Q1 2020 Earnings Call

Good day and welcome to the trial bank or Banks first quarter 2020 earnings self-install. All participants will be in listen-only mode says you need assistance, please signal the conference special the star key followed by zero.

After today's presentation me an opportunity to ask questions to ask a question. You may press star than one on a touch-tone phone charger question, please press * please note Thursday is being recorded. I would now like to turn the conference over to Luke lies seeing everybody's president finance and investor relations, please go ahead good morning. Welcome to the Triumph Bangkok conference call to discuss our first quarter 2020 Financial results before we get started. I'd like to remind you that this presentation may include forward-looking statements those statements are subject to risks and uncertainties that could cause actual and anticipated results to differ the company undertakes. No obligation to publicly revise any forward-looking statement.

If you were logged in to our webcast, please refer to this live presentation available online including our Safe Harbor statement on slide to for those joining by phone. Please note that the Safe Harbor statement and presentation app available on our website at ww.w bancorp.com. All comments made during today's call are subject to that Safe Harbor statement.

Vice chairman and CEO are our Chief Financial Officer and Todd ritterbush our chief lending officer after the presentation will be happy to address any questions you may have about the time. I'd like to turn the call over to Aaron Aaron. Thank you Luke. Good morning. I will provide a review of our first quarter results which are largely a rear view mirror. Look at the way things were before the long march Market disruptions. We are also providing information on what we've observed in our business since the downturn and what we have done and are doing in response the first time since going public in 2014. We are reporting a quarterly loss which totals 4.5 million or 18 cents per diluted share.

Our first quarter results were heavily influenced by the implementation of the new current expected credit loss or Cecil accounting standard diesel requires us to estimate and record an allowance for on and off-balance-sheet credit loss considering expected economic conditions over the remaining contractual term of our portfolio considering the financial turmoil experience was certainly an interesting and challenging quarter to implement Cecil total credit expense was 20.3 Million Seventeen point four million of this reflected as a credit app pens and relates to our on balance sheet loan portfolio, 2.9 Million of the total credit expense relates to our reserve for off-balance-sheet commitments to lend and is included in other name extension the income statement.

cumulatively this

420 basis-point impact on our efficiency ratio for the quarter

the allowance for credit loss for all loans on the balance sheet increase to 44.7 million or 1.04% of total loans prior to the change in the economic environment and Outlook. The allowance is a percentage of loans under Cecil on January 1st was 70 basis points.

Increase in the allowance is primarily due to a much less favorable economic Outlook over the next four quarters. The increase is also affected by a mix shift of our loan portfolio. The numbers underline the Seventeen point four million dollar credit loss expense reflect a continuation of acceptable Trends seen in recent quarters with net charge-offs of one point five million or four basis points and net changes in specific reserves of 2.3 million. The remainder of the credit expenses due to approximately $225 million of net loan growth of the quarter as well as the change in Lone mix and economic Outlet past due loans increased twenty five basis points from Q4 to 1.99% of total loans off while non-performing assets to total assets increased by 22 basis points to 1.09% We previously have talked about tightening our credit standards over the last year as part of the Strategic.

Makeshift of our business while we did not foresee this type of disruption coming and while it's definitely still early it seems those efforts have put us in a better position than we otherwise would have been off as I mentioned earlier under Cecil. We are also maintain an allowance for unfunded loan commitments disallowance is reflected in other liabilities and increased by two point nine million this quarter to five five point five million on $572 million of commitments these commitments include $127 million from liquid credit loans. We committed to acquire wage or unsettled as of quarter-end. The initial credit cost was reflected in other expense conversely when these liquid credit loans settle in future periods. The reserve for unfunded commitments will be reduced through other expense and offset by an increase in provision expense for on-balance-sheet loans with no impact to net income.

Deposits were a bright spot for us again in the first quarter non-interest-bearing deposits grew $37 million and our up $162 million since we increased our focus on deposit gathering at the end of second-quarter in 2019 on the interest bearing side, we quickly and sharply reduced rates in response to recent market conditions and have seen no adverse impact two balances.

Due to covid-19 are Dallas branch opening has been delayed, but we are ready to go as soon as soon as soon as circumstances allow.

Premium Finance Lending Group has held held for sale as we are exploring selling this business. We do not see this business scored two tbk we will however continue to offer insurance premium Finance to our Trucking clients following the sale of this platform now, I'd like to turn the call over to Todd our chief lending officer to talk about our Community Bank lending and the efforts underway to support our communities and customers in light of the unprecedented impact of covid-19.

I'd like to start by sharing a summary of the actions. We've taken to support our clients during the pandemic prior to the signing of the cares Act and the payroll Protection Program. We had already initiated a payment default program for Lending clients and began waving many fees for for those clients depending on the demonstrated need of the client. We deferred either their full loan payment or the principal component of the loan payment for 60 or 90 days as of April 15th. We have completed 400 four of these deferrals representing outstanding loan balances of $233 million. In addition. We have another 397 request representing $276 million in outstanding balances that are in process, but not yet complete.

Thanks.

We have implemented waivers for a broad spectrum of deposit fees to assist our clients during this time and expect those waivers to impact non-interest income by approximately four hundred fifty thousand a month through May 31st. At which time the Weavers will be re-examined.

Moving on to the paycheck Protection Program. We've ramped up very quickly. We redeployed sixty employees to assist with payroll verification SBA application filing and loan documents need to be able to process several hundred requests per day as of April 17th. We opposed or approved with the SBA 732 PPP loans representing a 150 a month in in funding. We are taking advantage of the federal reserve's very efficient paycheck Protection Program liquidity facility to fund these loans

Now I'd like to provide an update on our current loan portfolio and concentrations in Industries most affected by the pandemic or the oil price War. We've included updated exposure information including any box owner occupied investment properties on slide seven. We have not seen a notable deterioration of overall credit quality deposit outflows or Panic driven draws on lines of credit, but of course continue to monitor the situation closely this is partly due to our Geographic concentration in smaller communities in the midwest in Colorado that have been less affected by the pandemic. It is also partly attributable to our relatively low concentration in the highest-risk industries.

Now, I'll turn the discussion back over to Aaron to discuss a few more topics in March. We saw a surge in our trucking business in spot Market activity most notably in refrigerated and drive and categories and a mild increase in rates, which was driven by restocking of retail inventories caused by a sharp increase in stockpiling by consumers as we look into the remainder of the year. There's a lot of uncertainty on both the supply and demand Side publicly-available Market data confirms that widespread business closures nearly fifty percent of small businesses and shelter in place orders covering 94% of Americans have already driven Freight volumes to presearch levels with spot great and subsequently carrier capacity expected to continue to soften into two q and likely throughout the rest of 2020.

speed in the degree

Which US economy returns to more typical levels assuming it does it all in 2020 is a significant variable in projecting Freight volumes. There are currently too many moving parts to predict how this will play out but additional Clarity will take form in the coming weeks is the Trump Administration and perhaps more importantly dozens of us Governors begin to announce state-by-state strategies to balance covid-19 containment with efforts to reopen the economy amid, all of the unpredictability. We are grateful that our new client Prospect pipeline is completely full each of the last three successive months have set all-time highs with respect to new client applications.

Transportation companies that need working capital and are facing issues with existing banking relationships are reaching out every day. We've seen this play out before when the market is benign Banks and non-bank go after Factory clients with quote new clothes quote product offerings the second the market seizes up weaknesses are exposed and needs entrance Retreat Trucking clients start to value our account analysis and collection efforts and they come back and do so generally for the long-term. This is sowing the seeds for future growth in one of our most profitable lines business turning to Triumph off during the first quarter try it paid processed 504000 invoices paying 45,000 distinct carriers payments process totaled approximately 531 million or a 12% increase over the prior quarter and a 277% increase from q1 of 2019. Triumph pays annual run rate payment volume now summer

And about two point 1 billion. Additionally, we have a top-20 broker in beta testing with a small subset of their carriers and expect to go to full-scale production with them in the next four to six weeks off. There are also two more top 20 brokers who have signed contracts are in the integration process with trying to pay and we expect at least one of those to fund in Q2 as well these large brown have large and complex Erp systems and control environments which can take several months to work through before going live covid-19 is clearly caused a Slowdown in the pace of integration, but we continued she really good progress in addition to market the market volatility has given us an opportunity to demonstrate the value of our try and pay platform. For example, we have offered a free Samsung pay on a temporary basis to provide liquidity to carriers and encourage engagement several hundred carriers have already signed up for this program and we expect a good portion of those to retain our quick pay services as Thursday.

Salt option driving revenue for us and our broker clients. We continue to enhance the user experience and are working on programs to build out the ecosystem and create network effects and importantly we are investing to ensure the stability and scalability of our platform for the rapid growth ahead.

turning

To Triumph business Capital total factory revenue and Triumph business Capital was relatively flat quarter-over-quarter at 24.8 million given the normal seasonal slowdown and a decline in invoices. I was a reasonably good overall outcome. The dollar volume of invoices purchased was 1.4 or $5 billion during q1 of twenty-twenty a 9.5% increase over q1 of 2019. We purchased $879,000 invoices during q1 twenty $20 an increase of $89,000 invoices over q1 2019 or 11% off as we move into two q and Beyond as noted previously, there's much uncertainty in Freight markets disruption in Global Supply chains and near standstill and the sale of consumer durables and the potential for widespread business closures hangover the market like a cloud this will inevitably impact Freight volumes in the US which we expect to see beginning early in the second quarter 2028.

Current estimates project a significant decrease in GDP and Freight during the second quarter of 2020 with the US east and west coast bearing the brunt of the decline a recovery and Freight volumes not expected to incur until the first half of 2021 unless full production returns to the US early in the third quarter 2020. We expect debtors overall to extend terms and Thursday. We have already dialed back our exposure to certain verticals and are closely monitoring debtors for signs of stress on the carrier side. We anticipate an excellent as fewer loads declines and spot rates and continuing High Insurance costs. Take their toll on the other hand. We expect Market stresses to weaken some of our competitors and create opportunities to win new business office.

I often referenced the Enterprise strikes in general, but specifically the incredible disruptions caused by covid-19 have surfaced several triumphs Enterprise strengths within a business for example, in mid-march. We successfully deployed 96% of our factoring Workforce nearly two hundred and eighty People based out of for business offices to remote home working environments within a 48-hour. The technological and operational complexities involved in doing this cannot be overstated. I'm incredibly proud of our team who is purchasing more than 12,000 invoices and dispensing more than twenty million dollars each day to clients while working remotely.

Turning from transportation to another bright spot. I want to talk about the driver for our loan growth in q1 are liquid credit team serves a couple of different functions for us. Number one job opportunity stick. Lisi's upon Market disruptions, tactically in normal times, but aggressively when there are dislocations such as in March number two, we use this team to provide added capability to evaluate the credit-worthiness of large account dead or concentrations in our factoring and try and pay portfolio. And we may also expand the mission and framework to hedge outsize risks as appropriate. We think this capability will become more important as trying to pay scales up and increases our exposure to top-tier Brokers the liquid credit team involved invest in broadly Syndicate of Leverage loans corporate bonds and structured credit when conditions are benign such as until the beginning of March they do a lot of underwriting, but we don't do a lot of investing.

When the market gets choppy.

We have a basket of names. We have underwritten that we can move on quickly. We have had tremendous opportunities over the last few weeks buying quality names from sellers forced to the market due to Redemption the opportunity set and liquid credit is the best. It's been in years spreads are one hundred and fifty to three hundred fifty basis points wider amidst the volatility leaving high-quality credit app to 6% or more we have to ask ourselves as a management team would we rather match a competitor Community Banks offer of an interest only 3.75% fixed 10,000 commercial real estate Loan in a secondary Market or own a floating-rate liquid credit as 6% yield. This is a pretty simple answer for borrower only relationships. During. The first quarter are settled liquid credit loan portfolio Grew From 81 million to 172 million in addition to those. And balances. We have another hundred and twenty-seven million in trades that have ma'am.

Settled which would bring our total book to $299 million over half of this growth was during the month of March in addition to loans in March. We bought 63 million of AAA clo Sakura which carry extremely remote credit risk yields not since seen since 2009 and twenty five million a fully defeased tax-exempt municipal bonds, which carry no credit risk of at all. And all of that was purchased at very attractive pricing much of this asset growth came at the end of the quarter. So we will recognize the income from these Investments until next quarter. Now, this is not a primer but when given the opportunity to step into a market that is panic selling and diversify our income stream for the future we will do so

Let me briefly hit a couple of other topics during the first quarter. We have expanded a couple of existing mortgage Warehouse relationships to move into the position of their lead lender and primary Bank wage. Ironically the surgeon lending brought on by low mortgage rates cause these clients lead Banks to grow beyond their legal limit limits and operational capabilities creating an opportunity for us to step in and take the lead off with that said given the rapid growth those clients have achieved we are carefully monitoring their liquidity and strengthening their covenants. We want to be sure the strength of their balance sheet supports their growth

I would also like to speak briefly about funding and liquidity the opportunistic and unforeseen loan growth that we pursued late in the quarter combined with our decision to allow some higher cost deposits to run off inflated our loan-to-deposit ratio at March 31st to 117% We chose to fund the bulk of our late quarter loan growth with Federal Home Loan Bank advances home after this. We had over four hundred million of undrawn capacity with fhlb at quarter-end deposit funding was and is available to us. But his deposit rates remain stubbornly high in March would have been much more expensive than fhlb borrowing deposit markets have begun normalized and excluding the impact of funding PPP loans with the Federal Reserve facility. We would expect our loan-to-deposit ratio to Trend lower from here.

I would anticipate.

The second quarter of 2029 interest expense to be flat with q1 excluding the effect of the reserve for unfunded commitments. We recorded a state tax adjustment this quarter but expect effective tax rate going forward to revert back to just over 24% Finally. We are committed to the safety health and well-being of our team members customers and communities not just saying words but taking actions we have implemented numerous programs to support our team members during these uncertain times for our front-line team members and our branches operations and call centers. We are adding a premium to them pay to acknowledge the extraordinary efforts in serving our customers. We've also modified Staffing to allow options for those who need time away for illness family member care or child care and with that I will turn the call over for questions.

Thank you. I would not like to turn the conference over to CEO for some additional comments.

Yes, good morning, a few recent developments before turning this over to taking questions first. We have signed an asset purchase agreement to sell the assets of our Premium Finance group two people bank and Ohio State Chartered Bank ticker symbol pebo and expect this to close in the third quarter subject buyers regulatory approvals and other conditions set for Thursday the purchase agreement the total assets of approximately $98 million consist. Primarily a Premium Finance Loans. We expect to bank book again on sale for this transaction.

Second we have some updated data on the paycheck Protection Program while the number of loans and balances have it moved materially since April 17th and won't until further government jobs added to the program. We continue to work under the assumption that will occur this week. Thus far the weighted average fee rate of about 2.9% on 166 million lakh with the SBA equates to approximately four point seven million dollars of fees on an average loan size of $215,000 and finally an update on our own in-house deferral program, as of yesterday. We have completed or having process 874 requests representing 550 million and outstanding balances full payment deferral and I owe deferral and with that we will turn the call over to the operator for questions.

Thank you. We will now begin the question-and-answer session to ask a question you remember stars on the loan on your touch tone phone. If you're using the speaker phone pick up your handset before off the keys and withdraw your question, please press * then two days. First question comes from Brad Millsaps, please go ahead.

Hey, good morning guys morning Brad.

And a lot of detail there certainly appreciate it kind of reading between the lines would would you say that you know, based on what you know today maybe aside from you know, the average balance is catching up with. In. Would you think that you know, you know, you're factoring receivables business with this represent kind of the peak for you guys for the year. Um, based on where you sit today or you think the account maintained here given, you know ability to take market share, um, you know versus what's going on with the overall Market. Yeah. Well, I know I talked to is going to be soft on any comparable period right Q2 should we'll certainly if you do a year-over-year comparisons going to be soft. It will likely be soft to q1. I'm not so convinced that Q3 is going to be software already starting to see some bottoming in the contract market and there's a lot of reasons around that and you got to have the khong

Stock market bottomed out before the spot Market comes back and and I think there's argument to be made to that end. I will say and it's a little harder to predict a little lumpier than we do have some opportunities to add Assets in factoring, um from an m&a perspective that we continue to look at. So it's I don't know if I were to say for the full year. I don't know that this quarter will be our Peak quarter. I wouldn't say that but I will say Q2 is going to be slow and then we're we're offered, you know, optimistic some things just the way the world has to work. We'll we'll come back in Q3 and Q4.

Okay with that in mind, obviously, you've got you mentioned some potential m&a there you're buying the you've got the additional see loads coming on the the the books that you talked about with your cat your TCU ratio. Now, you know below 8% How are you thinking about Capital? You know, does that limit you in any in any degree? I know a couple of quarters ago, we were off about, you know, really slowing the growth overall in 2020 building Capital focusing on things that you know, you guys are best app, but obviously the markets changed a lot and and other opportunities arise so just kind of curious your thoughts around, you know, the overall Capital ratios sure let you know. So let's set what happened over the last two weeks of March and context for everyone. I mean, I was not, you know, we did not come into this year expecting liquid credit to grow on the other hand. You had a market where the not you set aside the fundamentals. There was just a disco.

Nation where people were being forced to sell things we alluded to this we bought a $25 million-dollar Municipal portfolio that's fully defeased has no credit risk at all. Just because of them had to sell it. You know, that growth will not be repeated that you know, or I'd be shocked if it were I to me that was a once-in-a-decade. It hasn't been that way since 09 buying opportunity. We we bought a hundred million in a week. If you were to Mark the AAA Securities and liquid credits that we bought during that period to market today we have about a ten million dollar embedded gains. Now, it's not our intent. We're not traitors. It's not our intent to sell that I mean if we had to to raise Capital like you, you know allude to we certainly could and and book that game but I expect will hold on to that. So that being said, obviously we free up some balance sheet room with the cell of trying Premium Finance will certainly recognize a gain on that wage.

We'll go into tangible Book value.

As we look at Acquisitions, you know of portfolios or things around factoring it's not going to be material and I don't expect our asset growth to be material. The reason it was cereal and q1. I mean, if you if you look at things leaving tpf in the mix, it was a 20% annualized loan growth rate. Like that's not going to happen through the rest of the year. But what it did by doing that this quarter, you know, we've set up in that triple a liquid credit portfolio, you know, you've got probably four million of Revenue a quarter now that's coming in there were more than twice what it was which is a nice offset as we see softening in other lines. So I don't expect balance sheet growth to repeat like it did I think the balance sheet growth? Well, yeah, it was very is going to be very valuable for our investors and us down the road and we are mindful of our TC ratio and those ratios and so wage.

We don't ever want to get close to being in a position where we aren't able to play offense. So I hope hopefully that helps so you to understand that growth was opportunistic and that should not be forecast out into the future and of course all the provisions for that growth or the ACL hit in q1, but none of the revenue hit which is you know, one of the reasons the headline number is what it is.

Thank you, and maybe just one final question on the field. Is that all show up in CN I I did notice that you know, you're abl book was also up quite a bit link or just just kind of curious, you know kind of the driver down there.

Yes, that would all show up and see Ni the abl book we had some revolvers that funded in the first quarter. I would not expect a BL growth wage or Beyond to be anything close to what it was in q1. Um, so all that's going to show up in that area. Of course AAA clo security show up in the Securities book not book Thank you guys.

Next question today comes from a VW, please. Go ahead. Hey. Thanks. Good morning, guys.

That maybe we can get start with you know, I heard the comments on your call. Great volumes being impacted in the second quarter, you know, if you look it's been a lot of dislocation with the price of oil with the 1-month contracts going negative yesterday and you know, the price will now down to Fifteen, you know that combined with the economic slowdown surprised to see the average invoices hold in it relatively well in the first quarter, but you know, I mean do you expect to have a notable and and significant decline in average invoice prices prices as we enter two q and and you know the middle part of the year.

Yes.

I think you two from what we're seeing today 8 I think you too is

going to be dramatically affected. I mean, I think like I said, we have some we're just talking about factoring. I mean the rest of the the business looks pretty good but just for example owner operators are being hit pretty hard when we purchase invoices from our factoring clients. If you purchase from a fleet, you're purchasing a schedule of invoices but a single invoice purchase is just you know, and that's an owner operator who can only sell you one at a time that was down in each of the past two weeks last week. It was down 40% off where we were running in the late March surge that happened due to the Panic buying so it would definitely we would definitely expect you to I this is me personally. I personally think you two is going to be the trough as far as spot market and invoices go now other things could happen.

And that can push that out. So I would not I would not expect us to just have growth off of q1 numbers into Q2 like we normally do due to seasonality this year is different and and you're going to see you know, there's a lot of Chaos in that market right now.

All right, and then you mentioned booking a gain on the sale of the Premium Finance portfolio account. How big will that gain be due to the terms of the agreement. We were were not able to disclose that. Obviously we sold it to another publicly traded company. It'll show up at quarter-end. We're pleased with the gain. I think they're pleased with the business office and everybody got what they were looking for.

And and who did you sell it to?

pebo people's

Great, thanks. Yes.

I don't know question today cultural Thomas water with Stevens, please. Go ahead. Hey, good morning guys. This is Matt. Only Stephens. How are you? Hey, Matt.

Hey one or two start with Triumph pay. I think you noted that the dollar amount of the invoice is purchased increased to 2.1 billion. The first quarter annualized with the wage type line that you mentioned in prepared remarks adding some some larger customers. Can you talk more about where you expect this to be towards the end of 2020? Thanks God. Yeah, I I would say, you know, my my I think before we disclosed the goal of seven billion dollar run rate. I'm not ready to walk that back yet. We got a lot of work to do and may come later in the year. If it does come later, it'll just be because you know, it's difficult to get people to update all their systems when their staff are working from home. So, you know, I would hope that that $7 billion I would say anything five to seven billion is a tremendous result at the end of the year seven would still be my God.

If we do above that, we're going to throw a party.

Okay, got it. And then and then circling back I guess we'll go to the the outlook on the net interest margin on one hand. It seems like the slow down the facts will impact the margin in the near-term. Can you talk to any kind of offsets that could negate some of that pressure and just two general expectations for the margin for that for the full year. Thanks God. I will say one thing that that showing up Liquid credit given the basis in those that loan buying we did at the end of the quarter or you're you're looking at over a 6% yield on that credit obviously factoring grows because of our client Pipeline and any m&a we do that's going to pull it up Premium Finance leaving. That was certainly one of our lowest margin lines mortgage. Warehouse is back online and it's grown on the whole I would say I still think that everything we see we have a chance for margin to expand for the rest of the year I served.

Don't see it materially Contracting and is it fair to say it could contract more near-term in with you and then rebounding three Q or do you see a client out more more flattish near-term Factory? Yeah. Definitely. I mean obviously as factoring goes so goes our margin. So if Q2 is slower, in fact during that will pull it down for that month that quarter. Okay, I understood and then also I appreciate the details around the disclosures from the potential hot spots around the covid-19 impact you put in your slide deck the equipment Lending Group. It sounds like your continued to grow balances in that group. And when you think about the Hotspots for covid-19, you did not include equipment. Can you just talk about that group in general? Why is that separate? And why is it less vulnerable than the other hot spots that you did call out. Thanks.

So first of all, you're right that the equipment Finance business has continued to grow in the first quarter. I think we will see the balance is level out in April and then probably begin to decline simply because we're not seeing a lot of New Deal activity at this point in that business you you're right to point out equipment Finance has an area of concern because of the fact I'm living in to Transportation with that said, you know, we do have the collateral there were monitoring collateral values and performance of these businesses closely. We have used payment deferrals pretty actively office space to give our equipment Finance clients a little room to breathe if the if the downturn in transportation lasts a lot longer than we're forecasting you will see additional thoughts in that space and I would call it a hotspot at that point.

Okay, guys. Thanks for the commentary.

It's Matt.

Our next question today comes from Wells Fargo securities.

Hey, good morning, everybody morning, sir, with the the paycheck protection act or paycheck protection plan that you had you expect most of that being come to come through in second-quarter. You know, I guess as you look at the the loans that you originated, are you assuming that most of those end up turning out pretty pretty short term and long? Is that going to go through and and I I for most of the second quarter and this is Bryce. I mean, we haven't Quantified that in a way to announce it here but you know, we'll be offering those fees when we receive them and it'll be a you know, a yield adjustment over the lack of those loans, you would expect a good portion of those who get forgiven and you know that that limp the speeds that will impact how much of it comes in how fast really only material part of that but we haven't really put the numbers together on what. That will come in, but overall there's a lot of revenue from the B-side available to us come home.

Arizona

Okay, great. And then

should we assume I guess you know with the good growth in the mortgage Warehouse business loans and first quarter, obviously with the great environment earlier in the quarter. I was off ending in the second quarter. We we might see a pretty dramatic drop off. They're pretty rapidly or is there a little more?

Go through on the side.

For mortgage Warehouse specifically. Yeah. So activity remains really robust in April, we're expecting that the April month and balances should be even higher than they've been in the past. So thinking the range of eight hundred million dollars, but then we expect the balances to begin to decline so they will be lower at the end of the second order then they've been recently and Jared you didn't ask this but I something that I thought maybe she'd get noted in our balance sheet, you know, there's there's obviously we got over a billion dollars of our balance sheet between mortgage warehouse and factoring that moves quickly, you know that you could shrink if you chose to which we certainly wouldn't do that. Um, obviously you have the reserve build this year r a c l x those two lines of business is like 1.3% um, which you know was about 50%

This this quarter over where we were and so, you know, I would not expect us to total asset growth in Q2 to be material if any at all frankly. I mean, we're not going to repeat what we did and liquid credit cuz the opportunity is not there. So while mortgage Warehouse May grow, you know, depending upon the opportunity and factoring will do as much of as I can since it's you know, a 5% pretax r o a line of business everything else. I think we'll settle in and and you know about where it's at now or maybe even shrink some

And then this finally for me when you look at the the broader macro economic Outlook, I was at flowing through your model. So, you know it was you look at the first page 21 days here in in April as the measures that you're paying attention to deteriorate is enough that you know, we should be looking at a cute to provision build similar to what we saw one or I guess any any detail around your your view on this macro. I'm not going to be able to answer that but this is Bryce I can tell you that, you know, we thought we were assuming there at the end of the quarter was a material worsening of employment in GDP in second-quarter followed by some improvement throughout the remainder of this year. It's GP was negative through all of this year was a pretty strong Rebound in the next year and we had an employment spiking 2/8 and a half percent. I mean

Who knows that it's going to turn out to be right or wrong, but you know just from an accounting sends and receives a little when we get to the end of the quarter will be looking again at what the world looks like from a go-for-it standpoint off there. If the world looks better than the March Outlook that we had we would expect to see some Reserve release from Cecil and conversely if the world looks off course will have probably more expensive the world looks like we assumed it then we should have captured most of the credit costs in this quarter.

Actually I color.

It was a gentleman as a reminder. If you'd like to ask the questions, please press star then what is next question comes from the following please go ahead Thursday morning guys. How are you?

So following up on the covid-19 hotspot. Can we get some color around lgb's in the hospitality exposure and in the red puffy. Can we get a split between fast food or formal? So with respect to the hospitality sector we have five TVs that are on a weighted-average basis in the mid-50s. Um, you know, there's some variability around that but we have very little that's at the high end of the spectrum. So I'm from an LTV perspective things look pretty good from a restaurant perspective. You have to recognize that first of all,

A fair proportion of what's in that restaurant number is in our liquid credits group and that is a client that operates drive-thrus so their business continues to operate so that's Quick Serve their dining rooms are closed, but they have drive-thrus and they're they're fast food restaurant chain. So we feel okay about that. When you move out to the Community Markets, you see more full service restaurant exposure. I don't have a specific percentage in mind Grant you have. Okay, so we don't know what the percentage out in the Community Markets, but you do have full service restaurant exposure out there. And of course that's an area where our lenders are looking to help by providing PPP loans and payment deferrals.

Okay. Thanks for that.

And then circling back on Capital any thoughts on share repurchases would be helpful and I'll wrap up here. Yeah, we I saw in the notes. We completed the authorized share repurchase program hindsight being twenty-twenty. We wish we would have delayed some of those purchases a few weeks as of now. Given our our current ratios and the uncertainty in the market. I think we're on pause for all the reasons that you know from what we're being asked to do a job bank to stand in the Gap and also just to make sure that we preserve capital for the unknown. So for now we're on pause and we'll evaluate that as we go forward.

And the next question comes from Steve morning guys had a question for you on your comments that you made earlier if I thought maybe I'd better we're sort of optimistic about the way the world has to work. Can you expand a little bit of pain your thoughts there? Well, I mean, if you if you look at the things that you know have to get shipped and and look there's a lot of different perspectives. I'm just sharing one person's perspective, you know, most of the industry's most severely affected by covid-19 are not industries that you shipping, you know think about sports think about concerts things that were a lot of people get together that don't a large portion of what they do is not tied to trucking and Freight on the roads.

And you know now also restaurants which there is a lot of freight tied to they've slowed down but that we we see that phrase showing up at grocery store. So I don't think you know that maybe more of a zero-sum game they're so it it just everybody's pulled back but frame still has to move and of course in our Factory business. That's that's General spot Market if you think about how Freight is shipped, you're always going to fill the contract Market first and then when there's a spike or a surge or capacities type that's when a spot Market gets involved. So because I think that the industries that are still functioning require Freight and I think you'll start to see that come back in Q3 because I think some wage capacity has left the system or will leave the system. I think in our own Book You'll See Spot Market activity chase the contract rate, which is bottoming out right now and unless yep.

There's a mass outbreak any economic activity. Any reopening we see later in Q2 is going to lead to more afraid in Q3.

Great. Thanks.

Hey, ladies, and gentlemen, this includes the question and answer session. I would like to turn the call back over to the management team pretty follower marks.

Thank you all for being with us. We hope everyone stays safe and we look forward to brighter days ahead.

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