Zions Bancorporation, National Association (ZION) Q1 2021 Earnings Report, Transcript and Summary

Thank you for standing by and welcome to the Zions Bank Corporation's First Quarter 2021 Earnings Results Webcast. After the speakers' presentation, there will be a question-and-answer session. I would now like to turn the conference to your host, Mr. James Abbott, Director of Investor Relations. Sir, you may begin.

Thank you, and good evening, everyone. We welcome you to this conference call to discuss our 2021 first quarter earnings. I would like to remind you that during this call, we will be making forward-looking statements, although actual results may differ materially. Additionally, the earnings release, the related slide presentation and this earnings call contain several references to non-GAAP measures. We encourage you to review the disclaimer in the press release or the slide deck on Slide 2 dealing with forward-looking information and the presentation of non-GAAP measures, which applies equally to the statements made during this call. A copy of the full earnings release as well as the supplemental slide deck are available at zionsbancorporation.com. We will be referring to the slides during this call.

Thank you, Harris and good evening, everyone. I'll begin my comments on Slide 10 with average loans and deposits. Loan growth has been elusive for banks recently and our first quarter results are consistent with that trend. As shown on the left side of the page, average total loans were nearly flat in the first quarter, when compared to the fourth quarter. The same is true for period end loans. Excluding PPP loans, average loans are essentially unchanged from the prior quarter and are down $1.3 billion or approximately 2.5% from the prior quarter. It's incidentally the majority of the loan declines that we've seen have been in revolving lines of credit, which is consistent with the deposit growth we've seen, and I'll describe that in a few moments. Within the loan portfolio, average non-PPP, C&I loans are down $149 million or about 0.5% from the prior quarter and down $782 million or 3% from the year ago period. Average consumer loans are down $403 million, or 3.6% from the prior quarter and are down $1.1 billion or 9% from the prior year period. Consumer loans are down in each category. Most notably in residential, mortgages as refinancing activity has added to fee income, while reducing outstanding loans on our books. The notable increases came from PPP loans, municipal lending and commercial real estate. While credit trends are generally improving across the portfolio, the credit quality in our municipal lending portfolio continues to stand out as being exception. The increase in PPP loans reflected the production of $2.6 billion of Round 2021 loans, partially offset by $1.6 billion around 2020 PPP loan forgiveness down to pay-downs, netting growth of nearly $900 million between the first and the fourth quarter period end. As Harris noted earlier, we're particularly pleased with being able to assist and support so many thousands of small businesses and obtaining the government stimulus money through our internally developed simple, easy, fast and safe process. Turning to deposits on the right side of this page. Average deposits increased 4.7% from the prior quarter, while period end deposits increased at a moderately stronger pace. Relative to the year-ago period, average deposits increased over 25%. Average non-interest-bearing deposits increased at a slightly stronger pace in both the quarter and year-over-year comparison. And at this point, our average non-interest bearing deposits are 47% of total average deposits up from a ratio in the low '40s prior to 2020. This mix shift has provided support to our net interest margin, although, non-interest bearing deposits are not as valuable when interest rates are low.

Thank you. Our first question comes from Ken Zerbe with Morgan Stanley. Your line is open.

Hi. Great. Thanks. Good evening, guys. I guess, Paul, just a couple of questions on guidance. I think you touched on this very briefly, but in terms of the net interest income stable is slightly increasing. Can you just break that out a little bit in terms of how much of that is driven by core balance sheet growth versus PPP run off over time versus core NIM compression versus the accelerated fee income that you're getting from the PPPs, if that's possible. Just it sounds like some of the core parts are a little bit weaker and that this might being held up by PPP but just unsure? Thank you.

Yeah. Thanks for your question, Ken. So what we try to do is provide an outlook that excludes PPP and the reason for that is exactly what you described that, that PPP is absolutely augmenting our current level of net interest income. But because of forgiveness and other factors can be somewhat volatile. And so, the outlook that we provided was really meant to speak to the underlying trends in net interest income, which are going to be defined by what's happening on our core balance sheet that is loan and deposit growth, and then also the absolute level of rates. We believe as activity improves, we're going to -- as we said in the loan growth outlook, which also excludes PPP loans. We are expecting some level of economic activity to translate to increased loan growth over the course of the next year. We think that will be additive. And then there is also an expectation that interest rates and/or the yield curve may continue to steepen over the course of the year, which we think would also be additive.

Got it. Understood. Maybe, I should rephrase my question I probably stated incorrectly, but how, like, what would you expect for PPP? You're obviously one of the biggest PPP lenders in the mid-cap space and it should be pretty meaningful for your results over the course of the years get some clarity around that. Thank you.

Yeah. So I can't make a specific prediction on PPP because of all the things we've outlined, but you can see in our financials that we've got over $6 billion of loans today related to the PPP program. Those are yielding 1%. There is also $168 million of unamortized fees, which will be recognized into net interest income as those loans either amortize mature or forgiven. And so those are the pieces that are going to flow into our net interest income, but the timing of that is just a little bit uncertain because it's somewhat dependent upon as I said, kind of a forgiveness or repayment of those loans.

Understood. No, I know it's hard to -- it's hard to answer that question. All right. Thank you very much, I appreciate it.

Thanks, Ken.

Thank you. Our next question comes from John Pancari of Evercore ISI. Your line is open.

I want to see if you can give a bit more color on your margin expectation. Just curious what's embedded in your stable to slightly increasing NII outlook and how that margin expectation might differ in terms of what factoring PPP or excluding PPP, I guess, however, you're able to help us kind of set that out? Thanks.

Yeah. I'll take that, John. Thanks for your question. This is very similar to the response like just gave relative to net interest income, that's really where we're focused revenue and net interest income, the margin is being significantly impacted by all the cash we have on the balance sheet. As I said, loan growth or deposit growth exceeded loan growth by $10 billion over the course of the last year and on our balance sheet that's significant. Of the approximately 55 basis points of margin compression, we've experienced over the last year, about half of that is related to an increase in cash balances. So that is to say, the underlying trend in the margin isn't nearly as bad, I will say as the headline outcome. And in fact, given what rates have done and how much they fallen. I feel pretty good about where our margin is. So looking ahead. again trying to exclude PPP because of the volatility, our expectation is that we will see a little loan growth in that is helpful from a volume perspective net interest income. And then also to the extent, the yield curve steepen a little bit from here, which is possible we think that would also be additive. So it's really those pieces of the core net interest income reflected in the net interest margin that we're focused on.

All right. Got it. Thanks, Paul. And then separately on the capital front, currently I've heard your comments around potentially becoming more active on capital management. Can you help us kind of how we should think about that. Like, what type of, if you could remind us of the priorities and clearly, there could imply a much more active buyback program. How should we think about the upside to that program and how substantial it could be as you look at where you stand right now at the 11.2% CET1? Thanks.

Yeah. I'll start with that and Harris will probably provide his perspective as well. I will say, we have said pretty consistently kind of up until the pandemic that the start of the pandemic, that we believe that we've got lower than average risk on our balance sheet and we think that a combination of kind of lower than average risk and average to slightly better than average CET1 ratio is the best outcome for us and our shareholders. And so as you can see that despite the pandemic, we have significantly grown our CET1 ratio over the last year, in fact our CET1 is up 120 basis points from 10% to 11.2%. And so it feels to me like we're getting a little further away from that sort of peer median performance or peer median level that we think is important relative to the risk on our balance sheet. So over the sort of medium term, John, I think that's, that might be a decent yardstick, but I'll let Harris provide a few comments.

Well, I just add -- we've got currently risk weighted assets are about $55 billion and so our CET1 is 11.2% and I think that and my own assessment is that we have a room to bring that down by about a percentage points. So you can kind of do the math, the timing of that is really going to depend on what happens with loan growth and now obviously profitability as we go through the year here, but I would expect that we'll try to work that back down to something closer to and I've kind of a strong showing relative to peers but not as high as we are today.

Got it. Thanks, Harris. That's helpful.

Okay.

Thank you. Our next question comes from Dave Rochester of Compass Point. Your line is open.

Hey. Good afternoon, guys. Paul, you talked about this earlier, but can you just maybe frame the magnitude of that difference in the front book, back book on the yield on your new loans in the securities purchases. It's a little bit closer to maybe 10 bps versus like 50 basis points. I know it may seem like splitting hairs, but with the cost of funds where it is, as low as it is around 9 bps. There just isn't a whole lot of room to offset that pressure outside of just deploying a lot of cash. So just wondering, how close we are to parity there? And I know you mentioned . I guess that was probably over the quarter, right. You might be a little bit higher on that now?

You kind of cut out there at the end, Dave, but I'm going to answer the question that I think you asked and then you can correct me. So I will provide some numbers although, I'm a little reluctant to do that because there is, you can imagine, sort of, a lot of volatility in the figures, but the trends that we're seeing on that what we refer to as the front book, back book that is loans and securities coming on versus loans and securities coming off. It's sort of in the range of 25 basis points in the loan portfolio and sort of 50 or 50 plus on the securities portfolio. And as I said, that's kind of consistent with what we've seen over the course of the past several quarters. So, no change in trend there.

Thank you. Our next question comes from Jennifer Demba of Truist Securities. Your line is open.

Good afternoon. Hi, Harris. Could you talk about the company's interest and acquisitions in the future. There have been some very high profile deals in the industry over the last several months, as companies look to add more scale.

Sure. I think that I wouldn't count anything out, but it's not something that we are out actively trying to pursue. I do expect that as we complete some of the systems work that we're doing and get out here just a few quarters. I think we could find ourselves, perhaps more interested if the fit is right and the price is right, etc. But it is not -- I guess, it's not a high priority for us right at the moment. And so I don't really expect it -- we'd see if anything significant in the near future, but as you note there, a lot of things happening and as the economy picks up and in particular, if we see some increase in interest rates some modest increase could put us in a much better position to be thinking about that. So I guess that's how I'd characterize where we are at the moment.

What kind of transaction would be of interest to Zion if the conditions became right for it?

Well, it would probably most prominently in market, Western US centric that I've noted in various forms over in recent times that a lot of smaller banks even some of the large community banks and smaller mid-sized banks have probably an over abundance of commercial real estate exposure that would not -- I mean that would be something we would not probably be very interest today. We would you look for -- our franchise has reasonably strong commercial orientation and there are not that many of them, but there are some out here that they kind of fit that profile.

Thanks, Harris.

Yeah.

Our next question comes from Ken Usdin of Jefferies. Your line is open.

Hi, thanks. Good afternoon. Paul, just wondering if you could talk a little bit more about that great Slide 11 you have about the securities and interest rate sensitivity. So you mentioned that you're a lot more as sensive now because of all the deposit inflows and I see that table of your planned to swap run-off. Just wondering, how you might intend to navigate going forward with either adding incremental swaps, putting on more floors and how you manage that against just what you're doing on the traditional ALM side?

Sure, Ken. Thanks for your question. So a couple of things, one on the traditional securities as I tried to lay out in the prepared comments. We're really, we're not going crazy in terms of adding either volume or duration there. We're really sticking to our knitting and sort of incrementally adding. So the real opportunity to sort of change into sensitivity is really on the interest rate swap side, sort of the, the synthetic extension of duration with swaps, which is what your question, keys on. I will say as the curve has steepened we the ALCO Committee have discussed the maturity profile of the swaps in sort of the duration that's accretive by that and we are incrementally adding to that. And so in terms of activity, when I think about balancing the duration of the assets and liabilities, we are going to be much more focused on the swap side to the extent that yield curve remains somewhat attractive. And I think that's -- the uncertain part -- the reason I pause is, the uncertain part is, again I tried to say in my prepared remarks, what we don't know is what the sort of real average life or duration of the surge in deposits has been or will be, right. So, we've got this incremental $10 billion of deposit growth in excess of loan growth, that's creating a lot of interest sensitivity in our models, but as managers. the ALCO's job is to look at that with some on level of skepticism and that's what we're doing. So, we're marginally adding duration either in portfolio size or industry interest rate swaps. But we haven't added a lot yet. Looking ahead, I would look for more activity in swaps and security.

Okay, great. Yeah. And that's what I'm getting at and is that -- would that -- those potential adds be built into your forward forecast like the potential to add and what kind of -- how in the money are swaps today versus what you saw them being three months, six months ago. Is it a clear winner to do it?

It's a much different risk return profile today than it was three or six months ago. And you can see that very clearly in the shape of the curve. Now we don't go out much beyond kind of five years on swaps and so you look at where that point of the curve, how that point of the curve has changed over the last six months. And you can see there is absolutely carry there now, where there was almost no carry there for example, six months ago. So, the issue that we had, let's say, six months ago about kind of trying to put on some protection against lower rates was, one, we didn't think the rates were much lower or could go much lower. And two, we weren't getting paid at all for adding that duration. Now there is, we're getting paid a little bit for, if you will, every duration dollar that we're putting on which is why we're a little more active. So nothing too exciting yet, but we're absolutely paying a lot of attention to that.

Okay. And that was in your forward -- that's built into your forward guide was my first part of it, I got away from it.

Yeah. It is. Although, I'll say there isn't a lot of speculation around a continued steepening of the curve. That outlook is really based on sort of what we know today and how we expect the balance sheet to change over the next year.

Understood. Thank you, Paul.

Okay. Thank you.

Thank you. Our next question comes from Steven Alexopoulos of JP Morgan. Your line is open.

I wanted to start on the expense side, if I just look at the big picture, so adjusted non-interest expenses were up 8% year-over-year parts legal and professional fees. But the comp line is still up 5% year-over-year. Maybe for Paul, can you run through why the comp expenses have risen so much?

Yes, sure. As we noted in the press release, a lot of that was related to long-term incentive. So first let me say year-over-year base salaries are down $5 million. Okay. I think that's really important. But year-over-year, you do see sort of increases in profit sharing and the company -- sort of company match 401(k). We have been encouraging our employees to participate more fully in 401(k) and the good news is that they're doing that, but that does create some incremental expense as we are contributing that. So, there's almost $6 million of year-over-year change just in those what I'll characterize as 401(k) related items between the profit sharing and the profit sharing in the 401(k) match. And then the other big piece is really in what we call our value sharing plans. So this is the kind of a three-year it's, -- if you look at our proxy statement, you can see how it's calculated. It is a very quantitatively derived three-year and therefore somewhat long-term incentive compensation program, and this is really largely our financial performance relative to peers and what we saw this year in first quarter was that the financial performance looks much better this year than it did a year ago with all of the uncertainty related to the pandemic. And so, there were increases in accruals associated with those long-term incentive plan. Those are the key drivers really year-over-year.

Okay. So, if we assume that base salaries don't decline moving forward. Again, should we assume that mid-single digit is where growth of the comp line should remain anything really described to be temporary assuming the employees continue to contribute?

Well, it's dependent on earnings is the key, right. So it's sort of meter to earnings. So as performance improves and this is what I tried to say in my outlook on expenses as performance improves, there is a meter on expense in comp that is related to performance, but that as it relates particularly compensation expense, sort of key performance indicator is really financial performance, if that makes sense. Otherwise, we feel like we have a pretty good handle and we'll remain really disciplined on expenses. As noted, there was an incremental $5 million, a total of $8 million of PPP related forgiveness expense that is sort of third-party help with forgiveness because it is somewhat complicated and that's the kind of thing that doesn't show up every quarter.

Okay, that's helpful. And then for my follow-up question, on the loan outlook, so you're calling for a slight increase in loans over the next year despite one an economic boom expected fairly widely and two, you're picking up quite a few new customers through PPP. Why you're expecting only a slight increase in loans? Thanks.

I'll start and then maybe Scott can jump in on that too. As I said, loan growth, that was $10 billion short of deposit growth year-over-year. And so we have a lot of deposits and we have a lot of customers with deposits. As I said in our prepared remarks, our line of credit utilization is down pretty significantly year-over-year and I think there's a direct correlation to deposits with that. So I think there's a little bit of a crowding out, if you will, of the government providing funds, such that our customers don't need as much credit, which makes us sort of a little less confident on economic activity translating for loan growth as it has in the past. Scott, would you add to that?

Yes. I wouldn't add much to it. Steven, I just think it's if you know when you're in a period like this, it's hard to call the bottom. But I would agree with you once it turns, I think we will see nice growth is just a function of when is it going to turn, and as Paul noted, the point to point decline in our loan balances is almost entirely related to lower utilization of revolving credits. So our non-revolving credits are basically stable with where they were a year ago, which I think is a strength and if you look through the PPP borrowers specifically, the new loans that we've generated with those borrowers, they represent about 10% of what the existing companies were borrowing pre-pandemic. So we're seeing a nice volume there as you noted. So I think we have a much more kind of positive outlook than we had maybe three to four months ago, but it's just a big ship to turn and once it turns, I think we should expect to be back in the mid-single-digit loan growth process, which is where we were for a number of years.

Okay, great. Thanks for all the color.

Thank you. Our next question comes from Steve Moss with B. Riley Securities. Your line is open.

Hi, good afternoon. Just following up on loan growth, maybe you guys talked about lenders being more optimistic about business activity kind of curious where maybe you guys are seeing improvements in the loan pipeline.

This is Scott. And I would just say that in the small business -- basic C&I and owner occupied areas, I think we also will see some strength from our one-to-four family mortgages that we hold on balance sheet. We're doing a number of things to get that held for investment percentage back up. We've seen some run-off there. And if you look back over the last peers one-to-four family mortgage growth accounted for about 25% of our growth in almost any time period, and so I think you'll see that return -- you've seen good growth in municipal over the last year it was one of the really nice growing parts of the portfolio, we love that business. It's a very high credit quality business and we're just starting to see some of the benefits of ancillary business coming from it and municipal historically like mortgage contributes about 20% plus or minus to our overall loan growth. So CRE, it'll grow, but it will probably grow equal to or less than the overall growth rate of the loan portfolio. But I think the incrementally positive growth will be in C&I small business kind of our core markets, mortgage and municipal.

Okay. Thanks for that, Scott. And then I guess for Paul, just kind of curious as to you held securities balances steady at 20% of assets. Could we tick up a couple of percentage points here. It sounds like you're a bit reluctant to do that and kind of also wondering where our investment securities yields here purchases today is a kind of a 1.5% range maybe versus the 1.3% for the quarter.

Well, on the yield, at any given day, obviously that changes, but yes, it's probably in that sort of 1.4% maybe 1.5%, generally speaking. As it relates to the investment portfolio itself, we have been holding back on growing that a little bit. As we've noted just because we're just uncertain as to the sort of the durability or sustainability of what we kind of are characterizing as the surge deposits that have come on as it relates to not only all of the fiscal programs, but also all of the monetary programs put on by the federal government. So, but nonetheless we -- it's not like we're doing nothing. I mean, we have added to the portfolio as we note on slide 11, that portfolio has gone from period-end basis $14.8 billion to $17.2 billion over the course of the last year. So as we're moving through time and we become either cash continues to grow and/or we become more confident in the sustainability of the cash, we are marginally adding the portfolio, but we're not going to go out and put on $5 billion in a quarter. If you're going to see increases, there will be marginal increases that certainly has been the trend and I expect that trend may continue over the near term.

Okay, great. Thank you very much.

Thank you.

Thank you. Our next question comes from Brad Milsaps with Piper Sandler. Your line is open.

Okay. Good evening.

Hi, good evening.

Paul, just wanted to follow-up on the discussion on securities. I did notice that the yield this quarter on the available for sale portfolio held in pretty flat, I think once 169 versus 170. Just kind of curious if there's anything in there from a time perspective that helps you in a positive way that we might see reverse out of the near-term, especially talking about where new money yields are coming in?

I don't recall anything in there that sort of one-time in nature. I think it more -- maybe it's more reflective of changes in prepayment speeds in the way those affect yields. As the yield curve picks up, prepayment slowdown, premium amortization slowed down, yields go up, that kind of thing. If I remember correctly, and I apologize, I'm just a little fuzzy right now. That's probably the key driver sort of offsetting some of the front book, back book stuff that we've described previously.

Okay, great. That's helpful. And then just on asset quality, clearly you guys have seen improvement. Just kind of curious if there is a level to think about in terms of the overall level of the reserve that you might see as sort of a floor as you think about your see-saw model and kind of where the reserves today relative to where you think it could be.

Well, I would love to be that confident that I can predict something like that. In CECL and as you know, this really is to sell highly dependent, not only on the underlying credit quality of the portfolio, but maybe and what you saw this quarter, more importantly dependent upon the macroeconomic forecast. So it's really hard for me to put any kind of floor on that figure. It's hard for me to give color beyond that, because it is going to be so dependent on largely the macroeconomic forecast on any given quarter-end.

Great, thank you.

Thank you.

Thank you. Our next question is Gary Tenner of D.A. Davidson. Your line is open.

Thanks, good afternoon. I appreciate all the color and discussion about the loan outlook, I did have one follow-up. And I wonder if you could kind of discuss where the kind of stance on appetite for lending in particular areas are maybe compared today to pre-pandemic areas that you are maybe still wanting to stay clear of or any of that maybe have changed your perception over the last year.

I think we've -- sure, has changed a lot. It's how we are -- we're interested in kind of across the board in commercial and C&I. We continue to have a lot of interest in building up in the loan portfolio, it's municipal loans and leases. And so I expect we'll see continued growth there. I agree with Scott as the economy continues to improve, I think we'll see more demand from small businesses. The issue that Paul spoke about, we respect all the liquidity. I do think it's an issue and a headwind and it's a little hard to get. I mean just never quite seen this before this much liquidity out there. So it's kind of hard to know what kind of headwind that's going to be as the economy starts to pick up, but I think we're interested across the board in commercial. Commercial real estate, we're trying to do a little more careful there because of some of the well understood challenges with respect and kind of retail CRE in office. Most notably, and I also tend to believe that multifamily is you just have to be careful with it right now. We've seen a lot of growth there in terms of just activity in the economy and I think that will see -- I agree with Scott said earlier I hope we'll see a little more growth in one-to-four family on the balance sheet jumbo ARMs that performed really exceptionally well. The consumers had a lot of, I mean we've seen pay downs on home equity credit lines and a lot of refinancing activity, but I think that will probably kind of bottom out here and I would hope to start to grow a little bit. So I don't know if Michael, if you have any particular thoughts, our Chief Credit Officer.

No, Harris. I think you covered most of the basis. I think if you look at utilization on the consumer side, it's down equal to or greater than the other domains that you think about consumer C&I CRE. So I think consumer is going to come back quite quickly both in utilization and new originations outside of one-to-four. And small business, we've recently taken some of the measures off that we put in during I'd call it kind of the heart of the crisis. So we'd lose some a little bit on small business and consumer and we're getting back to sort of the pre-COVID place. So I would expect there would be growth there as well.

I'd also add owner-occupied real estate, commercial real estate is a category. I said I expect we'll see some growth here. That's, something we're really comfortable with and we were trying to emphasize in some of the market. So a little of all of the above I guess.

I'd just add this. This is Scott. I'd just add to that that there are some things you won't see us do if you go back into time and you look at other periods of low loan demand and low interest rates. We've seen other banks reach for credit and reach for yield. You won't see us do things out of the norm on taking larger share of credit. You won't see us dramatically increasing our leverage finance book. We've been very modest in that regard, you won't be us growing rapidly our construction loan portfolio. But you won't see us lean into things that other banks additionally lean into when they're faced with and taking higher risk.

Well, great. Thank you for the color.

Thank you. Our next question comes from Erika Najarian of Bank of America. Your line is open.

Hi, just one question from me. Your peers that have upgraded their expense outlook during this earning season either also upgraded their revenue outlook or had much bigger freebies. I hear you loud and clear that there is a significant amount of conservatism baked into the revenue outlook, but if we enter a stronger period for either the curve -- in terms of the curve steepening or loan demand picks back up greater than low single digits, what should your investors expect in terms of that guidance for expenses if your revenue expectations do prove to be conservative.

Go ahead, Harris.

Paul, I was just going to say, I don't think to see a lot of change other than probably incentive compensation which as Paul noted earlier has some linkage to the profitability, we'd see higher profit sharing contributions, etcetera, but I don't think it's going to, otherwise we don't -- I don't think unless otherwise being particularly linked. I mean we're going to work on expenses really hard regardless of what happens in the rate environment.

And if I could, I'll just note that we have not, changed our expense outlook. Our noninterest expense outlook there were clearly some items in the first quarter that we thought we need to talk about. And then in my prepared remarks, I also talked about sort of the risk of inflation and what might happen there, but our non-interest expense outlook hasn't changed from the prior quarter.

Okay, got it. Thanks.

Thank you. And our next question comes from Peter Winter of Wedbush Securities. Your line is open.

Hi, I just had a quick question on PPP. I was just wondering if you could say how you're thinking about it in the second quarter and if there was any impact this quarter with the loan portal closed for part of the quarter.

Scott, you want to take that?

The new loan volume is down to a trickle. So we don't anticipate unless something happens new that you will see us reporting at the end of the second quarter significant change from what we've reported other than more forgiveness. But we're not seeing a lot of new PPP volume nor do we -- nor is the rest of the industry.

Right. I was looking more for net interest income number relative to the $60 million in the first quarter.

Sorry about that. Paul?

Well, I guess, sorry. This gives us forgiveness the -- and it is really hard to predict, right. As you pointed out, there was a little bit of a slowdown by the SBA, but really like in the middle of the quarter and the new administration put on some sort of different rules and things around forgiveness and access of the program and you know there were several things that happened in the quarter, but I think things really accelerated again by the end of the quarter. So I'm not sure on balance that it was significantly different than otherwise would have been. And then I think it will be somewhat speculative to start getting into what's happening in the second, third or fourth quarters which is why we've tried to provide an outlook that excludes the impact of PPP because it's really hard to predict. It's not up to us, you know what I mean and so a little hard to predict. But that's why we've given you the component pieces. We're giving you the PPP loan balances, as I said, those are 1% as long as around the books. And then we've got $168 million of unamortized fees, so those are the pieces and then it's really a matter of I think -- your guess is as good as mine as it relates to how efficiently or effectively all of that stuff works through the process.

I might just add, Paul. I mean, I'm just reflecting on the fact that it's been over a year since we made our first PPP loan, we still have, I mean, at this time a year ago, we were really busy pumping these things out and I just don't have a lot of those around one or 2020 loans that that have not yet applied for forgiveness and so I wouldn't have expected that -- I would have expected of these were kind of melted off much more quickly than they have. So we're just, we're watching and learning as we go, but just underscores what Paul is saying.

Thanks, Harris. Thanks, that's all I had.

Thank you. I am showing no further questions. So with that, I will turn the call back over to Mr. Abbott, for any closing remarks.

Thank you, Valerie. And thank you all of us, I think you'd all of you rather for joining us on the call today. If you have any additional questions, please contact me by email or phone number as listed on our website. Again, it's jamesabbott@zionsbancorporation.com. We look forward to connecting with you throughout the coming months and thank you for your interest today in Zions Bancorporation. This concludes our call. Thank you.

Thank you. Ladies and gentlemen, this does conclude today's conference. Thank you all for participating. You may all disconnect. Have a great day.