Ladies and gentlemen, thank you for standing by and welcome to the Midland States Bancorp's Fourth Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised that today's call is being recorded.

[Operator Instructions]. I would now like to hand the call over to your speaker today, Mr. Tony Rossi of Financial Profiles. Thank you. Please go ahead..

Thank you, Brandi. Good morning, everyone, and thank you for joining us today for the Midland States Bancorp fourth quarter 2020 earnings call. Joining us from Midland’s management team are, Jeff Ludwig, President and Chief Executive Officer; and Eric Lemke, Chief Financial Officer.

We will be using a slide presentation as part of our discussion this morning. If you have not done so already, please visit the Webcast and Presentations page of Midland’s Investor Relations website to download a copy of the presentation.

Before we begin, I would like to remind you that this conference call contains forward-looking statements with respect to the future performance and financial condition of Midland States Bancorp that involve risks and uncertainties including those related to the impact of the COVID-19 pandemic.

Various factors could cause actual results to be materially different from any future results expressed or implied by such forward-looking statements. These factors are discussed in the company’s SEC filings, which are available on the company’s website.

The company disclaims any obligation to update any forward-looking statements made during the call. Additionally, management may refer to non-GAAP measures, which are intended to supplement, but not substitute for the most directly comparable GAAP measures.

The press release available on the IR website contains the financial and other quantitative information to be discussed today, as well as the reconciliation of the GAAP to non-GAAP measures. And with that, I would like to turn the call over to Jeff.

Jeff?.

Good morning, everyone. Welcome to the Midland States earnings call. I'm going to start on slide three with the highlights of the fourth quarter. Our reported results reflected one-time charges related to the prepayment of FHLB advances.

Excluding those charges, we delivered another strong performance this quarter despite the continuing challenges presented by the ongoing pandemic. We had adjusted earnings of $12.5 million, or $0.54 per share, which included $3.2 million impairment of commercial mortgage servicing rights.

Excluding this impairment charge, we also had adjusted pretax, pre-provision income of $28.9 million. This represents an adjusted pretax, pre-provision return on average assets of 1.69%, which reflects the strong overall level of profitability that we are now producing.

The FHLB prepayments were part of our over restructuring of our FHLB advances that we did to better match our near term funding needs and reduce our interest expense. We've prepaid $114 million of longer term advances that had a weighted average rate of 2.1%.

These prepayments resulted in a one-time charge of $4.9 million that we expect to earn back in approximately three years. By prepaying these advances, we will reduce our interest expense by $2.3 million in 2021, which should positively impact our net interest margin by two to three basis points.

During the quarter, we also added about $200 million in short term FHLB advances. So despite the prepayments, we are showing an overall increase in FHLB borrowings. These low cost short term borrowings are being utilized to fund the expansion of credit lines we provide to our commercial FHA lending clients.

The strong performance this quarter was driven by a continuation of a number of positive trends we are seeing over the past several quarters, most notably a higher level of loan growth that helped drive an increase in our net interest income.

Our total loans increased at an annualized rate of 13.2% in the quarter, as our equipment finance group continues to perform well, and we saw greater utilization of warehouse lines provided to commercial FHA lenders. Due to the nature of the warehouse lines, we'll see some fluctuation in these balances going forward.

In addition, we saw improved demand and pricing on commercial real estate loans, which enabled us to grow our CRE balances for the first time in quite a while.

On the liability side of the balance sheet, we continue to see an improvement in our deposit mix, and total deposits increased at an annualized rate of 5.6%, driven largely by continued increases in core deposits. This resulted in a further reduction of our cost of deposits.

With the strong loan demand, we were able to redeploy some of our excess liquidity into higher yielding earning assets. Combined with our lower cost to deposits, this helped us to offset lower yields on earning assets and keep our net interest margin stable during the quarter, excluding the impact of PPP related income.

Looking at asset quality, we continue to be encouraged by the overall trends we are seeing. We're able to successfully resolve some of our larger long term problem loans during the quarter with no meaningful additional write-downs required.

Combined with minimal inflow of new loans into non accrual, our total non-accrual loans declined by about 20% from the end of the prior quarter. We continue to see a decline in our level of deferred loans, as well as more borrowers returning to either full or partial scheduled payments.

We are closely monitoring these borrowers and receive updates on their business trends and financial performance. And as conditions improve, we continually put new terms in place that will support these borrowers while their business recovers, while also moving them closer to resuming their full scheduled payments.

While we are seeing encouraging trends, there's still a great deal of uncertainty regarding the timing of a stronger economic recovery. In light of this, we continue to build our reserve coverage, which now represents 1.18% of total loans, and 112% of non performing loans.

Moving to slide four, we'll provide an update on our PPP efforts and the impact that these loans had on various line items in the fourth quarter. Through the end of the year, we had about $93 million of our PPP loans received forgiveness, and through January 25 that number is now up to $116 million.

This brought our total amount of PPP loans down to $184 million at the end of the year. With the loan forgiveness accelerating our fee recognition on PPP loans, we recognized $3.1 million in fees during the fourth quarter, up from $1.1 million in the prior quarter. This left $4.3 million in fees remaining to be recognized from the first PPP program.

In terms of the new PPP program, we've started taking applications and through January 25 we had received applications for approximately $60 million in loans. Turning to slide five, we'll provide an update on our loan deferrals. At December 31, we had $209 million in loan deferrals, which represented a decline of 25% from the end of the prior quarter.

Our loan deferrals now represent just about 4% of our total loans. As I mentioned, we are moving more borrowers to at least a partial payment of their deferred loan.

As a result, the amount of loans on full payment deferral dropped from $238 million at the end of the last quarter to $106 million, while loans with interest only deferrals increased to $103 million from $41 million last quarter.

The largest contributor to our deferrals continues to be the hotel/motel sector, while one area that we have seen significant improvement in is assisted living facilities, which now do not represent a meaningful portion of our total loan deferrals.

At this point, I'm going to turn the call over to Eric to provide some additional details around our fourth quarter performance.

Eric?.

Thanks, Jeff. I'm starting on slide six, and we'll take a look at our loan portfolio. Our total loans increased to $162 million, or 3.3% from the end of the prior quarter. If you exclude the impact of PPP loans and the run off, we had related to forgiveness then our total loans increased $255 million or 5.5% from the prior quarter.

This increase was primarily driven by four areas. First, $137 million increase in warehouse lines of credit to commercial FHA originators, which includes the new relationship with Dwight Capital that we entered into as part of the sale of our origination platform.

Next, the expansion of two existing relationships resulted in an increase in commercial loans of approximately $59 million. After that, a $46 million increase in the equipment finance portfolio, which continues to experience strong demand in both construction and manufacturing. And finally, a $29 million increase in commercial real estate loans.

The growth in these areas has helped to offset a decline in our residential real estate portfolio as we're not making an effort to retain loans that are looking to refinance. On slide seven, we have provided an update on our equipment finance portfolio.

As of December 31, we have $50 million of deferrals, which represents a decline of 33% since the end of the last quarter. Almost all the deferrals represent borrowers in the transit and ground transportation industry, many of which are operators of tour buses who have been temporarily impacted by the decline in travel.

We're continuing to work with these borrowers on payment programs to bridge the gap from now until an eventual rebound in travel. And more than half of our deferrals in this portfolio are now making a partial payment of some kind.

We're also evaluating the potential of borrowers in this portfolio to receive another round of PPP funding or other temporary stimulus. On slide eight, we've provided an overview of our hotel/motel portfolio. At December 31, we had $83 million of loan deferrals in this portfolio, which is down 22% from the end of the prior quarter.

We continue to see positive trends in occupancy rates and cash flows in many borrowers, which is enabling them to resume at least partial payments. As of December 31, we had approximately 34% of our deferred loans in this portfolio making interest only, or some other form of payment, up from 18% at the end of the prior quarter.

Looking at slide nine, we have provided an update on the consumer loan portfolio that we have through our relationship with GreenSky. We had just $3 million of deferred loans in this portfolio as of December 31, which represents less than half of 1% of the total loans.

The portfolio continues to perform well over the past few quarters, and the delinquency rate has stayed in the 30 to 40 basis point range. In addition to the strong performance, the escrow account is available to cover any deficiency in Midlands principal balances. The escrow account stood at just under $30 million at the end of the year.

Our total balances in the GreenSky portfolio remained relatively flat during the fourth quarter, and we expect it to remain in this range throughout 2021. Turning to slide 10, we'll take a look at our deposits. Total deposits increased $72 million or 1.4% from the prior quarter.

The growth was attributable to increases in retail and commercial FHA servicing deposits, which were partially offset by declines in commercial customer deposits and money market accounts.

The deposit flows this quarter drove an improvement in our deposit mix with non-interest bearing deposits increasing to 28.8% of total deposits from 26.9% at the end of the prior quarter. Looking ahead to the first quarter, we will have additional opportunities to run off higher costs time deposits.

We have a little more than $100 million of CDs maturing at a weighted average rate of 1.19%. As these deposits renew at current rates, we should see a positive impact on our deposit costs. Looking at slide 11, we'll walk through the trends of our net interest income and margin.

Our net interest income increased 7.1% from the prior quarter, due to higher average loan balances, as well as the expansion in our net interest margin.

Aside from the higher PPP income recognized in the quarter, our margin benefited from a favorable shift in the mix of earning assets as we redeployed some of our cash holdings into higher yielding assets, along with an eight basis point decline in our cost of deposits.

Our net interest margin for the quarter excluding the impact of PPP income was 3.36%.

Going forward, we expect our net interest margin excluding the impact of PPP income to remain flat as potential increases in margin from a shift in earnings assets noted in the fourth quarter, combined with additional declines in our cost of interest bearing liabilities will be offset by continued reductions in accretion income.

Turning to slide 12, we'll look at the trends in our wealth management business. With markets rebounding during the fourth quarter, we saw a $220 million increase in our assets under administration. The higher assets under administration resulted in a 5.6% increase in our revenue compared to prior quarter.

On slide 13, we'll take a look at non-interest income. This was the first full quarter without the commercial FHA origination platform. We also saw a decline in refinancing activity and the seasonal slowdown we normally see at the end of the year in mortgage banking.

Both factors created a difficult comparison of the fourth quarter results to prior quarters. Compounding this was a $2.3 million impairment on commercial mortgage servicing rights, and some securities gains we recorded in the prior quarter. All of this resulted in a 24% decline in non-interest income compared to the prior quarter.

When the impairment and securities gains are excluded the decline was just 10%, which was largely attributable to lower mortgage banking, and commercial FHA revenue. Turning to slide 14, we'll review our non-interest expense.

Our total expenses were impacted by a number of items this quarter, including the FHLB prepayment fees, a loss on residential mortgage servicing rights held for sale and a small amount of residual charges related to our branch and corporate facilities consolidation.

When these items are excluded, our non-interest expense was up a bit from the prior quarter, primarily due to three items. First, in light of the impact that COVID-19 had on our employees ability to take vacation in 2020, we made the decision to allow one-time rollover a vacation time and recorded an accrual for that rollover.

We had an increase in incentive compensation to reflect the stronger performance in the second half of the year. And also in light of the impact of COVID-19 we increased our contribution to the Midland foundation in order to provide more assistance to the communities that we serve.

As we start 2021, we will realize the full cost savings from the consolidations, which should put our quarterly operating expense in the range of $39 million to $14 million per quarter. Turning to slide 15, we'll look at our asset quality trends.

Our non-performing loans decreased $13.3 million from the end of the prior quarter as we were able to resolve some of our longer term problem loans without any material additional losses. We also transferred some loans to other real estate down and had minimal new inflow, which also accounted for the decline in non performing loans.

Our net charge offs declined from the prior quarter, and were just $2.3 million or 19 basis points of average loans. We recorded a provision for loan losses of $10 million, which reflects the loan growth we had in the quarter, as well as additional reserves allocated to the equipment finance and commercial real estate portfolios.

At December 31st, approximately 96% of our allowance for credit losses was allocated to general reserves. On slide 16, we show the components of the change in our allowance for credit losses from the end of the Prior quarter.

Our ACL increased by $7.7 million and strengthened our reserve to 118 basis points of total loans from 107 basis points at the end of the prior quarter. With economic forecasts stabilizing this component is having less of an impact on the reserve bill.

As it was last quarter the biggest contributor, this changes in our portfolio, largely resulting from new loans, downgrades through risk ratings, and adjustments for COVID impacted loans on deferrals or other payment plans. On slide 17, we show our allowance for credit losses broken out by portfolio.

The reserve bill this quarter was primarily driven by an increase in coverage on our commercial real estate and equipment finance portfolios.

In addition to the ACL to total loans, we also track the coverage ratio when excluding loan portfolios with certain credit enhancements or government guarantees, including the PPP portfolio, our GreenSky loans, and commercial FHA warehouse lines.

When these loans are excluded, our ACL coverage increases to 1.52%, compared to 1.36%, at the end of the prior quarter. And with that, I'll turn the call back over to Jeff.

Jeff?.

Alright. Thanks, Eric. We'll wrap up on slide 18, with a few comments on our outlook and priorities for 2021. First and foremost, we will continue to focus on maintaining strong capital and liquidity, so that we are well-positioned to continue supporting our clients and communities through the duration of the pandemic.

We will also continue to capitalize on those areas where we see loan demand in the current environment. We expect equipment finance to continue to grow at a strong rate, and commercial FHA warehouse lines will be a larger contributor to the overall loan mix. Although there will be fluctuations in those balances as I mentioned earlier.

We're also looking to increase loan production in our traditional community and commercial banking areas. Given the trends we are seeing in commercial real estate, we believe we could have better opportunities to stem off the runoff we have seen in the portfolio in recent years, if not grow those balances.

And we have also made some recent hires with an eye on increasing our production in a few niche areas; SBA, agribusiness lending and especially finance. We intend to sell the guaranteed portion of the SBA production.

We don't expect it to be a meaningful source of non-interest income this year, but over time, it's a new source of revenue and loan growth that we look to expand. But the growth expected in equipment finance, commercial FHA warehouse lines, and commercial real estate.

We are targeting loan growth in the low to mid single digits excluding activity in the PPP portfolio.

This should lead to higher net interest income and with the lower cost structure we have in place, following the actions we took last year, we should be able to increase our operating leverage and see more of our revenue growth fall to the bottom line.

Our goal is to continue to tightly manage expenses, although we will continue to invest in technology to improve our operations. Over the last few years, our technology spend was primarily focused on upgrading older systems, and adding new resources that reduce costs and improved efficiencies.

And these efforts have been very successful in building the foundation of a robust digital platform. We recently launched online retail account opening and digital origination portfolio portal for mortgage applications. And later this year, we will be adding peer-to-peer payments, and digital loan platforms for consumer and small business lending.

Going forward will shift more of our technology spend towards investments that will enable us to capture more wallet share from existing clients and enhance our revenue generation.

These investments include data analytics that we will use to create an automated analytics based marketing platform to help us determine the most appropriate products and services to offer both new and existing customers. We've already seen good results from many of our initiatives.

And we're confident that these investments will continue to positively impact our deposit gathering, loan production and fee generation. With the pandemic continuing, we will remain internally focused and as a result, we are not expecting a significant acquisition this year.

However, we are evaluating opportunities for smaller add-on acquisition and niche business lines such as wealth management. As we have had a number of successful acquisitions in the wealth management area in the past and would like to further increase the source of reoccurring revenue.

And finally, we intend to employ a balanced approach to capital deployment.

While we expect to continue to increase the amount of capital that we return to shareholders, through increases in our quarterly dividends and share repurchase activity, the decision on the amount of the increase will be balanced with our objective to raise our capital ratios above our current levels, so that we are better positioned to support continued organic growth and eventually M&A opportunities.

In closing, while it's hard to say that we are optimistic in the middle of a pandemic. It does accurately characterize how we feel about the progress we've made in restructuring our operations over the last two years to create a more efficient, more profitable institution. In 2018, our efficiency ratio was 66.1%.

And by the end of 2020, we had brought it down to 58.6%.

In the last year alone, we have eliminated expenses through our branch consolidations, and the sale of our commercial FHA platform, restructure our FHLB advances to reduce interest expense, and support our net interest margin, and continued investing in technology to enhance efficiencies and improve revenue generation.

As a result of all these actions, we begin 2021, we are in much better position to realize strong operating leverage as we continue to grow our balance sheet and drive higher earnings and improve profitability in the years to come. With that, we'll be happy to take any questions. Operator, you can open the call..

Thank you. [Operator Instructions] Your first question comes from Michael Perito of KBW..

Hey, good morning, everyone. Thanks for taking my questions..

Good morning, Mike..

Happy New Year. I want to start on slide 18 here. I was wondering if you could maybe spend a minute Jeff on some of these new commercial banking verticals that you're expanding into. SBA is traditional 7(a) that you're doing.

Is it regionally focused? Or is it national? Maybe a little bit more color or example about the agribusiness lending and then ditto on the specialty finance as well?.

Yes. So we've always done some SBA 7(a) business. So we've sort of dabbled in it. I think at this point, we're starting to put some dedicated sales folks on that line, and it'll be sort of in market, so not a national footprint. It's I think, a good additional product line for the Community Bank group.

So we're going to start with within the markets and we think there's some opportunities there. On the agribusiness side, we're in the middle of Ag country. As you know, there's corn all around us. And we do some ag, not a lot. But there's an opportunity there for us, we believe.

And we've hired a lender in that space to help us pursue some agribusiness, not necessarily farm operations, but sort of the next ring out of farm operations on agribusiness. And we think there's some opportunity there, given our geography. And then, on the specialty finance, it's a sort of the term we use internally.

We have what we call our specialty finance group, and they do tax credit deals and commercial real estate rehab type of projects that are maybe a little more complex if you will. And we're adding another lender sort of that team. And we've seen some good growth out of that group.

And so we're encouraged with those hires as we can continue to build some loan growth going forward..

That's really helpful. Jeff. Thanks. And it seems like yes, you got those two lines, the equipment connects unit continues to have some success and the consumer balances kick off, and then CRE activity seems elevated.

So when I think about your low to mid single digit growth for 2021, I mean, it would seem like maybe there are some other portfolios you guys might be de emphasizing. And I'm just curious, I guess, is that true? And then and/or is it just really the PPP loans potentially running off at some point, presumably.

And then follow up to that just would be, how do you see the loan mix kind of shifting over the next 12 to 24 months? Maybe is there a target? Are you guys like trying to make a purposeful effort to get some higher yielding stuff? Or how should we think about that?.

Yes. I would say on the consumer side, I think we're planning for this year to hold the consumer portfolio sort of flat. So that sort of maybe be the remix. We've seen a fair amount of runoff in commercial real estate. I think, in some regards its been disciplined over the last few years to maybe not chase them deals.

And our commercial real estate as a percent of capital is fairly low and quite a bit lower than our peer group. So I think we have an ability -- we have some capacity to put some commercial real estate on the books. And so maybe, less on the consumer side, we're not we're not putting residential mortgages.

Those are any payoff there, we're trying to refinance in the secondary market.

Consumer, I think we're going to try to hold relatively flat, and then the mix change are probably mostly being commercial real estate and commercial, I mean, our Midland Equipment Finance Group continues to see some good demand in the market, mostly around the manufacturing, construction type of industries..

Got it. That's helpful. And then just lastly for me on the comment about wealth acquisitions. Curious if you could help, frame that a little bit more for us. I know, you guys have done that a few different ways in the past.

What's the appetite look like? What are you guys out there looking for? And how's the kind of the pricing and competition for those types of deals at this point in the marketplace?.

Yes. So smaller add-on, nothing that's going to materially change the trajectory of that business. But if we could find something that could add 10%, 15% would be a good add on, trying to find good businesses at good pricing. And the pricing can at times get challenging. But we do see an opportunity or two out there that we're sort of hopeful on..

But it would be kind of regional..

Yes. Build sort of building out current business lines within wealth management in current geographies..

Got it. Awesome. Very helpful, guys. Thank you very much..

Thanks, Mike..

Your next question comes from line of Terry McEvoy of Stephens..

Morning, guys..

Good morning..

Appreciate the outlook on expenses for the first couple quarters of 39 to 40. I guess as you think about the full year, could you just talk about whether there's a need to invest in technology? Jeff, you kind of ran through some new hires on the lending side.

Along the same lines are there also opportunities to kind of think about the branch network and reduce the footprint there?.

Yes. The way I think of expenses is that sort of guidance for me is and it's hard to predict out the whole year, but it's sort of how we think about the whole year. So that 39 to 40 is sort of how I at least think about every quarter in 2021. I think we've -- the technology spend, we've been spending in that area for many years now.

I think, I don't see us spending more money. I see the money that we're spending sort of shifting and where we're spending from, getting some foundational technology in play to now moving to how do we use those foundational technology plays that we've invested in to generate revenue.

So it's a -- to me a shift in how we're spending the dollars, not necessarily spending more dollars. And then on the sales side, some of this is a sort of a reallocation of resources into other lines..

Thanks. And then, Jeff, I guess reading between the lines is the buyback on hold just given the growth commentary on loans and the need to build capital.

When I look back at last quarter capital did come down a bit and you were active repurchasing stock?.

Yes. So we have roughly $5 million, $6 million left in the plan. And I guess what I would say is if our stocks trading under tangible book value, you will be a small player in buybacks. But what we're trying to do now is build the capital ratios.

But if there's an opportunity in the quarter to buy some stock back at below tangible book value, we'll probably do that..

Thanks. And then, just a follow up. Last question here. I look at the ACL for equipment finance, it's about $11 million. And then there's $44 million of deferrals in the transit & ground passenger portfolio. And another bank move that to non-accrual this past quarter.

So, could you just help me get comfortable with the reserve specific for that equipment finance portfolio, given just the elevated level of deferrals? And what could be some additional kind of stress and loss potential there?.

So, I'll pick the beginning of that. But I think there's two pieces in there, right? There's a equipment. There's a loan piece and the lease piece in. About 2.5% -- or 2% to 2.5% of the balance. So I think it's more than -- maybe you can look that up, Eric.

But we're, as you can imagine, we're stressing that portfolio on a regular basis, that I think we're really encouraged by the fact that a lot of those customers are now making a payment, whether it's interest only contact payment, a partial payment. So that is encouraging.

And I think as it relates to accrual, non-accrual, I think those decisions will begin to get clear for us as we get through the first and into the second quarter.

Anything else, Eric?.

Yes. Terry, to kind of follow up on that. So, that portfolio is kind of split into loans and leases. And when you look at our entire portfolio, we have about $17 million, $18 million in reserves against it. We're constantly stress testing that transportation portfolio in general and reaching out to those borrowers and understanding where they are.

We have started to see some small losses from that transportation portfolio. But kind of, as Jeff said, we're trying to set payment plans to get them through to about April, when we hopefully can see elevated travel or at least travel somewhat back to some sort of sustainable level and get then reassessed from there..

Great. I appreciate the additional color. Thanks..

[Operator Instructions] Your next question comes from line of Nathan Race of Piper Sandler..

Hey, guys, good morning..

Good morning..

Just continuing the credit discussion. Just a quick question around how we should think about the provision entering 2021. Obviously, non performers came down, charge-offs came down. But it seems like deferrals are still elevating some segments, but you guys are expecting much losses, generally, I guess, near term or as this cycle continues to unfold.

So just any kind of commentary just in terms of what we can expect in terms of additional ACL builds starting off this year?.

Yes. I'd be happy to answer that. So there's still a fair amount of economic uncertainty out there. But I think at this point, how we view it is that we've sort of reached peak ACL build, and going forward any increases would be from loan growth, or mixes to that loan portfolio, as we kind of discussed earlier.

And so provisions going forward would be to replenish because of any charge-offs that we see. And we will see some -- I think we're kind of expecting to see those come through maybe late second, third quarter..

Got you. And Eric, can you kind of just like frame up those charge-off expectations. Things are a little bit elevated early last year. But I imagined it may not repeat to that same degree.

So we talked in like 30 bps as charge-offs potentially increase?.

Yes. That's a difficult question, but I'll take a shot at it. So Nathan, if you remember, our charge-offs were elevated, we took a lot of charge-offs in the first quarter resolving some old specific reserves and some older loans that we had on the books last year. And so that's partially why we're elevated in 2020.

Going forward, what we're kind of thinking is that, an estimate could be somewhere between 40 and 50 basis points of total loans with the Met portfolio being on the high end of that range and other portfolio being on the lower end of that range..

Okay. Got it. That's helpful. And then….

Yes. So we think, provision will be less this year than it was last year..

Understood. That's helpful. And just changing gears. In terms of the core income outlook for 2021, if we kind of strip out some of the servicing impairment, adjustments in those marks last year.

Just any thoughts on just in terms of overall income growth this year? Mortgage obviously be a challenge to offset, but just generally, how you kind of think about the run rate entering 2021?.

Yes. I think our fees for the quarter if you add back the impairment is a number that's not a bad starting point. I think we feel good that we can continue to grow our wealth management revenue. I think there's some comps, as we look back to 2020, that are going to -- they would be helpful, right, when it comes to service charges and interchange.

So those trends should continue to move in the right direction as long as the pandemic doesn't revert back and the stimulus sort of, when it comes out sort of puts a little pressure on some of those revenue lines. You're right.

Mortgage is going to be -- there's a little bit headwind there in terms of -- we don't we don't expect as much refinance business in 2021 is 2020. But we're putting some more capacity there as well to sort of offset some of the refinance business that we might may lose.

So -- and then, and then commercial FHA is going to look a lot probably like the current quarter. There's not going to be a lot of revenue there. It's going to be the servicing revenue that comes off that servicing book..

Got it. That's very helpful. I appreciate you taking the questions. Thank you..

At this time, I show no further questions. I would now like to turn the call back over to management for any closing remarks..

All right. Thanks, everybody. I think we believe we had a very productive year and 2020 and really excited about what we can do in 2021. So thanks for joining. And we'll see you next quarter..

Thank you for participating in today's conference. You may now disconnect your lines..