Q2 2021 Byline Bancorp Inc Earnings Call
Yeah.
Good morning, and welcome to the Byline Bancorp second quarter 2021 earnings conference call on.
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Please note. This event is being recorded I would now like to turn the conference over to Brooks running head of Investor Relations. Please go ahead.
Thank you Andrew Good morning, everyone and thank you for joining us today for the byline Bancorp second quarter 2021 earnings call and on.
Accordance with regulation FD this.
Mode being recorded and is available via webcast on our Investor Relations website, along with our earnings release and the corresponding presentation slides management would like to remind everyone that certain statements on today's call involve projections or other forward looking statements regarding future events or the future financial performance of the company.
We caution that such statements are subject to certain risks uncertainties and other factors that could cause actual results to differ materially from those discussed.
The company's risk factors are fully disclosed and discussed within its SEC filings. In addition, certain slides contain and we.
We may refer to non-GAAP measures, which are intended to supplement but not substitute for the most directly comparable GAAP measures.
Reconciliation for these numbers can be found within the appendix of the earnings presentation.
For the additional information about risks and uncertainties. Please see the forward looking statements.
Statements and non-GAAP financial measures disclosures in our 2021 second quarter earnings release.
Information, we will provide today is accurate as of June 32021, and we undertake no duty to update the information.
I would now like to turn the conference call over to Alberto Powertrains.
President of <unk> Bancorp.
Thank you Brooks and good morning, and thank you all for joining us on the call today to review our second quarter results first off I'd like to welcome Brooks <unk>, who recently joined by line as our head of Investor Relations to his first earnings call.
Joining me on the call.
<unk>, our chairman and CEO, Roberto <unk>, our CFO, <unk>, <unk> and Mark <unk>, our Chief Credit Officer, I'll start by giving you an overview of the results on highlights for the quarter before passing the call over to Lindsay who will walk you through our financials in more detail I will then provide you with closing remarks.
Before opening the call up for questions.
Starting on slide 3 of the deck I am pleased to report that we executed well during the second quarter and capitalize on the improving economic environment to generate outstanding overall results.
Earnings for the quarter were at record levels for.
As a public company with net income coming in at $28.5 million or <unk> 73 per share profitability and return metrics were excellent across the board ROA came in at 170 basis points, while Aro TCE was 18, 9% pre tax preparation.
<unk> came in at 216 basis points up 10 basis points from the previous quarter.
Revenue growth was solid and was primarily driven by strong loan production across all our lending areas. Excluding PPP loans, we had $315 million in loan originations during the second.
<unk> quarter, a record level for the company and up from $152 million in the prior quarter notwithstanding the impact of payoffs, which also increased total loans ex PPP increased by $155.6 million or 16% annualized and stood at.
At $4 billion as of quarter end.
Demand for credit continued to build throughout the quarter as borrowers became more confident in the recovery in economic activity continued to return to normal overall loan production was well balanced across commercial commercial real estate sponsors.
Sir on equipment leasing, notably we also saw an uptick in commercial line utilization, which helped us to drive some additional growth in commercial balances line utilization was 56% up from 48, 5% at the end of the prior quarter.
While increasing.
Sponge on demand was a key factor in our growth. We're also seeing the benefit from the talent additions we've made over the past few years, particularly in C&I and CRE. These bankers are steadily building their books and making a larger contribution to balance sheet growth last quarter I mentioned that we were encouraged.
By the growth, we're seeing in our leasing business contributing to that growth were additions made to the team with expertise in industrial and material handling equipment.
These hires not only complement our team and increased volume, but also add diversification to the portfolio at attractive risk adjusted yields.
We continue to actively look at opportunities to add talented bankers to our franchise.
Moving on to government guaranteed lending. This business also had another strong quarter of production with $143 million and close loans compared to $112 million in the prior quarter.
Investor appetite for these loans remains robust with secondary market premiums at record levels compared to the first quarter of 2021 gain on sale income increased by nearly 48% to $12.3 million.
We remain a market leader in this business and as of.
<unk> 30.
Are the fourth largest 7 day lender in the United States on the liability side, we continue to see the effects of clients are operating with higher liquidity levels and also saw good inflows of deposits from new relationships to the bank the.
The quality of our deposit base remains exceptional.
June <unk> interest bearing deposits increased $74 million.
And now account for 41% of total deposits.
This improvement in our mix drove another 4 basis point decline in deposit cost to just 8 basis points, which is a cycle low this combined with stable.
Non asset yields help us to increase our margin by 1 basis point for the quarter, excluding the impact of accretion income, which today is no longer as material as it was in prior quarters, notwithstanding the rate environment on higher liquidity. The margin has held up very well when compared to.
Other banks in our market.
Asset quality continued to improve with both NPL and NPA is declining again from the prior quarter. Both in dollar and percentage terms, while net charge offs declined significantly and came in at 17 basis points. Our permission was reflective of a reserve release.
Earning I'll still maintaining our allowance at 138 basis points of loans are 155 basis points excluding PPP.
Our capital position remains strong with a CET 1 ratio of just under 12% and total capital ratio of just under 16% at quarter end.
With our strong level of profitability and capital position, we've been able to increase the amount of capital that we returned to shareholders. Our board authorized an increase to our quarterly common stock dividend from 629 per share, which is now 200% higher than when we initiated it at the end.
2019 during the second quarter, we repurchased approximately 539000 shares of common stock and our board also authorized a repurchase of an additional 1 on a quarter million shares given the strength of our balance sheet, we are well positioned to support organic growth continue investing in the franchise.
End of choices.
Our franchise and pursue strategic opportunities, while returning capital to shareholders now I'd like to turn over the call to Lindsay who will provide you more detail on our results.
Thanks, Alberto Good morning, everyone I'll start with some additional information on our loan portfolio on slide 4.
<unk>, Brian on discussed earlier that new loan production and increased line utilization more than offset the forgiveness, we had on PPP loans and runoff in the acquired portfolio.
Our originated loan portfolio increased by $64 million or $205 million on PPP loans are excluded each major area of the portfolio increase.
Increase from the prior quarter with the exception of the expected residential mortgage runoff.
On PPP loans on the residential mortgage loan portfolio are excluded our originated loan portfolio increased 22% over the past year, which reflects the growth in our core commercial client base as well as the strong demand we have seen for equipment financing which is up.
It's 6% over the past year.
The growth in the originated portfolio during the second quarter was offset by a decrease of $49 million in our acquired loan portfolio, including $13.1 million on resolutions in the acquired impaired portfolio.
<unk> PPP, we had $315 million of new originations in the second quarter.
<unk>, which was partially offset by $218 million of path with.
With respect to PPP loans, we have included a page in the appendix on page 14 that provide details on the balances forgiveness and fees from their respective round.
Turning to slide 5 we will look at our government guaranteed lending business.
At June 30th on about.
On balance sheet, SBA, 7 day exposure with $474 million approximately $32 million higher than the end of the prior quarter was $78 million being guaranteed by the SBA.
<unk> on balance sheet exposure was $68 million down $20 million from the end of the prior quarter of which $32 million as guarantee we.
<unk> generally improving trends in this portfolio with most borrowers returning to regular payment data following the exploration of deferral period and subsidies.
However, we remain cautious until the economy demonstrates more resiliency as a result, we've kept our allowance as a percentage of the on guaranteed loan balances unchanged from the end of the prior quarter.
At just under 9%.
Moving over to deposits on slide 6 our.
Our total deposits increased $68 million from the end of the prior quarter to just under $5.1 billion.
The growth came in our lower cost of deposit categories. As we continue to see strong inflows of commercial transaction deposits that.
Net of replacing higher cost time deposits.
This resulted in a continued positive shift in our mix of deposits.
Noninterest bearing deposits increased to 41% of total deposits from 41% at the end of the prior quarter, while commercial deposits continued to account for over 75% of all noninterest bearing.
Account.
Time deposits represent only 14% of total deposits.
Our deposit composition continues to be a core strength of our franchise.
Moving on to net interest income and margin on slide 7.
Our net interest income was $58.2 million for the quarter up 2.7% from the prior quarter due to.
Emerge balances on both loan and securities as well as lower funding cost.
On a GAAP basis, our net interest margin was $3.74 in the second quarter down 3 basis points from last quarter accretion income on acquired loans contributed 9 basis points to the margin for the second quarter down from 13 basis points in the last quarter.
Excluding accretion.
Income our net interest margin was $3.65, an increase of 1 basis points, primarily due to the decline in our average cost of deposits.
Looking forward, our GAAP margin will be impacted by the $11.8 million of net processing fees from PPP loans.
The exact timing and the amounts are dependent upon the sba's timing and process for forgiveness.
Net.
We believe our core net interest margin, excluding accretion and PPP will see pressure as a result of lower loan yields next quarter with less offsets available on the funding side as a result of our cost of deposits coming down to 8 basis points.
We anticipate that the margin should stabilize by the end of the year and begin to increase as rates begin to rise.
Turning to noninterest income on slide 8.
In the second quarter, our noninterest income increased $5.3 million from the prior quarter relative to the first quarter of 2021, we had balanced growth in fee income consistent with economic activity on our market.
The largest increase came on our net gain on sale of loans, which were up $4 million.
Our volume of loans sold and record level premium.
We sold $100.6 million of loans in the second quarter up from $73.9 million in the prior quarter.
Longer term loans accounted for a higher percentage of the loans that were sold this quarter, which had a positive impact on premiums.
Our non interest income also benefited from a smaller.
Due to high range on our loan servicing asset revaluation, this quarter compared to a $1.5 million charge in the prior quarter.
Moving to noninterest expense trends on slide 9 our noninterest expense was $43 million in the second quarter up from $38.8 million on the prior quarter.
The increase was primarily attributed to 2 factors.
Smaller first our salaries and benefits expense in the prior quarter was reduced by $2.8 million in deferred loan origination costs related to the second round of PPP loans and second we recorded an impairment charge of $1.9 million on assets held for sale related to former branch locations.
These increases were partially offset by $1 million decline in occupancy.
C on equipment expense, primarily due to seasonality related to our winter months.
In addition, during the quarter, we consolidated an additional 2 branches and repurpose the locations into commercial loan production offices.
Our branch Count is now at 44 and average branch size has increased to $115 million deposits per branch.
We continue to focus on our expense run rate and look for opportunities to gain efficiencies. Our adjusted efficiency ratio improved to 49, 5% in the second quarter from 54% in the prior quarter due to our growth in revenue as we continue to invest in our talented team, including the additional bankers as Alberto described earlier.
We believe the quarterly expense run rate will increase slightly we believe noninterest expense will begin trending between $42 million to $44 million per quarter.
Turning to slide 10, we'll take a look at asset quality.
We continue to see positive trends across the loan portfolio during the quarter, excluding government guaranteed loans, our nonperforming loans.
Ins declined 10 basis points to 66 basis points of total loans and leases, which was reflective of solid resolution activity.
Net charge offs also declined to 17 basis points from 47 basis points of average loans and leases in the prior quarter.
In addition, we saw a 27% decline on delinquencies and continued.
Classified assets.
Given the reserve reserve build we've had since the start of the pandemic. The positive trends, we are seeing in the portfolio and the improving economy, we had a negative provision of $2 million this quarter, which resulted in a small reserve release.
Despite the small reserve release, we continue to have a high level of total loss absorbing.
<unk> as measured by our allowance plus acquisition accounting adjustments, which represented 178% of total loans and leases excluding PPP loans at June 30.
On slide 11, our strong capital position and financial performance has enabled us to accelerate the return of capital to shareholders. This year.
Through the first 6 months.
Vince the ear, we have returned approximately 46% of our earnings to shareholders through common stock dividends and stock repurchase program as Alberto mentioned during the quarter. We continued to repurchase shares year to date, we have repurchased 871000 shares and with the expanded program. We have approximately 1.6 million shares remaining.
On a continued to opportunistically manage our capital through share repurchases or capital deployment actions reflect our strong capital position and increasing optimism, we continued to generate excess capital, while allowing us the flexibility to grow both organically and strategically with that Alberto back to you. Thank.
Thank you Lindsey and turning to slide 12 I'd like.
We can wrap up today with a few comments about our outlook for the remainder of 2021.
While the emergence of the Delta <unk> create some level of near term uncertainty. We generally expect the positive trends we've seen in the first half of the year to continue no doubt there will be headwinds that will cause some level of variance in our performance.
<unk>, most notably the contribution of gain on sale income as we reach the seasonally slower period for loan production.
And premiums potentially moderating 1 SBA enhancements and in September our pipelines, though remained strong which position us well for continued growth in the portfolio.
Folio and continuing to remix our earning asset base from securities to loans.
With respect to priorities they remain consistent and we're focused on executing our strategy of growing loans deposits improving profitability continuing to invest in technology and capitalize on opportunities to.
Add talent to the organization.
We built a strong reputation on the market as a banquet sophistication balance sheet products support and culture for talented bankers and teams to thrive and serving clients. We continue to look for opportunities to add bankers to further improve our business development capability.
Yes.
With respect to M&A the market has been active and we continue to evaluate opportunities that fit our criteria and can further enhance the value of the franchise in closing we are optimistic about our ability to grow our franchise, both organically and through M&A.
Create and create additional value for shareholders in the future I would also like to say thank you to all our employees, who make it happen on a daily basis for their hard work and dedication throughout the year with that operator, let's open the call up for questions.
We will now begin the question and.
<unk> session to ask a question you May Press Star then 1 on your telephone keypad.
If youre using a speakerphone please pick up your handset before pressing the keys if at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then 2.
At this time, we will pause momentarily to assemble our roster.
The first question comes from Terry Mcevoy with Stephens. Please go ahead.
Hi, good morning, everyone.
Good morning, Barry.
I guess lithium a question on the 42 to 40.
And $4 million quarterly expense outlook.
Within that outlook do you assume any additional new new banking hires.
Yes.
<unk> talked about some of them in his remarks, so yes, there are some.
We continue on the trajectory it'll trend Terry likely towards the higher end.
And from there I'll I'll keep you posted but yes. It does include the ones that Alberto had referenced in terms of in his comments.
Great and then I guess, just as a follow up all.
All the other banks that I talked to we're just fighting over quote unquote, good credits and really not showing a lot of growth I guess my question is.
And get comfortable with 16% annualized loan growth and making sure that youre winning those good credit is just more than others.
Sure.
Terry and I think this goes back to 2 previous quarters, where we've kind of.
Guided to the fact that pipelines had been building up.
And I think this quarter, we just benefited from really business development efforts that have been building out throughout the course of the year.
We do expect and I guess just to add to your question and give you a little bit of guidance, we do expect.
Still kind of.
Can you help a mid single digit growth over the course of the year. So I think this was a good quarter pay.
Payoffs as you noted there in the back also increased.
We were fortunate to have really good originations this quarter across the board.
And also pay offs wildly.
That increased spill were very manageable so.
We'll have to see in the quarters ahead, but we are seeing.
Good pipeline still today the market is competitive.
That being said demand for credit is good the other thing I would add Terry is.
Line utilization.
It was better this quarter.
It was certainly up which certainly aided.
Balanced growth for the quarter as well.
Thank you very much and have a nice weekend. Thank.
Thank you Terry.
<unk> next question comes from Nathan race with Piper Sandler.
Please go ahead.
Yes, hi, everyone. Good morning.
Inc.
I was hoping to risk.
Sales to the capital deployment outlook. It sounds like you guys are still seeing some <unk>.
Acquisition opportunities, we've obviously seen.
The number of announcements in the Chicago land area recently, so just curious in terms of.
The feasibility and likelihood for an acquisition over the next year or so.
In that context curious how price sensitive you guys are going to be with <unk>.
Additional share repurchases going forward, obviously, you increase the author.
In addition, along with <unk> results today, So just trying to get some color in terms of how we should expect buybacks to unfold over the back half of this year within other.
Options to deploy capital.
Yeah, I think Nate the guidance there is we have.
We.
We look at acquisitions with certain parameters in terms of fit in terms of pricing and we have been very disciplined in the acquisitions that we've done and I think we expect that to continue that being said we are seeing opportunities as you noted the market here locally.
<unk> seen 2 transactions.
This year happen.
So I.
I think conversations in the M&A call. It environment is certainly active and we are participating in that we're also seeing opportunities outside of traditional bank M&A.
Interest, we're evaluating those as well so.
With discipline and with the approach that we've taken in the past I would say, how we would approach Emma.
M&A going forward and the same goes for buybacks I think you can obviously the board authorized an increase in the dividend.
So I think hopefully shareholders appreciate that.
And we will be opportunistic also in terms of.
Buyback activity in the context of us continuing to build excess capital. So I think that's what Lindsay I don't know if you want to add.
Brito I don't know if you want to add anything else to that.
And you just say I mean, it's a small share repurchase program Nate so.
No.
On the dividend, we still feel very comfortable with where we are relative to our peers.
And again I think interest.
We love the position we're in with the <unk>.
Capital.
To support.
The growth in organic <unk>.
And the growth that we think.
On may come from some acquisition opportunities in the next 12 months.
It's great color very helpful and just staying on the M&A disruption topic.
Nickel curious if theres any.
All lines of business or kind of other areas that you guys would maybe look to grow opportunistically add talent into continued kind of smoothed out the overall revenue.
The equation in terms of reducing kind of the quarterly variability that we see within the SBA gain on sale.
Sales revenue.
Yes, certainly in our commercial lines, but I would say.
I would say in general across the board, we still feel like we have opportunity across the board in all of our lines.
No.
There is plenty of share for us too.
2 games, so that does not preclude us to to look at.
Even on the government guaranteed side to look at opportunities there if they were to arise, but I would say to your question in terms of the more traditional kind of balance sheet lending business.
I would say commercial.
Commercial real estate.
And certainly our leasing business as well.
Okay, Great and then if I could just less ask 1 more on credit.
You charge offs and overall charge off levels are pretty low in the quarter on obviously, that's benefiting from all the stimulus efforts thats been particularly Todd.
Targeted volume across the SBA space. So as we look out to next year can you guys just remind us in terms of thinking about normalized charge off levels as it relates to your own.
Government guaranteed line of business.
I think we're still going through.
Period, Nate were subsidy payments to some degree are still there.
You have certain other government programs that benefit. It for example, restaurants entertainment kind of amusement type industries. So we're monitoring that.
Quickly I think the comments at Lindsay made are spot on which is we're cautiously optimistic but as you see we're remaining cautious there because we want to see.
Really when the impact of all of these programs and really how how these borrowers are going to be able.
<unk>.
To come out of that that said the trends so far are positive.
We have seen borrowers that are coming up subsidy. The significant vast majority of those borrowers just resume and have resumed making their payments. So we're optimistic in that end.
Certainly for the rest of the year and I would say.
For the beginning of 2022 as well.
Got it very helpful. I appreciate all the color. Thank you everyone and congrats on a great quarter.
Thank you Nate Inc.
The next question comes from.
Tim Switzer with <unk>. Please go ahead.
Hey, Good morning. This is Tim Switzer on for Mike Perito.
Good morning.
If I could get 1 more from you guys on your capital distribution you guys have increased the dividend to ties now this year.
Is there kind of a.
Total or just sort of a targeted.
Targeted dividend payout ratio you guys are targeting over the long term that youre, hoping to kind of build up to over the next.
Year, 2 or 3 years at all.
Yeah.
I don't know that we have anything.
Yes.
I mean anything that we would tell you like thats kind of what our target is I think the answer to that is really contingent on capital deployment opportunities. I also would remind you that remember in 2019, we had never really pay the dividend.
10, really we started with a very very modest dividend.
We also are the following.
We also that was the first time also that our board authorized a buyback authorization and we've increased that over time as our earning power has increased and certainly as our capital.
<unk> has built up to a point, where we really in our view we were generating excess capital. So we wanted to make sure that we were returning that capital back to our shareholders. So in that context is how I would say that we would think about.
Future increases.
Capital dividend and certainly buyback activity as.
As well.
I hope that gives you.
In answer to your question, Yes, yes, no we're just trying to determine.
Generating a little bit of extra capital at these PPP fees. So.
Deploying that through share.
Repurchase makes sense, but trying to get more of a long term look at what you have.
Capital distributions over the long term yes.
To the comment that Roberto.
On the on the prior question remember, we're coming off a low base.
So certainly as the earnings power.
As in the earnings of the company continues on an upward trajectory certainly we certainly feel we have flexibility.
With respect to our dividend in the future.
Okay.
Lindsay keeps us really.
Very grounded on it and we never want to.
<unk> be in a situation right to disappoint, meaning that you are paying a certain dividend and then you have to.
Reduce it or do something that doesn't make sense right. So so I think we're guided by by all the factors that Alberto mentioned, but also by.
Where we are relative to our peers.
Here's and also not wanting to to disappoint the market.
Yeah.
Of course, okay, and on if I could get just a little bit more.
Color on maybe what are you thinking longer term for your SBA sales because right now they are probably just a little bit elevated with the margin and.
The high demand.
Maybe going into 2022, if we have a more normalized market you guys are clearly 1 share I think over the last year. So.
What's kind of a normalized level, we should be looking at.
Yes.
Premiums are really being driven right now by the subsidies.
That are out there.
And the liquidity in the market, though I do think that this year as it has been anomaly and.
So in terms of guidance I look back historically, and it's a function of of historical premiums and really volume. So we continue to grow the business and continue to originate.
To be more every year and it'll be more consistent with what you've seen in the past few years I think this year has been phenomenal just given the subsidy that the government put in place and we've just really been able to capitalize on that.
Yes, Okay makes sense and if I could get 1 more we're hearing a lot about really competitive.
<unk> loan market with.
On.
Banks have all this excess liquidity they need to deploy so on have you guys seen on your market as well and if you could talk about if there's any categories, where it's a little bit more intense than others competition wise.
Sure.
Think Tim I think it's fair to say that I am sure every banker that you cover it tells.
The market is the most competitive market ever and we would agree with that so.
So yes, the market the market is competitive.
I would say in relative terms today.
I would say C&I has probably the most competitive market.
Got it.
Followed by by CRE CRE has been compressing pricing had widened on certainly came into the year wider than it is today, it's been compressing. So far we have not seen a deterioration in terms of structure.
Sure.
Although.
That probably is the.
The next shoe to drop so to speak but.
But I would say those 2 price C&I has been consistently very competitive and it makes sense because you are competing.
It's a set pool of customers Youre compete.
Market or credit worthy customers and you are trying to establish long term relationships. So people are generally going to be aggressive to try to win the business.
First in the context of that business really being with the bank for for an extended period of time.
On the SBA front I think.
We've been pretty disciplined in how we approach that and in some of our other.
Niche businesses like leasing I think if anything thats been pretty steady.
And sponsor again, a little bit more competitive, but I think again consistent with.
With what we have seen within bounds with what we are on <unk>.
Custom to operating in.
Great. Thanks for the color.
Again, if you have a question. Please press Star then 1.
The next question comes from Brian Martin with Janney Montgomery. Please go ahead.
Hey, good morning, guys.
Good morning, Brian.
Okay could you guys just give a little thought maybe lindsay on.
Alberto on margin and just to the context that the loan yields maybe coming in.
On a little pressure to limit these comments earlier, but on.
This quarter there was some nice expansion of the core loan yields kind of ex the PPP. So just trying to understand what the driver was of that this quarter and then just kind of the context of the guidance going forward.
Loan yields certainly would be under pressure given the competitive environment.
So I think really the wild card with the loan yields is really pay off.
In terms of what's driving that so what we've been seeing is.
At times, we have pay.
<unk> that have higher loan yields and we just can't replace those yields.
So youre seeing that headwind and I think thats whats.
And in my comments, Brian, but there are some upside for sure in terms of the mix of loans and what types of loans. We bring on the for example in September is that VA subsidies expire will go back to a 75% guarantee the SBA loans for example are yielding a.
Reflect your percentage at Prime plus 250 to 275, so those will obviously help the margin and offset some of that though.
Again, theres moving pieces and again the payoffs are really the wildcard if payoffs are less than we anticipate things will be better, but given what we've been seeing and as these higher yielding assets.
On a higher off it's very difficult to replace them.
Got you okay. Thanks for the help there and then just.
With regard to the SBA is there a new legislation out there that could change kind of the outlook for I guess theres been some talk it seems like there could be some benefit with this new legislation out there I guess.
Can you guys.
Comment on that at all or just kind of what you're seeing with the new legislation that's out there.
Actually Brian the only thing new that on that.
I've heard very recently is the infrastructure bill potentially.
<unk>.
Taking some of the essentially ending the.
The benefits sooner now remember the fiscal year was scheduled to end at the end of September anyways.
But if the bill were to pass in the Bill would be signed by the President and the language sticks in the legislation then potentially that subsidy would go away quicker.
It doesn't impact the subsidy payments, though that comes from a different part of money.
But that's that's.
As far as we know Thats the latest that we've heard most recently frankly this week.
Okay, Alright, I'll check into that and then just on on the reserve.
It sounds as though you're still carrying.
A high level of reserves on that government guaranteed book I guess as we think about.
Some of these things changing and you guys get more clarity I guess it feels like there's opportunity for that to move lower as you is that the plan as you guys get more clarity on.
As the subsidies are kind of wind down.
I think potentially I would I would caution you, though on the fact that to the degree that the portfolio continues to grow naturally you would you would obviously see us provisioning to account for growth on the overall portfolio. So just keep that keep that in mind.
Gotcha, Yeah, Okay, and then last 1 from me is just really on.
On the I guess on the timing of the PPP I guess, given what we've seen from some other banks and commentary seems consistent that you.
We would expect the bulk of the PPP to try and get resolved it for given this year and some maybe some tail into next year is that still seem appropriate yeah, I think that the majority on.
<unk> will be recognized by the end of the year, but they are there.
Based on the sell out of our for sure Yeah. Okay. Alright, that's it that's all I had and thanks and congrats on a great quarter.
Thanks, Brian Thank you.
And we have a follow up from Nathan race with Piper Sandler.
Please go ahead.
Yeah.
Appreciate the follow up question just a question on overall balance sheet growth expectations as the P. P. P. Forgiveness process continues to unfold I mean, we saw deposit growth slow a little bit on this quarter on an average basis. So I'm. Just curious is the P. P. P. Runoff continues do you guys expect.
Overall, earning asset.
Growth.
Going forward or is it more of a remix equation and we should be thinking about on the back half of this year and into 2021 'twenty 'twenty 2 as well.
Sure so as long as loan growth continues.
We'd like to see that mix change right and as we have access liquid.
We continue deploying that into loans.
And letting the securities portfolio run down so it's really a little bit of both.
In terms of redeploying here so.
As a reminder, we do have PPP lf on our balance sheet. So that that does play a factor as well so.
In terms of the balance sheet.
We'd like to try to continue to grow loans in remax door enter into loans wherever possible.
But just generally speaking I mean, do you expect the earning asset balances to grow as the P. P. P loans run off or do you expect that kind of liquidity to kind of remain on our balance sheet to some.
Yes.
It will remain to some extent I mean, we still have $400 million thats going to be coming off here over the course of the next 6 to 9 months call. It.
It's going to be tough to deploy it that fast.
I think youll see it come.
Come down a little bit in terms of overall, earning assets.
Okay very helpful. Thanks.
Thanks again, everyone.
Great.
Thanks.
This concludes our question and answer session I would like to turn the conference back over to Alberto Porcini for any closing remarks.
Great. Thank you operator that concludes our call this morning.
On behalf of all of US here. Thank you for your time today your interest in byline and we look forward to speaking to you again next quarter. Thank you.
Okay.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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Okay.
Okay.
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