Q1 2021 Byline Bancorp Inc Earnings Call
Good day and welcome to the Byline Bancorp first quarter 2021 earnings conference call. All participants will be in a listen only mode should you need assistance. Please signal conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one.
Please note that this event is being recorded I would now like to turn the conference over to Tony Rossi of financial profiles. Please go ahead.
Thank you Paul Good morning, everyone and thank you for joining us today for the byline Bancorp first quarter 2021 earnings call, we'll be using a slide presentation as part of our discussion. This morning. Please visit the events and presentations page of <unk> Investor Relations website for access to the presentation.
Before we begin I'd like to remind you that this conference call contains forward looking statements with respect to the future performance and financial condition of byline Bancorp that involve risks and uncertainties, including the impact of the COVID-19 pandemic.
Various factors could cause actual results to be materially different from any future results expressed or implied by such forward. Looking statements. These factors are discussed in the company's SEC filings, which are available on the company's website. The company disclaims any obligation to update any forward looking statements made during the call.
Management may refer to non-GAAP measures, which are intended to supplement but not substitute for the most directly comparable GAAP measures. The press release available on the website contains the financial and other quantitative information to be discussed today as well as the reconciliation of the GAAP to non-GAAP measures.
With that I'd like to turn the call over to Alberto Parachini President of Byline Bancorp.
Great. Thank you Tony and good morning, everyone and welcome to our first quarter earnings call. Thank you for participating on the call. This morning, and joining me on this call are Roberto where NCR, our executive Chairman and CEO Lindsay Corby, our CFO and Mark <unk>, our Chief Credit Officer.
It is our normal practice I'll start the call with a summary of our results and provide you with highlights for the quarter before I turn the call over to Lindsay who will walk you through our financials in more detail after that I'll come back with some closing remarks before we open the call up for questions. As always you can follow our comments with presentation.
Materials, you can find on the Investor Relations section of our website.
Overall, we had a very productive first quarter net income was a record $21 8 million or <unk> 56 cents per share. This was up substantially both compared to last quarter and on a year over year basis profitability and return metrics were excellent across the board ROA came in at 134 Bay.
At this point, while our OTC was 14, 86% both record levels for the company.
Pretax pre provision ROA came in at 206 basis points and was up from the previous quarter and at the highest level over the last five quarters.
One highlight for the quarter was our strong participation in round two of the PPP program, which is summarized on page four of the deck. We continue to support both existing small business customers as well as new customers drawn and by the positive experience of working with a relationship oriented bank.
In the market.
We have approved more than 2400 loans totaling $330 million during the current round and when combined with the first round, we processed over 6600 loans totaling 965 million. We also remain active in helping customers navigate the forgiveness process.
With 173 million loans $173 million in loans forgiven during the quarter all in on an excellent job by our bankers and supporting our small business customers and their employees.
Economic activity continue to pick up this quarter and our asset base increased by five 6% to $6 8 billion.
Outside of originations related to PPP, we had a good quarter of business development with $152 million of new originations with strong contributions coming from all areas of our commercial banking platform inclusive of our leasing business.
Loan balances, excluding PPP increased during the quarter, which is notable given PPP activity the high level on of liquidity built up among our commercial clients and the fact that the first quarter tends to be a seasonally slow period for us on a.
Year over year basis, new loan originations increased by 24% are government guaranteed lending business also had a strong quarter of production with $112 million in closed loans, which was as expected lower than the fourth quarter, but up $32 million over the same period a year ago.
Premiums in the secondary market remained at record levels.
On a year over year basis, our net gains on sales of loans increased 74% to $8 $3 million on the deposit side. We saw continued strong inflows of commercial deposits stemming from the addition of new relationships and the buildup of liquidity among <unk>.
<unk> commercial clients, our deposit mix remains outstanding with DDA is now representing 41% of total deposits.
On core balances exceeding 90% of deposit balances the improved mix helped us to drive our cost of deposits lower by three basis points to 12 basis points at the end of the quarter, which allows the margin to remain stable with deposit costs, helping to offset the impact of increased lift.
Quiddity and lower securities yields.
Asset quality improved with both Npls and NPA declining from the prior quarter reserve levels remain solid with the allowance representing 147% of loans.
And 171% of loans, excluding PPP net charge offs remained stable at 47 basis points on our coverage improved to 177% of nonperforming loans classified loans also declined from two 7% last quarter to two <unk>.
4% at the end of the quarter.
Capital remained strong with CP at 12, 1% and total capital of just under 16% at the end of the quarter combined with our strong financial performance, we were well positioned to return capital to shareholders during the quarter, we repurchased approximately 300.
Third 33000 shares of our common stock our balance sheet strength positions us well to support organic growth return capital to shareholders and pursue M&A opportunities.
Turning over to slide five.
Total deferrals declined by $46 2 million to $54 $4 million and now represent one for 2% of loans, excluding PPP deferrals in the government guaranteed portfolio stood at $34 7 million a decline of $48 million from the prior quarter.
Nearly half of the deferrals outstanding consist of loans to borrowers and accommodation and food service industries. Please refer to the appendix for more detail of loans to COVID-19 affected industries and with that I'd like to turn over the call to Lindsay who will walk you through our financials.
Thanks for bearing out good morning, everyone. Thanks for joining us today.
Start with some additional information on our loan portfolio on slide six.
Our total loans and leases were for 5 billion at March 31, an increase of $114 million from the end of the prior quarter, which price which.
Which was primarily due to new originations of PPP loans, although we did have a little bit of growth outside of the PPP portfolio are.
Our originated loan portfolio increased by 181 million or <unk> $82 million when PPP loans are excluded we.
We saw a broad growth across our commercial commercial real estate and equipment leasing, which helped offset the continued planned run off in our residential mortgage loan portfolio.
When PPP loans and residential mortgage loan portfolio are excluded our originated loan portfolio increased 13% over the past year, which reflects the growth in our core commercial client base.
The growth in the originated portfolio during the first quarter was offset by a decrease of $67 million on our acquired loan portfolio, including $24 million and resolutions in the acquired impaired portfolio.
Excluding PPP, we had 152 million of new originations in the first quarter, which was partially offset by $123 million on payout.
Turning to slide seven well look at our government guaranteed lending business, we had another very strong quarter on production with $112 million of loan commitments.
At March 31, the on balance sheet SBA, seven day exposure was $442 million, including $50 million of which is guaranteed by the SBA USDA on balance sheet exposure was 88 million of which $51 million is guaranteed by the outlook for a stronger economic recovery is improving we believe it is prudent to continue on.
<unk> our coverage on this portfolio as these borrowers begin to return for regular payment status from deferral and subsidies.
Accordingly, our allowance as a percentage of on guaranteed loan balances increased approximately 9% at March 31 up from eight 6% at the end of the prior quarter.
The SBA continue to introduce new programs designed to support the borrowers.
Impacted by the pandemic. This includes $28 6 billion restaurant revitalization fund, which will began accepting applications for grants targeted to businesses with the primary purpose of surf include our drinks.
The SBA program subsidies and grants are providing a bridge to assist borrowers until the economy fully reopens.
Moving over to deposits, our total deposits increased $273 million from the end of the prior quarter and exceeded $5 billion for the first time in our history.
The growth came in our lower cost deposit categories. As we continue to see strong inflows of DDA, particularly attributed PPP funding this quarter.
Our deposit activity during the quarter continued to result in a positive shift in our mix of deposits.
Noninterest bearing deposits increased to 41 percentage of total deposits from 37, 1% at the end of the prior quarter, while commercial deposits now represent just about half of our total deposits.
Moving on to net interest income and margin.
Our net interest income was $56 6 million for the quarter up 1% from the prior quarter. This was primarily due to an increase in PPP related income as well as lower funding cost.
On a GAAP basis, our net interest margin was 377 in the first quarter unchanged from last quarter.
Accretion income on acquired loans contributed 13 basis points for the margin for the first quarter down from 16 basis points in the last quarter excluding.
Excluding accretion income our net interest margin was $3 60 for an increase of three basis points.
The increase was due to the PPP income recognition and the decline in our average cost of deposits.
Have a little more room to bring down our deposit cost as time deposits mature and reprice over the next quarter, which should help offset compression from securities and loan yields.
We believe our outlook for our core NIM, excluding the impact of Pvp and accretion is expected to be slightly compress next quarter and level off for the remainder of the year as economic conditions improve and loan growth returns our margin outlook could improve as we remix the balance sheet away from securities and more towards.
In addition, we added $350 million of forward, starting pay fixed cash flow hedges to protect net interest income in future years.
And as well as protect against market value losses in a rising rate environment.
Turning to non interest income on slide 10.
In the first quarter, our noninterest income decreased by $2 million from the prior quarter the day.
Increase was primarily attributed to a couple of factor <unk>.
First we added one $1 million decline in the net gain on sales on government guaranteed loans due to a decrease in the volume of loans sold and second we had a $1 $4 million decrease in net gains on sales of securities.
This was partially offset by a decline on the loan servicing asset revaluation charge this quarter.
Although the contribution from our government guaranteed loan group, but lower than last quarter. The trends in this business remain positive as a result of the enhancements made by the SBA.
Even with the seasonality, we typically see in the first quarter the contributions on gain on sale exceeded our expectations, particularly when compared to the first quarter of 2020, we sold $73 8 million of loans in the first quarter of 2021, an increase of 21% from last year.
Average premium was $12 65 in the first quarter of 2021, which remains well above historical normalized level and benefited from the temporary waiver of the SBA guarantee fee.
The volume of loans sold was also positively impacted by the increased guaranteed by the SBA, which enabled us to sell 90% of the loans originated.
Moving to non interest expense trend.
Our non interest expense was $38 8 million in the first quarter down from $47 million in the prior quarter, which included charges related to the branch consolidations and impairment charges on assets held for sale.
Excluding these charges our noninterest expense declined primarily due to lower occupancy and equipment expense. Following the branch consolidation. This was partially offset by an increase in loan related and other legal fees.
Our salaries and benefits expense was reduced this quarter by $2 8 million in deferred loan origination costs related to the second round of PPP.
The success, we're having in generating balance sheet and revenue growth, while controlling our expenses as reflected in the improvement in our efficiency ratio, which was down to 51, 3% this quarter as well as our non interest expense to average assets, which declined to $2 39.
Excluding the impact of the deferred loan origination costs, we would expect our expense run rate to be in the $41 million to $43 million range for the foreseeable future.
Moving on to Slide 12 next we'll take a look at asset quality, we continue to see good trends in the conventional loan portfolio during the quarter. Our nonperforming assets declined 10 basis points to 64 basis points of total assets and our nonperforming loans declined 12 basis points to 83 basis points of total loans and leases.
Excluding government guaranteed loans, our nonperforming loans declined 10 basis points to 76 basis points of total loans and leases.
Our provision expense was $4 4 million down from $10 2 million last quarter, which reflects our improved asset quality on the conventional loans portfolio.
We had a small release of the reserve for acquired impaired loans due to resolutions in improvements and expected cash flow, which was offset by a further increase in the reserve held against the on guaranteed portion of government guaranteed loans.
We remain measured in our approach to reserve with our total loss absorbency as measured by our allowance plus acquisition accounting adjustments, representing 198 basis points of total loans and leases excluding PPP loans.
On slide 13 liquidity and capital levels continue to be strong or robust capital levels, along with our earnings contribution continue to support our quarterly dividend of <unk> per share. In addition, as Alberto discussed we did repurchase 333000 shares at a cost of around $6 million.
Our stock repurchase program remains in effect until the end of 2022 with approximately 917000 shares remaining with that Alberto back to you. Thanks, Nancy turning to slide 14, I'd like to wrap up today with a few comments about our outlook, we've gotten off to a good start for the year on our priorities for 2021.
Main consistent since our last call, we're seeing good customer activity as it picks up in lockstep with the economic recovery and the diminishing impact of the pandemic, notwithstanding PPP activity and the amount of excess liquidity in the system loan pipelines remained healthy and we're seeing good deal flow, particularly in commercial.
Real estate sponsor leasing and small business capital.
We also continue to see good opportunities to add talented bankers to the organization on the M&A front, we continue to look for opportunities that fit our criteria and have seen a pickup in dialogue over the prior quarter in closing, we remain well positioned to capitalize on both organic and M&A opportunities.
Continue investing in our franchise and generating returns for our shareholders with that operator, please open the call for questions.
Thank you and we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
If youre using a speakerphone please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble the roster.
Yeah.
And our first question today will come from Terry Mcevoy with Stephens. Please go ahead.
Hey, good morning, everyone.
Good morning, Terry theory.
I think the commercial loan growth ex PPP really stood out based on all the other releases we've looked at.
And I know you kind of ran through a bunch of areas.
Where you saw growth could you just maybe rank order and expand a little bit on.
What drove the increase in the first quarter and what your thoughts are for for the second quarter.
Gary It was pretty broad based we're seeing good activity good deal flow in general.
So.
I can't say that it's one area today that is above and beyond the others I think we're seeing good activity across all our commercial business lines.
Deal flow is.
We bid we compete we have to actually win it but we're getting plenty of at bats and.
Yeah.
The one thing that I would maybe add debt we haven't touched on in the past. We're also seeing good activity on our equipment leasing business, which is a relatively small part of our portfolio today, but it's an area. That's been building over time, and we're actually seeing really good solid pipelines on good growth.
<unk> coming from that business.
Thank you and then just as a follow up I guess I'm a little surprised there's all these SBA programs are enhancements as you call them that Lindsay ran through to support those borrowers yet the reserve relative to the young guaranteed proportion was higher quarter over quarter. So I guess my question is what do you need to see before that.
<unk> come down it comes down in and how long are these programs in place is it essentially a guarantee on a non guaranteed loans so to speak.
Good question, Terry and I think you hit the nail in the head I think there is there is a lot of programs that are supporting.
These borrowers obviously, so there is a fair amount of uncertainty as these programs Wayne and these borrowers have to stand up for themselves.
And I think we will be cautious as we see the impact of those programs subside over time, we want to see how these borrowers come out.
On the other side of the pandemic without the support that they're getting today from from the various programs.
And Perry if I, if I may add.
We're obviously you know we're not as seasonal bank and but if you look under the covers so for seasonal banks.
Youll see right.
They did everything possible to adjust.
With.
Qualitative factors for that.
Those reserves.
It didn't go down as much.
In particular to the hospitality segment.
Okay.
Great. Thank you for taking my questions.
Thanks Terry.
Okay.
And our next question will come from Ebrahim <unk> with Bank of America. Please go ahead.
Good morning.
I guess just.
Just first question just on capital allocation.
So the stock's, obviously up a fair bit to date talk to us in terms of the appetite to continue with.
A similar pace of buybacks debt, we saw in the first quarter as you move through the rest of the authorization and also would love an update we've seen clearly a pickup in M&A activity.
I guess part of some of the strategic changes you made last quarter was to accelerate how quickly you can execute just talk to us in terms of do you see.
Did you have moving closer to getting to a point for you and are we should we should expect a M&A.
M&A announcements from bi.
Good good question. So you Ian I'll take I'll take the first crack at that.
This on the on your first comment related to capital allocation I think.
Look I think we have the nice thing is we have a lot of flexibility to support organic growth.
Return capital to shareholder as Lindsey mentioned.
The combination of the dividend plus the amount of dollars that we spent on the buyback this past quarter amounts to about 40% of earnings for the quarter, which is pretty good for us.
And then lastly on you'd touched on it on the second point is M&A and what we're trying to do is really just just balance all those opportunities obviously with.
Our profitability up it just gives us a lot of flexibility. So we won't comment specifically in terms of do we continue to buyback or not and at what levels.
Certainly we have flexibility and if the.
The uses of capital.
We don't have a use of capital where we're going to deploy it whether it be on an M&A transaction or supporting growth supporting the acquisition of themes, then I think I said.
Ben our guidance, we will certainly find ways to return capital to our shareholders.
On the M&A front, I think what I would add too to what I. Just said is we've certainly seen a pickup in dialogue since we last spoke.
As you know these things are not things that materialize immediately and so on dialogue its relationship building and.
Two parties have to come through on an agreement here, particularly with price expectations and Thats, usually the part where the bid ask with potential sellers, sometimes is more difficult, but that's what I. That's what I would that's how I would answer your question.
Okay.
And I guess just moving on.
Lindsay head on.
Thanks for the margin outlook I, just wanted to make sure the core margin ex accretion was 364.
What was the total PPP impacted the margin this quarter I know you mentioned, the 10 basis points increase.
While on <unk>, but just wanted to forget what the.
Yeah.
So in terms of what it what it contributed we had $7 million of net interest income that was associated with the PPP. This quarter E V. And then we also included a charge in the slide deck that shows that there was 10 basis points debt was attributed.
For the PPP.
But it's a $7 million attainment and remind me how much what's the breakdown of a.
So on the one was the zone to fees and loans debt outstanding at the end of the quarter.
You bet as of the end of the quarter. We currently have $617 million of PPP loans on our balance sheet in terms of the bifurcation on me.
The remaining fees that need to come through for the first round, we have $4 1 million approximately left and for the second round, we have about $10 1 million.
And what's your best Guesstimate I guess in terms of how quickly does the second zone will get forgiven.
Sure. So first round is moving along nicely on we've really seen a pick up with the FDA in terms of debt forgiven.
Forgiveness processing second round I really think it's going to be the second half of the year EV and <unk>.
In terms of highlight flow as well will be commensurate with that the SBA processing speed. So.
I do think it is going to be weighted more heavily towards the second half, yes, one thing to add there <unk>.
On the second round borrowers have the windows are from assured as eight weeks to as long as 24 weeks, so that points to probably somewhere in the latter half of the year.
Understood. Thanks for taking my questions.
Okay sure.
And our next question will come from Michael Perito with <unk>. Please go ahead.
Thanks, Good morning, guys.
Good morning, Mike Good morning.
So just a piggy back just to make sure I'm on I understand the margin correctly. So the.
The NIM ex accretion on X 10 basis points was in the mid three <unk> range. It sounds like that has room to compress on the second quarter, but you're hopeful that it'll stabilize on the back half of the year as liquidity is deployed but then on a reported basis. You know, obviously that will ebb and flow more with the pace of PPP forgiveness, which relative to the first quarter it sounded.
The second quarter has actually been moving along at a decent rate does that all kind of a fair summarization of the margin thoughts.
Yeah, I think I think you're I think you're close.
And.
It's hard to give you exactly where it is headed obviously on on growth and on GAAP basis.
A little more volatile with the PPP timing.
But I.
I think you've got the right picture there in terms of what Youre, saying, it's a we've.
We've got a lot on liquidity and it's going to be really all about the earning asset mix and I do think we have some upside for the faster we can shift from from securities and cash and debt and alone the better so and there is some upside there.
Got it.
And then in terms of the.
It seems like some of your peer banks that have nice sized SBA platforms are still pretty bullish about the origination activity.
Obviously, you've had a couple strong quarters of SBA gain on sale here I'm. Just curious if you could provide really three in a row actually so I was just curious if you could provide any thoughts I mean, how I guess, how long I used the real question is Alberto Roberto is how long can this kind of elevated origination activity in the SBA platform kind of last year.
It seems like there's still a lot of support from a structure standpoint to make these loans attractive, but any updated thoughts there that we should be mindful of.
It's hard to say precisely Mike, but look the program today is still very attractive obviously, a 90% guarantee reduce fees. So from a just from a pure.
Cost of capital standpoint for borrowers is still very attractive program. So we think that debt in the short to medium term.
Volumes are still going to be pretty good.
The second piece that I would add to that is.
You have we have all of these borrowers that have gotten PPP loans and in some way shape or form.
Those borrowers got financing from that program that money at some point is going to run out and those borrowers are probably not certainly not 100% of them, but some of those borrowers are going to need financing, which bodes well in terms of providing additional demand for SBA loans. So we feel pretty good about it.
You know we're in the business for.
<unk> for the long run we're not you know.
A company that is in the SBA business this quarter or next quarter, we have been in the business a long time. So we take a long term view of that business. So we feel we feel pretty good about.
The outlook there.
Very good and then just two quick last one for me just Lindsay is the the first quarter tax rate decent proxy going forward here.
Yeah for our guidance for that I'd say, 25% to 26%.
Got it and then any new updates on the tech investment side.
In terms of things you guys are.
Close to rolling out or looking at or or just anything kind of a general I mean, I know that it seemed like that was an area of focus from a strategic high level last last time, we spoke and just curious if there's anything that you're willing to bring the market in terms of updates on on investments or things that you're looking at yes.
Yeah, we're going to we continue to add capabilities, Mike I mean, we have a <unk>.
Pipeline of call. It projects that we're executing on to continue to add capabilities to our platform. So for example, this year, we're going to enable a new platform to do online account opening both on the consumer side and on the business side.
We're rolling out additional capabilities too.
Kind of support on bought dress the SBA platform that we have today by being able to do smaller balance loans, which.
It's not something that historically, we focused on so now we have a platform and we're going to be rolling out that.
That will be primarily geared towards are really smaller business customers that actually we establish a lending relationship with as part of the PPP program. Those are two examples as you know last year, we rolled out and implemented.
<unk> for our commercial loan origination.
Business in general so today, we really use that platform across the organization with the exception of leasing to really originate both SBA and government guaranteed loans as well as conventional loans. So those are just a few.
A few examples of things that are that are in the pipeline.
Migrating. Another example, we're migrating our.
Business customers to the next generation of our business online and mobile platforms. So that's in progress so just those.
Those are some of the highlights of things on the tax side that that we're doing currently and then there are things that we're planning on looking at.
For later in the year as well as into next year, but those are those are some of the highlights.
No. That's helpful flavor I appreciate the color I guess, just you don't have to get specific on names, but just out of curiosity are a lot of these updates and upgrades are they with your core are they outside of your core or is it a mix or.
Primarily outside of the core.
There are some there is one in particular that I mentioned, there that thats with our core.
The other ones are all outside of the core.
Got it appreciate it Alberto and Lindsay on Roberto Thank you guys for taking my question.
Thanks, Mike.
Yeah.
And once again, if you'd like to ask a question. Please press Star then one.
Our next question will come from Nathan race with Piper Sandler. Please go ahead.
Yes, hi, everyone.
Morning.
Hey, Nate going back going back to the core margin discussion ex PPP on accretion and just kind of thinking about the denominator in that equation you guys expect in the balance sheet to kind of remain flat, maybe slightly higher as the PPP forgiveness process continues to unfold. Obviously, you guys had strong core deposit growth as well on the corner. So just kind of any thoughts.
On those.
Balance sheet dynamics going forward.
Sure. So so they are our intention is not to shrink the balance sheet here, but you made based on just natural attrition because of the PPP and depending on how quickly. It is coming off and we do have PPP Lf as well just to remind you that though.
Some of it is funded through the PPP Lf in that that could cause some as well in terms of shrinkage, but overall, we really want to continue to grow the balance sheet and we've seen great loan pipelines here and so our intention is to continue to grow from here.
Okay, great and changing gears, a little bit on thinking about the SBA production and then kind of that cadence over the course of the year.
Except for maybe last year I think we generally tend to see SBA production build over the course of the year is that a fair way to think about what you guys expect in terms of sold volumes and so forth over the course of 2021.
So clearly we have seen we saw good production.
Obviously this quarter it was up comparatively speaking on a year over year basis, Nate that's our expectation just because it's what we have seen the how the business has essentially.
You performed in the past so so to answer your question.
Short answer there is yes, that's kind of what we expect over the course of the year.
Got it and do you guys kind of continue to expect the secondary.
Premiums to continue to go.
So higher as it was.
Was this quarter somewhat of an anomaly or are you guys kind of thinking about it.
No.
Yes.
Good question on it seems like every time, we see bids and we see where levels are coming in I think we kind of look at one another here internally and say.
Some of us have never seen premiums be this high.
The good news is they are high so we will take advantage of that.
But also if premiums were to normalize and decline we still think the business is obviously attractive so premiums wood from these levels would have to decline a lot.
For us to rethink whether or not we're better off.
Selling the loans, where we're better off holding them and certainly we have the flexibility to do either.
We've said in the past, we're pretty agnostic when it comes through that.
So.
But today I mean, these are very very attractive I mean, probably as attractive as we have collectively seen in our careers in terms of.
The strength on on from market participants to buy guaranteed.
Loans, Yeah, and I need just to add to that I did say in my prepared remarks about the guarantee fee being waived and that definitely helping in terms of the premiums just to keep that in mind. So as the SBA enhancements roll off the timing of that is still a little uncertain given that it's driven by the funding in the <unk>.
Graham.
And the ultimate and.
It's still not completely certain yet but.
Once that is gone.
We then come off a little bit of their highest.
We'll see.
Yep got it that's great color I appreciate that.
Could just ask one more just going back to the M&A discussion Curie.
Curious as you guys kind of thinking about the discussions you're having or the.
Deals that we could expect going forward like we are going to be similar to what we've seen from you guys over the past several years or is it maybe something more transformational.
Yeah.
I think the way I would say it is I think our.
We've shared in terms of kind of what the criteria is for for M&A transactions, that's not to say that certainly the board would not consider something outside of that.
But I would say, we're kind of focused still on.
Kind of the general.
Cohort of banks that are let's say between.
$400 million, two two plus billion dollars and we think that that cohort and the number of banks in that range. There is there is a significant number of them in our market areas. So that's that's really where we're kind of focus but.
That's not to say that.
Our board would not have flexibility in considering something outside of that.
Understood I appreciate all the color. Thank.
Thank you everyone.
And our next question will come from Brian Martin with Janney Montgomery. Please go ahead.
Hey, good morning, everyone.
Brian.
Just can you I guess most of my assessment answered, but just on the reserve.
I'm not sure for whom but just it seems like you're seem very optimistic on.
The outlook with the economy kind of improving and the loan pipeline building just kind of curious on the SK enhancements I guess, if they're working as they should and you built the reserve toward that needs to be just how do we think about the reserve going forward. If the economy continues to improve here and kind of things play out as you guys are thinking I guess.
Sure Brian.
I think as Albert.
In regards to the SBA, yet there's enhancements they remain cautious.
In terms of spending that stage there, but overall for you look forward on our provisioning for only going to be commensurate with the growth that we're going to be seeing and frankly, just the ultimate.
That comes out of the that's the enhancements whether it's the subsidy payments are deferrals.
Okay.
Borrowers get back to regular payment data what ultimately happened. So I think we are definitely cautious just because there is still a level of uncertainty and we're going to follow it through from there and so on.
We'll see what happens, but I think we we feel that our reserves are adequate and and we feel comfortable with where we're at.
And the clarity Lindsay just on the on the SBA is there a time on kind of when you when you'll get more details on that as far as like how long. These enhancement programs last what's kind of the timing of that where you might expect to have more clarity on that.
The condition of those those credit.
Some borrowers.
You know Brian its day, it's day to day with the SBA. So for example, with.
The restaurant revitalization fund that just came out and they still are not yet taking application. So it's hard to give you a perfect answer.
Things over the next I'd say two to three quarters, we will definitely play out.
I don't know Albert hour for enough do you have anything else.
The one thing.
I'm sorry go ahead.
Yes, the one thing I was going to say Brian is.
Yeah.
So remember it's hospitality right mostly.
Restaurant.
Restaurants business that we have exposure in the SBA portfolio. So so I think we're still on the pandemic right. The restaurants are still slow so I think.
Better indication would be as the economy improves and people start really to embrace going out again.
Visiting restaurants.
That will be a better <unk>.
Many of them on occasion.
Got you, Okay that makes sense I mean, I guess I'm thinking about the vaccine and all that but the.
Getting back from getting everyone doing that is is important so.
And maybe just one other follow up for me was just the given the competition on the market and your expectations on on loan growth or at least it sounds as though that momentum is building.
Kind of at current yields and credit loans right youre, putting on loans today Where's that at and.
Is it how has that been lately here at the last quarter or so.
Sure. So in terms of the loan yields excluding PPP for the quarter Brian.
They did go down quarter over quarter. So they werent for 82 at the end of the year and then went down to for 72 itself.
Seeing some pressure there on new loans are coming on for in the range of about for 50 to 460.
We are seeing a little bit of a pressure there.
Okay, Brian just to add on.
To what Lindsay said, so on a quarter over quarter basis, I would say.
Spreads in general some businesses are.
I would say spreads have compressed a bit I would characterize that for example in commercial real estate.
Breads were wider last fall they compressed a little bit in the fourth quarter and we've seen some compression that being said the quality of the transactions that we're seeing the capitalization of those transactions. The structure is very strong. So there's only a certain amount of really credit worthy borrowers then it's <unk>.
Normal to expect that competition would pick up for those borrowers in the market and we have seen that commercial is always competitive, particularly as you have.
Companies that are looking for new banks you know there is there is still.
It's fair to say there is still some of the effects of the disruption here in the market. So you have attractive borrowers whose lines and facilities have expired or matured.
That are out in the market and that's going to draw competition and again in C&I. That's a longer term business is less transactional. So people are going to be also included people are going to be aggressive in wanting to to acquire customers that you can build a long term relationship with <unk>.
From that I would say.
Pricing in general outside of those examples.
It's been pretty consistent.
This quarter compared to last quarter.
Got you Okay I appreciate that.
Thanks for taking the questions.
And our next question will be a follow up from Michael Perito with VW. Please go ahead.
Hey, guys, sorry, just one quick follow up just looking for a broader you know I was just looking through the model as we were talking through stuff in.
The SBA revenues.
A pretty tight range for the last for five years I mean, it seems like there's a lot of disruption in market share going on in that marketplace right now and I was just curious if you could give.
A quick comment on whether you think this kind of return to being on a line of business that where the revenue growth for you going forward or is that the target or or is it more.
It's still more of a defensive for market share type positioning or just curious maybe you could just provide a little extra color on that that'd be helpful.
Hey, Roberto you want to take that one.
Happy to.
Mike.
It's true growth there.
On the revenue side of the SBA business with.
With what we have right is to make the business.
More efficient.
And.
Lever off the expense base on the platforms that we have.
There is plenty of room for us in.
In other.
So SBA such as USDA fiber for which traditionally we haven't been.
Focused on and as.
As we talked a little bit about this for the last time.
We're paying attention we're getting into the weeds there.
So over time.
We believe for this business assets.
Uh huh.
Really good revenue potential for us.
The mix may change, a little bit right as Lindsey mentioned M&A business cloud.
Tell us a little bit in <unk>.
Premiums come down a bit which would be the right expectation.
It will it will bring down revenues, but the idea of true is to grow the revenues.
Revenue side of this business.
Got it helpful. That's it for me thanks, guys for all the color.
Okay.
You bet Mike.
And then there are no further.
Other questions. So this concludes the question and answer session I would like to turn the conference back over to management for any closing remarks.
Great. Thank you operator that concludes our call. This morning. Thank you for participating today in the call and your interest in byline and we look forward to speaking to you again next quarter. Thank you on will that operator, I think that concludes the call.
Thank you and the conference has now concluded. Thank you for attending today's presentation. At this time you may now disconnect.
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