Q1 2020 Earnings Call
[music], ladies and gentlemen, today's conference is scheduled to begin shortly.
Please could you be standby. Thank you for your patience.
[music].
At least somewhat participants' lines are in listen only mode.
Speakers presentation there'll be a question and answers to ask a question. During this session read the press star one of your telephone.
Please be advised to today's conference is being recorded interview or any further sisters. Please press star zero.
I like them to conference orchards Pixthree Needham director of Investor Relations. Thank you and please go ahead Sir.
Welcome and thank you for joining us today on the call or George Jones, President and CEO across first bancshares.
Dave O'toole, Chief Financial Officer across first Bancshares, and Mike Maddox, President and CEO cost first bank, our Chief Credit Officer, Randy rap well also be joining the Q and a portion of the call to answer more specific questions regarding our loan portfolio.
As a reminder, a telephonic replay of this call our earnings release and presentation will be available on our Investor Relations website for an extended period of time.
Before we begin let me remind everyone that this call may contain certain statements that constitute forward looking statements within the meaning of the private Securities Litigation Reform Act of 1950 for 1995.
We caution investors at actual results may differ materially from expectations indicated or implied in our forward looking information we provide a comprehensive list of Rex risk factors in our FCC filings, which are highly encourage you to review any forward looking statements speak only as of today and we undertake no obligation to update.
Them, except as required by applicable securities laws.
Reconciliations of non-GAAP financial measures to the nearest comparable GAAP measures have been included in the release or presentation and copies are available on our Investor Relations website. All earnings per share metrics discussed on today's call are provided on a diluted per share basis I'd now like to turn the call over to George Jones.
Thank you Matt good afternoon, everyone.
I want to start the call today.
Finally, we stepped down to our employees customers shareholders and their families. During these unprecedented and on certain time.
No one knows the duration or ultimate impact.
And.
What we're doing our best to manage through it.
We are focused on helping our local businesses and communities, while keeping our employees and our clients site.
Throughout my entire banking career I've never seen an environment like the one we are faced with today.
Cross border moved quickly to respond to the crisis.
Implemented a comprehensive business continuity plan in early March several weeks prior to the issuance of many state stay at home orders.
Approximately 70% of our employees are working from home.
And for those who continue to serve our customers on the bank.
We're taking extra cost.
Well there.
We also have reallocated resources, a handle a large volumes applications.
[laughter].
Let's see.
Oh.
Under the Paycheck Protection program. In addition to request for loan modifications and principal or interest payment from us.
As part of the cross first coupled with my team response.
Number also Nigel and risk management initiatives have been implemented.
Onto the potential economic headwinds.
We expect to see a continued rollout.
<unk> relief and funding to support businesses.
And cross first well continue to help our customers implement these problems.
And grant loan modifications and I say.
And.
No as I move onto our performance.
Probably for another quarter positive operating revenue growth.
Our pretax pre provision net income.
Was the best in the company's history.
Despite the uniquely challenging operating an interest rate environment.
Operating revenue reached 40.3 million.
Oh, 14% year over year, an increased 2% from the previous quarter.
The combination of continued asset growth.
And the reacting quickly to reprice deposits after fed rate decisions.
Allowed us to slightly increase our tax equivalent net interest margin to 3.24 personnel.
We recorded a 14 million dollar provision.
During the quarter.
Mostly.
Mostly due to increased uncertainty in the loan portfolio from economic conditions surrounding the cobot 19 pandemic and recent oil market volatility.
This prudent decision obviously affected our bottom line net income.
And related performance metrics for the first quarter.
During the quarter, we achieved a 55% efficiency ratio.
And our cost management initiatives are being accelerated.
As part of our cold with my team response plan.
After achieving earnings per share of seven cents.
And after having positive market impacts on our bond portfolio.
Our tangible book value per share at the ended the quarter was $11.60.
Our teams continue to deliver healthy organic growth.
And deposit growth for the quarter as we crossed over 5 billion dollar Mark and assets.
Our year over year loan and deposit growth.
Reached 22%.
And 17% respectively.
Despite the economic uncertainty, we continue to move forward with relocating our Kansas City, Missouri branch to a more prominent location.
And opening a new office in Frisco, Texas.
With our strong capital position and focus on credit quality.
We believe we're still well position to take advantage, if you too often HM.
[noise], we trust that are well diversified loan portfolio and strong underwriting criteria.
We have positioned the portfolio to withstand the current economic environment.
At the end of the first quarter, our nonperforming assets declined.
But we have a slight increase in our adversely classified loans.
The full impact to our markets and the overall loan portfolio.
It's still on no.
The recovery will depend on the time, it takes businesses and consumers.
To regain confidence in the economy.
And people have a safe environment to operate and the function.
We're closely monitoring our portfolio.
And with that I would now like to turn the call over to CEO and president another Crawford buying might Maddox for more detailed discussion regarding our loans and our asset quality.
Mike.
Thank you George and good afternoon, I want to Echo everything George just said about the safety and well being of our employee please on customers.
We always have and always will serve our customers and local communities an extraordinary ways, particularly during these extremely challenging times.
Our branch White strategy relationship banking model and technology have really allowed us to quickly implement our pandemic planned work remotely to be safe and have the ability to effectively serve our customers when they need at most.
As a part of our broader risk management strategy, we prioritized implementing the paycheck protection program is the most expedient method to getting incremental liquidity to our clients.
As of Tuesday April 20-F, more than 900 loans had been approved by the S.P.A., representing just under 400 million of loan proceeds.
Furthermore, the paycheck protection program allowed us to efficiently serve over 200, new customers and loan over $100 million a program funding outside of our existing customer base.
We believe those customers can be transition to the into stronger long term relationships.
Our successful implementation of the Paycheck protection program with the small business administration is a great example of how our strong teams continue to position us for a long term success.
For most clients, who have requested payment deferrals, we're modifying loans to help customers preserve capital and liquidity.
Our approach to loan modification deferment request is structured to help our clients while assessing their unique capacity to support the alone as well as the ongoing rest across first.
As of April 20-F, we had provided modifications to almost 350 loans representing over $750 million worth a lot.
In the month of March we also served our customers by extending more than $180 million of new credit.
Which partially includes 137 million of additional draws on operating lines since December 30, Onest 2019.
We're working side by side with our clients, which should benefit cross first our communities and our clients in a long run.
Hi, responsibly responsibly, helping them through these short term challenges.
We believe this will ultimately benefit our shareholders in the long run.
During the quarter, we increased average loans by 4% from the fourth quarter of 2019.
And 20% compared to the first quarter of 2019.
In addition, our loan portfolio continues to be balanced between commercial and industrial and commercial real estate credits.
We continue to use our strong relationship based banking model across first bank supported by cash flow based one thing that consider sensitivity to stress proactive management and portfolio diversification.
Which should allow us to support growth through the economic cycle and produce results.
Because of the Cobot 19 pandemic, we assessed our portfolio and identified key areas for increased monitoring and attention from our teams.
We have highlighted certain that rest segments of our loan portfolio given the current economic uncertainty.
The ultimate impact to these portfolios will depend on the duration of the cobot 19 pandemic.
The impact of shelter in place orders on consumer.
Business activity.
And the extent of the benefits from government stimulus programs.
Depending on how long well prices remained depressed and the duration of the pandemic, we could see increased changes in adverse risk ratings impairments and charge offs.
We will continue to monitor the adequacy of our allowance for loan losses on an ongoing basis and evaluate the reserve as credit conditions change.
The energy portfolio is $399 million or about 10% of our total loan portfolio.
But only 257 million or 6.4%.
Total loan portfolio is exposed to the recent oil market volatility.
Well pricing has been negatively impacted by lower consumption from the cobot 19 pandemic.
You bet compounded with high production in inventory supplies from ongoing political disputes.
Again as with all banks, we're not immune to this downturn.
However, we lend on proven and producing reserves and typically do not lend to midstream shale or oilfield service companies.
We are conservative conservatively land as a senior secured lender with customers that are backed by long life assets and require hedging of our largest customers.
Our portfolio, whether the downturn in 2016, so the portfolio has been shock for adverse market conditions in recent years.
The company will work closely with our borrowers and continue to monitor the situation over the coming much.
More information has been placed in the supplemental materials of our earnings presentation on the other segments impacted by Kelvin 19.
We look forward to answering any questions you might have on those portfolios.
While the net charge off ratio increased on both a linked quarter and year over year basis. It was due to the partial charge off of our previously disclose large nonperforming asset, making its way through the credit cycle.
Decline and nonperforming assets was directly related to that same charge off.
We have taken a proactive approach to evaluating risk ratings across the entire commercial loan portfolio and have considered risk rating changes in the valuation of our allowance for credit loss.
Our loan loss provision a $14 million in the first quarter of 2020 compared to our normal quarterly provisioning was related to changes in risk ratings and deterioration in economic conditions.
The increase in the allowance for loan losses considered our best estimate at this time.
It is based on the significantly slower economic growth higher unemployment and partially offset by the benefits of the government stimulus programs pursuant to the cares Act.
Our classified assets to capital and allowance for loan loss ratio for the first quarter increased to 15.8% compared to the fourth quarter of 2019.
And decreased slightly year over year.
At the end of the quarter. The overall loan loss reserve was 1.29% of loans compared to 1.48% in the fourth quarter of 2019.
The decline was a result of the charge off of our previously disclosed.
Non performing asset.
Offset by a reserve build.
In addition at this time, we do not have any plans to adopt Cecil in 2020, though we continue to run parallel analysis on the potential impact of our reserves and capital.
As we have mentioned several times the banking industry is operating at historic and extremely challenging environment.
Our balance sheet is strong our customers are diverse.
On our credit underwriting standards are thorough and our core deposits have increased from the previous quarter that some customers are designed to hold cash and low risk investments.
It's a times like this when portfolio diversity combined with disciplined and consistent underwriting will pay off.
Even after the economy opens back up that is unclear how long it will take to offset the psychological ramifications. This has had on our markets and our customers.
We have a very strong capital position no debt and our capital structure and we believe we have enough liquidity to manage through these difficult times.
For now we will continue in doing what we do best and remain highly focused on doing what we can for our customers communities and employees to get through this unique situation.
Now I would like to turn the call over to our Chief Financial Officer, Davao tool for a more detailed discussion of the financial results.
Thank you Mike I would also like to wish the best to our employees customers shareholders and their families. During these turbulent and uncertain times.
As George mentioned, we had another positive quarter of operating revenue growth.
Primarily because we're able to maintain net interest margin and grow our balance sheet.
Net interest income was 38.2 million for the quarter, representing a 3% increase on a linked quarter basis, and a 14% increase from the same quarter in 2019.
For the quarter tax equivalent net interest margin increased from 3.23% to 3.24% consistent with what we anticipated at the end of 2019.
Loan yields declined 23 basis points and interest bearing deposit costs decreased 28 basis points on a linked quarter basis, mostly due to the impact and timing of 150 basis points of FOMC adjustments.
And the first quarter combined with certain balance sheet mix changes.
To illustrate the opportunity presented by the Q1.
Hello, M.C. rate adjustments, we measured the incremental cost for new funds as of March 31, and found that with weighted average deposit pricing our cost of new funding was <unk> 0.52 per cent compared to actual first quarter cost of funds of 1.49%.
During the quarter, we shortened the duration of our interest bearing liabilities to take advantage of lower interest rates and.
And replaced nearly 150 million a brokered Cds with shorter duration less expensive non deposit funding, which resulted in an increase in our loan to deposit ratio to 101%.
We continue to use our marketable securities portfolio to optimize liquidity.
Income and mitigate downward pressure from interest rates.
In addition to reinvesting our cash flows and called Securities we capitalized on certain market movements during the quarter by selling a small block of municipal bonds, resulting in a 300000 dollar realized gain.
The resulting total unrealized gain in the marketable securities portfolio. It in end of the quarter was approximately $30 million.
The modest investment portfolio yield declines for the year were a combination of lower reinvestment rates and yields affected by higher prepayment speeds.
On mortgage backed securities.
Consequently, the tax equivalent portfolio yield was 3.21%, reflecting these small change from the previous quarter.
Given the current economic conditions and uncertainty we regularly evaluate our municipal portfolio and dispose of bonds that may present, an average an above average credit risks to the bank. This helps us concentrate the bulk of our portfolio and highly rated investment grade securities that are constantly.
Monitored by an independent third party advisor.
For the first quarter of 2020 total operating revenue grew by 14% on a year over.
The year comparison, and 2% compared to the previous quarter.
Non interest expense increased just 2%, resulting in positive operating leverage for the first quarter of 2020.
Solid and consistent balance sheet momentum, coupled with diligent expense management drove pretax pre provision net income to 18.1 million.
Up 43% from a year earlier.
This may become a very relevant metric in the current economic environment to evaluate the ongoing earnings power of cross first and currently we expect it to continue to trend favorably.
On a linked quarter basis, our efficiency ratio decreased 50 basis points to 55.1%.
This improvement can be attributed to decreases in discretionary spending and.
And other operating expenses, while operating revenues have increased.
As a core component of our strategy, we strive for disciplined expense management and sustain Pos.
Positive operating leverage and increasing pre tax provision profitability.
We improved the assets per employee ratio to 13.9 million during the first quarter of 2020.
While non interest expense ratios remained well manage and trending favorably for the third straight quarter.
We've continued demand you manage the pace of hiring which accounts for 65% of our noninterest expense.
As George mentioned, our cost management initiatives have been accelerated as part of our co bid 19 response plan.
We have suspended hiring with the exception of occasional replacement positions and with the economic slowdown we selectively reduced our discretionary spending in hopes that this will offset some of the additional provisioning that may be required in the future.
Our management team feel strongly about reducing costs to strengthen the company for the long term.
Return on average assets for the quarter as clearly impacted buyer elevated loan loss provision in the quarter. However, our pretax pre provision our away was 1.46%.
In closing our board advisory boards and management have significant ownership and cross first so we are well aware of where the stock price is trading.
We have deliberated over a stock buyback given how lower value valuation is compared to historical prices.
We are regularly and aggressively stress testing, our credit and capital with a myriad of fed defined and other more stressful cobot 19 recessionary scenarios.
Many banks have suspended their buyback programs and our current position is to preserve capital and evaluate a buyback at a later date.
Our business model evolves robust growth. So we went to the capital markets in 2019 for our IPO.
We had planned to use the proceeds to support our growth strategy. Today, we're fortunate to have the flexibility of those funds and to be well capitalized for safety and soundness as we navigate through the cobot 19 pandemic.
Thank you again for joining our call today and as we mentioned earlier earlier, our full results and financial metrics are included in the earnings release and presentation.
This wraps up our prepared remarks, and now our turn it back over to the operator to begin the Q and a portion of the coal.
Thank you.
As a reminder to ask your question, we'll need to press Star one your telephone withdraw your question. Please press the pound key.
Please stand by will be composite kuni roster.
And our first question comes from the line of Michael Rose with Raymond James Your line is now.
Hey, guys. How are you good afternoon.
Hey, Michael Michael.
Hey, I'm, just just wanted to get some color on.
Thank you mentioned that you guys are running parallel Cecil models, and I guess I'm, just trying to figure out what that would have.
Yes necessitated in terms of a provision this quarter versus being incurred loss model and then maybe.
Just using that occurred last model what were some of the assumptions unemployment oil prices et cetera that wanted to developing that that number for the quarter. Thanks.
Michael.
Because we don't have to.
Adopts the sold for some time, yes, we are still working on the model a little bit we're making adjustments to us as we run these parallel.
Runs, we prefer not to try to disclose that at this point in time, but obviously.
With our unfunded commitment levels on this bank, we do have some.
Some adjustment that will need to make to go ahead and recognize the reserves against those assets.
Okay and then.
Yes go ahead, sorry, Michael is Randy I would just add to that.
We are under the incurred loss modeling, we've not seen significant no grade migration in the portfolio and so we really make adjustments in several of the Q factors.
To to support the higher reserve again, just looking at the uncertainty that existed in the in the oil space and then also just in the general economic conditions wouldn't any one metric, we really tied that higher.
Okay.
I guess just drilling down specifically into the categories that you mentioned is at risk. It looks like it's 26% that seems to be a little bit higher than than some others that hub and I know, it's apples to oranges, but I guess can you help us feel comfortable or you know what can you say to us to make us feel comfortable that.
The 129.
Reserve ratio that we should.
Comfortable with the ability to absorb losses from here. Thanks.
Yes, Michael this is Mike we.
As a management team weve divided up these higher risk areas.
Really try to be proactive to make sure we are giving them full attention and so I've taken some and our chief credit officer Randy's taken Simon So I'll, let him start with oil and we can work our way through a page nine.
Yes.
Michael This is Randy again, so on oil.
Our portfolio, but just to reiterate I mean, it is it's any NP focused portfolio, it's a PDP only portfolio, 64% oil 35% gas.
You advance rates at when we've looked at new transaction there in the 60% of the of the PDP PV nine.
Value. We also want to sensitivity case based on a reduced cash flow based on our price deck.
I think it's important to note that we have a very experienced lending team that's been through several cycles. We have a eight experienced customer base that has been through several cycles. We have a very long live property set with our average half life over 10 years. So it is a longer term longer.
Horizon portfolio.
And I, we've got to experienced approval team. That's also got several years in the in the business.
Most of our transactions.
All of our transactions actually our single bank. So we're not in big syndicated facilities, our borrowers do not have any mezz debt and so when you look at some where some of the issues have been with some of the other energy borrowers. It's actually been at that those that have higher mezz levels. So we feel good about the quality of the portfolio obviously.
It's been a lot of noise around the prices certainly on the spot market as we've seen year in the last several weeks, but I would tell you that we tend to take a longer term view of pricing.
We follow obviously look more at the at the strip and what it says out for the next year too.
And the scrip has oil going back to almost 30 by the end of the year and higher than that and 21 and gas which has not been is negatively impacted goes to $3. This year. So.
We're looking more at the long term when we set our price deck and.
And so I think those are some things that the characteristics of that portfolio, which should make you.
Actually absent some confidence in that in the portfolio.
And when we ended the quarter, we had 93% of the portfolio and pass as pass grade. So again, we've not seen significant great migration.
In the portfolio.
Okay.
Maybe just one follow up for me.
Just wanted to reconcile some of the loan growth. This quarter. So I think you'd mentioned 137 million of draws.
And then it looks like you had some.
Some participations.
That.
Went up in terms of loan participations.
So.
Purchase excuse me that those balances went up quarter on quarter, you're going to have.
The TTP, what I'm trying to figure out as you'd previously laid out at 20% growth target plus or minus understanding the backdrop, we're probably not going to get there but whats.
As you look in your Crystal ball could day for the next three quarters I know, it's really difficult, but can you give us some semblance of what you're targeting from from a growth perspective, and maybe what areas do you see opportunities and I would assume that some of these add risk categories would would be areas you wouldn't want to focus on thanks.
Yes, Michael it's just it's really hard to predict what future loan growth is going to look like over the next several quarters. We just don't know how quickly that activity is going to come back in the first quarter a lot of our loan growth was related to some really strong.
Real estate loans.
A lot of those out of our Dallas office.
But.
On the CNS side and certainly in these areas, where we see more risk.
It's not likely that we're going to see a lot of new loan growth.
But still positive PPNR trends correct.
Yes expecting.
Yes.
Alright, Thanks for taking my questions guys I'll hop out of Q.
Thank you and our next question comes on line of Brady Gailey with KBW. Your line is now.
Thanks, Good afternoon guys.
Randy celebrated.
The start with the.
Record distributor loan.
All the.
Net charge off was that just charging off the allocated reserves or that you talked at all.
More I think that loan was $32 million previously.
7 million.
Is there any of that loan.
Well, that's potentially at risk.
Brady This is Randy I'll take that.
We did has been disclosed charge off $18 million of that have that credit in Q1.
Also we are able to liquidate a portion of our collateral and there was a pay down of over $4 million that came from that.
We do still have a balance on that transaction that is less than $10 million. We do still have reserves against that and we're in the process of liquidating some of the other assets of the business and of the guarantor.
All right.
Right and then looking.
Your energy portfolio, it's helpful to see the 45% of it was hedged.
Just a little more color.
Does that mean that 45% of production.
Has that 45% just.
Customers have some level hedge at this any additional color on.
How that headwind.
[music].
Sure Brady. This is this is Randy again.
When we disclose the hedging at 45% totaled 43% oil that is the dollar weighted hedge of the production. So thats not number of borrowers that actually have some level of hedging that number would be higher than the 43, but the 43 is actually the production for 2020 that is hedged and at that that is at an.
Average price of $51 in 12 cents on oil, 48% dollar weighted on gas at an average price of 214.
All right.
And then lastly from me on the service charge side.
Nice bump up in service charges was there anything abnormal.
Roughly half a million of service charges this quarter.
No I think Brady, that's just continued growth in our.
Our credit card.
The business as well as our analysis service charges, we continue to to really have nice growth in both those areas.
Okay, great. Thanks, guys.
Thank you and our next question comes from the line of Andrew Liesch with Piper simply your line is out.
Good afternoon, guys how are you.
Good thanks.
Just.
On the margin here.
Looks like a substantial room on the on the funding cost side, just looking at though.
As close as you guys made but also earning assets are coming down through what I guess Im curious what was the average rate of the new loan production here in the first quarter.
Okay have that on the tip of my tongue Andrew.
Our loan our overall loan yield as you can see came down to the number I presented in there.
But I don't have the number I can get it too yes.
I guess.
Higher.
Well just at a higher level then if.
Just with the opportunities on the funding side and the margin being fairly resilient here.
We see it expands from this level from the quarters ahead.
We think our margin is fairly resilient.
It certainly we certainly can hold of the current level. It will expand somewhat just due to the impact of the yield related fees from the PPP program, but those are temporary those would go through the system here in the next quarter or thereabouts.
And after that we feel pretty good about margins at the current rate environment that we're in right now we have shortened down our liabilities to the point, where we actually have room.
To lower our cost of deposits, even further if necessary.
But right now we're concentrating on getting through this little bubble from the PPP and thats going to kind of move margin around and funny ways for short period of time.
Thanks, that's helpful and then.
On the expense side it sounds like some.
Coloration of your costs costs and payment or cost control initiatives.
We expect to see expenses come down here from this $22 million level.
Slightly yes.
With our growth with our growing balance sheet and our growing operating revenues.
Part of our goal is to hold our expense levels, where they're at not let them grow at the pace they were before.
There could still be a little bit of an increase the balance of this year and our operating expenses over where they were in the first quarter, but not much.
Got you that's really helpful. Thanks, I'll step back.
Thank you.
And our last question comes from the line of Matt Olney Stephens. Your line is now.
Hey, guys. Thanks for taking my questions I want to start with credit.
I think in the prepared remarks, you mentioned addition of adverse rated loans in the first quarter.
What was that increase as the adverse rated loans and any more commentary you can give us as far as the inflows what industries, where they in.
And where the where the inflows from koeppen 19 weakness from from March or where the inflows from earlier in the quarter. Thanks.
This is Randy I'll take that.
It was not covert related it was primarily one.
The 3 million dollar transaction.
That is well secured its in the process of resolution than we do not expect in a material.
Loss on that credit at all.
And what was the industry.
Hi, it's in the residential alarm industry.
Okay.
And then going back to the discussion around the draws in the first quarter.
I think there was a 137 million any more details as far as which industries you saw those draw them.
If it really wasnt a specific industry is mostly in our see an eye portfolio and and.
It was really across the board.
Okay. Thanks for that.
And then just to kind of a higher level of strategic question.
Back in 2019, it sounds like the bank with picking a pause from market expansion and branch expansion, but but then January it seem like you are ready to get back and death more because of the opportunities that you thought there.
Obviously, the environment's changed quite a bit since January so just give us that kind of a high level update as far as where you see the opportunities and as it relates to market expansion. Thanks.
I think everybody's trying to evaluate what that looks like in the future and when we come out of this and I think it'd be.
Hi, premature to talk too much about where we see the upcoming opportunities, but certainly we think we're well positioned as a company to be very successful as we come out of this timeframe and we've been able to two really.
You know grow organically through the last.
You know few months than we had a very good first quarter and.
We believe we still have a lot of opportunity in our existing markets and we're always evaluating additional opportunities.
Okay, Yes, I understood. It's still early in the process I'm sure that's still a.
Changing as we speak.
My last question when I go back to the energy portfolio and you guys disclose that the energy allowance.
He has a 1.9% that the overall energy loans.
As you're aware many your peers had energy allowance.
Well north of that sometimes at the 10% and I guess theres, a large variants and not all energy books are the same but how do you. How do you think about your energy allowance versus some of the peers and how do you justify that being quite a bit lower.
Matt This Randy.
Yes, I think when you're comparing banks, it's hard to get to make sure you're comparing apples and apples on portfolios in the said, we when we look at our portfolio and looked at it say if the PDP only portfolio some of those banks with higher reserves have quite a bit of oil field service and some midstream that we don't have a so that I think thats that's one.
We have a methodology and heard model, we've not seen a lot of significant great migration in that portfolio, which would require additional reserves and.
The level today is higher than the entire losses in that portfolio since we've been in that business since 2014.
Okay.
I appreciate the details I appreciate it thank you.
Thank you.
And I'm not showing any further questions at this time.
So this does conclude todays question and answer session I would now, let's turn to cut back to Matt Needham for closing remarks.
Thank you again for joining us today. This call can be accessed via replay at our website and as always you can contact me with any follow up questions. You might have again, we appreciate your interest or investment in our company and thank you for taking time with US This afternoon.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating and you may now disconnect.
[music].