Fulton Financial Corp (FULT) 2020 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Fulton Financial Fourth Quarter 2020 Results Conference Call. (Operator Instructions) Please be advised that today's conference is being recorded. (Operator Instructions)

I would now like to hand the conference over to your speaker today, Matt Jozwiak, Director of Investor Relations. Thank you. Please go ahead, sir.

Good morning, and thanks for joining us for Fulton Financial's conference call and webcast to discuss earnings for the fourth quarter of 2020. Your host for today's conference call is Phil Wenger, Chairman and Chief Executive Officer. Joining Phil are Curt Myers, President and Chief Operating Officer; and Mark McCollom, Chief Financial Officer.

Our comments today will refer to the financial information and related slide presentation included with our earnings announcement, which we released yesterday afternoon. The documents can be found on our website at fult.com by clicking on Investor Relations and then on News. The slides can also be found on the Presentations page under Investor Relations on our website.

On this call, representatives of Fulton may make forward-looking statements with respect to Fulton's financial condition, results of operations and business. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, and actual results could differ materially. Please refer to the safe harbor statement on forward-looking statements in our earnings release and on Slide 2 of today's presentation for additional information regarding these risks, uncertainties and other factors. Fulton undertakes no obligation, other than as required by law, to update or revise any forward-looking statements.

In discussing Fulton's performance, representatives of Fulton may refer to certain non-GAAP financial measures. Please refer to the supplemental financial information included with Fulton's earnings announcement released yesterday and Slides 11 and 12 in today's presentation for a reconciliation of those non-GAAP financial measures to the most comparable GAAP measures.

Now I would like to turn the call over to your host, Phil Wenger.

Thanks, Matt, and good morning, everyone. Thanks for joining us today. Today, we'll follow our usual call format. I'll provide a high-level overview of the quarter and the year, then Curt will share some thoughts on our business performance, and Mark will discuss the details of our financial performance. After that, we would be happy to take your questions.

We were pleased with what Fulton was able to achieve in the fourth quarter of 2020 and for the year as a whole, given the environment in which we have been operating. The prolonged presence of COVID-19 and the extended low interest rate environment have made a very challenging year. But to me, the word that best describes 2020 is resilience. And by working together, our company, our customers and our communities have withstood nearly a year of extreme challenges. Thanks to the creativity of the Fulton team, the partnership of our customers and the support of our shareholders, Fulton has continued to fulfill our purpose to change lives for the better even in these most trying times.

Overall, many of our customers have managed to hold their own, and we were pleased that nearly 10,000 small businesses and nonprofit organizations calling us for approximately $2 billion in loans through the Small Business Administration's Paycheck Protection Program or PPP. We administered round 1 of that program in 2020, and we began helping our customers through round 2 earlier this week.

In 2020, there were other signs of customer resilience as we saw significant deposit growth and diversified fee income for the year. Our mortgage business had a historically strong year, and loans grew in both our consumer and commercial lines of business when excluding the PPP loans. Our wealth management business also performed beyond our expectations.

Our asset quality remains stable, and Curt and Mark will discuss this in more detail in a few minutes. And we successfully accessed the capital markets with a subordinated debt offering in March and a preferred stock offering in October of 2020, enabling us to continue to build our capital position.

Despite the challenges of the low interest rate environment and the effects of COVID-19, we were able to make progress towards achieving our strategic priorities. We continued on our branch optimization activities. In the fourth quarter, 50 of our financial centers changed formats to better meet their customers' needs. And on January 8, 2021, we consolidated 21 financial centers into nearby offices.

Since 2014, we have consolidated 58 offices or approximately 23% of our total locations, continuing to make our retail system more efficient. We continued our focus on growing our presence in the urban markets of Philadelphia and Baltimore. In June of 2020, we opened our new Yard 56 financial center in Baltimore. And we have announced plans to open a new financial center in University City, Philadelphia. We are planning to open additional branches in both Philadelphia and Baltimore later in 2021 or early 2022.

Over the past 18 months, we have been recognized in both Philadelphia and Baltimore for revitalization in support of those communities. And we are pleased that we are increasingly viewed as a contributing member of these vibrant and historic cities. Some of this community support is now coming from our newly created Fulton Forward Foundation, an independent private foundation funded by Fulton Bank that makes donations to nonprofit organizations that share our vision of advancing economic empowerment, particularly in underserved communities. Last year, the foundation made special grants to support organizations that were addressing COVID-19 in the communities we serve.

In 2020, we worked to deliver an appropriate return to our shareholders, maintaining our quarterly cash dividend of $0.13 per share throughout all 4 quarters and declaring a special cash dividend of $0.04 per share in November. Doing these things help us demonstrate to our shareholders how much we appreciate their investment in Fulton Financial. In 2019, you may remember that we purchased 2 wealth management businesses, and in November 2020, Fulton Bank acquired the outstanding stock of BenefitWorks, Inc., a registered investment adviser and retirement services firm in Central Pennsylvania. This acquisition is helpful in financial advisers accelerate its growth rate.

So now I'll turn things over to Curt for more detail on our business results. Curt?

Well, thank you, Phil, and good morning, everyone. As Phil noted, our fourth quarter performance produced solid results. And I'd like to share some more detail on several key areas. Overall, loan growth trends for the quarter were solid, excluding the impact of PPP loans. We continued to generate relatively consistent amount of commercial loan originations, and we saw continued residential loan growth. Commercial loan balances, excluding the PPP loans, increased $190 million for the quarter on an ending balance basis. Looking forward, our commercial loan pipeline at December 31, 2020, is down only 1.3% from a year ago. We expect that loan originations in the first quarter will be adequate to support our annual net interest income guidance in our outlook.

In consumer lending, our loan balances grew $58 million linked quarter on an ending balance basis. More specifically, residential mortgage results continued to be solid, producing linked quarter ending balance loan growth of approximately 2.6% or $80 million. This growth is in spite of significant refinance activity.

Given our asset-sensitive balance sheet and the high-quality nature of these residential borrowers, we have room to continue growing this segment on our balance sheet for the next several quarters, and we expect to continue to do so. Deposit growth far exceeded our expectations for the quarter as noninterest-bearing demand deposit balances grew 2.4%, despite experiencing some seasonal outflow of municipal deposits during the quarter. Overall deposits grew $109 million on an ending balance basis, with growth in checking and savings deposits, offset by planned runoff of higher-cost certificate of deposit. We continue to actively manage our deposit portfolio. And deposit cost declined 6 basis points during the quarter, down from 29 basis points to 23 basis points.

Moving on to fee income. Our fee-based revenues decreased overall during the quarter. As a reminder, the third quarter was very strong in terms of fee income. In the fourth quarter, we experienced declines in certain areas offset by growth in others. First, mortgage banking revenues declined $7 million after a record third quarter. These results were still $4 million higher than a year ago. These results were fueled by both strong originations and historically strong gain on sale spreads. Total residential mortgage originations for the fourth quarter of 2020 were just over $807 million, an increase of 59% from the same period last year, and our purchase activity is 57% of total originations. Our mortgage pipeline currently sits at $737 million at year-end, seasonally lower than the third quarter, but continuing to be elevated that we've seen in recent quarters. Year-over-year, our mortgage pipeline is almost 3x that of the prior year.

Next, our wealth management business performed better than we anticipated as the stock market edged higher for most of the quarter, and we continued to benefit from a high level of recurring fee business. Our assets under management administration grew to $12.8 billion at quarter end from $11.8 billion last quarter. Capital markets revenues, which are primarily commercial loan swap fees, declined in the fourth quarter. This decline came on the yields of several very strong quarters.

Moving to credit. Overall, we are pleased with where we are given COVID-19. Using the CECL methodology, we feel we are properly provided for potential losses. In terms of delinquency, we saw an increased linked quarter, but delinquency remains stable year-over-year. In terms of net charge-offs, we actually had net recoveries of $3.3 million, further improving from a net recovery of $2.4 million last year -- or last quarter. We're very pleased with these results in consecutive quarters as we experienced very low charge-offs in the current environment, and we continue to work hard to obtain recoveries.

Slide 14, we have provided updated loan deferral trends through December 31, 2020. Commercial loan deferrals are down significantly to approximately $200 million or 2% of the commercial portfolio.

Slide 15 provides a summary of the segments we believe may be more at risk due to COVID-19. Our special mention designation has increased over the past quarters, as a result of continued monitoring of the commercial portfolio, specifically the greater than $5 million relationships and the relationships in industries that were highly effective by COVID-19. In our consumer portfolio, the total amount of consumer loans under COVID deferral decreased 56%, down to $130 million or 3% of that portfolio.

Despite these very positive near-term credit trends, our outlook remains cautious for the next few quarters. While our loan deferral trends have been favorable to date, certain segments of our portfolio may be affected by the second wave of COVID-19 that continues to lengthen the full reopening of the markets we serve.

Now I'll turn the call over to Mark to discuss our financial results in a little more detail.

Thank you, Curt, and good morning to everyone on the call. Unless I note otherwise, the quarterly comparisons I will discuss are with the third quarter of 2020.

Starting on Slide 3, earnings per diluted share this quarter were $0.30 on net income available to common shareholders of $48.7 million. This is $0.08 lower than the third quarter. Included in these results were $15.4 million of expenses recognized as part of our cost savings initiatives previously announced. Our fourth quarter performance included a lower provision for credit losses and higher net interest income, offset by lower noninterest income and higher noninterest expense due to the charges related to the cost savings initiatives I just mentioned. Compared to our quarterly guidance, loan growth and operating expenses were in line and deposit growth, net interest income and our tax rate all exceeded expectations. Our noninterest income came in just a little bit below our guidance.

Moving to Slide 4. Our net interest income was $161.6 million, a $7.5 million increase linked quarter, mainly due to fees earned on PPP loans forgiven during the period. Our net interest margin for the fourth quarter was 2.75% versus 2.70% in the third quarter. The 5 basis points of linked quarter increase largely resulted from PPP loan forgiveness and related fee income recognition. Without the $6.4 million of accelerated PPP fee income during the quarter, our net interest margin would have been 2.65% in the fourth quarter. As Phil and Curt mentioned, deposit growth and retention continues to be stronger than we anticipated, and our fourth quarter saw average deposits grow by approximately $400 million.

We also grew our investment portfolio during the quarter as we invested the net proceeds of our $200 million preferred stock offering. And we also selectively deployed some of our excess cash in the mortgage-backed securities as the yield curve steepened in the fourth quarter. Our average loan-to-deposit ratio declined slightly during the quarter from 92.6% to 91.4%.

Turning to credit. Our fourth quarter provision for credit losses was $6 million versus $7 million in the third quarter and $20 million a year ago. As you know, COVID-19 had a significant impact on our allowance for credit losses in the first half of 2020. But as economic forecasts have eased in the second half of the year, so has the needs for our allowance for credit loss. Of course, this could change in future periods based on new loan origination volumes, loan mix, net charge-off activity and economic projections. Nonperforming loans as a percentage of total loans, excluding PPP loans, were 85 basis points for the quarter, up from 83 basis points linked quarter and 84 basis points a year ago. Including PPP loans, nonperforming loans to loans were 78 basis points, up 3 basis points on a linked-quarter basis.

The allowance for credit losses as a percentage of loans at year-end was 1.60%, excluding PPP loans, an increase of 4 basis points from the prior quarter. The allowance for credit loss as a percentage of nonperforming loans was 189% at December 31, an increase from 188% last quarter.

Moving to Slide 6. Noninterest income, excluding securities gains, was $56 million, down approximately $8 million from $63 million last quarter and in line with $55 million a year ago. This was slightly lower than our guidance as a result of lower mortgage sale gains. Mortgage banking revenues were also impacted by a $1.3 million impairment on our mortgage servicing rights during the quarter compared to $1.5 million in the prior quarter. This brings our total MSR impairment for the year to $10.5 million. Wealth management revenues were $16 million for the quarter, an increase of 5% from the third quarter and an increase of 9% from the prior year. Capital markets revenues declined linked quarter after very strong performance for the prior 4 quarters.

Moving to Slide 7. Our noninterest expenses were $155 million in the fourth quarter, up $16 million linked quarter. However, as I previously noted, in the fourth quarter, we incurred $15.4 million of expenses related to cost savings initiatives. Excluding these expenses, we came in at the low end of our guidance range.

Slide 8 provides detail on the special charges recognized in 2020 related to these cost savings initiatives. In total, we expect this initiative will reduce our operating expenses by $25 million on an annual basis. We anticipate reinvesting a portion of these savings in 2021 in order to accelerate the digital transformation of our company. We also plan to continue making normal ongoing investments into our franchise in 2021. However, on an overall basis, we expect this expense initiative will result in 2021 core operating expenses lower than our 2020 core expenses. Our effective tax rate was 9.5% for the quarter compared to 13.4% in the third quarter of 2020, primarily due to lower pretax earnings.

Slide 9 gives you more detail on our capital ratios. During the quarter, we raised $200 million of Tier 1 qualified preferred stock, which increased Tier 1 capital and related ratios. We continue to maintain solid capital and liquidity. Our previous share repurchase program expired on December 31 of last year, and we are considering a new repurchase program for 2021.

Lastly, we would like to provide our thoughts about forward guidance for 2021. We are streamlining our guidance for 2021 to the following areas. We expect our annual net interest income to be in the range of $620 million to $640 million. We expect our provision for credit losses to be in the range of $30 million to $50 million for the full year. We expect our annual noninterest income to be in the range of $210 million to $220 million. And lastly, we expect our core operating expenses to be in the range of $550 million to $570 million for the year.

And with that, I'll now turn the call over to the operator for questions. Deidy?

(Operator Instructions) Our first question comes from the line of Frank Schiraldi from Piper Sandler.

Just a question on -- Mark, you just mentioned buybacks. And Curt, I know you talked about credit, and you said, I think, optimistic, but outlook remains cautious for the next couple of quarters. So I just wonder if, when you talk about buybacks, is that more so after -- in the back half of the year or are you comfortable enough with the outlook to maybe institute something earlier?

Yes. I think, Frank, we continue to evaluate whether or not that would make sense. I think it would be unlikely that, that would occur any time in the next month or 2. But I think as the year goes on, I think it would make sense for us to consider deploying some of our capital in that way.

Okay. And just on the heels of that, given the guidance you provided, and obviously, the preferred raise boosted your Tier 1. Just curious if that any -- if the guide includes or you could share any sort of target on Tier 1 or TCE ratio at year-end 2021.

Yes. Our capital guidance for our internal minimums continue to be what they've been in prior quarters. So nothing has changed with respect to our capital targets.

Okay. And then just finally on PPP. I know it's very early days for the second round. But just curious your thoughts compared to the rush of the first round. Just wondered your thoughts of how large you think the opportunity for the second round could be for Fulton.

Yes, Frank. It's Curt. So we have our application live as of 3:30 on Monday. And we do have pretty significant application volume. It's a little too early to tell. The average loan amount appears to be less than on round 1, but we do think it's potentially a significant opportunity again.

Our next question comes from the line of Chris McGratty from KBW.

I want to start on the guide, if we could. The one that was materially, I guess, different from what we were thinking about was the noninterest income. I'm interested in kind of the pressure points that you see on the horizon from noninterest income. Is it simply mortgage normalizing? Or are there other kind of structural issues with service charges given liquidity levels with some of your borrowers?

Yes, Chris, it's predominantly mortgage. And we had such a great year this past year. It's a little difficult to project how that's all going to work out. So we did the best we could, but it is mortgage.

And how much of that -- like, what is the base case for mortgage in that $210 million to $220 million? What's the contribution?

Well, this year, Chris, we were north $40 million. But with that $40 million, I mean, we've averaged the last 3 quarters over 3% gain on sale spreads. They came off just slightly in the fourth quarter. Third quarter, they were 320. The fourth quarter, they were 312. But I mean that can't sustain itself. And I think with the increase in the tenure recently, I think that will have some downward pressure on gain on sale spreads going forward. So if you normalize that more to where gain on sale spreads were in 2019 which is like in the 150, 160 range. If you normalize back down there even somewhere in the middle, it's easy to see where you would get to our overall guidance.

Okay. That's helpful. On the credit guidance, I guess most peers are kind of refraining from giving the specific of a target. I guess, could you speak to the visibility that you have with that $30 million to $50 million provision? It seems fairly optimistic, but obviously, we all know there's quite a bit of uncertainty that's out there.

Well, I think when you look at what our trends have been and when -- again, we use Moody's for our economic forecast. So if you believe in their base forecast, which will be a gradual reopening of the economy, and understanding how that CECL standard works, we have largely built our reserves to account for future losses that may come as a result of COVID-19 and the effects of that over the prior 3 quarters. So then going forward, our reserve needs would be primarily growth and then replenishing, to some extent, net charge-offs, but based on the economic outlook, you could see that 1.6% ACL loans decline over the next couple of quarters and be totally appropriate.

Okay. And then maybe one last housekeeping, if I could. I think you mentioned $6.4 million of the fees. I guess, what was the total fees of PPP in the quarter? And what's -- I guess, what's left to be realized?

Yes. It was just under $14 million for the quarter. So if you recall, we had $60 million, roughly, fees in round one. We had just under $14 million in the fourth quarter. What remains for 2021 is about $33 million from round one.

Our next question comes from the line of Daniel Tamayo from Raymond James.

Maybe just looking at the -- in the capital discussion, you talked about repurchases. I asked the question last quarter, what would it take to get more active in M&A discussions? Maybe just following up on that, what your current thoughts are there? If you're having any discussions, what those other banks are sounding like, if any, more likely, less likely to sell at this point? Just kind of what your take on the environment is.

Well, we're anticipating in the second half of this year that M&A activity is going to start increasing, and we're having some discussions. But I think once we get to the middle of the year and folks are vaccinated and the economy starts moving back to normal, I think you're going to see an increase in activity.

Okay. And then switching gears here. Just following up on Mark's discussion of the net interest margin. You had some nice growth in deposits. You've got some additional excess liquidity now. What is in -- how are you thinking about the deployment of that excess liquidity as it relates to your deposit portfolio? And how quickly you can do that? And then how does that play into the net interest income forecast for 2021 or guidance?

Yes. Danny, we -- I think the whole industry has expected in 2020 that more of the PPP funds that were in bank deposit accounts would be used. And a combination of that and just other deposit growth, we've been pleasantly surprised at the level of deposit growth we've seen all year, which has created an excess liquidity situation. We continue to believe that at some point when the economy does reopen, that some of those deposits then will be used, business deposits used to restore inventories and restart CapEx. But for -- I would expect at least for the first half of 2021 that we would continue to have elevated excess liquidity. We deployed a little bit of that in the fourth quarter, but I think you'll continue to see elevated liquidity remain until the back half of the year.

Okay. And then -- so I guess I can figure that kind of ex everything else, you would expect to see perhaps some acceleration in net interest income growth in the back half of the year as you might see some margin expansion based off of that deployment?

Yes. And again, a lot of that deployment is based off of assumptions on what the reopening of the economy looks like. We've seen declines since COVID hit of line utilization. So if that line utilization goes back to historic levels, pre-COVID levels that, that would translate into commercial and a little bit of consumer growth in the back half of the year and into 2022.

Our next question comes from the line of Erik Zwick from Boenning and Scattergood.

I wanted to first just start with a follow-up. I think it was some about Curt's commentary about the loan pipeline and the commercial loan pipeline, I think, down just about 1% year-over-year and feeling confident that what you would pull-through in 1Q would be adequate to support kind of the full year net interest income outlook. Curious, I guess, first, in terms of what industries are you seeing strength and demand from your customers? And then secondarily, just thinking about loan growth for the full year, you've got the -- if I kind of assume that the expectation that the remainder of the first round of PPP is gone by kind of midyear in terms of forgiveness and things of that nature, I guess, there's about $1.8 billion to come off there. Is the outlook for organic growth positive enough to offset that headwind for the whole year? Or is that likely a drag in terms of kind of what the net growth will be for the year?

Erik, just to clarify my comments that, that was excluding PPP. So it's originations of our core consumer and commercial business. The commercial pipeline is essentially at levels pre COVID. So we do think that will allow us to continue origination pace that would be consistent with what we're putting in the forecast for NII.

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And then just for the industries that are -- go ahead.

Yes, I was going to answer your question on types of businesses. The pipeline remains very diversified and is picking up market share and growing with current customers. So we work really hard to continue to have a very diversified portfolio. There's not really any specific segment that is more heavily weighted there than historical.

And then Mark, maybe just curious in terms of the effective tax rate for 2021. I think, I've been using something in the 15% range. Is that still good? Or should we expect something potentially different?

Yes. I think that's a good thing to start unless Washington tells us something different.

Okay. And then last one for me. I mean, looking back to 2018 and 2019, Fulton was generating an ROA in excess of 1%. That came down in 2020, given the reserve build and some other factors. Just curious, looking at 2021 and your outlook doesn't look at that 1% kind of hurdle will be achievable at this point. I guess, what is the path back at this point? And what other levers do you potentially have at your disposal to improve profitability at this point?

Well, I think when you look -- we continue to be an asset-sensitive bank. So obviously, getting to a fully reopened economy, getting back to the Fed's target rate of kind of 2% core inflation and then having an increase in short-term interest rates would certainly help, but we don't expect that until 2023. When you look to 2021 and maybe then going from there to 2022, it will be continued -- we can get continued positive outing leverage through just disciplined loan pricing, continuing to really keep a little on expenses. We obviously went out with our expense initiative, and I think that's going to allow year-over-year decline in expenses. So we can have a 2-year stretch, where you have very low kind of core expense growth over a 2-year period of time, which then doesn't require a whole lot of earning asset growth to generate that positive leverage.

Our next question comes from the line of Russell Gunther from D.A. Davidson.

I'll just start with a clarifying question on the NII guide. Is that on an FTE basis, number one? And then number two, does that include your remaining PPP fee recognition assumption?

That is -- it is not on a fully tax equivalized. So that is our GAAP number. And it does include our assumption of what percent of that remaining $33 million will be recognized during the year. While we think the majority of it will be, some portion of those customers will stay and convert to a full-term loan.

Got it. Okay. I appreciate the color there. And then do you guys have the criticized classified number for this quarter? If so, can you talk about how it compares linked quarter? And then in the context of your provision outlook being the fairly benign, do you think that number has peaked?

Yes, Russell. It's Curt. So we do have the numbers linked quarter. We did provide some detail on the COVID risk on Page 15 in the investor deck. You can see the specifics there. That also gives you the total special mention, substandard. That trending -- it continues to trend up, specifically in special mention. Substandard is pretty much flat year-over-year, and we are seeing that in the affected industries predominantly. That contributes to most of that increase in special mention that we've been working through all year. So we continue to continuously monitor the portfolio, make sure risk ratings are accurate given the current circumstances. But we do have an increasing trend in special mention specifically.

Okay. And then I guess as you monitor and we move out of deferrals, I mean, is there the potential that, that continues to trend higher? Or do you think we're through the bulk of that negative credit migration at the end of 2020?

No, we continue to monitor customer performance. I think it depends on how the economy opens up and recovers. Again, most of the increase is from heavily COVID impacted customers. So with the -- we have been rated appropriately we feel right now, based on the outlook that is evident in the modeling.

Our next question comes from the line of Matt Breese from Stephens, Inc.

I wanted to go back to Mark's comment on the core NIM ex PPP. I think you said 2.65%, and that sounds fairly stable quarter-over-quarter. Just curious about your expectations for the core NIM trajectory throughout 2021 and whether or not we troughed or stabilized here and there's perhaps core NIM upside based on liquidity deployment, or is there still more pressure on loan yields and margin expansion, you don't expect that yet?

Yes. Yes. We think on a core basis, if you stripped out the full effects of PPP, not just the fee income acceleration, we think that we've approached or are in the trough here in the fourth quarter. That's going to be masked a little bit in the first half of '21 because you're going to continue to have acceleration of that remaining $33 million of unaccreted fee income, a good chunk of that may come through in the first half of the year.

So you may see, on a quarterly basis, our net interest margin go up the first half of the year and then the third quarter, fourth quarter, it may optically then come back down a little bit. But we think on a core basis, we're approaching the floor now. We still have a CD book that's over the first 3 quarters of 2021. That's about $1.2 billion combined in those 3 quarters still to come due. As those have been repricing, they've been repricing lower by over 120 basis points. So we think there's still opportunity there to put -- push our deposit cost down a little bit lower. And then as -- we'll see what the effects of a steepening yield curve are and just other pricing discipline that we have throughout our other loan segments.

Understood. Maybe just a follow-up there. As I think about the NII guide less the majority PPP fees being recognized, let's call the midpoint, roughly, $600 million in core NII or $150 million in core NII per quarter. Just wanted to get a sense for how you feel about the fourth quarter of 2021, the exit quarter. And where core NII might fall. And it sounds like you expect it to be north of $150 million and on an upward trajectory. Is that correct?

Yes. Yes, I think that's fair, although keep in mind that numbers in the back half of the year are then going to be further clouded by round 2 of PPP. So we're going to be talking about PPP going into 2022, which means that...

Understood. Okay. And just one other follow-up here. What are, in fact, new C&I and CRE loan yields coming on the books at?

Yes. It's -- this is total commercial. Total commercial is a shade over 3%.

Okay. Okay. Last one for me is just you mentioned a bit of a cautious outlook on the credit front, given the ongoing second wave. Can you just provide a little bit color there in terms of what you expect to happen as a result of that? Are you suggesting that there's a second wave of higher deferrals coming or NPA formation that we should expect or higher charge-offs? Just a little bit more detail there.

Yes. It's Curt. Just to clarify, second wave. We feel we're in the middle of the second wave. So we're not thinking of a wave beyond this. And really, we're looking here in the Northeast that getting through the winter and getting through the current wave that we have now. That is not forecasting a wave beyond that.

At this time, I'm showing no further questions. I would like to turn the call back over to Phil Wenger, CEO, for closing remarks.

Well, thank you again for joining us today, and we hope you will be able to be with us when we discuss our first quarter results in April.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.