Q1 2020 Earnings Call

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Good day everyone. Welcome to the earnings call for Western Alliance Bank Corporation for the first quarter of 2020. Our speakers today are Ken vecchione president and chief executive officer has been Chief Financial Officer. You may also view the presentation today via the webcast through the company's website at ww.w Western Alliance Bank Corporation phone call will be recorded and made available for replay after 2:00 p.m. Eastern April 17th, 2020 through May 17th, 2020 at 9 a.m. Eastern by dialing 677-344-7529 using the pass code 1 0 1 4 2 0 0 9 the discussion during this call may contain forward-looking statements that relate to expectations beliefs projections future plans and strategies anticipated events or Trends and similar Expressions concerning matters. Yep.

That are not historical facts.

The forward-looking statements contained herein reflect. Our current views about future events and financial performance and are subject to risks uncertainties assumptions and changes in circumstances that may cause our actual results to differ significantly from historical results. And that is expressed in any forward-looking statement.

Factors that could cause actual results to differ materially from historical or expected results are included in this presentation. The related earnings release and our filings with the Securities Exchange Commission, except as required by law. The company does not undertake any obligation to update any forward-looking statements. Now for the opening remarks, I would like to now turn the call over to Ken vecchione know he's go ahead good afternoon and welcome to Western alliance's first quarter earnings call joining me on the call today are Dale Gibbons our and our chief credit officer Tim Bruckner. I will first provide an overview of Western alliance's response to the coronavirus pandemic. Then Dale will walk you through the bank financial performance afterwards. We will open the 6 to take your questions. I'll begin by laying out west Airlines is approached to The Cove it and economic crisis first and most importantly. I hope that everyone on the line is doing well and Thursday.

Families and loved ones are safe and healthy. These wishes are especially extended to all the Care and safety workers actively putting themselves In Harm's Way to protect our communities and off the lines Bank are people remain healthy and engaged and despite the vast majority working from home for the last month continue to go above and beyond the Call of Duty to serve our customers and and the community that we operate to navigate this challenging time. Our business continuity plans have been working as anticipated and I am proud of the entrepreneurial Spirit our people continue demonstrating to get the job done and develop unique solutions for our clients first. I like the layout the business actions Western Alliance has taken in light of the evolving environment. Although we did not participate the widespread severity and likely duration of the virus. We did start assessing potential risks and mitigants as early as mid-January and as the breath of the Panthers

It became apparent we accelerated implementing plans in mid-February to prioritize asset-quality capital and liquidity management. We have since divided the business into age appropriate risks segments led by senior managers with deep credit and workout experience to Monitor and Foster early engagement with our borrowers and begin the necessary credit triage. For example, Robert Sarver is leading the hotel franchise group while I am leading the warehouse lending in gaming group's Dale has corporate finance and Tim Bruckner Courtney overseas and directs all credit activities all all risk management approach is focused on establishing individual bar bar or level strategies in which we are practically engaging in customer conversations to evaluate and agree upon Financial plans focused on liquidity management to conserve resources in anticipation of an elongated economic wage.

counter today

Give me that direct dialogue with all bars with over three million dollars in exposure or 86% of our portfolio and substantial dialogue below this level. We assume that all bars will have some level of covid-19 impact and are focused on evaluating our powers remediation efforts access to Capital and contingency plans. We also very pleased that Congress and Fire Federal Federal Government came together to expeditiously pass the Cavs act and stimulus measures a few weeks ago. Additionally. We applaud the fed's actions to reduce interest rates support liquidity in the financial markets do quantitative easing for a wide variety of asset classes and provide support for small and medium-sized businesses through its innovative new lending programs. We recognize that the SBA offer a large task in front of them and I'm extremely proud to say that our people worked tirelessly with them so that we could successfully process the triple P program loans on the first day off.

A dedicated over a quarter of our work for for us to Avail our clients of this important program and have successfully approved over twenty-six hundred applications. Totaling 1.5 billion hours today. We anticipate funding approximately a hundred and fifty million dollars per day as part of our broader risk management strategy. We have prioritized implementing the triple P program as the most expedient method to quickly too quickly get incremental liquidity to our clients furthermore. We believe that the newly initiated Main Street lending program when implemented provides incremental liquidity for a large clients as well as triple, P participants are approached the loan modifications and deferment request is to look for a resourceful ways to partner with our clients off along with assessing their willingness and capacity to support their business interests. We are asking our clients to work hand-in-hand with us for a long-term solutions to hopefully short-term challenging environment dead.

We're by our clients contribute liquidity capital or Equity as an integral component to loan modifications are longer-term solutions based approach distinguishes us from industry standardized. 90-day deferral programs are approached collectively uses the resources of the borrower government and the banks balance sheets develop solutions that extend beyond six month window providing in the cares act this negotiation process has lice likely slow thar modification pipeline as approximately four hundred million dollars has been processed to date we learned during my last downturn when both the bar on the bank use their resources to bridge the gap. It generates a mutually favorable. How come with all this as the backdrop? I like to walk to our financial performance for the quarter off despite uniquely challenging operating and rate environment. I am proud to report then the first quarter West Airlines generated a hundred sixty three point four million dollars of operating pre-provision net revenue wage.

Sent you over a year and 3.

Percent quarter-to-quarter, we continued with the adoption of Cecil accounting changes this quarter which resulted in a provision for credit losses of 51.2 million dollars for the quarter 47% off which was driven by our robust balance sheet growth. Dale will go into more detail in a bit on how the unique features of Cecil drove are Provisions, but our ACL to fund that loan ratio now stands at 1.14% wall generated net income of $84 or $0.83 per share and tangible book value per share was $26,000.73. This quarter wage reduced an M A 4.22% and had net recoveries a 3.2 million dollars and continue to improve our operating leverage even with our increased vigilance organic life and she continued to be healthy in q1 for both loans and deposits deposits grew two billion dollars to 24.8 billion as we gain market share and soul of our key business life.

As well as traction and one of our recently launched deposit initiatives which added over four hundred million dollars this highlights the continued strength of our Diversified funding channels and over all of the franchise to generate stable low-cost liquidity irrespective of the macroeconomic environment continuing our strong momentum from 2019, total loans increased two billion dollars fifty three point 1 billion approximately 1 and 1/2 billion of this was through organic loan growth from new client projects in another five hundred million was credit line draw Downs of which approximately half off cuz we deposited into the bank. Let me take a moment now to make a few high-level comments on West Airlines loan portfolio. We believe that are well-diversified business model and purposeful decision is made over the past decade regarding conservative underwriting criteria and sectoral allocations positioned the portfolio to withstand the current economic environment at quarter in a squad.

What's table with the decline in totally adverse graded loans and Oreo to assets of 1.2% from 1.27% in Q4 West Airlines has a direct energy or large retail Mall exposure. We stopped making loans to the quick service restaurant sector several years ago with current exposure of only a hundred fifty million dollars off our construction and land and development portfolio is now under 9% of our loan book in our institutional lot banking business which makes up 30% of the portfolio have not received any deferral request at this time single family residential construction, which composes another 27% was still experiencing positive absorption Trends through March month. However, April's traffic has fallen off.

A portfolio is extremely well-positioned coming into the pandemic and right now is performing as expected. We are especially focused on monitoring and engaging with our clients in our hotel franchise finance and technology and Innovation segments, which will be reviewed in more detail later in the call during the quarter. We repurchased 1.8 million shares at an average price of $35.30 additionally consistent with our ten be five plan. We were purchased two hundred seventy thousand shares thus far in Q2. However, given the rapidly changing environment we have now paused share repurchase activity. Finally Western Alliance arrives at this crisis in a position of strength uniquely prepared to address what's ahead we remain well capitalized and highly liquid with a CT one ratio of 9.7% and ample liquidity total liquidity resources of over ten billion dollars Dell will now take you through our financial reforms dead.

for the first quarter

Reliance generated net income of 84 million or 83 cents per earnings per share net income was reduced by a fifty one point two million dollar provision for credit losses driven by the adoption of Cecil balance sheet growth as well as the change in the economic Outlook through the pandemic strong ongoing balance sheet momentum coupled with diligent expense management drove operating pre-provision net revenue 263.4 million up 10% from a year ago, which we believe is the most relevant metric to evaluate the ongoing earnings power of the company net interest income and see and can remain relatively stable projecting net operating revenue from 285.3 million primarily a result of lower yields on loans, which was partially offset by lower rates on deposits and borrowings.

Non-interest income declined 10.9 million to 5.1 from the prior quarter due to mark-to-market a preferred stock Holdings a primarily large Money Center Banks of eleven point three million jobs offset by 3.8 million Equity investment gains to date of the eleven point three million dollar Mark 3 and 1/2 has been recovered.

It's credit spreads wine during the last quarter of the yield on preferred stocks followed impact evaluations. We do not believe this represents a permanently reduced valuation and and and that preferred stock valve that will continue to recover over time. Finally not interest expense to fly 9.3 million is compensation and other operating expenses declined by 7.

Regarding implementing Cecil in our allowance for credit losses in our 10-K. We just closed the adoption impact of 37019000000 of which was attributable to funded loans fifteen million or unfunded commitments and two point six million for held to maturity Securities this resulted in a combined January 1st allowance of $240 million during q1 loan to open it just you know, twenty four million of required reserves and it is a $30 million was driven by changes in the economic Outlook as a result of the pandemic in total Reserve Bill during the first quarter was ninety million an increase of 50% from the year-end from the year-end reserve the quarter-end ACL of 268 million was 1.14% of funded loans up 30 basis points provision expense for the quarter was 51.2 Million, which is over ten times the average quarterly provision during 2019.

As of March 31st to reserve bill reflects the our best estimate of the future economic environment, including the impact of government stimulus programs. We utilized and assimilation of em macro economic Outlook scenarios to capture the most likely economic outcomes in a more severe scenario for potential tail risks as the economy continues to change we will adjust wage modelling accordingly turning out into net interest drivers editors income for the quarter declined a modest three million from the prior quarter to $269 and is there was one last day during the quarter compared to Q4 and margin compression was offset by loaning deposit growth investment yields showed a modest Improvement of 2 basis points from the power cord it a 2.98% However on a linked quarter basis loan yields increased 31 basis points due to the lower rate environment the average yield of our portfolio at quarter end or the wage.

Rate was 5.02%

Interest-bearing deposit costs increased 18 basis points in q12 90 basis points as a result of immediate steps taken to reduce our deposit costs after the fomc cut rates twice and large the spot rate of total deposits of quarter-end was 29 basis points total funding costs decrease 11:00 would all the companies funding sources are back-ordered including non-interest-bearing and borrowings through the transition to a substantially lower rate environment during the quarter net interest income was $269 million in decline of 1.1% from Q4 continued strong balance sheet growth and immediate steps taken to reduce the cost of interest bearing deposits counteracted to decline in crime and Library.

Net interest margin declined 17 basis points to 4.22% during the quarter as they're earning asset yield sell 28 partially offset by 19 basis points funding costs decrease home with regards to a certain sensitivity. Our rate risk profile has declined notably as the majority of a variable rate loan portfolio has flipped. It's a fixed rate as far as have been triggered by any rate environment presently 82% or 8.1 billion of variable rate loans with floors are at the floors with the addition of our mix to shift primarily to fix residential loans 16.2 million seventy percent of loans are now behaving as a fixed-rate portfolio.

This is reduced our interest rate risk and a 100 basis-point parallel shock lower scenario to 3% at March 31st from six and half percent one year ago and assumes that rates are held off at zero across the term structure turning out to operating efficiency on a linked quarter basis our efficiency ratio decreased two hundred basis points to 41.8% as mentioned earlier. The Improvement was attributed to it decreases in compensation and other operating expenses while our revenues increased modestly as a core component of our strategy, we continue disciplined expense management to sustain industry-leading operating leverage and profitability.

Our core underlying earnings power remains strong is pre-provision net revenue. Roa was 2.38% flat from the prior quarter while return on assets was down 70 basis points off point to 2% directly related to our provision expense and excessive charge-offs of 54.4 million.

It's 10:00 mentioned earlier are strong balance sheet momentum for 2019 continued into q1 during the quarter loans increased 2 billion to 23.2 billion and deposits off Route 2 billion to 24.8 loan-to-deposit ratio increased to 93.2 from 92.7 in the fourth quarter.

Are strong liquidity position continues to provide us with balance sheet capacity to meet funding these shareholders Equity declined by 17 million as dividends and share repurchases were matched by net income tangible book value per share increased $0.19 over the prior quarter to $26.73 per share as our Share account declined.

We continue.

You believe our ability to profitably grow deposits as both a key differentiator in a core value driver to our platforms long-term value-creation.

Q one is a seasonally strong deposit order and coupled with the rollout of our deposit initiatives deposit screwed two billion. The increase was driven by growth of 1.3 billion and non-interest-bearing GTA primarily for market share gains in our mortgage Warehouse operations, additionally HOA continues to perform well and contributed 330 million of low-cost deposits.

During the course of the relative proportion of non-interest-bearing DDA grew to nearly 40% of deposits from 37.5 on a linked quarter basis.

Turning to loan growth in line with the industry. The vast majority of growth was driven by increases in C&I loans, totaling 1.8 billion followed by a hundred and seven million in construction and Land Development Office in ninety-two million in residential residential loans now comprise 9.7% of our portfolio while construction loans decreased as a relative proportion of the portfolio to 8.9% from 9.2 in the 4th at the segment level Tech Innovation loan through 626 million with 124 from Capital call and subscription lines and $576 million from existing technology loan drives intern bolstering technology-related deposits by 383 million.

Corporate Finance Loans group 408 million which is primarily due to line draws two thirds of which were from investment-grade borrowers bring utilization rates to 38% from 13% during the prior quarter mortgage Warehouse also contributed loan growth or 550 million approximately 50% of which was due to line drawers.

Across the bank one quarter or about five hundred million of our net new loan growth was driven by a draw Downs on existing loan commitments from the beginning of the quarter in all total loan growth of two point two million for the quarter. It was fully funded by deposit growth of the same amount overall at the Quality was stable during the quarter was total diversity graded assets increasing ten million during the quarter to 351 million while non-performing assets comprised of loans on non-accrual and repossessed real estate increased $27 million to 97.7 million and ninety 7.33% of total assets and is now as held-for-sale.

Within These categories we had migration from special mention this substandard as some of the normal investor funding was delayed and Tech and Innovation as a precaution when remaining liquid declines below six months. We're paying those loans into either special mention or sub for enhanced monitoring and engagement.

This quarter. We also we saw the impact of our efforts of managing certain special mention in substandard loans as several resolved in our favor with no losses a hundred million of adversely graded loan not resolved during the past quarter 37 loans or fifty million paid off in full while while the other fifty million were upgraded to pass as Ken mentioned in his introduction. We are well-positioned entering this economic cycle. We only incurred $100,000 of growth gross credit losses during the quarter which was more than offset by 3.3 million in recoveries resulting in that recoveries of 3.2 million.

we typically have one or

21 off credit charges every quarter, however, highlighting the strength of our loan book. We didn't experience any of these in q1 We Believe early indication in identification and conservative managing helps mitigate classes on these assets.

In all the ACL defunded loans increased Thirty basis points to 1.14% in q1 as a result of Cecil adoption and the resulting provision expense related to Q One loan growth and changes in the bank account. Look.

We continue to generate capital and maintain strong regulatory Capital ratios with tangible common Equity the total assets of 9.4% and a CT one ratio of 9.70 to 1. Our reduction of tce. The total assets was mainly driven by 2.3 billion increase in tangible assets due to our significant loan growth while the tangible common Equity was affected by 15 4 million of Provisions in excess of charge-offs do to Cecil adoption in spite of reduced quarterly earnings in the payment of quarterly cash dividends of $0.25 per share are changing. I appreciate our Rose $0.19 in the quarter to $26.73 and is up 15.2% in the past year.

Or Diversified deposit generation platform and access to significant liquidity resources is critical in times of economic stress. Overall. We have access to over ten billion in liquidity just primarily through our 4.7 billion dollar Investment Portfolio of which 2.7 billion are investment-grade readily marketable and not pledged on any borrowing base additional $7 billion unused borrowing capacity with the FED Federal Home Loan Bank and correspondent are strong Capital base access to liquidity and diversified business model will allow us to dress off any credit demands in the future.

Oh no hand back the calls. I can to conclude with comments and a few of our specific portfolios deal regarding our hotel franchise Finance business. We believe our focus on a select service sub-segments conservative loan to cost underwriting discipline and strong operating Partners sets us up for a maximum Financial flexibility to whether the duration of the crisis like most hotels in the country. Our clients have seen a dramatic reduction in occupancy rates over the last month. And Senior Management is involved in active dialogue with each borrower to evaluate of mediation efforts and contingency plans going into the pandemic 75% of the portfolio had an LTV under 65% and more than 73% had a need service coverage ratio of one point three times. Additionally. We only partner with experience Hotel operators with significant invested equity and resources to support dog.

Ongoing operations fully 66% of the portfolio is with large sponsors who operate more than 25 hotels and 90% operate 10 or more properties. Franchise or flats based on an ongoing constructive dialogue. We believe that sponsors view this as a temporary event and want to continue to maintain and support these properties over the long term given their significant Equity Investments. We are actively working with them to appropriately utilize the triple P program and the Main Street lending programs along with their own liquidity as a helpful Financial bridge to arrive at a longer-term solution based on the mutually developed Financial action plans. We will selectively Implement loan modifications along the lines. We previously discussed. Thursday is a prime example where both parties contribute to a comprehensive solution now regarding our Tech and Innovation business, we primarily Finance established growth technology firm.

with a strong risk profile

Mainly companies classified as stage 2 with an established business model validated product multiple rounds of investment and a path to profitability this provides grainy operating and financial flexibility in times of stress. Ninety-nine percent of the borrowers have revenues greater than five million dollars and a strong institutional backing with 86% backpack or more PC or PE firms during the quarter of the portfolio grew 495 million dollars to $2 billion dollars or 8.8% of the total portfolio, which wage tributed to $175 million of existing line draw Downs in the technology Division and an additional $124 million from Capital call lines a product that historically has had zero losses Tech and Innovation commitments group $200 million in q1 and utilization rates increased to 60% from 49% in Q4 2019.

The portfolio is fairly granular with average loan size of six million dollars and these bars are generally liquid with more than two-to-one deposit coverage ratio additionally since June 2007 warrant income has covered cumulative net charge-offs two times over currently 14% of Technology loans or $164 million dollars has less than six months remaining liquidity, which is in line with historical Trends. Although some fundraising has been delayed. We were pleased to see several investment rounds closed over the last several weeks and days with strong continued sponsored support in conclusion. We see increased cash generation driven by our bouncy momentum going into the quarter end as well as continue loan off on the triple P distributions. We expect pre-provision net revenue to continue to grow through Q2 with the ability to absorb any necessary future Provisions given uncertainty surrounding

The like the duration of the virus and evolving economic environment. We will continue to reassess our Outlook as health and economic facts warrant regarding asset-quality are proactive risk-management approach is institutionalized throughout the company. We are actively working with our borrowers to develop mutually agreed-upon Financial plans, assuming an elongated economic downturn that leads to long-term Solutions are strong collateral positions and little unsecured or consumer lending should serve us well in mitigating potential risk of loss as we navigate these uncertain times. We stand ready to implement the likely next phase of triple key and the Main Street lending program to assist our clients and communities.

Finally Western Alliance has assembled the season management team that is weathered several economic downturns and is applying the Lessons Learned From The Great Recession to face these uncertain Economic Times and with that will open up the line operator and we'll take everyone's questions. We will now begin the question-and-answer session.

You may press * then 1 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 * then two packs. First question today comes from Beijing hair of Jeffries, please go ahead thanks gud morning guys. This is question on the on the reserve build. Obviously, you know, uh a tricky tricky proposition here, but trying to get a you guys mentioned you use a bunch of Moody's scenarios. You just give us some colors too long. You know how much waiting was given to to the Moody's adverse scenario, you know, what kind of recovery you guys are are assuming how much government help, you know, the stuff that the government is doing is, you know offset it and then obviously, you know the duration I know that's a lot but just trying to get some color as to as to the the magnitude of of Reserve build here dead.

So are are we primarily use the Baseline case as of March 31st, and and then we looked at we looked at s 1 and we looked at S3 S3 as the kind of the above scenario which uh is obviously more more critical and a longer recovery. Um, we we do struggle with what you know, what what is the timeline of this of this month type of thing and how much does things come back? We do think that the the institutions and the plans done by the federal government and both on the on the Congressional side as well as as well as the uh, I am see have an effect in terms of being able to you know, mitigate this and draw make a bridge to 2 when we're at a time when we can start to turn the economy back on. I don't have a timeline for you in terms of kind of when that is going to be but we will look at this. We we fully reserved as of March 31st, and it will look at this again at the end of the second quarter. Yep.

I would just add and say, you know, we did factor in some impact with the triple P program. But as we were processing we didn't know what that size level was going to be. So, you know having twenty-six hundred thousand participants over a billion five looking to go out. It's going to be very helpful. I don't think it's been fully factored into our Reserve calculations, but that billion five will help wage six point seven billion dollars of commitment in our company or 4.6 billion of current outstanding loans, which means that's about 20% of our current portfolio Thursday. Okay, great and just just following up on the on the loan modifications if I heard you right? I think you said four hundred million to date. So it's just specific. What exactly are you guys guys doing there? And then, you know, like any color as to how how much you've improved upon that 400 million as of April 17th here month.

Yeah, by the way.

400 million is April 17th number. Okay. Okay, and number two. Um, I would say in terms of color. I think we call it a lot of our clients by surprise of ours by surprise when we said early on this is going to be a longer-term problem. And let's have a longer-term solution rather than the standardized cookie-cutter 90-day p and I am and by the way that took a lot of getting used to from our client base and we had to go back to them several times as we've had that conversation. You can see that our viewpoint but more likely than not going to be correct. We don't know how long it's going to go. But we said let's start with figuring it out and through the end of the year and because of that, we need you to borrow to contribute something more Equity more collateral more more liquidity to the project and then we will help you along with deferral as well.

And we took each loan on a case-by-case basis. So we did make broad proclamations that said we'll just do 90 days here. So every loan is is being different. And as soon as we get into questions about different books of business, I'll give you some stories behind each one of those books of business, but we think getting out there and doing with our clients on a one-to-one basis is going to be faithful and by the way the same lessons that we learned in the Great and the Great Recession that getting there early having conversations for the longer-term helps our clients survive, but more importantly would they know that will be there when they start to see growth opportunities and the combination of their growth opportunities the ability to get through this gives them the ability to prosper longer-term. That's our approach what we sit down and we talk to our clients case. Okay, great. Just last one for me because clearly prioritizing the triple P program for long growth just to khong

So, how what do you how are you guys funding this? I'm just trying to get a sense for what the margin the incremental Nim might be and you know how willing you know how you know regarding cap macquiddy, you know, are you willing to to go much higher on the on the deposit ratio? And and and as well as on the TC ratio?

So you you may have noticed our ending balance is for loans and deposits were significantly above the average balance for the first quarter. So we had one point seven billion more in loans and a billion five more in deposits down or the deposit number was in DDA that gives us we think momentum in terms of expanding ppnr into two Q U layer this billion and half then on top of that took a myriad of ways to be able to fund this one is we think we have you know additional deposit opportunities to is the Federal Reserve has said they'll Advanced 100% on these loans and three we have another ten billion dollars of liquidity that we could get elsewhere. So we're not really concerned about, you know about funding that um cost I think is going to be something around 25 basis points, if we put it to the FED, it's thirty five basis points to do that and we're off then we'll take these in so that again I think shows you know that we expect, you know continued balance sheet growth into the second quarter primarily driven by these triple Pinos.

okay, so and and if

I'm understanding the trouble. It comes on at around 2% with the with the fees Associated. So it looks like a about a 175 incremental. Margin. Yes. All right off. Our our weighted fee on on the billion five we've done is 2.4% and and then these loans I mean the preponderance of this is fairly short term. We're going to call it six months wages for the for the part that isn't forgivable that has a tail that that goes out two years on the the actual loan rate on the entire program is 1% So you get 2.4% on the entire bucket and some of that is going to be accelerated in terms of recognition based upon the short-term nature of the of the of the forgivable element.

Great. Thank you. I'll step back.

Today comes from Aaron cyganiewicz of City, please. Go ahead.

Thanks. I was wondering if you could just talk a little bit about the the working with a customer's I appreciate all the commentary. I guess I just want to have a better understanding of what portion of your customers are actually getting deferrals now and and how that how those are categories relative to the modifications that you're discussing wage. I'm going timber out there of our chief credit officer takes out. All right, thank you. And this this is I think a nice follow on to the discussion. We've just had in in the prioritization of the the customer conversation that dialogue is of top priority. So that started for us back in February. We forgot to parts to this that have come into our common language. There's the the trough and then there's there's the recovery and stabilization and and new normal as as a dead.

Bank and has a business. We know that the better that we do in the better that we help our borrowers through that trough in terms of proper planning the better that has stabilizes and in The New Normal. So the the conversations are actually going very very well. But but there's there's obvious differences between borrowers and industries and businesses and and so necessarily there's different conversations and discussions. But what Thursday it's us do is a business is then monitor that cash and liquidity through the trough and be best positioned in in the recovery and then stabilization and in North whatever it is for their business and so it's really a dialogue that started in in February and it would continue throughout this entire process PPP is just part of it. So this is dead.

Let me just it's an interesting question that you ask because there's not one singular answer for the entire portfolio. It depends which portfolio you're talking about. But maybe some color behind the choice would be helpful here. So for example, we're we're talking to everyone in the hotel booked. Right? That's HFF that's two hundred billion dollars well percent of those classes 2% of our clients have already made their p&i for April and then 80% of the remaining 50% are in a deep conversations with us where we hope that we'll have something tied down in the next couple of weeks in terms of a modification program and then they'll make their payments at that time, or maybe they'll extend a first and then we'll get some payments after that. So that's see that's the hotel book and that's how the conversation is going there. The conversation say in lot banking is quite different where I am.

so you getting inbound calls, and we're we're

And people are asking us all you going to be there when we find Opportunities and in our question is well, are you looking for deferments and we've had a couple deferrals we got a couple of clients call in and say hey, I'm not going to ask for anything. I'm looking at the future. I need you to stand with us. So those are just two different two different ways to book is different from our gaming book. Okay is completely different than what's happening. We think our gaming book other than five or six small the deferrals that we made on Prince principal. We think our overall game has enough liquidity to survive into the summer.

I would just so that makes all conversation. They're a little bit different. We can take a little bit more time. We can see how the Main Street Landing facility can be accessed because gave the gaming competition could not access the triple P program. So every different segments of our book has a different conversation and that's why if I can reiterate again and Tim was very early on this in our or and we do a weekly senior operating committee meeting but in the second or third week of January, he just stood up and said, okay, we're going a senior leaders being charge of books of business across the entire company that have work at experience heavy credit experience has been through something like this. And therefore we can tell each discussion differently. That's for so for example, Robert running the hotel, you know, Robert was born with Hotel business in his veins. Why wouldn't yep

Take that on and run with that. All right, and so we looked for different strengths to match up against the portfolio here. I'm sorry. It was a longer answer, but I hope it gave you some color choice. So how we're managing our conversations with our clients. That's that's very helpful. I appreciate it. Thank you.

The next question today comes from drops and early UBS, please. Go ahead.

Oh, thanks. Good morning. It's you know, bigger big picture to start. Do you think this is going to be a you know mild or severe recession in the scale of recessions that you've that we've experienced in the past. Well, my my answer keeps evolving as information evolved. Um, and I try not to be tick-by-tick, but certainly more pessimistic than I was in early March and mid-march, you know, given fifty two and half million people have recently filed for unemployment claims. So I think it's going to be deeper than I've ever experienced.

All right, but I think our our answers or our approach was one that we anticipated that it was going to be longer than what people we just didn't think the severity of what we're seeing was going to be as deep.

Okay, and and more specifically around, you know investors real concerns here for the for the hotel book like what what percentage of properties would you say, you know go bankrupt in an average recession. Okay, so, I'm sorry. I didn't mean to cut you off. Yeah, go ahead. Okay, so we went back and we looked at the GE this was originally the G business and we bought it in G 4G 2016. So we went back and we looked at their performance level from 2007 to 2015 and during that time during those eight years total loss has amounted to $52 billion dollars off charge-offs of sixty basis points with Peak losses coming in 2010 at 3.3% They had a portfolio of about a billion dollars in size. Now what's important job?

Is there a portfolio is completely different than the model that we constructed their portfolio is more of a shotgun approach. They had week Flags. We do not they have small office hours. We do not they had week sponsors. We do not and they had ltvs 75% and our LTV as I said earlier are about 60% off. So we have a different model than what they have. But that's our best look back to get a gauge or what may happen going forward adjusting for the difference off of our models and I just want to add one thing to that is um, I think if you really look at it to our sponsorship and sophistication lack of investor composition is is a lot different than than that Legacy portfolio as well. We we really have the larger operators birth.

The higher level of sophisticated investor when we have these dialogues and say come on we're solving for something here. That isn't 90 days. We have folks that understand why and how we can work together and do that and that and that's going to keep the leverage down on this portfolio how we do on that puts us in the position in the rebound that we want to be at home and lastly the the debt service coverage ratio is that you show on page twenty. Are those those as of q1 or those through April 8th early? No Hotel performances got. You know, we wouldn't have that information that quickly for April got it home. Okay. All right. Thanks for the color. Thank you.

The next question today comes from a piper Sandler, please. Go ahead.

Hey, good morning guys morning morning Brad. And I think you gave the stat on the textbook that 14% of the companies had cash-on-hand six months or less which was pretty consistent with history. I was curious if if you could give that same kind of stat for the hotel book. Obviously. I know that the PPP program, you know is having an impact there as well. But just kind of want to get any kind of sense on you know, kind of the Ford look on on debt service coverage for that book. If you could look at it in a similar way too as you as you look at the tech book.

Well, I don't have the stat on what the collective liquidity is for the the hotel book. We Are that is one of the single most often questions. We have our clients and it's we're Gathering that information as we speak. They generally don't run with a lot of liquidity and now here's my however long my however is if you are a recently-opened hotel, which we have a couple they have liquidity because they have put it on on their balance sheets ready for the opening. So they're they're okay. If you are a hotel that was building up your reserve to do a pip you have some of that liquidity if you are a hotel it's been operating for a while, distributions have gone back to your investors you have less and therefore we have to talk to you to go to the investors you get a capital call to come in for you to get a defer wage.

To get some deferral so a little bit different and that's why one of the things that I can keep repeating here case-by-case individual hotel by individual Hotel & Lounge or individual property throughout the whole book of business. Okay, and just maybe a follow-up to follow-ups one. How large is the is the gaming and then secondly, I think at the end of last year you had about 8 and 1/2 billion of unfunded commitments in total for the whole loan portfolio. Can you talk about the potential? You know for those to be gone down maybe where you cut those too and and and implications of that without have on Capitol. So also be easy question and then I'll flip it over the Del for the hard one. The simple answer is five hundred million on game.

Yeah, so so are the most significant draw we've ever had on on unfunded has been 8% of that amount which frankly got close to kind of know where where we were um, you know with this drawdown, we're not seeing any more additional drawers at this time. We're in fact, we've had some kind of repayments of some of those rods so long so we don't see in a lot of these drawers are I mean, there are these commitment lines. We don't think they would really kind of ever be drawn down in terms of you know, the structure behind some of these some of these credits. So so while we have, you know, these unfunded elements to them and you know, we we did have a draw down in in March predominantly. We're not anything else subsequent to that.

Okay, great. Thank you guys all back in q.

And today comes from Chris negrotti you please go ahead. Hey Chris. How're you doing quick question. I was just a balance sheet trajectory given the comments about the growth and the drawers any thoughts on on adjusting the resi mortgage strategy of it too just in light of the capital and liquidity.

So the the the purchase of resi mortgages may be far more opportunistic right now than we've ever seen as off. Some of our clients are selling their mortgages at significant discounts, which will allow us to go ahead and and buy at fire yields and we bought in q1. So we're going to look at that. You know, the key word we used to use or we used for our share repurchase with opportunistic same thing here if we can get the right choice reward trade-off. In fact, there are mortgages available that have better or lower ltvs lower DTI and higher FICO score that are selling for much higher yields than well. We've recently purchased say at the end of 2019. So we'll look at that and there's opportunity there. We're going to take take advantage of

I think an important thing on this program as well. As on the hotel book is is you know collateral. I mean we are in strong collateral positions that such that it would take, you know, considerable sustained valuation declines to ever Pierce where we are in terms of risk of loss.

Okay, and just just if I could follow up the deal in terms of the either the or the tangible, obviously this quarter had a big big chunk down just cuz of the growth. Where do you where do you comfortably off those ratios in this environment over the next few quarters? Well, I mean, so we saw a decline in in those two now with the triple P program that could pull down r r a m e e. It really won't have an effect on t one because those are all you know 0% risk. Wait, is there s be a brat back but we can see this number come down into the 8th. Okay. And then maybe the last one if I could do it the the color on the hotel history of loss is great. Could you could you do a similar run-through of the tech book in terms of you know P classes when when you didn't own it off they were kind of in the mid single-digit, but the earliest age but just Blended I think there were around to 3% any color would be great. And your are your your recollection is correct? I don't have those in front of me, but we'll we'll pull them up as you know, they're available.

SNL, yeah, the last time I looked at it and it was a while ago and it wasn't for this particular situation. As I said in my prepared remarks there was a two times coverage of a warning, so the credit losses and as you know credit losses come early in the morning comes later, but when you look at it overall that the warranty income that we get has always covered the way more than covered the credit losses. Unfortunately, we connect you just can't be time to be in the same quarter. I think it's also notable that that are mixed is changed since then as well. So, you know, we're now offering a significant portion of our growth has been in these Capital call and subscription lines. It's not something that bridge was engaged in as a stand-alone Enterprise but something that we entered in as part of our, you know, our litigation strategy essentially last year to to Really lend into areas that have had zero to no losses historically for not just us but for other participants in this base wage.

So, you know, um, let me give you some color as part of our review just so you know, I'll speak for Tim Bruckner.

For a second, but you know every Monday at my s o senior operating committee meeting we set the tone for what we're going to try to accomplish that week that that month that quarter and so forth depending on the circumstances and then Thursday we run to senior long committees on Tuesdays and Thursdays. Basically, we're not really approving senior loan packages, but we are reviewing launch, uh credits that are being worked on for modification and then Tim hold individual weekly meetings with each one of our wrists segments. So we're we're daily talking to a segment and getting live information. So on the technician which is as live as I can get it, you know why I was I was asking the credit officer there last night. How would you describe our book of business and the way he just said what he said was a rating turbulence.

But I don't see large losses. So things can move around in terms of pass not pass but he he's at this point. The book is behaving. Well at this point, I might just one one more point of that. We've seen the support from the sponsorship what we're in these transactions that a low loan-to-value with with a number of rounds typically in front of us before. We're in fact what we're seeing is if anything takes a a hit here. It's a hit on valuation before it impacts our loan. So the the rounds are off during the funding is occurring the valuations might be slightly lower but the the capital is still flowing in the segment and and that gives me some comfort zone.

Great. Thanks for the color.

The next question comes from Tamira braziller of Wells Fargo, please. Go ahead.

Hi, good morning. Good morning, maybe for a deal first. You had indicated that you're starting to see some of the utilization. Come back is that in the technology package as well or are those utilization rates still increasing all those are you ization rates are fairly stable for Thursday. We are right now on both sides both on the tech and Innovation as well as in the corporate finance area Okay, and then of the 14% of the the tech loans which have like six months or less of liquidity have any of those been funded up in the last couple of weeks or was your commentary in the prepared remarks for for other relationships?

Know what's there now has not been funded up. We had a we had a couple of sponsors put money into a couple projects right before the end of the quarter which was told to us, but you know overall that number has been relatively steady in bridges history, but we are encouraged by what we're seeing away from us with sponsors completing their rounds. We actually had a credit that uh wasn't in any trouble in our lives science yesterday that got us a potential amount of sponsored financing. So we're not seeing it. We're not seeing the sponsor financing run away from us. Well run away from the the industry.

Okay.

Then just one more on the loan modification. It looks like at least through quarter in the majority of it was within your Arizona and Nevada portfolios. I guess what's driving that is Odd Parents on on residential loans or why such a high number out of those two geographies. It's it's really the pace and Cadence of those customer discussions with those discussions drive it the discussion results in an assessment of liquidity liquidity necessary to to bridge the trough in some cases that liquid already exists the the solution which may include some form of modification is tailored tailored to the liquidity golf. So it's really just the the pace and Cadence of those discussions.

Okay, and then last question for me for you can with your commentary that you're a little more pessimistic now than you are in in mid-to-late March. I'm just wondering how that correlates with using the Baseline Moody's assumption for allowing me to see another tick higher for adjustment on the existing portfolio or at this time or are you still comfortable with the Thursday that was provided for the existing book in detail? So I'm calling with the provision that we provide at quarter-end based on everything. We knew at that time right off. I'm sorry. I just I just had I just had a senior moment second part of your question was do you want to take so long? You know, obviously this seems to change almost by the hour, but in terms of what the expectations are and and since then we've had we've had some worse news we've had, you know north of twenty million people dead.

File unemployment. We maybe got teased with some good news with you know last night with uh with a a treatment that looks like it's going to be, you know proved to be efficacious for this month, you know in the next seventy-five days. My guess is there's going to be a lot more news. And so we're going to reassess this at the end at the end of June in terms of what that looks like, you know, if I can get things back, you know in some track upward again in terms of the economic Outlook. I can see things getting better if that's not the case, you know, if we're still doing, you know kind of in this lockdown phase I I don't think that's yeah. We're probably looking at additional provision in the second quarter can't really say right now just so I'm sorry we captured by thought I froze there for a moment thinking but I think what's going to be surprised the folks is that the pace of charge-offs are going to be

Or the cycle is going to be pushed out a long gated because of the triple P program and because of the Main Street Landing facility and I think people I think investors will be surprised that there aren't heavy charge-offs coming early on maybe on some of the smaller businesses you would expect to see them but on some of the larger credits, I don't see charge is coming to the back part of the year if they come at that time, right and so now and it's Adele's, depending how quickly that the country opens up and the speed of the pace will then determine what we need to do as we look forward at the end of Q2.

It's commentary. Thank you.

The next question today comes from John Armstrong of RBC Capital markets, please. Go ahead please thanks gud morning guys morning. Thanks for that, Can I was I was just I was just going to ask about that, but maybe we'll go ahead a different way to provision.

So they'll be I think what you're saying is things are a little better by late June or than by that's Thirty million incremental in the provision packs. Go away for two two. That's the right way to think about it. Well, I wouldn't necessarily say that that Thirty million would be reversed. I mean if if the Outlook at the end of and end of June is similar to what it was at the end of the first quarter. I think that there's no additional amount given for deterioration of off of a you know, a credit conditions. So I think that holds that holds with that 30 million, you know for for that to be released back into income. I think we probably have to get to a farther. Down the page and say, you know what we actually are well on our way toward, you know, reducing our unemployment rate we're bringing people back in and so the Outlook is better than kind of what is the base case for Moody's? Yep.

The end of the first quarter and and and we're and we're have which you know that has an extended, you know return. I mean, that's some of that really is held down through the end through 2021 If instead you get back to something that resembles more of a you know, what pick your letter right, you know a v or you instead of like, you know a lazy you or an L. You know, I think there's a possibility that you could release that I think what Ken said was off. We're not really expecting to experience charge-offs. If and when they come until after these periods of the PPP program The Main Street lending program and as well as a you know, the the the rules the rules allowing, you know for certain types of some of these some of these restructurings that can be done in the in the sight of this of this overall pandemic that's going to push out ignition of lost. At least I think a couple of quarters

Not all makes sense, and I'm not seeing reversal. I'm just saying it doesn't it doesn't show up again in Q2.

I guess the other question is on margin appears like you set up reasonably. Well from a margin perspective. I appreciate all the disclosure but give us an idea. Some of the you know, geared term longer-term puts and takes are you thinking about the margin? Yeah, so, you know when we we have a you know, a lot of clients that are at their floors we talked about that issue. Um, you know, I would say competitively at this point in time, you know spreads of white and out is as rates as rates came down is uncertainty Rose, uh, if that settles in fact could see that maybe some of the spreads would actually come down over time which could put pressure on earning asset yields on a more longer-term basis. I think that assumes that things are getting better economically wage. Well, if things are getting better economically maybe the FED has been inclined to look at you know, where we are in the zero band and start putting that back up. So, you know, you could be a scenario that you actually don't see, you know rates.

Is coming down in terms of loans generally because at the same time as friends are declining maybe overall base rates start to rise because people are comfortable.

In terms of kind of the recovery the economy so but those are two dynamics that I'd really don't know how to gauge but we are you know, we're at the zero bound here, you know, I don't see obviously I don't think things are going to get lower. They may be, you know, the FED has come out and said that they're against negative rates. I think that would certainly be a mistake to go there. So, I mean you you maybe have this kind of overall lighter compression over time, but as of right now that's certainly not the case may indicate it on the residential side in particular, you know, we actually seen I've seen rates rise and and in fact, you know spreads in residential loans have increased in some cases and and really haven't participated in in terms of the rate cuts that have taken place.

Okay, and then 10:00, maybe one more for you talked to earlier about a billion five in organic loan growth. Maybe a third of it was a credit draw Downs as I think what you said you talked a little bit about the quality of that growth. How how you think about that is is you know, it seems like you still a big number for a lot of uncertainty in the economy. So maybe just bigger picture broader talk about the quality of the growth and maybe some of the drivers of that. Yeah. So the long is 2 billion the credit draw Downs brought it down to what would have been a billion five that was our estimate, uh somewhere early into the quarter when we start to see some opportunities build now where that growth came from Capital call lines industry has never had a loss came from Warehouse lending. We've had that business. Yep.

So 11 plus years we've never had a loss. It came in reselect financing. Not only have we never had a lost. But the team that's been running that business for 35 years has never had a loss. So you go if if you can forget about the pandemic for a second and go back to our approach in 2019. We started talking about risking the balance sheet CLD was coming down which it has and we were update where you saw the update in our residential book of business and our warehouse lending in our system will call lines and Resort financing. So those businesses are zero or very low risk loss businesses off and you know, I wouldn't expect the volume 4qu to to match what we did in q1 on our kanak basis, but I would expect to grow to come in those business segments that I am.

I mentioned.

All right. Thanks a lot guys. Appreciate it. Appreciate it.

The next question today comes from Tyler stopper. Stephens, please go ahead. Hey, good morning guys. Maybe just to start on that last question there or last comment wage. Can you just talk about the the balance sheet growth expectations this year? Obviously a strong start here in the first quarter. You mentioned some of the the draw Downs on the line, but just how should we think about both both loan and deposit growth for the remainder of the Year relative to that prior kind of $6,800 range. Thanks. I'm not going to put a number out there. They're just so many moving fact. I have a little more visibility around Q2 and you know, I think I would plan absent the triple P loan portfolio. I think I would plan on the lower end of that range five to six hundred million on deposits five to six hundred million on on loans and if we surprise to the upside down,

Then great. We we put in.

On the deposit side a number of different programs that we thought we hope that can be successful and or maybe take some market share from our home group. Um, we'll see if we can make that happen for the rest of the year. But I think towards the lower end of that range would be the right thing to do and don't forget when we spiked up you too and have some of that Spike hold on the Q3 because of the triple P loans. They're going to just fall away towards the back half of the year.

Fair enough for a fully recognize there's lots of puts and takes care of things. The rest of my questions been asked to answer.

The next question today comes from David chiaverini of wedbush Securities, please go ahead.

Hi, thanks follow up on the hotel book. You mentioned that loan modifications are going through at the end of the year, but hypothetically if hotels remain, you know, empty until a scene is developed which could be twelve to eighteen months from now at what point and under What scenario would you move to foreclose on the hotel property David if it came across as the end of the year I meant I thought I said the end of the quarter or during the second quarter. Um, if that's what we're what we're looking for is we're looking for a solution that combined, you know Capital contribution from the from the borrower with our ability to give them a you know, a deferral or or some some relief and in a modification that that takes this, you know, beyond 3 months Beyond six months which we see a lot of the other competitors doing it seems like they're just hanging out kind of three months to froze and say well let's let's address this again in June or July dead.

We're not doing that. We're trying to bridge to a to a longer timeline in terms of you know, what is this look like, you know, and so I mean these borrowers, you know, they have obligations work, you know, we're going to be able to give them some relief on this type of thing. But you know in a lot of them have, you know, considerable resources to draw upon so is there a situation whereby some of them become very stressful and you know, we see migration, you know down to you know, special mention down to substandard. I think that's certainly the case. What's it going to take for us to foreclose on one of these? Well, you know, we you know, we have like, you know, we have a value we have shareholders that we need to respond to and we're going to be you know accountable to that and we're going to be responding to that. That's why we think the loan-to-value is so important here because you know, if somebody isn't if somebody doesn't want to be able to continue here or has to throw in the keys then it's like okay. Well as long as hotels overall haven't fallen, you know more than 40 years.

Sense of original value. We probably have very nominal risk of loss because because of where we are on the strong LTV.

It's helpful. Thanks for that and then shifting gears you mentioned about how the Mage free lending programs should benefit some of your larger customers. I was wondering will you be able to swap out your existing loans for the new loan under the facility and essentially transfer the risk to the government? No, no. No, the program doesn't allow doesn't allow for that in terms of wage. When you when you issue a Main Street Landing program. It has to be a new disbursement. It can't pay off something that's already upstanding. Okay. And do you believe the program is big enough to make a difference because looking at the s b a p p program that those funds were exhausted fairly quickly. Well, I mean they were exhausted fairly quickly and I guess it remains to be seen whether they're going to re authors for another two hundred and fifty. I I'm not sure that the process for the Main Street. Let me program is this is going to be as complicated a pathway as it is for the Federal Reserve. You don't suck.

They have two different, you know parties from different, you know, opposite ends of this book.

Medical Spectrum to be able to unite on something and agree. You have to get the fomc the Board of Governors of the Federal Reserve System to agree on this so I I don't know. I mean I think remains to be seen what the demand is. They put it out there a hundred million that seems like that's got some room to go. It's obviously it goes too much larger Enterprises, you know, um, you know, uh, you know, two and half million of Revenue ten thousand employees. So we'll we'll we'll see about kind of what that life like, but I haven't heard anything about that but I think they want to get it going and maybe see what the demand is before they before they go on from there. But you know again we expect to be early we were early the Triple-T. We got, you know one and half billion. If you look at the proportion of what we did in trouble. To our size to the overall banking community and the country we had a much higher penetration than most institutions.

And then the last one for me is in the slide deck. It was mentioned about 82% of the variable rate loans with floors are are at those floors. Can you remind us what's the average life of average stated maturity of those loans? Well, the the average maturity of our loan book is just under four years and that it's going to track pretty closely with that.

Thanks very much.

The next question today comes from Gary gender of d a Davidson, please. Go ahead.

Hey, thanks guys. Good morning. Just wanted to ask a technical question on the I think you mentioned that as those get funded. They'll be on the balance sheet for up to six months. I thought the back online for when the bank or borrow could I guess apply to have the loan forgive was about seven weeks is that is there something different than that? I'm going to Canada if I mean, I'm a little bit. So you you obtain a triple P loan and the portion of that that that is forgivable. I eat that's used to cover, you know, employee compensation certain elements of you know, rent and other and other you know, basic expenses that that's the part that's that that can be that can be forgiven by the SBA. And so that is a going to be a shorter timelines actual TPP loans themselves are two years. So what we see is we see what was the usage, you know, somebody gets alone for x amount. What is the usage of that about two-thirds of the of the amount used?

These loans has been for something that should be ultimately forgivable because those funds are going to be used to support those particular items that are identified in the legislation. The Latin the back bumper is something that isn't forgivable. And so that's going to be more of a a term structure for two years.

Okay, thanks and the fees on that you'll be sending for them through spreading come or is that what if it'll go through spread income?

It'll be front end loaded because because of the the kind of the odd nature of how these loans are going to amortize with the with a payment forgiveness. And then and then the bar were responsible for the rest of it. So it would it would artificially inflate the margin say in the second quarter and then have a lesser impact is like a paid off beyond that. Yes. So then and then I'll just follow up in terms of the paid ads. I think can you mentioned some paid downs from those of the lungs that were drawn in March. You've seen some of the repayments. So could you maybe quantify what you've seen in terms of the repayments on some of those lines? It's it's been it's been modest. What I what I what I meant to say is we're not seeing additional drawers of any significance and there's been some modest, you know payments. It seems to have been stable stabilized and that Echoes what I'm hearing from these other institutions. I think they made a particular comment about this, but if you look at you know,

Where are these Corporate Finance Loans or you know who this indicator is? It's JP Morgan. It's B of A. It's Wells Fargo. It's the larger institutions and I think what we're seeing.

Really mirrors with what they're what they're talking about.

Thanks a lot.

The next question comes from Michael Young of SunTrust Robinson Humphrey, please go ahead.

Hey, thanks for taking the question. Maybe just a follow-up on your comments about you know, net charge-offs and when they'd be realized I guess maybe in particular. Could you just talk about high level where you think those thoughts come from at this point? Sounds like maybe you don't expect as much from hotel given the collateral base there, but would it be more Tech and Life Sciences businesses with less collateral base or some of the home or he's in particular shared National credits or anything like that that maybe we're we're not seeing they're focusing on right now.

So I think I took a little bit of a step out there saying I just think charge-offs will be a little bit later. My crystal ball isn't as clear to say which group is it. Uh, we're are going to have a charge offs and I don't feel comfortable really putting that out there at this time. I just don't things are changing. So quit that I would clearly be wrong and I just brought a whole back my intuitive feel on that, but I do feel generally that charge-offs will come later in the year. I'm not as early as people think

Okay, and then maybe Dale just on the the shared National Credit book. I think that was the strategy that you guys had had in the past on a small hold basis, or maybe it got much to say about a billion maybe not standing at one point. Can you just tell us the the balance at this point and anything that we should be, you know looking at there in terms of mitigating factors home? Yeah, we're I mean, we're probably at about a billion for I mean most of the drive that have come down have come down and and snakes and you know as we've talked about in the past. This is a you know, kind of low investment-grade portfolio, uh it the the syndicators are as I just mentioned the you know, the large the large banking companies that we participated in we've you know, we we've at times we've tried to we've tried to do so so that we can augment our ability to to push forward deposits from some of these Enterprises that are in our markets. And so we've taken a little piece of

Okay, and then maybe just last one for me just on the expenses obviously a pretty decent step down this quarter related assume lower-wage, um expectations, but in that kind of a new run rate that we should kind of Base growth off of from here or you know, any other, you know factors that may be shifted meaningfully with everyone working from home Etc.

No, I think we're on we're on we're on a lower trajectory from from where we were with this with the step down and we're continuing to do the necessary Investments that we have in technology to make sure our platform continues to support what we're doing today, which is basically executing on our in our business resumption continuity programs.

Okay, that's all for me. Thanks. Well, it looks like we've exhausted all the questions so we ran longer. Thank you for spending time with us. We look forward to talking to you again, and we wish you um, uh a good weekend health and and safety walk out there for everyone and we'll be in touch. Thank you all.

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