First Bank (FRBA) Q1 2021 Earnings Call Transcript

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First Bank (FRBA 1.59%)
Q1 2021 Earnings Call
Apr 27, 2021, 9:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the First Bank's First Quarter 2021 Earnings Call. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions].

I would now like to turn the conference over to Patrick Ryan. Please, go ahead.

Patrick L. Ryan -- President and Chief Executive Officer

Thank you. I'd like to welcome everyone today to First Bank's first quarter 2021 earnings call. I'm joined today by Steve Carman, our Chief Financial Officer; Peter Cahill, our Chief Lending Officer; and Emilio Cooper; our Chief Deposits Officer.

Before we begin, however, Steve will read the Safe Harbor statement.

Stephen F. Carman -- Executive Vice President, Chief Financial Officer and Treasurer

The following discussion may contain forward-looking statements concerning the financial condition, results of operations and business of First Bank. We caution that such statements are subject to a number of uncertainties and actual results could differ materially and therefore you should not place undue reliance on any forward-looking statements we make. We may not update any forward-looking statements we make today for future events or developments. Information about risks and uncertainties are described under Item 1A Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the FDIC.

Pat, back to you.

Patrick L. Ryan -- President and Chief Executive Officer

Thank you, Steve. I plan to hit on a few of the highlights and then turn it back to you, Peter and Emilio to provide some additional detail. Overall, I think it was a very strong start for 2021. Here are few highlights. Our cost of deposits continue to move lower pushing our net interest margin higher. Our non-interest income categories, all came in above budget for the first quarter, expenses looked a little higher than our guidance from last quarter, but those numbers also included over $300,000 in accelerated expense tied to consolidation of some of our back office space.

Our asset quality metrics continue to improve, delinquencies declined, deferrals declined and we saw net recoveries during the quarter. PPP production in 2021 has been stronger than expected. We have funded over $100 million in new PPP loans so far this year. PPP income of $1.6 million did help during the quarter and we expect approximately $6 million in additional PPP fees going forward. We did not use a lowering of our allowance ratio to support earnings in Q1. While our provision was negative, that was based on lower loan balances at the end of the quarter. If economic conditions continue to improve, we may see opportunities to actually lower our ALLL ratio as we move forward throughout 2021.

So to misquote, Tom Cruise and Jerry Maguire, investors have been saying to us for some time show us the earnings. That is exactly what we're trying to do. With our evolution from an early stage growth to profit-focused entity, we are starting to show the true earnings power of the franchise and we think there is more to come. We can continue to move deposit costs lower, our fee income efforts are bearing fruit, our expense savings initiatives will keep a tight lid on costs going forward and our loan pipeline remains very healthy. And above and beyond the core earnings strength, PPP fees and lower credit cost could also support earnings as we move through 2021.

At this time, I'd like to turn it over to Steve Carman, our CFO, to discuss additional financial details for the first quarter 2021 results. Steve?

Stephen F. Carman -- Executive Vice President, Chief Financial Officer and Treasurer

SThanks, Pat. For the three months ended March 31, 2021, we earned $9.7 million in net income or $0.49 per diluted share. That compares to $3.2 million or $0.16 per diluted share for the first quarter of 2020. The factors contributing to our record profitability included a credit to the provision for loan loss, increased non-interest income and increasing net interest margin and controlled non-interest expense growth, which contributed to an efficiency ratio of below 50% for the first quarter of 2021.

After finishing 2020 with strong growth, our loan portfolio in the quarter excluding PPP loans declined approximately $82 million, due primarily the loan prepayments. As a result, in the first quarter of 2021, there was a credit to the provision for loan losses of about $1.1 million due specifically to the reduction in the loan portfolio, excluding PPP loans. Supporting our allowance for loan losses for the quarter were strong asset quality metrics. For example, non-performing assets as a percentage of assets was just 0.47% and our allowance for loan losses as a percentage of non-performing loans was 214.74%, a strong coverage ratio.

In the first quarter of 2021, total non-interest income totaled $2.3 million compared to $1.2 million for the same quarter in 2020, an increase of $1.1 million or 89.5%. Three areas of notable increases were loan fees, gains on sale of loans and gains on recovery of acquired loans. Loan fees, primarily loan swap fees, increased $415,000 for the comparable quarters. Gains on sale of loans, primarily from SBA loan sales showed a $436,000 improvement in Q1 2021 to Q1 2020. Lastly, there was $189,000 increase in gains on recovery of acquired loans.

Over the last several quarters, we've discussed our efforts in enhancing and strengthening our core profitability. We focused on moving our net interest margin higher and growing net interest income by continuing to make quality commercial loans, while lowering our cost of funds, which was a priority. Looking back to the first quarter of 2020, interest rates had moved dramatically lower due to the pandemic. At that time, our cost of interest-bearing deposits was 1.56%. Factoring in non-interest bearing deposits, our total cost of deposits was 1.29%. From that point forward we worked on changing our deposit composition and lowering our cost of deposits to peer levels or lower.

With stronger liquidity levels due primarily to the impact of the PPP loan program, we were able to lower rates on more expensive time deposits as CDs matured, which lowered our cost of deposits and positively impacted our margin. Time deposits, which represented 38% of deposits at 3/31/20 declined to 25% of deposits, just a year later. From the first quarter of 2020 through the first quarter of 2021, we have also lowered rates on all interest-bearing deposit types to market levels. As a result, these and other actions our cost of interest-bearing deposits declined to 51 basis point to 3/31/21and over a 1% decline from 3/31/20. Factoring in non-interest-bearing deposit balances, our overall cost of deposits was only 39 basis points for the three months ended March 31, 2021, a decrease of 90 basis points from the same period in 2020.

We certainly have benefited from interest rebalances from PPP loans, but we've also benefited from successful initiatives implemented by management to grow non-interest bearing deposits and lower cost commercial deposits. Non-interest bearing deposits as a percent of deposits totaled 25.4% at 3/31/21, a notable achievement when considering that just a year ago, non-interest bearing deposits were 16.9% of total deposits.

Our tax-equivalent net interest margin, which bottomed out at the end of the second quarter of 2020 to 3.07%, has been on the rise ever since. Our tax-equivalent margin at the end of Q1 of this year was 3.60%. That's a 53 basis point improvement over the last nine months. Our first quarter margin was positively impacted by $673,000 in loan prepayment penalty income reflective of the increased level of loan prepayments we experienced referenced earlier. That level of prepayment penalty income is about double of what we had projected for the quarter.

As we look forward, the actions we have taken over the last several months has enhanced our core profitability. This is reflected in a non-GAAP financial measure, we find useful in tracking core profitability trends, pre-provision net revenue. Pre-provision net revenue is calculated by adding net interest income and non-interest income and subtracting non-interest expense adjusted by certain non-reoccurring items such as merger-related expenses, for example. Pre-provision net revenue at the end of Q1 of '20 was $7.2 million. By the end of 2020, pre-provision net revenue had reached almost $10 million. Reflective of our record Q1 2021 performance, this measurement reached $11.7 million.

With commercial loan growth projected rebound after a challenging first quarter and a lower cost funding base, we are well-positioned to continue the growth in our core profitability and achieve our financial goals for 2021.

At this time, I'll turn it over to Peter Cahill, our Chief Lending Officer for his remarks. Peter?

Peter Cahill -- Executive Vice President and Chief Lending Officer

Thanks, Steve. As outlined in the earnings release, total loans in the first quarter were down $25 million or 1.2%. We did experience a reduction in commercial loans that we talked about on the last earnings call for 2020's fourth quarter. You might recall that we finished 2020 with a very strong quarter. For the fourth quarter alone, we reported loan growth of around $97 million, exclusive that from PPP. That was a big quarter for us and it came from a combination of both C&I loans and investor real estate loans.

We knew at the time, however, that we had a number of loans where our customers notified us of upcoming payoffs, primarily in the investor real estate area. I noted back in January we'd see some first quarter prepayments offset by normal loan generation plus the addition of new PPP loans that we had in process and that's what we had. New loans funded in the first quarter exclusive of PPP approximated $70 million. Unfortunately, but again as expected, prepayments of investor real estate loans were a little over $100 million. When you add to that some large reductions under lines of credit and the normal amortization of term loans, the result was that negative loan growth that Steve described.

We did earn some prepayment penalty income on many of the commercial loan payoffs. Also, adding for the pay-offs, I mentioned was the sale of the guaranteed portion of four SBA loans, 7(a) loans, which totaled around $5 million. Fee income related to these sales was mentioned in the release. SBA lending is an area, I've talked about on previous calls. We have a small team focused solely on SBA loans and concentrating mainly on 7(a) loans. They are off to a great start and I see them exceeding expectations this year. It was a busy quarter but I'm confident we'll make up the negative loan growth over the next three quarters and we'll report good growth for the year.

Our loan pipeline at 3/31, which is based upon probable funding has shown steady growth from the end of the fourth quarter. At 12/31, the pipeline totaled $142 million. At the end of March, it stood at $209 million. That represents growth of 47% and positions us well for the next few months. For comparison, the 12-month average for all of 2020 was $154 million. We do project loan funding as well as pay-offs looking out 60 days to assist Steve in the finance area with funding. Just to support this idea of a strong pipeline, I'll mention that we projected funding of $80 million for April and May. These fundings will be offset by loan prepayments, which we've forecasted at $22 million. So, the net positive amount of $58 million will help us make a good dent in getting caught up the plan.

I should also mentioned asset quality. There is a lot of good data in the earnings release and Pat and Steve touched upon some of it, including the allowance. I'll just reiterate that things continue to look very good. Nonperforming loans were up a few basis points, but recoveries exceeded charge-offs for the quarter. Delinquencies are minimal I'm happy to report with past-due loans at the end of the quarter around 37 basis points, down from where they were at year-end. Our deferred loans related to COVID-19 are also outlined in the release. Deferred loans at year-end had dropped to $37 million or 1.8% of the portfolio. At the end of the first quarter, deferred loans further declined to $22 million or 1.1%. We continue to be in close contact with diversified group of customers and we're optimistic that the number of deferred loans will continue to shrink.

So, in summary, I think we had a decent first quarter in lending. We continue to learn to deal with the challenges of working around COVID-19, while calling on commercial clients and prospects. We assisted many small businesses in the quarter with PPP loans. We were a little unlucky with the timing of new loans compared to early loan prepayments, but our pipeline in near-term fund numbers look good. Lastly, we believe asset quality is strong and we intend to grow the portfolio as we have in the past and hit our loan growth goal for the year. That's my report for lending for the first quarter.

I'll turn it over now to Emilio Cooper to discuss deposits. Emilio?

Emilio Cooper -- Executive Vice President and Chief Deposits Officer

Thanks, Peter. I'm happy to report we are off to an extremely positive start in our deposit side of the business. For 2021, our focus remains consistent and intentional. Grow low-cost core deposit, improve the mix, lower cost of funds, deliver best-in-class service and grow fee income. Thanks to great collaboration between the lending, cash management and deposit teams, we are very pleased with the results we have seen for the first quarter. We did a fantastic job in the first round of PPP in 2020. So, it is no surprise that the team stepped up big time and is doing an even better job in the second round of PPP. This round of funding certainly had a positive impact on our deposit growth in Q1.

Key highlights of our deposit performance for the quarter are as follows. Non-interest bearing deposits are up $76 million or 18% from the end of 2020. Interest-bearing checking is up $6.5 million. Money market and savings are up $14 million. Time deposits are down $30 million. Total deposits have grown nearly $67 million from Q4. Our growth goal for the year is $97.6 million. So, we are off to a very strong start compared to goal. It is important to mention that we do expect to see some reduction in deposit growth as we progress through the year, as customers who received PPP or other stimulus funds put that money to use in the economy.

As it relates to our focus on adjusting our mix, we achieved a huge milestone for the Bank in Q1. Non-interest bearing balances now represent 25.4% of deposits and time deposits represent just 25.1%. This marks a major milestone as our non-interest bearing balances now represent a greater percentage of deposits than our time deposit balances. Over the course of the last 12 months, we have increased the percentage of deposits comprised of non-interest bearing balances by over 8.5%. While we know the influx of liquidity and impact from our strong performance with PPP accelerated this movement, we believe our investment in our cash management team, business banking, capabilities and strong collaboration between lending and deposits will enable us to retain much of this benefit over time.

Our cost of deposits declined to 39 basis points for the three months ended March 31, 2021, down from 50 basis points for the December 31, 2020 quarter. This is a reduction of 99 basis points from Q1 2020. A few factors are the key drivers of this reduction. First, as Steve mentioned, we continued to benefit from the ongoing repricing lower of our CD portfolio. Secondly, the shift in our mix toward more non-interest bearing balances and last, our execution in reducing rates paid on existing deposit portfolio product. We do expect to see continued modest improvement in this area in the near term.

As a community bank, we know that personal service is a differentiator that is often hard for larger institutions to replicate. A recent example is what we saw during the initial phase of PPP. To provide an ongoing mechanism for us to measure our delivery in this key area, we launched an initiative to survey our customers on a quality of service they received from First Bank. We are using a Net Promoter Score metric to track and monitor our performance. Early results are very good. As we gather more time tested data, we look forward to sharing those results with you. As I've mentioned on prior calls, we've also been working on a number of initiatives to improve fee income. We track these at a more granular level than the data that is summarized in the financial charts. As a result, we are able to see positive trends developing in several areas.

In summary, we are off to a strong start in deposit growth led by non-interest bearing deposits. We achieved a milestone in the improvement of our mix in the quarter. We are continuing to reduce our cost of deposits and we are seeing positive trends developing in Net Promoter Score and fee income growth. All in all, a fabulous start to the year.

Back to you, Pat.

Patrick L. Ryan -- President and Chief Executive Officer

Great. Thanks, Emilio. Thanks, Steve and Peter. And at this point, I'd like to turn it back to the operator to open things up for the question-and-answer session.

Questions and Answers:

Operator

We will now begin the question-and-answer session. [Operator Instructions] Our first question today will come from Nick Cucharale with Piper Sandler. Please, go ahead.

Nick Cucharale -- Piper Sandler -- Analyst

So, I wanted to start with expenses. I heard your comments on the accelerated expense in the quarter, but can you help us quantify the impact of the branch consolidations and the reduced corporate office space on the occupancy line going forward?

Patrick L. Ryan -- President and Chief Executive Officer

Yeah, I mean, some of that was baked in, Nick when we provided guidance last time around. As I mentioned, there was a specific cost in the first quarter related to some accelerated depreciation and some other things we had to writedown as part of a termination of a lease, we had for some back office space and the impact of the savings from the two branches that we closed won't sort of fully funnel in until later this year. I think in one case, the lease runs through August, although, we have been able to reallocate the personnel. The other one is an old location.

So, there won't be a rent savings, but depending on how we're able to redeploy that space or potentially then look at the sale of property, there maybe some impact going forward. But I think the biggest piece of it was the -- the lease that we didn't renew, which was roughly $300,000 in annual rental cost plus additional depreciation maintenance, etc. So, I think there'll be some nice savings for us as we move forward. That lease expired at the end of March and it's just one of several areas that we continue to look at on the cost side.

Nick Cucharale -- Piper Sandler -- Analyst

Great, that's very helpful. So, I appreciate the positive commentary on loan demand in the coming periods and the big increase in the pipeline since year-end. Have the prepayments normalized in April or have they remained elevated?

Patrick L. Ryan -- President and Chief Executive Officer

Well, I mean, we're obviously or I guess through April, but that only gets us a month into the quarter. So, to try to estimate a trend out of three or four weeks is a little tricky in the loan prepayment world. I'll turn it over to Peter to see if he's seen anything specific so far at the beginning of Q2. But those are things that kind of come in bunches. You have a couple and you don't have any for a while and you have a couple more, but Peter, anything you'd add to that in terms of trends you're seeing so far?

Peter Cahill -- Executive Vice President and Chief Lending Officer

No, I would say we hope it normalized. I mentioned our loan funding projections we do for our finance team and we were projecting for April and May, you look out, we don't look at more than 60 days. But we're projecting pay-offs of, these are prepayments basically of $22 million and we haven't seen anything exceed that number that comes to mind. So, I think that's probably a more normalized number and that's kind of where we are, the stats at three weeks.

Nick Cucharale -- Piper Sandler -- Analyst

Okay. So, it's fair to say you're expecting net growth to be pretty healthy in the second quarter outside of any kind of unnormal activity?

Peter Cahill -- Executive Vice President and Chief Lending Officer

Yeah, I mean we hope so. Our -- I think our plan for the year was to grow loans 6% and we had planned basically a fairly flat first quarter knowing what we're facing. So yeah, we plan on making up the small whole we're in and achieving plan for the year.

Nick Cucharale -- Piper Sandler -- Analyst

Okay, very helpful. And then in terms of funding costs, a really significant reduction year-over-year. Where do you think that eventually stabilizes?

Patrick L. Ryan -- President and Chief Executive Officer

Yeah, I don't know, Nick, it sort of, depends on the rate environment and maybe more importantly than the competitive environment. But with short-term rates, it seem to be staying low for the foreseeable future and perhaps more importantly, banks dealing with excess liquidity, I don't see there in the short run, being a real impetus to drive competitive pressures on the deposit side. I don't see the Fed moving short-term rates. And so, as we continue to have term deposits mature, we'll continue to reprice and lower and Emilio and his team have done a great job looking at our standard rates on deposit products and I think over the course of the first quarter he moved those lower once or twice as well. So, I think it's a little bit -- a little bit here, a little bit there. The magnitude and the impact will start to shrink, but I think we'll continue to see those costs trickle lower over the next couple of quarters.

Nick Cucharale -- Piper Sandler -- Analyst

Thank you for taking my questions.

Patrick L. Ryan -- President and Chief Executive Officer

Yeah. Thank you, Nick.

Operator

Next question will come from Bryce Rowe with Hovde. Please, go ahead.

Bryce Rowe -- Hovde -- Analyst

Thanks. Good morning.

Patrick L. Ryan -- President and Chief Executive Officer

Good morning, Bryce.

Bryce Rowe -- Hovde -- Analyst

Wanted to ask about the SBA business, obviously a nice hit here, the fee income. I'm just curious how consistent those loan sales will be? I mean it sounds like you've put a little more ounce [Phonetic] behind that effort?

Patrick L. Ryan -- President and Chief Executive Officer

Yeah, I mean listen, I think it's -- it's something that won't be as smooth on a quarterly basis as some other lines of business. But as Peter mentioned, having a dedicated centralized team has made a significant difference and our ability to now funnel those opportunities that we were seeing in the past to a group that is now along the process can keep things moving quickly, get things done faster, make sure all the administrative, Is are dotted and Ts are crossed. I mean all of those I think give us optimism for continued good results in that area as we move forward. But, Peter, anything you'd want to add there.

Peter Cahill -- Executive Vice President and Chief Lending Officer

Well, you know, like the, just that their pipeline is very strong. I mean the SBA has an attractive product out there now as you may know in the 7(a) side, guarantees up to 90% and -- and they're waiving application fees from the borrowers. So, that's a selling point that we've been trying to utilize whenever possible. So yeah, I mean, having a team there that can process these things and get them across the finish line is great. Previously, we'd had your average commercial RM trying to respond to SBA needs and it got just kind of cumbersome.

Deals were spread out all over 20 RMs and now they're focused where the RMs make the -- make the referral for this team and they do the underwriting and processing and sale of the guaranteed portion. So, it's much more efficient I think and the RMs are more have to make a referral than sit down trying to drag deal through to approval.

Patrick L. Ryan -- President and Chief Executive Officer

Yeah, that's a good point. Bryce, I would just add to that. And this is I think probably speculation at this point. But if you think about what's going to be happening in the small business world over the next 12 to 24 months, right, a lot of companies that obviously had challenges in 2020 are going to be looking for financing this year and next year based on historical results that won't look great, balance sheets that probably get damaged a little bit and so I think the SBA maybe a good place for some folks that were able to survive the storm, but certainly took some damage and probably need a year to a better results to get back to a point where maybe they don't need SBA support.

So, I do think you're going to see higher percentage of small business financing happening through the SBA, partly because of the financial results, they're going to be trying to use to get financing and the fact that the fees have been waived, make it a much more attractive option for them as well. So, I just think that's going to be a bigger area of focus across banking over the next year or two, and I think we should be well-positioned to benefit from that as well.

Bryce Rowe -- Hovde -- Analyst

That's good -- insight, Pat. I appreciate it. Wanted to kind of move onto capital and use of capital. Maybe you can provide us an update on buyback activity for the first quarter. It looked to be a little lighter than maybe we saw in the first half of last year. And so, any commentary around kind of appetite to buyback stock, especially with it now below tangible book value?

Patrick L. Ryan -- President and Chief Executive Officer

Yeah, I think there certainly is appetite as I'm sure you're aware, when you set up these 10b5 programs, you don't always have as much discretion as you like in terms of periods of blackout and instructions you provide that can't be changed during periods of blackout and all sorts of rules about their inability to buy to start off the trading day or to close out the trading day. So, sometimes execution can be a little bit more challenging than you'd like, but as it relates, I think generally to your question, do we think it's an attractive investment to buy our stock back at or below book value, the answer is absolutely, yes. It's just, sometimes the execution doesn't go as quickly as you might like, so...

Bryce Rowe -- Hovde -- Analyst

Okay, that's fair. And then one, one kind of nitpicky model question. You guys have called out some level of prepayment activity here in the second quarter. Any kind of guidance in terms of what prepayment fees look quite tied to that or just generally for the second quarter as we think about margin?

Patrick L. Ryan -- President and Chief Executive Officer

Yeah, I mean I would say, Steve alluded to it in his remarks, we kind of budgeted $330,000 a quarter and that number is pretty -- pretty significant standard deviation, right. Some quarters it's $100,000 and some quarters like first quarter it was $670,000. But that number probably will end up doing better than that this year, just because of how strong the first quarter was, but prepayment income isn't the kind of thing where if you have a good first quarter in prepayment income and good might be the wrong word there, but if you have a lot of prepayment income in the first quarter, that doesn't mean you'll have a lot in the second and third. The chances are it probably means it will be down in the second and third quarter. But over the course of the year, I don't see any reason why the average of $330,000 wouldn't still be the number we will be looking at this point.

Bryce Rowe -- Hovde -- Analyst

Okay. Thanks for the comments. Appreciate it.

Patrick L. Ryan -- President and Chief Executive Officer

Yes. Thank you, Bryce.

Operator

Our next question will come from Erik Zwick with Boenning & Scattergood. Please, go ahead.

Erik Zwick -- Boenning & Scattergood -- Analyst

Good morning, guys.

Patrick L. Ryan -- President and Chief Executive Officer

Good morning, Erik.

Erik Zwick -- Boenning & Scattergood -- Analyst

Maybe I'll just follow up, kind of a follow-on question to Bryce's last question there about the margin and thinking about kind of the core margin first. I think last quarter you mentioned excluding the impact of PPP, the core margin was about 3.4%. The fees from PPP this quarter was $1.6 million, so if I back that out, get to around 3.3% or so. So, you mentioned the opportunities to continue bringing down the deposit cost of the CD portfolio, specifically presenting an ongoing opportunity. Just curious about the trajectory of the core margin from here at this point.

Patrick L. Ryan -- President and Chief Executive Officer

Well, I think the trajectory and the core margin will improve. I think you hit on one of the variables in the margin, right, the PPP impact. We also had elevated prepayment fees that flow through the margin. So, that bumped it up a little bit in Q1 as well. But if you kind of stripped all that out, I think loan yields will hopefully stay where they are, maybe come down a little bit. Obviously what happens in the long-term section of the rate market will impact that to some degree, but as Emilio said, I think we can continue to move deposit costs down. So, I think if you kind of stripped out prepayment penalty income, PPP income, I think that core margin would be relatively stable, maybe get a little bit better.

Stephen F. Carman -- Executive Vice President, Chief Financial Officer and Treasurer

Hey, Erik, this is Steve. I think our margin, the core margin is probably closer to 3.40%. I mean, just make sure from modeling purposes, you're also, I'm sure you're backing out the PPP average balances. And so we stand on our margin just a little bit higher than that core 3.30% after we back out the average balance of PPP loans.

Erik Zwick -- Boenning & Scattergood -- Analyst

Got it. That makes sense. Thanks for the clarification there. And then just in terms of thinking about the kind of the all-in and reported margin going forward, I know you mentioned about $4.8 million in remaining unamortized fees. Curious if you could break that out into what is kind of related to the 2020 PPP originations in '21 as I think about kind of the timing as those flow through?

Patrick L. Ryan -- President and Chief Executive Officer

I don't know Steve, if you have that breakout, I could take a guess or if you have the numbers handy.

Stephen F. Carman -- Executive Vice President, Chief Financial Officer and Treasurer

I don't have the numbers directly in front of me, but, but clearly it's all obviously predicated I guess on some forgiveness. You know, our -- if you take a look at the amortization of round one, it's been close to $500,000 a month, or about $1.5 million a quarter and then it's just impacted by lot of forgiveness. Obviously round two with $101 million as we're still getting on our traction there. It's a less type of run rate based on a five-year type of payout as opposed to two with the round one.

Patrick L. Ryan -- President and Chief Executive Officer

Yeah, I mean, I would just add to that Erik. I think if you looked at where we were at year-end, I think we had about $3 million in unamortized PPP fees from the 2020 loans and we had $1.6 million come into income during Q1 that was almost exclusively tied to that portfolio. So, call it $1.5 million left from that group. But then there is some loans that we made that we haven't applied for forgiveness or for the fee yet. So, I think the total of remaining PPP fees is probably closer to $6 million and I'd say three-quarters of that is going to come from loans we've made this year in 2021 and a quarter it's remainder of last year's loans.

Erik Zwick -- Boenning & Scattergood -- Analyst

Okay, great, that's helpful. And then last one for me. Switching gears to credit, you mentioned in the prepared remarks that most of the provision, the kind of negative provision this quarter was driven due to lower balances and really haven't had any release for an improved economic outlook or any other kind of factors improving in your, in your loan portfolio. So, as we think about the opportunity for additional reserve releases go forward, how do you feel or where do you feel kind of the equilibrium level for the reserve might be if we get back to a more normal economy with kind of, steady growth and minimal credit risk looking forward?

Patrick L. Ryan -- President and Chief Executive Officer

Yeah, it's a good question. It's a little hard to speculate because you don't really know what that new normal economy looks like, but I'd say one way to think about Erik is if you look at what we set aside last year in provision, it's probably $5.5 million, $6 million more than what we would have done in a typical year. Now, is all of that going to come back out again. I don't know. Right. I mean our allowance model is going to dictate our overall level of the allowance, which will ultimately drive provisioning together with net net charge-offs or recoveries. But there obviously was a lot of additional provisioning last year that so far hasn't translated into significant additional credit problems. So, is it fair to think that some of that if the economy continues to prove would -- would come out. I think that seems like a potential scenario that could play out, but we're just going to have to see what the data tells us and what the [Technical Issues] tells us.

Erik Zwick -- Boenning & Scattergood -- Analyst

Appreciate the thoughts there. Thanks for taking my questions today.

Patrick L. Ryan -- President and Chief Executive Officer

Great. Thank you, Erik.

Operator

[Operator Instructions] Our next question today will come from Christopher Keith with D.A. Davidson. Please, go ahead.

Christopher Keith -- D.A. Davidson -- Analyst

Hey, good morning, gentlemen. How are you?

Patrick L. Ryan -- President and Chief Executive Officer

Good morning, Chris. How are you doing?

Christopher Keith -- D.A. Davidson -- Analyst

Good, good. Hey, so, just looking at the C&I portfolio, what portion of the portfolio is related to lines of credit? And can you share where about the utilization rates are today?

Patrick L. Ryan -- President and Chief Executive Officer

Yeah, that's a good question. I don't know Peter, that data you have handy or might be something we will need to breakout for next time, but...

Peter Cahill -- Executive Vice President and Chief Lending Officer

It's really not something I have handy, utilization rates, that's something we have to breakout for next time I think.

Christopher Keith -- D.A. Davidson -- Analyst

That's OK, no worries. And then can I just...

Peter Cahill -- Executive Vice President and Chief Lending Officer

C&I, I would, just as the number show, C&I is about 20% to 22% of the portfolio and that includes PPP don't forget. So, the number is probably a little higher than it may normally be, but utilization rates, I just don't have right now.

Patrick L. Ryan -- President and Chief Executive Officer

I mean I would say anecdotally we haven't seen Chris a significant change but we can -- we'll get some data to support that.

Christopher Keith -- D.A. Davidson -- Analyst

Okay. Appreciate it. And then can I just confirm that the guidance for 6% for the year, is that -- is that excluding PPP loans?

Patrick L. Ryan -- President and Chief Executive Officer

Yeah, I guess, you have to clarify 6% -- the 6%, I think of it more [Technical Issues] what do we say, Peter, $120 million in net non-PPP loan growth for the year.

Peter Cahill -- Executive Vice President and Chief Lending Officer

Yeah, yeah that does exclude PPP. Yeah, we said $120 million over what was it roughly $2 billion at year end, so that's a 6%

Christopher Keith -- D.A. Davidson -- Analyst

Got it. That's helpful. Thank you. And then I guess just turning to the margin, you made some commentary around the yield, which I appreciate. I guess, I'm just curious overall where loan yields -- where the average loan yield is coming on today for new loans?

Patrick L. Ryan -- President and Chief Executive Officer

Yeah it really, it really depends on the type of loan. I think in the investor real estate segment you're probably seeing things plus or minus really strong credits, you're probably 3.5% or a little less and good credits, but maybe not as foreseen, you're probably closer to 4% and you're probably getting better than that on the C&I in terms of the term loans and things. But Peter, I know you track for the monthly Board meetings, the weighted average yield on new loans, I don't know if that's daily you have handy or not.

Peter Cahill -- Executive Vice President and Chief Lending Officer

Well, that's, those numbers relate to, yeah due loans getting put on for the month. I don't have it with me right now, but the numbers you described are what we're seeing, roughly mid-3s to four on average.

Christopher Keith -- D.A. Davidson -- Analyst

Got it. That's helpful. Thank you. And then just last one for me. I noticed that average securities had declined and is that just a product of payoffs kind of overlaying the ability to find new paper or is that more of a deliberate reduction?

Patrick L. Ryan -- President and Chief Executive Officer

Yeah, let me, maybe ask that question again, Chris, I'm not sure I was following there.

Christopher Keith -- D.A. Davidson -- Analyst

Just looking at average securities, I noticed that it had declined and I'm curious if paydowns in the securities portfolio drove that, or it was the deliberate reduction in the securities portfolio? And I guess what I'm really getting at is, if we can maybe kind of get an understanding of what direction the average securities portfolio might go over the next few quarters.

Patrick L. Ryan -- President and Chief Executive Officer

Yeah, I mean I think we've been trying the put some excess cash to work in the securities portfolio over the last month or so, but I would also say, we're doing it cautiously, right. I mean it's obviously concerned about inflation and what that might do to the long end of the yield curve and what that could do to the market value of securities purchase today.

So, I'd say we're taking a cautious approach, but obviously, an environment where you're not earning much on your cash, it's, there is a cost that's sitting on the sidelines too. So, we're trying to strike the right balance. I think at the end of the day, if our excess cash position remains elevated, we'll be a net buyer here and there, but we're not looking to put hundreds of millions to work in the bond market right now, so...

Christopher Keith -- D.A. Davidson -- Analyst

Got it. Thanks so much. Thanks for taking my questions.

Patrick L. Ryan -- President and Chief Executive Officer

Great. Thank you, Chris.

Operator

[Operator Instructions] There being no further questions, this will conclude our question-and-answer session. I'd like to turn the conference back over to Patrick Ryan for any closing remarks.

Patrick L. Ryan -- President and Chief Executive Officer

Great, thanks. So, I just like to thank, everybody that took the time to listen in today and we'll look forward to reconnecting with folks after the second quarter. So, thanks, everyone.

Operator

[Operator Closing Remarks]

Duration: 46 minutes

Call participants:

Patrick L. Ryan -- President and Chief Executive Officer

Stephen F. Carman -- Executive Vice President, Chief Financial Officer and Treasurer

Peter Cahill -- Executive Vice President and Chief Lending Officer

Emilio Cooper -- Executive Vice President and Chief Deposits Officer

Nick Cucharale -- Piper Sandler -- Analyst

Bryce Rowe -- Hovde -- Analyst

Erik Zwick -- Boenning & Scattergood -- Analyst

Christopher Keith -- D.A. Davidson -- Analyst

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