ConnectOne Bancorp, Inc. (CNOBP) Q1 2021 Earnings Report, Transcript and Summary

Greetings, and welcome to the ConnectOne Bancorp Inc. First Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host Siya Vansia, Chief Brand and Innovation Officer for ConnectOne. You may begin.

Good morning, and welcome to today's conference call to review ConnectOne's results for the first quarter of 2021, and to update you on recent developments. On today's conference call will be Frank Sorrentino, Chairman and Chief Executive Officer; and Bill Burns, Executive Vice President and Chief Financial Officer. The results as well as notice of this conference call on a listen-only basis over the Internet were distributed this morning in a press release that has been covered by the financial media. At this time, let me remind you that statements and assumptions in this conference call contain or are based upon forward-looking information and are being made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to numerous assumptions, uncertainties and known or unknown risks, which could cause actual results to differ materially from those anticipated. These risk factors are more fully discussed in the company's filings with the Securities and Exchange Commission. The forward-looking statements included in this conference call are only made as of the date of this call and the company is not obligated to publicly update or revise them. In addition, certain terms used in this call are non-GAAP financial measures, reconciliations of which are provided in the company's earnings release and accompanying tables or schedules, which have been filed today on Form 8-K with the SEC and may also be accessed through the company's website at ir.connectonebank.com. Each listener is encouraged to review these reconciliations provided in the earnings release together, with all other information provided in the release. I will now turn the call over to Frank Sorrentino. Frank, please go ahead.

Well, thank you, Siya, and good morning, everyone. We appreciate you joining us today. As you've seen ConnectOne had a strong quarter and continues to build momentum as we move into the post-COVID economy. The first quarter highlighted by solid financial and operating results and diligent execution, against our strategic plan is a strong indicator of the performance, we can expect through the rest of the year. Our proactive position coupled with the improving operating environment, has allowed us to take advantage of many growing market opportunities. This is the third quarter in a row that operating earnings exceeded 2% of assets, and notably that's increased sequentially each quarter. Our loan production was robust. We utilized the full range of the company's banking expertise to support our clients, who are not only financially strong, but have also realized new opportunities through this pandemic. We stand ready to support them as they expand their businesses. Same time, we saw a large increase in pay downs and payoffs. There are number of reasons for this, which we believe are short-lived or one-time events. Our strongest clients are sitting on large cash balances, due to the liquidity that's in the market resulting in pay downs on lines of credit. Our pipeline in construction saw unusually large numbers of completions and resulting payoffs as timelines were affected by the early COVID-related shutdowns last year combined with the late starts for new projects. Extraordinarily low interest rates through last year caused a higher than usual level of refinances that we chose not to participate in as we remain disciplined in our approach. We're seeing these events normalize. As we begin the second quarter, there appears to be a slowdown in both pre-payments and in payoffs. We are seeing strong demand across our markets, further building growth momentum which can be seen in our existing loan pipeline, which I'm happy to report is at the highest level in the company's history. We continue to expect net loan growth to accelerate in the back half of the year. Now turning to credit, we continue to see better than anticipated strength and no doubt we're in a much better position than was originally anticipated at the start of this pandemic. We implemented the CECL accounting standard on January 1, and Bill will provide a little more detail on this, but in summary our one-time adjustment was modest. During the quarter, we released a small portion of the reserves, built over the past year based on the improving macro-economic outlook. Our deferment portfolio declined modestly at the end – as of the end of the quarter, and the total amount of loans where all payments have been deferred is now less than $50 million or less than 0.8% of our total loans. Total deferments are expected to decline significantly over the remainder of 2021 and we believe our reserves reflect adequate protection against any potential losses. I'd also like to note that, our net interest margin continued to expand during the quarter, the sixth consecutive quarter that margin widened. We're proud of our results this quarter and remain disciplined in managing our business, as we look forward towards growth. As the vaccines continue to be deployed throughout the New York metropolitan area, we're anticipating a significant uptick in our client activity. We're geared up for meaningful growth for the remainder of the year, and as the economy opens us even more we're preparing our team to capitalize on increased opportunities. Speaking of ConnectOne's team, they've returned to a work environment on – working from the office environment, and I'm proud of the resiliency that they demonstrate each and every day to take care of our clients. You have heard us discuss for some time that we are progressively moving towards a hybrid banking model. For us, the early investments we've made in technology and our infrastructure allowed ConnectOne to be well prepared to respond to the pandemic. We plan to further develop this model and our strong technological foundation as we move into the future state of bank. As always, ConnectOne remains a growth-oriented company and with signs of stability and expansion returning, we are well positioned with the capital strength necessary to take advantage of these opportunities and to maintain, or even improve our best-in-class performance metrics, some of which are our high returns on capital common equity, the building of tangible book value per share, and improving on our best-in-class efficiency ratio. With those things in mind and with that outlook, today we announced the 22% dividend increase to go along with the resumption of our stock repurchases. Over the past couple of years, we've seen notable technological shifts, including reliance on digital platforms, virtual deposits and online financial tools. We continue to innovate and invest in our infrastructure to enable us to deliver the quality products and services that our clients demand. At the same time, as client behavior evolves, we continue to reduce our retail brick-and-mortar footprint, relative to the size of our balance sheet and in client demand. In the first quarter, we further reduced our branch count, completing the previously announced sale of two branches. It's interesting to note, that over the past five years, we have doubled the size of our assets, our loans and deposits, while only increasing the net branch count from 21 to 24 including the integration of two acquisitions. And as – also as a quick update, we continue to build our SBA lending platform in our marketplace to serve our existing clients and to support small businesses and the communities where we do business. This initiative has been gaining traction and we see opportunities over time to generate revenue through an expanded SBA division. Now turning to BoeFly. We see terrific growth in that platform, which is generating more traffic through its proprietary products, bVerify and the patented bQual, and this in turn will lead to increased fee generation through loan referrals. As we scale and extend BoeFly's competitive position, we're seeing opportunities to further enhance BoeFly's platforms and add complementary products to its offerings and build BoeFly into a robust business marketplace. I look forward to updating you on our progress in the quarters ahead. We believe many more opportunities exist to partner with fintech companies and to build more value, while modernizing financial services. As you may have seen, ConnectOne has joined with dozens of other banks to participate in the JAM FINTOP Banktech fund, a fund dedicated to investing in the future ecosystem for community banks. At ConnectOne, we've long believed in the power of partnership and we believe this opportunity supported by the country's leading banks will provide a high level of diversity to further fuel innovation. Finally, a few thoughts regarding M&A. 2021 is already shaping up to be an active year. As in the past, strategic acquisitions are an important component of our long-term growth strategy. Whether we participate directly or not, we see incredible opportunities to attract new talent, add new capabilities, as well as benefit from others' activity. At its core, ConnectOne's growth – is a growth company, we've built a dynamic team that's accustomed to high levels of production, an operational model that can continuously evolve its technology and infrastructure and the ability to successfully execute franchise-enhancing M&A opportunities. Given our culture and our strong capital position, we're poised to accelerate our strategy and capitalize on market opportunities to drive substantial growth. This is an exciting time for ConnectOne. We look forward to sharing our progress with you each quarter. And I'll now turn the call over to Bill to provide a little more detail on the quarter's financial performance. Bill?

All right, Frank. Thank you, and good morning, everyone. So as Frank alluded to the first quarter was a strong start to the year and not only did we have a very solid quarter, I believe we are also very well positioned to excel, as we continue to come out of the pandemic. And let me go through some highlights for the first quarter. Loans grew by 2.5% annualized and that was aided by the second round of PPP. We were – our loan production was very strong but a lot was – a lot that was originated was offset by elevated prepayments. We are now though seeing strong production trends and that's combined with declining prepayments thus loan growth is expected to accelerate. In terms of deposits and funding, the mix continues to improve. Our average non-interest-bearing deposits as a percent of total deposits improved to 22.5%, this quarter and that's from 21.6% in the sequential fourth quarter and up a lot from 17.8% one year ago. And we continue to drive strong growth in core interest-bearing deposits, while the higher rate CDs, higher rate wholesale borrowings and subordinated debt all declined and we still have a large amount of CDs at 2% that will be rolling down in rate or just off the balance sheet. So the net interest margin widened for the sixth consecutive quarter, coming in at 3.56% on a GAAP basis and that largely reflects continued improvement in the cost of funds combined with a well structured loan portfolio which is repriced slower than most other banks. Going down the income statement to non-interest income that was flat for the quarter. I do realize that included the previous announced branch sales, so excluding the sale we were down slightly. There were small declines in fees and BOLI investment income, as well as gain on sale of loans but my expectation is that those items will rebound in the quarters ahead. Of particular note, BoeFly's recorded revenue fell sequentially but the traffic on its website is increasing and based on that, we are anticipating increases in loan referral fees in both the second and third quarters of this year. Turning to non-interest expense, that was flat sequentially for the quarter. Our expectation for the rest of the year is modest expense growth, certainly within single-digit growth. Some of that will be contingent on how strong revenue growth we have, but our efficiency ratio will remain low and continues to be in the top-tier in the industry at around 40% and we will continue to drive efficiencies throughout the rest of this year. In terms of performance metrics, we like many others benefited from the reserve release with the return on tangible common equity exceeding 19%, return on assets was very high, as well at 1.8%, but even on an operating basis, the PPNR return on assets was 2.06%, very high relative to our peers and that's the fifth consecutive quarter we've seen improvement there. Let's turn to loan growth and margin expectations. In terms of loan growth, we are optimistic that from here on out, to the end of the year, we can produce double-digit annualized growth rates. As Frank mentioned, our pipeline is the largest it's ever been. And keep in mind, we are a growth company, so I am optimistic, we are better prepared than most to capitalize on a recovering economy by actually closing on more deals with better credits and higher spreads. As for margin, we continue to run at historic highs for us, now over 3.5% and structurally we still have funding benefits coming with nearly $800 million of higher rate CDs maturing over the remainder of the year. However, that continued low rate environment combined with loan growth will at some point have a contracting impact on the NIM, even as we deploy excess liquidity. So going forward, I have to say, we might see some modest margin compression, especially with larger than expected loan growth or -- though this could be less then if the yield curve steepens. As always, I've mentioned this before, when it comes to net interest margin, there are a lot of moving parts, including prepayment fees, the dynamics of the PPP program, excess cash on hand, but my overall feelings at the margin although it could compress to some degree, it's going to remain relatively wide and certainly wide enough to support superior returns on equity and continue to drive valuable long-term creation of net interest income. Let me provide a little color on our transition to CECL, which took place on January 1 of this year. You might be aware, we've been running the CECL model parallel to the incurred loss model over the past year, we just put off the implementation of it on our financial statements and we started it January 1 of this year. Our one-time adjustment recorded on January 1 was about $9 million, that included the CECL for the loan, portfolio as well as for the -- for loan commitments and about $5 million of that comes from non-accretable discount growth, subs that came out purchase accounting. So that leaves only $4 million as a charge to pre-tax capital and that $4 million is pre-tax. So it was only about a $3 million hit to equity. As I mentioned on the last call, we didn't expect CECL implementation have a significant impact on our balance sheet and that did turn out to be the case. So, now during the quarter, commencing right after the one-time catch-up venture, we had a release of reserves of $5.8 million and that's due to the improving Moody's Economic Forecasts and what it does to our CECL model and especially with regard to future unemployment rates and CRE pricing trends. So going forward as an industry, I think we're going to see more volatility in provisioning, especially in light of changing economic forecast post-COVID. In terms of capital deployment. The last 12 months our capital retention has been strong, putting us in a great position with excess capital to do a few things. We're going to grow organically at double-digit pace, we did announce an increase to our cash dividend and we're resuming our stock repurchases, the level of repurchases over the course of 2021 will depend on our earnings retention and growth rate, but I do expect us to remain active for the remainder of this year and probably beyond that. Couple more things, before I turn over to Frank. I want to expand a little on deferments, the total level fell to slightly over the first quarter, as many of the modifications we made in the latter half of 2020 are contractually in place until the second quarter. So the expectation is that, over the next couple of months that deferral balance is going to drop by about 50%. In addition, I want to point -- I think Frank mentioned this, but I want to point out also that less than 25% of that towards $200 million is a full payment deferral, the rest some $150 million were modified with some payments continuing. But just looking at what's in the pool, we just don't see much in terms of potential losses and believe, we remain adequately reserved at this point. And just the last point before I turn it back to Frank is our effective tax rate for the quarter, we did increase it to 24.8%, a little higher than I think the expectation was and that reflects a significantly higher level of pre-tax income to both to strong operating performance, as well as the reserve release. So, if pre-income -- pre-tax income rates fall, the tax rate could be a little lower going forward. And before getting into questions, I'll turn it back over to Frank for closing remarks. Frank?

Thanks Bill. And I just like to reiterate a few key points that you heard -- that you did hear me mention before. Our earnings profile is strong, our balance sheet and credit and are in a good place. We continue to grow organically and we see a strong growth rate for the rest of the year. Our capital position is strong. We have a valuable franchise and continue to benefit from multiple streams of income and increase momentum across multiple platforms. We're a skilled acquirer, with a strong track record of integrating both traditional and fintech-focused transactions, quickly and effectively. We're continuing our digital enhancements and our investments and we continue to improve on our best-in-class efficiency. So looking ahead to the remainder of the year, we're optimistic that the operating environment will continue to improve and expected to gather momentum throughout 2021. We're excited about our future and we remain confident in our ability to drive value for our shareholders, our team and our clients. And with that, I'll be happy to take your questions. Operator?

And at this time, we will be conducting a question-and-answer session. [Operator Instructions] And our first question is from William Wallace from Raymond James. Please proceed with your question.

Hey good morning guys. It's Amar from Raymond James filling in for Wally.

Hi, how are you?

Hey, good. Good morning. So just a couple of quick model cleanup questions for me. The period PPP -- the period-end PPP balance for the quarter, do you have the average PPP for the quarter?

Yes, I do. It was something like $430 million was the average PPP balance for the first quarter?

Correct yeah.

Yeah. It was 400 -- sorry it was $417 million for the first quarter, $405 million for the fourth quarter.

Perfect. Thanks. And then just a second question on PPP, do you have the loan forgiveness figure for the quarter and if any additional PPP loans that you originated, do you have that figure as well?

I would've known -- $185. In round two, it was $185 million.

For the originations?

For originations in round two.

Okay. And then, how about the forgiveness that you guys saw from round one this quarter?

Should have that number. About $150 million in forgiveness.

Okay.

And we are really conservative I just -- I don't -- I'm not sure exactly, what you're using those numbers for, but we have -- we are being conservative in terms of the income we're recording and I did disclose that on -- in the release. So the return on those loans is about 3.1% or 3.2% and we've got another approximately $10 million in unrecorded income related to PPP.

No that's great. Yeah we're just trying to back into the core margin ex the PPP and then forecast forward.

Right it's 3.1% 3.2% including the 1% that's contractual on and plus the fees is what's included in the margin okay?

Okay. That’s very helpful. Thanks for taking the question guys.

Sure.

And our next question is from Michael Perito with KBW. Please proceed with your question.

Hey good morning. Thanks for taking my question.

Hey Michael.

I had a couple of questions on the fintech side first. So it was good to hear that the kind of it seems like the activity on the BoeFly platform is kind of percolating here I imagine as the economy opens up that will be a nice tailwind for that platform. I was wondering if you could just give us a quick reminder about near-term long-term, if there is success and growth there what type of impact to the financials we can see? I mean is it fair to think near term it's more fee-driven but then as the product roadmap around it expands it could impact NII more materially or? Just any additional thoughts or reminders you guys want to provide on that platform as growth seems to post-accelerate here.

I mean I'll let Bill speak to some of the numbers there but just in general right now what we are looking at is we continue to invest in that platform to make progress in two ways. One, to further develop with their baseline businesses which is this business marketplace which we think has a lot of value in this franchise market space. And two we find that there is a number of other business opportunities that that platform allows us to engage in and we're developing those as well. So right now any revenue, we drive and even if we were to drive multiples of the revenue that comes off the BoeFly platform we would probably reinvest it right back into the platform. So I don't think you're going to see anything meaningful in the near term. Bill may want to comment on that.

Okay yes. Well it depends on me to fill it I mean millions would be great. We run at about on average $250,000 of revenue there per quarter and I do see already the signs of that increasing based on the activity on the platform. So it's $1 million a year. And the question is how fast a growth we're going to apply to that. There is a big universe of franchisors out there who continue to try to increase the number of franchisers and use the platform, improve the usability of the platform, reduce the friction and it's getting people to use the platform that leads to loans requests which leads to referral fees. And where one of our main focus is driving those numbers.

Very helpful. And then kind of a similar question but on the JAM partners fund curious I mean I imagine there's going to be some type of potential financial impact was just wondering, if you could walk through that even if it's multi-years out? And the second is so is it correct to think about this more kind of as an -- like an idea incubator for you guys to get exposure and help that fintech partners and potential platforms and is that the more meaningful near-term piece strategically or? Just any additional comments there would be great.

I think it's all of those things. I think it's a good opportunity to invest together with what we think are some of the best investors in the marketplace. I like the idea of getting together with other like-minded financial institutions who are thinking about the ecosystem in the same way and certainly really like the idea of a fund that is fully dedicated to the banking ecosystem and not fintech opportunities that are looking to compete with banks. So I think it does a lot of what you said I think it provides us with a lot of opportunities both economically based and just strategically based for the future along with the ability to have a view into what's going on in the marketplace in real time.

Great, thanks Frank. And then just last one for me that -- it's good to hear about the double-digit kind of loan growth annualized expectation for the balance of the year. Just wondering if you could maybe unpack that a little bit more where are you seeing the pipeline overall record levels any particular areas of pockets within that that are noticeably strong and you expect to drive that line to your growth? Any kind of updated views on the commercial recovery of the New York City metro that are relevant to share?

I would say our pipeline right now pretty much reflects the diversity in our balance sheet as it exists. And so each of the various teams that are working out there today are seeing opportunities. So there is no one area that, I would say is lopsided in a concentration. We're seeing great opportunities across the entire spectrum of the products and services that we provide. So that's -- and likewise across the various geographies that we currently have markets in. So we're pretty happy about that part of it. I would also tell you though that we are seeing some tremendous opportunities for talent in many of those places as well, as I mentioned in my comments before there's a lot of M&A activity going on in our marketplace which is really just lodging some good people from different places and we're taking advantage of that.

And to help you with your model, I just want to add -- I just wanted to add that the rate on that pipeline is from about 350 to 375.

And that kind of factors -- I guess just to wrap it all up here I mean that the comment about adding talent and the comment about the rate we know these were both factored into your margin and expense comments previously Bill correct?

Mike would you repeat that again for Bill?

I was just saying to just kind of close the loop on that your comments about adding talent and then the rate comment on 350 to 375 I mean, it's fair to think that those were both factored into kind of your near-term expense and margin outlook commentary from your prepared remarks?

Yeah. Yeah, absolutely.

Great. Thank you guys. Really appreciate it.

You're welcome.

And our next question is from David Bishop with Seaport Global Securities. Please proceed with your question.

Yeah. Thank you. Good morning gentlemen.

Good morning, David.

Good morning.

Hey, sort of dovetailing or pending to Mike's question in there, Frank, you noted the opportunity to pick up talent from some of the end market consolidation obviously it's been pretty active of lately. Within that opportunity are there any sort of loan segments or niches that sort of excites you more than others, are there any sort of being a particular niches that maybe you're focus on -- focusing on over and above others?

I think we're seeing opportunities across the board and I think in some of the places where we might want to see some faster growth let's -- in some of our C&I segments we're seeing some great opportunities, but we're also seeing some great opportunities in our CRE space, construction space. I want to say, it's pretty much across the board.

Got it. I think you noted within the preamble within the release, loan deferrals expect a pretty material decline in those, just curious what you're seeing in terms of cash flow updates, is that -- the pay downs or improvement there, is that sort of a function of fiscal stimulus or maybe sort of a more endemic of an economy that's reopening in cash flows or improving from the borrower standpoint?

I mean one thing we definitely have noticed a lot in our underwriting is specifically with our business clients they definitely have cash on their balance sheets, whether it came from PPP, whether it came from increased sales, whether it came from figuring out that they can operate their business with 50% of the employees they had before, there's lots of reasons why a lot of our clients are sitting on increased amounts of liquidity. And if they're sitting on liquidity and interest rates are at zero, they're not going to pay a credit line of 4%, so many of them are paying down their credit lines until business improves even more dramatically. So we're seeing a lot of that and I think that is -- again, I think that was a product of the time, I think those things are going to start to change as we continue to move forward as more businesses are open in a full capacity and as businesses start to normalize whatever that means.

Got it. And then I guess one final question, Bill, you noted, I think it was about $800 million I think you said in CDs that are maturing or rolling off, just curious what the current pay rate is in terms of current-time deposit offerings?

It's about 2%. So it's either going to come down or it's going to roll off.

And what would they -- what sort of rate would they be rolling into it the term offerings?

50 or less, right. 50 basis points or maybe less.

50 or less. Got it. Thank you.

[Operator Instructions] Our next question is from Zachary Westerlind with Stephens Inc. Please proceed with your question.

Good morning. It's Zach Westerlind filling in for Matt Breese. How's everyone doing?

Good.

Hi, Zachary.

So apologies, if I missed this earlier, did you guys give a guidance for 2021 loan growth ex PPP like mid single-digits, high single-digits something like that?

I mean we are hoping to get it to double-digits from this point out from March 31 to the end of the year on an annualized basis.

Got it. Thank you. And then I'm just kind of curious on the construction pipeline. I live in New York City, I feel like I've been just seeing a lot more construction activity generally, was just curious if you've noticed anything picking up in terms of construction permits or activity in the pipeline?

Yeah. I think we're seeing a lot of activity in the construction pipeline. As I mentioned in my previous comments, there were two different things going on with construction that actually negatively impacted us all those -- was Liz Magennis, our President will tell you it's a positive development and that is that construction loans paid off at a higher rate in the first quarter and that was really attributable to jobs being shut down early on in the pandemic, in the first and second quarters of 2020. A number of construction projects were shut down and then the inevitable delay of restarting either those projects or new projects as we went through the balance of 2020 brought us to a place where we're here today, where we're having more payoffs than draws on new construction projects. But the pipeline for construction at ConnectOne is very strong, we are seeing it across all of our markets both in New Jersey and New York and across various types of asset classes. So I'm pretty bullish about construction right now, there is -- clearly when you talk to realtors in the market, there is just not enough homes being -- new homes being constructed, even the apartment space which many thought may have been overbuilt is still showing high levels of demand both here in New Jersey and in New York City there's actually bidding wars breaking out in parts of New York City on rental apartments, especially some of the ones that had large price declines. So I think your instincts are correct, there's more cranes, more concrete trucks, more construction workers going back into the workplace and I think this all really bodes well for both ConnectOne and in the markets in which we serve.

Appreciate that color. That's really encouraging to hear. And then just one last question for me. Considering how well BoeFly has worked out for you guys, could you just discuss any other potential fintech acquisitions -- not specific companies, but more like tools that you'd like to have in-house or proprietary?

I think we're really focused on a couple of different areas and we're looking at BoeFly as sort of the center of our universe. There is lots of opportunities to do things that are complementary or adjacent to what BoeFly does. And so whether it's an infrastructure company, whether it's a payments company, whether it's something to do with data, whether it has something to do with AI to be able to speed up some of our processes, we are looking at things that create both a good client experience, but also allow us to continue to build on our operational efficiency, which I know we keep saying is best-in-class and is great. But I think for an industry it's terrible it has to go lower than where it is today. So that's -- those are the two things that I think are driving us, it's either how do we improve our client experiences or how do we get even better efficiencies out of what we do with the people that we have.

Great. Appreciate that. And thanks for taking my questions.

You’re welcome.

And our next question is from Frank Schiraldi with Piper Sandler. Please proceed with your question.

Good morning, guys.

Good morning, Frank.

Good morning, Frank.

Just on the -- so on the untapped well, I mean you're accreting capital even with double-digit loan growth as PPP runs off, maybe you could continue to accrete capital I'm just wondering if -- your thoughts on capital level today versus the end of the year and if you would maybe consider getting more aggressive on capital return, more aggressive on the buyback special dividend that sort of thing. Any thoughts there?

Yeah. I think I did mention that depending on growth, well, we would be adjusting our repurchase activity. And like I said, I expect us to continue to do that for the foreseeable future. And we'll see if the growth rate is a little bit higher maybe we'll do a little bit less repurchases, if the growth's a little lower we'll do more, but we certainly feel that we're a little bit overcapitalized right now. I don't know I want to say exactly what capital ratio we're targeting, but I do feel we're above where we need to be.

Okay. And then I think you might have touched on the reserve to loan ratio as well, but in terms of -- if the economy continues to reopen, the environment continues to improve, uncertainty comes out. Where do you see that reserve to loan ratio? Are there additional releases that we could see, where do you see that migrating towards?

Well it is -- we have less control, I don't want to use that word over what that ratio should be because of CECL. And so to a large extent, we're tied into the model and that model is tied to Moody's forecasts. So for example, the forecast that just came out in the middle of April was better than the forecast at the end of March and we use the forecast at the end of March. So right off the bat, we probably have a little bit more releases. I imagine at some point that's going to stabilize and as we grow our loan portfolio, we'll be adding reserves. So Frank, it's hard to say. And then in terms of specific credits having issues, things that we can try not just for ConnectOne, but for everyone. So not sure what other bankers are telling you, but it's hard to project and I don't think it's going to move too much from where it is in the day.

Okay. Great. Thank you.

And we have reached the end of the question-and-answer session. And I will now turn the call over to management for any closing remarks.

Well, thank you. I thank you for all the questions. I hope you found this to be an informative earnings call and I want to thank you for joining us and I look forward to speaking to you again at our next call. Thank you.

And this concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.