Q1 2021 ConnectOne Bancorp Inc Earnings Call
Greetings and welcome to the connect one Bancorp, Inc. First quarter 2021 earnings call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad.
Please note this conference is being recorded.
I'll now turn the conference over to your host see advancing for your brand and innovation officer for connect one you may begin.
Good morning, and welcome to today's conference call to review connect one's results for the first quarter 2021 and to update you on recent developments on today's conference call will be Frank Sorrentino, Chairman and Chief Executive Officer, and Bill Burns Executive Vice President and Chief Financial Officer.
As well as notice of this conference call on a listen only basis over the Internet were distributed this morning in a press release that has been covered by the financial media at this time, let me remind you that statements and assumptions in this conference call contain or are based upon forward looking information and are being made pursuant to the safe Harbor provisions.
The private Securities Litigation Reform Act of 1095, such forward looking statements are subject to numerous assumptions, uncertainties and known or unknown risks, which could cause actual results to differ materially from those anticipated.
These risk factors are formula for are more fully discussed in the company's filings with the Securities and Exchange Commission for forward looking statements included in this conference call are only made as of the day of this call and the company is not obligated to publicly update or revise them. In addition, certain terms used in this call are non-GAAP financial measures reconciliations.
Which are provided in the company's earnings release, and accompanying tables or schedules, which have been filed today on form 8-K with the SEC and may also be accessed through the company's website at IR Dot connect one bank dot com. Each listener is encouraged to review. These reconciliations provided in the earnings release together with all other information provided.
In the release.
I will now turn the call over to Frank Sorrentino, Frank. Please go ahead.
Thank you Sarah and good morning, everyone. We appreciate you joining us today.
As you've seen connect one had a strong quarter and continues to build momentum as we move into the post COVID-19 economy.
The first quarter highlighted by solid financial and operating results and diligent execution against our strategic plan is a strong indicator of the performance. We can expect through the rest of the year.
Our proactive position coupled with the improving operating environment has allowed us to take advantage of many growing market opportunities.
This is the third quarter in a row that operating earnings exceeded 2% of assets and notably that.
Increased sequentially each quarter.
Loan production was robust we utilize the full range of the company's banking expertise to support our clients who are not only financially strong but have also realized new opportunities through this pandemic, we stand ready to support them as they expand their businesses.
Same time, we saw a large increase in paydowns and payoffs there are a number of reasons for this which we believe are short lived or one time events. Our strongest clients are sitting on large cash balances due to the liquidity that's in the market, resulting in pay downs on lines of credit.
Our pipeline and construction, so unusually large numbers of completions and resulting payoffs.
Timelines were affected by the early COVID-19 related shutdowns last year combined with delayed starts for new projects.
Extraordinarily low interest rates through last year caused a higher than usual level of refinances debt, we chose not to participate in as we remain disciplined in our approach. We're seeing these events normalized as we begin the second quarter there appears to be a slowdown in both prepayments and payoffs.
We are seeing strong demand across our markets further building growth momentum, which can be seen in our existing loan pipeline, which I am happy to report is at the highest level in the company's history. We continue to expect net loan growth to accelerate in the back half of the year.
Now turning to credit we continue to see better than anticipated strength and no doubt we're in a much better position than was originally anticipated at the start of this pandemic.
We implemented the seasonal accounting standard on January one and Bill will provide a little more detail on this but in summary, our onetime adjustment was modest during the quarter. We released a small portion of the reserves built over the past year based on the improving macroeconomic outlook.
Our deferment portfolio declined modestly as the yen is as of the end of the quarter and the total amount of loans were all payments have been deferred is now less than $50 million or less than 0.8% of our total loans.
Total deferments are expected to decline significantly over the remainder of 2021, and we believe our reserves reflect adequate protection against any potential losses.
Also like to note that our net interest margin continued to expand during the quarter the sixth consecutive quarter that margin widened.
We're proud of our results this quarter and we remain disciplined in managing our business as we look forward towards growth.
As the vaccines continue to be deployed throughout the New York Metropolitan area. We are anticipating a significant uptick in our client activity were geared up for meaningful growth for the remainder of the year and as the economy opens up even more we're preparing our teams capitalized on increased opportunities.
Now speaking of connect ones team they return.
We work environment and I'm proud of work it from the office environment and I'm proud of the results of the resiliency that they demonstrate each and every day to take care of our clients.
You have heard us discussed for some time that we're progressively moving towards a hybrid banking model for us. The early investments we've made in technology and our infrastructure allowed connect one to be well prepared to respond to the pandemic.
We plan to further develop this model and our strong technological foundation as we move into the future state of bank.
As always connect one remains a growth oriented company and with signs of stability in expansion. Returning we are well positioned with the capital strength necessary to take advantage of these opportunities and to maintain or even improve our best in class performance metrics.
Some of which are our high returns on capital common equity.
The building of tangible book value per share and improving on our best in class efficiency ratio with those things in mind and with that outlook today, We announced a 22% Inc. Dividend increase to go along with the resumption of our stock repurchases over.
Over the past couple of years.
We've seen notable technological shifts, including reliance on digital platforms virtual deposits and online financial tools, we continue to innovate and invest in our infrastructure to enable us to deliver the quality products and services that our clients demand.
At the same time as client behavior evolves, we continue to reduce our retail brick and mortar footprint relative to relative to the size of our balance sheet and client demand and.
In the first quarter, we further reduced our branch count completing the previously announced sale of two branches. It's.
It's interesting to note that over the past five years, we have doubled the size of our assets are loans and deposits, while only increasing the net branch count from 21% to 20 for including the integration of two acquisitions.
And as also as a quick update we continue to build our SBA lending platform.
And our marketplace to serve our existing clients and to support small businesses and the communities, where we do business.
This initiative has been gaining traction and we see opportunities over time to generate revenue through an expanded SBA division.
Now turning to both line, we see terrific growth in that platform, which is generating more traffic through its proprietary products be verify and the patented b qual and this in turn will lead to increased fee generation through loan referrals as we scale and extend both lise competitive position, we're seeing opportunities.
To further enhance both wise platform and add complementary products to its offerings and build both fly into a robust business marketplace.
I look forward to updating you on our progress in the quarters ahead.
We believe that many more opportunities exist to partner with Fintech companies to build more value, while modernizing financial services.
As you May have seen connect one is joined with dozens of other banks to participate in the JMP <unk> Top Bank Tech Fund a fund dedicated to investing in the future ecosystem for community banks.
At connect one we've long believed in the power of partnership and we believe this opportunity is supported by the country's leading banks will provide a high level of diversity to <unk>.
Further fuel innovation.
Finally, a few thoughts regarding M&A.
2021 is already shaping up to be an active year.
As in the past strategic acquisitions are an important component of our long term growth strategy.
Whether we participate directly or not we see incredible opportunities to attract new talent and new capabilities as well as benefit from others activity.
At its core connect one to growth as a growth company. We've built the dynamic team thats accustomed for high levels of production and operational model that can continuously evolve its technology and infrastructure and the ability to successfully execute franchise enhancing M&A opportunities.
Given our culture and our strong capital position, we are poised to accelerate our strategy and capitalize on market opportunities to drive substantial growth.
This is an exciting time for connect one we look forward to sharing our progress with you each quarter and I'll now turn the call over to bill to provide a little more detail on the quarter's financial performance.
All right Frank.
And good morning, everyone. So as Frank alluded to in the first quarter was a strong start for the year.
Not only did we have a very solid quarter. I believe we are also very well positioned to excel as we continue to come out of the pandemic.
Let me go through some highlights for the first quarter loans grew by two 5% annualized and that was aided by the second round of PPP.
Our loan production production was very strong, but a lot was a lot what was originated was offset by elevated prepayments.
We are now, though seeing strong production trends and that's combined with declining prepayments thus loan growth is expected to accelerate.
In terms of deposits and funding mix continues to improve our average noninterest bearing deposits as a percent of total deposits improved to 22, 5% this quarter and Thats from 21, 6% in the sequential fourth quarter.
<unk> up a lot from 17, one 8% one year ago.
And we continue to drive strong growth in core interest bearing deposits, while the higher rate Cds higher rate wholesale borrowings and subordinated debt all declined and we still have a large amount of Cds at 2% that will be rolling down in rate or just off the balance sheet.
So the net interest margin widened for the sixth consecutive quarter coming in at $3 56 on a GAAP basis.
And that largely reflects continued improvement in the cost of funds combined with a well structured loan portfolio, which is repriced slower than most other banks.
Going down the income statement to non interest income that was flat for the quarter I do realize that included the previously announced branch sales. So excluding the sale we were down slightly there was small declines in fees and bowling investment income as well as gain on sales loans for my expectation is that those items will rebound in the quarters ahead of.
<unk> note, both Lise recorded revenue fell sequentially, but the traffic on its web site is increasing and based on that we are anticipating increases in loan referral fees in both the second and third quarters of this year.
Turning to noninterest expense that was flat sequentially for the quarter.
Our expectation for the rest of the year is modest expense growth certainly within <unk>.
Single digit growth.
Some of that will be contingent on how strong our revenue growth, we have but our efficiency ratio will remain low and continues to be in the top tier of the industry at around 40% and we will continue to drive efficiencies throughout the rest of this year.
In terms of performance metrics, we like many others benefited from the reserve release with a return on tangible common equity exceeding 19% return on assets was very high as well at 1.8, but even on an operating basis, the PPE and our return on assets was 2.6 very high relative to our peers in that.
The fifth consecutive quarter, we've seen improvement there.
Let's turn to loan growth and margin expectations in terms of loan growth.
We are optimistic that from here on out to the end of the year, we can produce double digit annualized growth rates as Frank mentioned, our pipeline is the largest it's ever been and keep in mind. We are a growth company. So I am optimistic we are better prepared for most of the capitalize on a recovering economy by actually closing on more deals with better credits and highest for.
Reds.
As for margin, we continue to run at historic highs for US now over three 5% and structurally we still have funding benefits coming with nearly $800 million of high rate Cds maturing over the remainder of the year. However that continued low rate environment combined with loan growth will at some point have a contracting impact on the NIM even.
As we deploy excess liquidity, so going forward I have to say, we might see some modest margin compression, especially with larger than expected loan growth. All this though this can be lesson of the yield curve steepens.
As always Ive mentioned this before when it comes to net interest margin. There are a lot of moving parts, including prepayment fees. The dynamics of the PPP program excess cash on hand, but my overall feelings at the margin, although it could compress to some degree is going to remain relatively wide.
And certainly wide enough to support superior returns on equity and continue to drive valuable long term creation of net interest income.
Let me provide a little color on our transition to seasonal which took place on January 1st of this year.
Be aware, we've been running the seasonal model parallel to the incurred loss model over the past share. We just put off the implementation of that on our financial statements and we started at January 1st of this year. A one time adjustment recorded on January one was about $9 million that included the seasonal for the loan portfolio as well as for the for.
Loan commitments.
And about $5 million of that comes from non Accretable discount gross subs that came out of purchase accounting so that leaves only $4 million as a charge to pre tax capital in that $4 million pre tax so it's only about a $3 million.
Hit to equity.
As I mentioned on our last call. We didn't expect seasonal implementation of a significant impact on our balance sheet and that did turn out to be the case.
So now during the quarter commencing right. After the onetime catch up ensured we had a release of reserves of $5 8 million and thats due to the improving Moody's economic forecast and what it does to our CSO model, especially with regard to future unemployment rates in CRE pricing trends, so going forward as an industry I think we're going to see more volatility.
And provisioning, especially in light of changing economic forecast post COVID-19.
In terms of capital deployment for last 12 months, our capital retention has been strong putting us in a great position with excess capital to do a few things we're going to grow organically at double digit pace. We did announce an increase to our cash dividend and we are resuming our stock repurchases the level of repurchases over the course of 'twenty, one will depend on our earnings.
Retention and growth rate, but I do expect us to remain active for the remainder of this year and probably beyond that.
A couple more things before I turn over to Frank I want to expand a little on deferments. The total level fell just slightly over the first over the first quarter as many of the modifications. We made in the latter half of 2020 are contractually in place until the second quarter.
So the expectation is that over the next couple of months that deferral balances going to drop by about 50%.
In addition, I want to point I think Frank mentioned, this but I want to point out also that less than 25% of that $200 million.
Full payment deferral, the rest some $150 million or modify with some payments continuing but just looking at what's in the pool. We just don't see much in terms of potential losses and believe we remain adequately reserved for this point.
And just the last point before I turn it back to Frank is our effective tax rate for the quarter. We did increase it to 24, 8% a little higher than I think the expectation was.
And that reflects a significantly higher level of pre tax income due both to a strong operating performance as well as the reserve release. So if pre income free tax income rates fall the tax rate could be a little lower going forward and.
Before getting into questions I'll turn it back over to Frank for closing remarks, Frank Thanks.
Thanks, Bill and I would just like to reiterate a few key points that you heard that you did hear me mentioned before our earnings profile is strong our balance sheet and credit or are in a good place. We continue to grow organically and we see a strong growth rate for the rest of the year. Our capital position is strong we have a valuable franchise.
And continue to benefit for multiple streams of income and increased momentum across multiple platforms.
For a skilled acquirer with a strong.
<unk> strong track record of integrating both traditional and Fintech focused transactions quickly and effectively.
We're continuing our digital enhancement enhancements in our investments and we continue to improve on our best in class efficiency. So looking ahead for the remainder of the year, we're optimistic that the operating environment will continue to improve and expect it to gather momentum throughout 'twenty one.
We're excited about our future and we remain confident in our ability to drive value for our shareholders, our team and our clients and with that I'll be happy to take your questions operator.
Okay.
And at this time, we will be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
For me please while we poll for questions.
And our first question is from William Wallace from Raymond James. Please proceed with your question.
Hey, good morning, guys that tomorrow from Raymond James filling in for Wally.
Hi, how are you.
Hey, good morning, So just a couple of quick model clean up questions for me.
Okay for the period.
For the period on PPP balance for the quarter do you have the average PBT for the quarter.
Yes.
<unk>.
It was something like $430 million was the average <unk> balance for the for the first quarter.
Correct, yes for sure.
Yeah.
It was.
It was 400, sorry, it was $417 million for the first quarter $405 million for the fourth quarter.
Perfect. Thanks, Bill and then just a second question on PPP.
Do you have net loan for getting it here for the quarter and if any additional PPP loans that you originated do you have that figure as well.
So I was at noon.
85.
In round, two it's $185 million.
For the originations.
For originations in round two.
Okay, and then how about the forgiveness that you guys saw from round one this quarter.
Sure.
Should have that number.
At $150 million.
About $150 million.
And forgiveness.
Okay.
Okay.
Pretty considerably just I don't know im not sure exactly what you're using those numbers for but.
We have we.
We are being conservative in terms of the income we're recording and I did disclose that on in the release. So the return on those loans is about three one or three 2% and we've got another approximately $10 million in unrecorded income related to PPP.
Yes.
That's great Yeah, we're just trying to back into the core margin ex the PPP and then right.
Okay.
3313, 2%, including the 1% that's contractual on it plus the fees.
What's included margin okay.
Okay. That's very helpful. Thanks for taking the questions guys I'll hop out.
Sure.
Yes.
And our next question is from Michael Perito with VW. Please proceed with your question.
Hey, good morning.
For taking more Michael.
I had a couple of questions on the Fintech side first it was good to hear that the kind of it seems like the activity on the bulk buy platforms kind of percolating here I imagine as the economy opens up that'll be a nice tailwind for that platform. I was wondering if you could just give us a quick reminder, about near term long term, if they're success and growth there what type of impact to the financials we can.
See I mean is it fair to think near term, it's more fee driven but then there's the product roadmap around it expand to cook it.
NII more materially or just any.
Additional thoughts a reminder, if you guys are willing to provide on that platform as the growth seems poised to accelerate here.
I mean, I will let bill speak to some of the numbers there, but just in general right now what we're looking at as we continue to invest in that platform to make progress in two ways one.
To further develop what that what their baseline businesses, which is this business marketplace, which we think has a lot of value in this franchise market space and two we find that there is a number of other business opportunities that that platform allows us to engage in and we're developing those as well so right.
Now any revenue, we drive and even if we would drive multiples of the revenue that comes off the <unk> platform, we would probably reinvested right back into the platform. So I don't think youre going to see anything meaningful in the near term.
Bill.
Yes, well.
First of all meaningful as well I mean.
<unk> would be great.
We run at about on average 250000 of revenue there per quarter.
And I do see already the signs of that increasing.
Based on the activity.
On the on the platform.
So it's $1 million a year.
And the question is how fast growth, where we can apply to that.
There's a big universe of franchise or is out there we continue to try to increase the number of franchises that use the platform.
Proof.
The usability of the platform reduce the friction and it's getting people to use the platform that leads to loans requests which leads to referral fees.
And.
One of our main focus is driving those numbers.
Very helpful.
And then kind of a similar question, but on the on the Jam Partners Fund tier.
I mean, I imagine there's going to be some type of potential financial impact was just wondering if you could walk through that even if its multi years out and then second is.
Is it correct to think about this more kind of ex never can idea incubator for you guys to get exposure and help that some fintech partners and potential platforms and is that the more meaningful near term piece strategically or just any additional comments there would be great.
I think it's all of those things.
I think it's a good opportunity to invest together with what we think are some of the cash to investors in the marketplace.
I like the idea of getting together with other like minded financial institutions, who are thinking about ecosystem in the same way and certainly really like the idea of a fund that is fully dedicated to the banking ecosystem and not.
Fintech opportunities that are looking to compete with banks. So I think it does a lot of what you said I think it provides us with a lot of opportunities both economically based and just strategically base for the future along with the ability to.
To have a view into what's going on in the marketplace in real time.
Great.
Thanks, Frank and then just last one for me that's good to hear about the double digit kind of loan growth annualized expectation for the balance of the year I guess.
I'm wondering if you could maybe unpack that a little bit more.
Where are you seeing the debt.
Pipeline overall record levels, any particular areas or pockets within that that are noticeably stronger do you expect to drive that line share growth interest any.
Kind of updated views on the commercial recovery of the New York City Metro that are relevant to share.
I would say our pipeline right now pretty much reflects the diversity in our balance sheet as it exists and so each of the.
Various teams that are working out there today youre seeing opportunities. So there is no one area that I would say is lopsided concentration, we're seeing great opportunities across the entire spectrum of the products and services that we provide so that's <unk> and.
And likewise.
Across the various geographies that we currently have market share.
So we're pretty happy about that part of it.
I'd also tell you, though that we are seeing some tremendous opportunities for talent in many of those places as well as I mentioned in my comments before Theres a lot of M&A activity going on in our marketplace, which is really dislodging. Some good people from different places and we're taking advantage of that.
Got it.
And to help you with your models one I had I just wanted to add that the the rate on that pipeline is from about $3 50 to $3 75.
Yeah.
Got it and that kind of factors I guess just to.
Wrap it all up here I mean that the the comment about adding talent and then the comment about the rate. We noted for both factored into your margin expense comments previously built correct.
Mike could you repeat that again for bill.
I was just saying to just kind of close the loop on that your comments about adding talent and then the rate comment on 350 to 375 I mean, it's fair to think that those were bulk factored into kind of your near term expense and margin outlook commentary from your prepared remarks, yes, absolutely. Okay. Great. Thank you guys really appreciate it.
Youre welcome.
And our next question is from David Bishop with Seaport Global Securities. Please proceed with your question.
Yes. Thank you good morning, gentlemen.
Hello, David.
Hey sort of Dovetailing.
Pending to Mike's question there Frank you noted the opportunity to pick up talent from some of the end market consolidation, obviously, it's been pretty active lately.
Within that opportunity, there or any sort of.
Loans segment or our niches.
That sort of excites you more than others or any sort of free in a particular niches that maybe your focus on focusing on over and above others.
I think we're seeing opportunities across the board.
And I think in some of the places where we might want to see some faster growth less than some of our C&I segments. We're seeing some great opportunities, but we're also seeing some great opportunities in our CRE space construction space.
I want to say, it's pretty much across the board.
Got it I think you noted.
Within the preamble within within release loan deferrals expect a pretty a pretty material decline in those just curious.
What youre seeing in terms of cash flow updates as debt.
The paydowns or improvement there or is that sort of a function of fiscal stimulus or maybe sort of a are more endemic of a dichotomy. That's reopened again cash flows are improving from the borrower standpoint.
I mean, one thing we definitely have noticed a lot in our underwriting is specifically with our business clients.
They definitely have cash on their balance sheets.
Whether it came from PPP, whether it came from increased sales whether it came from figuring out debt.
They can operate their business with.
<unk> 50 per cent of the employees. They had before there's lots of reasons why a lot of our clients are seeing an increased amount of liquidity.
If theyre sitting on liquidity and interest rates are at zero. They are not going to pay a credit line of 4%. So.
Many of them are paying down their credit lines until business improves even more dramatically. So.
So we're seeing a lot of that and I.
Think that is.
Again, I think that was a product of the time I think those things are going to start.
Change is we as we continue to move forward as more businesses are open and our full capacity.
And as businesses start to normalize whatever that means.
Got it and then I guess one final question Bill.
I think it was about $800 million I think you said in Cds that are maturing are rolling off just curious what the current day rate is in terms of current time deposit offerings.
Oh, it's about 2%, so it's either going to come down or it's going to roll off.
And what what would they what sort of rate with maybe rolling into current offerings.
They are less 50 basis points or maybe less.
Thank you your loans.
Got it thank you.
Okay.
And again as a reminder, if anyone has any questions you May press star one on your telephone keypad doing so will ensure that you do joined the question in here for Q.
Our next question is from Zachary <unk> with Stephens Inc. Please proceed with your question.
Good morning, Zach Westerlund filling in for Matt Breese, How's everyone doing.
Good day.
Sure.
So apologies if I missed this earlier.
Would you guys give a.
Our guidance for 2021 loan growth ex PTC.
Mid single digits high single digits something like that.
We are hoping to get into the double digits from this point out for March 31 to the end of the year on an annualized basis.
Got it thank you.
And then I'm just kind of curious on the on the construction pipeline.
I live in New York City, I feel like I've been just seeing a lot more construction activity generally.
I was just curious if you've noticed anything picking up.
In terms of construction permits our activity in the pipeline.
Yeah, I think we're seeing a lot of activity in the construction pipeline as I mentioned in my previous comments.
For two different things going on with construction debt.
Actually negatively impacted us all those lives Mcinnes, our president would tell you it's a positive.
Development and that is that construction loans paid off at a higher rate in the first quarter and that was really attributable to.
Jobs being shut down early on in the pandemic in the first and second quarters of 2020.
A number of construction projects were shut down and then the inevitable delay of restarting either those projects for new projects.
As we went through the balance of 2020 brought us to a place where we are here today, where we're having more payoffs than draws on new.
On new construction projects, but the pipeline for construction at connect one is very strong.
We are seeing it across all of our markets, both in New Jersey, and New York and across various types of asset classes. So I'm pretty bullish about construction right. Now there is clearly when you talk to realtors and the market Theres, just not enough homes being new homes being constructed.
Good.
Even the apartment space, which many thought may have been overbuilt.
Still showing high levels of demand both here in New Jersey, and in New York City, Theres actually bidding wars breaking out in parts of New York City on Av.
Rental apartments, especially some of the ones that had large price declines. So I think your instincts are correct. There is more cranes more more concrete trucks more.
Construction workers going back into the into the workplace and I think this all really bodes well for both connect one and the markets in which we serve.
I appreciate that color that's.
Really encouraging to hear.
And then just one last question for me.
Considering how well <unk> has worked out for you guys.
Can you just discuss any other potential fintech acquisitions.
Not specific companies, but more like tools that you had that you'd like to have in house or proprietary.
I think.
We're really focused on a couple of different areas.
Looking at both lie as sort of a center.
Our <unk>.
Universe, there's lots of opportunities to do things that are complementary or adjacent to what both light does.
And so whether it's an infrastructure company, whether it's a payments company whether it's.
Something to do with data, whether it has something to do with.
AI.
To be able to speed up some of our processes. We're looking at things that create both a good client experience, but also allow us to continue to build on our operational efficiency, which I know, we keep saying is best in class and is great, but I think for an industry. It's terrible it has to go lower than where it is today.
So that's those are the two things that I think are driving us it's either how do we improve our client experiences or how do we get even better efficiencies out of what we do with the with the people that we have.
Great I appreciate that and thanks for taking my questions.
Youre welcome.
And our next question is from Frank.
Schiraldi with Piper Sandler. Please proceed with your question.
Good morning, guys.
Good morning, Frank.
Just on the <unk>.
Bill on.
On the unpopular.
You are creating capital even with double digit loan growth.
As Triple P runs off maybe you could continue to accrete capital I'm, just wondering if your thoughts on capital levels.
Yes.
Today versus the end of the year and if you would maybe consider getting more aggressive.
On capital return more aggressive on the buybacks special dividends that sort of thing.
That's there.
Yes, I think I did mention it depending on growth.
We would be adjusting our repurchase activity and.
Like I said I expect us to continue to do that for the foreseeable future.
But we'll see if the growth rate is a little bit higher maybe we'll do a little bit less repurchases of growth a little lower we will do more.
But we certainly feel that we're a little bit overcapitalized right now.
Don't know that I want to say.
Exactly what capital ratio, we're targeting but I do feel we're above where we need today.
Okay, and then I think you might have touched on the reserve to loan ratio as well, but.
In terms of <unk>.
The economy continues to reopen.
The environment continues to improve uncertainty comes out.
Where do you see that reserve to loan ratio are there additional releases that.
We can see where do you see that migrating towards.
Well it.
We have less control if you had warned us that word over what that ratio should be because of seasonal.
And so to a large extent, we're tied into the model and that model is tied to Moody's forecast. So.
For example, the forecast it just came out in the middle of April was better than our forecast at the end of March and we use the forecast at the end of March so right off the bat, we probably have a little bit more releases I imagine at some point that's going to stabilize.
And and as we grow our loan portfolio, we will be adding reserves.
So.
Frank it's hard to say.
And then in terms of specific credits having issues things are looking strong I think not just for kinect one for for everyone.
So not sure what other bankers are telling you.
But.
It's hard to project and I don't think it's going to move too much from where it is the end of the day okay.
Okay, great. Thank you.
And we have reached the end of the question and answer session and I will now turn the call over to management for any closing remarks.
Well. Thank you I. Thank you for all the questions I Hope you found this to be an informative.
Earnings call and I want to thank you for joining us and I look forward to speaking to you again at our next call. Thank you.
And this concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.
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