Q1 2020 Earnings Call

Dead dead dead.

Thursday Thursday

Good morning, and welcome to the Bryn Mawr Bank Corporation first quarter 2020 earnings call all participants will be in a listen-only mode says you need assistance placing a conference specialist by pressing the star key followed by after today's presentation, or we an opportunity to ask questions. Please note today's event is being recorded at this time. I'd like to turn the conference call over to Mister Mike Harrington Chief Financial Officer Mister Harrington, please go ahead.

Thank you, Jamie. Thanks everyone for joining us today.

I hope you had a chance to review our most recent earnings release and presentation. Both of these documents are available on our website at home.

We will be referring to the presentation during the course of this conference call.

On the call with me today or Frank Leto president and CEO and lamb Berkeley. She credit officer.

Before we began, please be advised that during the course of this conference call management may make forward-looking statements which are not based on historical facts.

Please refer to the disclaimer labeled forward-looking statements and safe harbor our earnings release and presentation for more information regarding what constitutes forward-looking statement off call forward looking statements display screen is call are based on Management's current beliefs and assumptions and speak only as of the date and time. They're made the corporation does not offer to update forward-looking statements for more complete discussion of the assumptions risks and uncertainties related to our business. You are encouraged to review of filing to prestige Exchange Commission located on our website.

I would not like to turn the call over to Frank.

Like to thank all of you for joining our conference call today. So let's begin by addressing our response to the covid-19 pandemic in January when news began to surface of the virus off the topic became a regular item of discussion internally.

It's potential impacts of the virus began to emerge. We declared the virus and incident and convened our incident assessment team that team assess the situation within a few days elevated the issue or crisis management team crisis management team, which is comprised of Executives and members of our Senior Management across the organization and chaired by our chief risk officer Patrick clean immediately convenient and initiate initiated our business contingency plan component of which includes actions related to ban demux while none of us could have predicted this exact scenario. We've routinely planned and prepared for situations such as this crisis management team was tasked with further assessing the situation and providing recommendations to Executive Management in addition to following the playbook out life in our pandemic plant among the many actions to priorities included ensuring the safety of our employees and customers as well as testing and stressing our remote capabilities.

To handle additional users on our remote private Network as of today nearly all of our back office support in many of our client-facing employees and lending wealth and ensure both groups are working from home this comprises approximately 70% of our total Workforce and I want to emphasize the technology Investments. We've made and spoken about the past several months of allowed us to complete this transition seamlessly into a degree. I never imagined.

Other actions we've taken to date included closing all Branch lobbies and reducing our branch hours of operations to further protect our clients and employees and adding a virtual format capability to our annual meeting with it being the last week.

Things began to put in quotes normalize in April the crisis management team continued to meet frequently to Monitor and react to specific situations.

While the risks in the current Marketplace are vast and ever-changing we believe our largest risks are in the operations Financial Health Credit and reputation areas.

From an operational risk standpoint business disruption loss of personnel third-party reliability cybersecurity and the inability to meet our client and Community needs our key points.

Crisis management team Works along Works alongside the executive management to quickly and effectively respond to the hurdles. We Face we have reallocated resources across the organization were necessary to meet increasing demand of our clients and communities.

Managing Financial Risk starts, well before the prices we have sound practices in place including frequent stress-testing implementing strategies to protect our margin and evaluating liquidity position or are located position on a daily basis or job now is to leverage our financial strength and skills to successfully navigate this unprecedented environment. You have to be keen on economic conditions including interest rates of sensitivity, meaning our funding obligations and continuing to invest in opportunities to support the business.

Well, Liam, Brinkley AR.

Officer will discuss your credit profile momentarily. I will add we have been very proactive with clients engaging their response to the market. We are aggressively monitoring high-risk segment of our loan portfolio and acting weird needed our hundred Thirty-One year reputation is one which we take great pride from our trust has helped and continues to help our clients communities to build a legacy in which we all share. Thanks for at the Forefront of this pandemic and we are working very hard to help those in need.

Thanks, Mike and

Today we're working extensively to create managed solutions for our clients and communities one area of focus over. The last few weeks has been the sba's paycheck Protection Program as the close of Friday. We received thousands of Online requests and over 1,600 applications were submitted.

Debate over seven hundred applications have been approved with SBA authorization for a total dollar amount over 220 million dollars to be funded through the bank.

Although the program's funding has been exhausted. We're proud of hurricane pulled together to design and Implement a process needed to handle this immense influx of activity. And we continue to process applications. We received in case the program receives additional funding more information on all of the relief programs are available can be found on our website or in our investor presentation release yesterday for each day brings new challenges and opportunities. We are confident in our organization's ability to come out the other side stronger than within ever. I'd like to now turn over to walk to Mike's to discuss our first quarter results.

Thank you Frank. The first quarter of 2020 was supposed to the net loss of 11.2 million and -56 cents per diluted share.

Main driver of the loss for the quarter which are implementation of Cecil and the recording of the associated provision for credit losses that is reflective of the current economic conditions brought on by covid-19 and Donna.

The experience and economic conditions unlike any we have ever seen and the future path of economic activity is highly uncertain.

Credit loss modeling purposes historical data may not be relevant in calculating credit losses. For example.

Pennsylvania unemployment

a key driver of a message in our allowance model is expected to exceed historical highs shortly, and it's returning to normal levels is subject to a great degree of variability.

The management team and the spirit of a in the spirit of the accounting guidance prescribed under social made efforts to estimate the allowance by leveraging historical lost data.

And its correlation so economic data such as unemployment in combination with our stress-testing modeling and qualitative factors to arrive at assessment as of March 13th, 2020.

I believe our allowance represents a reasonable estimate of future credit losses as of the reporting date.

Acknowledging that the estimate will be subject to change as the path of economic activity goes clear.

Setting aside to provision expense discussion our business activity was growing during the first quarter. We saw that interest income increased by 1% in the fourth quarter as longer wage increase 2.1% from the prior quarter and strategies from used to defend the margin of to mitigate the effects of lower interest rates.

The income continues to be a consistent source of a range for the bank as fixed assets abroad over the years leading the impact of the market sell-off late in the quarter with dissipated. Our non-interest expenses were flat quarter of a quarter despite the recording of a $3000000 reserve for unfunded loan commitments related to the change in the credit risk environments cheating with the hands on it.

Tax-equivalent that interest margin increased from 3.36 to 3.38% quarter-over-quarter. This is a direct result of the strategies be applied to manage the margin including wage for reduction of cost paid on over five hundred million dollars in deposits and modifying pricing on lunch to reflect the inherent risk of learning in this environment.

It also positions are borrowing portfolio. They were short term with the majority and over.

Reevaluate our liquidity position on a daily basis and review all options accessible to us frequently. The bank has significant liquidity available at the federal home loan bank and to a lesser degree the Federal.

We also have multiple options or other Wholesales deposit channels.

Introduction of the paycheck Protection Program has made available an additional Avenue for liquidity support funding these ones we expect to Avail ourselves of the spending money Investment Portfolio is also a source of liquidity events, very liquid and high-quality.

Capital of the bank and the corporation we managed wall above our internal targets to be deemed. Well capitalized manage capitals off various economic scenarios stress-testing is a fundamental tool be utilized to understand the scope of our capital and Equity positions under the most severe of circumstances and this modeling helps inform the amount of capital we hold in normal times. This modeling would be put to the test that we are obviously living a stressful area.

Might have the development surrounding covid-19 reports share BuyBacks and March at that point. We have repurchased 207000 shares during the first quarter 2020.

Cancel environment involves. We we'll reevaluate Capital Equity position beside Capital actions regarding our shareholder dividend. You may have seen that we approve the 26% off then. Yes.

Special note on slide a task the quality of Fairly stable in the quarter with the exception of leases where we elected to charge off. All 60 plus day delinquent leases in anticipation of these credits in anticipation of these credits will experiencing experience distress in the current environment.

Also depicted as the increase in provision cost with the adoption sushil.

Slide depicts more detail with regards to implementation and Cecil and it changes in the major loan site on the first of the month increase in the allowance of only fourteen percent subsequent to January 1st, the future state of the economy much more tenuous the emergence of depend on it, and this is reflected in a calculation as a quarter app.

Also note the increase in the reserve, but I noted earlier.

For it turn it over to Lam. I wanted to know that we have withdrawn all died in size of related short business activity for twenty twenty given the uncertainty of the current month that officer think I'm quickly for discussion of the bank's loan portfolio.

Thanks, Mike.

Credit has always been a key focus at Bryn Mawr Trust regardless of the economic environment. The bank has always had a reputation for being responsive consistent and conservative as it relates to credit. Our team is currently spending a considerable amount of time literally every day of the week working with new and existing clients to help them during this uncertain.

Is that like looks like ten or portfolio is Diversified across both borrower and property types. We continue to actively review all areas of the credit card phone with a focus on those segments that are more vulnerable to current market conditions.

Specifically we are actively working with clients in our Commercial Business and our commercial real estate non-owner-occupied segment. We also have an outpatient program for our consumer second.

Further the bank is a lease portfolio that accounts for roughly 5% of total lungs while this segment is Success susceptible to downturns in the economy. It is Diversified bulb industry and geography with borrowers in all 50 states in Washington, DC.

We do anticipate losses in this space given an economic conditions, which is partially reflected in the provision of work.

We were working with clients across the retail multi-family Flex office and Hospitality spaces in our commercial real estate business. We have many long-term relationships with sponsors who supported their projects through prior economic Cycles.

And it's worth noting that we are primarily a recourse lender.

As indicated on slide 11 entering the crisis the cree portfolio was granular with reasonable ltvs across all property types.

Because modest and granular exposure to a vulnerable Industries including restaurants manufacturing and energy and we do not anticipate significant choices in those areas.

We have not seen a significant increase in the utilization is under our line of credit.

December 31st through March 31st or commercial line of credit usage increased by approximately 2% for $16.

In response to the pandemic we've developed several relief programs to assist our clients through these hard times. The programs are consistent with the guidance issued by the Federal Reserve Bank and the federal Accounting Standards Board.

Participants in the federal programs come from RC and I are small business and our commercial real estate portfolios.

Commercial Department decisions are made one client at a time based on current conditions with the client and the impact of the virus on their business model.

For commercial and small businesses are program offers a referral of all payments or modification to an interest-only structure for a period of three months.

With a one-time Bank option which allows us to extend these deferrals for an additional 3 months if conditions proved that to be necessary month-to-date, we have over 240 commercial participants with a total loan balance of approximately five hundred million dollars taking advantage of these deferral for Consumer clients. We offer a six month full payment holiday consistent with various guidance statements by the fed and Fannie Mae.

To date we have 140 consumer clients total loan balance of $25 billion dollars utilizing these short-term payment holidays.

We are also actively engaged in the SV a paycheck Protection Program is Frank detailed earlier.

As Mike mentioned we are living in an environment that none of us have seen in the past. However, our conservative nature over the years leading up to this pandemic has allowed us to be well positioned to mitigate future losses. We remain Vigilant and confident in our management team and they their experience in navigating through these uncertain economic environments.

with that

I'm tries back to Frank.

Thanks, Liam, and thanks Mike and thank you again with that. I think we'll open up the call to questions. So I'll turn it back to the operator.

Yeah, ladies and gentlemen at this time. If you would like to ask a question, please press star and then one to withdraw your questions, you may press star and two if you are using a speakerphone, would you ask you please pick up your handset before pressing the keys to ensure the best sound quality. Once again, that is star and then one to ask a question.

And our first question today comes from Michael Barreto from KBW, please go ahead with your question.

Hey, good morning, guys. Thanks for hosting the call this quarter morning Mike. I wanted to maybe start on the kind of the credit and provision discussion here Thursday. And you know, I realize it's it's it's a little difficult but you know that the the the dance we're trying to work with over here is figure out, you know, kind of relative credit exposures and the new slides are helpful, but I was wondering if maybe microwave guys could break out a little bit more about some of the economic assumptions that drove, you know, the the large provision in the quarter that you guys are assuming. I think you mentioned in prepared remarks might that you thought it would seem reasonable Assumption of how you see it today. I thought maybe it'd be helpful to just kind of expand on some of those more specific assumptions so we can kind of compare them to ours and our models and and see how they come home could could change going forward.

Sure, why not? I start and then I'll and wants to add anything to do that the primary driver in their diesel model the way it was billed is Pennsylvania and I just put an oil change in my prepared remarks. And right now Mike were assuming that that unemployment rate hits It's Max month, which is around 9% And that was achieved back in the last financial crisis Trends up to about nine percent almost immediately moved it stays there for a quarter and then it starts to revert back to a long-term historical mean which just for ease of conversation is around 6% off so over the next six quarters were assuming unemployment is 9% and then turning down 6% and it stays at 6% they are after for modeling.

It's just the and that's the model was built fundamentally build off of unemployment. That was highest highest correlated macro economic Factor, uh at correlated to charge offs. And so that that trajectory of unemployment then generates the charge off figures at the pre for provision off balance figured since we're displaying here on the other thing we baked into the model is we we recognize that we're there's pay holidays are in place. So it's not likely we're going to see a lot of charge option the next few quarters because of these payment holidays. So some of the charge of activity will also also happens later. So we factor that in as well for the cash flow perspective. And other than that, I think that that's really at the heart of expecting right now are they should factor into the into the model?

And you have anything you want to add?

Is in in in the development of our Cecil modeling through the last crisis the last fifteen years the farmers had Fairly minimal losses in the office space and we use pure benchmarking data in building the model frankly because we had you know, he'd adequate inadequate bad's to build kind of replicable model. So that is another driver in in some of the the downside assumptions here.

Does that also that's also the leases are also built.

Yeah, no, that makes sense. And that's helpful guys. I guess there's a follow-up. So, you know if we're trying to think about this may be an oversimplification. But so if the unemployment rate plays out as as you guys have plunged into the Cecil model, you know, there's the reserve then kind of stabilized in this level near-term and then you know move down later depending on charge-offs. Yep. I know there's a wide range of possible outcomes. But if we just assume the assumptions you made today or correct, is that how you would expect it to to to react over the next year or so?

Well, I'll answer. I mean if if what we projected here turns into the reality of then there's the charge-offs work their way through the portfolio with the amount of provision that was required on a go-forward basis with the last but there's so much like there's so much variability. Yeah. No. Yeah. I know my payment about it because it's just impossible to know right now as my opinion. So and this is where we wrestled with any coming up in landing where we did also probably should say through things or just Embellishments.

My comments related to that I made my work, It's just we also compared this, you know this result in allowance to stress test. And we do so we do a lot of investing that's outside of this process compared those results what we're seeing here as a just a check or separate month and a third party on a third party, but just another view this environment and we also did a few overlays on some of the categories shoved him into some categories that were more focused on either the retail sector, of course, so we did add some qualitative adjustments to a few of the sectors that you're seeing here on slide nine months in order to account for the uncertainty related just to the credit profile some of these sectors on a go-forward basis, especially retail gave an example of that.

Okay, and then just one last question on the credit topic just have you guys seen, you know, any any real significant changes in kind of commercial or residential real estate values in in in your Market set giving everything going on or is that not really materialized yet?

It's it's it's too early to to to make an assessment there, you know trading activity was was very brisk up through the end of February and then just went dead. So, uh, the long the long-term implication on values and pricing is going to play out but we we have no empirical data at the point anything right now on a price. Okay, and then just put you in yours one last question for you Mike just on the margin, you know, it was it was pretty resilient this quarter wage. Obviously there was there was pretty dramatic move lower and short-term rates, you know that occurred in the first quarter. I was just curious if you had any kind of near-term thoughts on how that Dynamic might might play out presumably as some of the liability pricing opportunities dwindles, but there could be some, you know, perceived longer legs and asset pressures. Although I know you know credit spreads haven't been horrible. So it's just curious. Maybe you can provide some updated commentary around marja.

The only other thing I would point out.

Given everything we saw at the end of the first quarter.

On the on the assets. I think that one we're going to have the dynamic of the PPP loans and those being added to our balance sheet and it's what that actual yield ends up being off and on the length of the average the average of like the life of those assets which you determine how quickly everything. I just this thing. Where may be surprised about is going to suck. Your question was deposit funding. We thought maybe would fall further than it has but you make sure many know in the call that Libor really hasn't moved down in lockstep actually found out relative to said fun. So we haven't seen kind of a wholesale Market reprice as much as we may have as expected and that's that's holding deposit pricing up maybe a little bit higher than me off with that with some if that would normalize. I think we might have some potential to lower deposit cost or right now we're being as I as I said very thoughtful about that because the option one increase accordingly

The institution right now. So the whole Marketplace kind of still supporting it up really high deposit costs higher than we would have expected to be decreasing the FED funds rate.

Okay. Well this helpful guys again. Thank you for hosting the call this quarter and I hope you and all your families are employees. Stay safe and talk more soon. Thanks, Mike.

And our next question comes from from betting and Scattered, please guys with your question.

Good morning guys morning morning first might maybe if I can follow up on the commentary you made about kind of your season model being Bap Pennsylvania unemployment rate in mentioning that overtime it turns down to kind of that 6% level which is as you see it a long-term average. I'm curious if if that 6% was also what you were using. You say pull it out of January 1st of this year given that that's your view of the long-term average or were you was the starting point at that point kind of a more aware than running in this kind of 4 and 1/2 thousand range is as I kind of just look at some stats here, right? That's a good question Eric. So the the yeah, so starting point was to current rate as of that point in time. And then we may we help the model holds that for a number of quarters. And then the model begins to revert to the long-term average is just how it was structured. So when we made our adjust wage,

on January 1st

First your point that that's what the employment path was at that point in time. Okay, so like a four and a half percent range somewhere in that so it was like a birthday we've kind of

yeah up to I think it's 5.8% is the long-term a particular I could get you that number if you need it, but it was something okay. So you were using the long-term average as of January 1st, right? Exactly. So yeah, we were we were starting at actual trending to the long-term and current except.

Okay. Thanks for the clarity and freezing a reversion methodology. So it starts with the current and reverts back to the main.

And it does that over a period of time that we select based on historic data around when employment reverts to its main. So we've done a study of wage employment date in Pennsylvania, then we

What's back to the end of the model?

All right, that's helpful Switching gears and looking kind of the wealth management revenue and trying to think about what that run rate could be going forward with regard to I think it's about approximately 40% of that wealth management AUM or fees are based on account market value or those fees calculated based on a. In balance or or an average for the quarter.

The bulk of them the majority are at a quarter end. So the majority that these are a function of quarter and although we do calculations intro wage the bulk of this quarter and they for the market-based day you went and then in terms of the the net interest margin, you mentioned kind of the impact from the participation in the program will depend on kind of that the average life of those loans for those that do meet the qualifications for being forgiven. Will you record any accelerated fees? Will that come through the other margin as well? Yeah, I'm assuming yes. It'll right now our expectation is all come through the margin. So the see that we collect will be treated like a thousand a month. Well, I create that as the loan is pay and then when the loan pays off portion of that key would be accreted anything come through the market so if he's end up being dead.

90 day loans or 180 day loans will you know as they as we present them for forgiveness or repayment will will record that.

And they gave some statistics around that so we're we're at about six and half million dollars. At least we haven't collected this week's Thursday, but that's what we expect to collect. Once the once they represent that refund. Wasn't that build event. Great. Thank you. Thanks. And our next question comes from Joe benza from hockey group, please go ahead with your question.

Morning, everyone.

This building on one of the prior questions just to confirm my short was the prior High and the Pennsylvania unemployment rate during the Great Recession that drove your forecast and not any sort of official projections for Pennsylvania unemployment for this specific situation. Is that right? Yes, and I think that number is 8.8% And then are there any objections? I guess at this point. We're Pennsylvania Unemployment from any of the various local forecasters, you know, someone you respect you've seen at this point.

We did not seek. We didn't know there's we don't have any forecast from any of the government agencies mean the other the other information we looked at is just generally available cash from like the Bloomberg consensus forecast we go through that one of the the big four uh-uh, accounting organizations out of forecasts that we could switch for that to see. Hey does this make sense relative to what we're assuming for Pennsylvania, but you answered your specific questions, you know, Joe.

Okay, and then I guess on that same topic might you know, some banks have given Reserve projections or the additions to the reserve that would be required if the macro situation were divorcing five year. So do you have some assumptions for expected Reserve build? Let's say Pennsylvania unemployment or some projection that you would wrote that you think is reliable goes to 15 or 20% or so.

Not no, not that we're prepared to provide through.

We have I mean when we modeled this we ran this model for weeks credit for putting up with the multitudes some versions that we came up with. But the model as you get into I will say this we get we get into unemployment numbers that are in excess of anything that's ever been recorded at least are the way our model system. I'll starts to lose some of its value because it just it has trouble solving where the month the losses are going to experience is this has no reference point the ball back.

And what roughly percentage of the provision allocation would you say was driven by the unemployment projection that you used?

Is it like 70% right now? Yeah, I don't I don't know I'd say let's say two-thirds of it ma'am. Feel free to weigh it. I think that's yeah. I I think I think roughly two-thirds of uh, the bump up for directly correlated with the unemployment number and actually possibly higher than that. Uh, yeah, but you're what you're saying like if reliable forecasters in the past or 20% unemployment projection, you take two thirds of the of the provision that you allocated this quarter and kind of double it. I mean, you know, well exactly

Yeah, I think.

Okay, the one of the one of the many wildcards we don't know the impact of the government government programs that are being rolled out here. So one of the reasons we just tend to fall to I mean Pennsylvania appointment probably be in the teens, right? I mean we're just the state itself has I think the highest number of unemployed highest percentage of its Workforce applied for unemployment some statistic like that. So we were to just applied we didn't just default to. Okay. Well, let's apply a 18% unemployment rate and have that Trend back down over. However many quarters the overlay report on it is now let's just use the high. Let's assume these government programs Provide support from a credit perspective and see how that plays out. So that's why this looking for is so much uncertainty life generally the situation that but that's the methodology used as we are trying to factor in all the stimulus is being provided and adjust for that the best wage.

Got you. Okay, and then the near-term outlook for the wealth business. It would seem from your comments that may be the bulk of the you expect to take in that business. Overall. You maybe took in the first quarter off or is that not fair to say?

Well, the the actually the business itself performed really well in q1 had met that client asset. So what's that got swamped by the I guess the job market counter after that the impact on there. Um, so the business activity was was very good and we're really pleased with that. So to the extent that we don't see the market like it did in the first quarter again, then you should see some stabilization of the the freezer and then we're also we normally this time you're going to tax prep season. I did some of that does suck a quick question or she had instances recording like that, but I would think it would stabilize is something we don't move a whole lot from from where we were and at the end of March, you know, like don't know exactly when the lounge certainly bounce back from there as you can in the Park. Yeah. That's what I was thinking. Maybe it's the reverse this quarter where you get a market object on that 40% that's marked to account market value if the market increase hold

And maybe a client activity declines a bit, you know, it's kind of netting that the same thing or is that too simplistic? Well, we hope for the best that we don't test. Yes. Your logic is, uh, it's sound

Okay, and then last one for me, what are the economic conditions that might lead you to re-evaluate the dividends?

Well, we're just going to look on that. We're going to look at that every quarter. I mean right now and we pay the dividend this quarter or comments around our capital and cheer that and we feel very good about the position brand. We held capital and a normal times four times like this. Uh, so we've got a lot of cash with the holding company sitting on about ninety now numbers ninety million dollars tagged with a lot of capacity to pay dividends. I think so my opinion about things deteriorate more than they already have from here than just something we're going to have to re-evaluate then but Frank applying on that ass well Sports, I I agree with Mike's comment. I think we just have to we just want to see how things play out.

Just got it. Thank you guys. Thanks.

Like to ask a question, please. Press star and one our next question comes from Christopher Marinette from Gomery, please go ahead with your question. Hey, thanks. Good morning. So a follow-up question, I guess given given the office job. So you took on Leasing and seeing eye. What is that 4:10 in terms of where the classified and other risk rates go for those when we see that and then you know, should you have less charge-offs next quarter. Just give up what you see now.

Ma'am, do you want to take that? Yeah sure. We are not anticipating a high volume of charge off in two thousand and because of the the volume of clients experiencing distress and taking advantage of the payment holiday programs will potentially masks some underlying weakness. That's that's emotionally true in that leasing portfolio. Uh, so we we we don't we don't foresee a rapid change in in the in the charge off activity and in terms of class, you know, we we went in to the crisis in relatively good shape. We evaluate our larger clients on a consistent basis with a view toward both their cash flows and the underlying collateral value and you know, we'll we'll ma'am.

Real-time risk-rating adjustments as the fax begin to present themselves. So right now but quick class, you know, or pretty consistent what they did for the last several quarters with no significant migration and we'll we'll have to see about how the economy that impacts the client base and adjustments will be made based on facts, you know when they start to come in.

Okay, so do the weird go ahead go ahead. I was just going to ask about further or or some of them tend to kind of what you've built here for 3:31.

I think it's I think it's fair to say that are the 331 adjustment takes into account page just updated downgrades in the next quarter or two.

Okay, that's awful.

I'm sorry Mike you were you were starting to say?

No, just the you know, I mean, we you know, the provision was a little bit higher cuz we were proactive with the Aslan mentioned that you noted on the basis. So we just we wanted to get out ahead of that knowing that God that category and they weren't those places cuz they were already sort of chronically delinquent didn't qualify for for a pay holiday. So we just wanted to get out ahead of that and I'm from a charge-off perspective.

okay, and then do you have a

Send some kind of deposit retention as you go through. I know you had some deposits that were supposed to leave during the the quarter before the crisis started.

Yeah, we had we had one large deposit we knew was going to roll out and that's that's really if you look at look at our numbers at a high level that was.

That's the variance. Otherwise the base was extremely stable. And as I noted we're continuing to monitor the market we were able to infuse some things from our pricing standpoint, but we're being possible about that and no monitoring the competitive market. So we'll see additional opportunities there, but it's not something we're trying to optimize project right now or more focused on liquidity and ensuring that we we stay in a really strong liquidity position.

once again if you would like

Great. Thanks for taking our questions.

And our next question is a follow-up from Michael Fredo from KBW. Please hold with your question. Hey guys, just one quick follow-up. I wanted to ask about a operating expenses going forward, you know, Frankie made the comment in your prepared remarks that some technology stuff. You guys done is already paid off and you know, obviously the expenses were fairly flat quarter-on-quarter and I think that was kind of in line with the plan that you guys laid out of your investor day. I was just curious if you could provide me with an update on the outlook on expenses, especially given kind of the rapidly changing Revenue environment.

like you want to

let me see. All right, I mean, this is Bryce. I'm just I mean, obviously you hit the nail on the head like in the in the sense that there was a focus for the first quarter of the focus for 20 28 leveling out that expense line after we had that expense build, you know with with the hires we made and a couple of the and the technology Investments which I as I said earlier paid off it. Change that dramatically I maybe we shift and we have to focus but I think it's going to take a little while for it to play out. Just how much of an impact all this is going to have on the operating environment our operating expenses for a month, you know our facilities for a number of these areas. So Mike. And if you want to add something like Harrington if you want to add something

No, I think that's that's exactly right. We will have to just wait and see where things go my canoe in the corner. I just I didn't know if this in my prepared remarks and the operating expenses bathroom break down a few million dollars, but embedded in that in those expense lines. And the other line is is the reserve we had that we made a reserve for unfunded commitments. That was about $3. That was a very never been down a couple of million dollars a quarter of a quarter.

There's some level of that every quarter though, right or or or not. Is there any chance you can give us into how elevated that was as we think going forward that reserved month? Yeah, so I mean normally that's only I would say a few hundred thousand dollars. Don't quote me on that but it's a very it's a very minor number. I mean, I'm not a hundred went to a bird. I mean it was it was only as of December 31st. It was only three hundred sixty. Sixty thousand that's on slide nine to slide this up. Now. We move that up under six other one point two million and that number would have been I think fairly static. I would have not probably would have been hardly any additional so that if it wasn't for the current this current home environment for operating in right now.

So there's at least a couple.

Million of the unfunded commitment build in the first quarter in the other expense line that that most likely will not recur. I guess obviously, you know, it could change but but that

Okay, and then generally speaking you still feel about that. I was just saying basically on you know, the rest outside of that you still feel fairly odd reasonably confident that that there's you know the investment you made put you in good position and there should be nothing down the pipe that really accelerates the expense group meaningfully, you know outside of maybe yeah covid-19 items that that could impact. Thank you guys for that for taking the additional question for sure. No problem.

And ladies and gentlemen at this time and showing the additional questions. I'd like to turn the conference call back over to management for any closing remarks.

This is Frank again, and I just wanted to thank everybody for taking the time in this uncertain environment to to listen to our conference call today. We hope everybody will be healthy and safe going forward. We look forward to talking to you all in the coming months. Thanks.

Ladies and gentlemen, that does conclude today's conference call with you. Thank you for joining. You may not disconnect your lines.