Q1 2020 Earnings Call

[music].

Course call please enter your Elite entry number followed by the pound key.

Welcome to course call. Please enter your Elite and Street number followed by the pound key.

Your number has been confirmed you will now be joined to the conference. Please note that an operator will pick up your line to collect your information privately executive chef. David Zalman will lead off with a review of the highlights for the recent quarter. He will be followed by a locksmith who will review some of our recent financial statistics and Tim two managers who will discuss our lending activities including asset-quality. Finally. We will open the call for questions during the call interested parties, May participate live by following the instructions that will be provided by our call moderator Eric before we begin. Let me make the usual disclaimers dead certain of the matters discussed in this presentation May constitute forward-looking statements for the purposes of the federal Securities laws, and as such may involve known and

Risks uncertainties and other factors which may cause the actual results performance or achievements of prosperity bancshares to be materially different from future the results performance or achievements expressed or implied by such forward-looking statements additional information concerning factors that could cause actual results to be materially different than those in the forward-looking statements can be found in prosperity bancshares filings with the Securities and Exchange commission's including forms, 10-q and 10-K and other reports and statements. We have filed with the SEC. All forward-looking statements are expressly qualified in their entirety by these cautionary statements. Now, let me turn them all over to David's almond. Thank you Charlie. I'd like to welcome and thank everyone listening to our first quarter 2020 conference call our merger with legacytexas was compact.

Hit on November 1st, 2019 and our management teams continue to find commonalities and strengths that we expect will benefit our company our shareholders with an associate's going forward.

Our plant operational integration remains on schedule for June of this year.

In our efforts to continue to enhance shareholder value Prosperity repurchase 2092000 shares of its common stock at an average wage price of $52.59 per share during the first quarter of 2020.

and that in

Come was a hundred and thirty million for the three months ended March thirty first two 2020 compared with $82 million for the same. This is the name.

You are now 2020 compared with a dollar $0.18.

This is yeah.

You are now joining the main conference increase.

For the first quarter of 2020 on an annualized basis return on average assets was 1.67% return home average common Equity was 8.86% and return on average tangible. Common Equity was 20.1% Prosperity Bank Asia, excluding that gangs on the side of assets and taxes was 42.9% for the three months ended March 31st, 2028.

Our loans at March 31st 2020 were 19.1 billion and increase good morning. This is the operator we're speaking privately. May I have your first and last name?

You are now two hundred and eighty 1.5% or 6%

Good morning. This is the operator. May I have your first and last name?

You are now point six billion or 38.5% off compared with the 17.1 billion at March 31st. 2019 Arlene quarter deposits decreased 373 million or 1.5% from the 24.2 billion at December 31st, 2019 a portion of this decrease due to our plan reduction a higher cost and broker deposits assumed in the Legacy, Texas merger

Excluding deposits. We assume in the merger and new deposits. We generated at the acquired banking centers since November 1st 2019 Bank deposits at March 31st, 2020 blue 1 billion dollars or 6% compared with March thirty first two thousand and nineteen months and 162 million nine basis points or 3.6% annualized compared with December 31st, 2019.

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Performing assets totaled $67 million dollars or twenty five basis points of quarterly average interest-earning assets at March 31st, 2020 compared with forty million dollars or Twenty One basis points a quarterly average interest-earning assets at March 31st, 2019 and 62 million or 25 basis points a quarterly average interest-earning assets at December 31st, 2019. The increased divorce first quarter of 2020 was primarily due to the merger.

During the first quarter of 2020 Prosperity increased its allowance for credit losses to $327 billion dollars from 87 million dollars in the fourth quarter of 2019 after adopting accounting standard ASU 2016-13 also known as Cecil the amount of the allowance is based on our Cecil methodology. We believe these additional reserves should help to insulate the company during these challenging an unprecedented times are allowance for credit losses to Total loans, excluding the warehouse purchase program phones now stand at 1.8% compared with 51 basis points at December 31st, 2019.

What's regard to Acquisitions as one would expect conversations with other Bankers regarding potential acquisition opportunities has subsided. However, we remain ready to enter into negotiations when it's right for all.

Parties and is appropriate freedom to our existing shareholders.

Lost today's challenges are certainly extraordinary Prosperity has a deep management team with experience in navigating and adopting and difficult time. We enter this economic downturn from a position of strength with Sound Credit quality robust capital and liquidity and solid black writing fundamentals. We believe that our team will see us through and we remain confident in our long-term future. I would like to thank every associate at Prosperity throughout the past several months while dealing with various personal challenges related to the pandemic our retail team operated at full capacity enabling us to keep our locations offer and serve. Our customers daily needs additionally our operational staff and lending team were crucial and accepting processing and committing.

s p a p e r k and closes

The star key followed by zero after today's presentation. There will be an opportunity to ask questions to ask a question. You may press * then 1 on your touchtone phone if your question has been answered and you wish to withdraw yourself, please press * then two, please note today's event is being recorded. I would now like to turn the conference over to Charlotte rashy, please go ahead. Thank you, good morning, ladies and gentlemen and welcome to Prosperity bancshares first quarter 2020 earnings conference call. This call is being broadcast live over the internet at Prosperity Bank USA and will be available for replay at the same location for the next few weeks. I'm Charles Executive Vice President and general counsel of prosperity bancshares. And on the call with me today is David's almond senior chairman and chief executive officer. Yep.

Working around the Box. Does this our customers? Thanks again for your support of our company. Let me turn over our discussion to Austell Rd Financial Officer to discuss some of the specific Financial results. We get paid also back. Thank you. Mr. Solomon, good morning, everyone that interest income before provision for credit losses for the 3 months ended March 31st, 2020 was 256 million compared to 154.9 million for the same period in 2019 with an increase of one hundred and one point 1 million or 65.3%

Tim to manage Junior

The increase was primarily due to the merger with legacytexas in November 2019 and 28.5 million in Lone discount accretion in the first quarter 2020.

Chairman also back as mon of Chief Financial Officer Eddie, vice-chairman Kevin Hannigan president and Chief Operating Officer. Randy has Chief lending officer Chief credit officer maze Davenport director of corporate strategy and Bob. I'm executive vice-president. David's almonds will lead off with a review of the highlights for the recent quarter. He will be followed by also Becca Huffman off who will review with some of our recent financial statistics and Tim to manage who will discuss our lending activities including asset-quality. Finally. We will open the call for questions wage.

The net interest margin on a tax-equivalent basis was 3.81% for the 3 months ended March 31st, 2020 compared to 6% for the same period in 2019 and 3.66% for the quarter ended December 31st, 2019 except for the accounting adjustments that for and interest margin for the quarter ended March 31st, 2020 was 3.36% compared to Thursday on 6% for the same period in 2019 and 3.26% for the quarter ended December 31st, 2019. Non-wage income was 34.4 Million for the 3 months ended March 31st, 2020 compared to 28.1 million for the same period in two thousand.

During the call interested parties May participate live by following the instructions that will be provided by our call moderator Eric before we begin. Let me make the choice disclaimers certain of the matters discussed in this presentation, May constitute forward-looking statements for the purposes of the federal Securities laws, and as such am involve known and unknown risks, uncertainties and other factors which may cause the actual results performance or achievements of prosperity bancshares to be materially different from future results performance or achievements expressed or implied by such forward-looking statements additional information concerning factors that could cause actual results to be materially different than those in the forward-looking statements can be found in prosperity bancshares filings with the Securities and Exchange Commission, including forms 10-K.

19 the increase in non-interest income was primarily due to the merger was legacytexas note the debit card income from Legacy Texas is now infected by the Durbin Amendment.

96 for the three months ended March 31st, 2020 was 124.7 Million compared to seventy eight point six million for the same. In 2019. The increase was primarily due to the murder with Legacy texts.

And 10K and the other reports and statements we have filed with the SEC. All forward-looking statements are expressly qualified in their entirety by these cautionary statements off now, let me turn the call over to David's almond. Thank you Charlie. I'd like to welcome and thank everyone listening to our first quarter 2020 conference call with taxes was completed on November 1st, 2019 and our management teams continue to find commonalities and strengths that we expect will benefit our company that our shareholders and Associates going forward.

For the second quarter 2020. We expect normalized non interest expense to range around 120 to 125 million in addition to this with 3 to 5 million in one-time merger expenses related to upcoming June conversion further. We expect to incur expenses related to SB a paycheck Protection Program in the second quarter, which are not included in the normalized not interest expense guidance.

Our plans operational integration remains on schedule for June of this year.

As we discussed in private quarters, we expect to realize most of our cost savings from the Legacy Texas murder beginning in the third quarter of June 2020 after the system integration that is planned for June today. We have already realized some postings from the murder and eventually expect additional savings of approximately eight to nine million per quarter combine. This will be in line with an ounce 25% cost savings.

In our efforts to continue to enhance shareholder values Prosperity repurchase 2092000 shares of its common stock at an average way price of $52.59 per share during the first quarter of 2020.

the official sorry

The net income was a hundred and thirty million for the 3 months ended March 31st, 2020 compared with $82 million for the same. It's a 2019.

our earnings

diluted common share for $1.39 for the 3 months ended March 31st, 2020 compared with the dollar $18 for the same period in 2019 a 17.8% increase

Show was 42.9% for the 3 months ended March 31st, 2020 compared to 42.94% for the same period in 2019 and 58.07% for the 3 months ended December 31st, 2019, which included forty six point four million in merger related expenses off the bunk portfolio metrics at 3:30 1020 showed a weighted average life of 3.08 years and projected annual cash flows of approximately 32.2 billion. And with that. Let me turn over the presentation to Tim to manage for some detail on loans and asset-quality.

Thank you also back.

for the first quarter of 2020 on an annualized basis return on average assets was 1.67% Return on average, Equity was 8.86% and return on average tangible common Equity was 20.1% prosperities efficiency rating, but excluding that gangs on the side of assets and taxes was 42.9% for the three months ended March 31st, 2020.

Our non-performing assets at quarter in March 31st, 2020 totaled $67 million $179,000 off our thirty five basis points of loans and other real estate.

The March 31st 2020 non-performing assets total was made up of 61449000 dollars in loans took $78,000 and repossessed assets and 5452000 dollars and other real estate.

Our loans at March 31st 2020 were 19.1 billion and increase of 8.7 billion or 83.7% compared with the ten point four billion at March 31st, 2019. Leave Porter loans increased 281 a million, 1.5% or 6% annualized compared with the 18.8 billion at December 31st. 2019 are deposited March 31st, 2020 were 23.8 billion and increase of 6.6 billion months or 38.5% compared with the 17.1 billion at March 31st, 2019.

Of the 67179000 dollars and non-performing assets 13187000 month 20% are energy credits.

12869000 dollars which car service company credit and $318,000 or Dusty up credits?

Since March 31st 2020 there have been no material delete from the non-performing asset list that charge off for the 3 months ended June 31st. 3020. We're $801,000.

three quarter deposits decreased 373 million or 1.5% from the 24.2 billion months or 31st 2019 a portion of this decrease was due to our plan reduction of higher-cost and broker deposits assumed in the Legacy, Texas Bank merger

There was no addition to the allowance credit losses during the quarter ended March thirty first two thousand winning.

The average monthly new Loan Production for the quarter ended March 31st, 2020 was $476 billion dollars.

Loans outstanding at March 31st, 2024 nineteen point one two, seven billion dollars the March 31st 2020 loans home is made up of 36% fixed rate loans.

Excluding deposit. We assume in the merger and new deposits. We generated at the acquired banking centers since November 1st 2019 off deposits at March 31st, 2020 blue 1 billion dollars or 6% compared with March 31st, 2019 off and 162 million nine basis points or 3.6% annualized compared with December 31st, 2019.

36% floating rate loans

and 28% that reset specific intervals. I'll now turn it over to Charlotte. Thank you Tim at this time. We are prepared to answer your questions Eric. Can you please assist us with questions?

Our non-performing assets totaled $67 million or twenty five basis points of quarterly average interest-earning assets at March 31st, 2020 compared with forty million dollars or Twenty One basis points a quarterly average interest-earning assets at March 31st, 2019 and 62 million or 25 basis points to a quarterly average interest-earning assets at December 31st, 2019 wage increase during the first quarter of 2020 was primarily due to the merger.

We will now begin the question-and-answer to ask questions. You may press star then the one on your touchtone phone. If you're using a speaker phone, please pick up your handset before pressing the keys to withdraw your question, please press star then to our first question today will come from Jennifer ambar of SunTrust. Please proceed with your question.

During the first quarter.

Good morning, David to talk about what you see as your most vulnerable loan Bucket over the long-term at the still kind of in the shutdown and things reopening slower than we'd like.

2020 Prosperity increased its allowance for credit losses to 327 million dollars from $87 Thursday 4th quarter of 2019 after adopting accounting standard ASU 2016-13 also known as Cecil off.

Yeah, the first I would say that you know, we probably have seen deterioration yet in in the loan portfolio. And again, maybe that's because wage, you know, you extend it a number of loans loans for that. But I guess it's obvious that vulnerable would be you know, the first thing somebody would pick out would probably be all in gas portfolio. However, when you really look at it, the majority of it is in production and that against having to jump in to talk about paying off a percent of that is is head the product amount that we got from Legacy at about $56 a barrel so that they had positioned in park next week probably between the more detail with an that the there's a little over 200 something million that we have and the phones that are in the service industry the thing I would say about that, is that most of those wage?

The amount of the allowance is based on our Cecil methodology. We believe these additional reserves should help to insulate the company during these challenging and unprecedented times are allowance for credit losses to Total loans, excluding the warehouse purchase program loans now stands at 1.88% wage compared with 51 basis points at December 31st, 2019 with regard to Acquisitions, as one would expect conversations with other bank direct potential acquisition opportunities has subsided. However, we remain ready to enter into negotiations when it's right for all.

Parties and is appropriate freedom to our existing shareholders.

And and the other customers that we have probably for the last twenty and thirty years. We didn't put if any new customers on there that they have experience in this and we met through this with them back in Sixteen and Seventeen when all $25 a barrel. So then I guess the next uh, I guess the next thing would be vulnerable would probably be uh, your hotels and motels and that is going to be until they you know, what your people start coming back traveling again, I would think that usually we don't like bugs Restaurant Loan. So that that most all the PPP money that came out probably is going to help a lot of hotel motels and restaurants and stuff like that. So they walk, you know like to get it was very helpful. And so we'll see how that goes. I don't know that anybody really knows really where we are at in the future. You know, it says the third quarter or fourth quarter wage.

Lost today's challenges are certainly extraordinary Prosperity has a deep management team with experience in navigating and adopting and difficult time. We enter this economic downturn from a position of strength with Sound Credit quality robust capital and liquidity and solid black writing fundamentals. We believe that our team will see us through and we remain confident in our long-term future. I would like to thank every associate and prosperity throughout the past several months while dealing with various personal challenges related to the pandemic our retail team operated at full capacity and ailing us to keep our locations offer open and serve our customers day. He needs additionally our operational staff and lending team were crucial and accepting processing and submitting dead.

Thousands of s p a p p p applications and closing the loans working around the clock to assist our customers. Thanks again for your support of our company took me turn over our discussion to also back our Chief Financial Officer to discuss some of the specific Financial results. We achieve hustle back. Thank you. Mr. Zalman. Good morning. Everyone else net interest income before provision for credit losses for the 3 months ended March 31st, 2020 was $256 million compared to Thursday is 54.9 million for the same period in 2019 and increase of one hundred one point 1 million or 65.3%

But I think a lot of the a lot of it's going to depend on how fast we turn back on the economy and I think Texas is planning on turning it on faster than in the summer other states. I think this Friday were were coming on. There'll be almost after that. It's not everything on. I don't know that the hair salons in the nail place. But even your restaurants are coming back and you're again, it's going to be a diminished capacity, maybe 25% or 50% or your medical offices or coming back in so I think the faster than in the past we come on the better it will be and again, I you know thing I feel good about it. Then I can I can't predict the future but we've been through this before we have probably our underwriting. It's probably been better. I don't want to say that did something may go wrong with you, you know, our car credit underwriting is probably been stronger than some of the other Banks was not taken as much risk to some dead.

the increase was primarily

You to the merger with legacytexas in November 2019 and 28.5 million in Lone discounted question in the first quarter 2020.

Banks and hopefully that should help.

Do this. But again, we don't know the future, but we feel pretty good where we're at long ask for Jennifer. I'm sorry. I can give you some color.

Yeah, that's okay. So how much how much is your loan balances have been deferred overall and specifically in that hotel as energy bucket wage. I don't know that I don't think I have felt against somebody has to jump in a minute. But what we have there wasn't as many in March but as if you look as of yesterday, we had 5643 lungs that we did have an extension on at a $66,000 almost $57,000. So that would be about 7% a little over 7.7% of our loans and the dollar amount that we extend it were $60 million $829,000.

The net interest margin when attacked equivalent basis was 3.81% for the 3 months ended March 31st, 2020 compared to 8.2% for the same period in 2019 and 3.66% for the quarter ended December 31st, 2019. For the accounting adjustments that for and interest margin for the quarter ended March 31st, 2020 was 3.36% compared to a 1.16% for the same period in 2019 and 3.26% for the quarter ended December 31st, 2019 nange interest income was 34.4 Million for the 3 months ended March 31st, 2020 compared to Twenty Eight Point 1 million for the same. Thursday.

You know David I might I might add but it's Jennifer. It's really a function and its saying start normalized really quickly.

2019 the increase in non-interest income was primarily due to the murder was legacytexas note the debit card income from Legacy, Texas is now he's acted by the Durbin Amendment.

96 for the three months ended March 31st, 2020 was 124.7 Million compared to seventy eight point six million for the same. In 2019. The increase was primarily due to the murder with Legacy, Texas.

I suspect we're not going to have that many severe lung problems if this gets drawn out more and more and more and more than obviously that could be a different story. But it's David mentioned Texas is starting to come back online. This weekend restaurant are allowed to open this weekend at 25% capacity and then depending on how things go. They're going to go to 50% capacity by midmark. And then once again based on how things go wrong, they could be at full capacity by the end of the day. I said bit more committed in May so there are a lot of things happening medical office. Our office opened their their client flow is obviously less than what it normally is Ben. But the important thing is they're they're open for business and people can go see doctors now.

Well, the second quarter 2020 we expect normalized not interest expense to arrange around 120 to 125 million in addition to this with 3 to 5 million in one time murder expenses related to upcoming June conversion.

Further we expecting for expenses related to SB a paycheck Protection Program in the second quarter, which are not included in the normalized not expect it.

I have to talk to him over the phone. So there's a lot of positive things in play that we're hoping will allow our customers to get back online fairly quickly. But we'll have to just wait to Kevin you want to jump in on the oil and gas at all.

As we discussed in private quarters, we expect to realize most of our cost savings from the Legacy Texas merger beginning in the third quarter of June 2020 after the system integration that is planned for doing today. We have already realized some frustrating from the murder and eventually expect additional cost Savings of approximately eight to nine million per quarter combine. This will be in line with an ounce 25% cost 8.

Yeah, I mean Jennifer is you know in this Tim just said a lot of this is about duration particularly in oil and gas low prices are one thing but low prices for a long time can be very destructive our portfolio, which is now $719 or 3.8% of the loan portfolio with it. It's pretty well hedged as David said if we look across the producing portfolio on the gas side for this year 88 and half percentage of the PDP is hedged at a weighted average price of $50.93.

The efficiency ratio was 42.9% for the 3 months ended March 31st, 2020 compared to forty 2.94% month for the same period in 2019 and 58.07% for the three months ended December 31st, 2019, which included forty six point four million jobs related expenses the bond portfolio Matrix at 3:30 1020 showed a weighted average life of 3.08 years and projected annual cash of approximately 2.2 billion. And with that. Let me turn over the presentation to Tim the managed for some detail on loans and asset-quality.

That rolls into next year.

We have 63.2% of the PDP had at $50.24. So these Hedges have not only for us because the industry kind of move a lot more of a hedging in 2015. So I don't think we're unique in this regard. We might be unique in the reporting it how much we have its buying us time. Not much worse than nothing works at $20 oil. So so there's going to be stressed within the portfolio as we talked about in the January fall covering our fourth quarter results, um, because of the marks we had back then which are now bored in the Cecil.

Thank you. I'll set.

Our non-performing to ask that headquarter in March 31st, 2020 total 67179000 dollars a month or thirty five basis points of loans and other real estate.

The March 31st 2029 for me and asked that total was made up of 61449000 dollars in loans took $78,000 and repossessed assets and 5452000 dollars and other real estate.

We've got 12.2% of our energy portfolio Reserve. So it's you know, we kept pretty tight looks at everybody else is just an energy portfolio and I don't think anybody's got that kind of reserved up. There's a couple that are now starting to approach has I think I heard a call yesterday were somebody had approaching 8% off but we've got a pretty healthy Reserve up against it. We're working really hard on the former energy credits. We had at Legacy if we had identified about five hundred million of those we wanted to get off the book. So if I just look at that portfolio back in September that Reserve Base portfolio is 511 million dollars, it's down to $355 and we haven't out of all those resolutions. They've all come at or below the market that were put on them. In fact everyone but one phone number

Of the 67179000 dollars and non-performing assets 13187000 dollars a month or 20% are energy credits.

12869000 dollars of with our service company credit and $318,000 duck up credit.

Since March 31st 2020 there have been no material delete from the non-performing aspects of list. That is a free month ended June 1st, 2020. We're $801,000.

There was no addition to the allowance for credit losses during the quarter ended March 31st 2020.

The average monthly new Loan Production for the quarter ended March 31st, 2020 was $476 billion.

Well, well within the Mark, I think we have one this quarter that we got out exactly on top of the mark on so we haven't gone negative in the market in all of these resolutions. So I think we're making progress on what's in front of us will see what we'll see what the rates are brings. I think we've got a good eighteen months of hedging with pretty darn good counterparties built into our Palm Garden parties are basically we're mostly BP Target of pretty good counterpart. He's on the other side of these things and and our clients are are actually doing pretty well these heads volume. It's up to us and we're instituting, you know mcrs or monthly commitment reductions on all of these guys to capture some of these clothes that they're benefiting from and reducing the debt.

Loans outstanding at March 31st, 2024 nineteen point one two, seven billion dollars the March 31st 2020 loan total is made up 36% fixed rate loans.

36% floating rate loans and 28% that reset Civic intervals. I'll now turn it over to Charlotte Rae. Thank you Tim at this time. We are prepared to answer your questions. Can you please assist us with questions?

Thank you. One more question David. Are you inclined to spend buyback activity right now or are you still active?

Thank you on your way before pressing the keys to withdraw your question, please press * 10 to our first question today will come from Jennifer ambar of SunTrust bank receipt with your question.

You know, I think if it were up to me, I I'm probably pretty followed. I would probably do it on the other hand. I know The Regulators right now whether or not you know, they haven't said that you can I ask you something that I think they would like us to make sure that you build your capital and so I'd say for the most part I've made it to them that it not anything format for life like this topic none the less our stock went really through the bottom or something. We probably wouldn't be buying. Back right now. So but you know that that's just kind of where we're at.

Thank you so much.

Thank you. Our next question will come from Brad Millsaps of Piper Sandler. Please speak with your question.

Good morning to talk about what you see is your most vulnerable loan Bucket over the long term as we as we're still kind of in the shutdown and things are reopening slower than the bike. Yeah the wage. I would say that, you know, we probably haven't seen deterioration yet in in the loan portfolio. And again, maybe that's because you know, you extend it a number of law just as long as for that but I guess it's obvious that vulnerable would be you know, the first thing somebody would pick out would be probably the oil and gas portfolio took over when you really look at it. The majority of it is in production loans and of that against haven't seen jumping and talking about 85% of that is is head product month.

Hey, good morning, guys. Good morning, David. I know one of the big aspects when you bought Legacy was, you know, right size in their balance sheet, you know running off some of their loan portfolio, uh, you know to kind of meld the two together just kind of curious where you are in that process, you know, kind of what this environment might use for to change timing of some of that or if you kind of have you know, the balance sheet terms of you know, the the left and right side kind of kind of where you wanted at this point.

We got Legacy at about 52.

I like having internet, but I think we're right on schedule. You know, I think when we first we saw be about $400 billion in loans or five hundred million in loans, and how long does gas just got a fantastic team over there. The Declan Gomery is being stuff. I mean, they're they're they're getting their clean up clean up your Outsourcing some of the month. We didn't necessarily want their their that Kevin said earlier the mark that we had on them back to this quarter. We actually we look at r a l l or or whatever they want to call now this piece of calculation. We took that asked how much was it 13 million that was really related to that. We took it out of the PC if they put it to the regular oil. So everything so far has worked out really good. I mean knock on wood. I don't want to just say everything's perfect in the world, but I I think that off.

$60 a barrel of that page position in for next season probably one of the more detail with you than that the there's a little over two hundred million that have faith in loans that are in the service industry. The thing I would say about that is that most of those came us and and those are customers that we have probably where the last twenty-odd years. We didn't put any new customers on there that they have experienced in this and we made it through this with them back in 16 and 17 went off $25 a barrel. So then I guess the next uh, I guess the next thing would be vulnerable would probably be uh, your hotels and motels and that's just going to be until they took some people start coming back traveling again. I always think that usually we don't like bugs restaurant loans. But so the most all the PPP money that came out

Really? I think we are when we want to be I I was a little bit leery on the you know, where we go to stay in the warehouse lending program. I think we've got more comfortable with it and and we were even able to there are some customers that we probably picked up a couple of customers because they were so strong that I can get from your system or else is probably Outsource a couple that we weren't making as much money on and so that's worked out real well with this. Uh, I think the other portfolio was that commercial real estate portfolio. We really haven't seen a lot of growth math portfolio yet or a lot of loans. And again, it's just paying down like it is so I hope that gives you some color and camping you may want to jump in office.

Probably is going to help a lot of hotel motels and restaurants and stuff like that. So they you know, they get they should it was very helpful. And so we'll see how that goes. I don't know that anybody really knows really where we are at in the future, you know in Phase the third quarter or fourth quarter, but I think a lot of the a lot of it's going to depend on how fast we turn back on the account of me and I think Texas is planning on turning it on faster than in some of the other states. I think this Friday were were coming on. There'll be almost dead but it's it's not everything on I don't know if the hair salons in the nail places, but even your restaurants are coming back on and you're again, it's going to be a diminished capacity G25 chance to 50% or your medical offices are coming back in so I think the faster they choose the faster we come on the battery will be and again, I you know bang I feel good about

I think David covered it pretty well. If anything, I think we're I had scheduled we still have about you know fifty million on the energy side. We'd like to work our way out of at least going back to those original numbers off today. We probably like to work our way out of a lot more than just but we're ahead of schedule. Brad got it even just the way from credit. What about on, you know the money in terms of you know, the liabilities, you know be mixing the deposit, you know sort of how does that you know impact in addition to what's going on with with rate impacts of your thoughts around the name. I think David Moss and last order kind of getting into that 335 range which he did this quarter, but just kind of curious what the environment does and then you know, kind of what you're in additional to do with legacies birth probably deposit as well. This is Tim I can give you a little insight on that. I've been working with May and others on the legacies birth.

Can I can I can't predict the future but we've been through this before we have probably our underwriting. It's probably been better. I don't want to say that it's going to make a wrong way. He you know, a credit underwriting is probably been stronger than some of the other side's not take too much risk to some of the other Banks. Hopefully that helps. Through this but again, we don't have the future but we feel pretty good about that long. And I'm sorry. I just want to give you some color. Yeah, that's okay. So how much how much is your loan balances have been deferred wages were all and specifically in that hotel and energy bucket. I don't know that I don't think that I have broken down. Somebody else can jump in a minute, but what we have there wasn't as much in my life, but is if you looked as of yesterday, we had 5643 loans that we did have an extension on at a $66,000 or almost sixty years.

to reduce

mm, so that would be

About 7% a little over seven per 7.7% of our loans and the dollar amount that we extended were 66829000 month.

Some of our interest expense and I think we're having a good success. We're trying to do it in a what I would call a considerate fashion Club cuz we don't want to run out customers that have the capability of being poor customers and staying with it over time. So we're we're taking a I guess you could call it somewhat of a relaxed approach with but yet focused and determined on lowering these great and I think we're having good sets off by and and maybe add to it but I'm not aware we have have lost any customers that we feel like are on the court customer that some that are more on the hot inside just inevitably will end up going somewhere else. So we're very focused on it. We have been we continue to be dead.

You know David I might I might add that. It's Jennifer. It's really a function of time if things start to normalize relatively quickly.

Aspect we're not going to have that many severe loan problems. If this gets drawn out more and more and more and more than obviously that could be a different story. But it's Dave mentioned text it to starting to come back online this week restaurant or allowed open this weekend at 25 pasty and then depending on how things go they're going to go to 50% capacity by midmark. And then once again based on how go off they could be at full capacity by the end of the day. I said a bit more expensive today. So there are a lot of things have medical offices are all she opened their their client flow is obviously less what it normally has been but the important thing is they're they're open for business that people can go see doctors now,

All the interest costs going down. Obviously the high-priced ones go down just like the low priced ones. Although there is a differential there. So I think having good set. I feel good about it. This is awesome. But I would like to add that related to uh to The Brokerage CDs that we have we have about 250 million off the two and a half percent that we were planning to the price hopefully soon. So there is that one. And also we have what kind of 25 subordinate debt that we going to pay off end up like the end of the year or December so that definitely going to help us with the reprise to help high cost, you know is really the Pug been even though they might have been down from the Legacy side long wait, we have this month, I guess with we probably just probably in the last month or two positive. He's probably a billion dollars it again some of that's probably because of the PPP but usually dead

I have to talk to him over the phone. So there's a lot of positive things in play that we're hoping will allow our customers to get back online fairly quickly. But we'll have to just wait Kevin. You want to jump in on the oil and gas at all?

And like this and normally normally our deposits come in the fourth quarter in first quarter, and now this now is not a time and this month we saw like an age a billion dollar increase to so when we went back and looked this happened in 2008 when it's time to get a little tougher. We we spend more people put more of their money with this. Is that right off the page on that. Yeah, it's quite safe so you can see that and as far as the net interest margin, I think it's also that could probably tell you this I asked if he feels comfortable and projecting anywhere from 3.455 to 3.55 nineteen Force marking point forward on a total if you want automatic smartphone without the without the appreciate what you do have three, but it's probably low to mid thirties that would do without oppression and when we provided range of $300,555 waived based on the about thirteen to Fifteen million federal income that we expect the second quarter dead.

Yeah, I mean Jennifer is you know in the stem just saying a lot of this is about duration particularly in oil and gas low prices are one thing but low prices for a long time can be very destructive our portfolio, which is now $719 or 3.8% of the loan portfolio. If it's pretty well as David said if we look across the producing portfolio on the gas side for this year 88 and 1/2 / month of the PDP is hedged at a weighted average price of $50.93 that rolls into next year that we have 63.2% of the PDP home and $50.24. So these Hedges have have not only for us because the industry and move a lot more of the way a hedging in 2015, so I don't think we're unique in.

And relate to the margin I can speak little bit the way out.

Balance has been transferred I think is very, you know better insulated than this time environment because we have if you look at our total interest-earning assets 31% off the bond portfolio with fixed rate. And also we have about 35% of loans and fixed rates. So that definitely helped us to maintain I would say our marketing definitely is going to suck flat but I think the wild-card enlists environment is the hour s b a p p p program that it depending on the timing of forgiveness the timing of the fun you could impact the market in the second quarter. I mean it's going to be diluted a little bit to the margin but if you look at it from the EPS the bottom line it will be very active also probably wouldn't need to lose if if you could take the whole premium that you're getting the three or 5% if you're getting in that wouldn't be believable if you have to take that what you're telling me over 2 years. Yes.

In this regard we might be unique in the reporting it how much we have its buying us time. Not much work. So in fact, nothing works at $20 off so so there can be stressed within the portfolio out as we talked about in the January call covering our fourth-quarter results because of the marks we had back then or now board in the Cecil. We've got 12.2% of our energy portfolio reserved. So it's a you know, we kept pretty much like looks at everybody else has got an energy portfolio and I don't think anybody's got that kind of reserved up. There's a couple that are now starting to approach it. I think that I heard a call yesterday. Somebody had approaching 8% but we've got a pretty healthy Reserve up against it. We're working really hard on the former energy credits. We had at Legacy.

if we had

Exactly. So you said you're not coming in from that D program? I think it's all said and done. We'll have a billion and half a billion dollars and fifty feet loans to pay, you know proof off that sound definitely impact our bottom line and EPS not creative way.

Great. Thank you. I'll go ahead back with you.

Identified about two hundred million of those we wanted to get off the books. So if I just look at that portfolio back in September that Reserve Base portfolio is $511 down to $355 and we haven't out of all those resolutions. They've all come at or below the market that were put on in fact everyone but one has been well well within the Mark, I think we have one this order that we got out exactly on top of the mark on so we haven't gone negative the market in all of these resolutions. So I think we're making great progress on what the front of us will see what we'll see what duration brings I think we've got a good eighteen months of hedging with pretty darn good counterparties came into our portfolio Garden parties are basically we're mostly BP and Cargill so pretty good counterpart. He's on the other side of these things and and our plants are dead.

Our next question will come from a David Rochester of compass point, please leave us your question. Hey, good morning guys. Nice border on the energy book. You guys gave a great detail on that. Um, you look pretty well protected at this point, but just wondering, you know, how far along you were in the spring redetermination and what you're seeing from the standpoint of wine reduction sauce. And then what's your baking in for oil prices and your new deck?

We're well into the redetermination. It's an ongoing process. You know, the customers are fully aware that that processed is Thursday the Thunder way and and appropriate and called for we haven't had.

Actually doing pretty well with these these heads volumes. It's up to us and we're instituting, you know, your monthly payment of reductions on all of these guys to capture wage some of these cash flows that they're benefiting from and reducing the debt.

Thanks. One more question David. Are you inclined to spend buyback activity right now or are you still active?

Really any resistance to the process? Obviously, some people don't like the fall out of the numbers, but they are what they are. We haven't had any dead what I'd call declared default so far in the process we seem to be working. Well with Berkley all the customers we understand where they oh, I understand where we are. I think it's like everything else is related to our loan portfolio. It's really a matter of of how long does it stay week. But right now I'm not overly concerned about it if prices are bad a year from now and two years from now, we're probably going to be more concerned about it so long, uh, I feel good about where we are and and the determinations, you know, people have the option of Fletching additional collateral the option of paying us down. Sometimes we

You know, I think if it were up to me, I I'm probably pretty bold. I would probably do it on the other hand. I know The Regulators right now whether or not you know, they haven't said that you can't do something that I think they would like us to make sure that you build your capital. And so I say for the most part I get to them that if it's not anything off and formal, but just passing them unless our stock went really through the bottom or something. We probably be buying stuff back right now. So but you know that that's just kind of where we're at Birth.

Thank you so much.

Our customers a little more time.

Thank you. Our next question will come from the Brad. The pipe burst and please speak with your question. Hey, good morning guys home. Um David. I know one of the big aspects of when you bought Legacy was, you know, right side bounced, you know, running off, you know, some some of their loan portfolio, uh, you know, I help you together just kind of curious where you are in that process, you know, kind of what this environment might use for to change. The timing is some of that or do you kind of have you know, the balance sheet terms of you know, the the left or right side kind of kind of where you wanted at this point.

We're willing to consider that and look at it. So it's a viable process. It's not a process that has broke down in anyway at this point time Yep. This is Cameron. I would just add to that. We're about halfway through at this stage of the game General sense in terms of what's happening is walk ins of anywhere from forty to fifty percent across-the-board and heavy usage almost I think every client we instituted NPR's wage. Okay, and then in terms of the the oil price you guys are using in your deck now.

I'd like seventies. I think we're right on schedule. You know, I think we talked about four hundred billion in loans or five hundred million in long does gas. Is that a fantastic team over there? Gomery is being set up. I mean, they're they're they're getting their cleaning up 11:16 up your Outsourcing some of the month. We didn't necessarily want their their that it does. Kevin said earlier the mark that we had on them actually this quarter. We actually we look at r a l l or if they or whatever they want to call this piece of calculation. We took that asked how much was it 13 million or 13 that was related to that. We took it out of DC DC if they put it to the regular so everything is so far has worked out really good. I mean knock on wood. I don't want to just say everything's perfect in the world, but I I think that dog

Somewhere between twenty-five and thirty bucks. Okay, Monday mornings were starting out the local. He's probably going to be yeah, we have a stress. We were they were running and take down my God. I don't appreciate that guys. And then I guess in terms of your loan growth Outlook if we get some thoughts there I know in the past month typically put together some some decent long grass on the environment is tougher because all the other Banks tend to tighten their underwriting standards and you guys are are already, you know operating with type standard. So just wondering a software on that as you seeing that unfold today is the same as what you just said again. Yep.

Really? I think we are when we want to be I I was a little bit leery on the you know.

Where we going to stay in the warehouse lending program? I think we've got more comfortable with it and and we were even able to there are some customers that month. We probably picked up a couple of customers because they were so strong that they didn't get financed to somewhere else and probably Outsource a couple that we weren't making as much money on and so that Thursday that real well with us, I think the other portfolio was that commercial real estate portfolio. We really haven't seen a lot of math portfolio yet or a lot of loans to the advantages and down like it is I hope that give you a call her and Kevin you might want to jump in.

She said I think that will probably be better at least 10 times and maybe some of our peers because we're in a better position probably. Yeah, okay, and then just switching to the margin which is. You're seeing a security screen investment rate these days and if you guys were buying to replace any of the runoff you're talking about and you talked about some decent cash flow coming off that or if you're just planning on working borrowings down a little bit. But really we haven't probably last month because we got around we bought a couple hundred million dollars cuz we got around that 2.4. 5.4 percent right now really with right for the rat. We're just we're just paying down in fact in the money and putting it back and set appointments Federal Home Loan Bank and life is putting it back to the loan spot on the warehouse to Warehouse.

Maybe we just one last one on M and appreciated the the thought this gave earlier. I was curious if you'd still be interested in scic assisted deal if those were off over the next year or so depending on how bad things get and if you go for only in Market deals or could go outside the market for those types of situations.

No, I think David covered a pretty well if anything, I think we're I have to schedule we still have about you know fifty million on the energy side. We'd like to work our way out of at least going back to those original numbers rep today. We probably like to work our way out of a lot more than just fifty. But but we're ahead of schedule Brad even just the way from credit. What about on, you know, the money in terms of you know, the liabilities, you know be mixing the deposit and you know sort of how does that you know impact in addition to what's going on with with rate impacts of your thoughts around the name. I think David happened last quarter kind of getting into that 335 range, but you did this quarter, but just kind of curious, uh, what the environment does and then, you know, kind of what you're in addition to able to do with with legacies birth portfolio deposit as well. This is Tim I can give you a little insight on that. I've been working with Maze and others on the legacies birth.

If you look back even when like that so far better deals, we've got even like the Franklin deal when it is been at times like this. And yes, we did it in and you know that generally when we took anything at a pretty reasonable price and so we we would be a better naturally we would be more interested in it in markethill having said that from a shareholder standpoint any money, you know how sexy it was if we could make some money we we consider that too. Yeah. All right. Great. Thanks guys.

order question

Come from Brady daily of KBW. Please proceed with your question.

To reduce some of our interest expense and I think we're having a good success. We're trying to do it in a what I would call a considerable fashion because we don't want to run off customers that have the capability of being core customers and staying with us over time. So we're we're taking a I guess you could call it somewhat of a relaxed approach but yet focused and determined on lowering these rates and I think we're having good faith. Sat in in maybe add to it, but I'm not aware that we have have lost any customers that we feel like thoughts are on the core customer side some that are more on the hot money side that just inevitably will end up going somewhere else. So we're very focused on it.

Hey, thanks gud morning guys, but I wanted to follow up on the fda's program. What's the app the that you're seeing currently off? This is Eddie, you know in the first tranche we had about six hundred and thirty million in approvals over 2,700 loans and I think if you take that average fee on Thursday was close to about three point about 3.2% on average or right around 3% on the fees on that or of course, you know early on into the second phase right now, how long has this morning? We've had about 3,000 approvals choline about five hundred million and we have a lot more to work through. So we really have analyzed fees on that. I will tell you the average time. It's come down in this trunk, you know, it started about $190,000. What we're looking at on the morning was supposed to $150,000 probably the estimated time.

Have we continue to be all the interest costs going down? Obviously, the high-priced ones go down just like the low priced one. Although there is a differential there. So I think we're having good success. I feel good about it. This is possible. I would like to add that related to uh to The Brokerage CDs that we have we have about eight thousand two hundred fifty million at two and half percent that we were planning to reprise hopefully soon. So there is that one. And also we have what kind of twenty-five and subordinate that that we going to pay off and the like the end of the year in December. So that's definitely going to help us with the price of the high cost and I get really the past and even though they might have been down from the Legacy side where we we have this month, I guess with we probably just probably the last month or two possible to be at least probably a billion dollar if it again some of that's probably because of the Dead

Call before what about a 3% fee of 3% on average cuz these are all in that lower level. Right? So if you guys end up doing 1.7 billion months 3% fee, and that's that's fifty million dollars of pre-tax earnings that could potentially float through the margin took over the next couple of quarters, as most of these loans are forgiven. Is that that'd be a nice kick up to the margin. Is that the right way to think about that it is I mean, there are some expenses that need to come out of that a little bit. But you know, these loans are 24 months amortizations, but forgiveness. We'll start eight weeks after they can start by eight weeks after the first funding and the rate at which they will be retiring that debt is debt to be seen we can conceivably see the lines here that I mean up in the next 12 months. I have a game.

But usually it's times like this normally.

Normally our feet deposits come in the fourth quarter and first quarter and now now is not a time and this month lease all like in April a billion dollar increase in wage when we went back and look this happening mm when trying to get a little tougher. We we can more people put more of their money with us that right off that's right on that. I can see that and as far as the net interest margin, I think that I can probably tell you this I asked if he feels comfortable and projecting anywhere from 3.45 to 3.55 that information. Forward on a total with the market without the without the we should weekly have to see but it probably low-to-mid 30s that would be without permission and when we provide the range of 3:45. 3:45, we've based on the about thirteen to Fifteen million Valley income that we expect a certain order and relate to more wage.

I think this is money that we really weren't counting on and if our model would let us our methodology. I would like to see if we could put some of that money against increasing our loan officers possible. So I wouldn't want you to count money just call you on that if we can model allow us off getting too much money and reserve it all on that topic, you know, it's hard to see a zero provision this quarter but you know, totally understandable given the credit quality of prosperity and where you're reserved for how far already had you think that you could be a zero provision going forward from here Thursday as well.

I can speak a little bit. Uh, the way I will balance is structured I think is very, you know better insulated than this time environment because we have if you look at our total wage earning assets 31% is in the bond portfolio with fixed rate. And also we have about 35% of loans and fixed rates. So that definitely helped us to maintain our faith. Our Martin definitely is going to stay flat but I think the wild-card can list environment is the hour s b a p p p program that it depending on the timing of forgiveness the timing of the van that you could impact the margin in the second quarter. I mean it's going to be deluded little bit to the margin, but if you look at it from the CPO bottom line is will be very creative to us. So they probably wouldn't be deluded if he could take the whole

Well, just I would say that I would like to take extra money that we have coming in and try to put some again from Rose probably going to look at me because this is all based on a methodology. But then the methodology there's what is it called the economic environmental deal where maybe you have some flexibility. I would like to put more of this profound money. We have not only that but we have some other things coming in that are above normal budget is and we would like to maybe put some of that so if there's a provision it would be with this extra money I would say and if the methodology allows it off and right now we're not faced with obvious defaults to change no actually get worse. And if it does then our model will address the appropriate wage. But again, I you know, it would be nice to just say here's another forty or fifty million. You have an income that you didn't count on, but it would be nice if we could put some of that away in my thoughts wage.

That's not looking Leslie for me.

Bringing this regarding the free or if you're getting in is that wouldn't be believable. If you have to take that what you're telling me over 2 years. Yes. Exactly. So you said that was coming in from that DC. I think it's all done. We'll have a billion and half to two billion dollars and CPP loans to pay him proof that's going to definitely impact all bottom line and he took it away.

You're looking at the energy reserve of around twelve percent. I think that is excluding another twenty 1 million dollars a fair value Mark. So what what they've got into it. It's more like a 15% energy Reserve is that way to think about it. Then that is a fair way today, but that what we call it persuasion is going to bleed off over time. So over the next 18 to 24 plus months that that piece of what you call reserves void to to place and went to $25 a barrel. We went first month and then go back and tell me how much money are we ever lost over a 2-year period and so I think the two years in this might be in the slideshow that we did. I think it was in 16 and 7 a.m.

Our next question will come from a David Rochester of compass point. Please proceed with your question. Hey, good morning guys. Nice quarter on the energy book. You guys gave great detail on that. Um, you look pretty well protected at this point, but was just wondering, you know, how far along you were in the spring redetermination and what you're seeing from the standpoint of wine reduction sauce. And then what's your baking in for oil prices and your new deck?

We're well into the redetermination. It's an ongoing process. You know, the customers are fully aware that that process took the underway and and appropriated called for we haven't had.

really any resistance

Over two years. We lost about thirty five million and $25 million of that or 24 million of that was oil and gas in the majority of that was from a bank that we bought in Oklahoma that so most of those losses came from that. So but again, we were smaller at that size so that if we go through something like that, you know again, I can't say that's what our total loss is it could be dead who knows? It could be eighty. It can be not too knows but again that just gives you some some flavor where it was well went to $25 last time what we charged off over time. Yes David, that's right that went from about mid June of 2016 through the first quarter of 2018. So it was half a year 16 all the 17th and first portion of 18 ice exactly correct and as far as reserves and again, you never can't say you have too many but and my lifetime as a banker I never have I've never been at one point a dead.

So the process obviously some people don't like the fall out of the numbers, but they are what they are. We haven't had any what I'd call a default so far in the process we seem to be worth well with Berkley all the customers we understand where they are. They understand where we are. I think it's like everything else that relates to our loan portfolio. It's really a matter of of how long does it take a week right now. I'm not overly concerned about it if prices are bad but year from now until years from now, we're probably going to be more concerned about it. So I I feel good about where we are and and the determinations, you know, people have the option of letting additional collateral the option of paying us down. Sometimes we need to give certain wage.

This is this is a Whole Nude dimension for me. So I hope we don't need it. But that's more than I've ever I've never been in a bank where the capital ratios we used to operate and we first started off at 5% We thought we were in great shape. And now we have Capital ratios of 10% You've got allowance for loan losses of almost 2% I mean, I don't know. I know I'm in this situation right now, but I don't know that really the banking the banking industry is ever gone into a downturn or where we're at right now as strong as most banks are right now also,

A little more time and we're willing to be considerate that and look at it. So it's a viable process. It's not a process that has broken down in anyway at this point. This is Kevin. I would just add to that. We're about halfway through at this stage of the game General sense in terms of what's happening in the reductions of anywhere from forty to fifty percent across-the-board and heavy usage almost I think every client we've instituted MCR Zone. Yep. Okay, and then in terms of the the oil price you guys are using in your deck now.

Got it. Thanks, David.

Our next question will come from Abraham lunala of Bank of America. Please proceed with your question. Good morning morning, I just want this for Kevin to the extent you can how do you see the mortgage Warehouse business playing out both in terms of this the demand off with the next few months for the next couple of quarters and what you're seeing on the pricing side in terms of

Yeah, when?

Somewhere between twenty-five and thirty bucks. Okay. Yeah, Kevin Nash probably do these days in the 20s morals are starting out the low twenties would probably average again to the big place. Yeah, we have a stress case that we were that were running and it takes it down to High Teens life and I don't appreciate that guy's and then I guess in terms of your loan growth Outlook just if we get some thoughts. I know in the past you guys would typically put together some some decent loan growth when the environment is tougher because all the other Banks tend to tighten their underwriting standards and you guys are are already operating with type dead. So it was just wondering what your thoughts were on that is you're seeing that unfold today. It's the same as what you just said again. Yep.

It's been pretty stable after years of being beaten down on margin there. I think you saw in the QR wave average coupon for the quarter was 362 on Thursday. We're house. Um, and notably, you know, it was a pretty big quarter in terms of refined purchased volume was 51% purchased 49 Samsung a lot of volume in the quarter. I I actually think that warehouse volumes this year going to peek in mid-may. So we're not too far away from where I think will be Peak volumes. It'll be somewhere between May 15th and May 20th by my math and for us

I think it's exactly what you said. I think that we'll probably do better at least kind of times and maybe some of our peers because we're in a better position probably. Yeah, okay, and then just switching to a margin which is curious where you're seeing a security screen investment rates these days and if you guys were buying to replace any of the runoff you're talking about and you talked about some decent cash flow coming off that or if you're just planning on working down a little bit.

Really? We haven't.

You know that piqued could be somewhere between 2 billion and 2.3 billion. And we've said we'd like to kind of keep this at 2 billion. We got a lot of bolts facilities out there to get folks through volume. Just keep in mind volume that comes on our balance sheet is usually an application that was taken by all of our customers six weeks ago. So what I do expect post, May 20th, is that purchased by ins going to drop pretty dramatically and we're going to see a much lower balance that from May 20th to June 13th. And when that purchased by returns, I don't know and once it starts returning realize we got another six weeks to lag before that application gets off on the line. So it may be a couple of months of lower volumes in the june-july. Which is normally when we're at so this year's going to be a little bit different in my opinion page.

Probably last month we modified because we got around the bottom couple hundred million dollars because we got around that 2.4 2.4% right now really with right for the Thursday. We're just we're just paying it down and taking the money and putting it back instead of borrowing on federal Home Loan Bank using that as a substitute and putting it back into the loan spot on the warehouse to warehouse work.

Maybe we just one last one on M and appreciated the the thought this gave earlier. I was curious if you still be interested in FDIC assisted deal with those were the life of the next year or so depending on how bad things get and if you'd go for only in Market deals or if you go outside the market for those types of situations.

Is based upon all the facts we're looking at so my crystal ball is and all that good past July and it will all depend then on whether the purchase volume goes back to life, you know, put their houses back on the market if there's traffic that there just isn't much foot traffic today that also extends over into the purchase Market. I think I'm going to have enough quarter in Q2. They all had pretty good quarters in q1 record kind of quarters through February and then some service started to the current contract in March.

If you look back even when like that some of our better deals we've got and even like the Franklin deal when it has been at times like this and yes, we did jump in and you know, that's generally when we can get things at a pretty reasonable price. And so we we would be interested in naturally we would be more interested in it in Market deal having said that from a shareholder standpoint depending, you know how sexy it was and we could make some money. We we consider that too. Yeah. All right. Great. Thanks guys.

Our next question will come from Brady gaily of KBW. Please proceed with your question.

There will be pockets of the United States and Home Building in Q2 where you will see some homeless and I'm not talking about the national for the most part. It will actually have negative sales volume in they'll be more bust out than they have in new new contracts. So this will be temporary wage both for homebuilders and I think for the warehouse going to be a different issue than we've ever seen.

Hey, thanks gud morning guys, but I wanted to follow up on the s t e p program. What's the average fee that you're seeing currently off? This is Eddie, you know in the first tranche we had about $630 million in approvals over 2,700 loans and I think the if you take the average fee on Thursday was close to about three point about 3.2% on average or right around 3% on the fees on that or of course, you know early on into the second phase right now, as of this morning we've had about 3,000 approvals totaling about $500 million and we have a lot more to work through. So we really haven't analyzed fees on that. I will tell you that the average South on his come down in this trunk, you know, it started about a hundred ninety thousand what we're looking at on average through this morning was closer to $150,000 probably the to make an assumption.

No, thank you. Do you just say that you see any fiscal concern that any of these independent mortgage companies could come off because of what's going on in the market and deferments etcetera where they have stuck with borders might be differing right at the onset of taking the loan. Yeah. We haven't seen that yet as we look at our portfolio and that's that's really all I've got a window into you know, the volume might have been on it in the in the short 17 days that we felt it has been less than 1% and it does seem like there's if you track this here in the last week, we've had some of the bsb's that greeted by those things if there are governments on them, which going to free up that market a bit if there's going to be issues for mortgage warehouse company wage.

Probably more. What about a 3% see about 3% on average? Cuz these are all in that lower level, right? So I mean if you guys end up doing 1.7 billion month free Lance had a 3% free and that's that's fifty million dollars of pre-tax earnings that could potentially flow through the margin took over the next couple of quarters, as most of these lines are forgiven is that that'd be an istick popper to the margin. Is that the right way to think about that it is. I mean, there are some wages that need to come out of that a little bit but you know, these loans are 24 months amortizations, but forgiveness. Weeks after they can start by eight weeks after the first funding and the rate at which they will be retiring that debt is yet to be seen we can conceivably see the Lion's Share of that coming up in the next 12 months. I have a game.

It would have been during that period of time where they were getting hit with the MSR write down for those guys those who have maybe big Ms. Ours and there was some that were caught on hedging and they had to settle up on, just the meaningful dollars there. Time and Mark our clientele made it through there. I'm not going to say unscathed but without any real liquidity concerns or anything else, we looked across our portfolio pretty hard during that period of time and in fact, we we stopped accepting Jumbo's without without identified takeouts. Probably in the second week of March just cuz gumbo Market also slowed down in terms of getting them off line. So I think we took all the appropriate steps and Thursday. We're just keeping an eye on him of stars and hedge volume.

Add that too, I think.

This is money that we really weren't counting on and if our model would have let us or methodology. I would like to see if we could put some of that money again increasing our Lounge place because it possible so I wouldn't want you to just call you on that if we can model allow us. I don't know that you could have too much money off of yep, and then on that topic zero for this quarter, but I totally understandable given the credit card prosperity and where your reserves are far already at you think that you could see a zero provision going forward from there as well.

That's helpful. Thank you. And just one question David, the follow-up on what you talked about in terms of being a bit of a capital home until things now. Does it suggest that for the near-term when I get near term is what it was three to six months. It's highly unlikely that you enter a deal or you entertain any m&a transactions on these complete in until we get to some form of the other side of the lockdown.

I think I understood your question, but it was a little bit muffled a little bit. I think you're asking what what are we seeing him? And I or what we're going to do with you might you know, our thought is the operational integration is first and foremost the June operational integration having said that I mean if an opportunity if an opportunity real life came up, we would probably really consider it because this this is what we wait for at least kind of times. We're we're there all the time but these are the kind of times that we really are in a good position to see what we need to do. So if if that comes up and I feel really good with the Legacy team and Kevin and Maze and the whole team has just been remarkable and they've just been some of the greatest party that never taking on and you know, the business we've kept what we thought we could do we did is that I feel very comfortable where where we are with our teams. And so if if that if that happens dead

Well, just I would say that I would like to take extra money that we have coming in and try to put some again probably going to look at me because this is all based on the methodology wage. But then the methodology there's what is it called the economic environmental deal where maybe you have some flexibility. I would like to put more of this extra found money. We have not only way that we have other things coming in at or above normal budget is and we would like to maybe put some of that so if there's a to be with this extra money, I would say a methodology allows it off and right now we're not faced with obvious defaults, right and if it's dead, but again, you know, it would be nice to say here's another forty or fifty million. You have it in the account on but it would be nice if it's some of that away my boss.

You know, we would we would we would do it.

Right. That's all I have.

Yep, that that makes sense. And I look and lasted for you looked at the energy reserve of around twelve percent. I think that is including another $21 off a fair value part. So what want to take that into it? It's more like a 15% energy Reserve is that way to think about it. Then that is a fair way to deal with that what we call it Force Mark is going to bleed off over time. So over the next 18 to 24 + months that that piece of cake call reserves void to deplete still be everything over 12% is depleted and off with oil went to $25 a barrel. We went first. I asked them to go back and tell me how much money have we ever lost over a 2-year period and so I think the two years in this might be in the slideshow Thursday.

Our next question will cover on Michael Rose of Raymond James. Please proceed with your question. Hey guys, just two quick ones first understand the comments around the the buyback. If I look back the kind of a great financial crisis you guys, you know still continue to increase your dividend you guys got strong, you know, Roi pre-tax, you know earnings Trends any reason to think that you'd slow on an annual dividend increases from here. My kids need milk money. So I hope God it's you know, the only thing I from what we see right now, I don't see that being an issue. But again, I I can't tell you that something would jump up in the third or fourth quarter and it's an automatic either but it's certainly I hope that's not the case. If you if you ask me which way we're leaning. It would be more more for dividend increases, especially with the the increase in earnings that we're projecting.

got it, Allison said

We did I think it was in 16 and 17 and over a 2-year period if we lost about thirty five billion + 25024000000 of that was bought a majority of that from a bank that we bought in Oklahoma with it's the most of those all came from that so but again, we were smaller at that size. But if we go to something like that, you know, I I can't say that for our shuttle a specific date to know to be enough. But again, I just give you some some flavor where it was well with the $25 a glass tower fell over to you. That price that went from about mid June of 2016 through the first quarter 2018 song half a year 16 all at Seventeen and first portion of 18. Exactly correct as far as the curves and you never can say you have too many but and my lifetime is the bank job.

And the different way one other question just as it relates to the timing of cost-saving if any of them been pushed back, it's just the conversion still on track to go as planned and change anything. We should think about their thanks know. I think this place will do is already in process. So we waiting for our June conversion after the gym conversion. We should have stopped being the savings off. I was you know, because so close to the poor end of conversion. It might a little bit delay on the realize the cost. But as we said that we already realized about 2 to 3 million cost savings this month and we're planning to another eight to nine million in future quarters, so it gets us to 25% savings, but we're hoping to do more than that, but definitely we'll give our 25% positive.

Never had I've never been.

All right. Thank you. Thank you. Thank you.

Our next question will come from very tender of d a Davidson. Please proceed with your question.

We'll point eight eight percent is this is a whole new dimension for me. So I hope we don't need it. But that's more than I've ever I've never been any Bank where the capitulation we used to operate on a first started off. We had 5% We thought. Right now we have Capital ratios of 10% You've got a lousy son losses of almost 2% I mean, I don't know. How may I know who are in the situation right now, but I don't know that really the bank the bank industry is gone into a downstairs where we're at right now as strong as most planes bar right now also dead.

Email from you live.

Got it. Thanks, David.

Our next question will come from Ibrahim lunala of Bank of America. Please proceed with your question. Good morning morning, I just one I guess for Kevin to the extent you can how do you see the mortgage Warehouse business playing out both in terms of this the demand off with the next few months for the next couple of quarters and what you're seeing on the pricing side and sending Scripts?

I need to the next one is probably all our next question will come from Kevin Zerbe of Morgan Stanley. Please proceed with your question. Hey Ken servey. She said it really quick follow up on the comment. You just made three million and billion of additional that you're going to cut off is the two to three million already included in the 120 to 125. That's like the normal run rate after everything said and done. She looks like a 1:14. So I'll make sure I got my numbers, right? Yeah, so clarification. So yes, the two three million + 10 is already baked in 2223. I provided so if you take another $89 million, I think we run rate as too many everything to stay the same as we thinking right now is going to be around 1 to 1:14 to 1:16 a.m.

We don't accept the million right just my expenses expenses. So I would say between 1:14 to 1:16 will be around right after all the time. We realized from the conversion.

Yeah, blending spreads have been pretty stable after years of being beaten down on Mars in there. I think it's on the QR wave every coupon for the porter was 352 age on the warehouse and notably, you know, it was a pretty big quarter in terms of refined purchased volume was 51% off is 40935 a lot of refi volume in the quarter. I I actually think that warehouse volumes this year going to peek in mid-may. So we're not too far away from what I think will be volumes. It would be somewhere between May 15th and May 20th by my math and for us

Got it. Okay. Thank you.

Our next question will come from John Armstrong of Capital Market. Please proceed with your question.

892 morning. Good morning. Good morning, Kate. Most of the stuff has been handled a little bit of dead. Um the kind of activity you're seeing there, you know non-energy related, I guess in terms of your thoughts on you know stresses in the real estate portfolio or housing. You know, I know you have exposure to the Permian, you know, probably go for it as well. Just give us an idea what you're seeing there. I'll start off. I mean I don't you know, I'm not crazy Market begin with when all and gas prices are address. Really there's really no there's there's no there's not enough housing. There's not enough people a restaurant maybe work one shift and set it to so I see I see a lot of that becoming more normalized in the midland-odessa area. I think that the Dead

Yeah, that could be somewhere between 2 billion and 2.3 billion and we said we'd like to kind of keep this a two billion. We got a lot of both facilities out there to get through just keep in mind volume that comes on our balance sheet is usually an application that was taken by all of our customers six weeks ago. So what I do expect post office all May 20th, is that purchased by ins going to drop pretty dramatically and we're going to see a much lower balance that from May 20th to June 8th and when that purchased by returns, I don't know and once it starts returning realized we got another six weeks a lag before that application get back on the line. So it may be a couple of months of lower volumes in the june-july. Which is normally when we're at the P. So this year's going to be a little bit different in my opinion dead.

And just based upon.

areas, for really nice to the West bacterias believe is Veronica Pollock down with Texas Tech University if we didn't

All the facts were looking at so my crystal ball is and all that good past July and it will all depend then on whether the purchase buying goes back if people, you know, put their houses back on the market if there's traffic that there just isn't much foot traffic today that also extends over into the purchase Market. I think home builders are going to have a tough tough and Q2. They all had pretty good quarters in q1 record kind of quarters through February and then some some bust out start the current contract in March.

Let me see. We really didn't see big increases or decreases in the market over there. I think it's it's probably a lot not only the only gas but it's probably agricultural-related job to some degree and again based on a college town. You have retail and Merle you've lived there and you may have some comments on what you what you see in the west Texas or how you feel about it. But no one picks economy is pretty stable boat up turn downturn. There's not much upside Lubbock. There's not much downside to 3% off Little Odessa. Yeah. I think the basic white thing is been so stressed. There's some of the things just to get back to school choice will be some job loss, but they can redeploy some of those people I think that there'll be a lot of stress because stress of hotels because a lot of those hotels been dead.

There will be pockets of the United States and Home Building in Q2 where you will see some home builders and are not talking about the national guys for the most part. Um that will actually have negative sales volume in Q2. They'll be more bus touts than they have in new new contract. So this will be temporary home both for homebuilders and I think for the warehouse it's going to be a a different than we've ever seen before.

The one fully occupied Iraq whether by phone or by some stress, but we don't have much hotels in exposure any choice we didn't do any in over there. Did we I think we've got one we might have one. Yeah, I think it's an older hotel. I think that brake Stevens around 30% off that's good. Yeah on the other hand off of gas. The price is really going to depend on the economy coming back at you know, when I talked we talked earlier about the GMC loan be head at least six something percent on the ones that we had from Legacy. We also have some from the west Texas area and mostly we do over there. We confirm the edge because you know, we let one guy named or ninety million dollars paid back down. The 2013 has $120 on deposit in the bank. You have another family. We have a long see what they've got sixty million dollars in the bank in the company's month.

That is actually very helpful. Thank you. Do you just say that any of these independent mortgage companies put on what's going on with the market and deferments stuck with borders might be differing right at the onset of taking the loan. Yeah, cause we haven't seen that yet as we look at our portfolio and that's really all I've got a window into you know, the volume might have a deferment on Thursday in the in the short 17 days that we followed. It has been less than 1% and it does seem like there's if you track this here in the last week, I had some gsd's agree to buy those things if there are departments on them, which kind of free up that market a bit if there's going to be issues for mortgage Warehouse companies off.

You know, I think what you're going to see the 06 production really come down. I mean I think guys are going to keep on because why not get that kind of money, but everybody else that we talked about that. They're really pulling back. They're just they're not going to produce but these levels until until the market comes back when the economy comes back. You'll see the oil and gas prices come back to life. Like it's important to note that to use the old Texas saying this isn't the first rodeo out there. These people are used to moving but that's the way it's always been and I think we've been personally, I think we've been rational in conservative in our loan approvals and most of our jobs that are out there have been through these substance Downs before as you just said, we we don't have many hotels we don't

It would have been during that period of time where they were getting hit with the MSR right down for those guys those who have maybe big Ms. Ours and there were some that were caught on hedging and they had the settling of edges of the meaningful dollars there for a period of time in Mark our clientele made it through the I'm not going to say unscathed but without any real liquidity concerns anything else, we looked across our portfolio pretty hard during that period of time and in fact, we we stopped accepting Jumbo's without without identified takeouts. Probably in the second week of March just cuz jumbo Market also slowed down in terms of getting them off the line. So I think we took all the appropriate Steps in Rome and we're just keeping an eye on em SRS and hedge volume.

that's

Help you. Thank you and just one question David phone either follow up on any given what she talked about in terms of at least for now being a bit of a capital built mode on buildings down. Does it suggest that for the near-term when it gets near the next 3 to 6 months, it's highly unlikely that you enter a deal or you entertain any accumulations actions of fact that the integration is complete and until we get to some form of the other side of the lockdown.

And many restaurants real estate values clearly are not solid right now, but our customers have been through these hard times a month and right now they're holding in there. So I'm it's possible as a leading Finance. He's brilliant, but he's always we don't have any drilling rig Finance. Well, I still have that one baby. Well, it's a it's a principal in here. You know, those are really really have to have those work over 2000. But once again, these are people that have been in business for quite some time. Yeah, so we don't have time again. We don't want to make it sound like we're not free from wage and you know, and we don't know really what the future but we do feel comfortable where we're at as we'll be able to get through all of this thing's so that's per month.

I think I understood your question, but it was a little bit muffled a little bit. I think you're asking. What what are we seeing him? And I or what we're going to do what I thought you might like, you know, our thought is the operational integration is first and foremost the June operational integration having said that I mean if an opportunity if an opportunity really came up, we would probably really consider it because this this is what we wait for at least kind of times. We're we're there all the time but these are the kind of times that we really are in a good position to do what we need to do. So if if that comes up and I feel really good with the Legacy team and Kevin and Maze and the whole team is just been remarkable and they've just been some of the greatest Partners were taking on and uh, you know, the business we've kept and what we thought we could do we did and I feel very comfortable where where we are with our teams and so that if that happened dead,

Just to maybe to you, you know periodically and ask about the average monthly production numbers, but I'm assuming if you take out PPP.

Uh, you know, we we would we would do it.

Late March and kind of April the day pretty weak. Just curious what you know, if that's true and kind of activity you're seeing and then what what is the correct corporate cluster a message of the lenders is that you know keep your customers closed or is it going to take the market share? Just curious what you're telling your your lenders to work on Thursday. Well, I think uh new loan applications, uh, probably have Wendell a little bit but in actuality not all that often, but our loan committee meeting are still reasonably robust. So there hasn't been a Slowdown in in New Republic, but there has been some once again, you know.

No, that's all I have.

Our next question will cover on Michael Rose of Raymond James. Please proceed with your question first understand the comments around the buyback. If I look back to a great price you guys, you know still Vivid end you guys got strong, you know protect, you know our friends with any reason to think that you blow on an annual dividend increases from here not my kids need milk money. So I hope and you know it it's you know, the only thing I what we see right now, I don't see that being an issue. But again, I I can tell you that something would jump in the third or fourth quarter and it's an automatic either but it's certainly I hope that's not the case. If you ask which way we're leaning it would be more more for dividend increases, especially the increase in earnings that project.

We try to stay when it comes to lending always in the middle of the Fairway good times or bad times. We try to adhere to discipline and principles month. We try to lend into cash flow and good collateral and borrowers that have experienced in her honest and that's always been our message to our lenders and it really hasn't changed just as was mentioned earlier in this call if things really start to deteriorate and and get bad we suspect some lenders are going to frame the and quit lending slowed down considerably their lending activities and historically that's always been an opportunity for us to pick up good customers that we haven't had so that's always possibility. We're not open at that happens, but it could so there's no there's no different message to our people off.

Got it, The motor with Donnie Allison said put in a different way one other question just to relate to the timing of prostate if anything's been pushed back. Um, it's just some conversion still on track to go as as planned. And um, you know anything we should think about their know, I think this place will do is already in a process. So we're waiting for our June conversion after the gym conversion. We should have started seeing the savings our you know, because so close to the end of our conversion. It might be a little bit busy on the realizing the cost. But as we said that we already realized about 2 to 3 million plus settings this quarter and we're planning to do another $89 million in future quarters. So get down to 25%. But we're hoping to do more than that, but definitely will achieve our 25% off days that we're now. All right. Thanks for taking my question. Cuz yep.

Is the same yesterday today and tomorrow just be conservative and try to bring in good customers. It's really not any right now. I think those back smiles and you like to move the times that you love us in the back, but never heard just kidding. All right. Thanks a lot. I appreciate it. Thank you. Thank you. This will conclude our question-and-answer session. I would now like to turn the conference back over to Charlotte for any closing remarks. Thank you Eric. Thank you. Ladies and gentlemen for taking the time to participate in our call today. We appreciate the support that we get for our company and we will continue to work on both shareholder values.

Thank you.

Our next question will come from very tender of d a Davidson. Please proceed with your question.

He might have dropped off a mutant name.

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

Mr. Cheddar, your line is live in to the comments.

Thursday

Add new to the next next question will come from 7:30 of Morgan Stanley. Please proceed with your question about hey in service. She said they're really follow up on the comment. You just made the two three million and billion of additional that you're going to get a million already included in the 120-125 have like the normal run rate because like I'm fourteen, so I'll make sure I got it right here. Yeah, so clarification. So yes, the two to three million cost savings already baked in in 2428. I provided. So if you take another eight to nine million, I think we'll run rate assuming everything to stay the same as we thinking right now is going to be around 1 to 1:14 to 1:16.

We don't accept the eight or nine million right just with both of my expenses expenses. So I would say between 1:14 to 1:16 will be around right after all the time. We realized from the conversion.

Got it. Okay. Thank you.

Our next question will come from John are from Capital Market. Please proceed with your question.

8 next morning. Good morning. Good morning. Kate a quick quick question. Most of the stuff has been handled but touch a little bit on with the kind of activity you're seeing there, you know non-energy related, I guess in terms of your thoughts on you know stresses in the real estate portfolio or housing. You know, I know you have some exposure to Permian, you know, probably eagleford as well. Just give us an idea what you're seeing there. I'll start off. I don't see no doubt crazy Mark to begin with when all the gas prices are at threats. Really there's really no there's there's no there's not enough housing. There's not enough people a restaurant maybe work when she said it too. So I see I see a lot of that anymore normalize that's in the midland-odessa area. I think it's a Thursday.

Areas, or really bite. The west Texas area is Levi store on a college town with Texas Tech University. If we didn't really see we really didn't see big increases or decreases in the market over there. I think it's it's probably a lot not only the little gas but it's probably agricultural related to some degree and again based on a college town you have retail in a Merle you've lived there and you may have to, what you what you see in the west Texas or how you feel about it. Outside Lubbock. There's not much downside and what it's pretty much an angle.

I think David Swank is the thing is been so stressed. There's some of

Just back to school. Yeah, they'll be some job loss. They can redeploy some of those people I think there'll be a lot of suppressed because a lot of those coattails didn't have one fully occupied practical see IFI weather's like over a sports. It'll be some stress fair, but we don't have much hotels offer any humidity and over there. Did we I think we've got one we might have one. Yeah, I think it's an older hotel. I think Ray Stevens around 30% off. That's good. Yeah on the other hand, I would say the oil and gas the price really going to depend on the economy is coming back. You know, when I talked we talked earlier about the Key & Peele. I'm just being had at least 95.7% on the ones that we had from Legacy. We also have some from the west Texas area and most of the people who over there waiting requirement Thursday.

Because you know we let one guy eighty or ninety million dollars to pay back down. The 2013 has $120 on deposit in the bank. We have another family. We have a long too, but they've got $6,000 in the bank and the Press companies and stuff there. You know, I think what you're going to see is you'll see production really come down. I mean, I think the guys that are hedge we're going to keep on producing because why not if they can get that kind of money everybody else that we talked to that they're they're really pulling back and they're just they're not going to produce at these levels until until the market comes back when the economy comes back. You'll see the lowest gas prices come back to I think it's important to to note that to use the old Texas saying this isn't the first rodeo out there with these people are used to moving, but that's the way it's always been.

And I think we've been personally I think we've been rational in conservative in our loan approvals and most of our customers are that are out there had been through the stuff to Downs before um, as you just said, we we don't have many hotels. We don't have many restaurants from home, uh, real estate values clearly are not solid right now, but our customers have been through these hard times before and right now they're holding in there. So I'm I'm responsible as a candy and finance the billing companies that we don't have any drilling rig Finance still have that page here, you know about those are the once again, these are people that have been in business for quite dead.

Yeah, so we don't have any planet again. We don't want to make it sound like we're not free from any sent, you know, and we don't.

Not only with the future but we do feel comfortable where we're at through. This will be able to get through all of this thing's so.

That's Kurt can maybe to you, you know periodically ask about the average monthly production numbers, but I'm assuming if you take out fifty P late March and kind of April the date pretty weak. Um, just curious what you know, if that's true and kind of activity you're seeing and that's what what is the kind of corporate Prosperity message of the lenders is that, you know, keep your customers close, or is it going to take some market share? Just curious what you're telling your your lenders to work on.

well, I think

new loan applications probably a little bit but in actuality not all that much wage meetings are still reasonably robust. So there has been a Slowdown in in new requests, but there has been some wage in our you know, we try to say when it comes to lending always in the middle of the Fairway good times are bad habits month. We try to adhere discipline and principles. We try to lend into cash flow and good collaborative and borrowers that have experienced better on it. And that's that's always been our message to our lenders. It really hasn't changed as was mentioned earlier in this call if things really start to deteriorate and and get birth.

And we suspect some lenders. We're going to freeze up and quit lending or slowed down considerably their lending activities and historically that's always been a known entity for us to pick up good customers that we haven't had for. So that's always a possibility. We're not open at that happens, but it could be so there's no there's no different message to our people. Our approach is the same yesterday today and tomorrow just be conservative try to bring in good customers and wage. It's really not anything right now. I think those back Smiles thing you'll like tennis it's time to kill us in the back, but never heard before God is good. All right. Thanks a lot. I appreciate it. Thank you.

Thank you. This will conclude our question-and-answer session. I would now like to turn the conference back over to Charlotte she for any closing remarks. Thank you, ma'am. Thank you. Ladies and gentlemen for taking the time to participate in our call today. We appreciate the support that we give her company and we will continue to work on building shareholder value.

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

Thursday Thursday