Citizens Financial Group Inc (CFG) — Q3 2020 Earnings Call Transcript

Thank you, Andrea, and good morning. Welcome to Investors Bancorp's third quarter earnings call. Last night, we announced our net income of $64.3 million, which translates to $0.25 per diluted share for the three months ending September 30, 2020. In comparison, our net income was $42.6 million or $0.18 per share for the three months ending June 30 and $52 million or $0.20 per share for the same period last year. This shows a 51% increase in earnings from the second quarter and a 24% increase over the third quarter of 2019. On an earnings per share basis, this represents a 50% increase from the previous quarter and a 35% increase from the prior year. For the first nine months of 2020, our net income was $146.4 million or $0.62 per diluted share, slightly down from $146.8 million or $0.55 per share for the same period in 2019. During the second quarter, we successfully completed the acquisition of Gold Coast, which added about $535 million in total assets, $443 million in loans, and $490 million in deposits. This acquisition brought us seven new branches in the New York market and nearly doubled our deposits in Nassau and Suffolk Counties. We are actively integrating these branches, and the prospects for market expansion are promising. Last Saturday, I met with prominent business leaders in Southampton, and the feedback regarding the transition of customers from Gold Coast to Investors was very encouraging. We believe our brand is strong in this market, which is appealing due to its demographics, a concentration of small and midsized businesses, and a high density of affluent individuals. I am pleased to announce that Investors Bank was recognized by Newsweek as the best big bank in New Jersey. Newsweek evaluated banks based on a wide range of criteria and identified one best bank in every state. They focused on banks with a strong local presence, noting that customers prefer convenience in accessing branches and ATMs. They also looked at banks offering competitive interest rates, low fees, and a comprehensive range of services, including loans and an effective mobile app. We take great pride in this recognition and it underscores our commitment to enhancing our digital platform. This quarter, we enhanced our online account opening platform, initially for bank customers, then for small business clients, and later for new customers. This system is fully integrated with our Salesforce management tool, allowing for better customer follow-up. The improvements to our online account opening process are part of a broader enterprise effort aimed at creating a cohesive customer experience that will significantly boost branch efficiency and improve the overall customer experience by automating several manual processes. While we are thrilled with the recognition from Newsweek, we remain dedicated to further enhancing our customer experience and digital capabilities. In the third quarter, we set aside a provision for loan losses of $8.3 million, compared to $33.3 million in the second quarter and a credit of $2.5 million in the third quarter of 2019. This provision was influenced by current and anticipated economic conditions affected by the COVID-19 pandemic and the new accounting standards. For the quarter ending September 30, net charge-offs amounted to $667,000, down from $4.1 million in the second quarter and $1.5 million in the prior year's third quarter. Pre-provision net revenue was $97.5 million for the three months ending September 30, an increase from $92.1 million in the previous quarter, marking a rise of $5.4 million or 6%. This also reflects a notable increase of $29.8 million or 47% from the same period last year. We have made significant efforts in assessing our credit position, focusing particularly on our commercial portfolio. As noted in our second quarter 10-Q, we reported approximately $2.2 billion in commercial loan deferrals, consisting of $447 million in commercial and industrial loans, $903 million in multifamily loans, $830 million in commercial real estate loans, and $15 million in construction loans. This figure has decreased from $3.6 billion reported earlier this year. Our lending teams are actively reaching out to customers during this challenging time, similar to our efforts with the PPP loan program, to support our borrowers through this tough period. Every Wednesday, we participate in Zoom calls to review credit situations extensively. Through ongoing communication and follow-ups, we have reduced our deferred loan exposure significantly. As of October 20, total deferral requests reached $593 million in the commercial loan sector, including $282 million in commercial and industrial loans, $188 million in multifamily loans, $108 million in commercial real estate loans, and $15 million in construction loans. We recently reviewed $175 million worth of loans set to begin payment on November 1 and expect that around $125 million will resume payments. Additionally, $37 million have been granted further deferrals, while about $13 million require more information before a decision can be reached. We also have $70 million scheduled to resume payments on December 1, and if we see similar results as in November, we anticipate another $50 million reduction in deferral balances. It's important to mention that we maintain regular communication with our borrowers during this process, and further deferrals may occur as market conditions change. Our outlook is influenced by government actions in our local areas and our collective move towards a more normalized lifestyle. Additionally, we have $200 million in loans set to return to payment as of January 1, allowing us to enter 2021 with considerably less exposure. Presently, 61% of the $593 million in deferrals is concentrated in six relationships, including a $46 million multifamily loan expected to resume payments soon, along with three hotel relationships totaling $268 million, one multifamily loan for $25 million set to resume payments in December, and an entertainment venue in New Jersey for $23 million scheduled to return to payment in January. The three hotels involved are well-established operators known to the bank, and we are committed to supporting them during this crisis. The hospitality and restaurant industry is currently facing substantial challenges, but with support from regulators, the Federal Reserve, and accounting professionals, we are positioned to aid our customers through these unprecedented times. The remaining $230 million in deferred loans as of October 20 consists of 113 loans, averaging $2 million each, with 59 loans carrying outstanding balances of less than $1 million. Our multifamily portfolio has a weighted average loan-to-value ratio of approximately 53%, with 14% classified as lower-risk co-op loans. The deferred multifamily loan totals $188 million, with a pre-pandemic LTV of about 59%. We have a modest $19 million in retail loan deferrals, with an LTV of $54 million, and one significant loan of $7 million in that group returning to payment soon. Overall, we are satisfied with our efforts to assist customers through this pandemic. Forecasting future events is challenging due to uncertainty, but we remain committed to supporting our customers as they navigate this crisis. We aim to be proactive in addressing these issues, understanding that difficult conversations may arise. Compared to other banks with similar portfolios in the New York/New Jersey markets, we believe our approach to provisions has been conservative, and we are well-prepared to face the ongoing challenges. Our allowance for loan losses has risen to 1.37% from 1.28% at June 30. Tomorrow, we expect to finalize a loan sale of $18 million, which will decrease our non-performing loans to $114 million from $126.8 million at June 30, with an anticipated recovery of $1.9 million from this loan disposition. In terms of delinquencies, $8.8 million of the $13.6 million in commercial loans that are 30 days delinquent are currently in good standing. In the 60-day category, total commercial delinquent loans amount to $30.6 million, with a $25 million relationship in the commercial real estate portfolio approved for extension and expected to be current once legal work is finalized. Non-accrual loans totaled $61.8 million or 39 basis points after factoring in the previously mentioned sale and are well-collateralized with restricted exposure. The average loan in this category is around $1 million. Given our current delinquencies and the progress we've made in reducing deferred loan balances, combined with the increase in our loan loss reserves over the past three quarters, we feel confident in our ability to navigate the ongoing pandemic. On the balance sheet side, loans decreased by $365 million during the quarter, primarily due to a reduction of $295 million in mortgage loans and $122 million in multifamily loans. While we have moderated the pace of this decline, we anticipate some growth in the fourth quarter as we have a strong pipeline and are diligently working to achieve robust results. As we continue to gain confidence in our exposures amid the pandemic's economic impact, we will actively pursue growth opportunities. As the situation stabilizes, we intend to explore growth across all loan portfolios, shifting from our earlier focus on business lending. This is not a major strategy change; rather, it's a timely opportunity. In terms of deposits, it was a strong quarter, with non-interest bearing deposits increasing by over $300 million or 10%. Overall, total deposits decreased by $594 million or 7% as we began reducing our cash position, which negatively affected our margin. Our loan-to-deposit ratio remained steady at 110% for the quarter. The cost of deposits declined by nine basis points during the quarter, and we see room to further decrease funding costs as we unload excess cash and complete a sales leaseback transaction, which we expect to yield around $9 million in gains to invest in reducing higher-cost wholesale liabilities. This should lead to an expansion of our margin in the fourth quarter. Regarding our capital position, we have announced a dividend of $0.12 per share and have seen an increase in our capital ratios, aided by the impact of PPP loans, improved earnings, and reduced assets. We believe we have adequate capital, a strong liquidity position, and a solid credit culture to sustain this dividend and manage any uncertainties that may arise. We anticipate increasing that dividend by $0.01 in January, in line with our historical practice. On the topic of stock buybacks, we currently have approval for 14.6 million shares and have bought back over $1.5 billion since our second step. We are judiciously managing our capital and are optimistic about the chance to resume buybacks. We are carefully assessing the ongoing uncertainties related to the election and the pandemic. Discussions about this opportunity continue with our Board and regulators, and we believe we are well-positioned to restart buybacks once conditions stabilize post-election in the fourth quarter. Reflecting on past challenges such as Hurricane Sandy and the 2008 Great Recession, we have effectively navigated through crises, always looking for opportunities. With this management team and the investments we've made in enterprise risk management, technology, and product development, we believe we are better equipped today to serve our customers and communities, leading to stronger returns for our shareholders. Now, I would like to hand the discussion over to Sean Burke, our CFO, for further insights on the quarter and our operational results.

Thank you, Kevin. Net income was $64.3 million or $0.27 per share for the three months ended September 30, 2020, an increase of $21.7 million or 51% quarter-over-quarter and 24% year-over-year. Net interest margin increased six basis points to 2.79% in the third quarter, with declining cash balances and deposit costs driving the improvement. We expect cash balances and interest costs to further decline in the fourth quarter. Total non-interest income rebounded nicely from the second quarter and totaled $19.9 million, an increase of $9.8 million quarter-over-quarter. Strong swap income, mortgage banking activity, and wealth and investment product revenues all contributed to the quarter-over-quarter increase. Expenses totaled $104.1 million in Q3, an increase of $4 million compared to the three months ended June 30, 2020. The increase was largely the result of increased incentive compensation and medical expenses. Included in expenses were approximately $1 million of costs related to the early extinguishment of borrowings in the quarter. Despite the uptick in expenses, our efficiency ratio improved slightly to 51.6% from 52.1% in Q2. Provision for credit losses was $8.3 million for the third quarter compared to $33.3 million for the second quarter. The decrease was driven by improving current and forecasted economic conditions. Third quarter loan originations were strong but not enough to offset the paydowns and payoffs. As a result, total loan balances decreased $364 million quarter-over-quarter, primarily driven by residential and multifamily loan categories. The impact to interest income from declining loan balances was minimized as we were able to allow high-cost funding to run off in Q3. While total deposits were down $384 million quarter-over-quarter, non-interest bearing deposits were up $305 million or 10% quarter-over-quarter. Our percentage of non-interest bearing deposits to total deposits improved to 18% at September 30, 2020, compared to 14% a year ago. Asset quality, liquidity, and capital continue to remain in a strong position. Non-accrual loans represented 0.63% of total loans at September 30, 2020, compared to 0.59% at June 30, while our allowance for credit losses to loans stood at 1.44% at September 30. Our common equity Tier one ratio was 13%. Our loan-to-deposit ratio was 110% compared to 122% at the end of 2019. Now, I'd like to turn it back over to Kevin for concluding remarks.

Good. Thanks, Sean. Our message is to be faithful and not fearful. We need to be a source of hope and optimism in our communities. All our branches are open at full service during regular hours, except for the recently mandated hotspots in Brooklyn. We are taking all precautions to protect our customers and employees. We have close to 75% of our corporate employees back to the office, and it is very good for me to see them healthy and strong, willing to return and lead our communities back to some form of normalcy. I visited a branch in Southampton, a former Gold Coast branch, on Saturday and listened to their challenges during this pandemic and their transition to our bank. Our retail teams are engaged and excited to be working and, more importantly, helping their customers and our communities through this pandemic. The past eight months have not been easy, but we have faced the challenge and continue to get stronger and more adaptable as we navigate the changes from these unprecedented events. If we can get some stabilization in the macroeconomic climate, along with some cooperation in Trenton, Albany and Washington, including another stimulus bill, that will then impact our economic models. We expect that we can finish the year with a great fourth quarter. We've been aggressive in calling on our loan customers and have a war room-type attitude toward monitoring our credit exposures with great teamwork and cooperation from our line of loan officers and our credit risk teams. This crisis is very different from 2008 as the banking industry is stronger with better capital to sustain this economic downturn. Investors Bank is also stronger and better prepared for these events, and I'm much more optimistic than I was in April or July when there was a lot more uncertainty. Our medical professionals and health workers have been outstanding and have learned a lot about the treatment of this virus, and we are in a better position to monitor and treat this terrible pandemic. We hit a goal of 10% return on tangible equity for the quarter. Our earnings per share increased 35% to last year after taking additional provisions in the quarter with fewer net charge-offs. Our balance sheet and capital are strong, and we are well positioned to grow as the economy improves. Now, I'd like to turn this call over to questions. Andrea?

Good morning. Kevin, just to follow up on the buyback comments that you made. With the TCE ratio pushing 10% and the stock trading sort of 75% of tangible book value, I guess I'm curious, why would you still have the buyback in place? Why would you be executing on that right now even before the elections?

Mark, I think it's our way of being prudent. There's such uncertainty in the market. We're continuing to evaluate it, and I think we're just waiting after the dust settles after the election while having continued discussions with the other constituents that are involved, mainly our regulators. We did the big repurchase at the end of last year, and we want to manage it in a manner similar to what we've done since the first step through the second step in a prudent manner. So it's a wait-and-see attitude, to see what happens to the markets afterwards. Our plan is to continue to buy back sometime in the very near future.

And Mark, it's Domenick, and if I could just add another comment to that. Obviously, we recognize that buying back stock is a good investment for us, and it's something that we want to do. We have already had some preliminary discussions with our regulators and with our Board. I remember someone saying to me once, it's not a matter of if, it's a matter of when. As Kevin said in his prepared remarks, things look good that we will resume buying back the stock sometime in the fourth quarter. But we would like to do a little more analysis on it and have more discussions with the constituents that Kevin mentioned.

Okay. And then secondly, it looks like you still have about $4 billion of borrowings at an average rate of 2.22%. I guess I'm curious how much of those will roll off over the next few quarters. And should we expect more prepayments like you did this quarter?

Yes, Mark. We don't have any more borrowings due this quarter, but we do have about $1 billion of brokered CDs and retail CDs maturing over the quarter at an average cost of about 150 basis points. This will provide some momentum for our net interest margin by the end of the fourth quarter. Additionally, as Kevin mentioned earlier, we signed a contract for a sale leaseback, which we expect will yield a gain between $7 million and $9 million. We plan to use that gain to offset prepaid fees on borrowings that have an average cost of about 2%. This will also contribute to our momentum. However, the significant gain this quarter will primarily come from the brokered CDs, as there are no remaining borrowings to pay off this quarter.

Okay. And then, Sean, I apologize. I missed your comments on your expense outlook for Q4.

Well, you missed it because I didn't provide one.

Well, let me rephrase. Can you provide one?

We believe expenses will be similar to Q3.

Okay. And then lastly, I wondered if you're seeing much of a difference in credit performance from your multifamily and commercial real estate loans in New York versus New Jersey.

Mark, on collection rates, I think we continue to see collection rates at about 85% for multifamily and about 50% to 60% on commercial real estate. But I did want to put out one piece of information that wasn't in the deck that we put out. Specifically about Manhattan, we looked at the deferrals in Manhattan by category. The LTVs of our multifamily loans in Manhattan are approximately 54%, and these are deferred balances in Manhattan. The lodging category, which is obviously the biggest category that we have of deferments, $244 million sits in Manhattan. The weighted average LTV of those properties is approximately 49%. There has been a lot of discussion around the industry about the knock on Manhattan and what's going on there, but we feel very good about the LTV situation, and the fact that the customers we're dealing with have a significant amount of equity in their properties in Manhattan, and we deem it a very low probability that they're going to walk away from these properties.

Thank you.

Good morning, guys. Just circling back on the margin, you talked about the runoff in the residential book and some opportunities for growth elsewhere. Should we expect or can we expect to see maybe an improvement in loan yields quarter-over-quarter on the core book based on that change in mix? Or should we expect sort of loan yields to stay roughly where they are?

Yes. I think you actually may see a reduction in loan yields, Jared, because if you just look at what the average loan yield was in our residential book quarter-over-quarter, it was approximately the same. But if you go back a year in our residential book, we're down almost 40 basis points. So that residential book, we're continuing to put loans on. We're just not putting on as many as we were in prior years. On the multifamily side, we have now moved our pipeline up significantly. On the commercial real estate front, our pipeline is about $1.7 billion. The weighted average cost of the CRE pipeline is about 3.90%. So that will bring down the yield on the CRE book. C&I is about $800 million, and that's a little bit more difficult to project. The combination of multifamily loans and residential loans continuing to come on the balance sheet will, I think, have the effect of lowering our average yield on loans.

If I may, Jared, it's Sean. I just wanted to add a comment, though, the trend that really benefited margin in the third quarter from declining cash balances with very low average yields and deposit costs continuing to come down. We expect that will continue in Q4. Despite maybe some headwind on the loan side, we do expect improvement in margin in Q4, similar to that which we experienced in the third quarter.

Great. That's great color. And then just circling back again on the credit and the trends you're talking about on those deferred loans, which is great. Are those values at origination? And I guess what are you seeing in terms of valuation impact from COVID? Obviously, you're not doing full reappraisals. But are you seeing valuations really get hit because of this? And if you did mark those to market, what would you guess they look like?

Yes. I mean we haven't seen any significant decline in valuations. We look specifically at cap rates, and cap rates continue to be in that 4.5% to 5.5% range. So, no significant decline there. On some of the C&I properties, it's a little bit more difficult to determine because, obviously, operating income has been impacted. Putting a valuation on a hotel, for example, its operating business is difficult right now. Specifically, though, in the commercial real estate and multifamily sector, while we have seen an increase in cap rates, it has not been significant. It's not actually what I expected it to be. It has stayed pretty stable.

Jared, I don't think we see panic in the market. People aren't knocking on our doors giving back the keys. I think there's still confidence in the market. We don't see panic among hotel operators. They are generational owners. One, in particular, has put up six months of payments in escrow on a large exposure with multiple properties. We are working with borrowers. It's a small group. As I said, 61%, $360-plus million is in six relationships, and we know these customers very well. We feel much more confident than we were sitting here six months ago.

As we evaluate the allowance level, assuming there are no changes in the macroeconomic model, is this a reasonable peak for the allowance? Should we anticipate that the provision or allowance will be sufficient? Could we potentially see a decline in the future as those loans are settled?

I think it's a big if, but we understand if forecasted conditions improve or remain similar, then yes, I would agree with your statement, Jared. But also keep in mind that loan volume and loan production and loan balances also impact that. We've seen declining loan balances. If the tide were to turn and we see more production, it could lead to an increased provision as it relates to loan volume.

Thanks a lot.

Good morning, guys. Just on the Manhattan, the CRE exposure. I just want to confirm if I heard that right, that it's primarily just the multifamily and the lodging that you guys spoke about?

Yes. I think we put a deck out last night or this morning. If you look at Manhattan, the total deferments are $313 million. The composition of that is $244 million in lodging, $58 million in multifamily, and then $10 million commercial real estate and $1 million in C&I.

All right. Perfect. Now, the presentation was really helpful. Regarding the buyback, the remaining capacity you have is approximately $150 million, or $120 million. So that's a little more than 50% of a year's earnings. Assuming you utilize that in the next few quarters, would you consider starting another buyback program next year?

Of course, we always look at the buyback as an effective way to manage our capital. Obviously, if it makes sense to buy back stock and we've run out of authorization, we would go back to the Board and ask them to reauthorize an additional allotment.

Great. And just along those lines, is there a target capital level that you would like to be above?

Yes. I mean, again, you're asking me that question in the middle of a pandemic. If you had asked me two years ago, I might have said 8.5%. These days, it's more like 9.5%. It just depends on where we are at a particular point in the cycle. But it's difficult to say that in all situations, this is where I would be very happy.

Understood. And then you made a comment about the pipeline in the fourth quarter looking good. Are there any particular segments that you're more optimistic about in the fourth quarter?

Yes. Health care is having a good quarter. The C&I book, we think we're going to close about $500 million in the fourth quarter. That's what I spoke to our Chief Lending Officer about this morning. In multifamily, we have approximately $250 million of new C&I loans in the pipeline. Despite the continued reduction in multifamily loans that has occurred quarter-over-quarter, this month, we have finally stopped that bleeding. So, we're actually flat for the month.

That's great news. And then just the last question for me. Your non-interest bearing deposits grew pretty well this quarter. Can you just give us some color on what drove the growth?

Yes. Steve, we had obviously some PPP money in there that continued to come in. We also deployed a team of bankers, business bankers that we talked about last year. Those folks have started to reap some benefit. We're doing more C&I lending. We are doing more treasury management. Those two factors are having the effect of bringing more non-interest bearing deposits in. It's been our strategy to continue to transition the bank from a traditional thrift to a commercial bank, and I think we're finally starting to see some benefit from those strategic decisions.

Hi, good morning. I appreciate the color on the near-term margin. Just considering the average balance sheet and the opportunity to continue to reprice the CDs, there's obviously room on the borrowings front. And then average new loan yields don't sound terribly off from where they are now. As we look into next year and you deploy the cash, where could we see the margin expand to? Where do you see that plateau mark?

We expect to benefit from the ongoing repricing of both borrowings and deposits, which presents a favorable situation for us. We anticipate that this benefit will continue, not just in the fourth quarter but also into 2021. We might begin to notice some decline in the second half of 2021. There could still be around 20 more basis points available for us to gain. Ideally, we aim to reach something in the 3% range. While this may be slightly ambitious, it remains a target we're striving for.

If I could just add to Sean's comment, you obviously get the benefit that he described on the deposit side. Our continued remixing of the asset side of the balance sheet is going to continue to provide benefit to us. We're seeing yields on C&I loans of 50 basis points to 5/8 above where multifamily and commercial real estate are coming in. As we continue to focus on the C&I front, that will help to add to net interest margin also.

Excellent. I appreciate that. You mentioned several points of the pipeline that sound relatively strong. Looking into the fourth quarter and beginning of 2021, how do you feel about net loan growth prospects? Can we expand gross loans from here?

Well, I think that net loan growth will be better as we head into '21. I think, as I said earlier on the multifamily front, we've stopped that bleeding. We are looking at ways to stop the bleeding on the residential side. We're dropping there probably $60 million to $70 million a month despite the activity that we have in that portfolio. However, it was a strategic decision to start slowing down residential balances on our balance sheet. With the pandemic, that presented an opportunity for us with wider spreads. Having said all of that, I think, Matt, it would depend on residential. If I can get residential to stabilize, we should see growth in 2021. We're going through the budget process right now. While I'm not trying to give guidance, we are projecting growth in 2021. That budget hasn't been approved yet, but we are looking at ways to continue to grow the loans in 2021 because, again, as Sean described earlier, the steam will run out just based on getting rid of the cash balances, and we need to start generating growth to continue to add to net interest margin.

Understood. Okay, last one for me. In your prepared remarks, you mentioned that you're getting 50% to 60% rent collection on the commercial real estate asset class. What are the components within that? What is it for office versus retail and hotels? You mentioned 85% rent collection in multifamily. What is that in New York versus New Jersey?

Matt, I don't have that breakdown. I would say that New Jersey is probably doing a little better than New York in all categories, but I don't have specific numbers to support your question. If you'd like, I can look up that information, and we can send it out to you.

Sure. I would appreciate it. That's all I had. Thank you very much.

Yes, thank you. Good morning. These slides are great, and I'm probably missing it, so I just need your help finding it. Of the $7.256 billion of multifamily, it looks like $3.049 billion is in New York City. But what I can't find, unless I'm not reading it properly, is the $188 million that you have in multifamily deferrals. How much of that is actually in New York City?

$58 million is in Manhattan.

I apologize for the confusion earlier. Regarding the $46 million in multifamily loans that will be returning to payment status next week, can you clarify if that amount is from the New York bucket or the New Jersey bucket?

It's coming out of the New York bucket, mainly out of Manhattan, like in the Bronx and other boroughs.

Okay, that's great. And then just a quick accounting question for you, Sean. The $1.9 million recovery that you're going to book on the non-performing loan disposition tomorrow, is that hitting your top line, your net interest income? Or is that going into non-interest income?

No, that will be in recovery through the allowance.

The allowance.

Perfect. That's all I have. Appreciate the detail.

Thank you. Good morning, guys. Just one final question for me. Dom, you kind of touched on it, but just wanted to get your thoughts on the mortgage banking outlook. You indicated your appetite for perhaps portfolio-ing more residential production. But just broadly, how should we be thinking about that? Because obviously, that was a huge number this quarter.

Yes. It's been a great business. Some of the spreads that we've seen on mortgage banking have been pretty remarkable. This morning, just going through our rate meeting, selling loans to Fannie Mae at two and three-quarters percent, we're reaping a price of 102. To the extent that we can continue to generate business loans for sale to Fannie, we're going to continue to do that. One of the questions we had this morning was should we lower the rate and take less price from Fannie, and the consensus was that we want to maintain the quality of the underwriting process and the closing process. We felt that we could be adding too much pressure to the group. Long-winded answer, Collyn, but I think you're going to continue to see more non-interest income as we go through next quarter and the early part of 2021 because that business is really hitting on all cylinders.

Okay, that's helpful. And then just the corresponding expense to that. I know you had indicated that this quarter's expenses were up because of incentive comp. Is there a big number there, a big delta in there for what the mortgage commissions would be as well?

It's not a significant difference, but it is part of the overall picture. The larger factor influencing compensation is the retail incentives. We have seen excellent growth in low-cost deposits and non-interest-bearing deposits, which we have encouraged our team to generate. This is largely responsible for the increase in incentive compensation.

Collyn, the commission on the sale of mortgage loans is netted in the gain on sale.

Okay. I just want to make that clear. Okay, got it. Thank you very much. That's all I had.

Thank you, Collyn.

Thanks, Andrea. First of all, I'd like to thank you all for participating today. Our country is a great country. It's a strong country, but it's not perfect. We have created a country of great opportunities. But like Investors Bank, we need to continue to get stronger, improve, and listen to all our constituents. It’s not going to be easy in 2021, regardless of Tuesday's results. We at Investors are well positioned to move forward into next year with great hope and optimism. We will create great opportunities for all our customers, employees, and the communities that we serve. I want you all to please stay healthy and follow the CDC guidelines. Listen to that Jesuit educated Dr. Fauci. Wear a mask and stay away from crowds.

And wash your hands.

Yes, wash your hands. Let's pray for each other and inspire each other in our daily work and look for magical moments to help each other to be the best version of ourselves during this crisis as we make this journey together. I said it earlier, in July, the journey is the destination. I want to again thank you for your participation today. I look forward to the day we can get out on the road and visit with you all soon. Enjoy Halloween, as I know I will, celebrating my first granddaughter's first birthday. The Raptors won their first road game last week, and college pro football continues. I think we need to be optimistic. Life is good, and we need to cherish the moments. It's another step back to normalcy, and let's continue to pray for a cure to this dreadful virus. Be strong, be safe, and God bless. Thanks for your time today, and have a great day. Appreciate it.