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First Financial Bancorp (NASDAQ:FFBC)
Q1 2021 Earnings Call
Apr 23, 2021, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning and welcome to the First Financial Bancorp First Quarter 2021 Earnings Conference Reference Call and Webcast. All participants will be in listen-only mode. [Operator Instructions] I'd now like to turn the conference over to Scott Crawley, Corporate Controller.

Please go ahead.

Scott Crawley -- Corporate Controller

Thanks Jason. Good morning everyone and thank you for joining us on today's conference call to discuss First Financial Bancorp's First Quarter 2021 financial results. Participating on today's call will be Archie Brown, President and Chief Executive Officer; Jamie Anderson, Chief Financial Officer and Bill Harrod, Chief Credit Officer. Both the press release we issued yesterday and the accompanying slide presentation are available on our website at www.bankatfirst.com under the Investor Relations section. We will make reference to the slides containing the accompanying presentation during today's call.

Additionally, please refer to the forward-looking statement disclosure contained in the first quarter 2021 earnings release as well as our SEC filings for a full discussion of the company's risk factors. The information we will provide today is accurate as of March 31, 2021 and we will not be updating any forward-looking statements to reflect facts or circumstances after this call.

I'll now turn the call over to Archie Brown.

Archie M. Brown -- President, Chief Executive Officer

Thank you Scott, good morning everyone and thank you for joining us on today's call. Yesterday afternoon we announced our financial results for the first quarter which once again reflect strong earnings and our consistent ability to deliver value to our shareholders. While uncertainty remains due to the ongoing pandemic, the accelerated COVID vaccine distribution, the unprecedented fiscal stimulus and an accommodative Federal Reserve have led to widespread optimism for our economy, which is in stark contrast to our sentiment at this time last year.

Our first quarter operating performance reflects this change in sentiment and we're more optimistic as a result of the improved business climate despite an operating environment that presents ongoing challenges due to very low interest rates and muted loan demand. Highlights from those recent quarter after being adjusted to remove non-recurring items included earnings per share of $0.50 a return on average assets of 1.24% and a 58% efficiency ratio. Net income for the quarter was bolstered by lower expenses, and significantly lower credit costs.

Despite expected seasonal declines, non-interest income was strong due to healthy mortgage demand, robust foreign exchange activity and higher wealth management fees. In addition, adjusted non-interest expenses declined $4.6 million from the linked-quarter resulting in a sub 60% efficiency ratio. As I mentioned, credit costs were low with $4 million of provision expense during the quarter and resulted in allowance for credit losses of 1.84% of total loans excluding PPP. Classified assets increased during the quarter, however, our overall credit outlook has improved significantly and our borrowers are seeing benefits from the various stimulus actions and the improved economy.

While the first quarter net charge-offs increased slightly from prior quarters, this was driven by a single customer relationship. Given our overall credit outlook, we expect the allowance for credit losses to continue to decline over the course of 2021. I continue to be pleased with the progress we've made in reducing our CARES Act loan modifications. Active loan modifications at the end of the first quarter totaled $251 million or 2.5% of total loans with hotel loans making up $153 million or 61% of these deferrals.

We expect loan balances with modifications to steadily decline through the third quarter of this year. As you know, the first quarter was again an active period for the Payment Protection Program and through March 31, we originated over $307 million in second draw of PPP loans with an average fee of 5.3%. We expect forgiveness payoffs for this round to flow in through the remainder of this year. Excluding PPP activity, loan balances declined slightly for the quarter due to accelerated mortgage and HELOC payoffs, increased borrower liquidity and muted business loan demand. As a result of these trends, we anticipate slower growth in the near term with some acceleration in the second half of the year. As of March 31, consumers and businesses were holding record levels of deposits with average balances increasing during the quarter as a result of the stimulus package approved by Congress last December. We anticipate further deposit balance growth in the second quarter after the passage of the most recent stimulus bill. This anticipated growth will likely continue to suppress loan, demand and service charge income in the near term.

From a capital standpoint, our ratios remained strong through the first quarter. The combination of our current capital levels and our improved credit outlook led us to repurchase approximately 840,000 shares during the quarter. Absent higher priority capital deployment alternatives, we anticipate additional buyback activity in the second quarter. I'll now turn the call over to Jamie to discuss the details of our first quarter results, then after Jamie's discussion, I'll wrap up with some additional forward-looking commentary, Jamie?

James M. Anderson -- Executive Vice President & Chief Financial Officer

Thank you Archie, and good morning everyone. Slides 4 and 5 provide a summary of our first quarter 2021 results. As Archie mentioned, we are encouraged by our solid first quarter results. Earnings were strong as the net interest margin stabilized, fee income remained elevated and provision expense moderated. In addition, our expense base decreased compared to the linked quarter and our efficiency ratio remained below 60%. As expected, core net interest margin stabilized during the quarter.

Lower loan fees and continued pressure on asset yields led to a 9 basis point decline in total net interest margin on an FTE basis. However, these declines were partially offset by deposit cost reductions. While there will be some volatility in total margin due to loan fees, we expect core margin to decline slightly in the coming periods. Regarding fee income, mortgage banking exceeded expectations despite seasonal headwinds. In addition, Bannockburn had another strong quarter of foreign exchange income while trust and wealth management income grew during the period.

Net charge-offs and classified assets increased during the period due primarily to a single $7 million charge-off and COVID related credit migration. While these trended negatively, these events were largely anticipated in previous quarters and we continue to believe our current reserve levels are more than adequate to absorb any further credit deterioration in 2021.

In addition, we capitalize on market conditions and repurchased approximately 840,000 shares during the quarter. Our capital ratios remain strong and are in excess of both internal and regulatory targets. We continue to believe that our balance sheet is well positioned for both the near and long-term and our stress testing results continue to indicate our ability to maintain these capital levels for the foreseeable future. Slide 6 reconciles our GAAP earnings to adjusted earnings, highlighting items that we believe are important to understanding our quarterly performance. Adjusted net income was $49 million or $0.50 per share for the quarter, which excludes $1.3 million of severance costs and another $1.3 million of non-recurring items.

As depicted on Slide 7, these adjusted earnings equate to a return on average assets of 1.24% and a return on average tangible common equity of 15.8%. In addition, our 58.4% adjusted efficiency ratio remains very strong, reflecting our ability to diligently manage expenses. Turning to Slides 8 and 9, net interest margin decreased 9 basis points from the linked-quarter to 3.4%. This decline was primarily related to lower loan fees including PPP, forgiveness fees. Despite the overall decline in margin, we were very pleased that basic net interest margin increased 5 basis points, as declines related to funding mix and cost outpaced the impact from lower asset yields and changes in asset mix.

The low interest rate environment continues to negatively impact asset yields, which declined during the period. Similar to the fourth quarter, a higher mix of investment securities contributed to the decline in total asset yields in the period, as we deployed excess liquidity on the balance sheet. In response to these declining yields, we continued to aggressively lower our cost of deposits, which declined 6 basis points during the period to 14 basis points. These lower deposit costs reflect strategic rate adjustments, as well as a shift in funding mix from higher price CDs to lower cost core deposits. While some additional decline is expected in the coming periods, we expect this to be more gradual as we approach our expected pricing floor.

Slide 10 illustrates our current loan mix and balance changes compared to the linked quarter. Excluding the increase in PPP loans, end of period loan balances declined slightly as an increase in ICRE loans was offset by declines in mortgage and consumer loans and a modest decline in C&I loans. Slide 11 shows our deposit mix as well as a progression of average deposits from the fourth quarter.

In total, average deposit balances grew $447 million during the first quarter, driven primarily by increases in low-cost transactional deposits. We remain very pleased with the trajectory of deposit balances, as average transactional deposit balances increased 21% on an annualized basis during the period. In addition, non-interest bearing deposits grew $137 million during the quarter, as clients received tax refunds and another round of stimulus checks. We remain focused on deposit pricing and we will continue to make any necessary adjustments, based on market conditions and our funding needs.

Slide 12 highlights our non-interest income for the quarter. As I mentioned previously first quarter fee income remained strong and was driven by elevated mortgage banking and foreign exchange income. We were also pleased with the increase in wealth management fees. Seasonal headwinds and the additional round of government stimulus meeted the trajectory of deposit service charge income, but we remain optimistic that this will rebound in the back half of the year. Non-interest expense for the quarter is highlighted on Slide 13; overall, core expenses were in line with our expectations and declined when compared to the linked quarter, driven by a decrease in incentive compensation and lower professional fees during the period.

Despite the decline from the prior period, salaries and benefits remained elevated due to incentive compensation tied to our high fee income, as well as increased healthcare costs. Turning now to Slide 14, our first quarter ACL model resulted in a total allowance, which includes both funded and unfunded reserves of $183 million and $4 million in total provision for credit losses.

The decline in provision expense from the linked-quarter was driven by improved economic forecast, which were partially offset by elevated net charge-offs. The model utilized the Moody's baseline economic forecast released at the end of March, which was improved from the forecast utilized in the fourth quarter. Net charge-offs as a percentage of loans increased to 38 basis points on an annualized basis, primarily driven by a $7 million charge related to a single relationship.

Additionally, as shown on Slide 15 classified assets increased $54.8 million as pandemic related stress resulted in some negative credit rating migration during the period. The potential for this credit migration led to our significant reserve build in 2020 and at this point in time, we believe we've captured the risk from future COVID related credit stress in the ACL model. Barring something unforeseen, we expect lower levels of provision expense for the remainder of 2021. Finally, as shown on slide 16 and 17 capital capital ratios remain in excess of regulatory minimums and internal targets.

All capital ratios remained strong, however, the shift in interest rates at the end of March, led to a decline in other comprehensive income and resulted in a slight decrease in our tangible common equity ratio and our tangible book value during the period. In addition, we resumed our share buyback program during the quarter and repurchase approximately 840,000 shares. Once again, we do not anticipate any near-term changes to the common dividend. However, we will continue to evaluate various capital actions as the year progresses.

I'll now turn it back over to Archie for commentary related to our outlook going forward. Archie?

Archie M. Brown -- President, Chief Executive Officer

Thank you Jamie. Before we end our prepared remarks, I want to further comment on our forward-looking guidance which can be found on Slide 23. Loan balances excluding PPP are expected to remain flat over the near term as we continue to see pressure in certain portfolios and we expect low single-digit growth as we get into the back half of the year. Average securities balances are projected to increase further by approximately $250 million in the second quarter as deposit balances are expected to stabilize without additional stimulus activity. The net interest margin is expected to be positively impacted by further PPP forgiveness payoffs and the associated acceleration -- fee recognition through the remainder of the year.

Excluding our more volatile variables, such as PPP fees, purchase accounting and loan fees we expect the margin to be under modest pressure from the low interest rate environment, as well as the excess liquidity on the balance sheet and subsequent increases to our securities portfolio. Regarding credit, we expect the provision expense to continue to decline throughout 2021. Specific to fee income, we expect continued strong mortgage performance with seasonal increases to volume, partially offset by pressure on premiums. Foreign exchange income should remain consistent with prior quarter and deposit service charges are expected to remain under pressure given stimulus activity, while we expect some modest growth in our interchange revenues as customer spending accelerates.

We expect expenses to be consistent with the prior quarter over the near term, this could fluctuate some with fee income. Lastly, we will continue to evaluate capital deployment opportunities including share repurchases over the remainder of the year. Overall, we're pleased with our improved performance and outlook from this time last year. We started to transition associates back into their physical office locations and we look forward to implementing the lessons learned over the past year to create an efficient, safe and collaborative workplace.

As our local and national economies continue to improve, we believe we are well positioned to deliver industry-leading services to our clients and returns to our shareholders. With that, we'll now open up the call for questions. Jason?

Questions and Answers:

Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Scott Siefers from Piper Sandler. Please go ahead.

Scott Siefers -- Piper Sandler -- Analyst

Good morning guys. Thanks for...

James M. Anderson -- Executive Vice President & Chief Financial Officer

Hi Scott.

Scott Siefers -- Piper Sandler -- Analyst

I guess first question was just on that charge-off that you had cited. Is that sort of fully resolved or would you expect any further charges and then I guess just to look forward, would the expectation generally be for charge-offs to revert back to I guess -- last couple of quarters at least has been sort of that 20% to 25%, pardon me, basis points range. Is something like that reasonable to look at going forward?

Archie M. Brown -- President, Chief Executive Officer

Yes Scott. We would expect the charge-off rate to come back down from the first quarter levels based on what we're seeing right now kind of more normal in the range that you're describing. I'll let Bill, maybe talk about the resolution of that credit specifically to give you an answer there.

Bill Harrod -- Corporate Chief Credit Officer

Yes absolutely. Thanks Archie. Hey, are you doing Scott. This was a long time customer of the Bank of the Commercial Finance Group, over time it morphed from our traditional agency deal into an aggregator of medical malpractice and we had some -- there are some issues between the carrier and our borrower and that relationship broke down and that led us to cut a deal with the carrier. So, this should be all behind us after this quarter or after discharge.

Scott Siefers -- Piper Sandler -- Analyst

Okay. So this isn't even really related to any areas that would be sort of -- kind of COVID impact, I mean this strikes me as kind of a special situation, is a fair enough conclusion?

Bill Harrod -- Corporate Chief Credit Officer

Yeah. Scott, I think -- I think we'd say if it were completely COVID related, we probably would have had a different outcome in terms of provision, but because it was something outside of that, it led to probably more provision.

Scott Siefers -- Piper Sandler -- Analyst

Okay, perfect. Thank you for that and then maybe just as we look to the second half of the year, certainly understand what's going on, on the consumer side and then I think we're all sort of waiting for this recovery on the commercial side, maybe to that end, any color you can provide on where utilization rates are currently versus what a typical number is and where you might expect those to go as we look to sort of the second half/2022 recovery in commercial?

Archie M. Brown -- President, Chief Executive Officer

Scott, I'm sorry, on the first part, you said utilization rates?

Scott Siefers -- Piper Sandler -- Analyst

Yeah. Commercial utilization rates.

Archie M. Brown -- President, Chief Executive Officer

Yeah Scott, we think in the back half of the year, we think they'll start to move up. I mean you have several things happening, certainly the liquidity that is sitting on balance sheets -- I mean we're seeing record balances sitting in demand deposit accounts both consumer and business. So, you have that going on. There is still, I think some clarity around the pandemic and making sure we're getting to final firm footing. And then there are still some supply disruptions and I think all that's got to work through, but we would think that would start to get better in the back half of the year.

Scott Siefers -- Piper Sandler -- Analyst

Yeah. Makes sense. Perfect, OK thank you guys very much.

Archie M. Brown -- President, Chief Executive Officer

Yes. Thanks Scott.

Operator

The next question is from Chris McGratty from KBW. Please go ahead.

Christopher McGratty -- Keefe Bruyette & Woods Inc. -- Analyst

Hey, good morning guys.

Archie M. Brown -- President, Chief Executive Officer

Hey Chris.

Christopher McGratty -- Keefe Bruyette & Woods Inc. -- Analyst

Jamie, maybe just kind of start with you on a balance sheet question; the expectation to add to the bond book and loan portfolio kind of stay flat. Given all the liquidity that's in the system, I mean, do you expect earning assets to have an upward bias, are we kind of just remixing for a couple of quarters?

James M. Anderson -- Executive Vice President & Chief Financial Officer

Yeah. So right now, we're going to add to the bond book to the investment securities and so that will go up. Our targeted balance now is right around $4 billion for investment securities. So overall, yes, earning assets will go up period to period by that amount and that's just with loan staying relatively flat, and so from -- Chris when you think about that -- your next question probably was talking about the margin. I mean, when you think about that, that's going to have an effect on the net interest margin and dilute the margin slightly. When we're reinvesting right now on the security side, we're getting somewhere around in that 2% range, maybe 2.10% [Phonetic] and so you think about that, obviously that is dilutive to the margin and we're still seeing a little bit of repricing on the loan side as well,.and then when you look at the deposit side, we had a large move down in the first quarter that we were expecting.

We could see that coming, we knew we had some room on the deposit side and we moved from 20 basis points on deposit costs to 14 basis points and that starts to -- there's not as much room to move down here going forward. So, we think we can get that down by another 2 basis points or 3 basis points. Not all in one quarter, but it just takes a little bit of time here over the next 2 quarters or 3 quarters to get that down. So, from a rate perspective on the margin in the second quarter, we're going to see some pressure, just given that putting that excess liquidity to work in the securities book and just some continued repricing on the loan side.

Christopher McGratty -- Keefe Bruyette & Woods Inc. -- Analyst

Okay, that's great color. Thanks. You guys referenced the efficiency ratio a few times in your prepared remarks, just a question about, about that. I mean is the expectation that in this environment, you can stay below 60 and then just a clarification, the near-term expense flat, is that relative to the reported number or the adjusted number?

Archie M. Brown -- President, Chief Executive Officer

Yeah. So, that's relative to the adjusted number. So yeah, whenever we're talking, we're talking about the operating number. So, we think that here in the short term, we'll remain relatively flat and then in the back half of the year just as things open up a little bit, you start to see T&E expenses start to come back a little bit in the back half of the year. We may see those expenses tick up a little bit, but yes, it's off the operating number flat in the short term and maybe up a little bit in the back half of the year.

James M. Anderson -- Executive Vice President & Chief Financial Officer

Yeah, and then on the revenue side, I mean certainly we see fee income slightly improving from here and with the additional securities book hopefully that we can hold revenue and maybe that efficiency ratio will stick.

Archie M. Brown -- President, Chief Executive Officer

Yes.

Christopher McGratty -- Keefe Bruyette & Woods Inc. -- Analyst

Okay. And then maybe as a last one kind of housekeeping on PPP, do you have the average balances in the quarter and then also the fees that were in the quarter and what might be still to come? Thanks.

James M. Anderson -- Executive Vice President & Chief Financial Officer

Yeah, so I don't have that average balances right in front of me, but -- Chris, but at the end of the quarter we're talking about the fees, we have -- so from the first round and then this last round of PPP, we have about $22 million of fees -- of unearned fees that will still come in and we're expecting the bulk of those to come in over the remainder of the year. We think the second quarter is actually going to be a little on the low side, just with the kind of the first round -- kind of wrapping up and this last round kind of really as the forgiveness hasn't kicked in quite as much. So, we think overall if you're trying to project those we think it's -- maybe roughly a third of those come in the second quarter and then the other two-thirds will be spread out in the third and fourth quarter.

Christopher McGratty -- Keefe Bruyette & Woods Inc. -- Analyst

All right. Thanks Jamie.

Operator

The next question is from Jon Arfstrom from RBC. Please go ahead.

Jon Arfstrom -- RBC -- Analyst

Hey thanks, good morning guys.

Archie M. Brown -- President, Chief Executive Officer

Hi Jon.

Jon Arfstrom -- RBC -- Analyst

Can you talk a little bit about maybe following up on Scott's question, can you talk a little bit about the commercial pipelines and what they look like maybe relative to a quarter ago?

Archie M. Brown -- President, Chief Executive Officer

Sure. Jon, this is Archie, I'd say the pipeline overall is slightly higher than it was a quarter ago and we're -- even in recent weeks, we're seeing more activity especially in our approved pipeline that is starting to move up. So, we think again in the near term a little more flattish there -- we're starting to see some momentum and that as some things improve, supply chain all of that stuff works its way through, we think in the back half we would start to see some growth out of that group.

Jon Arfstrom -- RBC -- Analyst

How would you describe the competitive environment also, maybe relative to a quarter ago?

Archie M. Brown -- President, Chief Executive Officer

Highly competitive. I mean it's very, very competitive on pricing and structure. We're probably competing a little more when we have to on price, but we are trying to stick to our disciplines on the structuring side of deals, but it's highly competitive for loans right now.

Jon Arfstrom -- RBC -- Analyst

Can you touch on franchise finance for a second and how that business is doing?

Archie M. Brown -- President, Chief Executive Officer

Yeah, I am going to have maybe Bill give you just a little color, I know we've got a slide on the portfolio as well in the deck, but maybe Bill, can you just a little color on how that portfolio is looking now?

Bill Harrod -- Corporate Chief Credit Officer

Yeah, the franchise book has performed very, very well through the COVID and the pandemic, especially in our delivery and our quick-serve restaurants they've adapted very quickly to the new normal during the pandemic. We also have some sit downs that we've talked about in the past, Golden Corral, Denny's, IHOPs and things like that, and we're starting to see a lot of progress being made in Denny's, IHOP and Golden Corral as those stores reopen. Denny's and IHOP are a little bit earlier in their performance returns than the Golden Corral. But our portfolio has -- the bulk of the stores are open now, not all of them on the GC side but on the Denny's and the IHOP they are, and with the plans that are in places, all of the Golden Corral should be open by the end of this quarter and the results have been -- not at 2019 level, but rebounding very nicely and all sit down formats through the Q4 and Q1 of this year.

Jon Arfstrom -- RBC -- Analyst

It's making me hungry, by the way. Just -- a couple of more things, can you touch on the classified asset increase. I know you talked about a little bit, but anything going on there?

Bill Harrod -- Corporate Chief Credit Officer

Yeah, I mean the uptick in classified asset is really tied into the COVID impacted portfolios, about 75% of that uptick was hotel sit down and then a retail credit. And as we put our COVID mods in place and we monitor the credits, we obviously benchmark them opposite our projections and our plans and these are ones that fell beneath where we thought they would and so we made the rate adjustment as appropriate. Based on our look on, we do think that the bulk of this portfolio is set to rebound as things open up and with the traction of the vaccine and the pent-up demand that we're seeing, we feel pretty optimistic about those credits actually improving over time.

Archie M. Brown -- President, Chief Executive Officer

I think we're seeing with occupancies north of 50% now.

Bill Harrod -- Corporate Chief Credit Officer

Yeah, we're seeing occupancies uptick in all of our hotel books and we're anticipating up around 50% 52% occupancy based on customer feedback, which is right in line or a little bit above the STAR's [Phonetic] reports for the balance of the year.

Jon Arfstrom -- RBC -- Analyst

Okay. Last one here on credit, this has been popular in other calls as well so I'll let you give it a shot. But do you see a path back to your day one CECL reserve levels and if so, any thoughts on the timing of that?

James M. Anderson -- Executive Vice President & Chief Financial Officer

Yeah Jon it's Jamie. So I think yes, I think in theory, that's where we should -- once everything has kind of cycled through where we should -- where the industry really and should come back to. But timing is the key here right. And so, if is it over the next year or so, I think is probably where we end up landing on that just as -- the recovery, kind of see where the recovery is and where things kind of land. When you think about hotels specifically, those are going to take a little bit of time to kind of see where they're at post pandemic. So, I think personally that it's a year out until we start to see that and it could be even a little bit longer than that. But, so when you think about that for us our reserve -- when you take out the PPP loans, we're at 184 of loans, our day one was right at 130.

So, you know, that's 54 basis points of release and obviously you can come in many different forms and you know, charge-offs are going to be some of that, if we have loan growth that obviously affects the denominator of that equation, but the signs are obviously pointing to lower provision expense here in the intermediate term.

Jon Arfstrom -- RBC -- Analyst

Okay, thanks a lot guys. I appreciate it.

James M. Anderson -- Executive Vice President & Chief Financial Officer

Thanks Jon.

Operator

The next question is from David Long from Raymond James. Please go ahead.

David Long -- Raymond James -- Analyst

Good morning everyone.

Archie M. Brown -- President, Chief Executive Officer

Hey Dave.

David Long -- Raymond James -- Analyst

You had mentioned securities investments you're getting about 2% obviously still at that level, dilutive to the NIM is the mix is shifting. But the question I have is, what type of securities are you buying to get these yields and are those yields still in place today?

James M. Anderson -- Executive Vice President & Chief Financial Officer

Yes, that's about our blend -- I would tell you that's our blended reinvestment rate is right around 2%. So it would be, when you look at the mix of our book between roughly 60% agencies, 40% non-agency. It's essentially the same mix of investment that we would have in our book -- at the current time. So nothing different. We're not going out really any longer and extending. Our securities portfolio is in that 3.5% to 4% duration. So, it's not really extending a lot there and so it's really going into the same type of securities that we currently have in the book, and yes, we're still getting that -- roughly that 2% reinvestment rate.

David Long -- Raymond James -- Analyst

Got it. And then second question comes out to the -- you talked about the round two of the PPP gross fees about 5.3% were there some deferred expenses with round two that would offset that gross fee when you start to report your net fees, maybe in the back half of this year?

James M. Anderson -- Executive Vice President & Chief Financial Officer

Yeah, no, there is no deferred expenses with that. No. So all of that 5.3% will be coming in. Now, we are initially amortizing or accreting I guess those fees in over the 5-year maturity period and then obviously as they get forgiven, we'll bring those in.

David Long -- Raymond James -- Analyst

Got it. Thank you Jamie. Appreciate the color.

James M. Anderson -- Executive Vice President & Chief Financial Officer

Thank you David.

Operator

[Operator Instructions] The next question is a follow-up from Scott Siefers from Piper Sandler. Please go ahead.

Scott Siefers -- Piper Sandler -- Analyst

Hey guys, thanks for taking the follow-up. First was sort of ticky-tack one on PPP, do you have the breakout of the balances between round one and round two by any chance of today's balances just one versus round two?

James M. Anderson -- Executive Vice President & Chief Financial Officer

Yeah. Scott, this is Jamie. At the end of -- say at the end of March, we had about $400 million in first draw, in the first round and about $300 million in the second round. So -- and just to follow-up from Chris McGratty's early earlier question, the average for the period in PPP loans for the first quarter was $645 million and it was in the fourth quarter was $778 million and we're projecting about $600 million of average balances in the second quarter.

Scott Siefers -- Piper Sandler -- Analyst

Perfect. All right. That's great. Thank you, and then just on the lower credit costs, I don't want to make you put like too fine a point on it, but it seems that with the exception of hotels, everything is in pretty good shape, particularly considering that the first quarter, sort of charge-off was more or less a special situation. Could you guys see yourselves taking a negative provision or would you -- would you anticipate just very, very modest positive provisions, what's sort of the thinking there?

James M. Anderson -- Executive Vice President & Chief Financial Officer

Yeah, I was hoping, you were going to follow-up about the demise of the European Super League Scott, but [Multiple Speakers] but on provision yeah, I guess and I hate to say it depends, but it does depend and so on the provision expense here going forward. We are, I mean -- again, we do think it's going to be lower. I guess the question becomes or that whether -- what charge offs look like here going forward. If we have, and you know, charge-offs can be lumpy. So, I mean if we have, if we have a quarter here over the next -- over the next couple of quarters where charge-offs are on the lower side, call it sub $5 million, there is a real chance that we could have negative provision expense.

Other factors obviously going into that would be, how much loan growth we would have in the period, and then just what the overall forecast looks like. But again, a quarter here over the next 2 or 3, where we had loan charge offs, you could see that happening for us.

Scott Siefers -- Piper Sandler -- Analyst

Okay. Perfect, thank you very much. And then, I'll follow up on Super League [Phonetic] offline regarding just sort of the influence of British politicians and fans and..

James M. Anderson -- Executive Vice President & Chief Financial Officer

That's a longer discussions. Yeah, appreciate it.

Scott Siefers -- Piper Sandler -- Analyst

Yeah. Thank you guys.

Operator

As there are no more questions in the queue, this concludes our question-and-answer session. I would like to turn the conference back over to Archie Brown for any closing remarks.

Archie M. Brown -- President, Chief Executive Officer

Thank you Jason. I want to thank all of you for being on the call with us today and following along our progress, we look forward to talking with you again next quarter. Have a great day. Bye now.

Operator

[Operator Closing Remarks]

Duration: 40 minutes

Call participants:

Scott Crawley -- Corporate Controller

Archie M. Brown -- President, Chief Executive Officer

James M. Anderson -- Executive Vice President & Chief Financial Officer

Bill Harrod -- Corporate Chief Credit Officer

Scott Siefers -- Piper Sandler -- Analyst

Christopher McGratty -- Keefe Bruyette & Woods Inc. -- Analyst

Jon Arfstrom -- RBC -- Analyst

David Long -- Raymond James -- Analyst

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