Q1 2020 Earnings Call

[music].

Oh and welcome to service parts Bancshares first quarter earnings Conference call. All participants will be in listen only mode that you need assistance. Please signal a coffin specialists by pressing the star key followed by zero. After today's presentation, there will be an opportunity task.

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Please note. This event is being recorded I.

I would now like to turn the conference over to Davis Mange Investor Relations manager. Please go ahead.

Thank you Charlie.

Good afternoon, and welcome to our first quarter earnings call Worldcom, broaden our CEO, but those chic, our CFO and Henry habit, Chief credit officer, covering some highlights from the quarter and then we'll take your questions I will now cover our forward looking statements disclosure.

Some of the discussion in today's earnings call May include forward looking statements actual results may differ from any projection shared today due to factors described her most recent 10-K and 10-Q filings.

Forward looking statements speak only as of today. They are made and Servisfirst assumes no duty to update with that I'll turn call over to Tom.

Davis, Thank you and good afternoon, and welcome everybody to our call my comments will be a little bit longer.

Oh the normal because these are interesting times, we're in today with a pandemic.

You know it seems like the first quarter was a long time ago, so much as happened.

Over the course of the assuming you know days I guess.

We have talked a little bit about the fan Jamie we activated our pandemic plan on March 2nd.

Oh I remember the first time we.

The regulator, so we need to have a pandemic plan I thought last you know about sealy of saying I've ever heard of July turns out some idea FDIC was right now and I was wrong went up you know we would of course, we all thought it was just going to be a bad flu season that would there was a way to to make it through and I've always believed that we give all the employees of freight flu shot and we're not going.

Have a flu epidemic was up for them a plan, but plans get a goodwill rob bit here during the pandemic, but well we found there really isn't we had an excellent well planned thanks to our chief risk officer, Mark. They we had an excellent plan.

Our focus has been on employee safety, you know employee customer safety or number one is employee safe number two is customer safety.

What we found is that a branch light technology heavy business model works very well during a pandemic our business model was made for.

For a pandemic.

It's one of our original C O cities I'm, so happy to manage and one office instead of the 34 branches at my whole bank I used to work with.

So.

It is much easier to only managed we have some 22 off season.

In many cases we.

Obviously doing like most people began to drive in only we have very limited in person contat.

We are rotating.

A number of our people are rotating were 50% work from home where where possible.

We're all today in this conference room large conference room is larger conference room. The normal so that we can all be socially Justin.

Six feet apart.

I also our second focus is minimal serving our clients in our communities needs.

We received very positive feedback from all of our clients are going a little bit more detail.

Sort of our stance.

You know.

When when you're facing an unknown threat you won't be as conservative as possible and that's what we've tried to do.

In every case of high we've managed the business since March 2nd we've tried to be is concerned as possible.

Certainly don't change anything we don't need to change.

And try to serve our customers needs that has been our total focus is serving employees getting employee site and serving our clients needs.

Henry address our Chief Credit Officer, he is going to talk in a few minutes a little bit more about our asset quality focus and give you a lot of details on that we put a.

Deck out this afternoon I think all the analysts have it it's on our website as supplemental deck and is a very sexy website as well.

Not a very big deck is I'm glad to say.

I remember when I was a young credit analyst that Amsouth Bank and I went in executive officers.

Office any handed me a credit file that was about six inches thick I still remember is it was a department store cost city stores out a new York.

Yes, obviously I don't remember boy that was the shared national credit or are we had a direct relationship Ana I stay or that date credit file it.

Exactly to say, Tom you need to understand that the quality of credit is inversely related to the thickness of the credit file. He's a very good company has a very thin file so.

Im glad to say that we are a good company and we have a thin deck that we posted out there today little bit more information here, we will go over a few minutes.

I want to give a feet high level comment some.

Asset quality.

Henry is going to talk about the loan categories that are interested investors.

We will you know would say that weve, everybody says they underwrite better than other buyers.

We buy says it of course, we say that but everybody says that.

You know, we do have minimal consumer exposure less than 1% of our portfolio is consumer.

You know I know that.

There are areas of interest you know, obviously restaurants hotels and things, but you just don't you know a recession.

Causes problems with weak players in every industry is not matter what industry. It is you're going to be.

For example, if you've got some big apartments that.

Not well underwritten and they've got a lot of tenants that laser job you're going to have some problems with something like that so.

He does expose all week players and all industries.

I don't you can hear anything you want to hear about what economists are saying that scale happened to the economy over the next.

The quarters.

I've been looking if anybody has got a list of economists that have gotten rich.

From do an accurate forecast I wish somebody would email me the lifts that this on this call today I'd love to have that I don't know veny.

Theres list I'd like to note.

I will say that charge offs.

Just common sense. It tell you there will be elevated a bit.

Over the next.

I don't think anytime soon.

You know remember during the 2008 recession.

What was greater in was homebuilders.

Idmc.

On pet hours, which we have some so bad they start greater in 2007, we were ahead of the recession.

But I remember that come in and they kind of say you need to make us a large unsecured loan or are we going for you. The case, so we'd say will handed the keys in late Hanggi, the keys and walk App.

This didn't like that.

We've had.

He has been very calm with new customers I think they've got some have asked for.

Loan extensions and Henry's come talk about could cover that in more detail, but you have kind of missed a price to who've asked for the loan extensions is.

You know as people that did or in really strong financial shape, I think there just lot them or be conservative as mainline mainline charges.

Who are not rely on them.

The collection plate for their revenue most of the monies sent by check or or by automatic debit.

Dennis.

Other medical professionals ended honest.

Dermatologists those sort of people of all of all asked for extensions as well. So I don't we don't expect any long term credit issues repayment issues for most of those solar people. So.

And the last thing I'd say on asset quality is we're not.

A deal by where relationship might we know our customers will.

We don't have deals.

All over.

The United States with some random deal. So we are there in our footprint for the most part and we feel really good about our customer base.

It's going to talk about deposit growth for a minute, we've seen really solid deposit growth in the first quarter and year to date, our liquidity continues to grow.

We have not seen on surge in line usage, we don't have any of those type of customers you read about at the big banks either.

A lot of credit usage surgeon in fact, our line utilization was exactly the same at March 31 is it was at December 31 within.

48.8 versus 48.2, so it's almost no change there whatsoever.

We did see very strong deposit growth during the last recession.

From customers looking for a good strong bank and we see this is shaping up to be.

But the thing.

Talking about loan pricing, but it's going to talk about our our margin improvement in a minute but.

Loan pricing today is much more rational that was just a few weeks ago.

We have made the decision to implement minimum pricing in early March.

Yes.

So our minimum pricing is been strengthen a good bit is it is forward interest in certain commercial customers will call to say they will they read the interest rates have dropped and they want to know taken.

We can redo their alone at a lower rate oil no you know the only borrower, whose borrowing cost has dropped as United States government.

In almost everybody else, including most countries in the world. They had borrowing costs have gone up so.

We straighten amount on from that standpoint, there is not we're not in the business a cutting rates. So.

I might be surprised people might go back to two.

Dubin silly things, a little quicker than I think but I don't think were gone.

See margin pressure in immediate future I think customers today are more focused on access to credit.

The cost is low is still low and I think thats.

It's going be remained the same for at least the balance of the year.

I was going to talk a minute about profitability.

We put in our press release that our first quarter.

Pre tax pre provision return on assets was 2.49% in the first quarter, which is obviously one of the best in the industry.

Our dividend payout has been in the mid 20% range of earnings.

We've had a lot of questions in the past about.

Why don't you buy your stock back on its always answer the while read a lot of studies and insiders never know when is the best time about stock buyback stock and always get cheaper.

So you feel fairly she bought back at a higher price.

And we've gotten the questions about what are you going do all your excess capital and Ali so well.

It might be nice to have one of these days.

And also we got questions about why we don't Bob while we hadn't been buying banks will all or excess capital and our answers always men that bank stocks may get might prices may get cheaper at some point.

So I'm very happy we don't have to.

Do any goodwill impairment assessments today on anybody actually vault and I'm also happy that we don't have to wonder about asset quality of the mines, we just bought so.

Our policies have served us well.

Pandemic hits.

It's going to talk for a minute about the.

Triple Pete.

Program.

Biotech paycheck.

Yes, I turn to assure me I call it a bit triple B S V.A. program.

You know I've never been we've never had a big we've done SPD loans in certain and we want to meet our CR rate you know commitment coming reinvestment that commitment to small businesses in our communities and that's very important to us and thus while we do ask the lowest but we've never looked at SB eight loans as a line of business.

I know a lot of bikes the way they made it through the recession.

He has they would.

Do a lot SB eight loans or sell off the guaranteed portion is booked a profit.

And that's what kept them alive.

You dollar pretty early in my career.

I didn't want to be a big SBK lender typically what I'd see us when the Democrats we're in office.

They want us to make a lot SB eight loans and then when the Republicans came in office they would try to figure out how to avoid the guarantees on the loans. We've made when the Democrats went off is so.

I got enough for that business pretty quickly and didn't want to have decided that was not something we wanted to do.

Despite having said that we decided participate in the program.

To support our customers in our communities that need to support.

Paul shape backers, one of our executive officers here in Birmingham ramped up our program did an outstanding job of.

We made about six months worth loans in two weeks period of time.

Thank was 33 have little over 3300 loans totaling 914 million that we have close and funded.

In the Triple B program and around one I understand I think round two is polycom and over the next.

Few days, possibly.

It's been interesting time, we had people working.

24, seven except for Easter Sunday trying to get all these loans booked in founded in very few cases week.

Excuse me, we had a fee that we didnt get known it typically was just because our clients did have had not yet given a solid information everybody has all the information they give it to us we might have I think we just made mistake on maybe two or three that we didnt get done, but he then I'm very proud of our team.

One thing is interesting is I think there are our production our loan officers have a greater appreciation today.

For our credit and operations people than ever before is truly been a team effort and I'm proud of what they've done to get those loans closed.

As we put in our slide deck the.

We expect the vast bulk of those loans to be forgivable loans.

And.

We will.

They will be off our books, we expect them to be off our books before the end of the second quarter, if we need.

Liquidity as I've mentioned earlier has been strong liquidity of.

Any additional funding we will go to the fed in excess of we've filled out the paperwork for the triple B.

Loan facility at the fed if that's necessary, but I'm not at all sure that will need to do that.

[music].

Due to the high demand, we did focus on existing clients and we did not.

We made an attempt first to prioritize the smallest clients first thinking that they would need to help but.

We just needed a we just needed randomly and.

In terms of that's the only way if it worked is to do it in that manner.

The expenses are quite high accounted learned that.

During the pandemic everything costs more except all them catering we did.

Our employees, we were catering as many three meals a day for all of our employees for a good good chunk of the time and that's one thing we've got a good deal flow.

Because restaurants, all needed business right now.

But everything else cost a lot of money so.

We do expect that will the program will be profitable in the second quarter.

And it we think it will make a nice addition to our loan loss reserve in the second quarter.

With that what what the net the net profit above we paid a lot overtime and we paid a lot of incentive.

Okay in terms of I called pace rate.

We face rate.

These to to get a lot of its done over the course of a 24 hour period, we had.

You couldn't when you started.

We only had I may be.

What we call seats at the SPJ, we had three seats when we first start including loans, we tried to get as many seats as we could we just didn't get them approved by the Sta. So I think.

We ramped up over the course of a few days from three see state seeks to 19 seats to 29 seats and we got it done all these loans are being closed funded.

I'll sign by Docie sign we got them all done.

At the end of the day.

Besides our overtime and incentive pay that will pay will will it'll be a little noisy in the second quarter.

For the analysts to to decipher.

In terms of.

All that.

And we will keep a reserve.

Knowing that.

Not my thoughts on.

If any issues down the road move on keep a reserve for.

Four of.

Any contingencies.

Although cycle loans.

I'm going ask Henry advent now to talk a little bit more about asset quality entering thank you Tom.

Looking at the service our footprint I'm cautiously optimistic at the economy.

Reopened interviewing heat map another data point that layout impacted Kevin 19 areas. Thus far the majority of our markets are in low impacted areas.

We're not in the northeast or some more heavily concentrated covered 19 impacted communities.

No one is immune to the brought impacts of the pandemic, but we should be well positioned as our markets reopened.

We had a well diversified loan portfolio on both geography in industry classification the portfolio granular, we don't have any major concentrations within industry code.

With always prided ourselves some being a well rounded commercial and industrial are seeing our bank partially bank. The focus is on theory transactions were has targeted industry calling officers.

Greater to 55% of our loan portfolio at the scene I operating companies and this is through owner occupied real estate loans equipment line for lines of credit.

We are very low failure to snacks as they represent only $65 million and current balances.

On a total loan portfolio of 7.5 billion, which has less than 1%.

Next we are involved in our because we have a direct relationship with the borrowers.

To date, we've had no major downgrades within the portfolio as a result of Kevin 19.

At the ended the quarter past the past dues decreased by $7 million from year end and nonperforming assets decreased by $3 million from year end.

As Tom mentioned, we have a slide deck on the web site.

And I'll cover some of that in more detail here.

For lays out areas of interest to investors, we're not a large hotel lender.

Tells only constitute roughly 2% of our portfolio and the overwhelming majority those are flagged hotels and nine our oriented towards convention or resort style accommodations.

Restaurant exposure as noted at less than 3% of our portfolio oil and gas is less than 1% of our portfolio retail theory consist of 267 million in loan, which at 3.5% of our loan portfolio.

The theory land are well established borrowers who have long standing relationships with at this bank.

Average loan size in this segment is less than $2 million.

Our agency portfolio to capital, 55%, which is well under the regulatory guideline of 100% our income producing portfolio, which is non owner occupied commercial real estate, it's 236% of our capital, which is well under the regulatory guidance of 300%.

Within our income producing commercial real estate portfolio, we don't have any major market concentrations.

The highest one being Alabama that accounts for just under 10% of our loan portfolio.

Given the guidance from regulators and Fas be we've agreed to provide coded related deferrals decline to have requested some form of payment relief.

We have taken a three much approach to these deferrals and we'll assess feature deferrals in the coming months.

The deferrals requested the vast majority have been principal only relief in the borrowers are continuing to make monthly interest payments.

On page five of the Powerpoint presentation, we lay out the industries of these deferrals.

Given the uncertainty with the financial impact of Kevin 19, we chose to retain our proven incurred loss methodology for calculating our a chip allow and delayed Cecil implementation.

With that I'll turn it over to but.

Thank you Andrew good afternoon.

First our net interest margin our margin increase from 3.47% in the fourth quarter 3.58.

The first quarter, a common talk by our strong growth for loans. The first quarter. We grew 307 million deposits grew 300 it to me.

Our variable rate loans were 3.1 million at March 31st and $1.2 billion. Those loans were at their floor ray or 40% of our total Baird right loans at the end of March.

Based on our March 31 balance sheet, our consolidated margin was 3.64.

Also our total deposit costs was 0.55 as of March 30 Onest.

Further future now we expect it to remain north of 3.6 go into second quarter exclusive triple pay loans.

A reminder, we have no accretion income.

Related to acquisitions, there were no other major income or expense items that impacted the first quarter earnings.

Liquidity, our investment portfolio is eight and half a cent of our total assets.

The portfolio is available for any liquidity needs vary, but no portfolio government agency mortgage backed.

How about meanies for that you're better underlying credit ready.

Treasuries agencies bank so your incentive.

In average life portfolio is 3.4 years.

Important noninterest income.

We added seven day bye.

In the first quarter.

Our American Bankers Association credit card referral program.

Mortgage banking income slow and first two months and then in March we had fee income of 525000.

I love It had to do with two fed rate cuts in March.

Also a reminder, we've not sell any government.

Guaranteed loan generate noninterest income.

For noninterest expense are already expenses increased 498000.

That was bigger updated appraisals on two credits.

Payroll taxes increased by 308 2000.

Primarily related to say news that we paid in January.

And our for a one k. contribution match increased 229000.

Related to incentives.

Net producers had five bit laugh.

The first quarter and we added three.

And as we've mentioned and our fourth quarter call, we'll have a new expense control initiatives.

For 2020, we'll continue to look at.

Our costs working with our vendors to control that which you're going to say the impact of that and 2021.

As opposed to 2020.

Our loan loss provision, our first quarter net charge offs were 4.8 million.

3.7 of which was loans that were previously impaired.

We continue to be proactive what our problem credits.

Capital our bank tier one leverage ratio was in excess of 10% at March 31.

Okay very very good ratio.

Taxes, our year to date tax credit tax rate for 2020 was 18.8%.

21.3, without the stock option tax credits in the first quarter of 1.1 billion.

The 20, not taking your debt right was 90.5.

21.3 without stock option credits of 772000.

We project the tax rate for the remainder 2020.

The 22%.

And that concludes my comments I'll turn it back over to Tom.

Thank you good.

I'll finish before we take questions I finished up by saying that.

We.

We do see a lot opportunities on the horizon, we see law opportunities.

With customers that had an unsatisfactory experienced their existing bank.

Some large banks in some regional banks and.

Do you might guess, what some of the people that.

Caps on how much they were going to do and they have very on.

In satisfactory experience they are with existing bank. So we are.

In the process of Onboarding, some new customers.

We see a lot more opportunity down the road.

We are mindful of the current economic conditions with any.

New request involves credit we certainly deposit accounts. This is a pretty simple being with any anything evolves credit we're stress testing any loan request in light of the current economic conditions.

In summary, I really like what we are today.

The positive far outweigh the negatives we had the.

Capacity to bring on.

A lot of new clients, and we and we intend to thrive not survive through this pandemic and we shall we can adapt to a new environment and do very well so.

We also got off of this chart out there on a page on digital banking opportunities, we were seeing much greater adoption today than ever before.

Scanners as well as.

Mobile banking so.

Our business model is working very well.

Given the current conditions will now turn it over to take questions.

That's very well now begin the question answer session.

Asked the question you May Press Star then one on your Touchtone phone.

Speakerphone, please pick up your handset before pressing the keys to withdraw your question can press Star then too.

Our first question will come from Kevin Fitzsimmons with D.A. Davidson.

Hey, good evening guys.

Hi, Kevin.

Well you know I recognize upfront how fluid. This is in all the uncertainty, but can you give us any idea.

How you you think about further reserve building off of this quarters to as we look forward in the next few quarters, because I'm just interested there how back.

To be went amongst you all in terms of.

You made reference to the very strong pretax pre provision profitability you had in weather.

What did you entertain the thought of using even more of that to be aggressive more than even thought what you can see now just to.

Try to get beyond you know get more of it in the rear view mirror and just.

That's a long lead the way of saying how should we think about provisioning going forward.

Hey, that's a.

Interesting question, Kevin we.

Obviously, if we thought we needed more money, we to put more money in there.

Now that that's the.

The clear answer is we fail.

You know necessary to do that we would have done side. So you know again, we like our customer base, we feel good about our customer base I mean.

Obviously this company some some some pain.

With some of the you know a restaurants for example, restaurants hotels have some pain, but we.

We listed for you our existing balances.

On the watch list on that day, we've had no downgrades as a result to cope with my team.

It takes a time for for things to play out but again.

Oh by the way of saying.

So analyst estimating.

What the fees are going be on the triple B.

And their estimate and Loulo high side, and I say I hesitate to give our average the calls an average is not a good number.

It is misleading because when you have a lot of 2000 $10000 loan request.

And you average that as we in with some very large ones you know that might be 2 million 5 million.

Huh.

So we think it you get some strange you give us a strange average at people trying to run off and I know thats not what you ask Kevin as mentioned that for all the analyst on the call their buys same still high but we think.

We will have an opportunity.

To make.

No.

Anything we think we'll me we can do is mostly of it in the second quarter Kim.

Okay, Great one quick follow up on on the subject to loan growth. It was very strong this quarter and I know.

I think traditionally in past years, the loan growth has been on the light side in early in the year and then it really kicks in the back half of the year and you mentioned that it really wasnt a surge in people drawing the lines so was it.

Was it just more of the PPP loans being on the books was it was it just a pent up.

Loan demand from last quarter.

Anything to attribute that to.

You know I could we had a couple of bank holding company loans close they were pretty good size. Good solid companies we had a.

Marine I want to gas customer pay off and they went permanent and.

The fall and they came back in with another vessel with US this quarter, which is the best part of our oil and gas exposure is one.

The last part, but the biggest one is oh.

Vessel this leased on a long term lease to major oil company.

So, but those probably three credits distorted the numbers upwards, Kevin that makes sense.

Okay. That's great. Thanks, Scott that's it for me.

Yeah.

Our next question comes from Tyler Stafford with Stephens.

Hi, good afternoon, guys picked up.

Hey, adding question also just start on the allowance and I saw in the release that you added a new.

Pandemic qualitative factor to the allowance.

How much did that new pandemic qualitative factor add to the allowance and reserve build this quarter.

Oh.

Yes, but I don't know if we have that here and I. Both sitting here I don't remember we had that specific amount in front of house.

I would have to go back book.

Okay [laughter].

Oh, that's fine but.

But other factors also played into it like GDP growth change in Prime continued to decrease I mean, there. There are other factors also that drove that.

So maybe I'll, let me ask it definitely.

You have a good frame of reference we can think about for what the reserve build would've been if you had adopted diesel.

Yes.

Yes.

Early in the quarter Talos is Tom obviously early in the quarter.

The difference you don't first of all.

We look at social two or three different ways, but.

Yes.

We started the stance if we won't be as conservative as possible you don't changing anything that you don't need to change we've got enough going out.

And what we've had going on is assessed the a triple B program and it's been kept us extremely busy and then we've had Oliver request for you know people looking for long stations called regulators announced of the world or they could you have them. So we had a handful primarily the triple b loans, but.

So we look at it on a couple of different ways first of all don't change you have you don't need to change.

Early in the quarter the difference between the two models was negligible.

As of the cost of deteriorating economy due to kind of 19 and ended the quarter, we put in another 8 million.

Due to the Kevin Knight to you know on the seasonal models is not a meaningful not really a meaningful amount.

And so we are we also tightness, there's some chance that total.

Don't know what Congress has gone David I'm told there's some chance that on a bipartisan basis I may decide to appeal.

Cecil at some point, if you already adopted it won't be a bit difficult on wind is not.

If you had adopted c., so the incremental 331.

Provision would have been it an additional 8 million.

Yes, okay.

Alright got it. Thanks I appreciate the details in the release around the deferrals from from cover 19, and the major industries impacted you just have what the total amount of loans that were deferred.

As a 331 or.

[noise] Canadian Yeah. So as its 331 total balances deferred was 700 or.

Excuse me 574 million and that was about 5% are less than 5% of our customers in terms of of units to 575 million.

As of the ended the quarter perfect.

And again this isn't.

You know 80 different industries them I look down the list in most industries get down to.

Yes, there might be a million in each industry.

For the last 51.

Our 2 million of each industry is.

I don't look at those as is vulnerable on credit side for the most for their people being you know their large mainline charges again, you know there people being conservative.

They think they're being conservative by asking for you know and we think we're being concerned because we didn't do any six month deferrals and we only did a three months of principal or.

HM Okay.

Alright. Thanks, Thanks for that and then on the to prior slide just around the portfolios potentially impacted by the pandemic I appreciate all the new disclosures and details here.

I guess sounds a little surprised that they were zero dollars of hotels and hotels on the watch list.

Was wondering if you get.

Maybe walk through why there would be no none of those balances on the on the watch list.

I think we're selective with our hotel lending you know were traditionally looking at low loan to value type hotels.

You know at this time, none had been downgraded and you know all were performing loans at the end of the court.

And I'll still are.

Okay.

All right that's helpful and then.

Maybe lastly, Tom did I hear you say that you provided three meals a day for all of your employees.

Right now not every day, but in many cases, we did that's one thing we got a good day alone was a catering.

Well, we did what we were you were in their full time, except for Easter Sunday, we were running.

The first weekend, we had rolled it out we had run it's close to 24 seven as we good yeah.

Hi, good morning, and on you for doing that that's a that's that's pretty great. That's that's all my questions. Thanks.

Thank you Tom.

Our next question comes from Gram Gold with Piper Sandler.

Hey, guys get even on for Brad Night.

Hi, Greg.

So kind of just following up on the portfolios on the as disclosed in slide deck.

Within restaurants.

Yeah, It's just trying to keep percent of your and your total loans, but would you mind, giving a little and so on like the composition.

Segment is it mostly quick service are weighted towards casual dining because.

Oh.

This is Henry.

So I want to on a true loan balance perspective, 145 million of that to 26 is full service.

Under that is in more limited service.

You not to that represents another 60 million and within that category. You know we did on that you know bars as well and so that's also another category but.

Breakdown is primarily full service and limited service.

That.

Okay, Great that's very helpful.

And then kind of following up with the.

Loan growth question.

Obviously going to be.

Finally on pause in time being where you guys are working through PPP.

And you could be continues to kind of pause.

Client activity by.

How do you guys think about it.

On group at the other ended and saying maybe is there a light at the end of the tunnel do you think you you might be able to get close to picking up where you left off or you expect to take out sometime to ramp back up to that that low double digit rate you guys had point 19.

We see an abundance of loan opportunities Graham is by the fact that you know people we've taken them all off the road, we're not making calls.

The call, obviously took them off airlines pretty early on compared to <unk>.

And we were on the Conservative side. We you know we had a lot of national teams around the company when we.

Tell people they get off the road and once they got off an airline don't come of office for 14 days.

We took a very conservative approach that we we see an abundance alone opportunities out there and we feel like we can be as is you know.

We could again, we can see.

You know strengthen our loan pricing.

We see better opportunities there.

In terms of where we are because there are certainly less banks that are able to to make loans today than they were you know just literally a couple of months ago.

Great. That's really helpful. Extra media guys. Thank you guys very much and congrats on the board.

Yes, I would say Graham that to answer you know allows people to hit the pause button on projects, which is just kind of common sense that because you've got a project underway a lot of people hit the pause button for a few months just let some of the dust settle a little bit.

Our next question comes from Kevin Swanson with Husky group.

Hey, guys.

Thank you again.

Thanks.

I see the multiple in the stock is held up well compared to others.

And despite you guys have strength this quarter and kind of the outlet it looks like there's definitely some banks, who who don't come out a bit on scale.

Prior to co vague guys set up well organically with all the M&A going on during your back.

Hi, backyard and some of the hiring you've done but as any change your thinking around being require.

The multiple seems to be stronger in the relative basis, and I'm kind of where you guys said.

Yeah, we will.

Absolutely we want to get on the other side of the.

Duston warm Kevin <unk>.

But obviously, it's much more interesting today than it was you know just literally a few weeks ago the prices or you know.

Substantially better than I would think then you know if people were even once emanate starts backup which might be might be six months I would guess it would be six months before we see any.

Activity, but certainly we'd be willing to entertain it is that at the lower level.

Pricing that we see today.

Okay. Thanks.

And then my last one is you know appreciating the significant uncertainty you like you mentioned remains.

Have you guys bought about any changes to kind of credit structure and underwriting policies given what we've learned so far in the impact.

Kind of how do you see it changed quite a bit and a great recession, but just curious if this is kind of refreshed any any kind of credit process near mine.

Well again were gone you know any request you know what we're focused on our existing clients and that's how we should be focused on today.

But Tony requests were we're putting an extra step stress tests on it.

It.

As one of our executive Greg Brian in Tampa said, you know list is.

That's what we did during 2008 to 2012 and in Florida, as we put an extra tested stress test on any loan request. So.

It makes perfect sense. So we we now we you know.

I've always said, we need to make the same loan decision.

You know in.

When the stock market has gone up 5000, Entre gold down 5000 points, we need to be emotionless on making a good sound underwriting decision it shouldn't Barry.

At all so you know the same underwriting standards appliances, we want to deal with good people good quality people.

Okay, great. Thanks, guys.

Thank you.

Our next question comes from William Wallace with Raymond James.

Thanks.

Good afternoon guys.

Well one sees some real quick.

Decision to delay it where you guys are delaying and an operating entity assumption that when you do it DOCSIS you're gonna have to go back and restate your results.

Well I mean, this but yeah I mean, we know we will have to recycle once once we have if that guy if that comes to pass in 2020, we'll have to do that.

And what kind of <unk> expense does it add to it to go back in and do that.

Is that they didn't expand examples.

Well I mean, yeah doing parallel I mean, we're doing our incurred loss and Cecil we'll do that each quarter. So so you have all the results right. There so theoretically shouldn't be too expensive right right.

Okay.

On the expense side is there anyway I'd.

There's a lot of commentary in your preamble, Tom about the expenses being pretty hard to to gauge and and generally being up can you maybe just help us.

Get a sense of what we might be looking at for the next couple of quarters on on the run rate basis understanding that I guess this quarter will be higher given the PPP activity.

Yes, the expenses in general are trending down I mean, we expect to see.

All our expense initiatives, we expect see most results in the second half 2020 in 2021.

So we're certainly we're more class whenever we put in some expense controls.

Given the current economic environment, but I just minutes. This can be a little noisy will have actually heightened expense in a number of categories because of the triple B program now having said that it's still going to bill profitable program. Wally. So it is but it'll be a little bit of.

Margin distortion and when we talk about marketing, we exclude out any effect from that.

Tripled the taken $914 million loans that are 1% exclude that from the margin. That's why we're we're going to look at it and thank you will look at it that way as well.

Yes.

Okay, and that's probably a good segue to think about the.

Sees related to Triple T I understand that when you've got a a few loans that are bigger in that 1% see range versus a ton of loans that are smaller in that 5% range or are we would you suggest that we see.

Better off modeling closer to that 1% range or.

Do you think.

No I think people make one in the 3% range absolutely yeah, I think people modeling as much as follow or something you know three and a half the four which seemed little high to me.

I don't know what that those might you know.

You know the it runs the gamut if we got 2000, we got a million 2000 10000, how long the question those customers they need to help you know they made it more than faithful to the big money. So we were there those are bipolar just as important to US is is a big customers bizarre, but but he I think you you're on track Wally with three three range.

Okay. Okay.

And then my last question on the line deferrals Bleach gave the number 574 at 331 would you be willing to share what that number is today.

Sure.

Yeah.

Today it today is that.

Through through part of last week, I guess not yet through April April 14 that number is 988 million.

Through through its true I guess through the first half of April.

Okay.

And I mean, I are you continuing to see a pretty high volume of requests coming through.

Yeah, I think it slowed down and in part now that people have some PPP Sun Yeah. As Tom said, we were able to accommodate overwhelming majority of our customer. So they now have the more capital to make payments on learn.

Yeah, I think the volume has slowed down whether that related to them getting TPC money, where our bankers working on TPP loans at the same time I can't tell you, but it is it is slowing.

Okay.

On on.

PPP part to ER, which looks like it could be a possibility.

How many applications have you received that that you didn't.

Weren't able to get through before they ran out of money in other words, how much do you already have in the pipeline that that you can take advantage of should there be a part two is not not a huge Wally we got most of them you know knocked out but it's in that 20 odd million dollar range I think is the loans at that.

We had in the pipe it when it shut down in course, we've added loans to the five cents banned from.

From people that are not ours, we again prioritize our existing clients, but then we've added class from other mines.

Trying to help people to had a by somebody else didnt participate in the program and you find out you know kind of amazing to me, but.

Yeah, we're trying to help people.

Yeah.

Okay.

I'll step out appreciate the responses. Thank you.

Thank you all.

Our next question is a follow up from Tyler Stafford with Stephens.

Hi, Thanks for taking the follow up is just one more quick one for me on the margin I appreciate that.

The the Twoq you outlook of relatively stable in the 331 total deposit costs do you have what did the spot loan yield rates were at 331 as well.

Mm.

No cow I want to say it was for 60, but I'll email it to you.

Okay.

But but the expectation is with what I think it was <unk>.

Five basis points to total deposit costs at 331 did total margin in the second quarter XP should be three sixtyish isn't what you said.

Ah, Yes, I wish Delta exclusive of Triple pay would still be threesixty.

Yeah, what I've got is the total loan yield for March so thats before all the repricing and fed cuts all that so I'll I'll have to find out what the yield was at end of March Ali military I'll email it to your body, Okay, and again kind of work where our goal is to strengthen loan pricing is called type.

Time, you know I mean, it doesn't happen.

Certainly we will have an opportunity in may.

You know my June renewal season, and then.

You know so you know obviously, we have more to your lines of credit and we used to.

No they so.

We see opportunity strengthen loan pricing.

Yeah, I know it will be impressed I think you guys can hold the margin flat <unk> into Q. After 150 best cuts in a in March said, no that will be impressive to see them.

Thanks, guys.

Thank you.

This will conclude our question and answer session as well as today's conference call. Thank you for attending todays presentation. You may now disconnect.

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