First Financial Bancorp (FFBC) Q3 2021 Earnings Call Transcript

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First Financial Bancorp (FFBC 0.96%)
Q3 2021 Earnings Call
Oct 22, 2021, 8:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning or good afternoon, all and welcome to the First Financial Bancorp's Third Quarter Earnings Call and Webcast. My name is. Adam, and I'll be your operator today. [Operator Instructions]

I would now hand you over to Scott Crawley to begin. So Scott, please go ahead, when you are ready.

Scott T. Crawley -- Corporate Controller and Principal Accounting Officer

Thank you, Adam. Good morning, everyone and thank you for joining us on today's conference call to discuss First Financial Bancorp.'s third 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 contained in the accompanying presentation during today's call. Additionally, please refer to the forward-looking statement disclosure contained in the third 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 September 30, 2021 and we will not be updating any forward-looking statements to reflect facts or circumstances after this call.

I'll now turn it over to Archie Brown.

Archie M. Brown -- President and Chief Executive Officer

Thanks, Scott. Good morning, everyone and thank you for joining us on today's call. Yesterday afternoon we announced our third quarter financial results which were highlighted by strong earnings, loan growth, solid fee income, lower credit cost and improving credit trends. Third quarter results were exceptional across the board with earnings per share of $0.63, return on assets of 1.49% and an adjusted efficiency ratio of 60.1%.

Third quarter earnings were the highest they've been since the MainSource merger in 2018 and were highlighted by a significant provision recapture of $10.1 million. Provision recapture during the period was a result of improving credit quality trends, specifically lower net charge-offs and declines and classified asset balances and we expect further reductions in credit cost in the fourth quarter of 2021 and the first part of 2022 given our optimism for further economic recovery.

In addition, earnings were positively impacted by elevated mortgage and wealth management revenues and we were encouraged by strong loan originations during the period. Total loan balances declined $150.6 million driven by $225.4 million in PPP forgiveness during the quarter. Core loan balances increased $74.8 million for the period as a result of strong origination activity which was approximately 12% higher than the second quarter. We're very pleased with the growth in our C&I portfolio of 16% on an annualized basis. Our origination levels more than offset loan pay-offs which remained high particularly in our specialty finance and our ICRE units. Additionally, we were encouraged by the loan pipeline activity has increased over the course of the last quarter. Deposit balances remain elevated as we saw some modest increases toward the end of the quarter as clients continue to maintain substantial liquidity levels. But third quarter continue to be a very active for PPP loan forgiveness, three quarter in over 98% of round 1 and over 50% of round 2 loans have been forgiven. We expect the majority of remaining round 2 payoffs to flow in over the remainder of the year.

During the quarter, we repurchased approximately 2.5 million shares at an average price of $23.04, bringing our total shares repurchased in 2021 to approximately $4.6 million. When combined with the common dividend, the share repurchases approximate a return to shareholders a 130.7% of quarterly earnings. There are approximately 367,000 shares remaining in our buyback authorization. We were also very excited to bring our associates back to physical office locations during the quarter, albeit with greater flexibility that pre-COVID. We firmly believe we are stronger when we're together and we've already witnessed how combining best practices learned from the pandemic with our culture of collaboration positively impacts our clients and financial performance.

With that, I'll now turn the call over to Jamie to discuss the details of our third quarter results, and after Jamie's discussion, I'll wrap up with some additional forward-looking commentary. Jamie?

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

Thank you, Archie and good morning everyone. Slides 4 and 5 provide a summary of our third quarter 2021 financial results. We are very happy with our performance, which included strong earnings, loan growth, stable net interest margin, provision recapture and elevated fee income. The highlights of our quarter included 3% annualized loan growth excluding PPP forgiveness which was driven by commercial and small business banking. In addition, the core net interest margin remained relatively stable as a positive shift in funding costs was offset by the impact from the repricing of earning assets and more days in the quarter. While there will be some volatility in total margin due to loan fees, we continue to expect core margin to face modest pressure in the coming periods given the prolonged low interest rate environment and excess balance sheet liquidity.

Fee income surpassed our expectations as both mortgage banking and wealth management remains strong. We also realized elevated income from limited partnership investments and insurance proceeds. Third quarter foreign exchange income declined slightly from record levels in the first half of the year. However, we anticipate Bannockburn will return to the typical run rate of $10 million to $12 million in the fourth quarter. Non-interest expenses were in line with our expectations despite elevated incentive compensation which was tied to our overall Company performance and slight increases in marketing and professional services expenses.

We were particularly pleased on the credit front, as both net charge-offs and classified assets declined during the period. These two factors combined with a positive economic outlook resulted in $10.1 million of provision recapture during the period. From a capital standpoint, we continue to take advantage of market conditions and repurchase approximately 2.5 million shares during the third in the quarter. Our capital ratios are strong and remain in excess of both internal and regulatory targets. To-date, we have repurchased 4.6 million of the 5 million shares, we are eligible to repurchase under the plan approved in late 2020. We expect that we will repurchase our remaining allotment in the fourth quarter, but do not anticipate any further repurchase activity beyond that in 2021.

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 $59.9 million or $0.63 per share for the quarter. As depicted on slide 7, these adjusted earnings equate to a return on average assets of 1.49% and a return on average tangible common equity of 19%.

Turning to slides 8 and 9, net interest margin increased 1 basis point from the linked quarter to 3.32%. This slight increase was primarily driven by higher PPP forgiveness fees. The impact on the net interest margin from changes in asset yields and funding costs largely offset one another and there was a small negative impact to the margin resulting from the additional day count in the third quarter. Asset yields increased modestly during the period due to higher loan fees which includes PPP forgiveness. In the first half of the year, we increased the size of the investment portfolio, which has negatively impacted the margin over the course of 2021. However, we expect the portfolio to remain at its current size in the near term.

In response to the current interest rate environment, we have continued to aggressively lower our cost of deposits which declined another 2 basis points during the period to 10 basis points. These lower deposit costs reflect strategic rate adjustments as well as a shift in funding mix from higher priced retail and brokered CDs to lower cost core deposits.

Our outlook on funding costs remains the same. We anticipate a gradual decline in the near term as we approach our pricing floor. Slide 10 illustrates our current loan mix and balance changes compared to the linked quarter. The majority of the decline in balances was related to the payoff of PPP loans. Excluding these payoffs, we were encouraged by $75 million of growth in the rest of the portfolio, which was driven by our commercial and small business banking group.

Slide 12 shows our deposit mix as well as the progression of average deposits in the second quarter. In total, average deposits declined $44 million during the quarter driven primarily by declines and higher cost brokered and retail CDs. These declines were largely offset by increases in lower cost transactional deposits. We continue to be mindful with deposit pricing and we'll make any necessary adjustments based on market conditions and our funding needs. Slide 13 highlights our non-interest income for the quarter. As I mentioned previously, third quarter fee income remained strong. It was driven by elevated production from mortgage and wealth management. We were also encouraged by the 13% increase in deposit service charge income compared to the linked quarter and 27% increase in client derivative income. In addition, other non-interest income increased 34% during the period due to increases in income on limited partnership investments and insurance proceeds.

With regard to Bannockburn, foreign exchange income declined from record levels in the second quarter. However, we expect them to return to their historical run rate in the fourth quarter. Non-interest expense for the quarter is outlined on slide 14. Overall core expenses were slightly higher than we expected and increased modestly when compared to the linked quarter, driven by higher employee costs, marketing expenses and professional services.

Turning now to slide 15. Our ACL model resulted in a total allowance, which includes both funded and unfunded reserves of $161 million and $10.1 million in total provision recaptures during the period. The decline in provision expense from the linked quarter was driven by improved economic forecast, lower net charge-offs and declining classified asset balances. Net charge-offs as a percentage of loans declined to 10 basis points on an annualized basis, while classified asset balances declined $17 million or 9% during the period. Our view on the ACL and provision expense remains unchanged. We believe we acted aggressively when building reserves in response to the pandemic and have been relatively conservative to this point in releasing reserves, given the unknown impact from the Delta variant. Barring something unforeseen, we expect further provision recapture and declines in the reserve for the remainder of 2021 and the beginning of 2022.

Finally, as shown on slide 17 and 18, capital ratios remain in excess of regulatory minimums and internal targets. All capital ratios remain strong despite slight declines in our ratios during the period. As I previously mentioned, we repurchased approximately 2.5 million shares during the quarter bringing our 2021 total shares repurchased to 4.6 million. 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 some comments on our outlook. Archie?

Archie M. Brown -- President and Chief Executive Officer

Thank you, Jamie. Before we end our prepared remarks, I want to comment on our forward-looking guidance which can be found on slide 20. Loan balances excluding PPP are expected to grow in the low to mid-single digits over the remainder of the year. Loan demand remains strong. Those several portfolios are expected to continue to face payoff pressures. Security balances are projected to remain consistent with September ending balances as deposits were expected to see some modest seasonal increases in the near term. The net interest margin will continue to be positively impacted by the remaining PPP forgiveness loans or payoffs and the associated accelerated fee recognition. We expect the majority of remaining payoffs to occur in the fourth quarter with a minimal amount carrying over to the first quarter of 2022.

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 increased balances in our securities portfolio. Regarding credit, we expect further improvement in quality trends and continue to expect additional provision recapture in the near term with further declines in the allowance for credit losses. We expect fee income to be between $40 million and $42 million in the fourth quarter with foreign exchange income rebounding to the $10 million to $12 million range and some seasonal declines in mortgage banking revenue.

Specific to expenses, we expect to be between $91 million to $93 million, but this could fluctuate some with fee income. Lastly, we will continue to evaluate capital deployment opportunities with all remaining shares under the 2021 repurchase plan expected to be repurchased during the fourth quarter. Finally, I am very pleased with our exceptional performance this quarter with record earnings and much improved credit trends. As we look to close out 2021, our focus remains centered on serving the financial needs of our core business, consumer and wealth management clients. Overall, the Company remains well positioned to manage in the current environment and we're optimistic about our ability to sustain the successes through continued execution of our core strategies.

We'll now open up the call for questions.

Questions and Answers:

Operator

[Operator Instructions] Our first question today comes from Scott Siefers from Piper Sandler. Scott, please go ahead. Your line is open.

Scott Siefers -- Piper Sandler -- Analyst

Good morning, guys. Thanks for taking the question.

Archie M. Brown -- President and Chief Executive Officer

Hey, Scott.

Scott Siefers -- Piper Sandler -- Analyst

Hey -- I wanted to ask first Archie about the loan growth outlook, sort of puts and takes. In your view what are sort of the portfolios that you see doing well and then maybe a little more color on the ones that you suggested would stay pressured for the time being?

Archie M. Brown -- President and Chief Executive Officer

Yeah, Scott. Thank you. As we sort of highlighted, C&I, the strong pipelines are strong and increasing. So we would -- I think we would continue to see some decent growth coming in there. There are some pressures there but not as much as we're seeing through other portfolios. In the ICRE portfolio, we've got strong originations, but we're just having record level payoffs. And it -- it seems mostly tied to the multifamily where the properties are being sold or going into the permanent market, but it is across a few other product types as well. So strong originations there, but very, very strong or high levels of payoffs.

And on the origination side, in some cases, we'll put the loans out, but -- many of our construction in nature. So there is a draw period. So even though originations are really strong, it takes time for those to draw fully up. The other place we're seeing some payoff pressure is in our specialty finance unit. You'll see, one of our slides in the quarter we showed franchise went back about what $29 million or $30 million in the quarter. In some cases, refinancing for -- we thought we're overly aggressively -- aggressive terms, in other cases, we exited a couple, in some cases a few sales. And then we're seeing and also in the finance company, we've got loans in some cases to RIA for insurance agents, and many of those businesses are selling in the current environment just so much liquidity in the market. So the payoff pressure is probably felt mostly in the ICRE and especially specialty finance units, but we're seeing again strong originations in commercial and in ICRE. The consumer side is running somewhat flattish, so decent origination side, I would say record level by any stretch, but just sort of running kind of in a flat mode right now.

Scott Siefers -- Piper Sandler -- Analyst

Okay, perfect. Thank you for that. And then I was hoping to get a little more color on the ForEx revenues. So, in this quarter $9 million was maybe a bit below the guide from 90 days or so, but the outlook is sort of down [Phonetic] back toward the more typical range. And in fact, I think you sort of bumped up that top end of the range. So maybe just some of the nuance of what generates the rebound and sort of how you're thinking about it sort of longer term as well.

Archie M. Brown -- President and Chief Executive Officer

Yeah. Scott, this is Archie again. The revenue, it works, it's a little, it could be a little bit chunky. There is a core -- there is a core base of revenue that's pretty consistent. And actually, when we look at third quarter, the core base of revenue was probably a little bit stronger than it had been in prior quarters. We just didn't have as many kind of chunky transactions that we would typically see. So as we look into the coming quarter, we had some near-term visibility into, no one did a few chunky deals, were going to be happening on top of kind of the normal core stuff. So that gives us some, it's going to rebound back into that $10 million to $12 million range.

Scott Siefers -- Piper Sandler -- Analyst

Okay, perfect. Thank you very much.

Archie M. Brown -- President and Chief Executive Officer

Yeah.

Operator

Our next question comes from Terry McEvoy from Stephens Inc. Terry, your line is open.

Terry McEvoy -- Stephens Inc. -- Analyst

Good morning, guys.

Archie M. Brown -- President and Chief Executive Officer

Good morning.

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

Good morning.

Terry McEvoy -- Stephens Inc. -- Analyst

Maybe Jamie, starting with a question for you, the pressure from low rates on the net interest margin, could you maybe just expand on how much of that is on the loan side, and just new loan yields versus the security side? And then, all things being equal, at what point are the low rates kind of fully priced in where your outlook would shift to more stable?

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

Yeah. Well, I mean I would tell you it's coming from both the loan side and the reinvestment side on the securities portfolio. So speaking directly to the investment portfolio. I mean, we get about, call it, between $100 million and $150 million a month in cash flow after the securities portfolio and those reinvestment rates are just a little bit lower still than our overall yield on the portfolio. So that's putting some pressure on the securities portfolio and then from a loan perspective, when you look at the yields, the run-off yields and the origination yields, a new loan coming on the books in the third quarter was coming on it about 3.35 [Phonetic] and a loan coming off, rolling off, paying off, maturing was about 30 basis points higher than that. So we still have about a 25 basis point, 30 basis point differential in the -- on the loan side as well.

So, and then when we see that stabilizing -- and then obviously on the deposit side, I mean, our deposit costs are at 10 basis points at this point. So getting more relief from the deposit side is really just not going to happen much. We may get another 1 basis point or 2 basis point, but at this point, we're basically at the floor. So when you look out into when that kind of stabilize is we're looking out into the middle of next year when the margin stabilizes somewhere around a core margin of 3 [Phonetic].

Terry McEvoy -- Stephens Inc. -- Analyst

All right. That was very helpful. And then as a follow-up question, it sounds like the remaining authorization on the share repurchase 366,000, that's what we should assume for the fourth quarter. If that's the case, at the end of this year, there will still be a fair amount of excess capital. So could you maybe just remind me what your targeted capital ratio is and as you think about next year, would we expect another share repurchase plan or would you like to see capital grow to evaluate -- capital deployment opportunities to use your terminology here on your slide.

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

Yeah, Terry. This is Jamie. So, yes -- so for -- if you're building out your model, we will, our plan is to complete 350,000 or so and during 60,000 shares in the fourth quarter. And then, so obviously that 5 million repurchase plan, that authorization will be up, and we will -- I suspect that -- it's dependent on how the Board looks at it, when we go back to them here at the end of the year, but our plan would be to renew that plan. I would suspect another 5 million shares just to have the flexibility, but it will be dependent on what I would consider to be normal capital management process of whether we would see other opportunities, potentially on the M&A side and then also obviously dependent on where our price is at that point as we look out into the future. But yeah, I mean we will -- we will want that flexibility to have another playing out there.

Terry McEvoy -- Stephens Inc. -- Analyst

Great. Appreciate that and have a nice weekend. Thank you.

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

Yeah.

Archie M. Brown -- President and Chief Executive Officer

Thanks, Terry.

Operator

Our next question is from Chris McGratty from KBW. Chris, please go ahead. Your line is open.

Chris McGratty -- KBW -- Analyst

Hey, good morning, guys.

Archie M. Brown -- President and Chief Executive Officer

Hey, Chris.

Chris McGratty -- KBW -- Analyst

Archie, I just wanted to follow up on that narrative on capital. Is the -- I guess, what are you seeing in terms of opportunities for traditional M&A? I mean, we've seen a lot across the country. I'm trying to decipher it. If you're trying to send a message that you're more optimistic about organic growth or potentially complement it [Phonetic] with deals, just a hesitancy on the buyback. Thanks.

Archie M. Brown -- President and Chief Executive Officer

Yeah, Chris, this is Archie. I don't think we have any near-term line of sight on whole bank -- whole bank deals. So there's been a few things that I would say, discussion, as I'd say, I always got some discussions with banks in the region, but I'd say nothing that I have some confidence. And so it seems that the authorization just gives us the flexibility that we can -- based on what our outlook is at in any point in time, we can decide that we want to repurchase shares, certainly the prices appropriate or hold back and do something else. We prefer to be organic growth and if that increases -- if the balance sheet started to really move up with earning assets in 2022, that's the preferred path, but I can't say, we've got to take loan [Phonetic] like that. We do look from time at fee based businesses and other specialty type companies and again have had some conversations, but nothing with any clarity at this point.

Chris McGratty -- KBW -- Analyst

Okay. And can you just remind me, if you did a larger transaction years back and proven to be pretty successful, what's the kind of range of opportunities if you were to do something? What's kind of a wheelhouse deal for you?

Archie M. Brown -- President and Chief Executive Officer

Yeah, I mean, Chris ideally it's -- it's a banking company in the Midwest, kind of -- more of a metropolitan footprint with more of a commercial bank orientation and probably a quarter to half our size. Now having said that, that's the ideal and if I can't find too many that fit that exact -- that exact model, but that prices would [Indecipherable] being fairly selective when it comes to whole bank M&A.

Chris McGratty -- KBW -- Analyst

Okay, that's helpful. And if I could just one more. We've heard a lot from your peers about the inflationary pressures that are in the market with wage pressure and employee costs. You guys have been really good about keeping costs down over the years. How are you thinking about intermediate term wage pressure and expense pressure broadly?

Archie M. Brown -- President and Chief Executive Officer

Yeah. It's -- Chris, this is Archie again, it's real -- we're seeing, especially well for any of the, you can imagine technology talent -- lending talents, security talent, fraud, risk talent and then on the entry level side, we're seeing those pressures. So I was looking prior to the call, our FTE counts down about 50 from year end. Down about another 15 or so from prior quarter. And I think our view is keep working on headcount reductions, but the trade-off is going to be higher wages for the folks that are here. So I think it's a combination of that. We have some branch closures. I think we have a couple this quarter and we anticipate more in '22 and that will also provide some offsets.

Chris McGratty -- KBW -- Analyst

Great. That's helpful. Thanks a lot, Archie.

Archie M. Brown -- President and Chief Executive Officer

Yeah.

Operator

[Operator Instructions] Our next question is from Jon Arfstrom of RBC. Jon, please go ahead.

Jon Arfstrom -- RBC Capital Markets -- Analyst

Thanks. Good morning, everyone.

Archie M. Brown -- President and Chief Executive Officer

Hey, Jon.

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

Hey, Jon.

Jon Arfstrom -- RBC Capital Markets -- Analyst

Hey, nice job on the buyback first of all, big numbers.

Archie M. Brown -- President and Chief Executive Officer

Thanks.

Jon Arfstrom -- RBC Capital Markets -- Analyst

Can you touch a little bit, I think a lot of this has been covered in a lot of the key topics. But can you touch a little bit more on the reserve path and where you think that could go longer term?

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

Yeah, Jon, this is Jamie. So, if you like -- like we mentioned, I mean I think we were aggressive in the -- during the pandemic of building the reserve and especially given our, the makeup of our portfolio, our exposure to hotels, our exposure to, on the franchise side. And so we think we were aggressive on the front end and we have, I mean, especially given the Delta variant. We have been purposefully conservative on the back end of releasing that. And I just kind of wanted to see where things were going to shake out, obviously losses are have been nowhere near what people have expected. But we still have -- I think we still have some room to go in terms of unless we see things starting to get away in terms of credit, but just given our credit trends, given the improvement in classified assets, the charge-offs that we're seeing now, starting to come down. We see some additional release occurring here over the next few quarters. And so if you look at our reserve now, take out the PPP loans, we're at around 1.62% of loans. And you look at kind of as a proxy where we started, pre-COVID, with CECL, we were at around 1.30% of loans. So, if you use that as a proxy, obviously the denominator will change some with -- with some loan growth, but we expect that over the next year that that will come back down into that range where we started on day one of CECL.

So it's another 30 basis point-ish of reserve release, like I said, the timing is probably the question here over the next year probably is when that happens. And then also, any deterioration in credit from here or any anything that could change that in terms of that variable, but outside of that we see it coming back down to that 1.30-ish range.

Jon Arfstrom -- RBC Capital Markets -- Analyst

Okay, good. That's helpful. Question on deposits, it's interesting to see the term seasonal in your guidance. It almost feels like normal again. But what are you thinking on deposit flows? Do you think this big wave of deposits and liquidity is starting to fade and we're getting back to more normal deposit flows? And I guess the other question that continuously comes up, do you expect some of your commercial customers to start to tap their deposits before you see loan growth really pick up? Do you have any thoughts on that?

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

Yeah. Jon, this is Jamie. I'll start. Yeah, the seasonal part of that comment is related to our -- to the Indiana operations. So over in Indiana, we have property taxes are due, May and November and we get a big pop of deposits coming in from our public funds in that November timeframe. So that's the seasonal aspect of it. But from a, I would say from a outside of that, I -- it feels like I've been wrong on this every quarter in terms of when we expect these -- some of these deposits, the search deposits to start running out. And they -- they really seem to be going the other way, obviously not at the pace that they were, but they had a [Phonetic] minimum, they've been flattish here over the last -- over the last couple of quarters. And that's with CDs going down.

So we are still building into our forecast on deposit outflow into next year just with that surge that we have, but it's not meaningful. And it's not the -- what the question is going to be the pace that that occurs and the -- and where it's coming from. But yeah, so we -- normal now on deposit seems like it's just been hard to predict, like I said, I would have though at this point that we would have seen some more outlook, but we just haven't.

Archie M. Brown -- President and Chief Executive Officer

Yeah, Jon, this is Archie. A couple of thoughts to add on to Jamie. If you look at our quarter, we saw some more up was probably on the consumer side, on the business side, it's still pretty close to peak fact maybe then edged up a little bit more. So they are flushed with cash. We did see, I failed to mention when I was talking to you about the -- some of the pressures, we have already seen in some cases, customers take cash and pay down loans or -- even with that, though, I would tell you that our C&I utilization rates moved up during the quarter. I think we moved from the low-30s to kind of mid-30s on our line utilization. So I think what it says is, they're just really good economic activity out there, it's disrupted some of the supply chain stuff, but business clients have revenue. They have orders, they have backlogs. It's a really, really positive overall environment from that perspective just with a lot of these interruptions and questions in the middle.

So I tend to think, yeah, they -- some of this cash maybe pay down some things, but they also will be expanding and doing other things with it. So I'm -- I'm probably more optimistic about it all.

Jon Arfstrom -- RBC Capital Markets -- Analyst

Yeah, OK. Yeah, you kind of -- you just touched on what I wanted to ask next Archie, was, you look at that slide 10, which is your loan portfolio, the ICRE bounces around from quarter to quarter and Oak Street and franchise can be somewhat variable, but that commercial and small business number really stands out. And it sounds to me like you're saying that's not an aberration, that that's a trend, and you expect that trend to continue. Is that fair?

Archie M. Brown -- President and Chief Executive Officer

Well, I'd say that's what we're focusing on and we're encouraged -- certainly encouraged by what you see on that slide. And we think that's where -- where the growth is going to be coming from.

Jon Arfstrom -- RBC Capital Markets -- Analyst

Yeah. Okay. All right, thank you.

Archie M. Brown -- President and Chief Executive Officer

Thanks, Jon.

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

Thanks, Jon.

Operator

[Operator Instructions] As we have no further questions, I'll hand back to Archie Brown for any closing remarks.

Archie M. Brown -- President and Chief Executive Officer

Thank you. I want to thank all of you for joining our call today, for your interest in our Company. Have a great Friday and a great weekend. Talk to you next quarter.

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

Bye.

Operator

[Operator Closing Remarks]

Duration: 36 minutes

Call participants:

Scott T. Crawley -- Corporate Controller and Principal Accounting Officer

Archie M. Brown -- President and Chief Executive Officer

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

Scott Siefers -- Piper Sandler -- Analyst

Terry McEvoy -- Stephens Inc. -- Analyst

Chris McGratty -- KBW -- Analyst

Jon Arfstrom -- RBC Capital Markets -- Analyst

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