Q1 2020 Earnings Call
Ladies and gentlemen, thanks for standing by starting in just a few minutes. Once again, thanks standing by we'll be starting in just a few minutes.
[music].
Please press Star then one on your Touchtone phone. Please note that this conference is being recorded Oh now kind of call over to Meghan O'leary head of Investor Relations. Megan you may begin.
Thank you Daryl I. Thank you everyone for joining us today, our president and CEO, Greg Becker and our CFO Dan back are here to talk about our first quarter Twentytwenty finance results and they'll be joined by other members of management, particularly nice.
Our current earnings release slide and some rate CEO letter, having filed an 8-K and are available on the Investor Relations section of our website actually be dot com.
Making forward looking statements during this call and actual results may differ materially. We encourage you to review the disclaimer in our earnings release dealing with forward looking information, which applies equally to statement, maybe let's call.
In addition, some of our discussion may include references to non-GAAP financial measures information about those measures, including reconciliations to GAAP measures may be found in our at Sep filing and in our earnings release and now I will turn the call over to I CEO, Greg Becker.
Thanks, again and thank all of you for joining US today, you can see from the materials. We filed earlier today that we had a solid first quarter. Despite a substantial macro environment loan loss provision.
But our primary focus and yours too I'm sure is only impacted the Kobin 19.
Our priority has been helping our clients employees in communities and we have provided some details on our initiatives there.
Like every business, we're assessing the likely impacted the crisis on or future performance.
We worked hard to provide as much detail as possible about what we're seeing and expecting despite limited visibility into how the economic downturn and the recovery will play out.
The bottom line is that we had the strongest highest quality balance sheet, our history, including ample liquidity.
We believe we're well positioned to support our clients through this crisis, while continuing to invest in our long term growth.
Well, we expect the near term to be challenging.
We're well prepared and believe our clients and the innovation economy will remain resilient over the long term.
We want to answer as many questions you have as possible. So I'll ask the operator to open up the lines right now thank you.
If anyone has a question you can press Star then one on your Touchtone phone. Once again you have a question. It's star then one and our first question comes from.
Tens or from Morgan Stanley go ahead, Jim.
Excellent. Thanks, good afternoon.
I guess.
Oh I just want to start off the your guidance for second quarter.
Seems to imply a lot less NIM compression than what we're expecting can you just talked about some of the actions you've taken to help minimize the impact of the fed rate moves and also if there's any factors that could drive NIM lower in future quarters like spread compression et cetera. Thanks.
Yeah, It's Dan So if we look at.
The NIM in the first quarter and whats taken place, obviously and we had the hedge portfolio are in place our floors were all triggered by changes in the rate environment and at the same time at the beginning of the quarterly but close to 2 billion of investment securities on the bother me and barnacles still favorable.
Paul somebody at all of that to a changing mix in the portfolio, where we had more growth and technology healthcare and lifetime blending that provide much more of a benefit to net interest income and net interest margin heading into the second quarter. So that's it really all the factors to consider now looking.
The ahead to future quarters, obviously, the shape of the curve is really important looking at where we can invest our phones from an investment securities perspective, it's something that can and will continue to put pressure on the margin.
Going forward, but I said, I think though that the primary factors.
Got it Okay. That's helpful and then in terms of expenses and the thing of the guidance for second quarter again.
I understand the lower compensation line to make sense, but can you talk about some of the other types of expenses that you're cutting at the non comp lines that help lead to share with your lower expense guidance.
Yes, it could be clear as we look at expensive, where we're not on the expense cutting business.
We're certainly more looking fueling bath and best in the long term, what we're really seeing as the natural outcome, what looks like a weaker business environment in front of all.
And those other expenses that are just lower by their very nature or business development and travel.
And things along those lines that are just tied to the amount of economic activity. If we take a step back and look at our strategic priorities were certainly investing.
The levels that mean anticipated.
And well continue to invest in our growth, but these are really business activity driven and we do expect that to be.
Weaker as we look at the second quarter.
Got it okay. If I could squeeze one last question then.
In terms of the reserve build and certainly the provision expense that we took this quarter how much of that relates to categories like the early stage portfolio versus some of your other technology lending categories. Thanks.
Hi, This is mark I'll take that one and the reserve build is.
Pretty heavily weighted towards the investor dependent categories and particularly the.
The early stage, where we've historically had the greatest amount of loan losses.
If you take a look at the the.
Earnings presentation, you'll see on slide 22, a pretty good detection and slide 23 for that matter a good depiction of how the reserve breaks down by risk based segment and the transition from the oil to the now.
Perfect Alright, thank you very much.
And our next question comes from.
Steven Alexopoulos from JP Morgan go ahead.
Okay.
Stephen your online.
Oh, sorry about that hi, everybody.
Hey, Steve I'm looking at the capital call details it looks like private equity remain pretty strong much stronger than BC through the quarter just given the higher mix of PV are you guys expect thing a drop off and overall capital call volumes into Q.
This is Greg Steve I'll start.
You'd have to what you know capital call activity as a function of.
Activity levels right. So you know as we've talked about clearly activity levels are going to slow so what's going to happen is as these capital calls have maturity dates over the course of this quarter in the following quarters, but there is a deal activity that then will replenish those pay downs you ever the by definition.
A decline in in that.
It was outstanding so that's why we kind of couched it in the second quarter is we could see some drop.
But again as we said the crystal ball beyond the second quarter is much more difficult, which is why we've kind of stuck to Q2, but that's something we're clearly paying attention to how fast activity levels pick back up to normal levels.
Yeah.
And then Greg in the past spray, we would normally see a pause and then we would see a larger pickup is firms took advantage of lower valuations again with more private equity and the mix versus say other cycles. How do you think about this part do you think it could be shortened as compared to prior cycle.
You know, Steve it's such a hard hard thing to say.
Here's the fact is that kind of go come into it right. So one is we've never seen this before right and we don't know the ripple effect and how long it's going to be and obviously when you can see our provision. We took we took the provision and basically assuming when we did our model.
Provision, we said, it's going to take longer is going to be deeper and longer what does that mean, how long will it take four deals to find the right balance between what investors are looking to pay for an asset and the sellers are looking to sell for we literally don't know, but I would say whether it takes a next.
For a quarter or whatever.
Your point is right on there's never been this amount of dry powder and we also believe that there's more money that's coming after this market even behind that.
When we've talked to limited partners. Unlike what we've seen in the past where limited partners are really spooked, we've done some channel checks and what we've heard from limited partners is that there are actually kind of looking at this as an opportunity and I think that's a great great sign so we've seen good indications, but calling.
When that's going to start to come back to normal is going to be really really difficult to.
To determine.
My question was on the phone LCF. He has anything he wants to add to it about what he's seeing or hearing.
Thanks, Greg, Yes, Steve there's something to think about as well just logistically right, we'll just to actually do a deal with clients.
With new investments is really hard right and it's going to be very difficult for somebody to get excited about investing $50 million over as Jim video call. So that's something I think you have to think about logistically now what would happen is if they have an existing investment and tried to continue to support that you could see investments continue going down that aspect, but the prospects of a new new.
It's really going to be impacted by the duration or how long we had to have the shelter in place would not be engaged physically overtime. It will certainly work itself out I think well figure out how to do deals like that but in the meantime that certainly there's certainly no doubt have been a drop off in new deal activity.
Okay. That's helpful and then for Mark.
At the early stage portfolio. So you guys are calling out accurately at half the size. It wasn't the last downturn in the financial crisis, but when you look at the composition of the early stage book is there any noticeable change that would lead you to believe that historical losses in early stage will be materially different than what we've seen in prior cycles.
Thanks.
Yep.
So there's I think one thing that's probably most important to call out and Steve that's not different and that's the granularity in that portfolio. The average loan size is around $2.3 million in early stage.
And that truly is the best defense against the unknown and certainly the best defense at times like this.
Moving beyond that what I would say is probably different in this cycle relative to the downturn two things primarily companies on average are more liquid going into this and investors on average have more dry powder with which to support their portfolio and so wrapping those three things together.
Continued granularity and generally speaking better funded companies with better backers more deep pocketed backers with more capacity behind them all other things being equal at this juncture at least we would not expect losses to be quite what we saw in 2009 2000 ton.
Okay, and so far VC behavior no change there.
As compared to other cycles.
In terms of supporting their companies.
Hi, no real discernible change the I would say, it's early yet I think.
Like all of US venture capitalists are taking stock of the portfolio, they've got making decisions in real time, and we haven't really seen beyond a couple of anecdotal instances where around to financing falls apart.
Is blamed and effect on October.
We've seen some of that I would say in the same BREP that many of those I think the the crisis was maybe an excuse these were companies and trouble anyway.
And so we haven't really seen a pickup in what I would call cope at related investor abandonment.
And that's probably a function of folks still taken.
Great. Thank you for all the color.
Thanks.
And our next question comes from.
Ebrahim Poonawala go ahead you Brian.
Hey, guys.
Hey ramp I just wanted to follow up on that deserves. So if we think about.
And then disliked when DTV employed good detail that yield on on the breakdown.
Your loan loss reserves X capital call lines of close to 3% give or take in only two aligned in Brazil peaked at about 1.92%.
So when you think about the fact that the portfolios become much significantly better than the loss crisis I'm, assuming you still don't expect even the 30 basis point losses that you provided for against capital call lines, just talk to us in terms of.
Incrementally it Didnt do you envision a meaningful Brazil bid for me you are at end of the first quarter.
At Lake.
Thats what ended up any minor tweaks, moody's forecast or something like that.
So even in this is Greg I'll start and then I know Mark will want to add to it I think what is it one of the things when you look at the provision and it's a substantial provision.
It comes from what we decided in the in the model.
As you know or Im sure you know there's a couple different choices, we had as we were going into it you could take the early March Moody's model or the later March Moody's model and the Delta between those two were very different.
Meeting the kind of economic forecasts and the leader Moody's model was very severe so we took that into consideration and we decided to really embrace that because there's just a lot of uncertainty. Despite all the things that we've talked about the credit quality is been very very good we don't expect.
Be as bad as it was an overweight all those things, including private bank. We've had good very good track record all those things.
We really as you know see sold in the modeling you need to kind of ROE rely a lot in your model. So that's that's where a lot of the reserves of came from and you've seen that analysis. So that's probably the most important point.
And then I'll turn it over to Mark to give you a little more specific color.
Right and so Abraham you mentioned.
Capital call lending in particular and and that is one of the couple of segments that we would expect to continue to perform very well from a credit quality standpoint.
Notwithstanding what the.
The March 27, Moody's Covance scenarios and the weightings, we've applied et cetera would suggest in terms of provisioning.
And expected loss there.
And to what I think was here.
Part of your question.
Will we see further provisioning in Q2, that's a hard one to answer right none of us can perfectly tell the future.
But we do take note of A. I think it was April 16th Moody's released a nother.
Subsequent version that was a little bit worse, but not quite the out of the delta that we saw between early March and late March and so two comments here I think the first is that we are on will likely I think the see a provision in the second quarter that adds significant.
As what we're seeing here in the first began can't tell the future, but all things being equal I think thats likely and then the other thing is in the form this of time right. We will see whether the losses projected by the model are actually showing up or down and to the extent that they are not showing up.
I think we'll have to take that into consideration.
As we.
Alleyway assumptions in the model.
Think about whether the reserve we haven't continues to be supportable.
Got it Tim.
Tied to that one on capital call lines, given the size of that loan book is there anything that's laid out in the last four to six weeks that would make you a change your view it on the fact that you had zero losses and most likely I think most investors expect does that book to be zero lost kind of portfolio has anything.
Occurred any customer behavior that could make you rethink that that did some potential for from losses.
Yes. He ran its mark again, I'll take that one Gregor Mike may wish to add to it.
The answer Blanketing answer is no we've seen nothing at all that would suggest.
That will that credit quality is going to deviate from what we've seen over the last 30 years capital calls are still being made on time, we haven't heard any issues about Lps.
To be slow to perform or asking GPS to slow down the pace of capital calls and more broadly we take comfort.
From the fund Finance Association put out a bullet 10.
That sort of covered the broader landscape with us and basically confirmed the same.
Noting that there has that a couple of articles referencing such things they were quick to dispatch.
Yes, the notions raised in those articles that there was anything invest reporting that there has been absolutely no capital call defaults, including with high net worth limited partners partners. Similarly, no acceleration of capital calls that was discernible.
So so far so good and our expectation as hopefully that will stay that way.
Water and just on the base separate topic in terms of deposit growth, we saw significant deposit growth in non interest bearing deposits.
The functional the crisis and the fact that needs to go back to Seattle I'll be back to an environment grid deposits once again, Scott being driven by non interest bearing deposit growth and I know, it's early days in the volatile but would love any color that you can then.
Hey.
Dan I think that in this rate environment, we're going to continue to see a can the trend that we saw the first quarter with more noninterest bearing grower.
That's not to say that we won't see interest bearing growth mix, then, but I do think we are seeing and we'll see a reversal that trend that we had over the last couple of quarters and we've baked that into our assumptions what we're looking at least for the second quarter.
There's a few things should and also to think about as well when you talk about deposit growth with certainly love to see continued growth, but some of the factors you keep an eye on its new company formation as well and this type of an environment as we are saying, whether DC therapy or invest in these new companies.
Welcome to the fact, obviously revenues or impact as well it depends it all comes back to the duration. There. So those are some other things at the thinks about when you think about deposit growth and deposit formation.
Got it thanks, Mike.
And our next question comes from Casey Haire Kohei Casey.
Jefferies.
Thanks, Good afternoon guys.
Just had a question about.
The capital call, if we do get a pause and this is going to be it's obviously, a very big portfolio for you guys. What so what do you guys do with those funds or does it park and liquidity. The Securities book, just just trying to get a sense of where where that money goes.
Okay casing, Dan if we do see Paydowns.
Currently.
Taking them and.
Actually investing them.
In the investment securities with deposit costs, where they end up.
At the ended the quarter near four basis points. All then in terms of cost the deposit filmmaking spread, albeit not what it was 12 to 24 months ago with investment security. So we can put that money to work there is also.
The short term used to those funds over the next.
Three to six months with the FDA.
Payroll protection program as we expect to originate over 2 billion.
So we'll be using some of those potential paydowns and those funds to be able to support that program.
There are places for us to be able to put that money.
Okay, Great and just mark follow up.
Question for you on.
The early stage portfolio, you mentioned that there are much more liquid.
There were.
Previous cycles.
Can you just give us a sense of what kind of what kind of cash burn on average that portfolio is.
No that those those companies are sitting on just first so we can gauge that versus duration here.
Yes, I don't have a average cash burn statistic candy and I don't think that's something we've disclosed previously.
What I could tell you that was that on average one of the staff that we take quite a bit of attention to is what we call remaining mumps liquidity.
Generally speaking at the outset of this downturn companies are in a pretty good place from a RM dollar remaining validity standpoint, and as we've all seen in the news and elsewhere companies are not wasting any time, reducing expenses at extending that runway, which we.
I think is one of the most encouraging things we could possibly see.
Really I for early stage.
The name of the game is to maximize that runway to stay alive as long as possible to get to a different place right a company that needs to go out and raise capital right now.
To the earlier points of folks, having their pencils down and taking stock of their portfolios et cetera, and not being able to.
Get out of there has to do due diligence right. All of those things are limiting factors. If these companies can push their runaway out and get to a place where things have become more on stock and capital is flowing again et cetera.
On average these companies are going to have much better outcomes and by extension, we're going to have much better outcomes.
Great. Thank you.
Yes.
And our next question comes from.
Jennifer Demba from Suntrust.
Thank you good evening.
Hey, Jennifer.
Hi, good to talk about that SVB leerink revenue outlook over the near term I would think with the healthcare life science focus it could be maybe a little bit more stable than another.
Competitors.
Yeah, Jennifer I'll start and then Dan may want to add something.
Yeah, we certainly believe it will it may be more stable than other.
Other markets for the reasons, you articulated but theres no question that will be impacted.
Obviously, they're doing some ipos, but the number of ipos are going to be.
Much much much fewer you saw that it towards the tail end of the of the quarter.
No again April had some activity.
It's just going to be slower now again, what's important note is that as that revenue declines.
The expense base drops substantially as well and so there is.
That's one one buffer you have.
Maybe the secondary question is how do we feel about.
Leerink overall and I would tell you feel still feel very very good about the platform. The team how we're collaborating across the platform because as we said when we originally made the acquisition. It was not just about the revenue that was generated from SVB leerink. It was about the platform benefit and there's no question.
We're seeing that we're seeing that with better information and knowledge sharing across our commercial banking life science and health care team and the SMB Leerink platform. So.
Yes, it's impacted but we are still very very good about.
The partnership we have with them.
Yeah.
PPD program, what percentage of your client thing.
Applied for a while there.
Yes, Jennifer so I'll start and I don't have the preset it but also give you the number of applications. So we had in these are round numbers, we had about 5500.
Clients applied for the PPD program, we had about 3600 3700 that were actually approved through the SP a program and we're in process of getting those loans funded substantial EMV already been funded and we're gearing up for the next waves.
We can then take care of the other roughly 1800 1900 companies that are kind of still in the queue. So that's kind of a perspective of it.
Feel really good about.
How we ended up rallying behind it since as we've talked about before we have not been an MSP a loan in I think it's 25 or 26 years. So we had to get ramped up very very very quickly.
And I just want to say a huge hats off to our team who did absolute incredible job working round the clock to get as to where we are today.
Thank you very much.
Yep.
Our next question comes from.
Chris Mcgratty from KBW go ahead, Chris.
Great. Thanks for the question.
Dan maybe a balance your question for you I think you talked earlier about the mix of deposit growth noninterest bearing interest bearing can you speak to how you see the decline flows trending on or off any change in mix that you might expect given where we are in the rate cycle in the macro whether be on or off balance sheet.
Yes.
We had a really strong quarter in terms of average client funds broke with over 7 billion.
Grower and what we did see especially towards the tail end of the quarter is more on balance sheet on balance sheet growth. So.
We do expect the seen more to offer on the balance sheet that as Mike mentioned earlier.
Look at the next quarter and we look at.
The lack of fundraising activity in slow down a business activity, that's going to lead to more of a flat to slightly low low or level of overall deposits.
Great. Thanks.
I could be the fee rate debt.
That you're an analysis by off balance with came down a little under 17 basis points.
Obviously, if they didn't have a full impact of the of the cuts.
You talked about where that.
Might see that rate kind of trough.
Yes, So I think we're going to end are in a spot where it's in the last caller high single digits maybe.
In the six to eight.
Basis point range, something along those lines.
Thats likely where it's going to trend at this point.
Great and then one last one if I could the guide for the Q2 does that assume those.
However, two two and half $3 billion Pvp loans get funded this quarter or is that irrespective of that.
The loans to take that into consideration as well as the market and the and IP. So that that is included in there to the extent that we originate more as we are looking at the second wave of that program.
There could be a little bit more from an extra balance perspective. So that is included in our Q2 metrics.
Great. Thanks.
Okay.
And our next question comes from.
Gary Tenner from D.A. Davidson go ahead here.
Well good afternoon.
Hey, guys couple of questions on the loan front I guess first off obviously the period end balances were well above the average so I'm just curious if you've seen.
Pay downs early in the second quarter that are driving that flux, a lower outlook from an average perspective.
So as to Greg I will.
Got it okay.
At this point.
Overall balances are slightly low lower but holding.
The beginning of April and.
Based on what's going to happen from a loan balance perspective are included in that view on the few to average balances.
Average lending.
That that we have in our guidance, Mike might want to add something to that.
Yes, I mean, obviously, we we finished the quarter quite strong in March with respect to loans right. We had certainly some drawdown from our clients as well as they prepare for this downturn as well too. So you saw average balances for loan to around 33.7 billion, but the period and number was around 36 as we enter into the Q2 are starting really strong there as.
Well too as we mentioned earlier the thing that we're watching very closely it's just the behavior of the private equity services are global funds banking to see if there is a little bit of yes.
Payback pay downs as well, but again, starting this quarter quite strong in terms of low numbers.
Okay, and just clarify the port from the last question in terms of the in your commentary where you've got the loan drivers to the upside could include increased borrowing by technology much launches as walls to PPP does your initial approvals that you've already got in the queue that is that driven.
Or is that embedded in the.
The guidance, whereas the ability to kind of.
One of the additional.
200, or so customers in the queue would be drive it would be the upside driver.
Is that the right way to think about that.
Yes, thats the right way to think about it we have a general assumption of what we think is going to be funded from the first round, where we already have approvals from the FDA.
The extent that we're able to do more and.
How much more we'd be able to do is clearly uncertain that can provide some.
So again, if you look at the rate on those loans, it's quite low.
Several won't have a material impact to the overall financials.
Okay, Great and then finally.
In terms of venture capital Limited partners, you talked about how.
They seem to still very positive view and dry powder in terms of investment theres been some commentary and reports about.
Whether or not VLP is might have to rebalance.
Or half the because of the lower public equity.
Values.
Maybe there are kind of overweight in their VC allocation is that is that an overdone concern or are you hearing.
This is Greg I would I'll start than and Mike Mike will want to add tubes, we both in spending time kind of hearing.
This dialogue with clients and limited partners.
I would say that.
Unlike the last time and actually if you go back to 2000, where that was like of the main event.
We're hearing some talk about it but it's a lot less than than last time, so I.
Im sure it will happen in the margin, but I don't believe it's going to happen as much and I'd say, there's a couple of reasons one is.
A lot of these pensions and endowments have actually been thinking about should they be upping their.
Alternative investment portfolio, but they don't it's like the question is when do they do it so now that they sit back and go rates are as low as they are or back down to zero I think you're going to see more kind of up to the percentage as opposed to just think about rebalancing. So yes in the margin you're going to see some but I think overall some of the American.
Look at this is an opportunity to what to add more to there to their investment pool.
Thanks very much.
Yep.
Yeah, What Scandinavia question Star then one on your Touchtone phone and our next question comes from.
That vendor fleet from yes go ahead.
Thanks for taking the question.
I was just trying to tie.
Page 22 of the release I think this slide 25.
In terms of the.
The deferrals.
The 2.1 billion of venture debt another portfolios that are deferred.
Characterize that.
Against what is the total total balance there is that 5 billion or is that a larger number.
Number.
So it's mark I'll start.
And I want to play back the question just.
To make sure I got it you are asking the total population of loans that were eligible for deferral, Florida.
Where we started to started at a high level I don't think this has come up yet, but just the overall deferral pattern that year.
Seeing entertained and then of that to 2.1 billion on that slide what's the.
What's the total.
Against that in other words.
What percentage of the portfolio has been deferred.
Okay. So ill attempt to answer it this way hopefully I'm answering the question Youre asking.
So just taking the venture debt program.
We started out with roughly 2.5 eligible 2.5 billion worth of eligible loans.
And if 100% of that population had accepted the offer.
That would amount to deferral of 600 up to $600 million of principal payments over a six month period of time.
A key points there interest payments will continue monthly during that deferral period and that six spots that we deferred goes to a six month extension period on the back of the loan.
It is paid ratably over that additional six months.
Stop there and make sure that I'm answering the question that you're asking.
Are you just dropped off.
You can press Star then one again to get back into queue.
I'm going to move on to.
Sure Shah from Wells Fargo.
Go ahead Jared.
Thanks, Good afternoon, everybody Hey, Gerry.
Hey, just looking at the at the margin guidance just had a couple questions on that.
First you mentioned the potential widening spreads on loans is that sort of just across the board and the general view that spreads are widening or is that more specifically in certain categories.
That youre seeing some early signs there.
This is Mike definitely here I mean, it's still very early here right right now but.
We're definitely seeing some move and some changes in different segments like cost. So for example, like private equity world, you're not seeing a whole lot of movement, there because there's not a whole lot of deal activity and so that it's still high quality product issue as you now than when you start to get kind of the technology and life Sciences area as well you are starting to see people price more.
Risk into it given the environment here CRC and a little bit of uptake in terms of price, maybe 50 to 100 basis points, but again not a whole lot of deal activity here. Given this is market at least for the new new out there are these going to depend different bank and then on the sponsored buyout you're seeing a definitely some even heavier pricing increase maybe up to 100 to.
Hundred basis points, but again very very few new deals being started so again really early but at least the pricing pressures from the previous before Cove. It. They definitely have started to alleviate but again time will tell but.
We'll see from here.
And with Mike and included in our second quarter margin and net interest income guidance, we don't have a substantial amount of that expansion.
Okay.
Thanks, and then on the on the PPP loans actually I guess, a two part question one whats the blended.
Key rate on that and then two should we expect that all of those views are ultimately donated in this out reflected in the expense expectation.
In terms of server Charles expense or.
Is that still levels, so should we determined.
Yes. This is Greg I'll start and the Dan will give you a little more detail.
So we don't have the we don't have the average yet our AR as far as the average fee.
We are in the higher end of the average loan size.
So you could is it somewhere between.
In the 200 basis points in that in that range, it's probably in that range give or take 25 basis points on either either side.
So you take that and so when we made the comment that we're looking to donate zone. It really clear about this is the gross fees less servicing fees and costs that we put together to administer it.
Look at.
It will pipe to estimate is there going to be any losses associated with it because obviously, we don't know exactly how this is going to play out.
And so that net amount is what we're looking to donate to charities.
And what that could look like it could end up some to being something in that $10 million to $20 million range. What all is said and done. So that's that's just a quick way to think about it from the top to bottom.
But we're going to know a lot more over the coming really.
Eight nine weeks is the forgiveness process starts to happen and we get more clarity from the us be it but that just gives you a little bit of perspective on on how we're thinking about it now see of Dan has anything he wants to add.
And just in terms of timing or what you're going to see the greatest financial impact other than the balance sheet associated with the program that's going to be mostly at Q3 event as that's when the majority of the forgiveness applications are going to occur and that's when you'll see the majority of both the fee recognition and then the net amount.
Most of the donation so that's not included in view for the second quarter.
Okay. So we should assume that the donation level is some early timed with the revenue as opposed to maybe being spread out over the following.
Four quarters.
For I mean, it's early and will really figure that out as we get closer to it I think the key pointed.
That we are looking to donate doesn't net net proceeds.
And as the situation clarifies, we'll give guidance on exactly how thats going to play out.
Thanks, and just actually a final question.
The termination of the swap agreements.
How much.
Patrick origin or benefit or Detriments margin is side does that.
But the overall value.
On a pre tax basis was close to $230 million. So what we're seeing on a quarterly basis.
It is included in the materials is something close to.
13 to 15 million of benefit Thats going to come through and that's going to amortize back into interest income over the next three three to four years.
The next.
The one to two years in particular, you'll see that.
Turning to $60 million benefit coming through.
Thank you.
Hey, what's scan at Star then one of gave a question and we have.
Brock vandervliet back with its power.
Great. Thanks.
So the.
The 2.1.
Maps to a total of of what in terms of the.
Investor dependent loans.
Oh, how much is the 2.1 billion that's eligible.
Yes, yes, the take up was 2.1 billion what was the rights.
Let's take.
Rough numbers it is about roughly half of the investor dependent population.
And as you rattled off on I think the question that you've started before you drop we see it about an 80% uptake rate so far and that programmatic offer expires tomorrow. The other programmatic offers are coming up on exploration as well.
And so 80% or so is about where we think thats kind of land.
Okay and beyond that and in your portfolio Theres been no.
No broader efforts at forbearance or other other measures.
Yes, so the the free Programatic offers are what you see here depicted on slide.
25.
It's the venture that private bank in wine.
We have looked at some other things we might do something on cards, we might do something on financial covenant.
Relief as we expect to see most companies by March 30, Onest reporting starts to show up and they start to recap their plans that the presumption is they'll see some financial covenant challenges that they want to talk to us about but the key point is will be pretty much from here on out past. These programs addressing everything we see now.
Next in more of a business as usual case by case fashion.
Got it okay. Thanks Nicholas.
Mhm.
And we have no more questions at this time I'm going to turn it back to Greg Becker for some brief closing comments.
Great. Thank you I.
I just want to thank everyone for joining us today just to reiterate we are in the best financial position, we've ever been end and have the resources and expertise to kind of navigate through this.
Really challenging times and not just for ourselves, but obviously to support our clients as well.
As I say on these calls every quarter, we're just incredibly fortunate to have.
Such amazing employees and.
I have never.
My 27 years.
I've never seen our team operate at such an amazing level, whether it's working the PPP program or.
Working with clients communities et cetera has been.
And meeting to watch and it would remember almost doing it 100% from home so thats been incredible.
It's also so incredible to be helping such amazing innovation clients as they navigate this storm and for US it's really about proving that we really we want to be a long term partner with them and I think we're showing that in this environment. So.
It's a challenging time, it's a tough time and I just want to say no we're going to get through it and just appreciate everyone's support.
Finally, our hearts and thoughts are with everyone, who has been personally affected by the crisis and we just want to hope and hope that everyone stays safe and healthy in this time. So thanks, everyone for joining us have a great day. Thank you.
Okay. Thank you ladies and gentlemen. This concludes today's conference. Thank you for participating you may now disconnect.
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