Q1 2020 Earnings Call

This morning. I'm joined by our chief operating officer jovel Chief risk officer. Grace Vivace and Chief Financial Officer Mike Fitzpatrick. As always. We appreciate your interest in our performance and are pleased to discuss our operating results with you this morning. We have a number of topics to cover that relate to the quarter our recent acquisitions, and of course updates regarding the impact of the pandemic on our business after that. We look forward to taking your questions.

In terms of financial results for the first quarter Gap diluted earnings per share were $0.27 quarterly reported earnings were impacted by a number of unusual items that total ten point four million dollars instead of em, these items related primarily to the adoption of the Cecil loan-loss standard and the Dual Acquisitions completed on January 1st, as a result. We paid quarter earnings at $0.45 a month looking past some of the unusual items for the quarter underlying financial performance was strong as demonstrated by expanding margins and increase in non-interest income and wealth operating expenses.

Learning strength of the franchise is critically important as we move into an environment of substantial economic uncertainty.

Regarding Capital Management for the quarter the board declared a quarterly cash dividend of $0.17. The company's 93rd consecutive quarterly cash dividend 17% dividend represents a conservative 38% payout of quarter earnings.

As you will recall we maintained a relatively low payout ratio over the past few years to prepare our balance sheet for a shift in the credit cycle. This allows us to maintain the common dividend while continuing to provide degree of capital flexibility.

There are no plans to reduce or eliminate our common dividends at the present time.

Capital levels remain strong with the tangible Capital assets to total assets of 8.9% at the car insurance rate. We expect to build Capital levels for the duration of 2020.

Early in the year the company was able to repurchase 648851 shares of common stock but suspended repurchases on February 28th as the global impact of the pandemic became apparent.

Purchases are possible in the future, but we will preserve Capital until the full impact of the pandemic is well understood. The company is slightly more than two million shares remaining in the current share repurchase program. Just a quick note regarding tangible Book value for share which narroflex the impact of the Two River and Country Bank Acquisitions tangible book value per share decreased by about 3% primarily driven by the consideration paid for the Dual Acquisitions completed in January.

The book value dilution is slightly more favorable than the estimate provided when these transactions were announced in August of last year and should accelerate the tangible book value per share earned back.

Turn to the income statement the first quarter demonstrated strong performance in net interest income healthy income driven by swaps and well-managed expenses included in the core operating expense number is 1 million dollars of expenses related to the pandemic.

These endemic related expenses should moderate in the future quarters.

Even without fully realizing efficiencies from the Twin Acquisitions the court efficiency ratio remained close to 55%

Google provide more detail regarding funding costs, but the stabilization of that interest margins also bodes. Well for future quarters.

Play during the call. Grace will walk you through credit provisioning and the impact of Cecil and the pandemic our decision to implement Cecil require some additional discussion. As you may recall. I've been vocal regarding the pitfalls related to this to Cecil and strongly advocated that the new standard be set aside given the unprecedented economic shock. The world is facing.

Unfortunately, the policy action taken regarding Cecil has made things even worse by offering an optional deferment. We have created a few new issues First Banks. The parents Cecil may be considered to have more precarious balance sheets. Second. Security's guidelines require the disclosure of impacts related to upcoming accounting changes. So Bank select the first Cecil have some responsibility to share the Cecil estimates anyway, and finally the idea that the deferral would require a future restatement of Prior. Financials is the icing on the cake.

We have a high-quality loan portfolio and a strong Capital position and determined it would be best to just move forward as plan.

I guess every crisis experiences in accounting issue in 2008 was the application of mark-to-market. And for the pandemic it will be Cecil.

Basic qualities especially important as we move into unfilled unfamiliar economic environments.

It's discussed on previous calls. We've been proving the balance sheet of higher-risk loans for quite some time. And we continue to sell higher-risk loans in the first quarter. First quarter of own sales were responsible for 88% of our net charge-offs for the quarter.

Helping Drive.

On the level of non-performing assets to just sixteen point six million dollars or a mere sixteen basis points of non-performing assets to total assets. In fact other real estate owned amount less than $500,000 a quarter in

you have an economic conditions. We expect these figures to grow in the upcoming quarters, but our balance sheet provides the critical room to work with our clients during a challenging time.

Regarding the pandemic we provided several supplemental slides to our quarterly earnings release these slides include important details regarding forbearance programs and our efforts to serve as a conduit the s p h p p p program, I won't repeat the discussion from our March 24th pandemic investor call. However, I will assure you that the bank was early to respond to the pandemic month. We continue to address operating conditions in a wide variety of ways. We remain open for business are assisting customers and are prepared to operate in a socially distanced world for an extended period of time.

Our operating disappointed strong digital Solutions of our ocean first two address forbearance crisis response quickly and effectively by applying our forbearance experience in Hurricane. Sandy may have been working with clients to address for bands requests since March 16th.

Over the past several weeks. We have had thousands of conversations with businesses and consumers that are result in a request to defer payments on one point 1 billion dollars worth of loans.

Are the federal experience indicates that forbearance loans performed quite well, when their pre-crisis credit risk attributes are conservative race will talk you through our supplements life which demonstrate the quality of the loans requesting temporary forbearance.

Joel discuss lending activities including our participation in the program. However, I want to quickly highlight the importance of having dedicated substantial resources over the past five years to build out our digital banking platform.

Put our efforts in perspective OceanFirst was not an active SBA lender when the cares Act was signed on March 27th less than one month ago. I'll say that again OceanFirst did not have an SBA Department nor had to be originated in SBA loan RSV a portfolio related exclusively two loans acquired through the purchase of other Banks.

In recognizing the critical importance of this program for our clients. We responded quickly by simultaneously building a digital application interface while working with the SBA to activate. Yes vay since we acquired on January 1st as a result of the Two River acquisition.

By April 3rd. We were channeling hundreds of digital PPP applications from our clients into our Encino commercial loan system for processing our first successful submissions to the page generated SBA approvals on Sunday April 5th.

the week of April

Sex with dedicated to developing a custom-built electronic closing package that would comply with somewhat fluid as be a guidance on April 14th. We began closing these loans electronic becoming among the first banks in our Market to disperse funds through today. We have secured SBA approval for 1,568 loans totaling $350 off which will fund over 36,000 jobs in our communities delivering for our clients was possible because of our extraordinary commercial lending team. Of course, they were supported by amazing Information Technology professionals where the tools skills and experience to respond promptly.

Before I turn the call over to Joe & Grace. I want to acknowledge the recent decrease in our share price.

We know the entire banking industry has been impacted but every ocean first employee is also a Cheryl we share a common goal to create shareholder value and know that the decisions we make in times of Crisis are especially important.

Our efforts in the upcoming quarters will focus on helping our customers through an incredibly challenging time.

Assisting our customers and their recovery will protect and preserve the assets of the bank and build the bank's reputation in our communities the combination of the strong balance sheet and Stellar reputation represents the path to building shareholder value over time at this point. I'll turn the discussion over to Joe to provide more details regarding operating conditions and some additional thoughts regarding many of the initiatives I've outlined

Thanks, Chris.

One origination is a $426 million drove loan growth of $158 billion for the quarter year-over-year origination is were up to 63%

commercial lending closings were strong at $267 million with quarterly commercial growth of $165 million.

New York and Philadelphia continue to progress as they closed a hundred and seventy million in the quarter.

Note the quarter had very little loan originations from country and to River as expected after an acquisition a closings have occurred in April and their pipelines are building our swap income had a strong quarter of over four million in revenue. And while we expect Revenue to be bumpy to to volume and economic conditions. We anticipate a solid year and swaps to offset reductions off their feed business.

A residential real estate continued its solid performance with $149 million closings. The total pipeline at $525 million at quarter-end was at an all-time high with Geico commercial and residential activity.

We anticipate a solid second-quarter and Loan activity and while there could be some Fallout due to the uncertain economic environment. We remain confident in our underwriting and risk appetite off Grace will provide much more detail and credit metrics and her comments to follow. I'll note that we are re underwriting every commercial pipeline transaction as we approach closing to be sure the underlying business is healthy and cash flows are intact in the residential business. We have also gone back to second time and re-verified income and job status prior to closing.

We've also also increased minimum.

Down payments for purchases and eliminated Cash out refinance is for vacation homes and investment properties while also reducing loan-to-value limits on equity lines and loans.

Moving to the net interest. Margin. We saw a coordinate interest margin Improvement of one basis point and a reported net interest margin expansion a 4 basis points.

Reported figure includes purchase accounting accretion and modest prepayment fees the additions of Country Bank and Two River Community Bank Loan portfolios help to keep a charge and stable despite the effect of Prior red cut that cuts in lower weighted-average originations.

across the deposits increased six basis points to 70 basis points

due to deposit cost from the acquired Country Bank and Two River Community Bank.

OceanFirst Lexi saw a reduced weighted average cost of deposits of 2 basis points in the quarter the sixty basis points while the weighted average cost of deposits at Two River was 87 basis points and the Country Bank deposits 146 basis points. We expect the cost of deposits and all portfolios to decrease in the second quarter due to continued reprisal.

Expenses were well-managed and it's Chris noted included approximately 1 million dollars in covid-19 related expenditures. Most of which represents pandemic bonuses paid to Branch staff back office Personnel. We remain confident in our quarterly expense run rate, but cautious given the economic Outlook.

We expect to spend as necessary and digital acquisition cyber security and other important initiatives including the safety and protection of employees customers and visitors to our facilities.

Well, we why we will be vigilant with our management of expenses now is not the time to save a few dollars at the expense of the health and safety of our staff or customers in our community.

Merger integration for two or Community Bank remains on track with a mid-may systems conversion and Branch consolidation is scheduled as previously noted. We will be closing 5 Legacy Ocean First Bank the same weekend.

I will note that the majority of the closure expenses related to the branch consolidation or in the first quarter expense number.

Closings will occur in Q2 and we will see the financial efficiencies beginning to 4.

In regard the Country Bank, we've elected to delay their systems integration date and will not make a decision on a revised 8 until mid-year since there are no Branch consolidations involved in Home Run Race and upcoming cost savings are not as as significant.

In regard to daily branch operations, you may recall we were one of the first things to close branches and limit activity to drive-thru teller transactions only.

as we

Now begin to focus on the return to work in a new normal environment, we expect to begin by focusing on the return a full-service banking, utilizing a hub-and-spoke methodology.

Well Service would be available at certain geographically specific Hub branches which surrounding spoke branches limited an hours or closed inside traffic while remaining open at the drive throughs

we are exploring abbreviated schedules as well using both customers and employees back into a safe environment over time.

We will employ safety protocols which will include the use of personal protection equipment.

Chris provided some overview comments on the paycheck Protection Program commonly referred to as PPP. Let me provide you a few more details to date.

We've electronically distributed over 3,000 application for assistance receiving back more than $2,500 and were able to secure s b a r approval for almost $1,600 prior to the wages around the funding being exhausted these approved loans represent $349 in loans to businesses employing over 36,000 workers. We met we remained rib to approve the remaining requests in our queue when the SBA program is reloaded with the goal of supporting loans approaching $500 and over 53,000 jobs between the loans we've done so far and the request we have intense.

And just to note on funding of the short-term loans if needed we will utilize borrowings from the Federal Reserve allocated to PPP pledge loans at a cost of 35 basis points off which will help to offset any funding costs for liquidity needs and has the added benefit of capital protection.

With that, I'll turn the call over to Grace. Thank you Joe as Chris mentioned I'll discuss in the components of the increase in wage as well as provide an update on our customers seeking debt relief.

I would like to preface these remarks however with some contextual comments regarding our preparedness for the current environment. OceanFirst has long had a conservative credit culture and strong earnings stream. This is borne out by the stress test results. We share during our investor call last month, you may recall that this stress test included a severely adverse scenario that approximated the severe adverse case in the most recent seek, our guidelines our model indicates an ability to absorb over three hundred million dollars of credit costs over a 9 quarter. While maintaining our profitability off our ability to pay dividends and our Capital ratios. Well above both Bank policy and Regulatory minimums. We certainly hope that the level of physical intervention will result in a far less owners hire meant but we believe the balance sheet is prepared for a shock.

these results are

Not an accident over the past several years management has focused on building a fortress balance sheet and anticipation of the next credit cycle. Please actions included maintaining our credit rating discipline despite increasingly liberal Market terms and a focus on credit risk management practices that ensured safe and sound growth.

Evidence of our efforts is the widely Diversified Credit portfolio as well as our risk selection. We have not participated in the leveraged-loan market and energy sector credits correct card Finance automobile loans or equipment Finance even lamb bones are negligible totaling just $19 for just one quarter of 1% of total loans.

What we could not predict what would trigger the next credit stress event? This management team has been through several credit Cycles over the course of our careers. And these experiences have taught us that preparation is the best defense for times like this.

With that context, I'll turn to the primary components of the increase in our allowance for credit losses the components I'll discuss are outlined in more detail on the slides that accompany the last night's earnings release.

In summary our transition from the incurred lost methodology to Cecil resulted in an aggregate 15.6 million dollar or 92% increase along reserves between December 31st and March 31st.

Now to break this change into components or December 31st, 2019 ending balance balance with 16.9. We added a day when Cecil Mark of four point two million dollars to River and Country acquisition Cecil marks of five point four million dollars funded net charge-offs of one point 1 million dollars and then added to the Cecil Reserve to address the expected economic deterioration related to covid-19. The code that Edition was driven by seven point two million dollars of qualitative Factor adjustments.

During the first quarter our loan growth was centered in portfolios with historically very low loss rates. This combined with further declines in Las Vegas and almost all of our loan portfolios would have resulted in the bath contraction of one point two million dollars in Legacy OceanFirst reserve requirements. Despite that loan growth.

These figures reflect the current risk rating distribution of our portfolio driven and historical loss rates and portfolio composition are key drivers and the exact balance. We have focused our lending activities and lower risk assets and subsequently have benefited from a very low level of credit losses for many years.

Please fax the allowance Mac acknowledging the unprecedented economic challenge ahead and the quantitative Reserve limitations. We expanded the total Reserve by adding qualitative Reserve related to covid-19 that total seven point two million dollars.

This is

7.2 million-dollar qualitative Factor adjustment is intended to set aside reserves to account for the likelihood of risk rating migration as the impact of the pandemic becomes clearer. This represents a best estimate at this time of expected future credit losses from the pandemic.

It's too soon to know the depth and duration of the economic impact the nature and breadth of economic stimulus is not yet fully known nor is the mitigating effect. These programs will have on the economy off the visual borrowers as the impacts become clearer. We expect the risk ratings on certain lones to deteriorate this shift may result in increased quantitative reserves, which could be funded by decreasing in qualitative reserves. Overtime this again represents our best estimate at this time of expected future credit losses from the pentatonic.

Okay, what we learned from our experience during Hurricane Sandy that forbearance loans perform reasonably. Well in that case our initial Sandy Reserve was one point eight million dollars wage jobs related to Sandy totaled less than five hundred thousand dollars. Of course. The pandemic is a different and much broader event and could be more protracted or severe than Sandy while very difficult to access at least now our collateral remains intact and undamaged and can return to productive use more quickly than real estate destroyed by a natural disaster.

Active acquirers like OceanFirst also maintain purchase accounting marks related to acquired loan portfolios even following the implementation of Cecil.

All these balance sheet marks exist outside the allowance for credit losses. They represent a different element.

Credit Reserve as a result of the seven whole Bank Acquisitions made by Ocean First We maintain a net amortized credit Mark of $38 that is in addition to our $30 allowance. We believe that these two figures should be viewed in concert.

Real estate values are by far the most important indicator of future losses for us and our low loan-to-value should partially protect us even in the event of a substantial decline in real estate values. This reality was evident during the Great Recession when our Peak and we'll lost rate was just 57 basis points are stable earnings stream is currently sufficient to fund the level of future Provisions that could be drugs and they risk grading migration additional qualitative Factor adjustments and net charge-off activity.

As I mentioned are low historical loss rates are largely due to our conservative risk selection in both individual loans as well as overall portfolio composition. Again, we have no exposure to the energy Airline or equipment leasing industries were not a credit card lender and have not participated in the leveraged-loan market. We don't maintain a consumer automobile portfolio off. So it's comforting not to have to consider least residual valuations. Even land loans are conservative $19 for less than twenty basis points of total assets.

Next I want to share some information on those borrowers that are seeking forbearance to date are early and active Outreach has resulted in $775 million dollars of commercial loan forbearance request wage. These credits have a strong pre pandemic risk profile, which is 5% rated special mention or substandard in ninety-three percent never delinquent over the past 24 months with a full 96% of this exposure is secured by real estate with a very low weighted average loan-to-value of just 55% and strong debt service coverage of 1.9 times an aggregate. These borrowers are well-positioned to whether the current economic conditions.

A commercial forbearance requests are centered in the accommodation and Food Services industry and Commercial Real Estate secured by retail properties. No other industry comprises more than 5% of total forbearance requests or more than 5% of total capital.

One quarter of our forbearance requests are from borrowers in the accommodation and Food Services industry. This includes restaurants of $92 and hotels of $110 for 1.2 and 5.4 of total loans respectively in aggregate or accommodation and Food Services credits have a weighted average loan-to-value at 52% and weighted average debt service coverage of 2006 X.

This includes the Irish Pub portfolio at countrybank of $69 or our real estate collateral has a weighted average loan-to-value of just 44%

the commercial real estate request secured by real retail properties total one hundred six million dollars. These credits have a weighted average loan to value of 53% and debt service coverage of one point eight thousand times.

We've also received over 1,100 residential debt relief requests totaling $311. These credits also have a strong pre pandemic risk profile.

Current weighted average FICO score is 742 on these borrowers and the weighted-average LTD is 70% furthermore almost ninety percent of these loans. I've never made a late payment over the life of their loan. You can see why this segment of low LTV and Hi-Fi the loads with exceptional payment history is not cause for undue concern.

Returning to our credit was profile more broadly. I'd like to point out that our allowance for credit losses now exceeds non-performing loans by a measure of 1.8 time.

When compared to 2008 are starting point for this crisis includes a more diverse loan portfolio stronger profitability a lower dividend payout ratio, and approximately 250 basis points higher Capital levels in short. We believe we are prepared for the storm.

I'll turn it back over to Chris at this point Mike Joe Grace, and I would be pleased to take some questions.

We will now begin the question-and-answer session ask you 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 withdraw your question, please press * 10 to at this time. We will pause momentarily to assemble our roster.

Our first question will come from Frank schiraldi with Piper Sandler, please. Go ahead.

Good morning, and hope everyone is well. Thanks Frank.

Just on the the reserves know even if you adjust for the for the the marks on the purchase book The Reserves loan ratio still, you know at argue down below where some of your Community Bank peers have built their reserves too. And I know Grace spoke to the confidence in the portfolio and the low expected loss, but I wonder if partially it also reflects maybe a difference in opinion on how provisioning is likely to play out and you know, it seems like a lot of the calls I've been on management teams are talking about a very front load washer where I've gotten the sense in the past, press that you know, you look at the potential for Cecil provisioning as being a bit more stable through the year, maybe as you know later in the month some quantitative factors, maybe take over for the qualitative factors currently, so I wondered if you could just speak to that. Thanks. Thank you Frank. It's you know, it's a difficult time for all of us.

Any of us and our peers to estimate, you know, what the impact of this pandemic might be like if we thought that we could put aside more reserves and responsibly do that. We would have done that in a very cautious not to send the message that hey we taken some giant Reserve now, don't worry about it for the rest of the crisis. I don't think any of us know exactly what the duration of the depth of the crime. I think the important point that I would stress is that taking a really healthy provision of largest. We've taken ever almost ten million dollars for the quarter. We still may I borrow a quarter way over 1% so we can continue to fund Provisions as needed very hard to tell what we will need. So, you know, we do look at this as the data comes in fact going to be data-driven. So I will say that while the aggregate number of forbearances is something that gives you pause as we've had conversations with our borrowers dead.

I think they've been very productive discussions about how their businesses will fare and we went into this and I think like many banks our clients got through two thousand eight am very well levels of Leverage. They put cash aside in many cases. The request for forbearance is a precaution, you know, it's not that they don't have any cash to pay us. It's they're trying to preserve their liquid because they know they've got a restart their businesses and hopefully ninety days or you know somewhere in that time frame so I think Frank you characterized it reasonably. Well, I would expect the elevator Provisions during the course of the pandemic but but I don't think there anything that should overly concern us giving our our earnings stream that are starting position. I also point out that you know, our composition of low-wage different than many peers and we really have avoided we've avoided a lot of asset classes that carry higher Provisions you think about you know credit cards, they typically run eight hundred basis points. So if you have any issues

On your on your balance sheet that's going to drive a more significant Reserve almost everything we have is real estate secured and the ltvs are quite low. So

We could have non-performers, but the actual charge-offs over the course of the pandemic may be lower than you think.

It's appreciated and then just follow up. Obviously you spoke to the strong pipeline. Can you maybe just talk a little bit more about growing the loan book in this environment and maybe if the focus has changed at all and and how you get comfortable with things like collateral values here. Thanks.

Good morning, Frank. Yeah, I think I just tried to refer to some of that in my comments in in the sense that we're trying to looking at every one of these a little differently as you would expect. We're making sure that the underdog criteria still meet. You know, what was our credit standard and what maybe even a little tighter registered at the moment and I think from the loan growth perspective. We're focusing on the big strong Theory types of credits that you may see we've recently financed approved to financing for Amazon warehouses. We're in the process of doing some some other credit tenants such as Walgreens CVS the kind of stuff where you're not you're not going to make a killing and spread but what you know is that you're going to put assets on Thursday at the right leverage position with bona fide strong historical cash flows. And I think as you go forward I mention I think the second quarter will be fine just because of birth

In the pipeline, I think we'll see some Fallout but I do think the second quarter be okay, but I think it's hard to forecast going forward. Right? I mean, it's we just don't know how things will occur to it really just depends on how the Panthers plays out and and not only consumer but also our commercial customer confidence.

I think you might have mentioned loan-to-value has that, you know underwriting standards in terms of the loan-to-value you're willing to go up to has that changed meaningfully. I wouldn't call it meaningfully. I think you know, it's you know, some basic commands that you know, we're not going to do certain types of of lending Equity lending has been a good example are like with our Equity book home has largely been for customers. It's a reactive portfolio very low. Well TVs in the in the mid-fifties. Typically we're still doing them. We're we've cut back on the on the maximum LTV, but we're not going to say we we don't we're not going to be there for a client that needs our support but we absolutely are looking at underlying underwriting criteria and scaling back a bit. Yes.

Right. Okay. Thank you.

My next question will come from Matthew Breeze with Stevens, please go ahead. Hey, good morning, man. I was hoping you could you know, maybe walk me through the process of actually getting a forbearance. What's the what's the bar for approval and are there any cases where you you didn't I or forbearance? So they're very different processes on the consumer and the commercial side. So when we have this experience during Sandy as well on the consumer side, you're dealing with lower dollar amounts and the burden for someone to provide paperwork in the middle of whatever life has to going through is is pretty rough. You know, you can't take someone who may have a family tragedy on on you know, playing out in front of them and say hey look we've like the tax returns. So on the consumer side of our rule is very clear. If you're willing to certify that you have a covid-19 issue and you need forbearance. You're going to get it and we're going to put you on forbearance and then you know is we we look at those loans wage.

Weekdays will have a deeper conversation.

And over the the reasons that you might need forbearance, and and I think that that's appropriate. I think if you consider the kinds of folks that have been impacted we just don't feel that reruns are writing those is appropriate. However, so that we understand the risk profile of what we're doing. We are capturing information like the FICO score at the point. The forbearance is granted so that we can understand the dead of deterioration that might hit this segment and make sure we're reserving appropriately as time goes on so we're collecting information but a consumer forbearance request is reasonably automatic berth. It's a little different when you ship to Commercial and we also want to be accommodating. We want to make sure that people have been impacted by covid-19.

Asking for minimum but you know some reasonable documentation about what's going on in the business again, this is about you know, making sure that our forbearance is are thoughtful and they're prudent. So let's take the case of commercial real estate. We're asking for new rent rolls. So we understand how much deterioration there has been in the hospital and look we have cases where if you were covering at the two times your debt service and now you're covering it one and a half times your debt service, you know, we're probably having a conversation saying that if we're Barrett's is not appropriate but if your rents are down and you can pay a principal but not interest we may put you on Ajo and etcetera so and it's still purposes. Well first we want to throttle the amount of parents as we Grant so there is a credit approval required then the second thing is this is the kind of data we will need during the course of the year to understand how much credit risk or faith

So it's an important point to pull that in the $775 billion dollars worth of requests that we noted earlier. There's a few hundred million of that we've been able to take action on and for birth. I would expect to get through the rest of it and coming weeks and make those decisions. But we're just as you can appreciate we're just getting rent rolls for April for many of the commercial real estate. And so it's it's two different analysis and hopefully that helps very helpful. I mean, the the million dollar question on our end is is how many you know how fast are these these modified or loans with for parents how fast are they going to grow and to what extent they're going to transition to not performers and any detail you have in terms of on the consumer side whether or not you know, if if it's a residential loan homeowners are unemployed, or if it's commercial loan and these these companies are shut down. Do you have those types of metrics at your fingertips?

So we'll look I can we can share some of what or highlight some of what we've shared today, which is if you take a look at the consumer book the fact that the FICO score in the 1740s is extremely encouraging and the reason for that is FICO is driven. I think it's a misconception that's driven just by late payments. It's driven a lot by credit utilization. So you don't wind up with a 740 bike of score if you're tapped out if you've got all your credit lines pulled down. So these are customers that have liquidity that are probably frightened about what's going on the economic environment. They're trying to preserve cash. They don't understand how long they're going to be out of work. So, you know any piece of help they can get so I'm not terribly concerned when the consumer side. Although the duration of time that people are out of work is going to play into this song on the commercial side. It's too early to tell so we're collecting information, but I think it would be too early to go out and make broad statements. I will say that when you think about dead

To assess the risk.

If you go back to our March 24th fall, we wanted to make sure we just close to everyone are concentrations in sectors where there could be a risk now. It's much more important to look at who's requesting for payments. Where are they coming from? And we went out and this is just our position. We proactively called our commercial clients in high-risk segments and said what's going on. Do you need help talk to us tell us what's going on? And we wanted to pull those forbearances out quickly. I don't want to wait until someone misses a payment to start a forbearance conversation. So I think if you look in the slides off and slides we showed you the unit Trend in request for for parents. And at least for this wave, it appears to be moderating for both consumer and Commercial. So I you know how long the pandemic is going to last and how how the restart efforts are going to go.

But we think we have the majority of the forbearance request to reflect it in the numbers were sharing with you today. And there's not going to be say another billion dollars coming to us in the next 30 days. We we we think we've got a good handle understood. Okay, and then on the provision, you know, I understand it. It's very hard to predict what's going to happen here. But maybe you can just set the stage in terms of framework, you know, as we think about the underlying assumptions if we go from an unemployment, you know forecast and we take it from 5% to 10% you know is the next increment 5% if we were to go to 15 is that as painful as the first or or is there some you know, does this often as you go higher or is there any sort of way you could frame the fact that for us?

I think there's there's two key attributes. You have to remember in reserving. The first is the the probability of a default. And then the second is the Lost get the form so awful things like the unemployment rate do affect the former. They don't necessarily affect the latter. Although they may it's it's really hard to tell this early in so I don't think it's as sharp and deadly Grace can give you a little more information when I'm done about kind of how we look at the model but in a portfolio like ours where the vast majority of loans are real estate secure and you have some presumption to real estate values staying in the same range of that saying they're going to say stay where they are your actual losses. The net charge-offs are going to be lower than you might expect. So I think for a balance sheet like ours,

It would not be unusual to see an elevation in non-performing loans. But like we saw in the credits in the last credit cycle in 2008 our Peak non-performing loans off crested it, you know, three hundred basis points or so, but our worst year of charge-offs, which is 58 basis points. So I think we may have a a bunch of loans that we're dealing with but the actual risk to Capital earnings the balance sheet may be wiser than that anything you'd had to the way we're the model works.

the only

Thing that I would add is that what's unusual about this situation is that you know the model and and many Cecil models are based off of historical correlations between things like unemployment and GDP going back decades, but given the measures that are being taken by the federal government for instance the supplemental $600 payment for unemployment. We really don't know how strongly those correlations were will hold we would think that the that it will be mitigated somewhat by that, you know, a lot of people are actually making more money on unemployment than they did as an hourly worker wage. So, you know that all kind of remains to be seen that the only thing I would add beside what Chris said

Understood thank you. And then my last one in terms of getting loans done as some of the the underlying mechanics have they improved yet. I mean local County Clerk's Office wage notaries areas where ink signatures are necessary. You know, how much of a hindrance is this the business and are the municipalities catching up and making improvements on their end.

It's getting better. So we had a couple of our state's New Jersey and Pennsylvania are going to electronic notary which is a new thing for them by and large the counties have been pretty good. So we were initially concerned that you know, title might be a log Jam or something like that for real estate transactions, you know, they're a little slower but they've continued to function probably the area where we still see significant wage is around anything related to construction. So, you know construction has been shut down or discretionary Construction in many of the areas we operate in although there are some carve-outs like Residential Properties where you have you know, fewer than say five contractors involved in the process of appraisals the process of inspections the ongoing issue of that segment has been just been more problematic, but you know, we're observing like I guess Pennsylvania will restart construction to a certain degree in a in a couple of weeks and Ed.

You know, we may see New York and New Jersey go to that soon as well. So so right now that's where we're seeing. We're seeing it inspections. He owes those Municipal Municipal inspectors being out on the job got okay. That's all I had appreciate take my questions. Thank you.

My next question will come from Christopher Merrimack with f i g Partners, please go ahead. Hey, thanks. Good morning, Chris and Tim. Thank you for all the background both last night. And on the call this morning. So back to the reserve level overall. I mean you're even with Cecil you're reserving for actual loss expectations. Right Chris. So at the end of the day your point of of kind of the past life experiences with Hurricane Sandy and other disasters really lead to kind of what you expect on losses and you reserve for that today. So it really reflects what you're expecting and until you have a different fact pattern. There's no reason to expect that The Preserve should significantly change. Is that correct? Yeah, that's correct. And I would point to the number gray share that seven million dollars worth of the allowance. We took is not quantitatively driven off to be driven. So we knew that the model was producing a number that we thought was light compared to what you know what our expectations were so that that set aside will cover some ma'am.

Nation of loans is that they kind of burned down. The other thing is that there's no reason to believe that Sandy will be exactly like this. They're very different.

Situations although in Sandy. We had the destruction of collateral. We had real estate destroyed in some cases, you know completely destroyed and our forbearance loans at that point had a 1.2% charge off rate on the consumer side. And interestingly. We had no commercial charge-offs related to Santa so, you know, we've tried to be a careful consumer Wonder so it was not the kind of broad-based issue. We're facing the out the pandemic but there wasn't two and half trillion dollars flooding into the economy either nor were wage employment programs like there are today so it's a tough time but our our quantitative reserves would have been about seven million dollars lower. We we up them with the qualitative Reserve because we knew we needed to put some additional funds aside for margin.

And then to follow up questions. Could you remind us how the fair value Mark will evolve over time? Does that kind of go down quickly the next couple of quarters, or will it be slow?

Chris's, it's Mike. It's it's it's a credit back in the income over the over the life of the loan, but it's based on a level yield. That's it's nice. It's more at the front end alone. So even though it's probably in over the last the next four years most of it comes in and then there's the kind of a long tail but that creep back in the income wage over the next several years great so we can still use that as a sort of de facto Reserve almost as if you just like you said the slides. Yeah. I think you could excuse me pool. You consider thirty-eight million dollars being created back in income and you could use that to to reallocate that into the credit losses if needed.

Great, and then last question just on on on the feds kind of upcoming Main Street Landing facility. Is that something that might apply to your commercial borrowers? Just any early read on that wage like the small number of credits that would be of the size and nature to qualify for a Main Street program. So we may have a few loans that we would add related to that but it would be for us a smaller event in the PPP program is

Got it. Thanks, Chris. And thank you. Everyone hates, Chris.

Our next question will come from Gunther with the Davidson, please go ahead.

Hey, good morning guys. Bring Russell Chris. I know we really don't have a great crystal ball in terms of how long the current situation is going to persist but just given sort of your footprint and sensitivity to you know, summer months and if beaches and boardwalks remain closed is is that type of event captured in in a qualitative Reserve this quarter or how my bat play out within you're within your modeling.

I think I think.

I said area Russell that is highly comparable to what we went through in in Sandy because even though people who come to the beach a lot of the restaurants hotels were just unavailable for use in the in the season off Sandy's remember Sandy hit late October early November very few businesses were able to completely reopen by the following day or you know, they might have reopened in part. Would you expect the week summer season this year just because the social distancing requirements and and we think it may hopefully, you know based on the numbers maybe the second half of the Season be better than the first month and usually July and August are more important to these summer Resort towns than the same age June. I guess the way I would think about it is probably live through this Thursday. It'll be okay. We have the the other benefit which we saw after nine-eleven, which is when people don't want to get on a plane they want to get in the car.

And something around 25% of the US population is within a tank of gas of the Jersey Shore Resorts. So, you know, I think that there'll be some element that will support us this year off and then I wouldn't be surprised if next year and God willing we have a vaccine and things are a little better shape. Next year could be a really rewarding year for the shore. So I think a week here this year possibly very strong next year and the advantage we have is we don't have to rebuild these places, you know, the there were cases where we're literally the entire building was gone. It was nothing but sand and I needed a lot of help to get something rebuilt and productively deployed some cases that took two or three seasons.

Understood. Okay. And so I guess Chris just to summarize. We're that to play out you believe that that type of scenario is kind of captured in the qualitative adjustments that we spoke on on disk order that week summer scenario. That's right. I think that I'll go back to my earlier comments about that reserves and charge-offs relate to the net credit experience not to non-performing loans. And when you have a very conservative real estate values, you may have a bubble of non-performing loans that does not result in the same degree of net charges.

So we met Terry, you know some of these and look the 6-month forbearance program will get us through this summer. If we've got further, you know issues after that, you know, some of these will become tdrs, but we go into this at a pretty good leverage rate most of our clients.

Yep. No, I appreciate you confirming that and you know, here's hoping for a better result. I've got my heart set on Spring Lake weekends this summer. So we're all pulling for the same thing. I wanted to follow up on questions for the loan growth and and Joe your comments. What are you guys assuming for kind of pull through rates within commercial and obviously a different situation be historical and then is there enough visibility to know recommit to a dead organic loan growth of fifty to a hundred million or just how do you see that? Uh is shaking out throughout the remainder of the year. So I'll take it in stages Russell. I think the money I think the resi business, you know with the underwriting criteria that we've always sounded in just as I mentioned earlier the focus on making sure that the new transactions that are going off.

or the right transactions and verifying all the income and job status like on

A good stuff we tend to We tend to see a very strong pull through a typically in the nineties and look the pipeline still been very strong. Do I think we'll have Fallout short? Is there some concern that we talked about just trying to get stuff through the pipe? Yeah. What we've done though, I think is what we've always done which is stick to what we do. Well in terms of the timer properties, we Finance the expectation for down payment. So I I think that and and look we haven't seen a significant fall out. If anything we we continue to see a lot of volume and in our reps today or not at the bottom a lot of very large banks are markedly lower than us and rate for other reasons. I don't know why but so that I think is an answer on the South Side on the on the commercial side. I think it's a little harder to predict. Although I'll tell you that with the addition of Philadelphia and New York to our Legacy markets. It's really allowed us and we've seen a quarter-over-quarter.

Sure. So if you have a good quarter then New York, we have a good quarter that Legacy more could have a good quarter. So I do believe we're going to still see opportunities and as I mentioned earlier that our focus on really strong thoughts on credits Theory or strong operating businesses in our markets that we know believe or not. We're going to get some new business out of the opportunities and some of the things we've done in the PPP program. We've reacted quickly. We've gotten a lot of Kudos even from customers or non-customers that we didn't do the PPP that heard how quickly we reacted to our own client base. So I think that we're going to see more fall out there. It's hard to predict the number but I think that will be successful in terms of committing to a a loan growth. I think it's a harder Dynamic right? I I think the same quarter will see loan growth boring boring us deciding to you know to sell some salesmen pools and in residential just for liquidity, but I think it's a harder dining.

To determine whether or not we're going to see that it's hard to forecast in the third and fourth quarter.

Understood I appreciate your comments Joe and then guys last line of questions for me would be to try to put a finer Point around the expense discussion, you know understand the kind of covid-19 cost in there. Um wonder if you could comment about just what impact on expenses whether it's positive following to the bottom line just from a certain Services being or facilities being closed. Um any offsets on on fees that would be lower. You know, do those things kind of come out in the wash and then around assumptions for Thursday for cost-savings. I believe last quarter was spoke about a a fifty million dollar quarterly run rate by the end of the year any update to that.

Stop guidance would be helpful as well. I guess I'd classify Russell by saying that the expenses will be a should be a Tailwind for us. Not a headwind. We will complete as Joe mentioned the Two River integration in the second quarter that and the reduction of five additional Legacy branches that were planned before the pandemic. Give us that that hail when going to the second half of the Year. We're a little cautious though about setting I wouldn't set out any guidance about a specific expense number. But as of right now I would say are Trends should be favorable. We just want to be cautious and understand as we worked through reopening protocols, you know expenses like PPE equipment and things like that. We're going to start to pile up. I still think we've got a tail wage, but we'll give you a better update probably after the second quarter.

Okay, great. Thank you guys. That's it for me.

Our next question comes from calling Gilbert, please. Go ahead. Thanks. Good morning. Everyone. First kudos to you guys for pulling off what you did on the month without having any kind of FDA platform in place prior to that. So that's very impressive. One thing. I just don't understand. I haven't asked my bank yet this you guys took to ask but what how do you see the relationship between those borrowers that are asking for TPP participation and then could they also be asking for for bearing a request to or how do you either collaborate on those two or isolate those two situations? What are the reasons to be really good about the program? Is it improve the clarity of your commercial clients? So every dollar we can get out to them to help fund their payrolls is going to strengthen their businesses and in the long run that's going to strangers.

To work with us. So there's a there's a virtuous cycle here. We're at the end of the day keeping our businesses afloat is only good for us. Right and we're also doing it, you know obviously need protecting jobs in our community banks are are closely correlated with their communities communities fine. You're fine. If it's not, you know, you can't do that much to change it. So, you know, we looked at that time. So, you know, we got a tremendous outpouring of requests from non-customers. We accommodated a few as we could but I think that this is going to be one of those reputational moment for both Banks and and what we're not the only bank that did a great job with PPP a lot of our peers have done a wonderful job as well. But some have we've been able to deliver and I will tell you that banking business three months ago. It's not a commodity business today people understand it. I've even had a couple of cases where people said look I need to give you guys a call in 30 days when this comes down wage.

Move over to you because we're disappointed with our with our banks. So and thanks for your comments about I was getting PPP going a lot of our staff is up to you know, twenty-four-seven. We were working straight through the page to make sure we got this done because we do is that important for our community.

Okay, and then just in terms of the the question on those that applied for the PPP program could they I mean then also apply for birth parents. Yes. Yeah, there is an overlap there and you know if you look at it and we say what what's the reason for the four minutes and if you're a restaurant or something and maybe your functioning on takeout only off or if you're a multi-family landlord and you have a slightly depressed rent roll for the next ninety days, but you think it's going to catch up that's a perfectly reasonable person to have poor parents what we've always stayed away from is businesses that have a defined significant weakness before the pandemic started. Those are the kinds of businesses that we may not be granting forbearance because we may not be able to help.

Okay, do you?

To happen to know offhand or have the number either number of borrowers or dollar size where there was overlap between the two programs.

Don't have that handy.

Sorry, but we may be able to get that to you after the call. Okay, that's fine. It's just not again. Not a question. I have others but it started thinking about that. Okay, and then just lastly you would indicate it in your own comments. Just you know, you mentioned swap activity with strong this quarter. But yet I think you had indicated that you thought that overall activity would still be strong for the year they're dead. And I guess I'm a little surprised by that in that just the thought that that activity would sort of come to a screeching halt. Can you just kind of walk through sort of how you're thinking about that business line and and dead wood activity you would need to see, you know within your commercial borrower base to sort of drive that I think for us, you know, adopting the product page over a year ago after I'd say probably a few years of clients saying this is you know, we a lot of us that have been familiar with swaps in the past from prior company's name.

Look forward to the opportunity and when we have the depth and the breadth to be able to do it on our own so adopting it was good. A lot of clients were excited to have it. It's open new doors for us. And I think I mentioned that you know, swap income can be choppy right quarter or quarter depending on what you get done. I think what we're seeing with a lot of borrowers that have very strong liquidity and balance sheets that want to hang out of and walk transactions is they're looking at what's likely to occur. So we're at all-time lows and interest rates and what's likely to occur is maybe not tomorrow maybe not near maybe not five years who knows some higher rates at a certain point or at least normalize rates so bar was look at the opportunity for flexibility swaps to give them that flexibility. So I still think it may not be significant. I think it'll end up being a very good year for us in swaps. And I think it'll just continue as the economy recovers. So we're bullish. We're bullish on on the swap business, but we're cognizant of it and wage.

Still maintain that that credit appetite that's a little bit more conservative. So we're we're making sure we cover the bases on both sides.

Okay, that's helpful. And there's some last question maybe sort of big picture or two on the on the lending side. But are you seeing just sort of anecdotally differences among how your business borrowers are operating and then we'll respond when the economy starts to open again, like from the geographies of what you're doing in New York City versus New Jersey vs. Philly off any any sort of interesting takeaways there as to how you might see each of those markets come back posted been some some interesting things that you pull out of the data that you might not have expected. So the number two category requesting PPP loans from us for example was the healthcare category which you know, how long you start to think about the dislocation and cash flows and health care whether it's a a hospital or a or a Doctor's practice, you know, these the stopping of elective procedures and all that has really disrupted.

Healthcare cash flows, which you might not have expected of going into this so

And we're seeing other things, you know, we had a high-end jewelry retailer That Was preparing for something like this had plenty of cash and doesn't need any help which we thought would have been, you know, one of the first people on the list may ask for help in terms of regions. There's certainly a different given the the impact of the pandemic has impacted. For example, the the New York City area much more than Philadelphia wage goes far but the theme we're hearing across all of our markets when you talk to I'll call them our smartest most liquid and best prepared commercial clients. They sense that it's going to be a good time to make investments at some point in the next year or two, but they are not interested in getting involved until there's more clarity around economic conditions. So I think there will be a wave of people on there on the sidelines today. There's a lot of cash out there that are more than happy to make investments going forward dead.

But they're not going to step into the market yet. So the the smartest people that we're talking to are waiting and watching they plan to be jumping in and investing. I think that'll happen at some point in 2012. And and that's the opportunity where we just can't tell what loan growth might be. I'll say this I think the credit appetite in our communities later in 2018 and going into 2021 is going to be very strong. So provided those are reasonable credit request that could be an opportunity for us to continue to continue to show organic one room, but we've got to wait a month that falls

Okay, maybe doesn't maybe sounds fairly similar to the bank stock investor now that I'm thinking about the the market anyway, okay, that's helpful color. I will leave it there. Thanks guys. Thanks for calling.

Our next question will come from with pending in Scattergood, please go ahead.

Good afternoon, everyone. Hey, Eric.

First question just curious if you have an expectation for for what percentage of the PPP loans will ultimately be forgiven. And then secondly, when what what quarter you would potentially record the associate at accelerate to see

Don't think the the first question kind of anybody's guess and what percent will be forgiven, but we think it's probably a pretty high percent. I think the folks that are accessing the PPP program are doing something because they plan to maintain their payrolls. They'll be eligible for for forgiveness and we'll file to do so and we expect this significant effort to help our customers do that in it's going it's going to be honest before you know, it those for forgiveness requests are going to start to hit in just a few weeks. The reason I'm a little bit tempered on it is we've had more than one story from a client who is applied for taking the SBA PPP funding is called their employees asked them to come back to work and their employees have declined.

and as you can imagine for all the right reasons

The unemployment supplement that Grace was talking about earlier in some cases means an hourly worker earns the same or better staying on unemployment than they would be coming back to work. So the financial incentive is not there and they've got concerns about coming to work and then environment it's kind of rough today. So I think if there's an issue around forgiveness long, it's going to be for those businesses who had difficulty getting their folks into work so they could pay them in qualify for the Forgiveness. So so I think that's where that'll I bought a house.

Understood I appreciate that your question, but I'm sorry I forgot it was in it was in terms of what quarter you would potentially expect to record the acceleration fee. Once they're forgiven. I think you can just see the majority of that in the next couple of quarters. But and then then with a tail after that, so I think you know, if you're getting a two-thirds or three-quarters of that in the next two quarters, it's it's probably around the right tempo.

Great, and then just looking at the trends of the loan yields both the pipeline deal and and the origination yields. It looks like the residential real estate yields have held up dead relatives commercial and home equity and curious if that's something specific to you your customers or if that's a reflection of some of the dislocation that we've heard about in in the secondary market for Residential Mortgage Loans off that's true in residential there has been a dislocation you so kind of well stepping back from the correspondent business. So there there are fewer players out there, but there's a broader thing going on as well most of our peers and and we've done the same thing of instituted pricing floors because we're just not we're simply not interested in making long-term loans at Thursday's interest rates so that historical relationship between say the 10-year Treasury and residential rates were even the 5-year Treasury and commercial rates as the credit spreads wiped off.

So I think you're going to see better pricing than the yield curve would expect you to see in this market.

Thanks, and then just last question for me in terms of the $949,000 charge of I think you guys call it higher-risk residential loans any color you could provide there with these loans particular issue related to a Coke addict or they previously criticised is kind of curious how that played out those were all issues. And we've just adopted a position it goes back a couple of years. Now, we're off if especially in the consumer world if things start to slide we don't want to be part of it and obviously we sell them at a loss but we'd rather get them off the balance sheet. Sometimes your first choice is your best loss. But no matter what we knew we had to make room. We we we expected a cycle shift. We didn't expect this but it is cycle shift. You don't have to fire sale Essence. So what you do is you make room on your balance sheet so that you when you've got good borrowers you can work through things with them. So it goes back a couple of years now. We've this as soon as we had a pool of

Loans, we could dispose of we would dispose.

To them, you know and cut our losses and move on so.

Great. Thank you for taking all my questions.

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

Our next question will come from Lewis Feldman with Wells Fargo Asset Management, please go ahead good day. Hey Louis, how are you? Pretty good little cloudy out here today. And as Yogi, Berra said it gets late early out here. Mike quick question for you given the stock price adjustment and stuff Have you talked with your Auditors about Goodwill impairments?

At this point we have Luis we've gone through that analysis is a given the stock price and some other some other issues related to covid-19 might be triggering events that we've done. We usually do that analysis paralysis annually in August, but we did it just recently and there was we concluded that there was no impairment in our order both agree with that.

Okay, great. Thank you. Thanks a lot.

Our next question will come from east and west off with 12,000 in, please go ahead.

Good morning, I guess afternoon at this point. Yeah, I just to get off on a different topic funding cost. I mean you had a pretty good jump again on your your deposit costs and obviously a lot of that came over from the acquisition. Where are we standing now, or what are your plans to try to reduce some of the those? I guess I'm a big spot with the savings account rate jumped up 30 basis points here.

Yeah, so the that was driven entirely by the acquisition of Two River and country that had higher deposit rate structures than ocean First Legacy had before that we bought we typically do adjust rates as we go through Acquisitions. We're always, you know, reasonably careful to do that over time as we get to know those customer bases and not kind of shocked them with a lot of these options. So we began reducing rates in Earnest in those in those two portfolios probably late in the first quarter. So you wouldn't see much of it in the overall deposit cost. But I think it's Joe said earlier we expect to be able to reduce the deposit cost of Legacy ocean first, but also the country and to River required deposit portfolios, of course of this quarter, so and we're looking for looking forward to that to help the stabilization of margin. So there's room there is room to bring those down and you'll see that coming down.

Okay. Yeah. I was hoping to get something that along those lines and and then I guess

Not to beat a dead horse as much with this this whole Cecil stuff. It's not get that right that basically the quantitative part of that model actually suggested a very small increase in the provision and you decided to add to that that seven million dollars. Yeah. It's ironic. You're actually right. So well, obviously there was the day one adjustment right where we had to grow up different methodology. But after we gross up the there's really two things that happened during the quarter. The first thing is our loan mix changed and Loan mix has a lot to do with provisioning because Disney owns a different experience levels. The second thing that happened is every every quarter of you add to your history changes your wasp history. And we added another quarter of life is to our history. So the quantitative numbers shifted down because our boss great actually continue to come down and then it shifted again because the composition of loans were very different wage.

I guess all else equal we would have had the the possibility of a contraction in the house not counting the day one and we certainly didn't think that was appropriate given economic conditions. The other thing is that she still drives off an economic model every bank has you know, some banks used their own projections. We don't have we're too small to have a group of Economist here at the bank and probably thank God for that month, but we have purchased the services of we use Oxford analytics. They provide us with our economic forecast their forecast was more benign than a number of other forecasts. We saw in the market. So we wanted to calibrate for that too and say that the quantitative model was that the inputs into that the economic inputs were rather than nine. So we using the qualitative adjustments we're able to adjust it to some of the other more Draconian for cash Adam economic conditions.

Gotcha, I guess can you share with you? I guess the do they know I've been understanding the unemployment number is a big factor in this. Can you share with that unemployment number was that was supposed to go into that model home to get away from sharing individual numbers. Cuz if there's a lot of numbers in there the unemployment numbers one the GDP numbers and other but there's a whole bunch of other numbers that go into it and of course probably somewhere around the range of fifty. So once you start getting one or another, you know, you start to go down a slippery slope. I will tell you though that the Oxford number was was lower than we than most other estimates and that's the reason that we put on the qualitative. Okay. That's that's kind of what I was going to point. Obviously like there's a smaller. I was just trying to get a a degree factor in that. Okay. That's all I have for the time off very much would be safe.

Again, if you'd like to ask you a question, and it's 911 to ask a question.

The next question will come from Frank's for Aldi with Piper Sandler, please go ahead just just one quick follow-up wondering how we should think about the wage increase in delinquencies blink, or is that just kind of bouncing around is that covid-19 and should turn likely into the firm. It's at some point cuz you have a 30 days greater walk past due it would seem that would imply guess February which would seem to be early to be covered. But just how do we think about that?

So you're exactly right Frank some of that we think is driven. You think hopefully the majority of it by coded. There's a strong overlap between forbearance requests and delinquencies because we only started to life for various requests on a March 16th, and then we do our credit underwriting them. So there's a credit process before we actually declare or parents. There's another small number that's related to age twelve Thirty One number was OceanFirst only and the 331 number includes to River and Country. So it's just a larger loan book, but we would look to buy the end of the second quarter have those Modern Life because of forbearance requests.

Okay, and then just you know my to bring the idea that those ran into issues in February and cuz I've seen this in a lot of banks actually just haven't asked the question yet, Um, do you think it's just you know, people saw the writing on the wall and just in a an attempt at Cash, uh preservation they missed the you know, the February payment off and it truly is something that's

Where the heaviest covid-19 is our in the US, so if you were in New York, if you were in North Jersey some of those early issues drove sentiment.

I will say this to the going through year-end delinquency trended really positively are weighted average risk ratings on loans before covid-19.

Okay, great. Thank you.

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

All right. Thank you with that. I'd like to thank everyone for their participation in the call this morning, and now this afternoon we Face a very troubled economy in the in the coming quarters, and nobody has a crystal ball, but he's been around since 1902 for a reason we take conservative risk positions were strongly profitable and we maintain ample Capital levels. We look forward to talking again after a second quarter results posted in July. Thanks again. Stay safe.

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