Q1 2021 Equity Bancshares Inc Earnings Call
Good day, and thank you for standing by and welcome to the Q1, 2020 one equity Bancshares earnings call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session.
And so asked a question during the session you depress star one on your telephone if you require any further assistance. Please press Star then zero I would now like to turn the call over to your host Kristen and I'm sure. All you may begin.
Good morning, and thank you for joining equity Bancshares conference call, which will include discussion and presentation of our first quarter 2020. One results presentation slides to accompany our call are available via PDF per download at Investor Day equity Bank Dot com by clicking the presentation tab and you May also cookie event.
Todays call posted on Investor Day equity Bank Dot com to view the webcast player.
If you are viewing this call on our webcast player. Please note that slides will not automatically and bass. Please reference slide one including important information regarding forward looking statements from time to time, we may make forward looking statements within today's call and actual results may vary following the presentation and we will allow time for questions and further discussion. Thank you all for joining us with that I'd like to turn it off.
Our chairman and CEO Brad Elliott.
Thank you, Chris and good morning.
Thank you for joining our call and your interest and equity Bancshares joining.
Joining me and Eric Newell our CFO.
Greg costs over our Chief operating officer.
And our president and Craig.
Craig Anderson.
Coming into the new year, we remain focused as always on driving value for our customers.
Employees and communities to enhance shareholder value.
When we've been able to do this through prudent capital management.
We are maintaining.
Gaining high credit quality standards, while swimming upstream against less prudent competition.
We're in the position of being a trusted advisor and experts to our customers.
And I believe we have anchored that status even more so this year.
We used our internal resources to improve and automate the PPP program.
Which was previously manual.
And have dovetailed this into our processes today.
This is what entrepreneurship is all about.
We created positive operating leverage, allowing us to accept a larger number of applications without adding burden to our staff.
Through last Friday, we have added 3815 applications approved by the SBA totaling $261 million of loans.
When the National banks said.
They were done accepting applications.
We announced through our social media distribution channels that we remain open and accepting applications.
This has been a windfall of applications.
But also has allowed us to now attracts a greater number.
Of these customers to our banking franchise.
I am proud of the team's efforts and making this yet another successful product offering.
Through our work as an advisor and expert to our existing and new customers.
We have deepened our relationships with them.
Building value for our customers and return for our shareholders.
Last night, we reported a big earnings quarter.
Eric will go into more specifics, including how the results were positively influenced by many operating factors Inc.
Creased fee income.
And reversing.
Of reserves for anticipated credit losses.
We have focused the last year as and operating team on increasing efficiencies.
Growing our customer base.
And attracting fee based customers.
We have done this through Treasury management products.
Our commercial credit card.
And our wealth management line.
Along with all of our core businesses.
Julie Huber, Galen Mcgregor, and Glenn Mail and have done a great job with these initiatives.
Our leaders are focused on growing customer relationships, our western Missouri market has excelled on growing all aspects of their business under Josh means and Mark Harman has done a great job of leading our metro markets.
Yes.
We remain diligent through our credit management to quickly identify any issues that may pop up and our portfolio.
And worked with our customers to resolve.
Rather than wait until we are forced into difficult workout situations.
To date, our processes work and the number of credits and dollars coming into our nonperforming assets remained very low.
We understand there is lots of stimulus and the economy now and it may be masking credit issues.
But our teams are looking for those situations and working to get ahead of them with our customers.
Our tangible book value per share was modestly impacted by the seasonal adoption this quarter as we signaled earlier.
We expect to continue growing book value as always.
We remain committed to our organic and acquisitive growth efforts.
This quarter, we experienced non PPP growth and our pipeline remains robust.
Craig Anderson has worked at putting in place strong regional teams in each of our metro and community regions that sets us up nicely for continued organic growth.
Merger activity and our footprint has picked up.
And we have had several conversations with companies over the last several months.
Equity is ready and willing to act as a partner to banks that fit.
And complement our organization.
We have a set of specific financial requirement for potential merger transactions.
And we will not stray away from those to ensure that our excellent merger track record continues.
We will stay true to our requirement on earn back.
Cultural fit.
And geographic strategic fit.
I recently traveled to all the markets and I'm excited about what we have already achieved in 2021.
And believe we are going to have a very robust year.
While the operating environment is not easy.
This is where our team can shine and show our customers are.
And our value proposition.
Eric.
Let's take everyone through the quarter.
Thank you Brad and good morning.
Last night, we reported net income of $15 1 million on a dollar and <unk>.
<unk> per diluted share.
We calculate core earnings of <unk> 65 per diluted share beating street consensus results. This quarter were driven by recognition of origination fee income from PPP loan forgiveness and improvement and fee based drivers such as mortgage banking trust and wealth management debit card and building momentum and commercial cards and <unk>.
Change income.
Expense management continues to be a focus as well with expenses down and linked quarter and year over year.
Our GAAP net income was impacted by and release of reserves from the allowance for credit losses totaling $5 8 million.
We have budgeted 20 basis points of average loans for provisioning. This year exclusive of credit losses, which would have resulted in a pro forma provisions and the ACL of $135 million and.
And we provided to the ECL as we budgeted and maintaining the same effective tax rate pro forma net income would have been $9 5 million or <unk> 65 per diluted share.
And we adopted <unk> on January one and as anticipated upon implementation, we recognized an after tax reduction to shareholders' equity of $12 4 million and transfer $12 million on purchase credit impaired remarks to the ACO.
Which are predominantly related to loans acquired from the transaction associated with our munis State Bank.
The ACL upon implementation was $61 3 million from a year and the allowance for loan losses of $33 7 million.
During the quarter the attributes that drove the release were predominantly related to the economic inputs used and the model and to a lesser extent and improvement and historical loss experience and its impact on the ACO.
On March 31 coverage of ACL to non PPP loans is 233% a significant improvement on the 48 basis points coverage, we reported at year end 2019.
Net interest income totaled 31, 8 million and in the first quarter declining from $35 6 billion and the December 31 quarter, representing a $3 8 million reduction and.
And the fourth quarter, we recognized $1 1 million of interest income on the return of assets to accrual, which did not repeat net.
During the current quarter, the weighted coupon and the portfolio declined approximately 10 basis points. However, when looking at our core loan products commercial and commercial real estate and agriculture, the weighted origination coupons and the first quarter were $4 six 1% from 414% and the prior quarter.
Furthermore, we experienced decline and the recognized level of loan fees due to an elevated level of origination fees recognized in the fourth quarter.
We had a reduction of purchase accounting accretion due to the implementation of seasonal and associated classification of purchase accounting marks.
Finally, and the fourth quarter, we recognized $3 $75 million on fee income and 777000 of interest income related to PPP loans.
And in the first quarter total PPP fee income recognized and interest income totaled $3 1 million and 896000, respectively.
This contributed to a $532000 decline and net interest income and the first quarter.
The $3 $1 million on fee income recognized in the first quarter $2 3 million was related to the acceleration of fees due to our customers' PPP loans being forgiven by the SBA during the quarter, which totaled $99 6 million.
At March 31, and 2021, we had $12 7 million of unrecognized fee income associated with PPP loans, which totaled $414 million.
Removing TTP fee income and interest income from net interest income and both the first and fourth quarters results and pro forma net interest income of $27 8 million and $31 million respectively.
Loan yields, earning asset yields and net interest margin and our quarter ending March 31 is $4, 61%, 365% and 319% respectively.
This compares to the quarter ending December 31, a five 5% for two 3% and three 7% respectively.
Craig do you want to touch upon on our origination activity this quarter. Thanks.
Thanks, Eric total loans grew $204 million in the quarter and when excluding PPP loans increased $43 7 million, representing a seven 6% annualized growth.
We originated $233 6 million of PPP loans in the quarter to 3300 customers.
We've had a nice pull through to closure from the pipeline this quarter.
Our total pipeline is approximately $450 million, which is similar to what we had been reporting over the last several quarters.
Our sales efforts have been keeping our pipeline constant, but and I anticipate the pipeline growing in the near future with the opportunities we are seeing.
I wanted to mentioned and our trust and wealth management business for a moment.
While we are thrilled about where we stood a year and in terms of assets under management. We have had an exciting quarter and have successfully closed a significant amount of business with her au and increasing to $265 million.
A level that we had budgeted for the end of the year and 2021 not by the end of the first quarter our.
Our sales team has gained a lot of traction and we are optimistic about our organic growth strategy for the remainder of 2021.
And as this new business starts to invest away from cash and the contribution of fees from the higher level of AUM will become more meaningful to total fee income yet this year.
I'm also enthusiastic about other fundamentals and our businesses that contribute to fee income.
Deposit account growth over the last year has contributed to more opportunity for deposit fees.
While the average balance of accounts has also increased our net checking growth has improved dramatically from just 12 months ago.
The opportunity for fee income should be elevated with a higher number of deposit accounts.
Our sales teams have also made successful efforts with selling treasury management products and commercial credit cards.
With a commitment to putting these cards in the hands of our commercial customers and selling them Treasury management products to help them facilitate their business needs and increases our opportunity.
For fee income.
The trend of commercial card interchange is quite positive and we will be supportive to our overall non interest income goal for 2021 Brad.
And I wanted to touch base on our digital strategy.
We added some detail on our digital strategy acceptance experience and our investor deck.
Over the last year, we had an increase of 27% and online banking adoption.
And a 67% increase and active users of mobile deposits.
Starting in 2019.
We began working on and on line deposit gathering channel.
While we were ready to open that channel last year.
And we delayed it with a high level of deposits we were gathering.
We are going forward with opening that channel.
And the next few months.
We branded the online deposit platform.
Moving it bank.
Which will allow us to differentiate between and market and outside of market strategies.
When it is more relevant in terms of pricing.
Customers will initially have the ability to open a DDA.
Savings and money market accounts, and our brilliant and bank platform.
It is completely paperless.
And customers can immediately fund their count upon opening.
We leveraged our work on brilliant bank and now have the capability for traditional customers to open accounts online at equity Bank.
This will permit our sales teams to leverage the online account opening capabilities.
And this Mac sounded like table Stakes.
But with the 750 banks and our target markets.
We are on the leading edge with this technology and strategy.
These platforms are a critical part of our overall deposit strategy and its contribution to our franchise value.
It allows us to incrementally reduce the cost of deposit acquisition.
And response to changing industry dynamics regarding how our customers interact with us.
With that said.
Presence and our markets continues to be important.
And we will remain committed to having our customers call us.
Or walk into our brands.
Talk to someone when they need us.
Eric.
Thanks, Brad we continue to show growth in our non interest bearing deposits, which grew $180 million and the most recent quarter and that has about doubled from what we reported in March of last year.
A couple of factors are at play here, which are systematic.
We understand that some of these funds may be a temporary phenomenon and we are studying scenarios on how this might have.
Impact on our deposit balances.
Last year, we originated $282 million on main street lending loans, and we required those customers to bring their operating accounts to equity.
Between late fourth quarter and early first quarter, we can identify over $100 million of deposit growth attributed to these customers and we believe these deposits to be long term and expect that will benefit our treasury management income.
Along with other actions, we have taken a reduce our cost of funds fees non interest bearing deposits are benefiting the overall cost of funding.
Total cost of deposits inclusive of non interest bearings.
For the quarter ended March 31 was 27 basis points declining from 33 basis points from the prior quarter.
The total cost of all funding defined as interest bearing funding and non interest bearing deposits for the quarter was 44 basis points down from 51 basis points and the fourth quarter.
As I mentioned on earlier conference calls time deposit costs continuing to benefit from repricing on.
Believe we have another quarter of benefit before its contribution to lowering interest bearing deposit costs, so long as meaningfully.
We took steps and January and again in April to reduce the cost of money market deposits, which should have some benefits and the second quarter.
As I mentioned earlier, when excluding the effects of PCT, our NIM and the first quarter was $3 one 9% impact.
Impacting this was a higher contribution and the securities portfolio and the composition of earning assets was impacted and the March 31 quarter by a higher contribution from the lower yielding securities portfolio and interest bearing cash and.
And the ratio of average securities to average, earning assets increased to 24, 3% and the March 31 quarter from 22, 3% and the preceding quarter.
And the yield declined 17 basis points.
And the ratio of average fed funds sold to average, earning assets increased to five 3% and the March 31 quarter from three 9% and the preceding quarter and the yield declined 24 basis points.
Greg why don't you take everyone through your thoughts on credit.
Thanks, Eric.
And as 2021 begins we continued to be optimistic about where we stand with many of our customers.
The equity bank team continues to work hard to position and both our customers and the bank for successful outcomes, including the facilitation that PPP loans, where needed and proactive communication with borrowers to understand their operating environments and need and timely resolution of any problems that do arise.
And the first quarter total non accrual loans exclusive of the impact of seasonal adoption and modifications to purchase accounting and including the Elmina merged assets were essentially flat to year end 2020.
Oreo was down $1 2 million during the quarter on sales of six assets without any appreciable losses.
Yes.
Oreo is now just $3 $5 million when excluding income producing CRE assets net regulations required to be classified as Oreo and former bank branch assets.
There were no material additions to Oreo in the quarter.
Upon the adoption of seasonal purchase credit deteriorated assets, which had been previously reported net of purchase accounting and are now gross for problem asset disclosures and driving the reported increase in problem assets also.
Also during the quarter, we updated the valuation of certain assets from our purchase of Elmina State Bank, which resulted in the classification at $2 $2 million and purchase discounts to potential repurchase obligations associated with government guaranteed debt and each of these changes drove up the ending balance of non <unk>.
Rural loans without impacting the bank's economic position in the assets.
At year end 2020, we moved one of our large relationships into special mention and our aerospace segment and associated uncertainty surrounding it had been previously discussed.
During the second half of 2020, the entity principles injected $50 million of capital and to the borrower dramatically improving the credit picture on.
Our borrower remains current on its loans at this time, we believe we are adequately collateralized and amicable discussions continue with the borrower management will continue to closely monitor and this relationship and overall portfolio and proactively work with our borrowers to ensure the best results for both the businesses and the bank.
We also use the extension provided to us under the appropriations Bill signed in late December to provide some relief to customers and that continued to be directly impacted by COVID-19 by deferring a portion of their payments for varying terms as permitted under the cares Act and.
Total loan balances under some form of relief generally and the form of deferral at March 31 totaled $73 4 million as we stated last quarter, we prudently structured the deferrals so that in the event the borrower met certain financial performance metrics, and the deferral would and and contractual payments.
And resume we believe we have appropriately risk rated these loans and assess them for accrual status as required by GAAP and regulatory standards. We also believe the majority of these borrowers have secondary sources of capital to repay should the primary source becomes insufficient about 45% of the balance.
Very strong operators and the entertainment sector, and who have outside and who have significant outside assets and about 22% is to very strong hoteliers.
We have been and communications with our large hotel operators and the environment is rapidly improving in this industry. We believe this in tandem with our conservative underwriting standards for these assets and combined with the owners quick and prudent actions to the Covid environment continued to lead our belief that any.
And that would be minimized.
The balance of our loan portfolio also continues to perform well and aggravated credits and especially had been a bright spot.
And represents 9% of our loan book.
Grain and protein prices have both been up and land values continue to be strong our AG lenders led by Levi guests are experienced and have firsthand knowledge of the industry and their markets.
As I said on our last call the prospect of future issues due to COVID-19 are still possible.
And we're confident we have the resources and our credit and special assets teams to address and a proactive way any perceived or actual issues as they arise Eric.
Thanks, Greg before turning the call over to Brad I wanted to again highlight our forecast slide.
And here you can see our thoughts on the forecast for the second quarter and how our first quarter outlook compared to actual results dramatically, we undershot NIM and the quarter due to the earlier reasons discussed.
Later in the quarter, we had more loans funding, which reduced excess liquidity on our balance sheet.
Such I believe that our downside on NIM is more limited and the second quarter.
We've also taken steps to hopefully see some modest additional benefits and the funding cost as well. However, the success and defending NIM will be dependent on loan growth and origination coupons.
Second quarter and full year outlook does not have any significant departure and or adjustments from what we expected and reported on and our January conference call Brad.
Thanks, Eric.
We continue to prudently manage capital and.
In October last year, the board of directors approved a second stock repurchase plan totaling 800000 shares.
Through last Friday, we have repurchased 570000 shares in that plan.
Management and the board continually discuss capital management strategy.
While considering credit quality and organic and acquisitive growth opportunities.
Under consideration.
Is the initiation of a common stock dividend.
And the event that the board were to approve a common stock dividend it would likely be and the fourth quarter.
Of this year.
And would represent a payout ratio that supports our overall growth strategy.
Before we open it up for questions.
I went and once again commend our equity bank teams and our markets for their focus on our customers and demonstrating that we are dependable and responsive to their needs.
Even during a pandemic.
Many of our competitors have not been able or willing to serve their customers.
And while we never closed our doors.
That decision to be a steadfast partner to our customers.
Is a differentiating factor between equity and others.
It provides value to our customers and allows us to build deeper and longer lasting relationships with them.
And with that.
We're happy to take your questions now.
Ladies and gentlemen, if you have a question or comment at this time. Please press. The Star then the one key on your Touchtone telephone. If your question has been answered you wished and with yourself from the queue. Please press the balance sheet.
Our first question comes from Jeff <unk> with D. A Davidson.
Sure.
Thanks, Good morning.
Good morning, Jeff.
A question on the on the margin and really the slide 25 and sort of the outlook.
And could sort of walk us through the balance of the year with those expectations on on <unk>.
On the Securities investment.
Management of margin and in the short term and.
And second half and how that $3 15 to $3 35 range.
It sounds like more like near term contraction been some relief as well.
As the year goes on.
Yes, Jeff this is Eric.
Julie.
If you look at the mid point, there, which is where I have been focusing on the 325 weeks ago.
Exclusive of any effects of PPP.
Interest as well as fee income.
And that that's showing actually a little higher than the $3 19.
We reported and a first quarter, which is also exclusive on PPP income and the reason that we're thinking that we're going to show probably 3% to 5% growth of NII dollars and the second quarter is due to <unk>.
Some of the coupon.
Your line is that we've been putting on.
In terms of originations and the first quarter and our core loan products Cree C&I and AG being about 20 basis points higher and the first quarter, then and then and the.
Fourth quarter.
And we're seeing some benefit there and the second quarter.
<unk> and the back half of the year.
I think debt.
I wouldn't necessarily say, we're going to continue to see contraction.
I will say a lot of it has to do with two things first off.
<unk> to see our originations have a four handle on that will.
And we'll be quite hopeful and defending and and to date, we've been seeing that and then second.
Cost of funding, which we've been getting some.
And tailwind from the repricing on the CD portfolio and time deposits.
Still fairly elevated.
But I do think book that we are probably in another quarter.
Benefit there and.
And then Mike I.
And that repricing will slow.
And its contributions are reduced.
Funding costs.
And will fall on the back half of the year, but we have been.
And taking steps to re.
Re price some of our our money market and other products as well so that will be important and defending and in the back half of the year.
Okay. Thank you.
And maybe Erik while I have you the.
And this is more of a housekeeping.
On the main street.
Income or servicing.
And just trying to map that within the non interest income line is that you.
Put that on and other or awareness what have you.
Accounts for that.
Yes, so we originated $282 million on main street.
Loans and the fourth quarter as a reminder were receiving 25 basis points of servicing on those loans as long as they remain on our balance sheet and and that income is.
Showing up and other on fee.
The income.
Great. Thank you and last one for maybe Brad I appreciate the comments on the.
And the buyback and on the dividend.
Discussion and become but.
Maybe just an update on the on the M&A front and on how.
And how about shutters.
Hi, Blake.
Sure. So we've had lots of conversations of late Jeff.
We are in.
Some some really good deep conversations.
And with people.
And then I think can come together.
And.
So it's really picked up the last three or four months.
And I'm very I'm very positive and hopeful that.
Those things will happen this year or could happen this year.
As you know as we always say.
Institutions decide when they want to merge we don't decide when they want to merge and so.
But but those conversations are very very positive.
And and look very positive to us all within our deal metrics. So nothing outside the box for us.
And.
All within our footprint.
So it sounds like seller expectations are still pretty rational.
Even given the kind of lift and equity prices over the last six months.
Yeah, I think all of the conversations we have seller expectations are all in line.
And with where the industry is today.
Great Okay, I'll step back thanks.
Our next question comes from Terry Mcevoy with Stephens.
Good morning.
Good morning, Jerry.
Nice to see the loan growth ex PPP I guess my question is when you think about the full year three.
3% to 8% average loan.
Outlook, that's in the and the Investor Day could you just talk about areas of the portfolio specific markets that.
And could create growth on the high end of that range.
Yeah I think.
We have actually some really good teams.
Got a really good team now down in Arkansas and we're.
And we're seeing a good pipeline build from them down there we've had some.
We've made some changes to that team and a positive way.
And they're really catches and traction down there.
Have a really great team and Tulsa, we had to reset that team about a year and a half ago.
And the new team there is one of the best commercial lending teams that we have and our group and their pipeline is.
And it's really really strong.
And so we've got great. So the metro markets are kicking in and well.
But the commodity markets are also doing a really good job.
Levi gets out and western Kansas.
<unk> got a really good team out there and we've added a couple of people.
And that we had a couple of people retire and so.
And we're pretty excited about that team and being able to generate some new loan volume force. So it's kind of all over our footprint Terry.
And then you know the utilization utilization on AG lines is way down and utilization on C&I lines are down. So if we have some inflation and we <unk>.
Have some people to start doing some work.
Again, I think that those Utilizations will go up naturally so I think we could get loan growth that's already on our books and then we could get loan growth from the from some of the teams that we've built our craig's built.
Thanks, and next question just on that the ACL ratio others adopted <unk>, a year earlier and have kind of guided us towards a day one level as a quote unquote normalized reserve.
Ratio Im not sure what are your thoughts on and a normal environment and what should the appropriate ratio be relative to loans.
Yes.
So whatever the model says Terry.
That's what I've been coach to say.
Uh huh.
And I appreciate the question Terry.
Chuckle, a little just because I don't have an answer for you.
Lot of it has to do with what perhaps you said, it's driven by our model.
Some of the things that happen.
Drove that.
Release.
First off historical loss experience.
When you look at the history of equity.
And we really havent shown a lot of losses and so.
Really than.
We have to look at management and qualitative factors and the economy.
And obviously the economic situation.
And really different.
Today than it was last year.
And most of our peers, we're adopting seasonal.
So that is definitely having an influence on the overall level that we reported at March 31, and also some of the trending that we're seeing there from the beginning of the year at one one when we implemented and $3 31 was favorable as well.
And so that's those are the two things that was really driving that release, but.
I wouldn't necessarily say that that high watermark of the $61 million on January one was was on target for us.
Thanks, Ed.
I appreciate all those comments and understand its a tough question.
And then lastly, maybe just.
Expand on brilliant and bank I'm downloading the App now and I guess my question is is this a strategy that if I'm in the six to seven two O seven ZIP code I get a different rate kind of a different product set versus somebody who is completely out of market and and and longer term how does that impact maybe your deposit costs.
Relative to the industry and peers and peers.
Yes so.
This is similar to what.
Other banks have let's say, we can use home bank that has giant bank as their online bank.
And so we were really focused on this two years ago Terry.
As a way so and we were needing to raise deposits are really only avenue was to go to a retail customer base and it kind of when you raised deposit rates. It raises all your deposit rates and so on your cost of funds grow very rapidly when you're in a deposit gathering mode and so are our strategy on this is that if we need debt.
Well, let's say, we need to raise 100 or $200 million and and funding. We could go to this product put a stated yield rate out there and money would flow in from national accounts. They would not be local accounts attractions, we wouldnt advertise in our ZIP codes honestly, we'd ever advertise outside our zip.
It goes.
Alright, thanks, everyone.
And it's really to keep those deposit rates completely different.
Makes sense.
Thanks, Brad.
Again, ladies and gentlemen, if you have a question or a comment at this time. Please press. The Star then the one key on your Touchtone telephone.
Our next question comes from Andrew Liesch with Piper Sandler.
Good morning, everyone.
Good morning.
Question for you guys on the on the loan growth and the quarter was that EBIT purchase or was it all originated and health.
There is a combination of both and that.
We.
And look for the mortgage products that we can put on our books that would augment we've had a lot of that on our books from several vendors that sell us those overtime and then we've also with the mortgage volume and being able to put some of that on our books as well.
Not in the long term extension risk though.
Got it so.
And that does sound like some of the mortgages, where you're all on originated though what.
What drove the strategy to retain these versus others.
And did they offer better credit better better rates what was the.
Different terms.
And on.
Structure what was the.
And they retain some of these.
Well, we've always had a big portfolio I would say.
And.
So it's not it's not a new strategy, we just have theres, just more volume and the marketplace today than there has been.
Got it.
And then on the main street lending program related deposits and those all flow and onto the balance sheet or do you think that could still be some more growth coming from those customers.
There's still some more growth.
We've got part of the relationship over and we're still working to have them unwind that relationship with the other institution and get the rest of it over so theres still some stragglers out there.
Got it that's good to hear and then just one last question on the.
Securities that you purchased just curious what was the what were the rates that you were adding those debt.
Yes, I would say that we're probably adding securities.
And.
100, 125 to 150 basis points.
Okay.
That's helpful.
They're not going too far out on the yield curve for that and just putting some money to work here.
Debt that covers all my questions. Thanks, so much.
Thank you.
Our next question comes from Andrew to Franco with Cape UW.
Hi, good morning, everyone I'm filling in for Mike today.
Good morning, good morning.
So I just had a question.
About loan pricing and if you could provide any incremental loan pricing and whether you expect loan yields to stabilize if loan growth continues and the back half of the year.
Yes, Andrew.
If you look at our core loan products.
C&I AG and this.
This quarter.
The coupon of origination there.
$4 61 per se and that compares to 442% and the prior quarter. So we had some benefit.
Getting higher and higher yields.
Certainly a challenge and we've been able to touch on credit.
Our originating four handle credits and that will definitely be something that will continue and look at them and.
Monitor when we're looking at now.
Our expectations of NIM for the remainder of the year, but we've been we've been doing it so far so I don't expect.
And we will have a significant departure from our experience there.
Awesome and.
And just the second question on fee initiatives.
Are you working on getting fee contribution up towards 20% of total revenues over the next few years or is there. Another target that you have in mind that you are willing to share.
Yes.
Yeah.
Answer is yes.
And it's definitely a focal point of US we look at our peers and our aspirational peers and we look at their composition of fee income on our coal revenue and Theres, certainly a gap between us and them and that's.
And definitely a focal point for us we've been focused on and.
And have demonstrated that we can improve debit card interchange income.
We are now putting on a commercial credit cards into the hands of our commercial customers and were.
Starting to see a more meaningful contribution of that interchange income.
To fee income.
<unk> is quite positive coming off a low base and it's actually very interesting and I see how much it's improved and just the last quarter.
And wealth management.
Our AUM and that unit iPad and of the quarter was around $265 million, which was.
A big increase from year end.
And frankly that was a goal of ours for the end of this year and not the end of the first quarter.
And while trust and wealth management fee income line.
Flat and the first quarter and there's a lot of the opportunity for us.
To be yet to be recognized and the back half of this year because of the wins that that sales team has.
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And Treasury management income is also on a big focal point for us and there's a lot of sales initiatives around that and as Brian was talking about with main street.
Loans and those deposits coming over all of those are treasury management customers and so there's a lot of opportunity there as well.
Cognizant and Brad.
So when you put all that together and.
And obviously looking at other initiatives as well and.
Our pipeline.
We believe that that will help us achieve that shorter term goal or kind of more of an intermediate goal of getting up to 20% and frankly, we'd like to get up to where some of our peers are which is higher than that.
Longer term goal, yes, the only thing I would state is these aren't things that we're just now thinking about these are I mean, almost everyone. On these initiatives has been kicked off more than 18 months ago.
And so we're actually seeing some of the pull through and traction on them already.
Great. Thank you so much.
And next question is a follow up question from Terry Mcevoy with Stephens.
Alright, Thanks, Eric I appreciate you, providing your thoughts on the NIM ex PPP.
Just given the the amount of kind of fee revenue expected in round, one youre about halfway there and then another call. It 13 plus of fees for round two could you help us maybe think about the timing. So we can incorporate that into our models.
Sure.
So we originally coming into 2021, we had about from 2020, PPP program and about $4 million of fees.
These yet to be recognized.
I think we recognize around two and a $5 million on to that quarter between two and $2 $5 million of that and the first quarter. So there's probably another million and a half to $2 million up from 2020 and PPP loan program.
And yet to be recognized.
And I suspect because our teams have been.
Maniacally focused on forgiveness, and we've done an excellent job.
And getting.
Our customers.
I'll take the application to the FDA and get forgiven.
So I suspect that most of that will be recognized and the second quarter and you and Mike.
And third quarter.
And that takes us to that.
12 to 13 million of net fee recognition that we have on that.
On the 2021 program and.
I suspect that by 75% and that will probably be recognized.
By year end this year.
With the remaining 25 per se.
And in the first quarter of 2022, but again our teams generally surprised me Inc.
Time to get back on low more quickly, but that's my my conservative view on that and.
We are modeling it and we've actually that 75% and 2021, we've been a little more biased and attack.
Second half of the year, so we might see.
A small dip and.
And fee recognition and the second quarter, but our teams are actually working on and automated approach for on many of our smaller loans debt.
Actually provide a filled out application to the customer and just execute and signed taking on work away from them and.
So you might be able to recognize more and the second quarter, and then and what we're modeling.
Probably a little bit more than you want on Elba.
No I appreciate that thanks, Eric.
Hello, Ladies and gentlemen, there are no further questions at this time and since there are no further questions. This does conclude the book.
And for spirits today, you may now disconnect and have a wonderful day.