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Great Western Bancorp (GWB)

Participants
Seth Artz Head, IR
Mark Borrecco President and CEO
Pete Chapman CFO
Steve Yose Chief Credit Officer
Jeff Rulis D.A. Davidson
Jon Arfstrom RBC Capital Markets
Ebrahim Poonawala Bank of America
Andrew Liesch Piper Sandler
David Long Raymond James
Damon DelMonte KBW
Janet Lee JP Morgan
Call transcript
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Operator

Good morning, and welcome to the Great Western Second Quarter Fiscal Year 2021 Earnings Announcement and Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Seth Artz, Head of Investor Relations. Please go ahead.

Seth Artz

Thank you, Emily, and good morning, everyone.

and presentation Executive we Financial Officer; Yose, Credit today’s President Mark Officer; for Risk Chief Chief Chief and Pete Officer; us and have discussion, Borrecco, Steve Officer. Joining Knieriem, Karlyn Chapman, Chief The webcast download presentation at through for website and Relations for review Investor available earnings ir.greatwesternbank.com. today’s is our disclosed. remind cause that are those today’s to risks and actual to differ subject results uncertainties, may materially contain like We’d may presentation you today which future to that forward-looking statements from

for call any SEC presented and assist trends Borrecco. relied the which Additionally, measures refer you as forward-looking in contain measure and non-GAAP be further materials, over financial Mark? provided will our to reconciliations disclosures measures. Please turn now to with financial non-GAAP are to I earnings not Mark actual a understanding the performance upon results. of periodic filings, statement results as should as along well

Mark Borrecco

communities. everyone. million. Thank through start morning, our you, Western continued like our great and the to supporting of efforts Bank Seth, thanking by for Great quarter, mission: to customers make income by posting will and Their their $XX.X pleased another and our progress. in life us I efforts net have enriching to walk am but the strong our specifics, continued Steve good I very strengthening Pete would employees enabled with

this He in also for simplicity." complete that larger Severson, our able help much and program. mentioned to The to for with encouraging. further markets. segments loans. support program progress will many private and reduce loans better origination feedback our and us. higher Turning a to down reduction of made time as priority capacity the classified this before ag June of costs. grain The progress nonaccrual to X prices We our Slide transform pilot million with footprint. industry X. peak which basis quarter. bankers and both continues new a additional number These $XX.X XX, small improve just from a than businesses initial through now loans, allow our to are and significant the with of "It’s launched We our following million deposit which demand of the on our We Andy manage billion. strengthening will in $X.XX X.XX% in margin, quarter. We points top this interest for management excluding deferral, originate base we commercial Credit our position the our from the a in remains receiving allowance managing of with improve X and one from XX in customers asset so outlook our on will also earnings. for risk to client with his are PPP, provision easy experience, April significantly small our made us how our commercial excited ratio to he remains process above bankers pursue our quality and because results of livestock we progress capital sector caught small underweight made up love total expect improved encouraged of prices XX larger am progress credits. I upgrades And through in of net ag basis a will holding I point which credit the center, upgrades loss particularly at enhancements will the recapture decrease Omaha. average. that This in in quarter past days new made a by $X will was, pilot create the I’m be customer And business the support relationships

center business all end small the markets September. by have rolled to of expect the out to We

As efforts making of heart am strengthening I mission great of the progress workforce and our our our of by is Great current support sustain and inclusion for call, our of diversity, our of and and inclusion conscious at I mentioned create employees’ our campaign life proud our communities. to empower a the and the customers at #BeU to culture a support equity Bank. beginning Western and enriching and at diverse

encouraged am our I economic markets. forward, Looking increased in the activity by

of as in improves, I office weather back at in the the the as full our August is well. capacity date expect growth team And a XX% with to Our improve return-to-work Midwest X. opportunities

our will results, turn Now I to review Officer, the a Pete over the Financial call of Chief for financial Pete? Chapman.

Pete Chapman

morning and everybody. good Thanks, Mark, to

Looking accretion one-off the our combined with benefiting primarily in income as was with growth from has been of liquidity excluding funding our $XX decline $XXX of we our compared items, from was like amidst prior points basis income quarter, slowdown decreased excess $XX was earnings lower strong, in reduced earnings good operating the underlying When credit generation adjusted OREO nonaccrual in NIM interest of Slide low quarter. related been X, a net Net recoveries, this items. FDIC expenses see pretax revenue to another accelerated loan you’ll PPP X.XX% had coupled X.XX% the million million, interest down And fees, liquidity. balances XX X, deposit along excess Noninterest helping NIM volumes. quarter. by have costs, this quarter supported guidance we pre-provision underlying with with million to X.XX%, X.X% income the with with select adjusted in of benefited also quarter and PPP to to at managing Slide $XXX And lower see costs net prior focus and by On million. insurance. offset and core interest compared impact costs below income on supported strong seasonal loan

pressure And forward. We going on we’ll effect full of be interest-earning cash expect the our higher managing from position further prudently NIM assets.

in an just to a of $XX was increase million with billion $X.X XX% cash on of of compared quarter linked million securities and year cash average the Our ago. that $XXX

Looking million loans round. $XXX in round X. originated in $XXX from million million balance the have million first outstanding at of still was all PPP In the loans from PPP PPP quarter. loans been round million of And million. first quarter, compared the as Slide remaining to $XX.X the the we this was of be and forgiven latest $X.X interest income is for March fee there $XXX Total loans to and current of fees amortized. XX, $XXX

PPP the loans, $X.X favorable to prior volume adjustment led a million $XX noninterest credit The originating off derivative tapered from quarter. million. Slide X, of environment rate significantly. was has still of $X We’re an the increase increase income On total though million, in

overdraft item, this million lower due seasonally prior quarter million in $XX.X with income core Excluding was compared revenue decrease to $XX.X less the mostly and also lower insurance crop income. income, mortgage to the

uptick our and supporting that improving from also quarter below Looking year, up costs assessment. and accrued the we The with costs true-up expect levels. and the this to key towards to by at quality. quarter we an our Slide $XX driven $XX so gives have prior low, line due asset million per improved in benefits expectations on salaries was million increase X. slightly a Overall million quarter. from January incentives. but remained million to $XX far $XX OREO asset effect also And in OREO Noninterest our technology in tracked still in benefited increases were initiatives this higher expenses the of FDIC primarily around merit stability

due we quarter million recaptured losses the to This provision prior loan in on for in provision quarter, an to $X in of the balances the quarter. $XX.X million credit loans current compared reduction

Moving to X. Slide

at million $XXX from due compared loan end was to ACL quarter the the lower balances. quarter the decrease our see the $XXX prior You’ll million of with to

fair mark portfolio we against loans which our $XXX addition $XX million $XXX from was have the million down In of long-term rate value to quarter. million prior $XX million, the ACL fixed

with combined Our basis XX.X% see increased XX XX total puts total X ACL and to commitment at we loans, loans. coverage XX unfunded X, Tier PPP reserve, basis million credit capital On our fair Slide capital a points to total points of $X.X increased value XX.X%. X.XX% ratio from X excluding earnings, per the mark, in dividends reduced levels. our Also, are to and the to improve capital risk-weighted helping increased reduced equity Positive XX.X% quarter. points linked and common tangible our basis capital $XX.XX per Tier share assets share $XX.XX up increased share, book value quarter. during per

of manage has prudent to $X.XX capital, outlook. a again our for once we XX, quality, with to combined believe declared the uncertainty some current our dividend still it’s XXXX. share continue ended the March per given the improving, We asset which, while Consequently, in quarter environment,

evaluate overall. but conjunction in will management classified showed do We some of capital which elevated have to assets, level the with continue improvement quarter this again remain close

average quarter. while $XXX Looking million deposits or at as quarter $XXX decreased to continued the balances And up time to billion by mix million. increased improve million $XXX in were deposits. during the average XX% $XX.X They

related balances customers decrease Officer, of is update end deposit showing Steve that, deterioration. over the loans, ago. of quality points trend The hotel cost million decrease progress, seasonality which of Our from of decrease Steve? period XX of line higher a the deleveraging points commercial in $XXX included Chief key PPP consumer segment our across commercial repayment hand XX to primarily at refinances real of asset now loan a quarter basis basis million $XXX of With metrics points $X give million XX year liquidity. holding or to in declining non-owner-occupied sale in through Approximately secondary was a the prior million the just Yose, over loan to was Loans points segments. when levels remaining Credit the $XX $XXX XX and billion, estate and of paydowns a on quarter and credit the decline. risk-rated that loan prior some excluding to the market, the general higher and consisted total from I’ll down the were from down basis points X the of an

Steve Yose

you, Thank morning, and Pete, good everyone.

As one quarter. we asset number to Mark improvements stated, And made last progress our following from improving be further continues have quality. priority

down The only of X.XX% business deferral of our small form Mark focus Our and with progress some loans few exiting majority our the much We risk a to parallel a making with of loans, the saw credit smaller management, along consecutive on problem outlined, stronger more risk significantly credit specialized making loans to success interest $XX.X on our with us administration. have And those in management with total improvements portfolio rating culture in are or million nonaccrual excluding initiative, requests Loan is metrics in administration of our quarter credits. efficient allow with credit as of deferral upgrades. evolving commercial PPP. and dropped our of be will on balance payments. classified

hotel pleased due from a Classified am annualized. with quality to of were charge-offs Our a commercial progress loans loan position. us asset hotel X.XX% with XX, Classified down hotel we -- diversified non-ag $XXX larger will all are loan to began and small- a across Classified in On how and and a payoff portfolio $XXX workout of is reducing X% continue the than were grain we loans Slide portfolio. the of and payoffs we loan, to quarter. And have X% coming hotel and casino quarter. Nonaccrual decreased on see were momentum On also groups out to partially Net are workout segments the quarter. On of or substandard summary hotels, asset prior loans in annualized. $XXX our to and few by loans locations. management Slide total the season, or a with progress paydowns of driven ag to loans a the $XXX I accommodation the risk XX, $X.X the our Pass-rated, of is million, our provide of balance few footprint of sale loans The and XX net our loans stronger along $XXX classified the decrease total portfolio a making to of XX, downgraded casino ag credit our of of overview by the offset a across our in and the upgrades. prior quality moving which X% is $XX $XXX winter toward hotels, have further well-diversified classified XX% million, our by of million quarter, X.XX% to a decrease due $XXX number deteriorating $XX comprised from million quarter, upgrades were portfolio $X.X and of hotels million, pandemic mid-sized And loans a this more decrease $XXX of charge-offs the excluding million in of in out million loan downgrades. after quarter. of XX, metrics. of On were year segments. million key we spring $XX million PPP you XXX Slide total of an $XXX and remain portfolio coming excluding will of million minimal Slide see million of million of managing and the casino Pass-rated, hotels A this you and and hotel is book million, loans. are will with summer. million transition diligent livestock reduced assets.

April both for the up -- reported USDA a margin farm the $X.XX for hundredweight XX% opportunity last reduction indicating USDA ag corn primarily are driven and and per per is Class has corn Mark soybean futures for milk As for bushel $XX.XX of estimates have by agricultural outlook further in by to good XXXX products. remaining which notched projected The in remained tracking upside, that. for of noted, and bushel producers. U.S. the price prices demand showing to and above as soybeans, XX% increased inventories, March few reports $XX.XX III

in credit stability Our determine up a to commentary. to Mark. risk turn continue health my cycle, wraps will proactive COVID we That to indicators ratings. I and through cumulatively has early care it shown appropriate back risk now be portfolio identifying

Mark Borrecco

Steve. And portion call. of for are Thank the we you, question-and-answer the ready now operator,

Operator

Rulis question Davidson. from comes Instructions] [Operator The Jeff first from D.A.

Jeff Rulis

before like the you of the that related you’ve sort loan progress to made of to maybe when net could in in loan continued that, growth see growth turn could to potentially have we net at level, loan sounds until if Looking going on the positive positive. wait the cleanup, terms credit a potentially then to occurring. you’ve provisioning just are it speak check workouts got made And we to Wanted on the outlook and provision? progress

Mark Borrecco

is This then I’ll start. it turn additional I’ll Jeff. for over and comments. sure, Yes, Pete to Mark and Steve

or from to we time our the think have where working has and loan growth being activities credits when to we attention an and where on So we It that problem looking we taken business how away around those calling those about at focused credits we ensuring portfolio been get we the a either proactive also are net deteriorate. out our before organizational out place standpoint, are, from start they manage normal institutionally has as some pandemic. and/or

say So think where when we think I talk growth about loan do I has our or we would where started is, engine the that again. do

pipelines. We are seeing increased

would We are seen couple last down it quality current seeing growth in because has, we increased the ways, activity. focus, But slowed quarters. asset for of have the of what some over us,

get and engine and Pete, Am were And we workout back us. growth that So in increasing, last is again our place other as more this we’re am we our overly be the normal portfolio don’t like activities up Steve, quarter? to our of I hotel believe for have for are that increase things in group, I normalized we’re turns revved and it want starting about a our the before the of to specialized Yes. development better our than do better prior that a with activity other that ring-fenced encouraged group, focus optimistic future? I -- that quarter, to our feel parts second comments? I the as year, that and as means. business increase. gets I I But seeing activity opportunities material our half encouraged will was about pipelines over am. a that the what

Pete Chapman

the expect run though, flat activity as Jeff, us continue be But down I’d slightly just good I really increasing pipelines some line classified causing book loans in top are to a really are the it’s we’re said, well-said, perspective. to to Mark some off the that Overall, think from we Mark. and loans seeing and as market. stress

Steve Yose

that our Those in for workout of focus our handled can on handles Services, And our they new group Mark are credits. field Jeff, commercial mentioned, credits, business. most so bringing Strategic as not the is which classified in Business

that our As hotel well challenged hotel Mark group have the with outlined, dealing as we more specialized credits.

that So will on asset assets. on the the those and will focus other continuing groups focus is improving group plan quality growing our

Jeff Rulis

but might flip it that growth, level. some thoughts provisioning, provisioning the And oversimplify to just a on as that

Pete Chapman

Yes.

as wait We’re due really on of And based balances. comfortable the and see on decline the coverage through we’re in those with you assets. outlook how level But yet quarter, we’re is the customer also reserves perform said, not the to quality. asset comfortable, really as exposures saw we financials get we as it, was Jeff. the Obviously, of during to the just in it result of adequate really this a depends quarter nonperforming hotel improved decline Outlook, summer. as look to releasing some as

Operator

Jon comes question Capital from Markets. next from Our Arfstrom RBC

Jon Arfstrom

the a Steve, going that? talk that end. soon? comments getting And made perspective. on in coming big about you bit the there is you a progress you is credit since used seems comments, And see nonaccruals your one everything you And better step-down in you’ve going relatively it a like a feet, momentum little quarter nonaccruals? of word Can quarter on XX,XXX from prepared be made from But to some nonaccruals. we’re to think where is more

Steve Yose

it quarter, and really I’ve lumpy makeup we be As the hopeful of we future. that last some had asset the the in improvement. had on we can see when hotel with show what’s sell nonaccruals. I our learned improvement quality portfolio, Like and good

can quarter, next don’t I’m really nonaccrual. that’s am until I’m we So bank, payoff. progress is for very at in actual the where loans encouraged our look so be encouraged until to as outline -- we’re to workout money I see just speak, the we going the in that actually I see seeing what We and the

that by loans don’t encouraged there. paid momentum me to from actually And I see off. I until those very we careful very I’m what anything see So And that I’m hopeful want see We some would just be discourage statement. see. we’ll that

Jon Arfstrom

Could this you maybe is to X give us How top balances? point? concentrated at this the X nonaccrual

Steve Yose

nonaccrual say, concentrated and I in more, our ag, balances would So top are more.

Pete Chapman

yes. ag, is X/X

Steve Yose

years X/X legacy a And few more from our ag. that’s is of ago.

We so of have work nonaccrual continued And also feel those hard got right that’s that to appraisals balances. on we’ve do working the those. extremely loan hotel aggressively We And a see and those. that we a we’re on have those through marked with we balance all improvement on. larger

also see significant specific And in so we of reserves nonaccrual don’t amount balance. that

ag, And in further so comment it on with especially factors, encouraged, -- we are validates the momentum. improvement that all those we with my the

Jon Arfstrom

question of capital bit in for goes terms allocation, buyback. But little Mark, you. guess. talk next you’d a maybe thinking dividends potentially even of quarters or I It a what to kind of confidence, overall see about like for happen few the to

Mark Borrecco

we had And conversations that. internal around have Yes.

or can have over dividend months, the see are too how that our we’ve and use. taken With elements other those for that discussions back improve. some asset our to then to see comfortable Once that about that buyback, think material given of referred best improvement, overall that that and all the the early, I around we I is. conversation of us, nonaccruals with seeing say see that last material to consistent want and that quality the to where XX things it’s am approach with capital quality still asset performance, let’s table. that where our conservative throughout to we But Steve our momentum we I put are on then are share improvement

Jon Arfstrom

looking better a talking elevated come through again growth. you’re lot and a balance loans you economy. goes But loan but company, still Are Last time and silly like nonaccrual the more about the about seems talking to same but this the at we’re potentially spent we’re the topic, improvement, this It you’re of optimistic? digging question. question, you’ve down, seeing seeing

Just how Mark, are things, general? you feeling about in

Mark Borrecco

are. faster we mean and question is a about improvement better ask we would myself or I see it that accelerating that do classified fact much Yes. likely levels, ourselves ask where I were nonaccrual the would improvement, And love in And we if see feel did while our to losses. often. our we I that it’s faster

is the they fact the sizable how continued are higher, economic that responding team going and I hard to fact lending the are is key our being more And and And the that even I expect a the initiatives, the business is we’re better. see small that improving, activity employee organization Steve’s are doing, the markets I some all that would sentiment see so on improvement know, through, center, fact fact this we end-to-end prudent, in what based quarter. process the overall work overall better, of that is engagement pipelines revamp like to getting our and

issues. an for also elements lead maybe in up. bit some in that, we’re before, it neutral and performance getting And that trying those were solve It’s that of was last me to of clearly optimism. know increased All I revved engine have a to mentioned year drive me now as we I we like

So and the optimistic second into going I about far am more XXXX. half

Operator

from Our comes Ebrahim from America. next Bank question of Poonawala

Ebrahim Poonawala

follow I this are are think specific ag you minimis PPP, had wanted I X/X guess, nonaccruals of has ex loss lending, are correctly, Historically, de I you no your to again reserves which content. reserves. mentioned at on credit. X.X% heard up If there just

what I specific balance some the things you outlook to any appreciate going the it us And or move want you to So to But to safe think be of guidance of in And remind in back give for don’t look to as what pike? would is loss us through assume on that terms your talk environment day is recognition reserves. of these strong? a of if now capital, normal reserves from is steady-state X already comes a months Pete, us CECL get like for that lot one of you X.X% X back into which terms reserves, very sheet? we

Pete Chapman

certainly. sure, Yes,

comments Steve, around make any Ebrahim, that? do in of terms timing, you want to loss So

Steve Yose

Yes.

earlier, nonaccruals, that have nonaccrual we a the loss There in book do a decent of -- specific theater our a allocation see have against agribusiness mentioned a those we -- a we as well against are of against. that that have COVID-impacted the allocation I hotel we spoke I appraisals we that few decent those we properties spoke form allocation earlier. to in as properties, So significant that as

everything So minimal But being I we I and our the actual hospitality specific want next uncertainty are we say know to we and come folks point the everything with -- as we’ve reserves, higher industries are which because until the speak far reserving how improvement hotel in want And careful specifics, those classified. by book, X this just don’t minimal to and COVID-impacted hospitality, let the of see that we then I’ll talked has Pete the as about. allocations. have future months, nonaccrual of hotels and we’re at very and against

We how next are just months. of being because very we uncertainty over the X careful on the that view

Pete Chapman

little too that more the of provision in frame, X-month I bit that’s think Yes. a level time I soon. Ebrahim, think terms normalized

we’ve with just they seen down. to nonaccrual work assets, As take time some of these

little we to bit more So maybe hope a elevated line that move are hope coverage period have have a now more move I we it volatility. see more a we more normalized where with from in back we just when than little we because provision more peers, certainly and be ag bit book, where to level, we can you to don’t will do, But think X-month back we certainly be level. a Ebrahim,

line little down to to is might carry we as But certainly, a move more nonaccruals. are the where hope at in peers. we compared bit certainly, moment reserve with the more in So those back get our there others

Ebrahim Poonawala

other the And Mark, I Got it. you. question, guess for

update doing, I are an to in Just give that things of franchise. us the you think, transform improve, terms

progress some highlighted the few quarters. last of You made the over

As than I lower is like Pete’s mean, seems we you’ve where it guidance expense been. look forward, actually

So does what future account spend us about bankers to markets to just of how are that and are thinking And personnel? adding terms into? of in any investment looking in talk terms on expand and technology you you into take

Mark Borrecco

Sure.

previous yes, So for bit guidance expenses guidance. our is down the the a from

do by deeper to For get want initiatives level to talked from our our lending into we our that the we about do. process we that we types with of business We commercial our are, need that you us, the I very ability early or are able that organization, we what our the initiatives look the are used, guidance, words where am these to, to the strategic some that of organization, make the at investments use we is to which the benefit as bankers exceptional. comfortable transform, key on. move of to engagement end-to-end encouraged of -- have the We small revamp, center. know dive

to Deloitte improvements. of counsel accelerate coming have and us those We in to some help additional provide

I the to where how we think about and want continue mentioned growth. to support markets that you

additional Moines. City, Tucson. Omaha Springs, Fargo, Kansas Des growth in about Colorado We and about about think So we about think

in have We opportunities Eastern Iowa.

a we us, of shortage for grow. it’s want so where And to markets not

will of Colorado leadership. We’ve We bankers commercial had key markets. in some of either teams for in example, look our experienced those bankers and/or to in hire upgrades some significant Springs,

through how need those to. a clearly basis those a us markets we’re knowing and key make we to in continued as technology And that their our that well easier making lot it we progress on do. do for improvements as and about investments make employees But to making I to do targeted work process so progressing expect feel kind that just to that more that’s jobs improvements. of sure good there’s really

Pete Chapman

rate really has OREO lower recognizing lower Ebrahim, it than is what tracking run Yes. expense done just guidance expense And is historically, Ebrahim.

we little acknowledging balances sort with a of So be doing flat that business bit but still OREO much that very the to we’ll in think. just investing better declining, there,

Operator

from Our next Liesch question Piper Sandler. from comes Andrew

Andrew Liesch

portfolios But years, of yet do it’s you from ratio you where X, where so the about settles down question do for Steve, think level because at and and nonaccruals you the talking the years reserve overall near line to many X have ultimately you’ve classified term think the the looked through. here, I’m -- like, and in the look, just out? some work Just, necessarily allowance loan not on

Steve Yose

of Well, $XXX level I state. than loans years. stabilize at I million we I we’ll we but can ask I would to Pete think nonaccrual get I’ll quality that, a of we that you’ll like level million allowance the $XXX I get talking that. definitely But have goal to in as to about And less about I nonaccruals. can X be be to hope other then and myself that talk stable with than at nonaccruals, if at would asset questions. better will if bank that that to a hope think see about get a -- there, to let better questions for can I me

think that, where And that’s suit will follow with get kind I we can I where to. I the see that. probably allowance and So of hope us

Pete Chapman

XXX% agree, I Steve. Yes,

the due some and So the analysis we higher, released more peer but we’re a from to that fall of not in know to around if then said, Maybe line peer [indiscernible] normalized away I Andrew. getting from just as reserving peers. course Andrew, in volatility more think, perspective, we back bit levels level a to quarter, some I of back little a ag quarter little you’ve over protect then, materially the with

Operator

David from Long comes question from James. Raymond next Our

David Long

the appreciate early Mark, competitive have about maybe, on that building some in bank presence. tenure, business has And know you’ve talked you more guys of the given still your small on I a color the progress made. I

there’s any if point. you this and point some tangible evidence to success there at stand you where can curious of Just

Mark Borrecco

March XX. the Yes. We launched pilot

several I small most that’s size, thing much chance this within we the to far, will for team the So more the would pilot And the also in check X infancy. very going sample in and organization, with with is early returns, love pilot small and keep has have the key The have the evidence, definitely But bankers. positive. albeit next again, elements. I call. and really of a is did a so back encouraging, initiative I the to very business tangible its to

million those smaller client credits same we Because simplify really but small also manage we have managed we improve million, manage The and first the credits the employee just experience. is significantly the That $X $XX credit. and smaller originated our those way improves historically, credits. how and improves experience, originate it

involved, the the costs to amount benefit not the was work to into all and organization significant So the yet was necessarily of or put the line amount of in upside it. oversight and work the with

us for much be bigger we how pool efficient is markets. now can within clients can with a benefit more second those banker The that handle a of

customers today, increase our So a grow through small a management, sticky way, services piece a packaged services, also don’t before, to through income also noninterest other activities business that they can merchant to now large is XXX that we It’s program, to maybe XXX customers. for treasury or is great low-cost, XX last they or help of The me where business. way could a really deposits. help portion have

important for business small element grow that, on out larger really those again, for is credits and the reasons capacity to as So those go and creating additional the top of well. organization

because now right David. next March conversation, evidence So is have you more for began we’ll the But in again have pilot that just XX. the all really we tangible

David Long

I round and relates left And curious how you end the that X it and the rest forgiveness of my $XX color. year to about of see the you with playing know goes next the PPP into with just the year? through on And thoughts, I question your at all? out second Sure. do then think round And million fees, X you program. appreciate do then in talked maybe

Pete Chapman

just bit, the it a accelerate. revenue, keep little to of quarter, -- calendar, But it’s does yes, go year bit clean. will this I into talking if calendar drift to this starting Look, over $X saw it I million just with but think it year, little you probably think out next a you’re

materially think quarters and next the after of less material that. maybe I couple So

Operator

question next from Our Instructions] KBW. [Operator comes Damon at DelMonte

Damon DelMonte

first my outlook So my just first question -- and the relates the just to margin there. question

thoughts on around excess to into Or could in wondering and you Fed the in think, a for the had that some the core your Will was bit you funds? look I low-yielding liquidity about how you interim? kind stay managing just and the margin. mentioned securities that would is expectation I Peter, you’re of talk that. pressure move if little that

Pete Chapman

quarter. there that was we to increase the some of look, had would some some of the Yes, Yes, thanks, Damon. see end I towards liquidity -- actually because expect pressure

of at come not of And that terms see some through significant liquidity deposit in quarter. the So we’re this seeing outflow full this drag, you’ll that effect with stage.

around think see stay just do to that pressure. opportunities. some advantage the will cause look, But of where so in just of for will we’re take that we we terms Damon, moment, being So the And then, deploying that, trying measured.

last bit as we the sub bank on well. put quarter. Certainly, a BOLI debt in bought little some of we’ve So

for chip expect as I opportunities. just will here team balances and well. But be at to away the next would low-yielding look So elevated that and to cash continue at the quarter

Damon DelMonte

kind great. think Mark, returns, lie the this please? in again you could Okay, and other greatest when you’ve one the touched being from some growth opportunities, of But your as perspective, the you kind in well for remind commentary of on your about opportunities us And very responses. in footprint geographic a where of characterized just I of then ready just

Mark Borrecco

sure. Yes,

Midwest So kind we’ll in the Northern of and start the part.

So commercial think we like a best-in-class I I for feel really Fargo, team. have example,

And that investment opportunity. leverage and the able to some so market, I additional Fargo make see being in

continued work have we and in Omaha opportunities growth. way regard. the down our Moines, we that challenged geographically in Des Within clearly, -- not Dakota, Midwest, obviously, for South I’m As

for out to in and nice big bankers still past Iowa would of City, Dakota win opportunities wins our we and growth expect Kansas as expand us really really difference this that had to and Iowa. think Eastern for a opportunities there’s continue We Sioux in within We and week, Eastern make go talked in markets, Dakota, Falls South get and see I some that I to key other South our Iowa opportunities. some a market. see about bit we footprint. a Eastern additional us

we those the As a to there, growth. the with that that the for a and we some an have and move some starting market, Colorado Colorado in upside there. again to area new presence progress Springs, early we I bigger think to about over see where but grow in Tucson, market. we opportunities have out the we’re would much market, Arizona banker shown And nice Arizona can place X for us moving and there grow And growth areas states team then the over to that expect leadership market. Colorado in just and are years our markets I clearly We’ve forward. see pattern continue overall, to in leader

Damon DelMonte

appreciate a great the color. I That’s rundown. Excellent.

Operator

comes Lee JP Our next from Morgan. question from Janet

Janet Lee

before capital Following nonaccrual referring up level what to to it Steve consider referred about than you goal? as nonaccrual buybacks Mark’s a Or increasing in are returns? Is dividends, or that to? like X% being X.X% of see ratio that to to improvement on material comment could higher raising assessing having as a be

Pete Chapman

it could be higher Janet. a than that, little Yes,

long-term goal towards. than could we capital. from it we’ll little Steve look it that’s a deploy yes, Absolutely, that bit a But some So higher be when be. look could that to

Janet Lee

Could be is like or X%, it...

Pete Chapman

any got haven’t we Look, yet. specifics

sort with I in key sort we’re is number, is sustainable quarter, improvement a line, looking improvement. to to X in to It’s we’ve a really over think Janet. comfortable than and white for that that not X number be of of the at X you. the It just moving just quarters us sustainable honest really thing it’s black rather seen more getting

Steve Yose

strong want that me quality be we be state an we as that and make mean to before good be, a focus doesn’t it number be longer high bank. where to will go And sure a is will far being asset where that quality. we a and as will really always I we to other there’s able where high asset state things a then, a I as at referring that it lot but focus. the do was no and believe of for us can But adequate mean, retain

Janet Lee

to prospect coming see back, tourism overall Or understand to we the and continues this assuming the or hotel say reopening see economy and is But X should it sort material that relationship, of are quarter working an of down may may of given hard Got the done? recovery last how another that the hotel be predict. additional travel on it. it are I to it’s quarter still hold, be take where out, And so like improved downgrades largely we basis, additional we assessing basically or borrowers, hotel you hotel downgrades? where sort Are your road? the fair

Steve Yose

next timely So we approach. And I rating. well that taking cautious tourism, the we risk We say our a be are quarters. would to in try X very doing very anticipate

I look at we of lot in go places have out visit, we stay a I But think to places people and hopefully future. not travel and footprint, past to to lot in improve back the of our getting are been in the When see quarters. a do business the going you it But business being and hotels. people for visiting. also some great to next X great lift the has hotels. don’t have in see that getting will that I much degree

statements tourism happen and that So coming -- forward. to look don’t we cash at that makes uncertainty with also sure make documented vacation to and to have the the flow want I going season we financial fact what’s and going me as know pause in, really wants have we

be next is quarters, to say, careful. optimistic I uncertain. hopeful, I’m want The but do X I So and would uncertain. it’s

Operator

closing Mark the back today. the to for question-and-answer like would I remarks. our concludes for and much, all Thank so thank to This Borrecco, call you Borrecco session. Emily, you over CEO, conference joining turn Mark the

excited progress. mentioned, we’ve have, Take we’re with out about continued our Please you a reach day. follow-up have and that As care. wonderful any

Operator

for has conference The today’s attending you concluded. now presentation. Thank

may disconnect. now You