipated a modest decline and deposits as we actively manage deposit costs down.
However, strong customer liquidity has continued to drive our balances higher and government stimulus payments provided significant inflows during the quarter.
Total deposits grew approximately $800 million on a linked quarter basis with growth burst and virtually all non maturity categories.
More specifically noninterest bearing demand deposits drove this growth increasing $515 million or seven 9% on a linked quarter basis.
Total deposits were up $4 billion on a year over year basis.
During the quarter, we continued to actively manage our deposit costs down.
As a result of deposit cost declined five basis points linked quarter and now total deposit costs have dropped to 18 basis points.
In addition, we.
We have made further pricing adjustments to our earnings credit rates on commercial accounts.
Moving on to fee income, excluding the visa b gain on sale, our fee based businesses deliver growth and revenue on a linked quarter and year over year basis.
As Phil mentioned, our wealth management business continues to perform well as we add new customers and equity markets continue to move higher.
We also have a full quarter's impact of benefit works and investment advisory and retirement plan service firm, we acquired in the fourth quarter of 2020.
Our assets under management and administration grew to $13 1 billion at quarter end up from $12 8 billion last quarter and 11 8 billion at the end of the first quarter of 2020.
And this drove record quarterly income for the second quarter in a row.
Mortgage banking revenues declined modestly linked quarter when excluding the MSR write up. However, these revenues are up 26% on a year over year basis, our mortgage banking business remains strong as we continue to experience elevated origination activity and historically strong gain on sales spreads.
Total residential mortgage originations for the first quarter of 2021 were $714 million and increase of 89% from the same period last year.
Purchase activity represents approximately 49% of total originations and remains relatively consistent with recent quarters our.
Our mortgage pipeline remained strong and as increased from year end and year over year levels.
Capital markets revenue, which are primarily commercial loan interest rate swap fees declined and the first quarter. This decline was in line with moderately lower commercial originations during the quarter.
Moving to credit despite the challenging COVID-19 environment, our asset quality remains relatively stable.
<unk> loans declined on a linked quarter and year over year basis loans on non accrual increased slightly however has remained relatively stable since prior to the beginning of the pandemic.
In terms of net charge offs. After two quarters of net recoveries, we had $6 1 million and net charge offs for the quarter, which was 14 basis points when excluding PPP balances.
On slide 14, we've again provided updated loan referral trends through March 31 2021.
Commercial deferrals declined approximately two of approximately $153 million down from $200 million at the end of the year and stand at approximately one 1% of the commercial portfolio.
Consumer loans on deferral and forbearance also declined and are now at $94 million down from 130 million at year end the.
And stand at approximately one 9% of the consumer portfolio.
In previous calls we noted selected industries. We believe may have more risk due to COVID-19, Slide 15 provides an updated summary of these selected industries.
Our credit outlook remains cautiously optimistic for the remainder of 2021.
Now I'll turn the call over to Mark to discuss our financial results a little more detail.
Thank you Kurt and good morning to everyone on the call unless I note otherwise the quarterly comparisons I will discuss are with the fourth quarter of 2020.
Starting on slide three.
Earnings per diluted share of this quarter were <unk> 43.
On net income available to common shareholders of $70 5 million.
This is 13 cents higher and the fourth quarter of 2020.
Our first quarter performance included a lower provision for credit losses, and higher net interest income.
We also reported higher non interest income and higher noninterest expense largely due to a balance sheet restructuring I will discuss in more detail in a minute.
Moving to slide four our net interest income was $164 million of $3 million increased linked quarter, primarily due to additional fees earned on PPP loans forgiven during the Corp.
As Curt noted during the quarter, we originated $685 million of new PPP loans, and this was offset by forgiveness of $579 million of PPP loans that were originated in 2020.
The latest round of PPP loans have a larger average fee of $4 five 4% due to a smaller average loan size for this wave of funding.
As of March 31, we have approximately $45 million of PPP loan fees, yet to be recognized $15 million from 2020 originations and $30 million from our first quarter originations.
We grew our investment portfolio of $272 million during the first quarter as we selectively redeployed some of our excess cash in the mortgage backed securities as the yield curve steepened during the quarter.
As Curt noted the latest round of government stimulus fuel deposit growth during the quarter on our first quarter sold deposits grow by approximately $800 million.
We continue to manage our deposit mix and our cost of deposits for the quarter was now only 18 basis points of decline of five basis points linked quarter.
And we won't expect our deposit cost to migrate moderately lower in future quarters, as we have approximately $775 million of Cds maturing over the next two quarters at costs that are approximately 100 basis points higher than current market costs.
Our average loan to deposit ratio declined during the quarter from 91, 4% the 89, 9%.
During the quarter Fulton completed of balance sheet restructuring, which reduced our interest rate risk and improved several of our performance metrics going forward.
This restructuring was detailed and an 8-K filed on March 30, and are summarized on slide five it and.
Included the sale of our visa class B shares at a gain of $34 million.
This gain was offset by losses on the extinguishment of higher cost debt, which included the prepayment of $535 million of long term <unk> advances and the cost of $1 seven and 8% the.
And the tender of $75 million of the subordinated debt at a range of four and 5%.
And the tender of $60 million of senior notes at a rate of three 6%.
So when you add those up we removed $670 million of liabilities on our cost of $2 two 5% and paid these off with cash that was currently yielding eight to 10 basis points.
We also entered into $500 million of notional value received fixed interest rates swaps during the quarter.
And those have 69 basis points of positive carry currently.
So overall this restructuring reduces our interest rate risk and improves our net interest income by approximately $17 million on an annualized basis.
The impact of 2021 is incorporated into the updated guidance I will provide at the end of my remarks.
Our net interest margin for the first quarter was $2 seven 9% versus 275% and the fourth quarter the.
The four basis points of linked quarter increase largely resulted from PPP loan forgiveness and the related fee income recognition.
Turning to credit and our first quarter provision for credit losses was a negative $5 5 million versus $6 million for the fourth quarter and $44 million a year ago.
As you know the adoption of seasonal as well as the impact of Covid had a significant impact on our allowance for credit losses, and the first half of 2020.
But as economic forecasts of improved in recent periods and it has reduced the amount needed and our allowance for credit losses.
As always and this could change in future periods based on new loan origination volumes, our loan mix net charge off activity and updated economic predictions.
Slide six also provide you with our normal quarterly credit metrics, which do not contain any noteworthy trends or surprises.
Moving to slide seven noninterest income excluding those securities gains.
Were $62 million up 6 million from $56 million last quarter, and up $7 million from $55 million a year ago.
Fee based revenues were strong and were driven by outperformance and mortgage banking and wealth management.
Mortgage banking revenues benefited from a $6 million reversal of the mortgage servicing rights reserve that was established in 2020.
Our remaining mortgage servicing rights impairment reserve is $4 4 million at March 31.
Wealth management revenues were $17 million for the quarter and increase of 11% from the fourth quarter and an increase of 15% from the prior year.
Moving to slide eight our noninterest expenses were $178 million and the first quarter up $24 million linked quarter, However, and the first quarter, we had incurred $33 million and debt extinguishment costs related to our balance sheet restructuring.
And in the fourth quarter of 2020, we had incurred $15 million of expenses related to cost savings initiatives.
So excluding these items from each period, our core expenses increased approximately $5 million due to higher benefits cost seasonal occupancy costs and higher incentive compensation accruals compared to the prior quarter.
Our effective tax rate was 16% for the quarter compared to 10% in the fourth quarter of 2020 as a result of higher pre tax earnings.
Slide nine gives you more detail on our capital ratios.
And the balance sheet restructuring did have a modest impact of total risk based capital due to the reduction in subordinated debt, but all other capital ratios improved slightly.
Our liquidity remains very strong.
We also announced the new $75 million share repurchase during the quarter, but did not repurchase any shares under that program during the first quarter.
And lastly, we'd like to provide our updated guidance for 2020.
This updated guidance reflects the impact of our balance sheet restructuring the current wave of PPP as well as other items that are now known to US as of March 31.
We expect our net interest income for the year to be and the range of 640% of $660 million.
We expect our provision for credit losses to be and the range of $20 million to $40 million for the year.
We expect our noninterest income to be and the range of $220 million to $230 million.
And lastly, overall, we expect operating expenses, excluding charges related to the balance sheet restructuring to be and the range of $555 million to $575 million per the year.
And with that I'll now turn the call over to the operator for your questions.
Ladies and gentlemen, if you have a question at this time. Please press the star and then the number of <unk> on your Touchtone telephone.
And your question has been answered or you wish to remove yourself from the queue. Please press the pound key.
The first one.
Is from Frank Schiraldi of Piper Sandler Your line is open.
Good morning.
Great. Thanks, Greg.
And I Wonder Mark you mentioned the updated guide obviously includes the balance sheet restructuring and the second ramp or the latest round of Triple P.
The interest rate picture has also improved the bit.
And wondering if that provides some potential upside do you think to two NII guide or is that just not impactful enough unless the short and moves in the zone that already baked into the updated guide yes.
Yes on the short end of the curve definitely impacts us a lot more than and the long and would we did take advantage of the first quarter as I noted and put some money to work and the investment portfolio out of cash.
But we're still sitting obviously and a lot of excess liquidity.
Our expectation is at the 10 year is going to stay relatively range bound and where it is right now.
And.
Candidly the trade off is if we invest too much into the investment portfolio today.
And then at some point and the future when PPP funds and burn through.
We're going to start to see line utilization draws happening again, and we'd rather use our liquidity for our core loan growth of putting too much on the investment portfolio at this point.
Okay. So so does the guide and then just sort of assume the securities book.
It's kind of flattish that these level of doors, there some of that excess.
Cash and get some gets redirected them through the rest of the year.
No.
I'd expect for the balance of the year on the Securities book will stay relatively range bound and less if we would see an opportunity of the 10 year would pop up the 180 again temporarily we could put a little bit the work there, but I would expect it to stay.
Relatively consistent as a percentage of the balance sheet.
Okay and then.
Just thinking about reserve levels I mean, it seems like this could be a fairly I mean, the still early in the year, but it seems like it could be a fairly normal year in terms of charge off levels and so.
The qualitative factors.
And you to normalize do you think there's opportunity for additional reserve release, I guess, where are the good level to assume you know the reserve to loan ratio could move back to us as it where it was with seasonal.
Day, one Mark can you just give us a low your.
And your thoughts there yes.
Yes, we went from 99 basis points to 120 basis points. When <unk> was first implemented and then and then I'm sorry to 140 basis points and then we went from $1 40 up to our current level as a result of Covid.
Do I think it could drift down to day, one seasonal again, yes I do.
No.
But again, that's obviously dependent and that's assuming our business mix stays the same.
That assumes that our pace of growth stays relatively the same as well.
As what we were historically, but the.
But I think there is definitely on.
Opportunity for that to happen Frank just it's obviously hard to predict the time.
Sure Okay. Thank you.
Right.
Your next question is from Daniel Tamayo of Raymond James Your line is open.
Good morning, guys.
Good day.
I'm not sure if I missed this or not but did you provide the and then you gave some some fee numbers from PPP, but did you provide the impact that had on the margin.
And the fourth quarter first quarter two of them.
Yes, so the way to think about the margin I mean, what I can share you is that our fee income totals Danny were.
$19 four.
And $4 million and the first quarter.
And up from $14 million and the fourth quarter, but we also saw increased excess liquidity in the first quarter.
And to me when you were talking about the effect of PPP and the margin you really have to consider both.
<unk> do you need to think about the fees, but then you also need the thinking about the fact of where we're sitting on some excess liquidity.
If both of those would normalize.
The impacts of about seven basis points and the first quarter.
Okay. That's helpful.
And.
And then maybe if you can talk a little bit about the assumptions embedded in your and your net interest income guidance.
And the NIM and then maybe on the on the balance sheet as well.
Well, yes, I mean, we were intention of when we gave our guidance to not provide NIM guidance for the year, because the timing and the and the volatility with PPP makes a little bit harder to predict balance sheet size and I think as you've seen from the whole industry and the whole industry is sitting on a on a.
Crush of excess liquidity and it wasn't even there back on that fourth quarter guidance was originally put out.
So I can comment that our guide does include our current assumptions on PPP.
And we assume that as I said earlier, we have $14 million of $14 seven.
Of wave, one and two fees yet to be amortized and then with the new originations that have just come on we have a little over $30 million of $45 million of fees that still need to be recognized I would anticipate of that remaining $1 billion.
The.
The somewhere between 80 and 90% of that.
And it's forgiven and is off the books by the end of the year, how much of the new.
Originations, which is approximately $700 million how.
How much of that comes off by the end of the years of little bit more of a wildcard.
But the.
But our assumptions on that are baked into the guidance. What's also baked into that guidance again would be the full year, while or the or the stub year impact of the restructuring, which really didn't take place until the last two weeks of March. So you really didn't see any material impact of that and the first quarter, but <unk>.
C E nine months effect of that $17 million.
Would be factored into 'twenty, one and and the full year impact of that restructuring would be factored into 2022.
Okay, that's terrific and then I guess.
Last thing here on the balance sheet restructuring and mentioned.
And reducing asset sensitivity a bit but coming into.
The quarter pretty strong given the increase in deposits.
So how does the bank from an asset sensitive perspective, now relative to maybe before COVID-19 or or this increase and asset sensitivity and how would you guys expect to benefit from our from rising short term rates relative to prior periods. It's.
It's a great question and the answer is with everything we've done.
What we're really just kind of treading water and we've reduced our asset sensitivity slightly but then remember every time you get excess liquidity.
If you're if you've got a non maturity deposit and it's sitting and overnight cash that's inherently very asset sensitive because of that non maturity deposit even if it's government stimulus, it's going to be sticking around for a little bit of time. So.
Our asset sensitivity would have gone up a lot more had we not done. This this is range of back into acceptable levels.
But depending on that dynamic of how quickly as loans get forgiven on oil.
Our books I mean, you are taking off alone and replacing that with cash.
So unless that cash gets used and the less and your balance sheet strength, both in terms of the excess cash and and deposits.
That is going to increase asset sensitivity a little bit more.
So we are still very.
And well positioned to benefit from rising rates.
I appreciate all of the color Mark.
Your next question is from and zinc from banning and Skeeter go and your line is open.
Hey, Eric Good morning, Good morning, Eric.
Yes.
Yes.
Hey, Eric we can't hear you if you were on need by any chance.
How about now.
Eric.
Okay, Great alright, sorry about that.
And maybe first just a question for Mark on the noninterest expense outlook for the year, if I remove the restructuring charges from the first quarter and then kind.
Kind of annualize that that.
And that level of kind of a $145 million on a quarterly rate kind of come in towards the top end of that range, just curious and and you mentioned investing in new branches and some of the urban markets. The tech investments, just curious and where's the opportunity potentially improve from that quarterly run rate that would get you.
Closer to the bottom end of that outlook range.
Yes, you should definitely quick question, Eric you should definitely not be taking that number and just kind of multiplying by four in the first quarter.
We had.
And some items that definitely won't repeat.
We did have.
And there's some some bonus payments that were.
And just related to our frontline personnel for all of the all the great work they've done throughout Covid. There was some kind of final true ups of.
Some of our 2020 bonus plans.
Our referenced on snow removal it was.
It was a tougher winter.
This year for us than some prior years and.
And just in terms of the number of incidents not necessarily of the amount of snowfall, but the number of incidents which increased cost there and if you look at our five quarter trend on occupancy expense because of that seasonality both in terms of heating as well as snow removal.
The first quarter always tends to be our highest level.
So when you strip those things out the.
And if you look at one of our guide was a quarter ago versus what it is now we increased it by about $5 million and that increase was really the amount that would be attributable to.
Bonus accrual adjustments for this year's plans.
Thanks, that's helpful and then one for maybe Phil or Kurt.
And then for our prepared comments, you mentioned that you're expecting loan growth to support the NII guide and just curious where you're seeing opportunities to grow.
Spoken to a couple of smaller banks and your market and they are still seeing a pretty tepid loan growth on <unk>.
Areas of maybe it's just your access to some larger customers, but maybe.
The access to some of the urban markets that might present more opportunities, where do you where do you see the opportunities for improved loan growth this year.
Yeah, So we're seeing the opportunities across all of our markets.
Be a little more in the urban markets, it's really Jeff.
It's really hard to grow your loan portfolio ex PPP when all of that PPP money is coming in and a lot of its paying down lines.
So as the that disappears and.
People.
<unk> using their lines of credits like the habit in the past.
And we see just great opportunity for growth there so.
We're still.
And.
We're still entertaining a lot of requests and are and we are settling.
It's just hard to show growth when that PPP money is coming in.
Yeah, Eric This is purchased one.
Point of that just linked quarter. The line of credit utilization headwind that we had was over $100 million just linked quarter.
And so and for the 18 months it's been.
700 million, if we would get back to kind of normal long term utilization rates.
Got it thanks for the color there and then just one last one thinking about the mortgage banking line and if I exclude the impact from the <unk>.
Mortgage servicing assets valuation of what the run rate was maybe kind of $8 million or so and just curious your thoughts going forward, we're entering the peak selling season and it seems like inventories.
The short and with the increase and 10 year yield I'm guessing of refi maybe starts to tail off a little bit just curious what youre thinking in terms of what you can generate from that business line.
Yes, we see that business continuing to be strong.
And we are putting loans on the balance sheet. So it depends if you look at fee income or if you look at the balance sheet growth that operation really funds and fuels both of those.
So we expect seasonal improvement just moving from from first quarter into then the normal higher home home buying season, but the business remains strong for us.
We continue to have really high gain on sales spreads and we expect them to moderate over time.
It really depends on the pace of that margin moderating, but we still see strong volume.
Great. Thanks for taking my questions today.
And thank you.
Your next question is from Russell Gunther from Davidson Your line is open.
Okay.
Yes.
Let me just first sorry, if I could on the NII guide one other follow up please so the $6 40 to 660, you guys mentioned.
<unk> PPP assumptions do you have a number for how much of that $45 million of remaining fees is included in that guidance.
On the.
We're not providing that specific guidance, but again, what I can tell you is that of the of the 15 million that relates to the first wave.
We're assuming it between 80 and 90% of those loans. So it's about $1 billion left on our balance sheet, we're assuming that that comes off by the end of the year.
And I'll keep in mind, and then one of the other things that's going to create more volatility.
Not just for us, but for everybody who is participating in wave three of these wave three loans are actually.
Created the fee is accreted over five years, because it's a five year note. Unlike the first waves, which were the two year notes.
So the.
$30 million of fees that we have yet to be recognized from this current wave.
And those are going to be until they start being forgiven theres going to be a little bit lower amount.
And that's going to be coming in on a more normalized basis until the forgiveness process starts.
Would expect these wave three forgiveness would start.
And the third quarter.
And the middle of the third quarter.
Okay. That's helpful. Thanks, Marc and then just following up on the Eric's question on the loan growth expectations and I know.
You don't put too fine a point on it and.
<unk> talked about.
Some of the geographic contributors, but how about mix for the year and.
You mentioned the portfolio some residential real estate, but.
Organic growth that you do show do you have a sense for how that might.
Contributes on the different loan verticals.
Yes, the Russell as Kurt.
We do still see residential mortgage continuing to be of significant provider of growth as it has and we have the ability to balance sheet that activity and that activity is strong.
On the commercial side.
We continue to focus on being diversified and our portfolios. So we really are trying to grow each segment and we feel that mix is going to be.
Very similar to what we've experienced over the last three to five quarters. So you'll have a mix of C&I and CRE driving.
The commercial growth.
Okay.
Thank you and then just last one for me you mentioned the.
$75 million buyback authorization and can.
Could you discuss your appetite to buy back stock at current levels.
The current levels of Russell, we run a model and just look at the what the earn back.
On the on that dilution and so obviously as the stock price goes up and Youre buying on a higher premium.
Two of tangible book value increases the earn back length.
We want to continue to have that out there.
As.
One tool and the toolbox.
But at current levels.
It would be unlikely that we tap it but that's going to ultimately be a question of what other opportunities are there to use capital for which would include.
Organic growth and include inorganic growth using cash as a component and M&A transactions as well.
Got it great. Thanks, Mark Thanks, guys for taking my questions Thats. It for me. Thanks.
Thanks Ross.
Your next question is from the Zack Winter line from Stephens. Your line is open.
Hey, guys. This exact question on here covering for Matt Breese, how are you.
And that's actually done.
Just to go back to the to the margin really quickly.
I was just hoping that you could provide a little color on incremental loan yields coming on the book and what new deposit costs are kind of on.
Looking like.
What I can share.
As we do without answering your question directly but the.
But what I would share is and I stated in last quarter's earnings call, which I know you weren't on mountain and so on.
I've said that we expected within the next quarter or so to be at our trough on margin on a core basis.
And I would say the with the balance sheet restructuring that we've just affected.
Do feel confident the then on and go forward basis, if you stripped out the impact of of PPP and other non core basis now.
We are out of Florida, and should expect to see some modest margin expansion going forward.
The only wildcard and that again is going to be.
And what that utilization.
Excess deposit.
From the PPP.
On the timing of that.
Great I appreciate.
Kate that and.
And I know you talked a little bit about asset sensitivity of the loan book are you able to share what percentage of.
Of the loan book is floating and or how much of that is at the.
At the loan floor.
To share that.
So so when and.
When we look at it today.
Our loan book appears on the surface to be 31% fixed rate, but that includes PPP. So when you strip out PPP.
The fixed rate of our loan portfolio was about 23%.
And.
And so we would still we then about 77% between adjustable and variable.
And in total.
We have about $12 6 billion of loans that are tied to either prime or LIBOR. So about two thirds of the loan book.
Yes.
Great I appreciate that and then last one from me just kind of.
On the M&A landscape, obviously, we've seen some pretty big deals and your market share lately, just kind of curious about.
And how these larger deals are impacting the conversations have conversations has been picking up slowing down or just any color youre willing to share on that front.
I would just say over the last six months conversations have picked up.
Perfect.
Is it for me and thanks for taking my questions.
Thank you of that okay. Thanks.
I'm showing no further questions at this time I would now like to turn the conference Becky and Phil Wenger.
Well. Thank you again for joining us today, and we hope you'll be able to be with us when we discuss second quarter results in July.
Yes.
Ladies and gentlemen. This concludes today's conference. Thank you for your participation have a wonderful day you may all disconnect.
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