Q2 2021 Heartland Financial USA Inc Earnings Call
Thank you and moment.
And for everything and have the spelling of your first and last name.
Yes, it's David.
A V I D Brown.
Brown B R. W.
And your company name.
IRA AI E R E.
8 I E R E.
Correct.
Correct.
And your email address please.
David other IRR that calm first name and the company name and Dot Com.
Thank you so much.
It'll be on hold until the conference begins.
Thank you.
Management will provide a brief summary of the quarter.
Order and then we will open the call to your questions before we begin the presentation I would like to remind everyone that some of the information management.
Management will be providing today falls under the guidelines of forward looking statements as defined by the Securities and Exchange Commission.
Part of these guidelines I must point out that any statements made during this presentation concerning the company's hopes beliefs expectations and predictions of the future are forward looking.
And statements and actual results could differ materially from those projected average.
And all information on these factors is included from time to time and the company's 10-K, and 10-Q filings, which may be obtained on the Companys website or the S. E. T. S website at this time I will now turn the call over to Mr. Lynn Fuller at HL F. Please go ahead Sir.
Thank you Peter and good afternoon well.
Welcome to <unk> second quarter 2021 earnings conference call. We appreciate everyone joining us today as we discuss the Companys performance for the second quarter of 2021.
For the next few minutes I'll touch on the highlights for the quarter.
I will then turn the call over to <unk>, President and CEO, Bruce Lee, who will cover business performance.
And then Bryan Mckeag, our EVP and CFO will provide additional color around <unk> results.
Also joining us today as Nathan Jones, EVP and Chief Credit Officer.
And the available to answer questions regarding credit.
Now onto the financial highlights for the second quarter of 2021.
I'm very pleased to report that we had an extremely strong second quarter. Following a very good first quarter.
We set a new record for net income.
And the second quarter at $61.6 million and after our preferred dividend of $2 million net income available to common shareholders was $59.6 million compared to $30 million for the second quarter of 2020.
And increase of $29.5 million or <unk> 90.
8% increase.
Year to date net income of $110.4 million was 102% increase over the first 6 months of last year.
We also set a new record for diluted earnings per common share for the quarter of $1.41 compared to 82 for the second.
Quarter of last year, and increase of 59 or 72%.
Year to date earnings per share is $2 and 61.
We'll annualize.
Return on average common equity and average tangible common equity for the quarter was 12, 7% and 18.
Pinpoint on 5 respectively year to date, that's 11, 2.9% and $16, 99%, respectively and.
Annualized return on average assets for the quarter was 135% and year to date, 127%.
The net interest margin.
And on a fully tax equivalent basis was 341% for the quarter and 354, 5% year to date on.
Our efficiency ratio was 57, 1% and year to date, 50, 686% and Bruce and Brian will share more detail and their comments.
And look value and tangible book value per common share continued to increase ending the quarter at $48.50.
And $33 and 98, respectively and.
And that's a 9% increase for both from a year ago.
Tangible common equity ended the quarter.
At 8.8% in line with our goal of between 8 and 9%.
Well, given our record quarterly performance history of growth great.
Great credit fundamentals and strong liquidity position relative to peers, we share our analysts optimism on their price.
Well on the M&A front, we continue to have a very deep pipeline of acquisition opportunities across our footprint with a number of active opportunities currently in process.
Additionally, I am pleased to announce that Shelley Reed joined our M&A team as EVP of corporate strategy and development and June.
With over 20 years, and the financial services industry, including 15 years of investment banking experience Shelly has an extremely.
Extensive background with all related aspects of buy side and sales side mergers and acquisitions.
Well at this month's board meeting HOS.
<unk> Board of directors approved a 25 per common share dividend, that's nearly a 14% increase payable August 32021 to shareholders of record on August 16th 2021.
<unk> also approved a preferred dividend of 100.
Third $75 payable on October 15th 2021 to shareholders of record on September 32021.
And last at our annual stockholder meeting in May we elected 2 new class, 1 independent directors, Catherine Graves Unger and Chris.
Hi, I'll also elected as class, 1 directors, where Susan Murphy.
Marty Schmitz and myself I will now turn the call over to Bruce Lee <unk>, President and CEO, who will provide an overview of the company's operating performance and credit Bruce.
Thank you Lynn.
Good afternoon, everyone I am pleased.
And to share with you <unk> record second quarter results. They reflect our continued growth across markets and the economy steadily improving conditions and <unk>, we see growth everywhere and this quarter, we saw growth and commercial loans consumer loans deposits and fees.
As holding and record earnings per share and net income.
And the second quarter, we delivered a record.
Dollar 41 earnings per share and increase of 21.
From the linked quarter, and 59 or 72% from a year ago.
Total assets grew to a record $18.4 billion and increase of $127 million from the linked quarter assets are up $3.3 billion or 22% from a year ago.
Pre provision net revenue was a record $72.8.
8 million, a 5% increase from the linked quarter and and 11% increase from a year ago.
And our strong results delivered another record quarterly net income available to common shareholders of $60 million 70 million, a 17% increase from the linked quarter.
And a 98% increase from a year ago.
Let's start with organic loan growth.
Loans grew $288 million across our portfolios excluding PPP.
And increase of over 3% from the linked quarter and a 13% and.
Annualized.
The $288 million of growth significantly exceeded our guidance for the quarter of $120 million.
We saw strength and each of our commercial loan portfolios from.
From the linked quarter commercial and industrial increased 97.6.
Our 4%.
The owner occupied real estate increased $102.6 million or 5.6% non.
Non owner occupied real estate increased $22 million or 1%.
Construction increased $58.3 million or 7.
<unk>, 3% and our AG portfolio was flat.
We added nearly 170, new commercial relationships and the quarter.
Representing $90 million and loan growth our bankers are leveraging the expertise of our growing <unk> special.
<unk> industries team.
I want to congratulate our top performing banks.
<unk> T and Iowa, first Bank, and Texas, Arizona Bank and Trust and Arizona.
Citywide and Colorado and Premier Valley Bank in California.
Our commercial pipe.
<unk> remains strong, we're forecasting $200 million and commercial loan growth and the third quarter.
I've been meeting with clients and bankers and we share a cautious yet optimistic outlook.
Some headwinds remain namely the impact of the Delta and other.
Other COVID-19 variance.
<unk> supply chain challenges.
Workforce shortages wage pressures and inflation.
We're working closely with our customers on the forgiveness process for PPP won and PPP 2 programs currently.
<unk> and where 90% of our PPP won loans have been forgiven.
Or are in the process of being forgiven.
Many borrowers who participated and PPP 2 are now eligible to file for forgiveness.
Brian will provide more PPP financial details.
Those comments.
Growth and our core consumer based loan portfolios, which encompass both commercial and residential mortgage loans with strong.
Increasing by $49 million for the linked quarter.
12% of these loans came from new customers.
During 13% of loans originated using our new online capabilities.
The strong growth and our core consumer based portfolios was partially offset by the continued run off in our non core legacy national residential mortgage.
Portfolio, which we retained when we exited that business in 2018.
Overall core and noncore net growth for consumer and residential mortgage loans totaled $13 million.
We expect continued strong performance and forecast.
<unk> million dollars of growth in core consumer base loans and the third quarter.
Turning to deposits non time deposits totaled $14.5 billion and increase of $133.3 million or 1% during the quarter.
<unk> pre saw a total deposit growth for the ninth consecutive quarter totaled.
Total deposits were a record $15.6 billion and increase of $56.1 million from the linked quarter and $2.9 billion or 23% from a year ago.
The growth this quarter was primarily from commercial customers.
We've maintained our exceptional deposit mix, 40% of deposits are in noninterest bearing accounts and 93% and non time account balances.
Total deposit costs remained.
At 10 basis points.
A decrease of 10 basis points from a year ago.
Our efficiency ratio increased slightly to 57.1.
We are laser focused on efficiency ratio and investing to support our growth while gaining.
<unk> technology improvements and achieving scale.
We reduced ftes by 40 during the second quarter.
We are deeply invested in recruiting and retaining top tier talent and each of our markets.
Since the beginning of 2021, we have.
And Lo and you to execute our multiyear talent strategy and have installed 4 new bank presidents and 4 new heads of commercial banking.
Our investment and talent also includes growing our specialized industry group and adding more than 30 experienced commercial bankers.
<unk> are 11 banks.
We have considerable momentum and talent acquisition and energy across our organization.
Turning to credit metrics I am pleased to report that we continue to see stable and improving credit quality on our already strong results.
And with nonperforming loans decreased to 85 basis points of total loans compared to 91 basis points and the linked quarter.
Nonperforming assets as a percentage of total assets also decreased to 50 basis points from 54 basis points and the linked quarter.
Our delinquency ratio remains low at 17 basis points.
Non past rated loans decreased to 10, 4% a decrease of 1.1% for the quarter.
And lastly, net loan charge offs for the quarter were $3 million or.
<unk> 12 basis points of average loans.
Our growth and solid credit metrics are enabled by our unique model.
Our bankers deeply understand our local markets and have strong relationships with customers.
This insight helps guide our strategies and invest.
And we are on track to deliver more service enhancements and digital functionality that will enrich the customer experience.
We'll be extending our video banking capabilities beyond our consumer customers to our wealth customers and commercial customers, who use treasury management.
And we're expanding our document management capabilities to help reduce administrative burden for our customers and bankers.
We're adding more convenience features like online appointment scheduling and live chat.
We'll offer PDP payments using zelle.
We are a.
Partnering with Temenos for robust online account opening loan origination and digital on boarding.
And we're excited about offering custom digital experiences in the future through our customer portal. That's currently in development.
Based.
On changes in customer behavior, including increased adoption of digital channels.
We will continue to optimize our branch network.
We expect a further reduction and the branch network.
10%.
Our investments and integrated payments technology.
And well received as customers move away from check payments and achieve improved cash flow and greater efficiencies.
We are proud to be recognized for the sixth consecutive year by Nielsen report.
And for top performance and commercial purchase card programs.
While the purchasing fleet and corporate card industry was down overall for visa and Mastercard last year.
<unk> saw a 21% increase.
On our purchasing card the fourth highest increase out of the top 50 card issuers.
H.
<unk> mission is to enrich lives, 1 customer employee and community at a time.
And in alignment, we are proud to invest and our communities and be a socially responsible corporate citizen.
A few investments we've made include financing the development.
Of low income housing the.
And the rehabilitation of historic buildings.
And we've also invested and solar energy.
We named Wendy Reynolds, <unk> first chief diversity equity and inclusion officer.
This new senior position reinforces.
For us and company's values and will lead our <unk> efforts with the support from me My executive leadership team.
And our employee diversity Advisory Council.
In early July we welcomed all H Tls employees back to the office.
And many choosing hybrid schedules.
There is and energy to serve our customers and communities that we are experiencing in person or GAAP.
I am proud of how we've embraced change over the past 16 months, we've been agile we've anticipated and we've responded.
And it quickly creatively and decisively.
We continue to be well positioned to benefit from increasing economic strength I want to thank our employees for their continued dedication to deliver strength insight and growth to our customers communities.
And shareholders.
I will now turn the call over to Bryan Mckeag, <unk>, Chief Financial Officer for more details on our performance and financials.
Thanks, Bruce and good afternoon.
I'll begin today by referencing our earnings release, which outlines.
<unk>, our strong quarterly results with earnings per share reported at $1.41.
$288 million of non PPP loan growth and <unk>.
<unk> credit metrics and continued deposit growth.
But before I go into my detailed comments I will like to remind you that you.
You can find additional information on the quarter and the second quarter Investor presentation, which is available in the IR section of our website.
So I'll start my comments today with the provision for credit losses, which totaled a $7.1 million benefit this quarter.
Primarily driven by.
By and improved economic outlook and.
And included the following favorable trends first and as we've already noted total loan balances grew $288 million ex PPP.
Second I believe this is the first quarter since early 2019 that loan upgrades.
Covid downgrades and at the same time nonperforming loans declined $6.5 million or 7%.
Third consensus economic forecasts have improved the past 2 quarters.
As a result, the economic outlook factors used to develop the allowance were upgraded to incur.
<unk> a portion of the forecasted economic improvement.
But the factors still retain a measure of caution and uncertainty that management deems appropriate for a lingering economic headwinds that are yet to be resolved.
And last net charge offs from manageable this quarter at just under 3.
<unk>.
And we're 12 basis points of total loans.
These charge offs were on loans that had previously been identified and had established reserves and therefore had minimal effect on the quarter's provision.
So a quarter and the total allowance for lending related credit losses, which includes.
3 <unk> for credit losses on loans, and unfunded commitments stood at $134.7 million or 135% of total loans.
And when the PPP loan balances are excluded the total allowance stands at 147%.
In addition at quarter end.
Both the unamortized purchase loan valuations on the balance sheet totaled.
$16.7 million or 16 basis points of total loans excluding PPP.
Yeah.
Moving to the rest of the balance sheet investments grew $176 million this quarter and comprised just over 37%.
And assets with a tax equivalent yield of 2.7% and duration under 6 years and generate about $70 million of monthly cash flow.
Borrowings decreased $66 million to end, the quarter and $424 million or 2.3% of assets.
<unk> tangible common equity ratio increased 54 basis points to 8.8 percentage at quarter end.
The TCE ratio rose 25 basis points due to the increase and market value of investments and gained 29 basis points from retained earnings net of balance sheet growth this quarter.
Assets <unk> regulatory capital ratios also remained strong with common equity tier 1 and just under 11, 5% and total risk based and just over 15%.
So the balance sheet continues to be very strong and well positioned.
Moving to the income statement.
Net interest income totaled $141.2 million, this quarter, which was $1.6 million higher than the prior quarter.
The net interest margin on a tax equivalent basis. This quarter was $3.4 1% that's down 7 basis points compared to last quarter.
During the quarter investment yields declined.
Net 1 basis point and loan yields declined 13 basis points.
These were offset by a 4 basis point drop and interest costs.
The margin was positively impacted by a $900000 increase and PPP fees recognized.
Primarily due to a full quarter of PPP.
New loan amortization.
And increased the net interest margin by 2 basis points over the over last quarter.
We exited the quarter with just over $23 million of unamortized PPP loan fees remaining on our books.
Also this quarter the net interest margin includes 9 basis points of purchases.
Aligned accounting accretion, which was down 3 basis points from the prior quarter.
Noninterest income totaled $33.2 million for the quarter, that's up $2.8 million from last quarter.
Total mortgage banking revenue was down $3.1 million, but largely offset by security gains, which increased 3 million.
And in addition service charges were $1.5 million higher and trust fees were up 300000, representing an 11% and 5% increase respectively compared to last quarter.
Shifting to noninterest expense.
Noninterest expenses totaled $103.4.
And this quarter up $1 million from last quarter.
Excluding acquisition integration restructuring and tax credit costs and asset gains and losses, our core expenses increased $2.3 million to $101.6 million compared to $99.3 million last quarter.
4 million increase was primarily attributable to professional fees, where automation and other digital technology project costs were higher.
On the positive side, both employee and facility related expenses were lower and as Ftes declined by 40, and the remaining cost saves from our aim integration.
Quarter were realized.
So as we look ahead to the second half of 2021 and start to develop some views about 2022.
We believe <unk> will continue to deliver strong results.
Highlighted by strong pipelines loan pipelines, leading to an <unk>.
<unk> loan growth rate ex PPP, and the 1.5% to 2% range per quarter going forward as the economy continues to strengthen.
Remaining round, 1 PPP forgiveness will happen largely over the next 1 or 2 quarters and.
And PPP to forgiveness will occur mainly on.
Expect to where 3 quarters.
We anticipate that PPP reductions will be replaced by non PPP loan growth and some bridge investments and as a result modest growth in earning assets assets is expected going forward.
Non time deposit growth is likely to slow.
The next could even show some slight runoff and the back half of the year.
And with moderate to low to flow to moderate growth expected in 2022.
The net interest margin will continue to be pressured however, and not net interest income excluding PPP fees is projected to grow 1.5% to 2%.
<unk> border going forward as earning assets grow and our mix improves.
Provisions for credit losses are expected to remain low and could be negative again in the next quarter or 2 and then return to more normal levels as loan growth continues and the economy stabilizes in 2022.
Noninterest income excluding investment gains or losses in total is expected to increase modestly modestly over the next 2 quarters from the $34 million this quarter.
Core expenses are expected to remain flat and the $101 million to $102 million range per quarter and the back half of 2.
Brooklyn 1.
Professional fees are projected to remain at current levels as we continue to invest in and complete projects and initiatives.
We believe a 22% tax rate is a reasonable full year run rate, assuming we get no tax law changes.
And lastly, we expect the TCE.
2000, and toward a climb back above 8.5% by year and as we get about 25 basis points increase from retained earnings per quarter. However.
However, a return to higher interest rates would weigh negatively on the ratio.
And with that I'll turn the call back over to Bruce for questions.
We will now open the call up.
<unk>.
Thank you.
I'll now be conduct and the question and answer session.
And ask a question and you will need to press star 1 on your telephone and again that is tariffs and then the number 1.
We draw your question press the pound key.
Please stand by while we compile the Q&A roster.
And your first question comes from the line of Jeff early on with D. A Davidson your line is open.
Thank you good afternoon hi.
Hi, good afternoon, Jeff.
On the loan growth front.
More than doubled your expectations and just wanted to kind of see what the.
The quest happened on the quarter or is it payoff subsided new demand a bit of timing and then so that's kind of part 1 and then part 2 just if you could.
Color that with and.
And the geographies that we're particularly.
Productive and or kind of within segment. Thanks.
Yeah, Jeff I think that we did.
And our minds kind of overachieve, what are what our forecast was but it really was the culmination of our pipeline and a lot of those new relationships, which I referenced.
About 170, new relationships Thats been a focus going forward and we were just very fortunate.
Whereas we won new business and won market share almost across the board and all of our markets and we were able to get those loans closed during the quarter, but with that we have a very strong and almost equal pipeline to what we had going into the second quarter.
Some areas, where we we saw that growth it.
It was in <unk>.
Core manufacturing healthcare distribution, where key areas and we saw the growth really both in the Midwest.
And in the West, we especially had solid growth and.
And in Colorado.
Arizona, California, Texas and.
And in the Midwest really the Dubuque, and Iowa kind of lead that group. So it was very.
Kind of consistent across all of our markets and as I went through the various portfolios, we had solid growth really across the board.
Got it thank you and.
And.
Ill circle back.
Brian on the.
And the expense.
And you talk about professional services staying.
Perhaps elevated.
You talked about kind of the the expenses flat to 1 on 1 on 1 O 2 what's the.
Maybe a difference there did you have some some 1 time and the.
Expense.
We should back out.
Yeah, well I think obviously projects and consultants are in there. So as we do project some of that moves around.
But I think that that line was.
What's the and when I had given guidance last quarter and part of that is we did think about upping our timing of some of our projects and moving things forward given that we had the fee income.
No benefit there was going to come from PPP too so.
So it'll be a little bit higher than I thought from the last half.
Higher there.
Still working on what it's going to be for next year, but.
We will continue to fund projects that we think are good paybacks and work on digital.
Technology and tools and applications so.
And maybe a little bit down for next year than what we spent this year, but we're going.
For the year and to invest.
Jeff.
Just say and I mentioned several of the investments that are ongoing for us we made a conscious decision to accelerate some investments that we had planned on and 'twenty 'twenty 2 into 2021 and that's why we're seeing those those elevated.
Expenses, but I would say they're all around.
Customer experience and improving how.
And how the customers interface with us from a digital perspective.
Okay.
And sorry, and just had 1 last 1 on the M&A front.
And you guys have been pretty.
And.
Active on the M&A discussions and I think really signaled California was was there was quite a few conversations there. Obviously, we've seen some deals just wanted to kind of check back in and see any territories and particular that sure yes.
Eyeballing are seem to have some some momentum.
Yes, we're seeing Jeff This Lynn Fuller, we're seeing a lot of activity.
Some of the activity, we're just simply passing on because it's too small or it's not a good fit.
And we've lost a couple of deals because.
And where our stocks trading for.
A larger transaction.
It's a little difficult to make those work and still stay committed to our financial performance metrics, but.
I mean, we're still looking at deals and Colorado.
Denver area and.
Arizona and the Phoenix area.
Kansas and the Kansas City area.
Texas.
This west, Texas, specifically in California and.
And we'll be making a number of calls.
This week and California and.
Last week I was in Montana, So there's no shortage of opportunities, it's just a matter of <unk>.
Finding the right ones and kind of sorting through them.
Action and I appreciate it thank you.
And your next question comes from Terry Mcevoy with Stephens. Your line is open.
Hi, good afternoon, everyone.
Good afternoon Gary.
Brian Thanks for all the financial outlook.
And that's always very helpful. Maybe I'll start the the rollout of H T. L. F. What was it in April we talked about it last quarter I'm, just curious 3 months and to that what's been the early feedback and or are you hearing what you were expecting and is it has it been effective.
Sure This is Bruce.
It's met our expectations I guess is how how we would say we think that H T O. After the more contemporary it's easier for some of our customers to understand and every 1 of our markets uses the financial strength of H T O F a little differently and.
And some.
Some of our tag lines are.
Iraqi Mountain Bank powered by H T O F to try to explain a little better than we have historically the <unk>.
<unk> 18 billion of resources and assets behind each 1 of our.
Each 1 of our member banks and I <unk>.
And we're starting to see that.
And in a positive way as we've gone upmarket and attracted new customers.
From a commercial loan standpoint.
Thank you and.
And maybe ask a question on on Slide 13, which is the <unk> digital strategy somebody put a meaningful amount of time and to that slide.
Bruce what's the what's the key takeaway from that slide and then from an expense standpoint, there's still a lot of work in progress.
Cons, there where are you and maybe use the baseball analogy what inning are you on that in terms of.
The expense side too and then kind of checking all those boxes off so to speak.
I'm going to let Brian take the kind of what inning we're in.
But I think that the big takeaway here is that we are focused on the customer and the.
<unk> changes or their behavior, and we're trying to get out in front.
Of.
What the customer.
Vacations are clearly our industry is being disrupted on many many fronts.
And we want to become 1 of those disruptors and make it easier for all of our customers to do business with as I mentioned when I was talking about the consumer loan growth I think it was 13% of all the loans that we originated.
We're done online.
A year ago, we didn't have that opportunity for us. So we are those investments are beginning to pay off for us.
And that's what's enabling us to prune.
Our branches.
Well as attract a different type of commercial customer than we ever have in the past.
Ex Brian from an inning perspective, yes, I would say, we're probably in the middle innings here I think we've got.
Lots of things that you can see that our under flight.
And that we're working on a few we've got ticked off.
And I think the ones just generally on the top part of that page are the ones that we're excited about those are going to really.
And will help our growth and our account acquisition.
So <unk>.
Smart to go which is why I think.
<unk> and when.
And we talked last quarter, probably didn't have this factored incorrectly and.
And why our expenses are up a little bit.
And some of these will go into next year.
And so they're not short just quick hit projects. These are bigger projects that have.
And then take a little bit of time, and we're excited about them and I think we're really committed to them and really enhance our capabilities and Terry I think Brian said it right. The top half those 2 are really again customer facing.
As we bottom half is much more about infrastructure necessary to support the top half and.
1 other reasons those consulting expenses went up is inter.
Internally based upon what we already had and flight we were pretty much at capacity. We wanted to accelerate these so we had to bring in outside resources to help accelerate.
Okay I appreciate the color. Thanks, guys have a nice night.
Thanks, Terry Thanks.
Your next question will come from Andrew Liesch with Piper Sandler.
And Andrew Andrew are you there Andrew your line is open.
Hi, I'm, sorry, Oh my gosh.
And I apologize for that.
I was on mute there.
And I'm sorry <unk>.
Covered most of my questions just.
1 on the utilization rate on.
Page 20 separate slide 27.
And obviously trailing 5 quarters.
And just given the environment, but where.
Eventually get back to and then any sort of timing on when you expect.
It could it could return to.
Yeah.
I think.
Utilization and that's your question Yeah, the 28 per cent and the second quarter I mean, the trailing 5 quarters on that goes back to 30% but.
Can that kind of early out of the pandemic. So I guess what would it have been before the pandemic hit and and.
And any expectation on your timing and when it could get back there.
Yes, I think we would have been and the mid to upper thirties, and if you would go back and look at say the.
You know the end of <unk>.
2019.
And honestly Andrew this is Ben 1 other things that we've been.
I guess wrong on and the last.
A couple of quarters, because we thought that that commercial balances and particular would not necessarily continue to grow we would start to see some additional utilization, but that's just not.
Not the case right now so I don't know that we can give you good guidance on.
On when its going to start going up we do think that we've sort of hit bottom and we.
I don't think it will continue to trend downward.
Got it okay. So then presumably it sounds like a lot of us any commercial growth you have going forward and it's going to be.
And you had market share gains.
Yeah.
That is true and got it yes.
Oh, cool and recover and everything else. So thanks, so much.
Thanks, Andrew.
Again, if you would like to ask a question that is star 1 on your telephone.
And your next question will come from Damon Delmonte with K B W.
Hey, good afternoon, guys hope everybody's doing well today.
And we're doing something.
Great and most of my questions have been had been answered, but just kind of curious on the on the outlook here for the reserve level going forward I think Brian you had mentioned.
We continue to be potentially negative or very low for upcoming quarters.
I think youre at $1.47, right now and 147% right now and what's our comfort level for you guys how far down would you let that go.
Well I guess I would ask that if you kind of look and I and I don't know on page it is and.
And that acreage.
If you look back we implemented C. So day 1.
We were at about 115 basis points.
And that was as you might recall under really good economic circumstances, we haven't kind of hit Covid Covid was still only and in Japan.
For China, we hadn't really.
You don't have any any big impact here and then if you look at the next quarter. It was it was coming in yes. It's on page 34.34.
And if you look at the first quarter. When we started to have give impact to that the COVID-19.
And we'd really autonomy was starting to have some worries that bumped up to 135 basis points.
Uh huh.
Bruce and I and Nathan and Nathan you can jump in I think we're thinking somewhere in the range of ex PPP.
We should be and the $1.30 to 125 ish range.
And under pretty decent economic conditions.
Okay great.
Helpful. That's good color and then just 1 other kind.
And my question here.
I think Bruce.
Bruce you May had mentioned about a longer term reduction and branches of around 10.
And the.
Overtime is that was that like a hard and fast.
And you guys have made already or is that something youre, just saying in general given the usage trends of customers and you could see yourself, reducing branches by another 10%.
I'll answer it 2 ways, we definitely feel that we will be reducing.
<unk>, 10%.
We do have a.
A process, that's ongoing and we expect to have it completed here in the third quarter on sort of specifically, how many and we should be able to provide you guidance at the end of the third quarter on exactly how many and when.
Got.
Percentage, yes. That's helpful. That's all that I had thanks, a lot guys appreciate it.
Thanks, and thanks, David.
Okay.
Thank you speakers there are no further questions at this time I would like to turn the call back over to Mr. Li for any closing comments.
Thank you Peter.
And.
Clothing, HD Olaf had a record second quarter.
We delivered a record $1.41 and earnings per share.
We delivered record net income available to common shareholders of $60 million per.
Pre provision net revenue was a record $72.8 million total.
Got it assets were a record $15.6 billion and.
And we ended the quarter with total assets of $18.4 billion.
We see growth everywhere and commercial loans consumer loans deposits and fees and our dividend to shareholders, which we've raised.
The pace this year.
We have momentum.
We're attracting and retaining top talent and driving growth.
Well positioned for the rest of 2021 and beyond.
And I'd like to thank everyone for joining us today, our next quarterly earnings call will be in late October.
Have a good evening.
This concludes today's conference call. Thank you for participating you may now disconnect.
[music].
And twice.
[music].
Okay.
And.