Q1 2020 Earnings Call
Ladies and gentlemen, thank you for standing by and looking to the first quarter 2020 lot Bancshares incorporated earnings conference call.
Tom All participants' lines are in listen only mode. After the speakers presentation. There will be question answer session drastically question during especially with the press star one of your telephone.
Please be advised of today's conference is being recorded in the group or any further assistance. Please press star zero.
No it down to conference or what your speaker today, Greg <unk> General counsel for life.
Okay Bancshares. Thank you. Please go ahead Sir.
Thank you good morning, everyone. Welcome to levels first quarter 2020 earnings conference call. Your webcasting lobby Internet and this call is being recorded to access the call over the Internet radio the presentation materials in commentary that you referenced on the call. Please visit our website at Investor Day, I look back Dot Com and go to todays call on our they powder for supporting materials.
First quarter earnings. This is also available on our website.
Before we get started I'd like to caution you that we may make forward looking statements during today's call, but are subject to risks or uncertainties factors that may cause actual results could differ materially for expectations are detailed in the materials accompanying this call.
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We did not undertake.
Statements to reflect the impact of circumstances or events that may arise after the date of today's call.
Information about any non-GAAP financial measures referenced the Queen reconciliation those measures to GAAP measures can also be found interesting findings were announcing the call over Japan, Chairman and Chief Executive Officer.
Great Good morning, and thanks.
In these trying times you find out what your mate.
What do we live oak as an institution stand for or we just have Mike.
Yesterday, a top four bank account Oscar told their customer we don't know anything about the Triple P. program.
Well the whole Bob.
What do each of our folks standpoint.
Well, we found out.
We reverted to our original guiding principles and we stood at all.
We have always thought of the three legged stool to business, our folks are customers and our shareholders.
This thesis that if you do everything humanly possible for folks.
Are the right.
And you tell them they have one job in one job only treat every single customer like the only customer in the bag and simultaneously you tell your very talented credit folks.
Number one is soundness.
Remember to this profitability and rule number three is growth.
Then all three groups.
Shareholders will.
I cannot begin to tell you what all 600 of our folks have done.
All 600 have been going at it 24, seven since the situation began.
Here are some responses from the field.
Cost.
What we're facing right now might be characterized as an economic meltdown.
We have prided ourselves and never like any want all due to lack of work in 30 years and business.
Until we were forced to curtail operations. This March.
We can't tell you help Michael we were to see that loan amount in our business checking account this morning.
Today, we spend hours planning on how we will bring our employees back and reserve our full operations as soon as it is acceptable to do so.
Number two wow.
Double explanation I just love into my Bank account in the money is there a triple X. collection.
Feel like crying I'm, so happy Triple actuation.
Payroll is Thursday, and everyone will get 40 hours six exclamation points number three and lastly.
Well I hope took it upon themselves to try to save the lives of over a dozen restaurants in Wilmington, I mean emails a three a kind of attempts to help keep these family businesses afloat.
You know the military gives metals for this sort of service.
Im not saying, though.
Now, let's take a step back before the virus.
We were on our way to achieve what we said on the last call.
We were highly confident we were going to exceed and may be substantially exceed 2 billion in originations.
On the liability side, we were moving all of our savings in CD customers Defense Act.
On the 13th of April.
The loan portfolio was growing.
Nexgen deposit platforms were being delivered.
Credit quality was excellent.
Dan.
Oh virus.
Who could have predicted that United States government would choose the SP a platform to distribute what might be one trillion dollars and capital to American small business.
So now it's going to.
And we left into action.
How can America's number one SB eight lender help.
First of all get rules right.
As everyone knows the S.P.A. is lots of rules rules for the express program rules for seven a rules for fiber for.
My gracious the book is 550 pages long.
But that was not the object to the exercise.
How can treasury and the S.P.A. stand up a product overnight to be distributed by banks and Fintechs alike.
To literally millions of small businesses.
I will remind you that in a normal year about 3000 bags make about 25 billion in SPL on.
The first 350 wasn't 13 days.
Your team here and other experience SBK lenders had a lot of input into that product that was launched at 12.1 I am on the third.
Now.
The absolute cheated the strip down SBH alone just to get a loan authorization number.
This platform is called <unk>.
Well, he Janice kind of like my grandfather's jalopy, sometimes you just have to walk away that you are the hammer.
Well, we know SPX Betsy better than anyone.
Many new that.
And I ask where our help.
And we gave it.
To a top four back.
To several top 10 Bucks.
Two cannot be backs.
And to some of the largest systems integration firms on the planet.
So everyone could well.
So small business goodwill.
So American goodwill.
So what has happened here at the back.
Two levels.
We have 4400 customers.
We service 5600 loans before the cares Act 1100, 28 customers ask for a 90 day deferral of principal and interest and it was granted.
And the Cures Act U.S. government will pay all principal and interest for six months to 100% of SPD borrowers.
They should get our customers some breathing room.
This is highly fortunate fly back.
After the launch of PPP, we had the following goals.
<unk> cash in the hands of 100% of our borrowers that they did it.
Felt small businesses and the communities that we operate.
In both partners in October.
That is out.
As of this moment, we have close funded 4826 loans totaling $953 million, we have each round numbers for an additional 131 business is going $28 million.
And I'll, let us a 116000 jobs.
Were saved by these 4960 business.
As we await the started going around to our pipeline to help others is substantial.
Lastly.
It is our belief that help us on the way on the other side.
The Express program has been temporarily increased from 350000 to a million.
It is our understanding that the house versions of phase for the carriers that concludes an increase of the guarantee percentages from 50% and the express program to 90.
And an increasing to 70 program from 75% Tonight.
Both increases wouldn't be temporary.
And there is absolutely no certainty that this would happen.
It would be good for our customers.
And good for America.
As always my opening comments discuss credit quality historically.
Body list.
This time I think you'll list.
So moving to slide.
I have four slot floor.
I don't deserve a banker in the land or a more wouldn't be pleased with the ratios noted above.
And as always we like to note our effective capital ratio 500 million in capital at the bank level.
60 million before the accountants mess with a loan loss reserve that probably is going to tell you about.
$2 billion been guaranteed paper for an adjusted cap ratio of about 26% and on top of that almost a billion dollars.
SP, a guaranteed loans, which have you slap whatever premium one on that is substantial additional gap.
In addition to that we have about a billion dollars appeared on the balance sheet before the fed.
Allowed us to finance these loans differently.
We took down $50 million in a credit facility at the holding company, bringing holding companies cash position to about $60 million in cash to begin to attack. This challenge.
I think over to you.
Thanks Chip you know to follow up on on his comments you know in times of stress banking fundamentals always seemed to come back to liquidity capital and credit quality.
And we believe we've always run a conservative balance sheet, but at the quarter unfolded, we took some cautionary steps to strengthen that even further.
As chip mentioned a billion dollars of liquidity on our balance sheet that increased by almost 25% over the quarter. We also sold an incremental about $50 million of seven eight loans, a sharp a little more capital here at the end of the quarter Iris capital stands at a healthy almost 15% and at times like this it's awful nice to have.
1.7 billion dollars' worth of or nearly half of our loan portfolio guaranteed by the government.
You might have seen in March we authorized the small share purchase program to better position ourselves when we get to the other side of that we have not repurchased any shares and we don't anticipate doing so until the world settled down.
Our dividend is reasonably small at just three cents a share and we plan to maintain that unless things get really Ralph.
Chip talked about credit quality I'll cover in more detail, but we've always follow the guiding principle that safety and soundness comes first and we believe we've been prudent and our credit Decisioning.
But you only can really tell that prudent sometime a stress when you see how will your customers with the help of their bank are able to navigate a crisis as a small business bank, we find ourselves in the last few months squarely in the I have a storm.
From the time the pandemic started we didn't get in touch with 100% of our over 4000 borrowing customers as chip mentioned, we processed deferrals for over a quarter of them and were able to secure payroll loans for all of them who need it.
Once we secure enough be authorizations for existing customers, we reached out into our community and the industry verticals, we serve and as chip mentioned, we originated nearly 5000 loans and nearly a billion dollars a payroll.
We're also proud to report as chip mentioned that as of this morning, 100% of those customers have loan docs in their hands and we funded over 97% of them, which is a chip mentioned over 115000 jobs.
When you return when you turn to the result of the quarter, though admittedly, there's a lot going on and the numbers.
Lending franchise started the year off strong deposit franchise with operating extremely efficiently and we were continuing to build recurring revenue secondary markets for 70 loans were robust and our loan pipeline with it at all time high.
All that feels like a lifetime ago.
The virus spread in the nationwide locked on set in our deal pipeline slow dramatically and while we continue to see some activity in selected areas like renewable energy and agriculture, primarily most of the new business activity has been put on hold.
Small businesses across the country, we're facing significant revenue challenges seemingly overnight.
After we mobilized the deferrals on our portfolio, we turned 100% of our attention to be payroll protection loans.
Now let me close the books on Q1, the obvious item that was most impacted with our loan loss provision and as luck would have it the industry also faced the implementation of Cecil this quarter and we elected to adopt the new standards starting July 1st.
Also of note in conjunction in conjunction with implementing Cecil we reclassified a portion of our loan loss reserve into a fair value adjustment for loans accounted for fair value in accordance with the disclosure requirements for those loves.
A bit of balance sheet geography shifts that I'll talk about in a minute that add to that of the noise, but all in all we increased our total allowance by about $13 million.
Partially as a result of the deteriorating macro environment.
Given the significant selloff of risk assets across pretty much all markets into the ended the first quarter. We also saw some volatility in our mark to market assets on our balance sheet I'd just like the work we've done over the past 18 month period is as impacts.
Secondary markets Respi loans declined by as much as four point into the ended the quarter interest rates dropped precipitously and other market indicators decreased across the board. These market changes impacted our gain on sale revenues the fair value of our hedges our servicing at the revaluation as well as the loans, we carried at fair value.
If you look at the highlights on page seven for the quarter, our balance sheet and recurring revenues continue to grow nicely year over year and quarter over quarter. All the metrics are largely on track although expenses were up as we hired into the end of the year as chip mentioned, our lending franchise and we continue to invest in our next generation technology initiatives.
Fundamentally though many of the same trend that we've discussed with you over the past year continued during the first quarter.
Given the moving pieces in the quarter, we thought it might be helpful to outline the various adjustments on our income statement and try to take a closer look at the core earnings power Bank, which will add on page nine.
Overall Q1 bank core earnings were pretty consistent from Q4, but there was an awful lot going on in between.
So little more detail on that a total credit related expenses that would have provided previously been in the provision line was $18 million, which comprises the $11.8 million addition to the provision.
And six and $6 million that is included in the fair value adjustment online.
The market, our U.S.J. lending hedges drove a 4 million dollar swing as long interest rates dropped 125 basis points in the quarter.
The fair value losses on the on the a fair value losses on the loans accounted for under fair value was $10 million as I mentioned over half of that was related to credit.
Our servicing assets continue to mark down despite the significant slowdown in prepayment speed and with the FDA paying six months or principal and interest on the entire servicing portfolio, it's actually pretty solid asset right now.
And lastly, our Fintech losses ran a little higher out in the fourth quarter. So all in all other a bunch of headwinds on the income statement that Matt what was a pretty solid quarter as it relates to the earnings power of the franchise.
Chip covered the credit stats in the quarter, so I'll get back through them again and the forward is obviously more important than the stat, but I do think it's worth mentioning that our portfolio wasn't really healthy heading into this crisis.
As a reminder.
You know over $1.7 billion of our loan portfolios guaranteed by the government 1.6 billion, if that's the a and 100 million at U.S.P.A.
And a total of $3 billion at the loans on our balance sheet or sta loans, including both guaranteed and Unguaranteed.
And as chip mentioned, the FDA will be making six months, a principal and interest payments on all those loans.
And that's on top of the deferrals that we processed before the cares that took place.
You combine that with securing payroll loans for customers and we believe that our borrowers have a few unique aspect that will better help them weathered the storm.
Also point out as I have an on prior calls the diversity of our loan portfolio and while we certainly do have some exposure to some of the higher impacted areas like hotels fitness centers in day care centers. We also have scenarios like renewable energy chicken farms self storage government contracting that are much less impacted by that.
Current events.
In terms of our go forward thoughts on credit, it's honestly too early to predict the depth of these impacts and the effect. The government intervention, we'll have to mitigate challenges that our customers face.
But we're actively engaged with our entire portfolio, especially those most impacted we're staying very close to our customers having reached out to 100% of them. We're monitoring their liquidity real time, helping them manage their fixed expenses working their options around rat and franchise relief and trying to ascertain as best we can when revenues will return.
Into some semblance of normalcy.
The initial tools at our disposal deferrals payroll loans and PNR support from the FDA have provided critical breathing room in capital to a large portion of our portfolio as we progress. We're confident we have a capital liquidity, we need to provide working capital to our customers that needed to help them through that.
As we indicated in prior calls we did not expect the day, one impact of seasonality material to our loan loss reserve.
Although the changes in the forecasted macro that were significant.
The day, one impact ended up being a $1.3 million decrease to our allowance.
And as we close the books on the quarter like most other banks, we evaluated which macroeconomic scenario is to use to calibrate the lifetime loss model and Cecil.
We settled ardent on the are in a pandemic scenario, which contemplates sustained high unemployment that escalate throughout the year ends in double digits.
On page 12, you can see the impact of the reclassification to our loan loss reserve that we mentioned earlier basically requiring us to separate our loan portfolio into those loans held at historical cost and those loans held at fair value and reallocate our existing loan loss reserve into those two buckets.
As you can see it really is just LNG geography the.
All in all our modeling for the quarter generate an additional 30 million in credit reserves previously classified as allowances and if it is comprised of about 7.6 million in the allowance and a 5.4 million increase and the credit component in the fair value loans. If you look on the far right. A page 12, you can see the total.
About $61 million of reserves across a few categories.
If you look at that on I've really simplistic basis, we have a little over $2 billion of unguaranteed loans or about a 3% protection on those loans.
Given the uncertainty of the ultimate outcome and timing and shape of any recovery, we're going to remain conservative as it relates to forecasting and spend all our energy supporting our customers.
On the funding side, our deposit platform remains really efficient.
And in a lot of ways events in the last six weeks of reinforce the importance of digital banking offerings.
Given the overall stress in funding markets, However, liquidity remain Paramount and our deposit portfolio has not reprice downward quite as quickly as we might have imagined given the feds action, we've seen some pretty rational downward pricing recently, though I think the opportunity for us to gain some ground here in near future.
If you look at the blended cost, though it's still a really great source of funding with minimal overhead.
We remain really excited about our operating accounts, the chip mentioned and building out checking accounts and launching that and in the near zero interest rate environment, we find ourselves yeah. There's the gap between those two cost on a fully loaded basis actually pretty compressed.
Versus versus the savings products that we have now.
In terms of our net interest margin recurring revenue growth was solid and margin was stable in the first quarter.
That said the fed action in terms of timing you came at a pretty bad time for us as our.
55% of our loan portfolio will reprice with 150 basis points fed action here at the beginning of Q2, and we were just the tail end of a lot of our Q1 FY repricing. So we expect our margin to take a hit in Q2, but to recover in the back half of the year as the deposit repricing.
We also had warehouse significant liquidity as chip mentioned in anticipation of the PPP program and with the introduction of the fed facility funding, 100% of those loans at a 35 basis point cost of funds, we find ourselves an extremely liquid balance sheet, which is great from a risk perspective, but will also compressing them in the near term.
Yeah.
On the expense side as I mentioned earlier, we hired into the end of last year anticipating a banner year of small business lending and technology deployment.
The silver lining to that is we found ourselves fortunate to have 600 incredibly talented incredibly dedicated teammates who rolled up their sleeves at the collectively working around the clock throughout the PPP program, helping small businesses across the country.
We repositioned over 200 people into new roles and process 5000 loans in two weeks for context, that's four times more loans and we made in all of 2019 in two weeks.
And we're back to work at that as we speak committing to getting more funds into the hands, a small businesses to help or hurt because preserve job and keep it going through this.
So our expense line looks high largely result of our team and we don't plan to change that one thing to note as you expect as you triangulate expenses and capital almost $3 million a quarter of our compensation expenses stock based comp, which helps from a capital perspective.
Our team is rock solid while the long term path to sustain profitability, maybe pushed back a little bit we're more confident than ever and our model of service to small businesses.
Aside from salaries and benefits, we had a couple million dollars an increase expenses related to our technology initiative as we continue to build what we believed to be the nexgen platform for the future of small business banking.
It really feels like our thesis related to technology and banking has only been reinforced by recent events.
Given some of our experience with Hurricanes distributing 600 people remotely and working in cloud based technology has become pretty ordinary course for us and over the last six weeks, we really haven't missed a beat in some ways. You can argue that weve collaborate even better with them and teams.
And our entire company rattling around a common mission.
Generating these PPP loans at scale requires flexible architecture and great technology platforms with the help of our partners. We stood up our PDP lending platform quickly we funded loans on the first day of the program and we booked loans onto a purpose built fintech platform, which we believe will dramatically increase our efficiency in the forgiveness process.
And our experienced the importance of robust digital banking offerings, coupled with great customer service Wednesday, we spoke directly to every single one of the 5000 small businesses that we funded PPP loan for.
And while there may be some fully automated solutions out there the feedback we got from our existing and prospective customers was extraordinarily positive. We believe the marriage of great people and great technology truly is the winning model.
As chip mentioned, we haven't lost sight of our broader technology initiatives, mainly replatforming our entire company on the next gen platforms like Benzaclin aperture and launching our digital small business checking account, we still believe strongly as ever in our model bank initiatives, but we paused them for a bit as we turned our attention fully to the PPP program, we're still on track for deploying.
One of our model bank this year savings and Cds launching on aperture and transact in the near term and a checking account close behind.
In the payroll loan program, we've proven that we can pivot quickly and redeploy people on the fly.
As we look to launch these new deposit products. Our team has energized and excited to focus on the new opportunity and what looks to be a flow or lending environment in the near term.
Meanwhile, our portfolio companies within Lydall ventures continue to perform well aperture finpac pay rails and others.
Canopy us sitting on roughly $500 million of dry powder to make financial technology investments and the banking industry now appreciates more than ever the need for next generation platforms to deliver digital banking services.
So how do you wrap all this up.
Do we go back to the long term goal slide that we've shown in previous quarters, clearly we didn't move the needle forward on the profitability side this quarter.
And with new business activity slowing.
And the need to help our existing customers our priorities have obviously shifted a bit.
Well, we firmly believe a goalpost remain the same even if it takes a little longer to get there sustainable revenue is sustainable returns will still require additional scale on our balance sheet and a more normalized lending environment.
But if the passes any predictor of the future we expect to see great opportunity to help provide capital a small businesses on the other side of this.
Away from the payroll protection program at the loans have always been critical components that economic recovery.
We believe we're well positioned to provide working capital to recapitalize small businesses and help them recover from the impact of this crisis.
Our long term mission remains unchanged to become the nation best small business back.
Our current mission and our obsession lies with helping small businesses across the nation through this crisis.
The company, we focused heavily on the safety and well being of our people and our people in turn are dedicating all of their energy focusing on the safety of our customers offering them advice loan deferrals and payroll loans.
We quickly expanded our attention beyond just our existing customers to help small businesses in our communities, both local and within our industry verticals self administer payroll loans to provide critical funds to small businesses.
That mission is still underway.
We've been inspired by the tenacity of our customers and by the small business owners across this country. They truly are and will continue to be the American dream.
Well the questions.
Ready for questions.
Thank you.
Ladies and gentlemen, if you do have a question at this time He's press the star in the one key on your Touchtone telephone.
So with Joe Your question. Please press the pound key.
Please stand by what we compared to Q1 a roster.
And our first question comes from the line of Jennifer Demba with Suntrust. Your line is now open.
Thank you good morning, hope everyone's doing well.
We're in Jennifer.
So many question so just starting with credit you guys.
Do you have only about two dozen or so vertical that you work with.
Just curious as to what you feel like the most vulnerable.
Industries are that you're talking to right now I know, you're you've got a unique borrower base with the sta guaranteed what they're going to deviate above and beyond right now, but they do you feel like most vulnerable right now.
So Jennifer this is Steve Smith. Thank you. So yeah, we've identified what we would call. Our most impacted industries is you can imagine dentists family Entertainment centers early childhood education wine and craft fitness centers that makes up just north of 20% of our portfolio.
What we've done with them as first and foremost.
Where it's come in handy is that we've been very diligent about collecting quarterly financials. So the first thing we do as we look at the most recent pre crisis financials that we have in each of these businesses.
And take a look at their balance sheet see what their fallback position their liquidity positions look like we mapped out against their income statements and their historical fixed.
Cost overhead and we've run analysis on how many months can they sustain based on a pretty.
Material impact to their topline revenue and then as the government programs and interventions kick in we map against the impact that they will have so we did reach out first and foremost be besides just these most impacted businesses.
To chips point, 100% of every small business borrowers live Oak Bank on AFFO call. We had a very detailed spend a good bit a ton talking to them assessing how they felt we immediately reacted with the deferrals, but.
About 19% of our clients expressed a need for deferral and then we see as the government started kicking in with these programs, we saw that flatline and even go down in some of them opting to hold off on the deferral is not the least of which the impact is the.
Six months of payments by the FDA, 76% of our portfolio, our SP, a seven day loans.
That will have the full pad I payments made on for them on behalf of the U.S. government. So thats created some confidence among these folks.
PPP every small business bar of live Oak Bank that expressed a need in the desire for a PPP loan.
We've won.
So that also then created some confidence in this group as well so we continue to map.
What their liquidity positions look like how impacted their revenues are.
And then try to assess the impact of these enhanced programs that are coming out from the government.
Monitoring very closely and Jennifer Shaw would look at that kind of four charges number one would be payment for a number two would be PPP.
Number three would be as Steve mentioned, the government, making payments on their behalf and that number four we do feel like Theres a good shot up more money common that 90% guarantee so our average loan is about <unk> million three.
So 25% would be either guaranteed percentage toward a 3 million 750 bucket, so having additional financing capabilities with 9% guarantee for working capital to take.
To take them beyond this challenge I think would be.
Anymore, but we'll see.
Can you elaborate on the.
Are you show that was factored into your provision you you mentioned that very quickly currently but.
Could you say that again, just given all more color.
Yeah, Jennifer this is Steve Smith again, so clearly the most impacted tactful.
Was the qualitative.
Factors that we used for unemployment so we.
Assumed an immediate impact to an increase in unemployment right off the bat and then sustained increased unemployment throughout the year. So that was pretty impactful that was probably just shy of an 8 million dollar impact to the provision just by making that assumption time will tell.
But right now and because see so looks at lifetime.
Loss in areas that had a pretty meaningful impact to the provisions.
I don't know how much participation do do you expect to have in the second round PPP.
You go beyond your current client base or.
What do you expect to me.
Well, Jennifer we're going to go like about out of Hill. So we have.
Partners that were working with some substantial partners.
And we're trying to.
Predict rather than more technology.
Around one was kind of the concierge brute force get it done for our customers tranche.
Who knows when theyre going to hit the.
Starting gone.
Some of said 12, a one I am tomorrow, but we're ready.
And we're going to go.
I asked in hard as we can.
And what kind of.
Well you mentioned that.
Some of the hiring done late in the year, obviously came through in first quarter expenses. How do you feel like first quarter expenses are good run rate going forward, what kind of expense control.
Will there be to put in place to kind of offset some of them.
Yes, your provisions weeks it.
It's a great question, Jennifer I think.
You know, obviously things are a little hard to predict right now clearly things like travel expenses, they're going to be down for the near future. You know our team is in place we don't expect that to grow at all but it'll stay it'll stay what it is.
When we're going to be redeployed folks we might have been a folks going out and find new checking account customers here before along with folks who historically had been in some other roles.
Certainly some of those folks you're going to shift into more portfolio management.
Work I think Mike My gut tells me there was a little bit of noise on the expense side. This quarter, but we always have a few puts and takes so I don't want to testing dramatically lower but I don't think is expected to to increase much through the course of through the course there.
Okay.
And what about future loan sales what is the market looks like right now is there any market for SPX every month.
Hey, Brett.
Yeah, Hey, Hey.
This is Brad.
Right now the secondary market.
It's a little bit off the buyers that are out there are typically just the buyers that wont to I and portfolio to government guaranteed line a there is a bit of ER.
I'd say slow down a with any buyers who are pooling line and that's it sort of during this time, a difficulty getting a pulling certificate I'd say there is activity.
And are moving but given.
The reduced number of players in the market.
Premiums are a compressed a bit as Tony mentioned referencing the roughly four percentage point drop on average.
For all lines that are being sold right now.
My last question for Chip Chip, what do you think for long term implications the ball there are.
What are your company in for the Bank in General in each party talked about you think it's certainly underscores the need for more technology, but any other applications.
Hey.
You know Jennifer when I put my head on the pill at night I, just think about our customers and as you know we go see a 100% of our customers before we make them along.
To try to determine if they have the tiger.
And so now we're going to find out.
Because I didn't ask for this we didnt ask for this.
Well, we're going to swarm that out.
After this PPP things over and who knows where all that's going to end.
But we have a geographic dispersed portfolio were 33 separate industries.
Yes, I actually think we're in the best position of any bank in the country.
Because of the nature of the SPD program and the.
And everything that we've talked about previously.
And.
I think will be better on the other side. We have spent the latter part as part of the last three years working on these nexgen technology platforms. We were right on the precipice of launching fins Zack we're booking loans on a fins act core today in the PBP program.
So.
American we'll be back our customers will be back level, it's not going anywhere.
Thanks, so much.
Thank you and our last question comes on line of Chris Donat with Piper Sir Your line is now open.
Hey, good morning, gentlemen, thanks for taking my questions. So with all the other changes going on in the World I'm, making the small change the trying to get filled the seat that Aaron deer has a vacated as he takes a CFO position. So thanks, thanks for taking my questions.
What I wanted to have someone who's.
New when looking at the story when I look at your your dominant position in the SP a market.
The 1 billion of loans disbursed under PPP seem sort of small but can you help me understand that is it just because you focused on the on your existing customers that that that.
Limited, how how large you would be in PPP I, just want to kind of understand the scope of PPP for you first round at least.
Yeah, So look I mean existing customers.
Most of the banking industry with servicing their existing customers, which is more streamlined Mckay why see per se.
So I had a that.
And then you go into new customers in Europe.
Her CNS scale, you got to make sure you're comfortable with a fraud, you're comfortable with your K white, the criteria or customer you're comfortable with eligibility and you know we took a bit of a more manual approach in terms of reaching out and talking to people and so we.
We went through all of our customers over the course of a couple of days that went really efficiently and then we wanted to actually see where we could have an impact you know so we did again you know we did four times more units than we did all of last year in the course of two we tried so I think we turn to crank pretty hard.
Yeah. There were there were some fully automated solutions that I think some folks used to turn massive volume and we'll see if and when the dust settles that they did a good job knowing the customer knowing the eligibility, making good loans being able to get the forgiveness.
You know done the right way and ultimately being able to affect the guarantee with some of these lanco bad we think about all those things having been the F.B. business for as long as we have yeah. We are banks that are much much larger than us that did about the same amount or even just a little bit bigger than us that had 10 x. more people filling out forms all day long. So we're really proud of what we did.
And Chris just I would remind you that our chief credit Officer, Steve Smith from the opposite cap.
At the SBK. So the number to guide the us bid in the last crisis no one knows.
More about is that a 100% guarantee or not then Steve and his team.
So maybe we were a little conservative earlier and relative to other banks and just so I would just was plus wow. This because as guaranteed by the Gulf maybe maybe it is and maybe it it.
We are highly confident that every PBP loan we made is 100% guaranteed by the United States go.
Got it appreciate that and then.
One of the challenges that this environment is the social distancing and chip you talked about how you still meet with your clients and.
Looking their eyes and see if they got the either Tiger how are you handling.
One on one meeting their onsite meetings in a social distant seen environment is capable of doing those meetings to resume and I can make changes or data rooms, or something or just help us understand how though.
World shifted for in the last month.
Steve why don't you take that one relative to both I'll start to let huntley add to it weve I being one that is not real tech savvy and the which is at zoo.
So it so out of adversely comes opportunity right for me I have embraced technology and found the wonders of other means of communication that can be as effective in meaningful so being able to zoom in.
I have conversations I would think that actually what we've given up as far as face to face walking in the front door we gained in.
Potentially more conversations with our our borrowers than we ever have in the past and we're already pretty good at Yep I also think.
She has arrived just at the right time in as we have construction portfolio right and so they're managing drives and site visits and inspections and those are happening virtually right and we're seeing collaboration happening in that way, we are as Steve said incredibly plugged in and communication with our customers.
We like to be doing that and also going and shaking their hands absolutely.
For our existing customers, that's actually not really that much requirement. We have met them in person we shaking their hand now our relationship can be totally virtual.
For net new customers look at the as the World evolves, we will be back to face to face, we think thats important to but were awfully connected right now there's no question about that.
Got it and then just last one on me and they economic forecasts, you're using a that did and we talked about that's one make sure I got it right.
It ends in double digit unemployment, how many did you give us a timeframe for that was scribbling. So through the end of the year will be will still be double digit through the end of the year in this in this forecast and then start the you know some from slow recovery after that.
Got it understood alright, thanks, very much <unk>.
Thank you.
And this does conclude today's question and answer session I would now like to turn the call back to chip man CEO for any closing remarks.
Well, we just appreciate everyone attending today and we look forward to progress in the PPP program and see on the other side.
Ladies and gentlemen.
This concludes today's conference call. Thank you for your participation you may now disconnect.
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