Glacier Bancorp Inc (GBCI) Q1 2021 Earnings Call Transcript

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Glacier Bancorp Inc (GBCI 0.80%)
Q1 2021 Earnings Call
Apr 23, 2021, 11:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning and welcome to the Glacier Bancorp First Quarter Earnings Conference Call. [Operator Instructions]

I would now like to turn the conference over to your host, Randy Chesler, President and CEO. Please go ahead.

Randall M. Chesler -- President and Chief Executive Officer

All right. Thank you, Carol. And good morning and thank you all for joining us today. With me here in snowy Kalispell is Ron Copher, our Chief Financial Officer; Angela Dose, our Chief Accounting Officer; Byron Pollan, our Treasurer; Tom Dolan, our Chief Credit Administrator; and Don Chery, our Chief Administrative Officer Yesterday, we released our first quarter 2021 earnings, and today we are ready to review them. We finished the first quarter of 2021 well positioned for the rest of the year. We do business in some of the strongest markets in the country, have record liquidity and our business model and people continue to attract new customers.

I'm also happy to report that most of our 193 locations are now fully open for business across our eight-state footprint as COVID cases decline and vaccination rates increase. I'll touch on some of the business highlights and then provide additional observations on the quarter. Net income of $80.8 million, an increase of $37.5 million or 86% over the prior year first quarter net income of $43.3 million. Diluted earnings per share of $0.85, an increase of 85% from the prior year first quarter diluted earnings per share of $0.46. Gain on sale of loans of $21.6 million, an increase of $9.8 million or 82% compared to the prior year first quarter.

Noninterest expense of $96.6 million, a decrease of $14.6 million or 13% compared to the prior quarter, and an increase of $1.1 million or 1% from the prior year first quarter. Bank loan modifications related to COVID-19 decreased $13.5 million from the prior quarter and decreased $1.4 billion from the second quarter of 2020 to $81.3 million or 79 basis points of loans, excluding the payroll protection or PPP loans. Nonperforming assets as a percentage of subsidiary assets was 19 basis points, which compared to 19 basis points in the prior quarter and 26 basis points in the prior year first quarter.

Core deposits increased $1.3 billion or 35% annualized during the current quarter and increased $4.5 billion or 40% from the prior year first quarter. The loan portfolio increased $147 million or 5% annualized in the current quarter and increased $1.1 billion or 12% from the prior year first quarter. The company funded 6,500 PPP loans in the amount of $487 million during the current quarter. The company received $426 million in PPP loan forgiveness on 6,800 loans from the U.S. Small Business Administration during the current quarter.

We declared a quarterly dividend of $0.31 per share, an increase of $0.01 per share or 3% over the prior quarter regular dividend. The company has declared 144 consecutive quarterly dividends and has increased the dividend 47 times. Further highlighting the company's core strength, pre-tax, pre-provision net revenue for the quarter was $100 million, which was up from the prior quarter of $99 million and up $28 million or 39% from the first quarter a year ago.

We think this is a very good measure of the health of our core franchise. We saw loan growth in most of our markets with Montana, Wyoming and Washington leading the way. And we are trending to our 46 growth forecast that we've talked about previously. Our pipeline of customer relationships larger than $5 million grew significantly in the first quarter and now stands at almost twice the level it did at the end of the first quarter a year ago.

As I noted, the loan portfolio of $11.2 billion grew $147 million or 5% annualized in the current quarter. If you exclude the liquidation of our residential mortgage portfolio, the loan portfolio grew $252 million or 9%. We continue to build on the 3,000 new customer relationships we picked up as part of round one PPP, with about $135 million of this quarter's commercial loan volume coming from this group.

All of this growth is even more impressive when you consider that the Glacier team processed over 4,300 regular loans and over 13,000 PPP loans, including new and those forgiven. Core deposit growth was incredibly strong driven by excess liquidity due to the unprecedented government stimulus and lack of spending due to the pandemic. Core deposits increased $1.3 billion and at the end of the quarter totaled $16 billion, most importantly at a cost of eight basis points, down one basis points from the prior quarter. Noninterest-bearing deposits increased $586 million or 11% over the last quarter.

We know that this substantial growth in low-cost core deposits will continue to add to our net interest income and position us extremely well to reinvest in new loans as the economy recovers. Total debt securities of $6.4 billion increased $900 million or 17% from the prior quarter and are up $2.8 billion or 77% from the prior year first quarter. We continue to purchase debt securities with the excess liquidity from the increase in core deposits and the forgiveness of PPP loans.

Debt securities represented 30% of total assets compared to 30% at the end of 2020 and 24% a year ago. The return on our debt securities reflected the impact of lower for longer interest rates, ending the quarter at 1.81%, down from 2.12% at the end of the prior quarter due to purchasing new securities at lower market rates. Debt security income was $27.3 million, which is about flat to the prior quarter.

We continue to fully invest excess deposits, taking a cautious approach to new investments given current low rates and risk at some point of deposit outflows and, as a result, are targeting a short average life with high-quality and highly liquid investments. Noninterest income was strong due to our better-than-expected mortgage business performance. The hot housing market and refinancings continued at a stronger-than-expected pace across our footprint.

It was a record first quarter for new locked volume, and our gain on sale margin was up slightly over the prior quarter. We expect those margins to decline in the next quarter slightly based on interest rate trends. Our biggest concern in our mortgage business is the availability of an ample supply of homes for sale. Noninterest expense was lower than expected due to the $5.2 million of deferred compensation expense from new PPP loans and good expense management by our divisions. Some of our expense saves were due to COVID.

We've been -- we have open positions due and not able to find a ready supply of new hires, and our travel and branch expenses reflect less activity. But we expect these saves to subside and expenses to return to a more normal run rate as the economy gets back to normal. The company's net margin -- interest margin as a percent of earning assets on a tax-equivalent basis for the current year was 3.74% compared to 4.03% in the prior year -- in the prior quarter and 4.36% in the prior year first quarter. The core net interest margin of 3.56% compared to 3.76% in the prior quarter and 4.30% in the prior year first quarter.

The core net interest margin decreased due to a decrease in earning asset yields. And earning asset yields have decreased from the combined impact of the significant increase in lower-yielding debt securities and the decrease in yields on both loans and debt securities. Debt securities comprised almost 36% of earning assets during the current quarter compared to 32% in the prior quarter and 24% in the prior year first quarter. Going forward, our margin will continue to be dependent on the incoming flow of new deposits, loan growth and the yield curve. The efficiency ratio was 46.75% in the current quarter and 50.34% in the prior quarter.

Excluding PPP, the ratio would have been 52.89% in the current quarter, which was a 300 basis point decrease from the prior quarter efficiency ratio of 55.96%. So the Glacier 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.

So that ends my formal remarks today, and I'd now like Carol to please open the line for any questions that you may have.

Questions and Answers:

Operator

Thank you, Randy. [Operator Instructions] Your first question comes from the line of Mike Young with Truist.

Mike Young -- Truist Securities -- Analyst

Hey, Randy. How is it going?

Randall M. Chesler -- President and Chief Executive Officer

Morning, good.

Mike Young -- Truist Securities -- Analyst

Wanted to start maybe just with the high-level trends. You kind of touched on it a little bit with the mortgage commentary. But just big picture, you guys saw a lot of influx of activity in migration as a result of the pandemic and the kind of closing down of the West Coast. Have you seen any of that sort of flow back the other way? Or is it still a pretty strong, enduring trend even as the reopening starts to take place?

Randall M. Chesler -- President and Chief Executive Officer

From everything we can see at this point, that trend seems to be sticky. We just have not seen -- the housing market, as I noted, continues. The home sale market -- homes continue to be in very short supply. When they do come on, they're snapped up pretty quickly. And so a fair amount of that is still outside buyers, as we would say, not from the end market coming in and buying homes.

So we've yet to see really any kind of a retrade where people decide they want to go back to the markets in which they came here from. But -- still watching it, but I have to say in the first quarter, no, we did not see any signs of that happening.

Mike Young -- Truist Securities -- Analyst

Okay. And then, I guess, secondly, just on the large amount of deposit growth and liquidity flowing into the bank. I'm just curious, from what -- the conversations you've had with other market presidents, etc., does it seem like permanent liquidity or temporary liquidity? And then how are you guys thinking about deploying that and leveraging that going forward?

Randall M. Chesler -- President and Chief Executive Officer

Yes. Well, let me just kind of talk about our outlook there, and I'll have Ron talk about our investment strategy tied to that because, obviously, we see this liquidity, I think the team has done a very good job taking advantage of it and getting some nice interest -- net interest income growth on it. But I think we -- so we had an incredible quarter of growth on deposits.

We think that's probably going to tail off a bit because the stimulus payments that fueled a fair amount of that are -- look to be at their end. We're seeing the PPP forgiveness come in which is building it. Yet, as the economy gets stronger and people have more places to spend money and feel more comfortable taking trips and doing other things, we expect to see some of that flow out a bit.

In terms of -- but overall, I'd say it's -- we feel it's very sticky, most of that. That's why I stress the core relationships or the core deposits are -- in our core -- what we would call core deposits. So we feel like they're in a relationship account. So any -- if there is a slow -- slower growth rate there, I think we'll see that over time. And Ron, do you want to comment on the -- our investment strategy with those excess deposits?

Ronald Copher -- Executive Vice President, Chief Financial Officer and Secretary

Right. Hi Michael. Just to be clear, we strongly prefer loan growth. But in the meantime, as deposits are flowing in, we will park them into the investment securities portfolio. And so the -- as you've seen, the dollars have increased because that's where the best yields we can get other than through the loan portfolio. So, the yields that we're getting were slightly higher than what we were getting in the fourth quarter. We're up to 110 to 115 basis points. And we're also sticking in the residential mortgage-backed security, agency backed. We've moved off the 10-year into the 15-year.

Again, a short weighted average life, and that's really key to the strategy going forward. So we're getting cash flow off of that. And as rates rise and as they rise more, we can all predict what that will look like over the course of the year. We think we -- it will bode well by what we've put to work. One thing I want to point out is we're not trying to time the market. We're not holding back large amounts of cash. So timing the market, you get lucky or you can even lose big. So we're pretty pleased with that. One thing I'll point out with the cash flow, the federal stimulus that came in, we were -- in the month of March put $750 million to work, only had 15 days of that. So we think that will bode well for the full quarter next quarter.

Mike Young -- Truist Securities -- Analyst

Okay. So, it sounds like just assumes sort of a ratable deployment of that excess liquidity as it flows in, and there's a willingness basically or there's no hesitancy about kind of the margin compression that'll be associated with that?

Ronald Copher -- Executive Vice President, Chief Financial Officer and Secretary

No, we are -- I mean, I'm not thrilled with that, but that's the result of what we're doing. We're much more focused on net interest income to grow earnings, to grow EPS, ultimately fund dividends. So that's where we are. I can't defy gravity. I think I've said that the last four quarters, so I'll just keep repeating that.

Mike Young -- Truist Securities -- Analyst

Fair enough. Thanks.

Operator

Your next question comes from the line of Jeff Rulis with D.A. Davidson.

Jeff Rulis -- D.A. Davidson -- Analyst

Thanks. Good morning.

Randall M. Chesler -- President and Chief Executive Officer

Good morning Jeff.

Jeff Rulis -- D.A. Davidson -- Analyst

Randy, you -- maybe I'd just kind of dip into the markets a little bit. You mentioned that Montana, Wyoming, Washington kind of leading the charge. It's not as if your other states are economic laggards, however, when you think nationally. So maybe it's just a timing thing, but Nevada, Utah, Colorado, do you feel like it's just, again, a few of those states leading? But I guess the balance of the footprint, what else are you seeing on a growth perspective?

Randall M. Chesler -- President and Chief Executive Officer

The footprint is extremely healthy. If you look at Idaho, Montana, Utah, Arizona, Washington, they're one, two, two, four, and six in terms of home price appreciation. And so yes, what we think is that we're in some of the best states in the country to be doing business. The leadership of those states; that surprised us. When we talked about it internally, we think it's probably not going to hold. I think it was a first quarter event. But a fair amount of that is because those states probably came out of COVID much quicker than the rest of our footprint and that they were open sooner, they had less restrictions going through it, and I think that's why we're seeing the loan growth, just the leading -- in the first quarter coming from those states.

Jeff Rulis -- D.A. Davidson -- Analyst

Got it. Yes, particularly, I guess, Eastern Washington versus the western side. So --

Randall M. Chesler -- President and Chief Executive Officer

Exactly.

Jeff Rulis -- D.A. Davidson -- Analyst

On a related front, I guess you had mentioned real estate. And typically, bank M&A can follow that activity as well. And I guess, as we've seen deals in the Southeast and in California have been pretty active, I guess are you surprised that the Rocky Mountain has been -- that the region has been less active? And I know there's less charters, but your thoughts on M&A. You guys have been quiet for a bit, but any thoughts on the acquisition outlook?

Randall M. Chesler -- President and Chief Executive Officer

Yes. And -- so I'd start the time frame -- because of the pandemic in 2020, we lost a year. So I'd -- as we previously commented, really started to pick things back up in kind of the December time frame. I think -- I don't think you'll see much difference over time, that the west will -- you'll see a fair amount of activity.

Just measured by the amount of phone calls that we've received and people who want to talk about transactions, it's very busy. So I think some of the other parts of the country maybe moved a little quicker, but I just think that's timing.

I think maybe the folks -- some of the folks in the West were just a little less in a hurry and wanted to see the full results of and get fully comfortable with the outlook due to COVID and making sure that you could -- not only -- there's two sides to this.

There's the buyers being comfortable that they can assess a good quality bank and understand the risk and the seller's interest in making sure that they sell at a time when they can get closer to their full value.

So I think those two things are coming together; have come together here recently. And I think over time, over this year, I would expect you won't see a big difference between the West and the rest of the country.

Jeff Rulis -- D.A. Davidson -- Analyst

Got it. Okay. And maybe last one, just a housekeeping and maybe for Ron. The deferred comp, the release says it's an increase of $5.2 million. Was that the -- what was the total? And maybe what is your generally historical level there just to try to peg?

I got your comments on total expenses. Maybe you returned to more of a normal rate with COVID impacting, I guess, benefit to the cost side. But first, the deferred comp and then maybe just kind of overall expense levels.

Ronald Copher -- Executive Vice President, Chief Financial Officer and Secretary

Yes. So on the deferred comp, as we originate these PPP loans, because they're a bit unique how we have to comply with all the SBA rules, we've assigned a cost to the origination of those. And so if you take the $5.2 million and divide by the units, you'll see what we basically put out there on average.

So PPP has its own unique set of loans. But when you then look at any other loans that we have, commercial real estate, name your category, we have a compensation charge that we defer over a long-lived asset. And that is a -- that happens every month. All banks do that except with the very, very small banks. So that's on --

Jeff Rulis -- D.A. Davidson -- Analyst

Ron, I'm trying to -- OK, go ahead.

Ronald Copher -- Executive Vice President, Chief Financial Officer and Secretary

That's why -- no, you go ahead.

Jeff Rulis -- D.A. Davidson -- Analyst

Well, just -- so I'm trying to -- understood the mechanics there, but the increase to $5 million, I'm assuming it was heavy PPP impact. But I guess what was that last quarter? I'm trying to get a level of generally historical deferred comp. As the PPP runs away, what does that level revert to, ballpark?

Ronald Copher -- Executive Vice President, Chief Financial Officer and Secretary

So -- yes. So just on the -- just looking at the PPP, if I'm understanding your questions, in the fourth quarter, since we didn't really originate any PPP loans, there was zero deferred comp associated with that. But are you looking beyond the PPP?

Jeff Rulis -- D.A. Davidson -- Analyst

No. I guess that helps. But if you're basically saying deferred comp related to PPP was effectively zero last quarter and you saw a $5 million increase, which was largely PPP, then the other deferred comp that's in the number, you don't really need to mention that, but -- so that's basically the piece that would effectively normalize going forward?

Ronald Copher -- Executive Vice President, Chief Financial Officer and Secretary

Exactly, yes. Yes, exactly.

Jeff Rulis -- D.A. Davidson -- Analyst

All right.

Ronald Copher -- Executive Vice President, Chief Financial Officer and Secretary

And then on the expense, you -- everybody saw our non-interest expense went down, just to get to the bottom line. So, we're estimating a normal run rate of $105 million, give or take a little bit, either $5 million -- but $105 million would be a good run rate. And so, the way I get there, just for everybody's benefit, if you take the -- I'm looking at our noninterest expense summary.

The comp and employee benefits, it went down to $62.5 million. We'll add $5, million, $5.2 million. So, let's call that $67 million, $67.5 million. I think that, that'll hold because in that number, we had an increase in headcount during the first quarter of 14. So those salaries were front loaded. We were able to put people on to work at the start of the year.

You also noticed that we had -- the FTE count went up by 24. That reflects the overtime pay. You heard Randy talk about the work we've been doing on the PPP one forgiveness. Round two, getting those new loans in from the customers we picked up from round number one. So everybody has been really busy. Plus, we've had the higher pike -- the higher employment taxes. So with all that said, I'm comfortable with $67 million, $68 million run rate for comp.

I'm going to move to the other expense line. It's a $6 million reduction there, $3 million, about half of that, is not sustainable. Part of that is we have been so busy taking care of our customers on PPP, round one, round two, that -- and then just think about just the COVID impact. So we haven't spent as much money on, what I would call, the business development side of the house, the travel, third party consulting. We have been just very, very busy doing that.

Keep in mind also in the fourth quarter last year, we talked about this in January, we did a lot of year-end cleanup so we could start the year clean for 2021. So -- but of that $6 million in other, only about $3 million of that will occur again. I just want to go back for a second on comp and employee benefits, because we were down $8.1 million. I've explained $5.2 million. That remaining $2.9 million or $3 million, that is not sustainable because that really relates to the fact in the fourth quarter, we had higher accrued expenses for the really good performance that we were seeing. So that won't happen again.

So when you boil that all down, that just leaves all those other expenses, advertising, occupancy. We think those are the right levels. They'll stay there. Everybody can see that other real estate owned is only $12,000. We don't have a lot of OREO. That's a real blessing. And then, -- I'll leave it there, but $105 million is the real run rate, we think everybody should go with.

Jeff Rulis -- D.A. Davidson -- Analyst

Great. Thanks, Ron and Randy. Appreciate it.

Ronald Copher -- Executive Vice President, Chief Financial Officer and Secretary

You're welcome.

Operator

Your next question comes from the line of Matthew Clark with Piper Sandler.

Matthew Clark -- Piper Sandler -- Analyst

Hey. Good morning.

Ronald Copher -- Executive Vice President, Chief Financial Officer and Secretary

Good morning, Matthew.

Matthew Clark -- Piper Sandler -- Analyst

I just wanted to circle back to the kind of the balance sheet growth-related question. I think 4% to 6% loan growth ex PP is still the guide for the year, and you're kind of on pace for that. But what I'm trying to get at is just your overall thoughts on NII growth, whether it's on a reported basis overall with PPP or without.

Ronald Copher -- Executive Vice President, Chief Financial Officer and Secretary

Yeah, Matthew, it's Ron here. So basically, net interest income was pretty much flat compared to the fourth quarter. So, we see that we're still going to be able to hold the loan yields just, say around 4.20% for new production. But as well, when we put more dollars to work in the investment securities portfolio, we think that's the way we're going to be able to maintain the net interest income.

As I mentioned, we've put a lot of money to work in the third quarter. But -- excuse me, in the third month, March. And so we will pick-up that benefit as well. But -- so no, we feel comfortable that we'll be able to maintain -- grow, I should say, our net interest income.

Matthew Clark -- Piper Sandler -- Analyst

Okay. And then, can you remind us, just how much in the way of round one PPP fee is left -- that you have left and how much in round two? Just not sure what the kind of gross...

Ronald Copher -- Executive Vice President, Chief Financial Officer and Secretary

Yeah.

Matthew Clark -- Piper Sandler -- Analyst

...coupon there or maybe net coupon?

Ronald Copher -- Executive Vice President, Chief Financial Officer and Secretary

Okay. So the net deferred fee remaining on PPP round one at the end of March is roughly, call it, $6.25 million, $6.25 million. That's around one. And then on round two, we've got just under $22 million remaining.

Matthew Clark -- Piper Sandler -- Analyst

Great. Thank you. And that's over a longer life, though, right?

Randall M. Chesler -- President and Chief Executive Officer

Yes.

Matthew Clark -- Piper Sandler -- Analyst

Okay. And then, just lastly, on the mortgage banking piece, can you give us the amount of loans sold in the quarter, this quarter and maybe last? I'm trying to get at a gain on sale margin. And just wanted to also verify, if there were any kind of MSR-related marks in there, I can't remember, if you guys do any servicing?

Randall M. Chesler -- President and Chief Executive Officer

So Ron, do you want to talk about the MSR. And then, I'll cover the sale?

Ronald Copher -- Executive Vice President, Chief Financial Officer and Secretary

Yes. So on the...

Randall M. Chesler -- President and Chief Executive Officer

Yes.

Ronald Copher -- Executive Vice President, Chief Financial Officer and Secretary

...on MSR, we're using lower cost or market. So we're not writing those off. But the fee associated with that is the 25 basis points, in the margin calculation. So that's been pretty steady for us. Again, some banks mark-to-market quarterly, and we have not made that election at all.

Randall M. Chesler -- President and Chief Executive Officer

And in terms of loans sold for the quarter, residential loans, so that was about $490 million for the quarter

Matthew Clark -- Piper Sandler -- Analyst

And how did that compare to last quarter? I just was trying to get a sense for the gain on sale. Margin was up slightly, so.

Randall M. Chesler -- President and Chief Executive Officer

Yeah. Just lately, yeah, we sold last quarter just about $680 million.

Matthew Clark -- Piper Sandler -- Analyst

Okay. Thank you.

Operator

Your next question comes from the line of Jackie Bohlen with KBW.

Randall M. Chesler -- President and Chief Executive Officer

Morning Jackie.

Jackie Bohlen -- KBW -- Analyst

Good morning. I noticed that you repaid just a real small amount of sub debt in the quarter, so I just wanted to get the thoughts behind that, and if you might look to do any other pieces?

Ronald Copher -- Executive Vice President, Chief Financial Officer and Secretary

So the only sub-debt we paid was $7.5 million and really was Tier two debts. It was something we picked up when we acquired Inter-Mountain Bancorp, First Security Bank in Bozeman. And had a very high coupon, 6% and 5/8%. So we paid that off on January 4. I'm happy to report that was $500,000, we will not payout, because we were able to retire.

They got to the call date. And so we probably paid it. All of the other sub debt is really trust preferred securities, very dirt cheap capital by any stretch. So we're going to keep that, of course. And that really is a liability for GAAP purposes in our financial statements, but its Tier two capital. Remember, it used to be Tier one. But because we crossed $15 billion when we did an acquisition, it got reclassed to Tier two. But it's still in our total risk-based capital.

Jackie Bohlen -- KBW -- Analyst

Okay. Great. Thank you for the color. And that's it for me.

Operator

Your next question comes from the line of David Feaster with Raymond James.

David Feaster -- Raymond James -- Analyst

I just wanted...

Ronald Copher -- Executive Vice President, Chief Financial Officer and Secretary

Good morning.

David Feaster -- Raymond James -- Analyst

I just wanted to start on, the increasing demand and just the trends in the pipeline. Just curious, how much of this is from existing clients, that are just more confident in the economic improvement and started to invest versus new customer acquisition from new hires? And maybe just an update on the migration of new client into the PPP program.

Randall M. Chesler -- President and Chief Executive Officer

Sure. Tom, do you want to cover that?

Tom Dolan -- Chief Credit Administrator

Sure. On the existing pipeline, little difficult to nail down exactly. But I would say about two-thirds of the pipeline is existing customers. Last year, there were projects that were put on hold until our customers got more comfortable with what they were seeing in the market. So now that -- with everything, for the most part, reopened, customers comfortable spending capital, that's what we see and so about two-thirds and one-third split.

On the PPP, we've made some nice volume there. Of the 3,000 customers, we've been able to bring over a pretty large share of that. And total loans to date on those customers that we've been able to bring over with round one PPP is about $207 million in total since the start of the program.

David Feaster -- Raymond James -- Analyst

Okay. That's great. And then just, Randy, following up on your commentary about the pipeline of customer relationships over $5 million being up pretty significantly. Just curious, how much of that is strategic, looking to go maybe upstream a bit versus just market demand and some fallout from some of the larger banks not servicing the lower end of that middle-market well and customer migration from PPP?

Randall M. Chesler -- President and Chief Executive Officer

Yeah. I -- there -- it's not a change in strategy. I think it's just a reflection of the activity levels in the market. And we are picking up some good loans from some of the other players in the market. Some of the larger banks continue to be distracted, so that's been very good for us as well. So really no change there, just something we talked about this quarter because of how significantly that particular area has grown. So it's almost double when you look at that pipeline, where it was a year ago. And I think it's more a reflection of the strength -- the growing strength of the markets than it is a change in our direction.

David Feaster -- Raymond James -- Analyst

Okay. And then just wanted to touch on any upcoming investments that you might have, whether on the technology front or just any other projects. I mean, we've talked in the past about kind of an ATM upgrade and deploying more IPMs. Just wanted to get an update maybe where you were at on that, and any other strategic investments or opportunities that you might have on the horizon?

Randall M. Chesler -- President and Chief Executive Officer

Sure. Well, I mean, we continue to make strategic investments and specifically in technology. We do that trying to keep, without the PPP, 54%, 55% range on the efficiency. So we feather those investments in, and we'd like to keep our efficiency stable and not experience any kind of cliff effect of big investments at one time. And also because we believe these projects are better executed in a bite-size fashion than just making big bets on technology and what we call a raise-the-curtain strategy where everything is put together. So it's worked very well for us.

We are evaluating investments in the ATM fleet, and that's under way. I think we're going to bring some consistency there and I think position ourselves well for the future. That distribution outlet, pretty generic today, but we want to make sure as things change. We're well positioned to use that distribution more strategically if the need arises.

So that's one area. We've talked about our commercial card business, the investment we've made there. That's continuing to grow very nicely at a very strong rate as we really penetrate existing customers with that product rather than a brand-new business line. We're just going to customers we already have and displacing people who are offering that product to them. So that investment is going well. Probably the third big one is our account opening process. We launched a virtual account opening process in the middle of the last year. Very well received, we're now going to roll that out to our branch system and deploy that. So I think that's another area. But again, David, we do all these against the backdrop of managing to that 54%, 55% efficiency, and that -- we'll continue doing that.

David Feaster -- Raymond James -- Analyst

Okay. That's great color. Thank you.

Randall M. Chesler -- President and Chief Executive Officer

You're welcome.

Operator

Your next question comes from the line of Tim Coffey with Janney.

Tim Coffey -- Janney -- Analyst

Yes, thanks. Good morning, Randy.

Randall M. Chesler -- President and Chief Executive Officer

Good morning, Tim.

Tim Coffey -- Janney -- Analyst

Randy, can you maybe provide a little bit of color on the forward direction of your on-balance sheet residential mortgages?

Randall M. Chesler -- President and Chief Executive Officer

Yes. The -- so we're -- we do service, we -- both the portfolio and then we service for the agencies. We've been very opportunistic in how we've grown that, and it's really based on our assessment of when we originate loans, what's the best -- most economic -- favorable economics for us and how to deploy that mortgage. So whether we hold it, whether we sell it or whether we sell servicing retained really just drives that portfolio.

Tim Coffey -- Janney -- Analyst

Okay. All right. That's helpful. And then just -- we kind of answered -- this question has been asked a couple of different times on this call, but I'm kind of curious about how long you think the current air pocket that we're in, in terms of, say, stronger loan growth, on-balance sheet excess liquidity, how long do you think that period lasts.

Randall M. Chesler -- President and Chief Executive Officer

Well, I would -- the first part, the growth aspect, I -- we don't view that as an air pocket. We view that as a very longer-lasting trend. So if you back up and look at the strength of the markets that we're in, and again this is relative to our geographic footprint, we have a lot of activity in our eight states that's very positive, all the way from Arizona up to Montana. Arizona, it's number -- fifth in the nation in tech job growth. That's what they're projecting. Utah, economy ranks number one among all 50 states in the U.S. News & World Report.

Reno is ranked number four of 25 best-performing large cities. So five of the eight states we're in, the unemployment rate is lower than the U.S. average. So all those things, I think, bode extremely well for growth. We've had in-migration of population. And we think the business investment follows that to serve a bigger population. And so that's a longer-lasting, multiyear dynamic that we feel very good about. On the deposits, I think that's probably going to be the -- certainly, the quarter we had this quarter was exceptional, that kind of deposit growth. We just see that tailing off over the next couple of quarters a bit because the stimulus payments aren't coming in.

That was part of what fueled that deposit growth. We got a tape of $0.25 billion of stimulus payments and -- as part of that. And also, the pent-up demand is there. And I think as people have more ways -- both businesses and consumers have more ways to spend their money, I think you're going to see some of that outflow. So those -- the deposit's probably -- we do see that trending down a bit. The market growth rate, like -- as I said, we feel good about over a long period of time here.

Tim Coffey -- Janney -- Analyst

Okay. And then on -- just kind of on the deposit side. So far this month, have you seen any change in the velocity within those deposit accounts?

Randall M. Chesler -- President and Chief Executive Officer

Just in April?

Tim Coffey -- Janney -- Analyst

Yes.

Randall M. Chesler -- President and Chief Executive Officer

I'd say from what we can see at this point, the -- we have not seen a big change. But I think it's a bit early. And I think as -- for the factors I cited, we're likely to see a bit of a downshift.

Tim Coffey -- Janney -- Analyst

Right. Okay. Those are only questions. Thank you very much.

Randall M. Chesler -- President and Chief Executive Officer

You're welcome.

Operator

[Operator Instructions] We have a follow-up question from the line of Matthew Clark with Piper Sandler.

Matthew Clark -- Piper Sandler -- Analyst

Hey, just a quick one on the round two of the PPP fees. Are you guys assuming a five-year life? Are you assuming something shorter, more -- something maybe more realistic?

Randall M. Chesler -- President and Chief Executive Officer

Well, round two, we put those on a five-year schedule.

Matthew Clark -- Piper Sandler -- Analyst

Okay. Thank you.

Randall M. Chesler -- President and Chief Executive Officer

Yep, you bet.

Operator

Okay. And I'm not seeing any questions in the queue at this time, so I'll turn the call back over to Randy for any closing remarks.

Randall M. Chesler -- President and Chief Executive Officer

All right. Well, thank you, Carol, for managing the call today. And I want to thank everybody who dialed in for spending some time with us today. Have a great day and a wonderful weekend. Thank you.

Operator

[Operator Closing Remarks]

Duration: 46 minutes

Call participants:

Randall M. Chesler -- President and Chief Executive Officer

Ronald Copher -- Executive Vice President, Chief Financial Officer and Secretary

Tom Dolan -- Chief Credit Administrator

Mike Young -- Truist Securities -- Analyst

Jeff Rulis -- D.A. Davidson -- Analyst

Matthew Clark -- Piper Sandler -- Analyst

Jackie Bohlen -- KBW -- Analyst

David Feaster -- Raymond James -- Analyst

Tim Coffey -- Janney -- Analyst

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