Glacier Bancorp, Inc.

Good afternoon, ladies and gentlemen, and welcome to the Glacier Bancorp Fourth Quarter Earnings Conference Call. At this time, all participants are on a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. If anyone should require assistance during the conference, please press star then zero on your touchtone telephone. As a reminder, the conference is being recorded. I would now like to turn the conference over to your host, Mr. Randy Chesler, President and CEO. Please go ahead.

All right. Thank you, Angela. Good morning, and thank you for joining us today. With me here in Kalispell this morning is Ron Cofer, our Chief Financial Officer, Angela Dosey, our Chief Accounting Officer, Byron Pollin, our Treasurer, Tom Dolan, our Chief Credit Administrator, and Don Cherry, our Chief Administrative Officer. Yesterday we released our fourth quarter and full year 2020 earnings, and today we're ready to review those results. The fourth quarter and full year results really demonstrate the quality of the Glacier team, the strong core of the company, and the attractiveness of our business model. We are navigating through the ongoing pandemic extremely well, and I am really proud of the Glacier team, our senior staff at the holding company, as well as our 16 bank presidents and their teams for their commitment, leadership, and service to their communities that they have demonstrated this year. Despite the pandemic, most of our customers have adjusted to the circumstances very well and are carrying on with business. Our residential mortgage volume is at record levels with refinancing and new home purchases, and our commercial lending business continues to improve. The performance of our loan portfolio demonstrates the strengths of the markets in which we operate and the value of our conservative approach to credit. Our markets were strong before the pandemic, driven by good quality of life, business-friendly environments, and low cost of living. And we are seeing signs that the natural social distancing that comes with our less urban markets will only add to the attractiveness of the West. Once again, the fourth quarter and four-year results highlighted the consistent strength of our exceptional people, customers, and markets. For the quarter, we reported earnings per share of 86 cents, a 39% increase from the prior year fourth quarter. Net income was a record $81.9 million. which is an increase of $24.5 million or 43% from the prior year fourth quarter. Highlighting the company's core earning strength, the pre-tax, pre-provision net revenue for the quarter was $99.3 million, which was up 43% from the prior year fourth quarter. Core deposits increased $579 million or 4% over the prior quarter, Non-interest-bearing deposits were 37% of total core deposits at the end of this quarter compared to 34% at the end of the quarter a year ago. The loan portfolio, excluding payroll protection program or PPP loans, organically increased 43 million or 42 basis points in the quarter. Bank loan modifications related to COVID-19 decreased 371 million in the quarter to 94.9 million or 93 basis points of loans excluding Triple P loans. Non-performing assets as a percentage of assets was 19 basis points compared to 27 basis points a year ago. The team was very busy submitting Triple P loan forgiveness applications to the SBA which resulted in a $539 million decrease or 37% in the Triple P portfolio and $14 million of acceleration of net deferred fees due to the loan forgiveness. The efficiency ratio was 50.34% compared to 48.05% last quarter. If you take out the impact of the Triple P loans this quarter, The efficiency ratio increased 106 basis points compared to the fourth quarter a year ago, primarily due to performance-based compensation. We declared and paid a regular quarterly dividend of 30 cents per share. This represents our 143rd consecutive quarterly dividend and the 46th dividend increase. We also declared a special dividend for the year of 15 cents per share, our 17th special dividend. On a full-year basis, we earned a record $266 million of net income, an increase of 27% over the prior year record net income of $211 million. Pre-tax, pre-provision net revenue for the full year increased 42%. to a record $368 million versus $259 million in 2019. Earnings per share were $2.81, which represents an 18 percent increase from the prior year earnings per share of $2.38. The SBA's Triple P loan program took a lot of our time during the year as we originated over 16,000 loans for almost $1.5 billion. And we recently began the forgiveness process for customers and have received SBA forgiveness for $539 million in PPP loans for our customers, with $909 million in PPP loans remaining, the bulk of which we expect to be waived in the first half of 2021. We've started the Triple P Phase II program, as we're calling it, and expect a fair amount of interest in the program, but not at levels we saw with the initial Triple P program. Loan growth was 17% for the year, including organic growth, Triple P loans, and our Arizona acquisition. It was an unprecedented year for deposit growth. primarily due to the record federal stimulus with deposits organically increasing $3.4 billion, or 32%, with non-interest deposit growth of $1.6 billion, or 44%. The housing market and refinancings were at record levels across our footprint and resulted in a record gain on sale of loans of $99.5 million. which was an increase of $65.4 million, or 192% over the prior year. The regular and special dividend that we declared resulted in $1.33 per share dividend, an increase of 2% over the prior year. And early in the year, we closed the acquisition of State Bank of Arizona with assets of $745 million, materially adding to our Arizona Community Banking franchise. Deposits continue to flow onto the balance sheet as a result of customers' reduced spending and unprecedented government fiscal stimulus and monetary policy. Core deposits now stand at $14.8 billion, which is an increase of $4 billion, or 38 percent, from the end of the prior year. We believe Some of these deposits will be spent and invested by our customers later this year if we see the pandemic circumstances improve. Total debt securities increased $2.7 billion, or 97%, from the prior year. We continue to purchase debt securities with the excess liquidity from the increase in core deposits and the SBA forgiveness of PPP loans. Debt securities represented 30% of total assets at year-end compared to 20% at year-end 2019. The return on our debt securities reflected the impact of lower for longer interest rates, ending at 2.29%, down from 3.15% at the end of the prior year. Debt security income was $99.6 million. which is an increase of 17% or $14.1 million over the prior year. We are taking a cautious approach to new investments, given low current rates and risk at some point of deposit outflows, and as a result, we're targeting a short average life while maintaining higher levels of liquidity. Our loan portfolio ended the year at $11.1 billion, which was an increase of 17% over the prior year. Pricing on the new and renewed loans was lower due to the interest rate environment, and as a result, the yield on the portfolio ended the year at 5.04% compared to 5.23% at the end of 2019. Interest income was $627 million. which was an increase of $81 million or 15% over the full year 2019. We recognized $38 million of interest income, including the 1% note rate and net deferred fees and costs from the Triple P loans in 2020, which included $14 million of accelerated income from the SBA forgiveness of loans. Net deferred fees remaining on the balance of the Triple P loans at the year end were $17.6 million, the bulk of which we expect to recognize in the first half of 2021 as the remaining qualifying Triple P loans from Phase 1 are forgiven. With all the deposit growth, we're pleased to see our cost of core deposits decline nine basis points to nine basis points from 11 in the prior quarter and 21 at the end of 2019. Total cost of funding was 14 basis points, down 16 basis points from the prior year end. Net margins continues to be difficult to hold due primarily to the interest rate environment, as we saw margin drop to 409 from 439 at the end of 2019. The core net interest margin ended the year at 405 versus 430 last year. And while we were successful in reducing the total cost of funding, it wasn't enough to outpace the decrease in yields on loans and debt securities. Non-interest income was driven by record mortgage production. We booked gain on sale of loans of $99.5 million, which was $65 million or 192% over 2019. Mortgage purchase and refinance business continues to be very strong. In addition to local demand, throughout the year we saw an uptick in the number of out-of-state buyers, which was a factor in our record. originations. Credit performance was much better than expected during the year with net charge offset 7.7 million or seven basis points of loans compared to 6.8 million or seven basis points of loans last year. Delinquent loans were 20 basis points of loans versus 24 at the end of last year and non-performing assets decreased to 35.4 million and were 19 basis points of assets, which was down from 27 basis points a year ago. During the year, we made over 3,000 loan modifications in response to COVID concerns on loans totaling over $1.5 billion, representing about 15% of the loan portfolio, excluding PPP loans. It's important to note that all the loans that received the modification were performing as agreed before we gave them a modification and were all short-term modifications. At year-end, modifications decreased by $1.4 billion to $95 million, or 93 basis points of the portfolio, excluding PPP loans. We continue our enhanced monitoring of industries that we think pose higher risk due to the pandemic. The total amount of loans under enhanced monitoring is 642 million or 6.29% of our loan portfolio, not including triple P loans. This includes loans to hotel, motels, restaurants, travel, tourism, gaming, oil and gas businesses. We ended the year with only 23 million of these enhanced monitored loans in modification status, or only 3.65% of the enhanced monitoring portfolio. Even with the steep reduction we saw in modifications at year end, we will continue with our enhanced monitoring process of the higher risk industries for the foreseeable future. And we continue with our rigorous approach to managing and proactively addressing any credit issues across the total portfolio. Credit loss expense was $40 million for the year, driven by the increased economic risk caused by the global pandemic. Our total allowance for credit loss stands at $158 million, or 1.42% of loans, 1.55% of loans not including triple P loans, which are 100% guaranteed. We believe this is a very adequate and prudent level given the uncertain circumstances caused by the impact of COVID, and we expect to maintain these approximate levels until we see a more certain economic environment. Total non-interest expense was $405 million, which increased 29.9 million or 8% over 2019. The increase was driven by compensation and benefit expense due to more employees, mainly from our acquisitions, as well as increased performance-related compensation as a result of our record year. For the year, the efficiency ratio is 49.97%, an improvement compared to the prior year efficiency of 57.77%. Excluding the impact from the PPP loans and the impact of the termination of the cash flow hedges in 2019, the efficiency ratio decreased 109 basis points versus the prior year. Tangible book value per common share of $18.21 at year end increased $2.60 or 17% versus prior year. Our access to liquidity remains robust with growth due to an increase in core deposits and borrowing capacity. At the end of the fourth quarter, the company had access to over $12 billion in liquidity. This includes $5.1 billion of unused borrowing capacity with $2.4 billion at the Federal Home Loan Bank, $2.1 billion in borrowing capacity at the Federal Reserve discount window and Triple P liquidity facility, and $600 million of capacity at correspondent banks, in addition to $3.3 billion in unpledged marketable securities and cash of $633 million. An additional $3.2 billion in liquidity is available from other sources, including broker deposits, over-pledged securities, and loans eligible for pledging at the Federal Home Loan Bank. Overall, 2020 was another outstanding performance from the Glacier team, and even more so given the extraordinarily difficult operating environment in 2020. The team, all 3,000 from Montana to Arizona, once again demonstrated the commitment strength, leadership, and performance that sets them far apart from other bankers in their communities and in the industry. And underscoring this, just yesterday, Forbes announced America's best banks for 2021. And Glacier Bancorp was once again in the top 10, moving up to number three. So those end my formal remarks. And I'd now like Angela to open the line for any questions that you may have.

Ladies and gentlemen, if you have a question at this time, please press the star and the number one key on your touch-tone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. Our first question comes from the line of Matthew Clark with Piper Sandler. Please go ahead.

Morning, Matthew.

And Matthew, we're watching.

Yeah, go ahead. Angela?

Angela? Yes, sir.

We're not hearing Matthew, so maybe we can move on to another question.

And your next question is from the line of Jeff Willis with DA Davidson. Please go ahead.

Hi, good morning. Can you hear me okay? Morning, Jeff. Yes, we can. Okay, great. So, Randy, just looking at, you know, nice to scratch out some organic growth in typically sort of quiet, you know, the back half of the year or back last quarter, but Randy, Interested in your thoughts of organic growth opportunity and maybe narrowing that down to kind of areas of the footprint that you think might be leading the way in 21 and just frame up overall what you think your growth expectations for the year would be.

Yeah. You know, there are parts of the footprint that are – having more organic growth than others. We think we will have low double-digit growth next year, somewhere around 4% to 5%. Some of the markets, particularly Arizona, just have an incredible inflow of migration, particularly from California. They're getting almost half of the out-migration in that state So they are extremely well positioned for some very solid growth, as well as our business in Reno and Nevada continues to gain from the out migration. So we expect to see some very, very strong growth. And the rest of our footprint, you know, the growth looks very solid. And so among all our eight states, we don't have a laggard. other than a couple states that we think will probably be a bit stronger as we move forward. The other one is Colorado. As the COVID circumstances improves, that's a market with a lot of very, very attractive business opportunities. circumstances that I think you'll see as companies want to start to move, you'll see Colorado, particularly Denver, respond very well. The rest of our markets are very solid, too. Montana continues to do very well. Idaho continues to do very well. Even Wyoming is perking along. So We feel good about all our markets and then, you know, with a little accent on those markets that I went through.

Sure. Appreciate it. And then just kind of broadening from organic to acquired, more specifically on M&A and thoughts on as we kind of crawl out of this eventually, do you think, What do you think seller price expectations are from a price discovery? I'm guessing you've had maybe sporadic check-in points with maybe a few banks, but just thinking about, do you think that's going to be a big impediment as you look to M&A, or is it a pretty rational group? Do you think once we open up, you could see some activity?

Well, Yeah, I think there's a number of factors in M&A, and yes, I do think they're a rational group that will respond to the market data, but I think we have to take a step back. M&A really was in hibernation for most of 2020 due to the pandemic. It's starting to come out of that. We've had We have a number of conversations, so I think we have some good real-time indication of where people are. I think that we've reengaged with folks, so people have been so very focused on their business franchise with everything going on that I think now they've just recently taken a step back over the last couple of months and reopened the door on M&A. We've had a lot of good discussions. I think there will be a couple factors in 21 and 22. Number one, I think we're going to see more people try to get into M&A and probably some banks that are less experienced in it. And so I expect it to be a little more crowded. I do expect there could be some price variability because of the inexperience of some of the people that I would expect will get into the market. But in the end, I think the same things that have made us very successful in the past will be in play in 21 and going forward. Number one is the quality of our currency. extremely attractive to sellers. Number two is our business model where we offer extremely unique opportunity for a bank to maintain a lot of its identity and people and as a result have a transaction where the community isn't disrupted and actually better served as a result of it. So very unique that most other companies can't do. So I think it's going to start to heat up. We're going to maintain our very disciplined approach to M&A, as we always have, and we're going to engage in a lot of the discussions, but probably a little period here initially where the price discovery has to occur, but part of that's the job of the investment banker to sit down with the seller and talk about And I think with those discussions, that will really help, you know, guide sellers to pricing that I think is really fair in the marketplace.

Got it. Thanks, Randy. I'll step back. Thanks.

And once again, ladies and gentlemen, if you would like to ask a question, please press star 1. Our next question is from the line of Michael Young with Truist Securities. Please go ahead.

Hey, good morning, everyone. Good morning, Michael. I wanted to maybe just ask on net interest income. I heard the comments about the NIM pressure. I think that's something we're seeing generally across the industry, and it's incredibly difficult to predict with both PPP and purchase accounting accretion and kind of balance sheet movements that are going on. But as we just think about sort of the NII dollar trajectory from here, you know, maybe if it's easier to talk about on a core basis, kind of XPPP. Do you have an outlook on kind of that, and can we trend higher as some of the extra liquidity is deployed into securities, or do you plan to just kind of hold that liquidity and wait for the growth to return?

Yeah, I'm going to ask Ron to give you a little more detail there. We've had a lot of discussion about it. Obviously, net interest margin is going to be under pressure because of the rates, but net interest income is really what we're focused on because the margin can go down, but net interest income is what drives EPS and growth in the company. So, Ron, do you want to give a little color to that question?

So, Doug, we're trajectory will occur, you know, to the extent that we can have the organic loan growth. And I'm going to segue in a second to PPP, but, you know, if we can grow the organic loans and we can get, you know, yield, say, 4%, you know, you'll see some trajectory going up there. But realistically, if the deposits continue to come in, and whether that's 5% growth, 10%, you know, that depends upon stimulus and a whole bunch of other factors. we will continue to put that into the investment portfolio. And so that, you know, you've observed that, you know, the loans are certainly, they're down as a percentage of our earning assets. Our investment securities are up, but we'll put that money to work. And so our net interest income will expand. Let me just talk to you about, you know, so the, we've got the TPP round two, round one, We had 37% of our loans forgiven, got $910 million remaining. And so we think that forgiveness will occur primarily in this first half, and that's a net positive. You know, coupon is nice, but getting those processing fees, and we're averaging 3.75%, that's a real positive. And then, of course, we're already underway. with the second version of the PPP program. So that'll help us. We think forgiveness on that program would occur likely more in the fourth quarter, and it could range from 40% to 60%. We don't know. We know it's going to be easier. We know there's more eligible expenses. So with that all in mind, yeah, there's definitely upward trajectory of our net interest income.

Okay, that's helpful. And, you know, Randy, I guess, you know, then the flip side of that equation is kind of managing, you know, the company, the expense base, and kind of what you're, you know, talking to the various presidents about as a result of kind of the outlook for the year. So maybe could you just talk about the messaging and, you know, maybe what the goals are, maybe from an efficiency ratio standpoint, given all the moving pieces on revenue? Sure.

Yeah, we think efficiency is going to be a very, very important measure. It is the most prominent part of our compensation plan, so I think that can answer part of the question about focus. And so, yeah, we think that that's an important lever. We still intend to be in the same range that we talked about last year, 54%, 55%. That gives us good opportunity to, we think it's a good efficiency rate and also gives us an opportunity if we are able to overachieve that to invest back in the business. So we're 2021 still targeting the range of 54, 55%. Okay.

And, you know, maybe just last one for me just on those investments. You know, I know with the pandemic and kind of, Some of your footprint may be being shut down, but some of it not. Have you kind of realized any areas of investment that are needed, and what are the plans for 2021 there?

So, Michael, we lost a little bit of your question. If you can re-ask it, I'd appreciate it.

Yeah, sure. Sorry about that. Can you hear me now? Yes. Okay. Okay. So I was just asking about kind of the areas of investment in 2021, if they're more technology-focused, given maybe some things that were raised through the pandemic and some shutdowns, or if they're going to be more people and lender hiring kind of focused.

Yeah. We continue to invest in technology across the entire company in ways that we think we can – improve either internal process and reduce expense and improve control and on the business side. So we have a number of investments. Some are geared towards improving the customer experience in terms of opening accounts. We've made that a lot easier and quicker. and virtual so people, especially in this environment, can do it without coming into a branch and quickly. We've also invested in our mortgage business technology to set the stage for further growth and better control. We've invested in some enhancement to our payment services products So those are just some of the examples, Michael. But we really, you know, when we think about investments, you know, number one are any kind of control items where we feel we can reduce risk are high priority. And then revenue-enhancing investments are also prioritized. We have our top ten initiatives every year, and we're going to stay focused on some of those I mentioned in response to your question. But those are the areas that we like to make investments in. And, again, staying in that 54-55 range, we don't really follow kind of a big cliff investment strategy where we take a big dollar investment. We do these in bite-sized pieces, which we like because we can control the investment, we can see the result, we can make sure the things are working the way we like, and we feel like and we've seen that we get a very good result by following that process.

Okay, thanks.

Your next question is from the line of Jackie Bolin with KBW. Please go ahead.

Hi, everyone. Good morning. Morning, Jackie. Randy, I wanted to stick with expenses, but looking more at the run rate in the fourth quarter and kind of stripping out what may have been unique. Starting with that other expense line item, and I know that in the third quarter you had a little over $2 million unfunded commitment expense, and that's now, well, was small in the quarter, but it's captured in the provision. So if I normalized for that, and then I've also gotten my notes that you had about $2 million in third-party consulting fees. It looks like that line item was up quite a bit this quarter, so I'm just wondering if there was anything unique in there that won't be repeating next quarter.

Yeah, there's what I would call a lot of clear-the-deck activities in there that we think we got some expenses incurred in there that won't be repeated. But we wanted to clear out, so there were some product expenses, some legal expenses, a combination of many items in there. But if I had to categorize them, I would say one-time expenses and kind of clear the deck so we start 21 with as fresh a slate as we possibly can.

And do you have just a roundabout estimate of how much that might have amounted to in the quarter?

Yeah, I think I'm going to ask Ron to cover that because I think your question gets at kind of our run rate expectation for 21. So I think he can answer both of those for you.

Hi, Jackie. Okay, thank you. Those items are roughly $3 million to $4 million, my recall. I do want to comment, though, on the $2 million of third-party consulting expenses, those were in the third quarter. I didn't know if you were putting it in the fourth.

Yeah, yeah, yeah, I got them in the third.

Okay, great.

Okay, thank you. And then I guess also which leads into more of the run rate question, because, yes, Randy, that's what I'm getting at it. It's just thinking about compensation, and I know there's been some push and pulls in terms of – you know, incentives given the changing environment between early this year and later this year. So just want to see what a normalized run rate would be for compensation next year, understanding that we're going into the first quarter, which will be seasonally high.

So, Jackie, the connection blurred a little bit there, but I believe you were asking about the run rate of expenses, and there was a question about compensation, but maybe, Ron, you want to just talk about general run rate, and then we'll see, Jackie, if you have any other questions.

Yeah, Jackie, so on the compensation side, Let's use $72 million for the comp because we're going to have some higher salaries, people, et cetera. So that would be fair. But the important thing, really more important, is that, you know, when we originate the PCP loans, like we did in the second quarter particularly, we're going to have some compensation expense that's going to be pulled out of compensation. It then gets added to the loans, and we then amortize that as part of the yield on the PCP loans. And so just ballparking where we think, you know, we're going to have less demand, we think, for the second round of PPP loans. And that number could range anywhere from $4 million to $6 million that will come out of compensation. Again, that's just so you see it, but the run rate for the comp would be $72 million.

Just so I understand clearly, does that $72 million already include the reduction of $4 to $6 million, or would that $72 temporarily decline to $66 to $68?

Temporarily decline. Thank you. Good clarification.

Great.

Thank you.

You're welcome.

And your next question is from the line of Matthew Clark with Piper Sandler. Please go ahead.

Hey, good morning. Hi. Do you have any cost saves left from your most recent deal to be realized?

Cost saves on M&A?

Yeah, from the SBAS deal.

I don't know. I think that a lot of our, certainly in Nevada, And in Arizona, our combination of, in Arizona, the foothills with the State Bank of Arizona has been done. We've converted it as part of what we tried to recognize this year to clear out any kind of acquisition expense. Cost savings, they're going to be very efficient because they picked up a lot of scale, specifically in Arizona as they've gotten bigger. But cost saves as a result of the acquisition, I would say that we recognize that and that that business now is positioned well as a complete bank and configured in a way that we think it needs to be to go forward.

Okay, great. I just had some additional savings in my number, so I'll take it out. Okay, and then... Do you happen to have the weighted average rate on new loan production this quarter as well as kind of the weighted average rate on new securities so we can get an incremental margin going forward?

Yeah, this is Ron here. So the incremental rate on the loan production in that fourth quarter, 4% is really where it was. And again, I say that because, you know, the bigger the loan is, you know, the title, the quality, but the smaller loans, you know, it would be higher than that. In fact, I would say it really came in around 415, if I look at my notes here, 4.15%, just to clarify. And then on the investment security, gosh, I wish it was higher. If we can get 90 basis points, you know, we're celebrating up here, high-fiving everybody. And that's just the market today. You know, to Randy's point in his remarks, you know, we're staying short, you know, and keeping the quality. Primarily, we're investing in the 10-year stated maturity, residential mortgage-backed security, and we get good cash flow off of that and trying to catch, you know, be ready when rates rise.

Okay, great. And then just any change in the way you're looking at tax credit investments with the change in the administration and whether or not that might cause your tax rate to go up a little bit going forward or not?

We are. So the nice thing is that the yield that we're getting on the low-income housing and especially the new markets has been really pretty good. And so we've You know, when we make an equity commitment, you know, we haven't even necessarily booked all this credit. So you're going to see more credit coming on in the future, irrespective of what's going on with the current administration, because we make these investments over a two- or three-year time horizon. So you're going to see those investments come on. And, you know, like, for instance, you notice that our tax rate for 2019 was 19%. Then it was also 19% for 2020 because we significantly grew, even though we significantly grew our income, I'm going to say taxable income, book income, et cetera. We picked up the munis, so we're going to get a lift there on the tax equivalent yield. We'll also get a lift because we've gotten more of these tax credits. So it bodes well for us. I think we're pretty tax efficient. I'll even go out and say that I think our tax rate for 21, you know, maybe it'll be 20% because of those things that we've made investments in. Again, the munis we put on in the first quarter of last year and then more so the continuing buildup of tax credits.

Okay, great. I figured that was one of your favorite questions anyway. Figured I'd ask it. Thank you. You bet.

And your next question is from Michael Young with True Securities. Please go ahead.

Hey, thanks for the follow-up. Just wanted to follow up on kind of the fee income side in particular, you know, the gain on loan sales. You know, obviously, you know, the expectation is for volumes in the markets to be down a little bit next year with refi trending lower, but, you know, I would imagine the the work from home move to, uh, your areas is, is a positive and you guys have been making a lot of investments in that business. So should we expect that to, you know, I don't know, track, track industry trends or with market share gains, should you do better than that? Um, just any outlook on that would be helpful.

Sure. Yeah, no, we've, um, so we think the mortgage business will probably be in line with the, um, Mortgage bankers forecast of around a 25% decline in business. We think our gains will probably be off a little more than that for a couple reasons. One is our markets are stronger than the national market. Unfortunately, we don't have the inventory, so as they shift into purchase, In many of our markets, we just don't have the houses to sell, and so that's probably going to hold us closer to the national forecast on business. The other shift is that the business shifts from more purchase and less refi and the overall business declines a little bit in the marketplace, our ability to get a premium pricing may deteriorate a little bit. So we're expecting a little less gains on the mortgages. So the gain will be off maybe a little bit more than what the NBA is calling for in mortgage originations.

Okay, perfect. Yeah, that's kind of what I was expecting. And then... Maybe just on the reserve or allowance from here, the day one kind of Cecil reserve for you all, you were at kind of a 150 sort of rate, 1.5% of loan. So as PPP winds off and we kind of get beyond this pandemic impacted macro outlook, et cetera, is that where we should still expect that reserve level to trend down towards or would it be lower than that due to some makeshift or any other indicators?

I'm going to ask Tom to give you some color on that. I just tell you that right now where we're positioned and right now what we see is the economic forecast. We just don't expect a lot of change in that level until we get a lot more certainty in the look forward. But, Tom, do you want to add some color to that?

Not too much more to add, but, you know, We evaluate the economic forecast on a regular basis, and until there's a material change in the future, we don't see a lot of reduction in the allowance. But certainly, as we saw this last year, a lot can change quarter over quarter. But given what we know today, I don't foresee any significant changes.

Okay. Thanks. Appreciate the follow-ups. You bet.

And I'm showing no more questions at this time. I would like to turn the call back to management for closing remarks.

All right. Thank you, Angela. Well, I want to thank everybody for dialing in today. For those of you not in the West, all of our ski resorts are open. Montana, Wyoming, Idaho, Utah, Colorado, Nevada, and even Arizona has ski resorts with a lot of snow. So some would need snow and others would snow on the way. So it's a great time to come out and visit. The other thing we'd like to say is please keep your COVID guard up. We still have a ways to go before this virus is behind us. And we hope you all have a great day and a wonderful weekend. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation and have a wonderful day. You may all disconnect.