Good morning, ladies and gentlemen, and welcome to Trustmark Corporation's First Quarter Earnings Conference Call. At this time, all participants are in a listen only mode. Following the presentation this morning, there will be question-and-answer session. [Operator Instructions] As a reminder, today's conference call is being recorded.

It is now my pleasure to introduce Mr. Joey Rein, Director of Investor Relations at Trustmark. Please go ahead..

Good morning. I would like to remind everyone that a copy of our first quarter earnings release as well as the slide presentation that will be discussed on our call this morning is available on the Investor Relations section of our website at trustmark.com.

During the course of our call, management may make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

We would like to caution you that these forward-looking statements may differ materially from actual results due to a number of risks and uncertainties, which are outlined in our earnings release and our other filings with the Securities and Exchange Commission.

At this time, I'd like to introduce Duane Dewey, President and CEO of Trustmark Corporation..

Thank you, Joey. Good morning, everyone, and thanks for joining us. With me this morning are Tom Owens, our Chief Financial Officer; Barry Harvey, our Chief Credit Officer; and Tom Chambers, our Chief Accounting Officer. Trustmark was pleased to report net income of $52 million or $0.82 per diluted share for the first quarter of 2021.

We will briefly review these financial results by turning to Slide 3. Loans held for investment, excluding PPP loans, increased $159.2 million or 1.6% from the prior quarter and $415.8 million or 4.3% year-over-year.

During the quarter, we originated 4,774 loans through the SBA's Paycheck Protection Program, which totaled $301.5 million, net of $16.5 million in deferred fees and other costs. Both insurance and wealth management businesses experienced revenue growth linked quarter with insurance revenue increasing 22.1% and wealth management revenue growing 7.4%.

Adjusted noninterest expense totaled $120.2 million for the first quarter, a 7.05% increase from the prior quarter. We continue to focus on efficiency enhancements throughout the organization, including investments in technology to gain efficiencies and better serve customers as well as rationalization of the branch network.

Our credit quality remained solid as recoveries exceeded charge-offs by $2.4 million, and the provision for credit losses was a negative $10.5 million, driven by decreases in the quantitative reserve resulting from an improving economic forecast.

We maintained strong capital levels with a common equity Tier 1 ratio of 11.71% and a total risk-based capital ratio of 14.07%. During the first quarter, Trustmark repurchased 4.2 million or approximately 145,000 of its outstanding common shares as of March 31.

Trustmark had $95.8 million in remaining authority under its existing repurchase program, which will expire December 31 of this year. The Board of Directors declared a quarterly cash dividend of $0.23 per share payable June 15 to shareholders of record on June 1.

At this time, I'd like to ask Barry to provide some color on loan growth and credit quality..

Be glad to, Duane. Looking over to Slide 4. Our loans held for investment, excluding PPP loans totaled $10 billion as of March 31st. That's an increase of $159 million from the prior quarter and $416 million from this time last year. Our loan growth came in CRE with both public finance and C&I getting some positive traction.

The loan portfolio remains well diversified based upon both product type and geography. Looking on to Slide 5, Trustmark's CRE portfolio is approximately 67% existing and 33% construction, land development. Our construction, land development book is 79% construction.

The bank's owner-occupied portfolio has a nice mix between real estate types as well as industries. Looking on to Slide 6. The bank's commercial portfolio is well diversified, as you can see, across numerous industry segments with no single category exceeding 10%.

Typically, these loans are well secured, governed by formulaic borrowing bases, covenanted to protect both the income statement and the balance sheet. On Slide 7, you can see we have a minimum exposure to restaurants and energy credits. Trustmark has never been in the higher risk C&I lending business.

And currently, we only have one customer totaling $11 million worth of outstandings in that category. The bank has always underwritten both hotels and retail CRE loans in a conservative manner. Looking at Slide 8. Our allowance for funded credit losses decreased $8.1 million from the prior quarter.

Our loan loss reserve levels decreased primarily due -- or decrease was primarily due to continued improvement in the economic forecast, along with some improvement in our COVID-19 qualitative factor. At March 31, 2021, the allowance for funded credit losses on loans held for investment was $109 million.

Looking at Slide 9, you will see we continue to post solid credit quality metrics. At March 31, our allowance for credit losses represented 437% of nonperforming loans, excluding those that are individually assessed. Other real estate declined 8.6% from the previous quarter and 57% from a 1-year ago level.

Recoveries exceeded charge-offs this quarter by $2.4 million. Looking on to Slide 10, the bank actively participated, as you know, in the PPP protection programs both in 2020 as well as 2021. We successfully assisted a significant number of local businesses that have been negatively impacted by the COVID-19 pandemic.

During the first quarter, we originated, as Duane mentioned, 4,774 PPP loans totaling $301 million net of deferred fees and cost. At March 31, 2021, our PPP loans totaled $680 million, net of deferred loan fees and cost of $22 million.

Duane?.

Thank you, Barry. Now turning to the liability side of the balance sheet. I'd like to ask Tom Owens to discuss our deposit base and net interest margin..

Thanks, Duane. Turning to Slide 11. Deposits totaled $14.4 billion at March 31st, up $335 million or 2.4% from the prior quarter and up $2.8 billion or 24.3% year-over-year.

Average balances increased $600 million or 4.4% linked quarter, primarily reflecting additional customer liquidity associated with the PPP loan program and government stimulus payments. Our cost of interest-bearing deposits declined 5 basis points from the prior quarter to total 22 basis points.

We continue to maintain a favorable deposit mix with 33% in noninterest-bearing deposits, and our liquidity remains strong with a loan-to-deposit ratio of 74%. Turning our attention to revenue on Slide 12. Net interest income FTE totaled $105.2 million in the first quarter, representing a linked quarter decrease of $9.1 million.

Interest and fees on PPP loans totaled $9.2 million, which was a decrease of $5.6 million from the prior quarter, reflecting a linked quarter decline in payoff activity.

Core net interest income FTE was $96 million, which was a decline of $3.5 million from the prior quarter as a reduction of $3.9 million in core interest income more than offset a decline of $400,000 in interest expense.

About $2 million of the linked quarter decline in interest income was driven by an 8 basis point decline in loans held for investment yield, while the remaining $1.5 million of the linked quarter decline in interest income was driven by a 22 basis point decline in securities yield, of which about half the decline in the securities yield was driven by continuing high residential mortgage prepayment speeds and relatively lower reinvestment yields; while the remainder was driven by the $301 million increase in the size of the investment portfolio during the quarter.

Net interest margin in the first quarter of 2.81% decreased by 34 basis points from the fourth quarter, driven by an approximate doubling in other earning assets from $860 million in the fourth quarter to $1.6 billion in the first quarter, resulting from continued strong deposit growth.

Core NIM ex PPP loans and Fed balances of 2.99% in the first quarter declined by 10 basis points from the fourth quarter. I do want to point out that when we refer to core NIM, we're now excluding Fed balances from the calculation. And in Note 5 of our consolidated financial information, we have recast historicals accordingly.

I've talked in prior calls about the distortion to our core net interest margin from the excess Fed balances and we felt that excluding them from calculations of the core NIM is a practice we've seen others in the industry adopt and we've decided to do so as well.

We think this helps clarify for the reader the true fundamental dynamics of our core net interest margin. And now Duane will continue with an update on noninterest income..

Thanks, Tom. We will now look at noninterest income by turning to Slide 13. Noninterest income for the first quarter totaled $60.6 million, a $5.5 million decrease from the prior quarter and a $4.7 million decrease year-over-year.

The linked quarter change reflects increases in insurance, wealth management and bank card revenues, which were more than offset by decreases in mortgage banking revenue and service charges on deposit accounts. For the quarter, noninterest income represented 37.2% of Trustmark's revenue, continuing to demonstrate a solid diversified revenue stream.

Now looking to Slide 14, we will cover mortgage banking revenue. For the first quarter, mortgage banking revenue totaled $20.8 million, a $7.4 million decrease linked quarter and a $6.7 million decrease from the prior year.

Mortgage loan production had a decline of 2.8% from the prior quarter, although still very strong first quarter production and an increase of 67.7% year-over-year. For the first quarter, retail production represented 75.0% of volume and $575 million. I'll now ask Tom Owens to cover noninterest expense and capital management..

Thank you, Duane. So turning to Slide 15, noninterest expense is broken out between adjusted, other and total. Adjusted noninterest expense totaled $120.2 million in the first quarter, an increase of 0.5% from the prior quarter.

This increase was mainly due to the $1.5 million increase in salaries and benefits related to increased payroll taxes and performance-based commissions. Credit loss expense related to off-balance sheet credit exposures was negative $9.4 million in the first quarter.

Other real estate expense totaled $324,000 in the first quarter compared to a negative $812,000 in the prior quarter, reflecting gains on sales of other real estate in the fourth quarter.

As noted on Slide 16, Trustmark remains well-positioned from a capital perspective with a common equity Tier 1 capital ratio of 11.71% and a total risk-based capital of 14.07% as of March 31. During the first quarter, we deployed $4.2 million via the repurchase of approximately 145,000 common shares.

At March 31st, we had remaining authorization of $95.8 million under our existing stock repurchase plan.

Duane?.

Thanks, Tom. I’m hopeful this discussion has been helpful and insightful for everyone. At this time, we would open the floor to questions..

[Operator Instructions] Our first question comes from Jennifer Demba with Truist Securities. Please go ahead..

Thank you. Good Morning..

Good Morning, Jennifer..

Just wondering if you could talk about the major levers you feel like you have to offset spread revenue growth challenges and mortgage comparison challenges this year and what we should expect in terms of 10-year term security portfolio growth for Trustmark? Thanks..

Jennifer, I'm going to ask you to repeat the question. We got bits and pieces. It was a bit jumbled and did not get the first part of your question. I apologize for that..

I'm sorry, can you hear me better now?.

Yes, a little bit. Still a little bit jumbled..

Okay. I will talk louder here, hopefully, it will work.

Can you just talk about the major levers Trustmark has to kind of offset spread revenue growth challenges and a difficult mortgage lending comparison this year? And how much securities growth you're willing to put on while the industry is waiting for loan demand to get better?.

Okay. I think we got most of that. There's a couple of different questions. I will start out and Tom and others can add in. First of all, as we reported in our last call, we continue to remain very, very focused on expense controls and efficiency measures across the organization.

We are doing extensive work in our branch system, looking at every opportunity to deploy ATMs and other means to serve customer needs and reduce the overall branch network as well as headcount. So continued focus there. I think in our prior call, we guided to 10 to 13 closures in the year.

We are -- in the first quarter, we had a net closure of 5, 7 closures and 2 new adds. The closure level could get as high as 16, 17 for the year with several new additions. So that 14 -- 10 to 14 net closure level is about right for the year, but we're intently focused on the branch system. We are continuing to invest in technology.

We announced a major digital program kicked off actually this month that we think serves customer needs very well, but also is a digital marketing enhancement, which over time will gain significant efficiencies as well as better insight into serving customer needs.

And then we are, as a leadership and management team, we are intently focused on headcount. We have a program in place of every replacement or new add of headcount. We're focused on reducing headcount across the organization where appropriate, and we are intently focused on that topic and that issue moving forward.

Tom, you want to pick up from there and talk about some of the other metrics [ph]..

Sure. Good Morning, Jennifer. Thank you for the question. So regarding the securities portfolio and the excess liquidity, so as we said, during the first quarter, we averaged about $1.5 billion of excess Fed balances. If you think about the driver, obviously, is the deposit surge, we are up $2.8 billion year-over-year.

We were up $300 million just in the first quarter in deposits. We did grow securities by $300 million, the investment portfolio by $300 million in the first quarter.

And if you think about the $2.8 billion in deposit surge year-over-year, if you look at LHFI growth year-over-year of about $400 million and securities growth of about $300 million, that's about $700 million. We've deployed about 25% of that deposit growth year-over-year.

And in terms of managing it going forward, I would think that we will continue to opportunistically increase the size of the portfolio. I think in the second quarter, something in the neighborhood of $150 million or so, depending on what happens with deposits.

But I will just say, in terms of managing that liquidity, when you think about what we are trying to do, we are triangulating between assessing what the effective duration of the deposit surge will really end up being, and you're trying to balance that against your outlook for the economy and interest rates, while at the same time, maintaining a competitive interest rate risk profile.

And so, you think about Trustmark, we have a very powerful countercyclical noninterest revenue engine with mortgage banking, which has kicked in here with historically low interest rates.

We want to make sure that we have a competitively positioned asset sensitivity as we come out of the pandemic and as market interest rates begin to rise and the Fed eventually normalizes monetary policy. And so as we look at it, we think we are probably underinvested in securities relative to the peer group by a bit.

There is the opportunity to do more, but we're trying to balance those things. I mean if you think about it, $1.5 billion sitting at the Fed, if we deployed that and picked up 100 basis points today, that adds about $15 million to annual net interest income.

But then you think about, well, if you do that, you put on -- you are putting on 4 to 5 duration assets, the opportunity cost going forward when market interest rates rise and the Fed begins to normalize monetary policy, it can be enormous. And we don't want to put ourselves at a competitive disadvantage.

So those are the -- those are our considerations. And again, in summary, I would say that we will continue to opportunistically increase the size of the portfolio..

Did we answer -- Jennifer, did we answer every part of your question?.

I think so.

Is there a -- is there a limit in terms of securities to assets that you would target?.

No, not a limit. I mean, again, historically, we've looked to be in the neighborhood of 20% of earning assets. And I think at this point, that would put us close to -- in round numbers, in the neighborhood of $3 billion. We are currently at $2.8 billion.

And as I said, we -- you could absolutely see us increasing the size of the portfolio, something on the order of $200 million here in the second quarter.

But again, we -- when you balance those things out for the time being, our view is that we want to run a little bit light in terms of the securities portfolio, not Jennifer, and that could change, right? I mean interest rates are low, the yield curve is flat, spreads are tight.

And so those three variables, when you think about it, if they start to move in a direction that becomes more attractive, you could see us deploy some of that liquidity more rapidly. Again, we are also keeping an eye on deposit dynamics.

We would have thought, and I think a lot of folks in the industry would have thought that by now, we would have started to see some rollover. We would hit that inflection point in terms of deposit balances. Now nobody necessarily anticipated the additional stimulus coming from the American Rescue Plan, so on and so forth.

So -- but as you can imagine, we diligently monitor each month those trends in the balances.

And so that's going to be part of the calculation as well is how much do those balances in those products demonstrate an effective duration that looks like something consistent with the back book, so to speak, versus how much of it demonstrates effectively shorter duration.

And we want -- at the end of the day, we want to maintain a competitive asset sensitivity to our interest rate risk profile..

Thank you..

The next question is from Catherine Mealor with KBW. Please go ahead. Ms.

Mealor, is your line muted?.

Thanks. Good Morning..

Good morning, Catherine..

Can you hear me? [Indiscernible]. I just wanted to follow-up on just your loan growth outlook. As Rob said last quarter, you were a little bit more cautious on loan growth this year versus last, but had really nice momentum this quarter. And so just curious how you're thinking about what loan growth could look like in 2021? Thanks..

Hey, Catherine, this is Barry. I will go ahead and address that. During Q1, our growth was, as I mentioned, we had a little bit of funding in our other construction book. And some of that was for where we continue to put those type of credits on the books that we felt good about during Q2, 3 and 4 of last year.

And so we would anticipate that those fundings still continue to be strong throughout the year. We have seen a little bit of improvement in our growth in the public finance area this quarter. We expect that trend to continue.

I think we are really focused on making sure we don't miss those opportunities and making sure we are prudent about how we approach that process. Then on the C&I side, we didn't have a little bit of forward momentum this quarter. It's a very competitive environment, but we are continuing to look at different alternatives.

We -- going forward, I think we are still -- our guidance is still low single digits, mainly because of the expected payoffs that we see coming in Q2, 3 and 4 on our commercial construction book, which obviously will be coming out of the existing categories as these projects stabilize and move out to the permanent market or is sold.

If for some reason, that is delayed, and you can definitely see that being delayed in Q4 as things tend to sometimes slide back a quarter, we could see us -- we could see our loan growth being more mid single digits than low single digits.

But that would be the reason is because there's a delay that pushes them out of the fourth quarter into the first quarter. Those things that are just moving within the year, I think we would -- those would all be accounted for within the low single digits guidance.

But it's more a function of some scheduled payoffs that we do expect to happen as well as the unexpected, which we are seeing coming through as we've guided forecast much more about that than it is about the production engine because we are still having good activity, looking at a lot of deals, putting them on the books.

As you know, in that particular -- in the construction [indiscernible] area, they -- you're getting a nice fee, but it is -- they are slow to fund typically because of how much equity is going in.

And then they'll stay on the books as long as it's attractive to the -- once they stabilize as long as it's attractive to the borrower in terms of what they can do with it in the permanent market as -- or sell the product if cap rates remain low and the permanent market is definitely open and ready for business.

So we would expect those projects to leave us as anticipated. But if some reason we're able to allow them to stay with us a little longer for stabilization or something of that nature, then you could see us generate more mid-single-digit loan growth than the low single digits that we're guiding to..

Got it. Okay. That makes sense.

And then maybe just on the reserve, how do you think about where you believe the reserves will bottom? Do you think we're headed toward the day one CECL reserve to loan ratio? And did you see that ratio falling below one? Or just how do you kind of think about where we're headed toward the bottom?.

And this is Barry then Catherine. Our challenge, and I think everybody's challenge is to forecast and our forecast continues to improve.

As you know, we use Moody's baseline and we forecast four quarters and we revert to the mean over four quarters, which in today's world that's a positive because the mean is higher than any of the four quarters in our forecast in terms of higher unemployment, whether it be national, southern. So that's actually beginning to work to our advantage.

I think we looked at April's numbers coming out of Moody's baseline or their S-1. And they did improve slightly with southern unemployment in national and informal, which are two of our bigger drivers. And -- but not to the same extent that we've seen them over the past several quarters.

So we are cautiously optimistic that continuing improving forecast will continue to be much to a lesser degree than we’ve seen previously. That would be a headwind that would help us not be moving back toward where we were day one, which for Trustmark, just for reference purposes, it was 88 basis points on funded debt.

So obviously, we’re 109 today on funded debt versus the 88. It's not our intention at all to be moving back that direction. Although I will say we also have a qualitative reserve for COVID loans.

And as you could imagine, over time, those loans will either get upgraded If they're in a non-pass category or we will decide we don't need the reserves, the additional reserves that were added to the pass category. And if that does occur, then that will be another headwind we will need to deal with.

But I think that's a little more controllable by Trustmark in terms of how we see the economy unfolding when we see the vaccine fully distributed to everybody who wants it, availability is unlimited, all those things, and then we can begin to determine do we think we don't need that COVID reserve.

And if we don't, then we can, in a systematic manner, we will begin to release those reserves as we should. I think it's a combination of that as well as the forecast not continuing to have the large improvements in the unemployment both national and southern that we've seen previously.

Those are the two things that are going to drive us lower with our reserving levels.

And so as long as we can have some moderation in the forecast from the economic side of it and then be patient, which we intend to be, on the releasing of the COVID reserve, on the qualitative side, to make sure we really see the lights in their eyes and everything is on -- moving forward, and the economic engine has turned back around and the hotels, the restaurants, the retails are all back on solid footing, then we can begin to release some of those reserves that were specifically assigned to those credits that were most impacted by the -- by COVID-19..

[Indiscernible]. Very helpful. Thank you..

The next question is from Brad Milsaps with Piper Sandler. Please go ahead..

Hey, good morning guys..

Good Morning, Brad..

Thanks for taking my question, I just wanted to quickly go back to the mortgage business. If my calculations are correct, it looks like your gain on loan sale margin was down maybe more than expected linked quarter.

Obviously, I understand there's pressure across the industry, but it doesn't look like your mix, in terms of retail, wholesale was all that different. Just kind of curious kind of what trends you're seeing.

Are we getting close to a bottom in terms of that gain on loan sale margin? Or if you continue to kind of see weakness as you moved into the second quarter?.

Yes. Thanks. I will start. Tom can add, if needed. But -- so first of all, mortgage business, as noted earlier, the production in the business remains very solid, very strong. $767 million in the first quarter is 70% higher than any prior first quarter we've ever had. So still volumes were being strong.

I think, in the last call and toward the end of the year, the industry was forecasting volumes to be down 30%-ish to 35% across the industry. We were in that same kind of category. We're seeing more like a 10% decline now over the year in terms of overall volumes.

So that's what we are expecting moving forward, especially in the closing quarters next quarter and beyond in that 10%-ish range of volume decline. We are still seeing the gain on sale margin tighten for sure. That one is much more difficult to forecast, much more dependent on a lot of other factors and the like.

And to your point, in your question, we've not necessarily seen it stabilize or bottom yet. We do see it continuing decline, probably down another 25 or more percent in the second quarter from what we are seeing now. Further into the year, it's much more difficult to see or get any visibility there.

So that would be my -- any further comments, Tom, on what you're seeing economically.

Is that helpful, Brad?.

Yes. No, that's great. And just maybe on the flip side of that, I mean, I know you -- that mortgage lenders are paid on production and not profitability.

So based on your -- if you think volumes are going to be down 10%, I mean it doesn't seem like you're going to have maybe a lot of expense leverage even though the revenue is going to come down at a faster clip.

Is that a fair assessment?.

I would say that's fair. Yes. I mean, I think that's right on the button. We do pay on production. And so, if you look at the first quarter expense totals and the 2020 expense totals that was included higher commissions than normal. And as we see the production come down, they will come down proportionately in that range.

So I think, yes, you've hit it right on the expense side..

Yes. And just back to Jennifer's question, I mean, obviously, it sounds like you're working on some things branch related in terms of expense levers.

Those -- but you're still -- you're looking like you're running a kind of a high single-digit kind of expense growth run rate, which seems a little bit higher than maybe what Trustmark has done historically.

I mean, is there -- do you think those brash rationalization efforts are enough to kind of bring that run rate down to something less?.

So Brad, this is Tom. I will take a stab at that. It depends on how you look at it in terms of the expenses, right? If you look at adjusted noninterest expense, we think we are tracking year-over-year, full year 2021 versus 2020 in the low single-digit range.

So just to give you an idea, so full year 2020, adjusted noninterest expense was $455.4 million. And so we -- it very much depends. The mortgage origination production and commissions is a swing factor.

We think that excluding that sort of elevated expense, we'll probably be in the 1% to 2% increase year-over-year in terms of adjusted noninterest expense. If mortgage origination volume continues to remain somewhat elevated for the remainder of the year, you'd probably be closer to 3% in terms of that metric for year-over-year..

Great. That’s helpful. I appreciate it..

[Operator Instructions] The next question is from Michael Rose with Raymond James. Please go ahead..

This is Carl Doirin for Michael Rose. Good Morning, I appreciate all the color on the loan growth. Just to piggyback on that question. I believe in addition to the CRE roll-offs that you had guided to, you also mentioned elevated pay downs were also a factor for the lower loan growth.

Just wanted to see, you previously -- I mean you just noted a pickup in C&I activity.

I wanted to see if -- where are pay downs relative to what you expected?.

And I didn't quite catch your name.

Is it Carl?.

Yes..

Carl, this is Barry. Let me speak to some of that. It's a funny thing, when you look at what we anticipated for payoffs in Q1, they're pretty close to being spot on. But I will say that some of the ones that we had scheduled for payoff in Q1 moved down into Q2 or Q3 and some of the ones that probably were slated for 2022 moved into Q1 of 2021.

So it's a fluid situation because of the opportunities our borrowers have from time to time to be able to move a project out, do a sale, especially where they're getting paid based upon the velocity of lease-up as opposed to the stability being achieved. So we do get surprised every quarter by some that moved from one year into this year.

And some that was scheduled for this year who slide down to another quarter, probably still in this year for the most part. We do budget a significant amount when we are trying to forecast or plan for, when we are trying to forecast a significant number of unexpected payoffs just because of the uncertainty around when things are going to leave us.

We do survey our customers quarterly, or our relationship managers do to make sure they know exactly when they would expect the project to leave. Our relationship managers do a good job of that because they understand that we have limits on things.

And if the better we can forecast when things are going to leave us, the better off we are in terms of not shutting off the spigot on something that we are going to have a lot of payoffs on. If we don't know about it, we can't plan for them.

And if we think we're filling up in a bucket, then we will end up stopping or slowing down production, when it was unnecessary if we'd only had the best information from the customer. So our folks do a good job of assessing that on a quarterly basis.

We reforecast every quarter, our CRE, in every category to make sure we are anticipating with the best information possible what’s going to transpire. And so to answer your question, we were about where we expected to be from a payoff standpoint in Q1. We do anticipate the scheduled payoffs for Q2, 3 and 4 being heavier.

But as I mentioned earlier on Catherine's question, that fourth quarter is a heavy payoff quarter for us.

Historically, you will see things slide from quarter-to-quarter, either because the things -- the stabilization is just not quite where they want it to be, while they would rather wait a couple of more months and get the maximum amount of value out of the project when they sell it or they still need to have a little more funding that they can do before they actually move to the permanent market, depending on what stage it is, whether it's just out of construction or whether it's just about stabilized.

So for all those reasons, it does vary, but I think we feel comfortable with our forecasting process, and we feel comfortable that we do have heavier volumes of payoffs coming in the remainder of the year than we experienced in Q1, but Q1 was in line with what we expected..

Got it. Thanks for the color. And then, I guess, if I can touch on M&A versus buyback. You started using the repurchase program so far in 1Q. Just in terms of M&A, and I know you also previously noted that you are looking to do an M&A.

Just in terms of that, how should we -- just in terms of the interactions and calls and activity, just can we expect whether you do an M&A to impact how much share you buy back going forward?.

Well, this is Duane. I will start. There's a tremendous amount of activity and discussion in the M&A world going on. There's a whole lot of activity really. We are approached with lots of different opportunities of all different shapes and sizes. And so there is a lot of talk and discussion out there in the marketplace.

Our position really on M&A hasn't changed. We are still very interested in the Southeast region of the U.S. We are looking to be opportunistic. We are looking for new growth markets. We are looking for expertise and talent that supplements our team as it stands today.

We are looking for product or product additions or additional product and categories we know and understand, and we will look to enhance again our capabilities for growth. And then finally, important to us would be efficiencies that we could gain through addition one way or the other.

We stated and still continue to be thinking in the range of $500 million to $5 billion in terms of partners that we would look at acquiring. And so that's kind of the view. And then I'll close by saying, yes, it is a very active time right now with lots of different discussions across the industry, so.

And then in terms of buyback, we have a detailed -- we have a capital planning committee that meets as needed or at least on a regular basis that looks at and considers our opportunities. We still have most of our allocated buyback program in place.

And when we look at that in the same way to be opportunistic and take advantage of market conditions, and we will continue to do so as the market allows, but we do have $98.5 million of available approved exposure or capital available for buyback at this time..

All right. Thank you very much. Pretty helpful for me..

This concludes our question-and-answer session. I would like to turn the conference back over to Duane Dewey for any closing remarks..

Thank you again for joining us for our first quarter call. We hope we answered questions, and we appreciate you being on the call and look forward to getting back together at the end of the second quarter. Have a great rest of the week. Thank you..

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect..