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spk02: Good morning and welcome to United Community Bank's fourth quarter 2020 earnings call. Hosting the call today are Chairman and Chief Executive Officer Lynn Harten, Chief Financial Officer Jefferson Harrelson, Chief Banking Officer Rich Bradshaw, and Chief Risk Officer Rob Edwards. United's presentation today includes references to operating earnings, pre-tax, pre-credit earnings, and other non-GAAP financial information. For these non-GAAP financial measures, United has provided a reconciliation to the corresponding GAAP financial measure in the financial highlights section of the earnings release, as well as at the end of the investor presentation. Both are included on the website at ucbi.com. Copies of the fourth quarter's earnings release and investor presentation were filed last night on Form 8K with the SEC, and a replay of this call will be available in the investor relations section of the company's website at ucbi.com. Please be aware that during this call, forward-looking statements may be made by representatives of United. Any forward-looking statement should be considered in light of risks and uncertainties described on page 3 of the company's 2019 Form 10-K, as well as other information provided by the company in its filings with the SEC and included on its website. At this time, I'll turn the call over to Lynn Hartin.
spk08: Good morning, and thank you all for joining our call. Results this quarter were driven both by strong underlying business performance and a very successful start to PPP forgiveness. EPS came in at 66 cents on a gap basis and 68 cents on an operating basis, both representing solid improvements over both last quarter and last year. Our return on assets of 1.3% drove a return on common equity of 12.4%. On an operating basis, our return on assets was 1.34%, and we reached 16.3% in our return on tangible common equity. These numbers include a discretionary $8.5 million contribution to the United Community Bank Foundation. Excluding this, our operating ROA was 1.49%, and our earnings per share was 75 cents. For some time, I've wanted to take a more strategic approach to our charitable giving, and in doing so, make an even greater positive impact in our communities. Having the one-time gain from PPP fees seemed like the perfect opportunity to launch that initiative. I believe this will be a win-win for all of our constituents. It certainly will be good for our communities as we focus on improving the vitality of our markets. Our employees are excited about having support from the foundation for the local charitable events and boards that they have served on for many years. It will also enhance our brand as the bank that Service built and continue to differentiate us in our markets from the banks we compete with. Our teams continue to deliver strong loan and deposit growth with 8% core loan growth and 13% annualized core transaction deposit growth. We are continuing to drive down deposit cost, which fell to 17 basis points this quarter, down 8 basis points from last quarter. The low rate environment has pressured the margin, which without PPP fees would have declined about 10 basis points. Credit continues to perform well. Net charge-offs were five basis points for the quarter, and non-performing assets were 55 basis points of total loans. We are seeing increases in criticized and classified loan levels, as you would expect, driven by COVID-impacted segments. Our allowance was essentially flat for the quarter as improving economic forecasts offset the provisions needed for loan growth. This was a strong quarter for the company, and it reflects great efforts by our teams throughout the bank to maintain focus and continue to take care of our customers. For more details, I'll turn it over to the team here, and I'll start with Rob.
spk06: Thank you, Lynn. I will start my comments on page 7. We were pleased with our loan growth in the quarter. Excluding PPP loans, we had $243 million in loan growth, which translates into 8% annualized growth in the quarter. Growth was well distributed across different portfolios from residential to equipment finance to commercial to real estate. We were also pleased with the progress we made in helping our PPP borrowers achieve forgiveness, with just over half of our PPP loans being forgiven in Q4. On page 8, we also feel good about our credit quality given the stress in the economy and the high degree of uncertainty. Our net charge-offs were very low in the quarter at just five basis points, with the benefit of strong recoveries again this quarter. NVIDA's net charge-offs were also relatively low in the fourth quarter at 75 basis points, which is the best number that unit has reported since the third quarter of 2019. Our loan loss provision was $2.9 million this quarter and totaled $80.4 million for the full year. as we significantly built the reserve as the economic forecast deteriorated with the pandemic. On page nine, we give you some more detail on credit. Loan deferrals were $1.85 billion at June 30th, as we took care of our customers at the start of the pandemic. But as the pandemic continued, the impact of the stress became more clearly identified in specific sub-portfolios. So deferrals have come all the way down to $71 million at year end, but as you would expect, we did downgrade some loans, which drove increases in our criticized and classified loans, about $207 million that mostly came from our hotel and senior care portfolios. I will remind you that both our hotel and senior care books have significant equity. The average occupancy of the hotel portfolio is 51%. and is being pulled down by the urban limited service subcategory, which carries a 42% occupancy. We provide greater detail on both portfolios in the appendix. Our NPAs increased $12 million and stand at 55 basis points of total loans. All said, we feel good about where we are on credit and where our reserve is. Page 10 shows a walk-up on the reserve in Q4. We put $3.3 million into the reserve in Q4 due to loan growth, but our economic forecast improved a bit, which resulted in $2.2 million coming out of the reserve. You also see a $3.1 million increase from specific reserves, which corresponds with the C&I increase of NPAs in the quarter that you saw on the previous page. Net-net, excluding PPP loans, our reserve percentage was basically flat at 1.38%. With that, I'll pass it over to Jefferson.
spk07: Thank you, Rob. I'm going to start my comments on page 11 and talk about capital. Our capital ratios were relatively flat in the quarter and remained significantly above peer levels. We expect to use capital in 2021. and are starting with two relatively small redemptions of a subdebt and a trust preferred in the first quarter. We are optimistic we can put some capital to work via M&A, and if that does not happen, you should expect to see some more redemptions of this type and for us to consider using our $50 million repurchase authorization this year. On page 13, you can see our net interest income and net interest margin. Our margin was impacted by significant PPP forgiveness in the quarter and the impact of loan accretion was stable. Excluding these two items, our core margin was down 10 basis points. About six basis points of the 10 basis points of core margin pressure came from increased liquidity in the quarter. This increased liquidity was driven by the $671 million of PPP forgiveness and our 17% annualized, or $629 million, in deposit growth in the quarter. More importantly, we were able to grow core net interest income by 8% annualized in a quarter despite the environmental headwinds due to our strong underlying loan growth and strong underlying deposit growth. Moving to page 13, it shows the details of the strong deposit growth I mentioned in the quarter. Deposit growth was strong all year with the total deposits up 23% year-over-year excluding the Seaside deal. This quarter's growth was benefited by our usual and expected increases in public funds, but excluding public funds, core transaction accounts were still up 13% annualized. We were also pleased that we made good progress on our cost of deposits, moving down to 17 basis points from 25 basis points last quarter. Page 14, we had a very strong quarter in non-interest income. albeit down from last quarter's record result. The main driver of the decrease from last quarter was mortgage, down $6.1 million. We record mortgage revenue at the time of rate lock, and rate locks were down 11% in Q4 versus Q3. Also, the gain on sale percentage declined in the quarter, requiring a write down in the pipeline. Our mortgage production in January has started off as strong as ever, but with the gain on sale normalizing downward, we are expecting one Q mortgage fee income in the $14 to $16 million range. We did sell some $17 million of SBA loans in the quarter, driving a $1.5 million gain on sale, and we expect to be selling a greater amount of both SBA and Navitas loans in 2021 versus 2020. On page 15, we talk on expenses. excluding merger-related and other costs, and our discretionary contribution to the foundation, our expenses came in at $95.5 million. This $95.5 million result included a $1.8 million accrual for paid time off, or PTO, as this year we allowed our employees to carry over 80 hours of PTO into 2021. Assuming people mostly stay with United in 2021, and we return to normal operations in 2022, we would expect to get back the lion's share of this $1.8 million in 2021. All said, I anticipate that our Q1 run rate of operating expenses is plus or minus $92 million, with a low single-digit growth rate from there. Moving to page 16, we were very pleased that we were able to work with and help our customers achieve forgiveness on their PPP loans And at 1231, we had over 50% of our customers' loans forgiven. PPP has been and continues to be a major tool that we are using to attract new customers from other banks. And we think we will make great progress with more forgiveness in the first quarter. I'll finish there and pass it back to Lynn for closing comments.
spk08: Thank you, Jefferson. I know all of our United team is proud to have ended the year with a strong quarter. As we know, it's been a year filled with challenges that never would have been expected 12 months ago. In spite of those challenges, we produced record levels of pre-tax, pre-provision income and grew pre-tax, pre-provision income by 15% in 2020. We had record organic loan growth in dollar terms. We had record organic deposit growth in 2020 with $2.5 billion in growth, up 23%. We also had record mortgage production, which nearly doubled in 2020 to $2.1 billion. Our teams created United's own portal and processing system for PPP origination and forgiveness, and our bankers literally worked around the clock to deliver that much-needed product to our customers. We welcomed a new bank, Seaside, to the United team, and we're now established in great markets in Florida thanks to them. We enhanced our executive team with the addition of our new general counsel, Melinda Davis-Lux. We enhanced our board with the addition of Jim Clements, president of Clemson University. And we made investments that will give returns for years to come with the establishment of our foundation and a new department focused on community development and engagement. I'm excited about 2021, and I believe we'll continue to see opportunities to improve and grow thanks to an outstanding team throughout the company. I'd like to now open it up for questions.
spk05: Thank you. To ask a question, you will need to press star then one on your telephone. To withdraw your question, please press the pound key. Our first question comes from the line of Brad Millsaps with Piper Sandler. Your line is now open.
spk11: Hey, good morning, guys.
spk08: Good morning, Brad.
spk11: Jefferson, maybe I wanted to start with the balance sheet. Obviously, you guys have had, you know, tremendous deposit growth this year. You're trying to figure out ways to put all the liquidity work. It continues to be a challenge in the past. I think you've talked about, you know, mid-single-digit type loan growth in 21. I wanted to see if that number kind of still held true and just kind of what your plans were, you know, kind of in the face of all the liquidity, you know, whether it be additional bonds. Obviously, you know, you've got some, you know, small amount of debt out there, but probably not enough to absorb kind of kind of everything you're looking at at this point. Just any additional color there as it relates to loan growth and kind of how that impacts the NIM.
spk07: Yes, I'm going to pitch it to Rich to start on the loan growth, and I'll take that and weave it into the story for the balance sheet.
spk09: Thank you, and good morning, Brad. Yes, we're expecting mid-single-digit growth in Q1 and 2021. The pipeline and activity are just very strong right now. and we don't see that changing. And again, with our new hires, we're feeling very good, and I think there's a great opportunity ahead for us.
spk07: And with that base of loan growth, you're going to see some of the same things you've been seeing already. First of all, we expect another $600 million in from PPP forgiveness, so more cash in, so we probably become slightly more liquid again for one more quarter. We are expecting the balance sheet to stay relatively flat to higher. We expect these deposits to have come in to stay. Now, there's a standard deviation of outcomes around that. You may see deposits come in a little bit as you get forgiveness, but we think the deposits are most likely going to be sticky or grow a little bit. We have about $1.1 billion of cash, again, with more cash coming in. We're going to first use it for loan growth, and you're going to see securities growth from here. We had about $600 million of securities growth This quarter, I would expect something relatively similar next quarter. And then from there, I would expect a relatively stable-sized balance sheet with a mixed change from cash to securities and securities to loans.
spk11: Great. That's helpful. And maybe just kind of one follow-up, you know, maybe for Rich. We've got round two of PPP coming, or it's here, I suppose. Would you guys expect to, you know, sort of participate, you know, kind of at the same level you did in round one, obviously adjusted for the size of the program, or do you expect that you could further increase share there given all the success you had during the first round?
spk09: Sure, and you are correct. We're living the PPP dream again. It officially opened up for banks our size yesterday, and our portal was open. To give you a feel, we had almost 1,900 applications come through yesterday, for about $230 million. That gives you an average loan size of about $120,000, which is similar to what we experienced the first time. I would say the demand is a little smaller than the last time around. Part of that's driven by the requirements of the program in that they have to have a 25% reduction quarter over quarter. Remember, the max loan size this time is $2 million versus $10 million. So there are some changes. So we're anticipating... I'm going to call it $400 million to $450 million to be the total demand. And right now it feels like we're in the right position. Remember, it's called the second draw program on purpose so that it's primarily geared at existing PPP customers. And so the ones that come through our portal, it's quite truthfully very easy for us to process. And this time around there's very little to do on loans less than, $150,000. Great.
spk11: Thanks for all the color. Yes, sir.
spk05: Thank you. Our next question comes from the line of Michael Rose with Raymond James. Your line is now open.
spk03: Hey, good morning, guys. I'm sorry if I missed this, but I understand the core margin was down about 10 basis points. Looks like there's some puts and takes you'll be redeeming. some debt, you know, mixed shift, you know, into loan growth, maybe some net securities purchases. Are we near a bottom in the core margin? And could we actually see it expand as we move through the year just based on some of the stuff that you laid out?
spk07: Yeah, thanks for the question. So, yes, I think we are. In the first quarter, I'll call it flat to down five in the core margin. Then I would expect it higher throughout the year. Now, this is – because of the mixed chain. This is not including really anything with PPP, too. So think of this as sort of a forecast or, my thoughts, ex-PPP.
spk03: Correct. And then can you just give us an update on the lending hires? I think you've hired 40 revenue producers over the past two years or so. What's your appetite as we move into this year? It does seem like there's some opportunities and some dislocations in some of your markets. And then how much of that kind of mid-single-digit loan growth is actually coming from new originations versus kind of migration of books of business from some of those lenders you brought on? Thanks.
spk09: Sure. Michael, this is Rich again. Great question. So in January... We have hired 10 commercial people, one private banker in there, to give you a feel of those 10. Six are in Florida. So we're taking advantage of our new platform in Florida and the metro markets that we're in. I will tell you there are a lot of good conversations going on. Some team lift-out opportunities. I'll also tell you that bonuses have to be paid right now. So I would expect a very strong February in terms of our hiring. and I feel very good about those conversations, particularly in Florida right now. It feels like Atlanta a year ago, particularly with Truist, J.P. Morgan, BMO Harris. There's just a lot of good opportunities for us, and we're moving forward with that. The last question you put in there to give you a feel, in March of last year we hired a team from Truist in central Atlanta. They started a week before effectively COVID hit, So for the first three months, they were doing PPP. But what I'm really proud to tell you is that team did $65 million in commercial commitments last year, most of which were full funders. So we feel really good, and we're feeling good about the teams we're talking to as far as the opportunity.
spk03: That's very helpful. Maybe just one more for me, just more of a strategic question. You guys did the Seaside deal. You have a presence in Florida now. what do you need to do there to really get scale? I know the footprint there is relatively small. Is it just hiring teams? Is it M&A as well? And then has there been any change in sort of the types of deals that you guys would look at, you know, I think historically done and talked about, you know, kind of down to 500, but, you know, up to kind of two or three billion in size? Thanks.
spk08: Yeah, so great question. You know, first relative to Florida, you know, there's nothing we need to do per se. I mean, keep in mind, you know, it's a private bank, commercial bank, so bringing these teams on is very consistent with what we've done. We're going to be able to continue to do that. We are adding two retail locations to the Florida franchise that we're excited about. With that said, we would be very interested in doing additional M&A in Florida as well as our other markets locations. We've got conversations going on around our footprint, and we feel good about the opportunity that we'll see there. So in terms of the sizes, your range is correct. Given kind of what we see as the opportunity, we're probably more focused on the larger end of that range today than the smaller end. But we're looking at any anything in that size range in our markets with good teams and a culture that fits. And we think we'll be able to have some good things happen this year.
spk03: Great. I appreciate all the color. Thanks.
spk05: Thank you. Our next question comes from the line of Jennifer Dimba with Truist Securities. Your line is now open.
spk01: Thanks. Good morning. Len, could you just talk about what you're seeing in terms of incoming interest and deal activity right now? You seem pretty optimistic maybe something can happen this year.
spk08: Yeah, well, I mean, I think, you know, everybody is looking at the same things we are. And, you know, in terms of margin, I think what we're seeing is a lot of banks that don't have a diversified business mix are going to struggle more. I mean, we've benefited from having Navitas, having mortgage operation, having multiple levers to pull, SBA, et cetera. And I think if you're a smaller institution, you're a great company, but you may not have those levers. I think they're thinking more seriously about who they're going to partner with. And I think culture and education Business model is playing more into that than raw price, I think, is what we're seeing. So I do think there's going to be some good opportunities this year.
spk01: Thanks so much.
spk05: Thank you. Our next question comes from the line of Kevin Fitzsimmons with DA Davidson. Your line is now open.
spk04: Good morning, everyone. Morning. Just on the subject of the increase we saw in criticized classifieds, we've kind of known at some point we were going to see this, where deferrals have come down meaningfully, but now we're seeing loans getting downgraded. How should we expect in the next few quarters? Do you view this quarter as more of a one-time, like pent-up, catch up in downgrading those credits, or would you expect a similar kind of pace of downgrades and increases to criticize and classify? Thanks.
spk06: Hey, Kevin, this is Rob. Thanks for the question. Really, two comments on how I'm thinking about it. Obviously, the biggest driver in the space that we have here is the pandemic, right? So the downgrades were almost entirely hotel and lease up or fill up infill senior care properties. So if the pandemic sort of subsides dramatically by the end of the second quarter and things begin to return to something closer to what they were pre-pandemic, I think this trend reverses pretty quickly. If the pandemic persists, I think there may be more. I can also tell you sort of leading into the second point maybe is we have our lowest pass risk grade increased by about $180 million in Q3, and obviously a lot of that went into criticized and classified during Q4. that lowest pass grade in Q4 declined by $50 million. So if the pandemic persists, I don't see a continued increase at the same rate, but I could see us have some additional credits move into criticized and classified. I will mention, though, you know, and maybe it just goes back to how you feel about the pandemic, but Typically, when you're building criticized and classified loans, you have maybe a flawed product or a flawed management team or a flawed business model. And in this case, I don't feel like we have any of that. We've got strong management teams, strong borrowers, strong products, appropriately structured. It really is an impact or a result of the impact of the pandemic.
spk08: Rob, maybe talk about the primary driver criteria. What puts something in the criticized category, which is really – the increase is really more in the criticized category versus the – That's right.
spk06: Yeah, that's right. So if we have a credit that can't make amortizing P&I payments – based off of current operations, then it gets downgraded to either criticized or classified. So they've got to be able to make both the principal and interest payments on the amortizing debt.
spk04: Okay, great, Rob. I appreciate that. And Jefferson, just one quick follow-on on expenses. Appreciate the outlook. Just curious if there are any specific initiatives that are that are embedded within that outlook beyond deal-related cost saves that you expect to continue, I would think?
spk07: Well, you mentioned the biggest one that you'll see is the $2 million a quarter as we start getting seaside cost savings as that conversion is happening later this quarter. You'll see the follow-through on the six branch closures that we had in December will translate into some cost savings. That PTO piece of it we don't think is going to recur, so some of that most likely comes back. And then from the other pieces of cost savings are just a lot of little things. We're trying to automate pieces of consumer lending, but there's nothing that's named. There's nothing that's one big major project that's going to cut a bunch of dollars, but there's a lot of little ones. that we think are ongoing that we think can help.
spk04: All right, that's great. Thank you.
spk05: Thank you. Our next question comes from the line of Catherine Miller with KBW. Your line is now open.
spk00: Thanks. Just wanted to follow up on some of the commentary, Jefferson, you made on the margin and thinking about both loan yields and deposit costs. And my first question is, Can you give us a sense as to where new loan yields are coming on for your new production versus where the portfolio sits today? And then also on the deposit side, I mean, your deposit costs are so low at 17 basis points. How much further room do you think you have there? Thanks.
spk07: All right. Thanks on that. And I guess the loan yield piece is my biggest worry for next year is right now you're seeing the loan yields come in at relatively similar to where they're going off, but We're sitting on a lot of cash. A lot of banks are sitting on a lot of cash. Loan growth is necessary to eat into that cash. And so I'm concerned that you're going to see increased price competition as we get into next year. And I don't know if, Rich, you have comments on pricing.
spk09: I would say we've seen a little of that but not a great amount. Right. And so I'm not concerned about it at this point.
spk07: So that's great that you have that there. On the deposit pricing, we were down at 12 basis points in the Q3 of 2015. That was our low mark. And that is our target, our interim target now. So if rates stay here, that's my target, try to get that down to 12 basis points.
spk00: Okay. So right now on the securities yields, where are the new securities yields coming on that $600 million you're investing per quarter?
spk07: Right. So... This quarter they came on at about 110 basis points. Now, the 110 basis points might be a little lower than you're expecting because some of the investing we're doing, I would call it alternative liquidity investing. So we're buying some pieces of bonds in the 50 to 80 basis point range. This is AAA portions of asset-backed securities like credit cards and autos. This is two-year and less paper. This is only the AAA portion. So as we are kind of moving, we're moving some of this just to be outside of cash before it goes into security. So if you think about the core securities portfolio, which is also growing, you're closer to kind of 150 to 175. Okay. Well, thank you. Okay. Thank you.
spk05: Our next question comes from the line of Brody Preston with Stevens, Inc. Your line is now open.
spk10: Good morning, everyone. Good morning, Brody. Good morning. I just have a question, Jefferson. I want to circle back to mortgage real quick. So I appreciate the guidance. I guess the mix of the production you're seeing in 1Q, I think you were at 54, 46 purchase refi is Is that a similar mix as what you're seeing in 1Q, or has anything changed?
spk09: It's a similar mix.
spk10: Okay. Okay, and what was the gain on sale margin for the fourth quarter?
spk09: I have it at 4%. That's right. Yeah, 4%, and we're expecting that to roll forward into Q1, and then we do forecast it to taper down as the year goes on.
spk10: Okay, thank you for that. What were average PPP loan balances for the quarter?
spk07: One billion dollars almost even.
spk10: Okay. And would you expect, I think you got a little, you know, like 640, 650, somewhere in there left. Would you expect that to, like, I guess, where are we in the pipeline of forgiveness? Is a big chunk of that going to be forgiven in one cue, or how should I be thinking about that?
spk09: Jefferson, can I answer that one? Please do. So let me tell you on, this is Rich, on second draw, one of the important things that we did was we told our customers that that in order for them to submit for second draw, they had to at least have their forgiveness submitted. And it was amazing how much came in in the last two weeks. So we did essentially $1.1 billion in fundings. at United, and then we also had Seaside, because they were under a different model at the time. But anyways, we just crossed the $1 billion mark in forgiveness that has been submitted to the SBA, and so we feel really good about that. So we're near the end of this one.
spk07: Okay. EOP will be close to zero, and average will be, I would think, a little less than 500.
spk10: Okay, great. Thank you for that. You're welcome. The sub-debt and trust redemption, that margin impact is just about like one basis point. Is that right, Jefferson?
spk07: That's right. That's not a huge impact. Those are pretty small transactions.
spk10: Okay. And the loan growth guide for mid-single digit, is that ex-PPP or inclusive of the PPP runoff?
spk09: It's ex-PPP. Okay.
spk10: Okay. I guess I'm having a hard time squaring mid-single digit versus something closer to mid-high, I guess, just because you guys have been knocking the ball off the cover in terms of growth, and it doesn't sound like you expect that to slow down in the first quarter at all.
spk09: I'm being conservative. I'm looking across my partners here because I can be a little bit over-optimistic, but it's a little hard to figure out what happens with stimulus. I'm always a little weary of payoffs, companies get bought, but we do feel good about the opportunity and the activity. So right now I see the machine keep going, and I really feel good about our hires, but that's what I'm saying right now.
spk10: Okay, fair enough. Jefferson, on the expense outlook, so $92 million for the first quarter. Could you just remind us, I think the convergence later for this quarter sometime in February, is that correct? That's correct. So are the bulk of those cost saves going to come post-1Q? Is that how I should be thinking about the run rate as we head into the second quarter?
spk07: Yeah, so you'll start seeing some here in the first quarter. So maybe you're only getting one – you're getting some cost savings starting 12-31, but full run rate in – Second quarter. Okay. But we'll also have merit in some other things that will offset some of that merit increase.
spk10: Okay. And then I just have two more. Rob, I just wanted to ask, specifically on the senior care credits, it's the second quarter in a row I think you've called out some deterioration. And just looking at it, it looks like 30% of the portfolio is criticized at this point as Is that all still related just to the lease-ups taking longer to reach stabilization, or have you seen any change in occupancy levels at all?
spk06: That's a great question. The short answer is yes, it's related to the lease-up properties. Our stabilized properties are running around 80% occupancy. So we see it's more of a one-off kind of thing. If you have a property that, you know, develops, you know, COVID sort of comes in and you have some change in occupancy, we have seen that in one or two properties. But we've got 20 properties in the book. And when we have seen it, we've seen them come back actually quicker than I would have expected in occupancy. So the stabilized properties, for the most part, are doing well. All of them, with the exception of two above, uh, 70% occupied. Um, so, um, I feel good about that. And it's really just the, the lease up staging that, that is creating the, uh, the challenge.
spk10: Okay, great. And then just on the Vitas, um, you guys have had really strong growth there. And I know that's, you know, there was a bit of a pullback maybe in, in the number of participants earlier in the year, just, just given the pandemic, um, So I wanted to get a sense for just broadly what the outlook kind of looks like. Have you seen competition increase? And then as we think about the growth in the business model moving forward, is there anything kind of unique about what you all do here that, you know, I guess maybe a focus on a certain niche that will continue to allow you to take market share at an above-average rate?
spk07: So I'll start with that and see what other people have to throw in there. So during the summer – we saw competition decrease a little bit when there was fears of liquidity, especially from non-bank competitors. We have seen the competition, I would say, normalize coming into now, but this momentum that we've had from a business perspective is continuing. I think it's really due to the strong team. We have great hires. So I think the competition has normalized, but I think we should expect strong growth there. We are continuing to make strong hires. We think we have some market share takeaway thesis happening as well there. And we have some budget there for them to hire people and grow that business this year. I would expect a return to selling loans. We're pretty far away from our 10% self-imposed limit. But just from, as you know, us, we think about risk quite a bit, and we think about diversification quite a bit. And with mortgage coming down as well, I would expect to see a greater amount of Navitas loan sales in 2021 versus 2020. And I feel like there's part of that question I might not have answered.
spk10: Yeah, the other part was just is there anything kind of unique and niche-y that you focus on within Navitas that sort of will allow you to continue to take market share? as some other folks step back into the market?
spk08: I don't know what I would say. There's multiple niches within the business. I think that's one thing that Gary and Mike and team have always focused on, having a diversified approach. I would just say it's a really extraordinarily well-run, well-led company. Gary's got a tremendous reputation in the business. Mike does as well. The technology, which is largely... The interfaces are self-developed. That's the same team that built our PPP portal, has created a product that's easy for employees coming in to manage the process with and sell. They can be more successful at Navitas, I think, with the team than others. So it's no one thing. It's just a lot of little things. There's no particular niche that is necessarily different.
spk10: Awesome. Thank you all for taking my questions. I appreciate the time this morning. Yeah, great questions. Thank you.
spk07: I see Chris in the queue. Oh, he may have come out. Oh, no, he's on.
spk12: Hey, Jefferson, can you hear me? I can. Welcome. All right, great. I wasn't sure if the announcer was waiting for... So my question just was the updated disclosure on the fair value marks with the past mergers and what's updated there at 1231.
spk07: Yeah, I don't understand the question on that one.
spk12: Oh, just is there an updated fair value mark from CSOD and past acquisitions?
spk07: Oh yeah, I don't have one. I don't have one. We're creating that currently for the queue. So we'll get back to you, or the CAE this time. So we'll get back to you on that shortly.
spk12: No problem. And just to follow up to Kevin's question earlier, you know, when you look at the criticized ratio, I'm just curious, you know, your capital and reserves are still strong. And, you know, if things do change and higher criticized happen, you know, what's the sort of change in reserves based on that? I mean, you saw the buffer, I presume. I don't know if it's necessarily a direct correlation. Just curious if you do have some more criticized kind of how that impacts reserve behavior.
spk06: So... We would have to look at it. You're right, there's not a direct correlation. But, you know, as, and we believe we're properly reserved for the losses that we're projecting currently. But there's, you know, the short answer is there's not a direct correlation there. Particularly not on criticized, because you're not doing specific reserves.
spk12: No, yeah, definitely not on criticized. Great. Okay, just wanted to clarify that, and we'll take it quarter to quarter. Thanks very much for all the information this morning. Thanks, Chris.
spk08: All right, well, it looks like that's the last question. So thank you all for being here. Thank this team. I think it was a great quarter. Thanks to the United team listening in. Great loan growth, great deposit growth, fee revenue. Appreciate everything you all are doing. And have a great day. Thank you so much.
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