Q1 2020 Earnings Call

Technical conference specialist by pressing the star key followed by zero after today's presentation. There will be an opportunity to ask questions to ask a question. You may press * then one on your telephone keypad wage draw from the question queue, please press * then two, please note this event is being recorded. I would not like to turn the conference over to Chuck whiskey president and CEO, please go ahead. Thank you Kate. Good morning and Welcome to our call clearly. Our world has changed dramatically since our last call. We hope you your family and your colleagues are healthy safe and secure. I would like to start with some good news today. We announced an agreement to acquire a Premium Finance company, which has approximately 100 million dollars of assets. We're excited about the opportunity to further diversify our product offerings and believe this acquisition will complement our insurance business.

We announce our earnings earlier this morning.

Which were a loss of $0.04 per share our results were heavily impacted by recent developments related to covid-19 and the actions taken by governmental authorities and others off the changes that the pandemic has had on our industry have been widespread and sweeping. It has changed the way we provide our products and services which is now more electronic and By Appointment. It has required us to be nimble and provide relief for our clients which includes quickly setting up the administration of recently announced loan programs while a substantial part of our wage course Works remotely the decision to lower interest rates to zero or near-zero has and will continue to have a negative effect on our results.

The implementation of the Cecil accounting standard in economically sensitive accounting approach is having a significant impact on our results what sets us apart from other institutions is our Lunch ends determination on execution coupled with our creativity and long-term Focus. We are frequently calling our clients and checking in on them. We are being accommodating helpful in their time of need by providing loan modification payment deferrals and by granting fee waivers, we have worked closely with the small business administration to begin off their paycheck Protection Program, as of April 17th, 2020. We had received authorization from the SBA and had approved 2532 PPP loans for $426 a portion of the loans have been funded and the remaining loans will be funded over the next two weeks. Yep.

The last week the funds allocated under this program had been exhausted. It has stopped for now. We believe we will continue to see demand for this product. Once the SBA receives additional funding to reopen the program.

We were selected by jobs Ohio as they have first partner in the state for a loan program designed to Aid small businesses in Ohio jobs. Ohio is a private non-profit Corporation charged with economic development. They are providing a 90% guarantee on the first twenty-five million dollars of increased exposure to small businesses clients May obtain up to $200,000 in additional financing on terms that are favorable to the clients subject to certain eligibility requirements with a grateful for this opportunity and believe that our clients and the communities will benefit greatly from the jobs, Ohio program.

When combined with the PPP we are seeking to help restore the economic well-being of our markets.

On the commercial lending business, we have approved request for principal and interest payment deferrals to clients who meet our approval criteria and a loan modifications correct total approximately $500 million. We have also increased lines of credit where appropriate providing additional financing to our commercial customers.

Consumer loan clients. We are offering relief solutions in the form of interest only payments for an initial 90 day. With the ability to extend on a case-by-case basis and forbearance programs that allow borrowers to defer the principal and interest programs for the additional for an initial period of up to 90 days for Consumer loans in $180 for residential real estate loans. We also stepping up for our Associates and our communities, which has included such things as a $500 stock Grant to all full-time associate at the assistant vice president level and Below support for child and Elder Care increase paid sick time increased technology capabilities to allow a Associates to work from home donations have face masks for First Responders monetary support by Associates through payroll deduction to local food banks, which has reached over phone number.

$1,700 per pay period purchasing lunch is from local restaurants on Tuesdays and Thursdays for associates a donation of $100,000 to our employee assistance program and activation of an immediate response program to provide expedited funds to Associates and need as it relates to our results some of the highlights for the course include a lower level of net charge-offs as our net charge-off rate was 7 basis points for the first quarter loan growth of 5% annualized compared to the link water bath and core deposit growth which excludes CDs of 7% from the linked quarter and and we closely managed our deposit cost which were down eleven basis points from the linked quarter allowing us to maintain a relatively stable net interest margin, which was 3.51% for the first quarter of 2020.

For the first quarter, we had a loss per diluted share of $0.04 which was a decrease compared to the linked quarter in the prior year quarter. Our results were heavily impacted by $17 of provision for credit losses given the current environment and economic forecasts or allowance for credit losses and provision where recorded using the Cecil model our total provision for credit losses during the first quarter impacted our diluted EPS by $0.65 during a quarter. We recognized additional costs related to annual stock grants, which are generally based on the prior-year results edit increased expense of $830,000 compared to the linked quarter and reduced diluted EPS by $0.03. We typically recognized additional expense of the first quarter of each year related to retirement age.

eligible or aunties

A true-up of expense related to besting a previous granted stock awards and expense related to an unrestricted Grant of shares to the board of directors. We also met annual contributions to employee health Benefit Accounts resulting in an expense of $427,000 to looted EPS by two cents worth a quarter. We had a pension settlement charges of $368,000 which reduced diluted EPS by one sense. We also had additional costs related to covid-19 of 140000 which to Greece diluted EPS by $0.01 or FDIC Insurance expense continue to benefit package credits that we in other smaller institutions have recognized related to the level of Deposit Insurance Fund that continues to be above the Target threshold for recognizing wage.

Credits this benefited diluted EPS by $0.01 for the first quarter.

Our return on average assets was a -7 basis points for the quarter on a pre-tax pre-provision basis are returned on average assets was 1.5% compared to 1.7% for the linked quarter and 1.8% for the prior-year quarter.

I diluted EPS for the first quarter was $0.77 on a pretax pre-provision basis for the linked quarter or pre tax free provision diluted EPS was $0.91. And for the prior quarter, it was ninety cents the decline in pre-tax pre-provision diluted EPS compared to the link and prior was mainly driven by the combination of lower total non-interest income excluding that gains and losses coupled with higher total non-interest expense.

During the quarter we made the decision to move forward with the implementation of the new Cecil accounting standard. We believe that moving forward with the adoption of Cecil was the most appropriate path to take a prolonging. The inevitable was not something we wanted to keep addressing in the future quarters. John will discuss this in more detail shortly. The good news is that I am Quincy in that charge off levels. Remain low. We are committed to providing relief to our clients and they prudent manner through this difficult time. Although we do have exposure to certain industries and wage earners who have been impacted a large portion of our loan portfolio is relatively stable.

We do not have a heavy concentration in Hospitality restaurants Child Care Facilities or nursing homes or underwriting standards have been the most important thing and we will continue to monitor our credits closely while working with our clients to provide relief when appropriate our delinquency Trends continue to be strong as long as considered correct comprise 98.5% of our loan portfolio at quarter-end. This is relatively flat compared to the year-end in the prior-year when 98.6% of our current we do expect a delinquencies in charge of the rise and future. Due to the continued impact of covid-19. Our net charge-off levels remain low wage an annualized net charge-off rate.

for the quarter

7 basis-point on net charge-offs for $498,000 during the first quarter while our gross charge-offs were higher for the quarter. We recorded a 1.2 million dollar recovery on a previous charged off commercial loan during the quarter as well.

As for a loan growth with a quarter, we generated 5% annualized growth compared to the linked quarter and most of this growth came from our construction loans off with commercial and residential real estate loans. We experienced one of the best quarters in several years as it relates to consumer in direct loan originations compared to a year ago our loan portfolio grew 6% at quarter-end, which was mostly due to the loans acquired from first Prestonsburg on quarterly average gross loans increased former annualized compared to the linked quarter with all of the growth coming from the commercial portfolio compared to the prior-year quarter average loan balances grew by 105 million, which is mostly due to the acquired loans as far as credit quality.

We had some increases in non-performing assets which were up 5.3 million compared to the linked quarter and the new accounting for purchased credit deteriorated loans on the Cecil resulted in the movement of three point nine million of loans from the 90-day plus accruing category at December 31st, 2019 to the non-accrual category, Thursday, March 31st, 2020. The remaining increase in non-accrual loans was due to one logic commercial relationship in several smaller loans being placed on an accrual wage.

Well criticize loans declined to 3.1% of total loans at the end of the quarter while our classified loans increased to 2.4% of the loans are criticized loans decrease during the quarter due to several upgrades. Meanwhile, we had the downgrade of one commercial loan relationship that drove the increase in a classified loans compared to year-end. I will now turn the call over to John to provide additional details around the income statement and balance sheet.

Thanks, Chuck. Our managers income declined 1% compared to the link order which was partially impacted by one less day in the first quarter also compared quarter our net interest margin declined five basis points are low. Neil's decline mostly due to the current interest rate environment. Our investment yields have continued to be impact a higher prepayment speeds which are associated with Securities back by underlying mortgage loans, which has increased our premium amortization as we had planned. We actively manage our phone cost by lowering interest rates on deposit accounts, which declined by 11 basis points.

the creation

Which is negative amortization expense added 1.1 million to net interest income for 11 basis points to net interest margin during the quarter compared to one point eight thousand or eighteen basis points to margin in the linked quarter compared to the prior-year our net interest income grew by 2%

This was partially due to the first Prestonsburg acquisition or higher are higher interest income on loans coupled with our clothes management of funding costs more than offset the decline in investment Securities income.

The the decreased investment Securities income was mostly related to higher premium amortization associated with faster prepayment speeds our net interest margin decrease by $29 basis points and was largely driven by lower investment security yields coupled with decreased loan yields accretion income added 722010 interesting age or eight basis points to not interested margin in the prior-year quarter.

Most recent changes in interest rate environment are challenged that we are actively managing we continue to look for ways to lower our funding costs and will continue to do so in future periods emotional positive products that were offered in the prior-year will be replacing as the year progresses and will contribute to reducing our deposit costs while we anticipate some of the client in our loan yields. This will be partially driven by the past that Libor takes is a large portion of our commercial loan portfolio is tied to library. We are fortunate to have it towed Diversified Revenue stream, which is not solely dependent on our traditional banking results. We were able to support our income statement with our fee income businesses, which has proven time and again to be an important part of our business model.

Our total non-interest income excluding gains and losses continues to provide support in these uncertain Economic Times for the first quarter it comprised 31% of total revenue, which was consistent with the prior year, but was down from 33% for the linked quarter total non-interest income excluding net gains and losses declined 5% compared to the link or during the first quarter Insurance income benefited from the annual Performance Based Insurance commissions that are primarily received in the first quarter each young age and represent a core component of our insurance income these annual commissions totaled one point three million in the first quarter of 2020.

However, this growth was more than offset by the decline in Electronic Banking income which is typically seasonally higher in the fourth quarter. We also saw a decline in Mortgage Banking in college, which was partially due to a write down of a mortgage servicing rights of $182,000 couples with seasonality as consumer activities traditionally lower during the fourth quarter in defining consumer activity as covid-19 arose swop fees were lower compared to the linked quarter all-time record level reflecting a typical fourth quarter in the impact of covid-19, which slow business activity light in the quarter as businesses delayed investments in response to the economic uncertainty created by the Panthers.

In addition Bank on life insurance and income decreased as a result of $482,000 of debt benefits that had been recorded in the fourth quarter compared to $109,000 in the first quarter of 2020 trust and investment income was lower compared to the linked quarter due to the recent decline in the stock market compared to the prior Year's total non-interest income excluding that gains and losses increased slightly during the quarter the positive service charges provided significant growth as a result of the first Prestonsburg acquired accounts coupled with the fully implemented new deposit account fee schedules, which were put in place in March of 2019 also back into the increased compared to the prior-year was higher Electronic Banking income which was driven by consumer activity and trust and investment income grew due to the higher Market values of the managed assets dead.

Coupled with new accounts these increases were largely offset by two million items lower Insurance income and the additional income recorded during the first quarter of 2019 of $787,000 related to the sale of restricted class being Visa stock for prior for the prior-year quarter annual Performance Based insurance company totaled one point four million dollars.

Our total non-interest expense increased 2% compared to the link order. This growth was largely due to higher salaries and employee benefits costs, which were primarily result of annual Merit increases which were effective at the beginning of the year, including the movement to a $15 minimum wage throughout the company.

An additional $813 annual stock grants and $427,000 of annual Health Savings Account contributions that Chuck mentioned earlier as well as a pension settlement charges a $368,000 recognized during the court. These increases were partially offset by lower professional fees amortization of other intangible Assets in marketing expense compared to the prior-year our total non-interest expense was up 8% This increase was driven by higher salaries and employee benefit costs, which are due to several factors including the additional employees from the first Prestonsburg acquisition annual Merit increases and continued moving to a higher corporate minimum wage and the pension settlement charges recognized during the first quarter of 2024, which there were no charges in the first quarter of 2019.

We also had higher professional fees for clothes real estate and other loan expenses and Electronic Banking expenses. These increases were partially offset by lower FDIC Insurance expense, which was related to the level of the Insurance Fund to continue to be above the Target threshold for smaller Banks to recognize credits while there were no similar reductions to expense in the fourth quarter of 2019. We could not reasonably anticipate any future recognition of credits as this is determined by the FDIC on a quarterly basis of religion related expenses for the first quarter of 2020 were $30,000 compared to $253,000 for the first quarter of 2019. We've also incurred $150,000 one-time expenses related to covid-19. We recorded an economic tax benefit during the quarter as a result of the free tax laws coupled with our tax wage.

income

Moving on to the balance sheet our Investment Portfolio increased 4% compared to your end.

compared to the prior

your quarter-end our Investment Portfolio 19% and was largely due to the Investments acquired from the first Prestonsburg acquisition core deposits which include CDs down 7% compared to the linked quarter end. This increase was driven by 8% growth and non-interest bearing deposits in thirty-six percent growth in governmental deposits, which are typically higher the first quarter of each year due to the influx of funding that occurs compared to the prior-year quarter end core deposits increased by 14% which was largely due to the first Prestonsburg acquisition coupled with Organic growth are demand deposits as a percentage of total deposits remained at 40% at quarter-end which was consistent with your engine and it was up in 38% a year ago quarterly average deposit total deposits were relatively flat compared to your end compared to the linked quarter we had increases

In our in our lower cost deposits including twenty-three million dollars of growth in our non-interest bearing deposits, which was offset by declines and higher costs brokered CDs positive and positively impacted our net interest in comes our quarterly average total deposits were 9% compared to the prior-year quarter which included growth related to The Firm Prestonsburg require deposits, which was partially offset by intentional reductions in higher costs brokered CDs.

While the current economic environment is unstable. We believe keys to managing to the crisis our capital and liquidity. We have a high level of capital. We continue to maintain a strong Capital position in at March thirty first Tier 1 Capital ratio of 14.1% intangible activated tangible assets ratio of 9.5% while we announced an increase to our share buyback plan in late February and repurchased over ten million dollars of of sheriff during the first quarter. We are actively monitoring our Capital levels and stretch testing under multiple scenarios. We are assuming a second quarter similar to the first quarter on a pre-tax pre-provision basis with Improvement in the second half of the year the unknown in Keystone, no variables in the required provision for credit losses.

Currently we show that we have an adequate Capital through the remainder of the year and we anticipate periods after 2020 would include some recovery and Improvement in capital metrics. We will continue to perform a little stress testing and we'll make necessary adjustments as appropriate which includes share BuyBacks and dividends. Although many are other institutions to stop their buyback programs are both active through the end of the quarter. We will continue to evaluate repurchases under our program is appropriate based on market conditions and other relevant factors at this time. We have the intention of maintaining or quarterly dividend at the same level for the remainder of the year. However, that is dependent upon our future Capital needs and the projected length and depth of any economic recession. We will we will adjust Capital hours to maintain adequate Capital during the crisis.

Is it relates to the quiddity? We had a loan-to-deposit ratio.

86% at quarter-end which enables us to be flexible and grow loans when it is prudent. We have a good we have a good liquidity and can leverage our investment Securities to gain liquidity to sales or wage which we have done some through today our loans give us the ability to increase volume capacity by by pledging loans to provide liquidity to meet our bar. We needs to our customers we intend to use them as the Federal Reserve program to take the SBA Loans as collateral for our borrowings. We do not expect the loan-to-deposit ratio, excluding the PPP to grow substantially during the court during the year as long pipelines have decreased at the current time.

During the quarter we implemented the new Cecil accounting standard. We decided to move forward with our seasonal process instead of reverting back to the incurred loss model. We've also wage opted The Five-Year phase-in period for regulatory Capital under the Cecil transition rules, as of January 1st, 2023 fully implemented the new accounting standard and recorded in in Chrome for allowance for credit losses for loans of three point two million dollars and unfunded commitment liability of one point five million a one-time cumulative effect adjustment of 3.7 million head of taxes and a gross-up of our loan balances to establish an allowance for credit losses for loans purchase for purchase credit. Loans of two point six million.

These amounts were based on economic forecasts and model projections as of the measurement date as we move further into the first quarter. The impact of covid-19 was at the Forefront of our processes and we ran and ran and updated several scenarios with our diesel models to gauge the impact of the pandemic at the end of the March economic forecasts were were projecting significant changes any assumptions that we utilize in our model which included higher rates of national and state unemployment and declines in Ohio GDP.

Our laws were credit losses.

For loans as a percentage allowance for credit losses is a percentage of loans as of March 31st, which was 4242.8 million dollars. This is an increase of 57% in our allowance for credit losses from the account recorded effective January 1st, 2028.

Addition are on funding commitment liability was 2.4 million and March 31st, 2020 which increased 63% from the amount on January 1st, 2020. The combined impact of these cogs phone has resulted in overall increase of 57% compared to the beginning of the year as a March 31st, 2020 are allowed for credit losses was 1.4% of gross loans wage compared to 75% at December 31st, 2019 based upon the economic factors and projections that existed it the end of the first quarter. We believe the allowance of March 31st. June twenty was appropriate under the circumstances the amount required in future. Will be highly correlated that changed and economic forecast at economic factors and succeeding periods as well as changes in our key credit quality metrics month.

I would all turn the call back to Chuck.

For his final comments. Thank you John. We are fortunate to have Diversified revenue streams, which can help us weather the storms our insurance trust and Investments and other faith-based businesses complement our banking Revenue sources during economic downturns. We continue to place importance on growing this Revenue. We believe the impact of the pandemic on our loan portfolio will be manageable based on the diversity of our portfolio the quality of the underwriting and proper portfolio management while we do expect to suffer some losses. We are not heavily concentrated in the hardest-hit businesses such as Hospitality restaurants childcare facilities and nursing homes. We will continue to closely monitor our portfolio and will take measures to help our clients when we have the ability and it is prudent to do so, well, it's very hard to predict what may happen for the remainder of 2012.

We wanted to provide just a few thoughts that this time this excludes any large Market changes in the impact of the PPP and the premium financing company a commission.

We currently anticipate a net interest margin between 3.3 and 3.45% for the last nine months of 2020. We expect total non-interest expense excluding one-time cost of between $33 and she's in between $33 and $34 per quarter for the remainder of the Year month. We project the income to average sixteen million per quarter for the last three quarters of 2020. We expect loan growth to be between 0 and 2% for twenty twenty-five compared to your end with the potential for growth in the latter half of the year. We anticipate that businesses and consumers will take a cautionary stance after restrictions put in place to slow the spread of covid-19 or lifted and the economy begins its recovery.

As it relates to the SBA PPP We believe We will earn approximately 13 million in pre-tax income during 20/20. We believe the third quarter should be the most impacted by the benefit from this program were excited about the opportunity to partner with the SBA in offer relief to our clients.

We anticipate that the Premium Finance Company acquisition will be accretive to earnings by approximately 2 to 4 Sandstone twenty twenty and eleven to fourteen cents in 1221, excluding one-time acquisition cost. We estimate that we will recognize between $500,000 and $750,000 of one-time acquisition cost during the remainder of twenty-twenty. The majority of these one-time acquisition costs will be recognized during the second and third quarter of 2020 and we anticipate how long we anticipate closing the transaction early in the third quarter.

we were trying and every

Way to help our clients communities and Associates during this time of need. We are giving back supporting and reaching out a helping hand before I open it up to questions. Let me take a moment and read the following which we left out in the beginning. Please be advised that the commentary of this call contains projections and folks the statements regarding our future financial performance and future events. These statements are based on our current expectations the statements in this call are not history fact in forward-looking statements involve a number of risks and uncertainties detailed in our Security and Exchange Commission filings. This concludes our commentary. We will open up the call for questions. Once again, this is Chuck cell arresting in joining me for Q&A session is John Rogers our Chief Financial Officer. I will now turn the call back to Jeff.

tens of or facilitator

we will now begin the question-and-answer session to ask a question. You may press * then 1 on your touchtone phone. If you are using a speaker phone, please pick up your handset before pressing the key to withdraw from the issue. Thank you, please press * then two.

The first question comes from Scott siefers Piper Sandler, please. Go ahead.

Hey guys, how are you doing? Thanks for taking the question doing. Well. How about yourself? Good good doing well. Thank you was hoping appreciate the the commentary on life the stressing and other stuff you guys have done was hoping Johnny might be able to go into some of the key assumptions forming the basis of the reserve. For example, just uh, you know, GDP contraction rate down payment rate some of those factors that that went into there.

Yes. Yeah, we

We use a model that's very similar to what others in the industry. Use. We are tied to the Moody's forecast. We use the Moody's Baseline scenario that that's their choice. So, you know you an employment was up quite a bit like in the next three months up to 8.66% unemployment was close to 10% 9.74 volt. Um, most of our portfolio is tied to unemployment the largest piece of that about sixty five sixty 6% of our portfolio, which is related to that factor wage, Ohio Unemployment drives a lot of the other portfolio, um, high unemployment alone about 13% of our book in Ohio unemployment in Ohio GDP is off 17% So you can see how that plays out there. So I don't know if I'll GDP was expected to drop, you know, quite a bit of 3% of the next three months so that kind of drove a lot.

lot of our projections on the the Cecil model and the impact that it had

okay.

Perfect. Thank you. And then also you talked about and forgive me if I I missed some of these I was trying to catch up with with someone what time but just in in terms of stressed Industries. Do you guys have sort of an aggregate number that they add up to for example, as a percent of the loan portfolio just the industry's that you would consider vole, you know, like energy retail cre kind of non-essential tough things like that.

In terms of what all those Industries added up together would look like or yeah, exactly. Exactly. Well, you know, I think the top six pieces that we would have that people would question would be about six hundred twelve million dollars, but I I think that I really encourage everybody to just take a cautious with everybody is built these models all these models make the same assumption the assumption. Is that a c i c and I loan is a c and I loan and so forth and there's so much so much difference between the different portfolios, but let's take the worst case scenario. Let's take restaurants for instance, which would be you know. Normally, you know considered pretty problematic, you know, we have a hundred seventy million dollar restaurant portfolio and that could ma'am.

Somebody you know scream but hundred thirty million of it is in McDonald's and you know McDonald's nationally is operating at 7% of Revenue in Ohio there or in all markets. They're doing seventy-five to eighty percent of their revenues stay in constant because of the tendency to use Drive in all of those franchisees took advantage of the PPP program and all of those franchise Thursdays. We we've been able to help them in terms of deferring, you know payments. So they're going to be just fine. So on on McDonald's and and by the way to my knowledge McDonald's has never, you know, failed anywhere and then the other piece of the portfolio, which is relatively yep.

All you can look at it and good chunk of it has an SBA guarantee on it. You know, we're a top hundred bank and the country in terms of jobs. And I'm sure you probably listening to hundreds of banks in the serving seasoned telling you why the models are the models and why they're going to be above average wage and that's what I'm you know trying to do but you know, we feel really good about where we are and it'll be as long as scary and perverse as this illness is and the tragedy that it's causing. I think that will be able to differentiate, you know, our performance over the next eighteen to twenty-four months.

Okay.

Thank you. And I guess last question just you just described broadly that you guys are going through a number of different scenarios, um to kind of come up with you know comforter on the the dividend your Capital levels Etc. Do you have a a sensor? Could you offer a sense for what type of cumulative losses you would have under some of those and are those scenarios similar to suck the the defense scenario that some of the larger Banks would go through or how have you come come at that sort of concept?

It's no we don't have the sophistication of a d fast model. We kind of we will tweak are you know credit stats and to drive provision off and and losses. So those types of things got different income assumptions margin assumptions et cetera, you know to drive things do and see the impact of that with you know pluses and my name is in different Capital actions and what and what happens there. So so we can try to you know box different scenarios and see what happens there. So it's not as it's not as complicated as a c cardi fast process, but I think you know the main component that we're stressing the end of the day is probably our credit stats and the resulting cost of credit which is our biggest variable. Obviously. We have a bulb or Capital, right?

Yeah. Okay. Perfect. Thank you guys. Thank you. Thank you. The next question is from Michael schiavone, please go ahead.

Hi, good morning. Thanks for taking my question. You're welcome.

Can you guys give us a little more background on the Premium Finance acquisition some color on how it fits into the overall business and maybe some color of what you paid and the impact to book value and capital.

The price was not disclosed. It was a cash transaction. It is based in Kansas City. It is a nice business, you know one man's trash is another man's gold. It was a business that was perhaps taught in the previous owner. We liked the characteristics of of the business office and are hopeful of being able to grow it at a faster rate premium for dancing and hard times makes more sense as more businesses need you no need the Assistance or want the assistant. So we're excited about it as it relates to the portion of your question as it ties into our other business office is probably not that much, you know, initially, you know, we you, you know, we are in the insurance agency business and we use Premium Finance. And so there's an opportunity job.

To move that business over, you know over time. We'll look to see if we can provide some ancillary services and also help potential with insurance financing of agencies.

Okay, thank you. And do you have any thoughts on your near-term operating expense from right? Yeah, I think it was in the script. I think we said right 33 to 44 million a quarter for the last 3 33 34. Thank you. All right. Thank you thirty-three to thirty four months.

Got it. Thank you.

I can't believe you were riveted on every word.

Again, if you have a question, please press * then 1 the next question is from Russell Gunther of d a Davidson, please go ahead. Hey, good morning guys morning Russell.

Follow up on, struck you made earlier in terms of the total number of deferrals. Could you just clarify for me? Is that $500 million in total package and that would include both commercial and consumer or is there um, you know, perhaps better granularity. You could share that. Yeah. I can give you the the number that we quoted over Fox about five hundred million was talking about the commercial space. If you want more color on that the McDonald's that I mentioned earlier was about 20% of that a little bit more than 20% of it. That's far and away the largest the largest chunk of it in terms of consumer actions that we took much smaller dollar amount many more customers, you know, 945 installment loans with $17 down.

Imbalances 333 mortgages with $29 million dollars and balances. So total in process and gone up forty six million dollars, you know consumer portfolios, you know about a billion three so much smaller percentage of the dollars, but many more touches if you will.

Got it. I appreciate that Chuck and then based on the Outreach that you've been able to undergo. You know late this Corridor. Would you expect those deferral balances them to increase significantly in in 2 q that when we're having this conversation again, and then are you providing a specific Reserve here know we thought we were very proactive from the get-go in terms of reaching out to customers and helping and helping them with the deferrals. We also were very active in reaching out with the PPP program. I think when you know when this is done I think will be among some of the higher-performing banks in terms of loans as a percentage of the you know, the the embedded book so between the arrangements we made for the commercial customers in the infusion of the capital from the BP low.

We think our customers are going to be in pretty good shape.

Particularly when you add to that granularity of our portfolio and so we're you know, we're going to help them as much as we can and feel pretty good about it off.

very good and then just on the PPP check the $426 million is

Is in addition to the $500 million of commercial deferrals question one and then question too from a p&l perspective the P thirteen million pre-tax income you quoted from PPP. Is that a a fee income or spreading some event?

The origination fee that that'll that'll it's accounted for or throw up the spread income. But the other thing is that 13 million dollars is just the origination spent that way getting is not I mean, it's only you know, we're only getting 1% on these loans and we've got it cost, you know thirty five basis points, but we all going to get sixty five basis points off on a couple hundred million dollars average balance for a period of time. So that's going to help also.

Russell I would State though that you know, that's kind of the current accounting but I do know that this is a accounting for PPP loans is a topic at the fast be

So maybe how it shows up where it shows up that could change but it's currently a topic of the fascinating. Yeah. Yeah. I understand. I appreciate you addressing that thank you. And then last question would just be a follow-up, uh to one of the original questions which was in regards to the internal stress testing that you guys perform. I just tried to get a chance for understanding that the you know, sophisticated defense model is not what you're running and wouldn't expect that. But in terms of potential aggregate loss rates within your life, you know various commercial and consumer buckets. Are you able to share what type of assumption you make in that analysis?

I don't have those currently with me but they're pretty high level. But you know, we're up there pretty high into the well into the single single digits of losses that would occur over time, you know, pretty pretty stressed pretty stressed levels of what we were doing. So not nothing not we're home of the aggressive and we looking at

Yep know it sounds like it. All right guys. Thank you so much. I appreciate all of the help you will. Thank you.

The next question is a follow-up from Scott siefers of Piper Sandler, please go ahead.

Hey guys. Thanks for taking the follow-up. Just was hoping you might be able to help us to frame that Triumph transaction a little more. I definitely get the EPS accretion. But you know presumably that'll be monthly in fees. Just any any color you can give on expected, um G income or overall revenue and then expense impact we should be um modeling in there would be people mainly margin income. The fees are just a small percentage of its, you know about a hundred million dollars of loans off at 7% right but it's about 7% gross. Then there's some origination fees that come off of that Scott and it kind of took a little bit like an indirect book where you have a buy rate you charge above that the times and then you also kind of the agents a little bit of cash that help you originated the loans like it's like

auto dealer

Another decent amount of late fees and those things that flow through as well. So it's a pretty good business producers are pretty good our way and expense wise most of the expenses are basically commission that are paid. It's a relatively small Workforce about half a dozen people that crank this out. So not a lot of fixed expense mostly variable time. Okay, and any sense for what it typical efficiency ratio looks like that or overhead ratio looks like in that business.

It's a little bit better than we would be better. Definitely be a more profitable. They'll be accretive to efficiency. They'll be accretive to our way. But even with eyes is not a big piece to us, so it's not going to have a huge, you know, pick up to that right? It's not a billion dollars. It's a hundred million dollars. I think if you look at the next three to five years it'll grow faster than the bank does, you know, if we getting Bank Acquisitions if you will, it has better growth potential than the bank.

Okay, perfect. Thank you guys. Thank you.

At this time, there are no further questions, sir. Do you have any closing remarks? Yes. Thank you for taking the time today. Please. Remember that our earnings release and webcast of this call may be archived that peoplesbancorp.com under the investor relations section again, I wish you all good health. Thanks for your time and have a good day.

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