Q2 2021 BancorpSouth Bank Earnings Call
$1.6 million gain on the sale of $725 million and P. P P loans.
While this is certainly not a repeatable revenue source. We did include it in our operating metrics given the fact that the gains simply brought forward earnings that would have otherwise been recognized in future periods.
This sale along with the forgiveness payments of 347 million resulted in only $167 million and PPP loans remaining on our balance sheet at quarter end.
While the Paycheck protection program has provided a tremendous opportunity for our bankers to deepen existing relationships and develop new ones. We believe that this loan sale will allow them to return to a more normal day to day environment and provide a renewed focus on critical sales and customer service activities.
And looking at our business development efforts more broadly we saw another solid deposit growth quarter, while continuing to chip away at our total cost of funding organic deposit and customer repo growth totaled approximately $225 million or just over 4% annualized for the quarter.
We're pleased to report organic loan growth for the first time since early 2019, we reported organic loan growth, excluding PPP of approximately $65 million for the quarter, while the day to day volatility and our economy and makes it hard to predict the future. We are hopeful we will see continued organic loan growth and future quarters, Chris will provide more commentary.
Harry on our business development efforts and a moment.
Credit quality continues to remain strong on.
Nonperforming assets declined by just over 8% compared to the end of the first quarter. This marks the third consecutive quarter, and which we've reported a decline and nonperforming assets.
And we did record a provision of $11.5 million for the quarter, which was primarily related to the day, 1 accounting provision requirements for acquired loans.
I'll close my initial remarks by mentioning that we successfully closed our merger with National United Bank and F&B Bank effective may the first.
We also completed the operational integrations of both banks during the month of June.
These transactions collectively added approximately $1.6 billion and assets to our franchise as expected. The teams from both banks have been a great addition to our company and we look forward to seeing their successes continue to contribute to our growth efforts.
I'll now turn to John and allow him to discuss our financial results in more detail.
Thanks, Dan and slides 5 through 7 share our summary income statement as well as details of our noninterest revenue and expenses.
Dan has already mentioned the trend and our EPS and pp and our numbers of disclosed I'll focus my comments. This morning on our net interest margin as well as a few other items that had variances compared to the first quarter of 2021.
Before we begin that I would like to point out that the 2 transactions that closed on may the first.
And which are noted on slide 4 and M&A update section and will certainly impact the comparability and the information shown on on those 3 slides.
For 3% quarter over quarter increase and net interest revenue that you see on slide 5 was primarily the result of these transactions.
And as we've said for several quarters the balance sheet dynamics for Bank Corp staff and the industry continued to put pressure on the margin and net interest income.
We reported a net interest margin, excluding accretion of 294% for the quarter compared to 3.08% for the first quarter of 2021. This compression continues to be driven primarily by balance sheet mix going into the pandemic the expectation was that PPP.
Would be a temporary drag on margin on that.
And for the reality is that liquidity has done nothing but increase while we work through that forgiveness.
And sale of PPP loans, which has put further pressure on margins, given our relatively low or lower yields and our securities portfolio.
And as we look further at some of the individual components are loan yields excluding PPP and accretion declined by 10 basis points from for 49% for the first quarter 2 for 3.9%.
We also saw a comparable decline and our cost deposits from 33 basis points for the first quarter to 27 basis points.
While we expect it to be lumpy and take some time, we remain optimistic that we can continue to try and deposit costs down, particularly and the time deposits and public fund products.
Regarding TPP net interest income for the quarter included approximately $3.7 million of accelerated income recognition associated with PPP loans that were forgiven or paid off during the quarter as Dan mentioned for the remaining PPP balance at the end of the second quarter was only $167 million.
Accordingly, the balance of unrecognized net fees associated with this program is not material.
Slide 6 shows the breakout of our noninterest revenue components, you'll notice here to $21.6 million gain on sale of PPP loans that Dan mentioned earlier.
Beyond that the primary variances outside of the impact of the merger closings are and our mortgage production and servicing revenue as well as on our insurance Commission revenue.
Chris will discuss both of these business lines Board a moment, but I would just briefly say that we've known that the elevated mortgage revenue that we reported through the refi cycle wasn't sustainable.
Well that will provide a headwind going forward our insurance team is seeing and expected to continue to see the benefits of a firming premium market.
Slide 7 provides the details around our noninterest expense expense, which was very stable quarter over quarter outside of the merger expenses, which is obviously elevated with the 2 merger closing and integrations as well as the cadence transaction. The only variance of note here is and salaries and employee benefits, which increased just <unk>.
For 7% compared to the first quarter. This variance is driven by the $3 million equity incentive comp accrual true up that lowered our first quarter salary and benefits total combined with the comp expenses associated with the 2 merger closings.
And I don't think and any of the other other line items here, where on any additional discussion that concludes my comments on the financials, Chris will now provide some color on our business development activities.
Thanks, John and good morning, everyone.
Starting on slide 8 you will see our current funding mix, we reported $1.7 billion and deposit and customer repo growth for the quarter.
1.5 billion and the growth was added with the national and United and F&B mergers. We also realized organic deposit growth for the quarter, a $225 million and <unk>.
Over 4% annualized.
Second quarter has historically had pressure on deposits from a tax and public runoff, but this is obviously and unprecedented environment from a liquidity perspective and.
Continue to focus on bringing our deposit costs down our total cost of deposits declined another 6 basis points to 27 basis points.
And at that time deposits, but still at a weighted average of around 1% for the quarter. There is additional room to continue to drive total deposit cost down and addition to the time deposits on public fund rates should continue to see downward pressure as well, although as Jon mentioned that will be somewhat lumpy.
On slide 9 you'll see similar data for our loan portfolio.
P P or triple P and K.
Column and acquisition activity, both of which have been discussed obviously creates a number of moving parts and the loan portfolio. When we adjust for those items, we actually reported net organic growth for the quarter for the first time since pre pandemic and about 65 million and organic growth was nominal we view it as and when considering the environment we've been moving on.
For liquidity and market theres activity and the loan markets, especially on multifamily home construction.
And also continues to be treated as very competitive pricing environment around quality credits.
Moving to slide 10, let's see key credit quality highlights for the quarter a day.
And I already mentioned, we saw another sequential quarter decline and total nonperforming assets and I'll be excess originated criticized assets declined as well.
And including acquired assets total nonperforming assets to total loans, and total assets and 56% and 37 basis points respectively.
We experienced net recoveries for the quarter at 5 basis points annualized EBITDA.
And record a provision for credit losses of $11.5 million, primarily as a result of day, 1 seasonal requirements associated with the acquired loans from the 2 mergers closed and this quarter.
This provision along with the reserve on PCB loans contributed to an allowance coverage ratio of 179% of net loans and leases excluding PPP loans.
While we do continue.
Actively monitor the segments of the loan portfolio that had been identified as higher risk as a result of the pandemic.
As shown on slide 11, and it is clear that at this time the economies and the markets. We serve are performing well.
And are currently no commercial loans and payment deferment from the pandemic and Theres a small dollar amount of loans still on interest on loans, primarily in the hospitality.
And I view today is that these credits are improving and our current expectation is that they will return to scheduled payments and the interest only periods expire and the back half of 2021.
Slide 12 provides a 5 quarter look at our results for insurance and mortgage products mortgage reported origination volume of 906 million for the quarter, 68% of which was purchase money.
While the pipeline remains elevated relative to historical levels. It did decline quarter over quarter as we worked through a large portion of the remaining refinances.
Decline contributed to an expected decline in margin for the quarter.
Moving to insurance total commission revenue for the quarter was $36.1 million, which represents an increase of about 9% over the second quarter of last year. We've.
And we've seen a steady increase and revenue due to a combination of winning new customers and continued firming and the premium market we are.
Seeing rate increases across the board and particularly in the P&C space now I'll turn it back over to Dan for his concluding remarks.
Thanks, Chris I would like to see a more robust environment in terms of growth and interest rate environment, Our board and management team are both proud of and successes that have been achieved by our teammates.
Most importantly, we've maintained outstanding credit quality throughout the cycle, our bankers do a tremendous job of utilizing the paycheck protection program as an opportunity to deepen relationships with our current customers and also developed numerous.
Successes on the deposit side of the balance sheet, obviously speak for themselves and finally.
And to our other frontline efforts on our mortgage team continues to maintain a strong purchase money pipeline. Our insurance team is taking advantage of a firming market.
And our wealth management team continues to grow assets under management.
And looking forward to getting back out on the road and the coming weeks and continuing to spend time visiting with our folks and meeting more of the cadence team.
As I said earlier, the combination of our companies, creating the new cadence provides us with a unique opportunity to create and organization with scale and expertise within the fastest growing parts of the United States truly a win win win win win for our shareholders a win for our customers and win for our teammates and a win for the communities we serve.
Operator, we'll now be happy to answer any questions.
We will now begin the question and answer session to ask a question you May Press Star then 1 on your Touchtone phone.
If you are using a speakerphone please pick up your handset before pressing the keys.
And so at any time your question and that's been addressed and you would like to withdraw. Your question. Please press Star then 2 and the interest of time. Please limit yourself to 1 question and 1 follow up at this time, we will pause momentarily to assemble our roster.
Our first question will come from Jennifer <unk> with true Securities. Please go ahead.
Yeah.
Hi can you hear me okay.
And good morning, Yes, we can.
Just curious about the lending pipeline as it stands now versus a few months ago. You said, you're hoping on gross can improve here soon and what are you seeing and what types of geographies are stronger and asset classes for stronger.
Yeah, C&I is where there's some strength and Texas and a couple of other places where we're seeing some of that so if you pull back the P. P. P noise of the quarter and you look at what was really happening you know and you.
Falloff acquisition noise of the quarter and then look at the territories, Texas grew the Florida Panhandle grew and.
Bank, Missouri grew a little bit on on top of that so.
We're seeing some opportunities, but Texas is consistently now for 10 or 12 or 15 quarters just continued to grow.
Can you just talk about the pipeline how it looks now versus.
And with a larger than it was a few months ago.
And I'll, let Chris jump in here on pipeline, but the pipeline has been holding on pretty well on the larger.
Very similar, yes, pipelines and pipeline totaling and well and on the last.
60 days, we've <unk>.
And our economies they've opened up our communities opened up and that's allowed us and start making more calls and log more pipelines. It is competitive but I think we've got good good data and good good calling efforts going on and this trading and pretty good key for us to explore and try it, Texas and Florida and successful opportunities and multifamily are presenting themselves.
And some of those geographies, especially Texas and other C&I space is pretty strong today.
Okay and my second question is on expenses can you just kind of give us and.
And some thoughts on the outlook given you just and just integrated the key deals that closed.
And now can you talk about the outlook for yeah.
And I'll, let John jump in here on that 1 too.
Jenny and clearly we closed on May the first so we're 60 days on it.
At quarter end to those 2 transactions, we integrated them onto our systems.
We will continue to be able to lower some expenses out of those 2 but we were we were fully loaded with 2 months of expense run and the quarter, So and the next quarter, even with some cost savings and place. We've got 3 full months of those 2 acquisitions coming forward John do you want to jump in on that.
Yes, we pretty much held the line.
Ginnie and the second quarter, we did have a jump up and salary and benefits.
And much of that is due to the may 1 acquisitions. Those 2 may on acquisitions, and 1 was depressed because and then.
And Q1 was was down about $3 million because of a true up accrual true up that we had and the first quarter. So all in all its pretty even quarter over quarter after adjusted for making those adjustments.
So do you think.
And are you looking for kind of a flattish.
On third quarter as you have the full load of the deal that's on cost savings come in.
And we're working hard to try and control expenses every way we can just as we always have I don't know that we've got a guidance on what the expense run rate will be for the third quarter. We know we've got cost saves coming in from the 2 small transactions that we completed on May. The first we know we've got a full quarter of them. So you've got revenue for 3 months on top of the and.
Expenses for 3 months there.
I don't know that we have a number for you for the third quarter, but we feel pretty good about our ability to control expenses and.
We feel good about the acquisition of small acquisitions that we've done journey. They typically are more efficient at least via the efficiency ratio than we are before acquisition and.
And then after acquisition, we do have a fair amount of cost saves coming into play there are small so they don't have a huge impact on our efficiency ratio but.
And they do have they do have going forward for virtually none of those were in place and the second quarters right whatever cost saves is going to come and <unk> and <unk> that's right.
Okay. Thank you. Thank you for sure it yourself.
Our next question will come from Michael Rose with Raymond James. Please go ahead.
Good morning, Mike and good morning, everyone Hey, good morning, Thanks for taking my I'm. Good how are you.
And I am good coffin.
Yeah, Yeah, we can hear all for you okay.
Just wanted to touch on because you mentioned and the press release, just with the buyback authorization is outstanding and I know, we've got the shareholder vote coming up on on August 9th.
And could we assume given where the stock is trading that you would look to pull the trigger assuming that the deal is approved.
Do you have the authority to utilize that buyback.
Either before or after the shareholder vote.
Just given where the stock is thanks.
And I think Thats, a great question and yes, I don't think anybody's pleased with where the stock is I think other buyback is certainly and the cards.
Pardon me.
I think that we cannot execute prior to the share shareholder meeting on August Tonight, but post that I think you know unless theres. Some other reason that we wouldn't be able to trade I think that we're in an open window at that point.
Okay. That's helpful. And then maybe just on the insurance income and this is a really strong quarter and I think we all know, it's a pretty hard pricing market out there and used.
Give us some color and outlook as to how we should think about.
Trends as we as we move forward and then what.
What's the appetite here for additional insurance acquisitions, I know, they're a little bit price, but you guys have been pretty active in that space over the past few years. Thanks, I'll start with EBITDA out of that and let Chris of the fronts I was going to say it sounds like an insurance guidance talking about hard commissions and all that yeah, yeah hog price.
Yeah.
And the pricing is definitely good for them from an M&A perspective.
I think that there are opportunities out there.
We want to continue to look for those opportunities you're right pricing is there, but I think we've got a we've got a good fit for many of the smaller.
Property and casualty brokers that are out there that would fit well with us and so I think our team is continuing to have conversations with opportunities certainly as we expand our footprint with the cadence transaction and they would like to be able to expand with us theyre looking for those growth opportunities. So I think theres real opportunity and that line, Chris talk about the revenue pick up yes, I think you.
Can you describe and it's a hard market out there, but we're also winning some business. So it's a combination of that.
And I would tag on to Dan's comments debt.
I think the expanding footprint will help us, but also our insurance team does a great job growing talent and producers inside so I mean, that's that's it.
Attribute to them and they've got a good model of bringing folks in and training them to produce and I think that will help us expand our presence. While we are also searching for acquisition opportunities.
Great. Thanks for taking my questions.
Our next question will come from Kevin Fitzsimmons with D. A Davidson. Please go ahead.
Hey, good morning, everyone.
Hey, good morning, Kevin how are you on.
Good Dan.
So on on the <unk>.
<unk> T cell on behalf of all of those debt.
Have to try and model that in for the margin and loan growth.
Yes.
I'll start with that but if you can give us some little youre.
Your frame of thought going into that because I suspect that it's an equally frustrating thing for you guys or more so for you to deal with internally and you mentioned that it can be a distraction from your core operation. So I'm just wondering the fact that you chose.
To accelerate that.
Is that a reflection on you seeing.
Better loan growth out there and coming in the near term debt.
You don't want to Miss So you don't want to be distracted from or are there other puts and takes in that decision.
Yeah. So let me start back with the decision process. So you know I think that there were buyers out there for PPP all along.
Pricing bounced around.
We had a automated process that we're still driving today that was making it run fairly smooth for us but with we.
We produced 24000 PPP loans, so just the raw number of customer contracts that you have to go through on the forgiveness piece was.
And I'm consuming on our team so as that pricing continued to improve and you can see from the numbers. We basically pulled forward every bit of the revenue that we would have recognized and the second or third or fourth quarters.
Through normal forgiveness process, we just eliminated the workload for those almost 13000 loans that we were able to do.
And to move over to a new servicer. So the decision was pretty easy on take all the revenue now theres no real discount to speak of a little bit but by the time you took all the technology costs and time it was a big win for us.
To move that off of our relationship managers and allow our relationship managers to get back focused on doing what they do best which is take care of our customers I don't know that I would tell you that across our entire footprint, we're seeing tremendous growth opportunities, but I think being out in front of customers gives us those opportunities and there are parts of our footprint that you are seeing tremendous growth opportunities and Frank.
I think we've had a pretty good success and hiring folks and bringing new folks on to help us grow revenue producers. So I think that the focus has been for the last 18 months has been taken care of the P. P. P process thats been an all hands on deck program for US It took lots of time lots of effort and.
And it was beneficial to us obviously from a revenue standpoint, but we want to focus back on taking care of our customers and this gives us the ability to do that.
Okay, great. Thanks, just a quick follow up just 2.
To the best you can as we're looking forward on the margin so at $2.99, and second quarter and I know.
Largely we're moving PTT removed and so on 1 hand, the drag from the loans. It also removes.
And the accelerated fees going forward.
Excess liquidity still remains a considerable so should we expect that to continue to grind lower but at a slower pace and and eventually stabilize how should we view that margin. Thanks.
Okay.
I'm, sorry, I was on strong button and I said that I'll, let John jump in here on this and just a second.
Large piece of this is just balance sheet size. So we continue to see deposits and flows we continued to manage deposit costs down and we think we continue to continue to manage deposit costs down.
But those deposit costs that are just deposit inflows.
There's just nowhere to put that that's going to continue to be able to hold so the larger the balance sheet gets the more pressure it puts on the on the margin if the balance sheet holds John and I'll jump from there is if the balance sheet holds where are we.
Well if you look at.
If you look at the quarter.
299 before adjusting for accretion.
Lower because as Dan said balance sheet mix.
That's with a 35% of our earning assets and investments and short term.
That cost us about 50 bps and the margin that debt balance sheet and mix.
And if you go back to 2016 second quarter.
Investment Securities was 18% of earning assets. So that's the difference there of about 50 bps between those 2 profiles going back let's talk about the positives before we talked about and anymore. The negatives.
Certainly we did have net loan growth and the quarter, so that bodes well.
Loan rate floor protection is about 50, 50% of our variable and floating rate loans, we've got about $10.10 billion and variable and floating rate about 5 billion, there and loan floors and now.
That is.
And those on.
On average you are paying a $4.38, but fully index rates $3.72, so it's going to it would take.
3 or 4 rate movements, probably to start seeing some good from from a rate movement upward loan yields, though are holding up pretty well, we are chipping away at deposit cost and.
And as Dan mentioned earlier credit quality remains pretty darn good.
And the negatives loan growth was not robust.
If we have the continued outsized deposit growth that will further dilute the margin.
As we get more of.
Concentration and short term and securities and investments and our earning assets that's going to further dilute the margin.
So.
And what's going to happen with loan growth and what's going to happen with this.
And this outside outsized and liquidity that we're seeing.
Those are I think the 2 keys to improving the margin.
We may be near the trough if.
If we could start to have some some decent loan growth and the liquidity slows down and so 280 <unk> after adjusting for PPP and accretion maybe somewhat of a trough we'll have to see.
Lots of moving great.
Yes, certainly, but a few lessons with P. P T com. Thank you.
Trying to clean up there I appreciate it Kevin Thanks for your help.
Thank you.
Our next question will come from Matt Olney with Stephens. Please go ahead and good morning, Matt Hey, Good morning, guys I wanted to stick with that last that last question.
And the strategy of <unk>.
Securities portfolio.
Is the strategy just to layer and gradually.
And the deposits come in and just to continue to gradually by securities or are you being more selective based off the yield curve I guess the question is partially around the timing of the purchases given we saw a flattening of the yield curve and the back half of the quarter.
The timing of the purchases of.
And so.
On the securities and <unk> would that more later throughout the quarter or does more loaded and either front half on the back half.
Yeah, I don't think we bought anything during the big trough that happened and the last couple of weeks here, if thats, what youre talking about and.
Most of that would have already been on coming into the quarter and then early in the quarter as we were looking at liquidity, but we are we're certainly price sensitive to what's happening out there were watching the market just like everybody else I think as we're looking at.
Securities ladder, that's been built out there and the cash flow that flows that throws off from that I think we feel like we can continue to manage that and we are better off having the earning something.
Over virtually nothing and and overnight funds because of the cash flow that's coming out from the portfolio and total John you want to add to that.
So we've been buying mortgage backs gradually as liquidity comes in mortgage backs it.
$105 something like that that's throwing off depending on prepayment speeds throwing off some good cash flows as we go through time.
Mostly mortgage backs.
It would be much better if we could put it into the loan book.
Sure Yeah, no I appreciate that we're.
And we are given and we're giving up for us as loan book 350 basis points and the spreads certainly.
And so yes, it's a negative.
Well I guess the other parts of the question is the strategy of Bank Corp, SaaS seems to be quite a bit different than what we're seeing at cadence right now in terms of their portfolio and the liquidity build so shouldn't appreciate windows balance sheets do come together.
And should we anticipate a more active deployment on <unk>.
Excess liquidity.
Once it's closed.
And I don't know that we've made that decision yet our integration teams and we're talking daily and certainly the accounting and Alco teams Youre talking every day.
As we ramp up towards the finish line here I think we both know what each other is doing I think that the hope is is that we can deploy that and C&I credits and a faster way their balance sheet is built a little different than our balance sheet and I think that's 1 of the strength of putting the 2 companies together is the diversification that it brings to us.
And I don't know that we have an answer for you as to whether you would expect to see the $2 billion and.
And overnight funds that they're carrying moved into a bond portfolio at some extremely low rate.
[laughter].
Okay. That's helpful. Thank you guys.
Thank you.
Our next question will come from Brett We're button with half day group. Please go ahead.
Net.
Hey, good morning, everyone. Good morning, Dan.
Wanted to ask about mortgage and just maybe the trends and the quarter I was little surprised the gain on sale margin was curious 1 does that bounce back any and then the pipeline and was down a little bit.
And on <unk> I guess.
And looking for a bit of an outlook on on.
On mortgage banking piece of the business.
Sure I think that I'm going to jump in and let Chris take that too so when you're when you're looking at the pipeline being down and that's what drives the margin down so the negative move and the pipeline has a exponential.
Move on to the margin.
If we can grow the pipeline and this quarter and there's a possibility that that could happen and we can see some some swing back the other way even if the pipeline stays flat youre going to see some pickup because that's a depressed margin from our normal rates along the way and I think 1 other things that you'll see is as you know.
Refi and the quarter was only 32% of our production.
So we were 70% or 68% purchase money and 32%.
New money and the quarter, we think that our team is out continuing to mine.
And mine for business when Youre looking at just total overall origination volume.
We're actually ahead.
Year to date and the first 6 months over where we were and the first 6 months of 2020. So from a volume standpoint, we're hanging in there we were at $1 billion for almost 1 billion 5 last year and we're at $1 billion 7 and production and the first 6 months of 2021. So the teams out there working hard I think the margin is obviously a factor of the pipeline changes, Chris you want to add on to that.
And I explained it well.
And what's the revenue recognition accounting guidance and the way those are per.
<unk> and it makes it a little bit lumpy I think given the unprecedented volumes we've experienced the last few quarters, it's almost best to look at it maybe over a bit of a time and we talked about that and prior years the margin can bounce around and it depends a lot on the deliveries on the accounting recognition on rate locks and.
And without going into on that I would tell you that there's probably some downward pressure on margin 135 is too low it's probably more likely to stay.
And if all production volume and rate locks for the same every month on every quarter, you'll probably see it too.
A little bit maybe 2 plus type type margin kind of stabilize there. It's clearly peaked out a little higher than that when the when the production volumes and we're just.
At the root of last half of last year, but I would expect us to move to its still high pipelines are still good I think it's going to move to more seasonality and a lot of it will depend on housing availability and some of these markets that are really good as the refi market.
Availability of product is the key that we hear that from all of our producers, especially in the Texas.
And market. So refi may slow and then it will some of that will depend on the availability of new stuff.
Okay.
And I appreciate the color on that and then the other thing I was curious about was you know there's the usual commentary from some players talking about opportunities with.
With M&A to maybe pick up people and.
And what I asked about this earlier.
Earlier on once the deal was announced but was just curious for for any update on.
And how the retention.
And it's been with on the cadence side in terms of tying up the people and keeping the core revenue producers.
With the pro forma company.
Yeah, I think for answers fantastic.
Paul and I think and Chris and Valerie and I and so we've been on the road talking to folks.
And theres not a whole lot of direct overlap and so those teams are excited about continuing to grow with a bigger balance sheet I think.
To my knowledge I can't name anybody.
It has left they've done a great job on retention and we hear that we had some retention agreements out upfront and so.
Certainly the key folks were blocked and with some retention awards and.
Along the way, but I think the team is excited as we made the rounds. This past month, just boosting and a couple of places and we've got a couple more stops for scheduled and the next couple of weeks.
Lots of smiling faces lots of excitement about what's going on and we haven't had to date, we haven't seen any attrition that I would be able to speak of.
Okay, great appreciate the color.
Thank you per se.
Our next question will come from Kathryn Catherine Mealor with <unk>. Please go ahead.
Ron.
Hey, good morning.
And I have been answered, but just maybe 1 follow up on growth.
Can you just kind of color on where.
And the pickup and growth is coming from it was a little bit hard to determine and they're on lease with the PPP loans coming out and then the 2 deals coming on and the geographic and alone type perspective, where that growth is coming from it looks like C&I loans declined a lot, but I think a lot and thats, where I guess from the PPP fail.
So that's that's correct and where you're really where you're really seeing that that on that newer and generation, yes, thats youre spot on on the PPP is coming mostly out of the C&I category, which which puts a blanket on those numbers and see.
And out ex PPP grew and and again, Texas is the star geography, and the process. There were a couple of other geographies that grew a little bit.
But Texas had the biggest part of that and C&I is where that growth is coming from Chris.
Chris.
And that's it and we drilled out and the numbers numbers of debt.
The P P P noise and the C&I was.
Disclosures are covered and that C&I book, So you're right it would be hard to see it but if.
If you did and if you drill down and most of it most of that organic growth came from the C&I space and then yeah.
Geographic markets, we mentioned and most of that's opportunities there and Theyre just mixed but some of the bigger opportunity and more multifamily.
Yes, we were down to $167 million and PPP at the end of the quarter and that number is continuing to decline on a daily basis.
And I hope would be that we would be virtually out of it at the end of the third quarter and certainly completely out of it by the end of the fourth quarter.
Yes.
Great. That's all I got I appreciate the color.
Thank you Catherine.
Yes.
Again, if you have a question. Please press Star then 1 our next question will come from John our strength with RBC capital markets. Please go ahead and good morning, John Hey, Thanks, Hey, good morning, good morning.
2 follow ups on PPP.
What did you keep and what was the decision behind.
Okay.
The answer is anything that was and the process of forgiveness. We kept we kept you can't you can't move something thats and the process of forgiveness.
And then we acquired some little parts of P. P. P through the 2 small acquisitions and we didn't have the ability to to divest that so anything that was and the process of forgiveness or acquired through the 2 acquisitions is what stayed on the balance sheet.
So on that.
And a little more on your.
And your trips across the footprint.
Can you give us a little bit more on.
The new information you picked up and I'd just be curious.
What kind of critical feedback you've picked up where you said. This is this is something we didnt realize and we had to focus on just kind of pluses and minuses.
And I don't know Theres been a whole lot of minuses because I think we had the same and knew where we were I think most of our trips had been focused on with the revenue producers out front on what kind of appetite is there you know can we continue to grow we've got a bigger balance sheet, what does that mean for us.
For all of our concentrations on our side, we've been visiting with the excess folks just as much as cadence folks and.
And on both sides of the aisle and our team has been and some concentration.
Penalty boxes on some CRE buckets that we have tried to slow down because of our concentration issues cadence had some concentration issues that they were trying to.
Throttle back a little bit and I think the diversification that we bring to each other is a big plus so again most of the conversations have been very positive.
On the support teams.
And that are behind us lots of conversations going on as early in the game on on all the different decisions that have to get made on a day to day support and where we're going because we'll be well into 2020.2 before we start flipping the switch to actually merged technology together.
But lots of work going on behind the scenes and that just creates questions.
Okay.
Chris a question for you when do you think some of this deposit growth will moderate and what are some of the signposts here youre looking at and considering.
So for Chris <unk>.
Great.
Our deposits grew over the last 18 months.
And some cases, while we basically hit our doors locked so it's really it's really been and unprecedented time on liquidity that's flown and.
Into the system.
Can't answer your question.
And I would've expected it for 1 billion.
And a half and organic growth and the first 6 months of the year right.
But even going back.
Moderate and going back for 2019 pre pandemic we were back.
Bank of the envelope I mean, I think we're up $6 billion and you can put 2 or 3 of them to the acquisition. It's just that's a lot and it's staying so far.
And then 1 other government naphtha and maybe they can answer your question [laughter] and other new.
And there was additional stimulus money that was put out just in the last month, we're saying the electronic deposits flow through on the child tax credit payments now.
And kind of segment segue for my last question for John maybe for you.
On the card revenues on the deposit service charge revenues would you consider those back to normal.
From your point of view or do you think theres still more.
And to recover.
The income the increase and.
Credit card debit card and merchant fees quarter over quarter.
Yes every other quarter year over year I'm, just curious if you feel like debt that's normalized somewhat.
Just alluded to some of the payments that you've seen flow through do you think there is still more room for that to rebound.
I think that and maybe some normalization and they're certainly getting back to normal and the economy.
So I think it's partly that.
Card revenues looked looks good and so and again I think when we look back and compare even wherever we were during the during the.
Pandemic.
On the card services dropped way off but they're back better than they've been and then on the other side of that is the deposit service charges deposit service charges are still running live and that would be and the NSF.
And insufficient funds category those those revenue lines are continuing to be pressured primarily because people have got cash.
And I guess, 1 more day and I asked this on the merger call and any more feedback from your side on the name change your view of it is really a non issue.
And then.
And so that 1 more time John on the <unk>.
Name change any more feedback from your side on the name change that's coming.
Yes, that's certainly quieted down as we've made the rounds and we've had the opportunity to discuss the whys behind what we're doing and the future growth opportunities with a name like cadence Bank I think thats fairly well behind us from the current state, but we all are fully aware that weren't assigned changes you know sometime in 2022 that will that will rare its head up again.
And it will be dealing with it we know we've got to spend.
Energy time effort and money on on a rollout of a name change and when we said all along is we wanted and we wanted to make a new cadence and so our marketing teams are actively working together to build that process out as we speak.
Alright, Thanks, guys I appreciate it.
Thank you.
This concludes our question and answer session I would like to turn the conference back over to the management team for any closing remarks.
Right. Thank you all for joining us today look forward to catching up with you again and the near future as we're out and about thank you for your support of our company otherwise, we'll look forward to speaking with you again soon thank you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.