Q1 2020 Earnings Call

Bring you up-to-date on our response to and to and the impact from covid-19. This is Dan Shrader speaking and I'm joined here at our headquarters for the first time in a few weeks about my colleagues filmed to our Chief Financial Officer and are in Kaslo general counsel for Sandy Spring Bank Court. Today's call is open to all investors analyst and the media and there will be a live webcast and a replay of the call back later on our website. But before we get started covering the highlights from the quarter and taking your questions, Aaron will give the customer a safe harbor statement.

Thank you, Dan. Good.

Afternoon, everyone Sandy Spring Bank will make forward-looking statements in this webcast that are subject to risks and uncertainties these forward-looking statements include statements of goals and tensions earnings expectations estimates of risks and future costs and benefits assessments of probable loan and Lease losses assessments of Market risk and statements of the ability to Achieve Financial other goals. These forward-looking statements are subject to significant uncertainties because they are based upon or affected by Management's estimates and projections of future interest rates Market Behavior other economic conditions future laws and regulations in a variety of other matters, including the impact of the covid-19 pandemic which by their very nature are subject to significant uncertainties wage because of these uncertainties Sandy Spring Bank or actual future results May differ materially from those indicated in addition to the company's past results of operations. Do not necessarily indicate its future dead.

Thank you, Aaron.

I'm pleased to be on the line with you today to discuss our first order results, but first off, I hope that we find you and your loved ones are healthy and that you're managing well during this unprecedented time that we're all facing. As we stated in today's press release. We came into twenty-twenty and the position of great strength. We have completed another record year and we were preparing to expand our Market presence and close the Strategic Acquisitions of Rembrandt Pendleton Jackson as well as Revere Bank.

As it is well known to all of you the global Health crisis and economic events that began to unfold late in the first quarter quickly took center stage and required Swift action.

But despite the significant disruptions though. We still completed both transactions as planned closing our PJ on February 2nd and Revere Bank on April 1st. We implemented our business continuity plans and continue to serve our clients during what continues to be an extraordinary time. We do remain on track for a full conversion of Revere systems this August we know that this is a critical time for us to come together as a company and we remain focused on building stronger communities driving sustainable growth and taking care of our employees and clients.

I will discuss our covid-19 response little later in the call and talk through the supplemental materials that we issued this morning. But our first start by going over our first quarter results. Net income for the first quarter of 2020 was $10 or $0.28 per diluted share compared to net income of 30.3 million or $0.85 per diluted share for the first quarter of 2019 and the net income of 28 and 1/2 million or eighty cents per diluted share for the fourth quarter of 2019.

Earnings for the current quarter were negatively impacted by the provision for credit losses of 24 and 1/2 million while we could have delayed the adoption of Cecil under the cares act. We objected to move forward with the implementation is planned a little later in our call Phil. We'll touch on Cecil more detail on the balance sheet total loans and deposits grew by 2% and 6% respectively wage compared to the prior-year and our loan-to-deposit ratio ended the quarter at 102 compared to 104% at the end of the fourth quarter within our deposit portfolio, non interest-bearing deposit of 7% compared to the first quarter of 2019 and two and half percent since the linked fourth quarter of significance is the fact that for the first time since the FED began cutting rates last summer mystery price faster than loans as deposit costs were down twelve basis points versus loan deals that contracted only eight basis points.

We continue to focus it.

Tension on deposit pricing is we plan to aggressively decrease rates aligned with market trends and our promotional pricing is already been reduced to levels We Believe reflect the current competitive environment.

Given, the current environment is likely that deposit growth will be limited to new relationship Source through our online account opening portal and the expansion of existing commercial and Retail relationships. Both of which we offer and social distancing was put into place.

On the funding side. We anticipate utilizing the FED paycheck Protection Program liquidity facility as the primary funding source for our PPP lending activity and we'll utilize our vast sources of additional liquidity should needs arise throughout the year. We are in a very solid position from a liquidity perspective.

Or Outlook entering the year was for solid quarter of commercial loan demand and we put some strong numbers up that speak to the momentum. We had coming into the year our commercial Loan Production for the first quarter increased $1,067 million to 351 million or 88% compared to the first quarter of 2019 representing our best first-quarter non-interest income was 18.5 for the first quarter of 2020 compared to Seventeen million for the first quarter of 2019. The current quarter included 200,000 and security schemes and the prior-year quarter included $600,000 in life insurance mortality proceeds.

Exclusive of these factors the growth of non-interest income for the quarter was 10% or 1.6 million compared to the prior-year quarter and this was driven by the 33% increase in wealth management income a result of the acquisition of rpj.

Headquartered in Falls Church, Virginia our PJs helped us enhance our Market presence diversify our sources of non-interest income and deepen our capacity in the well space as a Community Bank in the grey dog, and we're committed to providing Financial Services to individuals families and businesses at every stage of life. So our ability to continue to grow in the well sector and attract top talent in the market is a testament to the fact that our approach Works in our clients do value this service.

On the Mortgage Banking side production in the first quarter was 315 million representing a 108% increase compared to the same quarter last year refinance activity account page 132 million of overall mortgage production, which is a 270% increase compared to the same quarter last year.

As for what we're seeing today application activity has declined from the elevated levels seen in March purchased activities continuing at a modest level within our footprint and refinance demand remains strong when social distancing policy begins to be relaxed. We expect purchase activity to rebound you the pent-up demand conditions are likely to remain generally favorable for mortgage production throughout twenty-twenty with tightening credit standards acting as a modest headwind relative to pandemic levels.

Mortgage Banking income for the first quarter was negatively impact.

Dial liquid secondary market conditions and widening primary to secondary markets friends at quarter-end. These conditions were the result of MBS Market volatility Esther cap capacity constraints in the collapse in the value of mortgage servicing rights do that abroad mortgage forbearance Provisions that were included in the cares act Federal Reserve asset purchases as long as the MBS markets and as a result, we are seeing improve the secondary market conditions so far in April investor capacity constraints and depressed mortgage-servicing valuations continue to be home, but they are showing early signs of easing up.

Net interest income for the first quarter of 2020 decreased 4% compared to the first quarter of 2019 reflecting the impact of declining interest rates over the preceding twelve months that ended your name and declined to 3.29% for the first quarter of 2020 compared to 3.6% for the first quarter of 2019 as the effect of lower rates continue to be realized in deposit pricing in as we integrate Revere into our balance sheet. We would expect our margin to remain in the 3:25 to 3:30 range inclusive over beer.

On on interest expense side expenses increased 8% to 47.7 million for the first quarter of 2020 compared to forty four point two million in the first quarter of 2019, excluding a million and a half dollars and merger-and-acquisition expenses this year not interest expense for the quarter increased 5% This is primarily due to increases in compensation expenses as wage commission for higher levels of mortgage loan originations, and we also incurred additional monthly cost of operating costs with the acquisition of rpj back in February.

Then on gas efficiency ratio is 54.76 for the current quarter as compared to $5,144 for the first quarter of 2019 and $5,198 for the fourth quarter of 2019 the increasing the efficiency ratio from the first quarter of last year to the current year was the result of the rate of growth in non-interest expense outpacing the growth in that revenues as a result of the mortgage margin compression during the same time.

Our credit perspective non-performing loans total 54 million compared to forty one point three million at December 31st, 2019. The growth of non-performing loans is due to the new accounting standard for expect credit losses as 13.1 million of previously disclosed and accounted for purchase credit impaired loans are now designated as non-accrual loans under the new standards guidance.

As of March 31st our overall credit portfolio remains strong as new loans placed on non-accrual during the current quarter amounted to 2.4 million compared to 6.2 million for the prior-year quarter of and 5.4 million for the fourth quarter of 2019.

As you move through the uncertainty of covid-19 and its impact on the economy we will continue to work closely with our clients and manage through what is likely to be a challenging credit environment

During the first quarter of the company completed in stock repurchase program purchasing a total of a million and half shares for a total of fifty million dollars at an average price of $33.58 per share with tangible Book value remained stable at $21.09 per share that March 31st compared to $21.05 at Mark's 3119 after the completion of the factory purchase program an increase in the quarterly dividend to Thirty cents per share in the second quarter of 2019 and the addition of $35 million in Goodwill and intangible assets.

The company had a total risk-based Capital ratio of 14.09 a, tier 1 risk-based Capital ratio of ten twenty three tier 1 risk-based Capital ratio of ten twenty-three and a tear down on average ratio of 878.

As I mentioned earlier the elected to proceed with the adoption of Cecil on January 1st, resulting in initial increase to the allowance for credit losses of 5.7 million, exclusive of the two point eight million reclassification to the allowance for credit losses related to the acquiring credit impaired loans. The impact to retained earnings at transition date was only two point two million.

As mentioned the provision for credit losses was 24 and 1/2 million for the first quarter of 2020 compared to a credit of $100,000 for the first quarter of 2019 and a charge of 1.7 for the first quarter of 2019 the impact of the negative economic projections as a result of covid-19 accounted for most of the first quarter provision, excluding the effect of the suggestion deterioration in the economic Outlook late in the first quarter provision for credit losses, which was projected to have been approximately 4.1.

I want to transition now to direct your attention to the supplemental materials that re-released this morning in conjunction with with our earnings release.

I'm going to cover several pages of that deck and and and film into is going to come in on RC solid option as well as our current capital position.

I'm going to walk through a number of slides reference the page numbers as I do and just make some general comments on the first few and then drive drive into some of the credit related material to help you understand a little more of of where we stand as we as we work through this covid-19 situation on on a slide three like many companies. We did took all the actions then that a lot did in terms of suspending business-related travel in-person meetings, you know, the clothes branches lobbies to Public Access with you with the exception of private appointments. We actually Consolidated branches that did not include drive-thrus, which is a number of Thirteen branches and I'm really pleased with the fact that we were able to transition approx 85% of our non Branch Personnel to teleworking that is been a very meaningful a number for us and we continue to serve

clients without without

meditation or without disruption

on on slide for you can see on the outside on the onset of the crisis. We established enhanced personal leave which will continue to evaluate but we provided two weeks of paid time off. We're unable to work for reasons related to covid-19. And we also put into place and appreciation bonus for branch Personnel or other members of our staff who were not able to work remotely and then we continue to actively redeployed employees where we need them in some cases that's in the mortgage area consumer lending our client service center or call center and those that may help out in the PPP loan loan process as well. We're routinely communicating throughout the company and

Keep people up to speed on on on what's going on on Slide Five from a client Outreach perspective. We want a special web page to provide the latest updates and resources for our clients to understand what's available to them. Not only from the bank, but in terms of federal relief programs as well as State Relief programs, we are working with clients as you might imagine on a case-by-case basis to help them through this difficulty and we have many of our Bankers working with clients to help them understand programs available through Maryland, Virginia DC and and the paycheck Protection Program, which I'll I'll hit on here in the next next slide and the bottom of the slide and we commented on this in the in the press release a number of different things that we're doing to help clients in the area of fee waivers.

July 6th, we have some of the statistics these are as of April fifteen in terms of our activity with the paycheck Protection Program, but the time funding ran out, we had received over 4,500 applications for over a billion dollars in requests. As of this date. We have 28 over 2,800 loans that have been registered with the same day and we're in the process of documenting and funding those with over $900 million and and dollars that will go to businesses that with an estimated employee base of about 88,000.

In addition to the PPP. We've also provided a number of deferrals or interest-only deferrals for for clients. Again, this is as of April 15th and does include uh, our new colleagues from Revere bank and our new clients from Revere bank. So we've received to date as of April 15th over two thousand requests. We've modified 912 commercial accounts and 79 consumer accounts for a balance of $845 million and is you'll see in in the next slide. There's there's more more to do with you as a relates to the requests and then a number of waivers in terms of of late charges for both commercial and and Retail clients off to transition to some specific portfolio data to hopefully inform you with a little more detail on certain segments of our of our credit portfolio as we move through the pandemic

What's like seven?

The busy chart there's four different really elements of information here for you the top left.

Is is alone composition just to show the diversity in the portfolio. This includes a pro-forma Revere but as of 3:31 in terms of that loan composition off if you slide down the page, the bottom left quadrant is just to give you a snapshot through April sixteen again combined company in terms of utilization Trends going back to December and through month by month through the first quarter and you can see there's pretty stable utilization both in the commercial space as well as home equity loans. So we have not seen you know, what some may have anticipate significant drawdown. So the existing lines of credit, which I think is a is a good sign moving across the page to the top right? These are the balances and certain segments of our portfolio.

On again combined portfolio over a beer in Sandy Spring and then the the quantifying the modification requests by portfolio and and you can see the person to the portfolio. So as of 4:16, we had uh a billion 761 a modification request. You can see on the prior page as of that same date. We had processed $850 off of those requests and then the bottom right is speaks to delinquency Trend that we see in commercial consumer and mortgage and no no real material movement.

In in obviously falling off what you see in the decline. There is once once they credit is deferred then they are no longer counted in the delinquency delinquency percentage why you see it fall off?

Sly date is and the next several slides really pull apart of a handful of portfolios and may may be of interest to you there certainly are of us as we work with our clients. This is the course real estate retail portfolio for the combined company again ProForm, as of April 1st, we got nearly $1,000 portfolio representing thirteen and a quarter percent of commercial loans. The good news is the average size is is two point six million from an underwriting perspective since these are really good number of these do these next two bullet points of weighted average loan-to-value and debt service coverage reflect the Sandy Spring portfolio. We have not pulled together the Revere portfolio into that assessment. We don't expect it to be a solid solid underwriting in Market retail neighborhood centers. You can see if the bottom of of slide eight I need to log

A note of correction. We re-filed this deck. I believe your death might see the 26% of the outstanding balances have requested a deferral or interest-only. That number is actually $30.00 and then a slight number of those have been approved for PPP loans office very similar information down nearly 9% of commercial loans again, small average size of slightly over two million, very strong metrics in the in the loaner values and debt service coverage. Just revealing some of the flexibility that these borrowers have in in a difficult Market again in market and and on the same correction, it's 16% of outstanding balance. Is it requested deferrals or interest-only as opposed to 12% I believe the earlier deck showed and then modest very minimal involvement in the PPP program.

and then the

The multifamily on slide ten same information just north of 6% of commercial loans again a very low average loan size very good ltvs and cover just again in Market minimum outside of our primary footprint and that number of outstanding balance is requesting deferrals is 21% compared to earlier at 18% And then the last the last couple of specific slides are around Hospitality our hotel portfolio took $376 million or 5% of commercial loans again, average size is just under 5 million 59% waited loan-to-value month and this obviously more participation in the PPP program or 77% have requested deferrals and about seven million of birth.

P loans associated with our hotel portfolio and then lastly is restaurants with 151 million in outstandings or 2% of commercial loans off the loan size or slightly over half a million 70% real estate secure 56% weighted average loan-to-value line usage is in line with overall commercial and public participation as you might imagine in the paycheck Protection Program of $65 million dollars of from 200 North or 220 client relationships in that space. So I hope that's information is helpful. These are the portfolios that we have zeroed in on and are focusing a great deal of attention and helping our clients through the cycle. And with that I'm going to pause and turn over to Philly but then talk about Cecil and and and

All right. Thank you Dan. Good afternoon. Everyone. I hope we find everyone well here this afternoon cuz I was on the call as Dan just mentioned. I'm going to take the next 5 minutes to provide some additional details related to our our Cecil peaceful driven allowance for credit losses here in the in the first quarter. And so the first time off as has been adopted pick up once like thirteen here which has we would refer to as a walk.

Over our allowance bill for the first quarter of 20 and as you can see the major component in the bill is due to the change in the economic forecasts, which highly dependent on a number of team or economic variables that will be outlined on the on the next on the next slide. If you go to slide Fourteen and we can talk about some of the methodology assumptions off to use as a moody space forecast, which is the which is developed with a local MSA that was released in this case by movies in early April, but effect that were in place at the end of the first quarter now this Baseline forecast integrates the effects of covid-19 and portrays a peek unemployment rate for our Market here about 24% in the second quarter of this year. So that's followed by a soon recovery in the second half of the year and then to 20 21 with an employment rate that settles it off.

4.7% range throughout next year this local forecast is based on a broader Moody's economics National Economic forecast that includes a New Jersey National projection for the unemployment rate to seek it actually 8.7% in that same second quarter of this year and then to be maintained in the level of 6% through 2061 in determining are reasonable and supportable forecast. For purposes of this particular application of Cecil. We chose to short time Horizon from two years at two 1 to reflect the uncertainty in the long-term Outlook that we have at this time. We did perform calculations of the results using both the one year and the 2-year forecast. But we then quickly deemed the that the difference in the two results was considered to be in material. So we chose to move forward.

The one-year support of the forecast. Because of the also the unformed a prevention of certainty. We also chose to not take into consideration any potential mitigating factors that would be based on what could be perceived as the positive outcome or impact of government programs such as the PPP and others. We just felt that this was the most comfortably that this was the best and most conservative stance that we can take in this regard. If you then book the flights slide fifteen, we provided some additional granule in this case related to The Reserve bill, but depicted by portfolio where you can see the most significant amount of Reserve increase is in the commercial business portfolio, which has long would not be a big surprise to most where we added 13.3 million in additional reserves above the level based on our January One initial adoption.

No.

Finally as it relates to our Capital position on slide sixteen. We provided you with a recent trend of our pertinent Capital ratios off with some brief explanations below regarding the movement in the ratios over the last three quarters. We do feel confident that our Capital position is strong and then we need to be most of this position with our $175 some debt raised during the fourth quarter of last year. I'm also note that in order not depicted on the sleeves have recently performed some stress test analysis against our Capital position. We reconstructed a Baseline and it's severe forecast scenario, utilizing the same Boutique bass line for Thursday in corporated in our system calculations and a code. They say stay with referred to as for economic economy and the severe case

having done, so

You to be confident that we have the capital to carry us through this ongoing situation.

Batman I'll turn it back over to you. Thank you feel just before we moved to your questions. I'd like to take a moment to express my sincere appreciation to all of our employees from Sandy Spring Bank rpj, and and our new new colleagues from Revere the way that our people have come together while working remotely to take care of our clients and each other has been nothing short of remarkable. And I know that our clients are grateful for all we've done to keep everyone safe and to help them through these uncertain times our clients need an advocate now more than ever and I can't thank my team enough for being there with that will conclude my comments and move to your questions. So Grant will take the first question and click, please stay who you are and what company you're with so we know what we're speaking.

We will now begin the question-and-answer session. Ask a question. You may press * then 1 on your touchtone phone. If you're using a speaker phone, please pick up your handset before pressing the key to withdraw your question, please press * then two at this time. We will pause momentarily to assemble our roster.

Our first question will come from Steve, Murray with G research, please go ahead.

Is this is Steve Ballmer at you? Research? Are you guys doing?

Hey, I want to start off. I really appreciate the the composition and Cecil disclosures. Those were were very helpful. Just kind of going through the portfolios and then kind of see still adjustments. I was wondering if anything if there's anything you guys can say about what has changed in the way you're looking at the reserve or their potential losses since 3/31, you know, obviously, we've gotten some additional data since then.

Do you spell I don't know that we have really gotten a whole lot of additional information relative to do what's going on in our office at this point to make any further kind of judgments on changes. We might make to the the reserve the Steve the the economic forecasts used actually was you know generated by Moody's with with the very end of the quarter walk. Right? In fact, it's kind of an in that regard kind of background. We probably went through

Five different Generations before cast throughout the corner and we were deciding how we were going to initially Implement peaceful to then lands on the one that was most recent that I think I mentioned in my comments off. They they finally published after the end of the quarter.

Okay, fair enough. Okay. So I'll switch to to Revere then. Basically you guys are going to get the full quarter of review and Q2. Maybe you can can help us to think about the puts and takes on nii and then where where we should look for a a starting point there.

This is Phil again. I think when Advanced initial comments, he suggested that we would we're looking at a a range of of the margin in you know, going forward into 3:25 to 3:30 range that is inclusive of what our thoughts are on the combined balance sheet between our two companies, One of the things that will probably have a good probably make some, you know, be some adjustment to that would be where we ultimately land related to the marks on their balance sheet, which I think we should believe are going to be, you know, somewhat different than what we initially thought. They would be back in September or you know, too obvious reasons funding to change and the interest rate environment impact on the input and the interest rate Mark which makes sense to be larger. I would say than what we had initially assumed and then of course the the change in in the credit markets that are related to age.

I'm looking at things in a in a very very different economic environment. Now some of that may offset each other to some degree depending on how that plays out. But that would be the only other thing that we would take into consideration and in further adjusting that that kind of margin outlook for the remainder of the year, but but then suggested does include the combined back.

Okay, okay, and then one more if I may so non-interest deposits looks like they were down in an average basis but up pretty materially on a. N. I'm wondering if you guys could provide any insight as to like how you expect to see those balances behave going forward.

This is Phil again. I think the the biggest driver in that kind of a. End build up in those demand deposit balances was the same typical kind of each month in in court or seasonality related to our Title Company businesses. And so I would say other than that you would you know, you were effectively because of the fact that I would say quarter-over-quarter at this particular point, you have given that

Current situation with the with the ability for business development that's in the market. I'm not sure we would be looking for a tremendous amount of growth in the in the d d a base wage would be probably be looking for it other than you know, existing existing client adding to their position. So to speak either in in the commercial or in the retail area, but DEA bearing we've taken steps on the on the right side in the light in the store to try to mirror what happened in terms of the moons of the Fed so that we could try to preserve the margin as much as possible which is probably put us more than middle of the pack in this market today for pricing as opposed to you know, for a fair long fairly long period of time we position ourselves in the top third of a break payers, even though I think a lot of our competitors will probably come back to where we are eventually dead.

protracted amount of of time we expect rates to be at you know, the kind of historic was

It's Dave Dan the the only other comment I'll make is on a temporary basis, you know, we'll see a significant amount of you know, DDA increase by virtue of the triple P program cuz that's how we're funding everything into into DDA accounts. But you know timing will determine whether that's seen a quarter ends or anything like that, but certainly off within the quarter. Yeah, which is which Steve also kind of reminds me that that you know within that within a margin kind of guy. I have not taken any related to the month program in consideration and looking at that range and I think we know that my teenager that could end up being a fairly kind of a lumpy result the quarter-to-quarter basis just because of the great build-up and then potential for forgiveness all the VIN, you know a couple of months.

Okay, thank you. Thank you.

Our next question will come from Kathryn Miller Miller with KBW, please go ahead. Good afternoon. I want to thank you for all this disclosure was really helpful and you know a lot more than what we're seeing from everyone. So so great job there. Thank you and wanted to start was a follow-up on a m p p program and just timing of when you think those fees will hit how should we kind of think about maybe what percentage You're Expecting or modeling to be forgiven? And then how much you think is in fact that the second quarter versus third.

Yeah, Catherine, this is Phil our current view towards.

The program in the potential forgiveness level is our we've been we've been kind of estimating somewhere in the twenty-five maybe thirty percent range that may not be forgiven and that may be somewhat high but that's kind of what we are operating under and I think we're also expecting that the fees related to this would be advertised, you know, the spectrum of the maturity of the loans and that would be you know would be brought back according to those that would be prepaid at that point of forgiveness. So that's about the margin is is that you know pass through the way it handled will probably, you know, it'll come back through I think interest income and have a you know, pretty big flip into the margin in that given month of the quarter. But right now that's that's about the best that we are kind of operating under cuz it really, you know, really don't really know where how much of it would be truly dead.

That's kind of what we're working with at this point.

That's helpful in terms of timing of you know funding we're at first that first round of PPP are fundings will you know need to all be done, I believe it's the 23rd or 24th. So it's all you know, that that funding will come come back. It's a little bit uncertain as to exactly how those fees are going to get paid off makes sense. Okay? And then that is a Revere Mark is can you cuz you're thinking about the purchase accounting marks for this quarter. Can you factor in the impact covid-19 and and increase your credit Mark and how I guess we went into this deal thinking it was going to be about I think it was about three months. I would have to book. So so you know with that with a higher Mark, how are you going to be included. Maybe a range of what book dilution could look like

Yeah, I mean, I think first part of your question initially related to the impact of the movie situation, I think have to clearly Thursday through into the Mark. I think it will also therefore impact the day to double count that we all are fond of and I think that that number depending on that regard the helmet how many of the loans again given the current environment are going to get carved out to be PCD versus not as opposed to what she imagined that number of the PPD will probably be larger than before the day to number in one way. It could be smaller because of loans that are going to be provisioned against right away which would be smaller but at the same time so that's going to be offset by just this year calculation based under a different very dead.

I mean, I guess it started, you know, looking through trying to trying to get a handle on what those

Reserve numbers you get the rear portfolio our I mean our best estimate right down and this again doesn't try to delineate how much is in PCD versus not would be if you're looking to reserve against their entire portfolio. We might be adding somewhere between Thirty thirty-five million dollars of reserve and that's probably right at the moment. Probably the best like to give you a bath.

Got it and included in that is the is both the the PCV peace and the and the non-pc DPS that will be kind of twice a month right now. We still not sure how much it's going to fall into what the bucket purse a month. Okay. Yeah, that's okay. Thank you. And the moment was just in the slide deck you talked about to yes, I want page you have the $845 million month payment referral and then you know, and then there's one point seven that I guess if we have been approved 1.7 have been requested so I can we get to your time with the difference. And if you think these are payment deferrals that you think will be granted over the next couple of weeks and then if that's the case, how does that song?

You're reserving as you I guess it really the question is as low deferrals continue to increase. How does that play into your life your your incremental Reserve over the next couple of quarters. Thanks.

Catherine the difference you hit it the difference in those two numbers is is the request versus those that have been granted and that the the Delta Lounge which is what nine hundred million or so is in some form of process and hasn't been determined whether those will be those modifications will be granted or not. And in many cases they will but I don't I don't think that at this point there's been a determination as to how those modification assets are modified as I'm going to be treated differently within our Reserve calculation. I think it's just a matter of digging into those from a credit by credit basis and determine you know, what do they look like coming out on a side? So I think there's more work to be done there in terms of the overall Reserve related impact.

It's helpful. Great. Thank you.

Again, if you'd like to ask a question it is * then 1 * then 1 to ask a question.

Our next question will come from Eric's work with burning in Scattergood, please go ahead.

Good afternoon, guys.

Maybe first I'll just start with a follow up on that last question. I'm curious if the pace of deferral request that you're seeing has changed was there, you know as It sped up or kind of remained constant over that. Or is it kind of pissed off in recent days or weeks?

No, I think obviously there was there was probably on the front end a a lot of immediate activity. But since that time, it's been pretty it's been pretty stable. I think a lot of clients have been as you might imagine working on making sure they're getting their place in line on the PPP program while at the same time, you know working through the appropriate. It's been a pretty stable process of requests.

Thanks, and that's a maybe a good segue to kind of program. So you had about forty five hundred applications 2,800 approved. So what's the status of the remaining $700 or any of those, you know not submitted for any reason or you just waiting for the second round of funding and and you continue to do to accept those applications today. Yeah, give you it'll give you a little more color there. We've got off right around a hundred fifty folks dedicated to to the PPP program and they did really Herculean type of effort to get those through the process that we did. The only reason why we didn't do more is the funding ran out and so we prepared and geared up so that when hopefully I don't know maybe the house is already active that the next phase gets approved will you know work diligently to get this remaining applications through as well as consider additional applications that ma'am

Through our portal but it's all it really all just about all about funding running out.

That makes sense. Do you have any confidence or or insight into whether kind of the remaining applications you have that there will be enough funding to meet all of those requests. You know, it's that's a great question. You know. My thoughts are this is our sense is that many banks across the country. It probably spends the last, you know week gearing up for phase to Thursday is making sure that the the many applications that they were unable to get through. So I you know our guess is that this next phase the money's probably going to go much faster than the first because we spent a few days everybody kind of gearing up with what seemed like daily changes to what what the SBA expected. So if they don't change the program and it's the same application then it's probably going to go pretty fast. So we're hopeful that you know, those those remaining applications in terms of dollars are not as significant as the front end off.

It is.

The best we can to quantify that at this point, but so there should be adequate resources. It's just a matter of how quickly they get eaten up.

Understood and then moving to the tax rate. Is there any additional benefit remaining due to that cares act provision or would you expect the the effective tax rate in 2q to kind of go back to Thursday 24 and half percent level?

It's still have expected tax rate to go back to a More normalized Level from this point forward. Okay, and then just last one for me trying to think about the Run rate of the wealth management line going out for the one key result had that the two months of rpj and they are so another month to put in but maybe just a reminder in terms of you know, how many of the you know assets under management you have are the fees are based off the market value levels and whether that's a average value or a. N level and just kind of thinking about the trajectory of that line item going forward.

Yeah, I'm looking for my AUM at the end of the quarter and I believe I think they declined reported a quarter from somewhere around 5 million to about 4 .05. So it's just in terms of the market market implications 657 million dollar decline in the balance in an offspring decline in the revenues of about $800,000 and that's netting out. You know, that's true. Netting, you know decline relative to market value for the most part, you know outside of the additional revenues that were added to our PJ.

Okay, so it's a most of that decline is is reflected in those numbers. So obviously tough to know where we're Equity Market values go from here, but if it were to stay flat you should have another month of rpj home or cell potentially at least kind of, you know flat maybe up if the market stays where it is. Obviously, that's the big question.

I think I think that's a I think that's a reasonable way to look at it as you say not really knowing exactly, you know, what else what else could potentially happen to the values? I think that's a reasonable way to look at it.

Excellent. Well, thank you for taking my questions today guys.

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

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The conference has now concluded thank you for attending today's presentation. You may now disconnect.