Q1 2020 Earnings Call
Thank you for standing by.
Welcome to the Columbia.
Well first quarter 2000, <unk> earnings conference call.
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Hi.
<unk>, Chief Executive Officer of Columbia banking system.
Thank you camera good morning, everyone and thank you for joining us on todays call as we review our first quarter results, which we released before the market opened this morning.
The earnings release is also available at Columbia Bank Dot Com.
Want to begin the call today by thinking R 2200, bankers, who despite tremendous disruption to the professional and personal wise.
Joining together to support each other.
Sure where customers communities and shareholders as the Colgate 19 pandemic has evolved.
The Puget Sound region entered into the pandemic earlier than other parts of the U.S.
With the first Corona virus death reported on February 29.
We developed a detailed pandemic plan many years ago.
Most recently tested it through a bank wide exercise in December 2018.
The phase plan and we began to execute against the first phase in early January.
Since then we've continued to fall or plan proactively planning for additional escalation.
Predetermine trigger points.
Early on our bankers went direct communication with our clients understand their individual challenges and work through options to provide relief for their businesses and families.
We're community bank apart and I believe that are bankers empathy compassion and support has been will continue to be our most valuable currency.
Columbia Bank as well position to handle the impact the Kobin 19, and it's in showing market disruptions.
This is different from the great recession of 2008 in 2009 and that it's not a financial crisis.
Public health crisis with serious economic ramifications that are still evolving.
The strength of our balance sheet credit profile liquidity in capital position, along with our proactive interest rate risk strategies and comfortable Spanish Matt will serve us well as we whether the economic consequences of cold It 19.
We started off year with tremendous momentum and you can see the impact throughout her financial statement woman items.
He P.S. declined by 44 cents on a linked quarter basis due to the related credit loss provision expense of 41, and a half million dollars.
On a pre provision basis. This was the fits best quarter in our history and what is typically a seasonally weakest quarter.
Well net income in E. P S for significantly impacted by the Cecil provision expense.
Our bankers remained outwardly focused and produce strong loan and deposit growth during the quarter, while reducing non interest expenses.
Absent the impact could be at 19, it would've been an outstanding quarter.
On the call with me today or Eric I would tell this past Monday was our interim Chief financial Officer.
Chris Mary well, our Chief operating officer, and Andy Mcdonald, our Chief Credit Officer.
Following our prepared remarks, we'll be happy to answer your questions.
Let me remind you that we may make forward looking statements during the call for further information on forward looking comments. Please refer to either our earnings release or web site or does he see filings at this point I'll turn the call over to Eric.
Thank you plan.
First quarter earnings a 14.6 million and earnings per share of 20 cents included the Cecil day to provision for credit losses of 41.5 million.
After factoring out the significant provision expense quarterly pretax earnings were best first quarter on record.
Pretax pre provision income was 59.4 million and it was 1.3 million higher than the first quarter of 2019.
Net interest income for the first quarter was 122.4 million a decrease of 2.4 million on a linked quarter basis, and an increase of one point fourmillion for first quarter 2019, the linked quarter decline and that's it isn't interest income was due to lower loan income from the reduction in the interest rate environment.
One day less of earnings and an increase in interest paid on FHLB advances. This was partially offset by 1.9 million of interest income and discount accretion related to the early payoff of three securities.
The increase in short term funding costs was mostly due to a decline in average deposits although period end deposits increased during the quarter.
The operating NIM of 4.02% was down seven basis points on a linked quarter basis, primarily due to lower loan yields our cost of deposits continued to be industry, leading at 14 basis points down seven basis points on a linked quarter basis.
Total deposits ended the quarter at 10.8 billion up 120 million from year end, primarily due to an increase of 105 million a public funds.
Our typical seasonal pattern is for little to no deposit growth in the first quarter.
At March 31st 49% over a long portfolio was fix 16% was that floors with another 500 million or 6% protected by our interest rate color. The result is 71% of our loan portfolio is protected from further rate declines.
Our liquidity position continues to provide us the balance sheet capacity to meet funding needs. Overall, we have access to 4.5 billion of liquidity, primarily through our 3.5 billion investment for portfolio of which 3 billion are investment grade readily marketable enough pledged on any borrowing base. Additionally, we have $1.5 billion unused borrowing capacity.
Fifth Federal home loan bank enforce five banks.
[noise] non interest income of 21.2 million was down 600000 from prior quarter, principally due to decrease in deposit account and other fees, partially offset by an increase in loan fees.
Compared to first quarter 2019, noninterest income was down 489000, primarily due to lower deposit account. He said that securities gains offset by higher loan fees.
Non interest expense was $84.3 million into first quarter, which was a decrease of 2.7 million on a linked quarter basis on a year over year basis non interest expense was actually down 429000.
We anticipate our expense run rate to continue in the mid Eightys as we handle expenses associated with Covance and continue invest in our future. Our core net interest expense ratio was 2.41% for the quarter down from 2.53% in the fourth quarter our expense ratio compares favorably to the 2.6 okay.
Percent.
Reported in the first quarter 2019.
Our effective tax rate for the quarter was 18.1%, which compares to 20.5% oil linked quarter basis, and 19% for first quarter 2019.
At this point I'd like to turn the call over to Chris.
Thank you Eric and good morning, everyone to Echo the comments opening comments, we have shifted the way that we work to serve the immediate critical needs of our clients communities. While at the same time, keeping our employees clients, who did you say.
Our production and back office changed outstanding.
Worked around the clock to assist clients containment forbearance and other related programs, including the SP, a paycheck protection program.
Teach and had been very quickly regulations have evolved and have been successful and guiding our clients process. As a result, we believe Colombia is positioned to participate in check protection program at levels that are far in excess of our relative market share.
First quarter saw solid loan and deposit growth in spite of the economic shutdown positrons by 128 million during the quarter and the mix remained at 59% business and 41% concern.
The increase was predominantly in the public funds and on the retail side.
Experienced our typical thoughts and seasonality as retail clients, we drew funds to pay down credit and other expenses and them build some back up towards the end of the quarter.
Our deposits our cost of deposits of 14 basis points continues to be lower than our peers, reflecting the strength of our noninterest bearing deposit base on the interest bearing side, we immediately moved to reduce rates. After the 150 basis point fed interest rate drop in March.
Deposit rates and back at levels last seen in 2017 [noise].
We continue to believe that our relationship based approach is a key differentiator and our clients rely on this as much as on any deposit interest rate available in the Mark.
Loan balances grew by 190 million.
On an annualized and annualized increase of 9% new loan production was 331 million.
Increased line utilization was 120 million during the quarter.
In line with the industry's first quarters increase in line utilization was predominantly in the cnine revolving lines, increasing from 49% at year end 2019 51.6 at the end at the first quarter.
New loan production was mostly centered in see every 39% or 128 million.
Hi, 38% or 126 month was approximately one third into real estate rental leasing sector, followed by the construction healthcare hospitality and agricultural section centers.
This was similar to the first quarter of 2019, where production was centered in the same sectors as well as public administration.
It's worth noting that agriculture is now presented separately in our financial statements previously it was a component of Cnine ones.
Agriculture, new production for the quarter was 32 million.
So term loans comprised 78% at the production, whereas lines were 22% of the total.
Quarterly production next was 68% fixed 20% floating and 4% variable.
Overall portfolio mix is now 49% fixed 34% floating.
17% variable.
New loan production throughout the quarter was booked at an average tax adjusted coupon rate of 4.32%.
Which is lower than the overall portfolio rate, 4.44% as of quarter apps.
The overall portfolio rate declined 25 basis points during the quarter unite down 39 basis points.
Oh, sorry down 11 basis points.
We're continuing to invest for the business as we have said in prior calls we expect improvements in our peer to peer database money transfer capabilities online deposit account opening and back office small business lending capabilities to go online later this year one early 2021.
Now I will turn call over to Andy review work.
Thanks, Chris the increase in provision I do see sold 41.5 million is primarily due to a deteriorating economic forecast, resulting from the focus 19 pin debit.
We use API H S market for our economic forecasts and when compared to the F. looked at the beginning of year. So you could imagine it has changed quite a bit.
In general our forecast anticipates, an annualized reduction in gross domestic product in the second quarter approaching 20% to 30%.
Relatively flat performance after that with the following quarter.
Getting to see a readout.
Therefore, the change in the forecast accounted for about 34 billion of our provision.
And the rest was due to negative migration that occurred in the portfolio.
[noise] Npis clicked up to 34 basis points.
However, this was not related to call that 19 impact.
The increase was in nonaccrual loans represented by borrowers who had been under stress well before cobot 19 issue and related impacts came to fruition.
Past due loans for the quarter were 23 basis points and net charge offs annualized will also 23 basis points for the quarter.
Therefore, your standard credit metrics for the quarter were very acceptable.
[noise], while the risk ratings lot loans rated watch for below increased approximately 450 billion during the quarter.
We saw watch loans increased 126 million.
Going from 184 million to 310.
Special mentioned loans increased 265.
To 317 million.
And substandard loans and saw an increase of 65 million and are now around 304 million in total.
These changes increased our watch and be low risk rating from 5.4% to 10.4% of total loans.
Many of these downgrades occurred in portfolios that we believe will be quickly impacted by coated 19 measures.
Clearly these are unprecedented follow.
The rapidly changing environment, we are operating in today has dramatically changed the banks assessment of credit risk.
As with the great recession.
We believe it isn't the best interest of all of our stakeholders for us to get out in front of this by focusing on industries. We believe will be some of the first to exhibit stress.
As such it is only prudent to acknowledge these risks and.
We believe that provision taken in the quarter and the assessment of risk ratings undertaken prior to quarter and demonstrate our resolve in doing so.
We have also granted 2600 requests for payment deferrals amounting to about 1.2 billion in total loans through April 24.
We believe these deferrals or in the best interests of our stakeholders as we try to work our way through this pandemic.
Most of the deferrals about 1400 or roughly 580 million were granted to clients at our dental portfolio.
[noise] roughly 770 were for small businesses.
Each accounted for another 300 million loan deferral.
With that I would now like to give you some color on the portfolios. We believe will be some of the first to be impacted by the 10 dental.
For Columbia that includes hotels retail restaurants aviation and of course, our dental and health care portfolio.
In aggregate these industries account for about 2.2 billion alone.
Or roughly 25% of our portfolio.
The largest portfolio impacted by coated 19 is our dental portfolio.
I'm sure. Most of you are aware most it's up directed dental practices to cease operation with the exception of emergency type procedures.
So effectively dental offices or close and are not expected to reopen until sometime in day.
As of March 31st we had 812 million in dental related loans, representing approximately 2100 notes for an average note size of 382000.
Therefore, it's a very granular portfolio.
As I said today, we'd have process payments referrals for approximately two thirds of this portfolio.
As such most will not be required to resume making payments until August of this year.
We believe the impact on this portfolio is truly transitory and by working with these clients, we will be able to minimize the impact of Copel get 19 on their businesses as well as the bank's balance sheet.
We anticipate a large number of these clients will also participate in the paycheck protection program, which will assist them with working capital needs as they reopen their businesses.
Before I move on I would like to share a few credit metrics and few concerning this portfolio.
As of March 31st approximately 95% of the portfolio was Brady past.
Past dues were minimal at 17 basis point.
I would also highlight that deferrals does not affect this number as deferrals were only granted to customers in good standing.
Said another way they made their remarks payment.
We also have approximately 4 million in non accrual dental loans.
However, these loans were already on non accrual prior to the co that 19 outbreak.
So excluding the dental portfolio, we have another 1.4 billion or 16% of our portfolio to discuss.
The next largest segment, which we have identified as having to high risk relative to the economic disruptions caused by cold at 19 is our retail portfolio.
We have approximately 498 million in retail related explode exposure.
Split between commercial real estate in commercial business.
This represents about 5.6% of our loan portfolio.
The largest part of our retail explosion is comprised of commercial real estate loans with approximately 460 million in total.
It's evenly split what I'm really struggling here between Washington, and Oregon.
You would expect centered in the Portland, and Seattle, and let's say.
The average loan size is 344000.
The largest component is building materials and garden center types of businesses representing about 23%.
Next is auto vehicle of parts dealers at around 20%.
Followed by food and beverage stores at 20% as well.
Using at origination values, we average loan to value for the portfolio was 54%.
With 85% of the portfolio, having a loan to value less than 65% based on originations.
We have stress tested this portfolio for an equivalent declined in value as seen in a great reception.
The average loan to value rises to 66%.
It's about 50% of the properties, having a loan to value less than 65%.
On a stressed faces 92% of their properties pebble loan to value less than 85%.
For the entire retail portfolio, 85% as past, 6% as watch.
6% of special mention and 3% substandard.
We've also seen minimal requests for payment deferrals today in this portfolio.
[noise] hotels is the next area I would like to dry.
We have 326 billion in hotel loans, representing about 3.6% of our loan portfolio.
About 38% is in major markets, which would include the Portland, and Seattle and I say.
However, we also have about 17% of the portfolio or 52 million of exposure out on the Oregon coasts.
To give you an idea of the type of hotels, we settle.
Most have one of the following flat.
Quality, and thus western very odd and Radisson.
These would be good examples of the types of flag for properties, we financed fab.
In total flex properties comprised 84% of the portfolio.
The average loan size is 1.8.
Today, we have granted 44 deferral requests for about 110.
Similar to the retail commercial real estate loans, we did some stress testing on this portfolio as well.
The average loan to value for the portfolio based on our originated appraised values, 52% with 80% of the portfolio, having a loan to value less than 65%.
On a stressed basis.
About 48% of the portfolio has a loan to value less than 65%.
87%, having a loan to value less than 85%.
Non digital health care is about 245 million in coal.
Approximately $85 million veterinary and another 122 billion, our physician practices of varying time.
We also have 38 million of other health care providers, such as chiropractors, physical therapists and counseling services.
The average loan size is 335000.
Today, 98% of the portfolio is perhaps rating.
With 1% on watch and 1% rated substandard.
You have granted 124 deferral requests for about 41 million in total.
In this segment.
Similar to the dental space, we see this sector rebounding when the economy opens up that's folks are once again able to city, the orthopedists dermatologists optometrist and so.
Okay restaurant and food service.
We have approximately 183 million in this portfolio with an average loan size of 299000.
Today, 84% as pass rated.
12% watching the balances substandard.
We have granted 101 deferrals for about 44 million in this portfolio.
Today, 84% as pass rated.
All for citizen watch and 4% as substandard.
The average credit had a debt service coverage of 1.56 with a loan to value of 46%.
Well, a stress case scenario loan to value rises to 56%.
The last portfolio I'm going to discusses our aviation portfolio.
Thats comprised of both direct exposure to domestic airline carriers as well as entities that these airplanes to airline carriers.
In total the portfolio is about 150 million with about 100 million being direct exposure to U.S. domestic airlines and the remaining 50 ability to exposure to less source of airplanes.
[noise] today essentially the entire portfolio is rated special mentioned with the exception of one credit rated substandard.
As you know during the week of April 13, the domestic airline carriers began are entering into formal agreement with the U.S. Treasury regarding the sea to fund the cares Act.
We believe this government funding will help them recover from coded 19 impacts along with the billions of dollars of capital raised in the past few weeks by many industry participants.
As for the less or portfolio, 49% of an exposure is in Asia, 23% in Europe, and 9% in North America.
The rest is in South America than that.
The majority of the portfolio consists of narrow body aircraft with an average age of six and a half years.
We view these younger more fuel efficient aircraft to be more in demand close the pendulum it.
Based on origination values, our average loan to value for the less or portfolio of 74%.
However, based on what we believe today's values are the loan to value is closer to 83%.
Okay.
I'll now I'll turn it back to clip.
Thanks, Andy.
I want to take a moment to welcome Aaron deer, our new CFO to the Columbia Bank family.
Many of you know Aaron as he has covered financial institutions for nearly 20 years.
In officially started on Monday, and we're delighted to have them onboard.
Aaron now gets to experience. These calls from this side of the table.
We also announced or regular quarterly dividend of 28 cents.
This quarter's dividend will be paid on may 28 to shareholders of record as at the close of business on May 14.
This concludes our prepared comments as a reminder, Andy Chris and Eric Our with me to answer your question.
And now you camera.
We'll open it up for questions.
Thank you to ask a question via the web acuity button on the left one of your screen type. Your question an open aireon click submit.
Okay questions via the phone line. Please press star one when your telephone keypad withdraw your question first abound Keith.
[laughter].
[noise] on the phone we have response from Jeff Rulis. Please go ahead.
Thanks, Good morning.
Hi, Jeff first question on the.
The margin before I get to that.
Good the percent of floors I wanted to went through a pretty quick but I think you said, 71% of the portfolio was protected from rate moves.
Which is 49% fixed loans, but could you walk through the personal loans with floors and those that are absolutely.
[noise], Yeah, let me.
Pulled up here.
[noise] Australasia [noise].
[noise], so we have 49% or fixed.
We have 16% Rs floors, and then we have the notional color.
500 million notional color of the that offset 6% of our.
One month LIBOR.
So when you add all that up that that's that's how you have come up with 71%.
Okay got you said the.
With the 6% is the notional color does that help roughly that John.
So it looks like.
Yes.
So that you know looking taking a step back on margin I guess the biggest risk that that you you all see is.
Is that loan yield security yields were sort of a lack of ability to lower deposits given the.
The already pretty low deposit level.
Probably off you know if all of those to some extent.
You know I I think in in the short run.
With the PPP program, or we're going to probably actually see yields increase over the next couple of quarters as loss or forgiven and we take that deferred fee income and to spread.
A longer run a obviously for the loans that we carry our balance sheet. That's that's kind of have an impact.
On our spread margins are going to continue to be under pressure.
Forecasting right now is a little bit of a challenge, we're seeing dislocation between LIBOR and fed funds in and so we're getting our arms around that but I think we're going to see continued.
Pressure on the NIM crusher.
Clint you want to add anything.
Well I think just looking at it is.
Slightly different way might help.
So between.
The fixed part of the portfolio.
The roughly 1.5 billion of of floating rate loans that are after floor already.
And then when we think about loans that wont reprice within the next year, there's about six and a half billion of the 8.9 billion in the portfolio, that's not going to two phase that re pricing pressure.
I think that it is Eric Eric mentioned.
Difficulty with now.
And for modeling purposes as well.
A bunch of us.
Just originated.
Loans with a 1%.
Coupon so.
But looking at our core business dynamics, you have a significant part of the loan book stopped going to reprice part of our interest rate risk strategies. If we put in place flows purchasing securities in advance.
Through much of last year that perform well in that in a down rate environment. So.
I don't think that you're going to see costs necessarily aggressively reinvesting into.
Those securities book at this time.
We'll be opportunistic about that.
So I think that gives us some defense.
Asset mix, yes, that's the big unknown.
I don't know when the economy reopens, how quickly things returned to normal.
We had a tremendous amount of momentum through January and February in terms of our organic growth and we saw some asset mix shift in the.
On the balance sheet shifting a little more towards phase.
Yes, it's still on the deposit ratio ticked up.
So those are kind of all the factors that that we're taking into account as we think about looking forward.
And as Chris mentioned.
Our our deposit funding cost of deposits are.
Near their historic lows, but we still have some fine tuning that we can do in that space as well.
Okay.
Just another question on the capital side.
In terms of you had a high payout ratio going in that included the special safe to say that you maybe table, the special and maybe buybacks, but on a focus on maintaining the regular any any thoughts on fund capital here.
Yeah, we.
We repurchased it was right around 731000 shares during the quarter.
Under our Tenbfive one plan.
And wound that down in late March when we hit the.
20 million that we had allocated for that.
We don't have any intentions right now of of.
Doing buybacks and the.
For the foreseeable future.
In terms of the special dividend.
Thats always been.
The tool that weve used to manage our capital ratios down.
We still have a pretty healthy Tc ratio of of.
10.7.
But I think there's so much uncertainty out there that our primary focus is.
Maintaining the regular dividend.
Then.
I think and that would be.
We'd be content to let those capital ratios drift upward.
Got it.
One quick last when the.
There was the reserve level. If you would include credit marks relative to that 137 of loans stated.
What would that be trued up.
So if we add back the discounts on on the acquired portfolio said that the question.
Yep.
Yes.
And on that math I don't think Andy has either been focused on just the about do you have the discount them out.
Yeah, we can follow up with you after the after the call. Okay. All right. Thank you.
Thanks, Jeff.
Thank you your next responses from Gordy's Mcguire. Please go ahead.
Good morning.
Hi, good.
So quite you had mentioned January February production being pretty record levels. I was wondering if you could provide what how those trended month by month I guess, how big was the drop off in March and what does the pipeline looks like heading into the next the next quarter and I guess you just your overall outlook for the rest of this year.
[noise] Howard this is Chris and I can tell you shop office pretty pretty significant.
You know as we moved into.
Okay, so things starting to be shutdown and business being closed we tables.
Andy pretty extensive review of the dental portfolio you said as an example is we have requests that we put on hold.
Based on this standpoint businesses being closed and things of that nature. So [noise].
I can get the actual figure.
Bob.
Got it was pretty significant for the last month, we were on pace to just 71st for partner [noise].
Because the pipelines pretty muted I would assume the out outlooks, probably more and more flattish from here.
The pipeline.
So.
Okay and pipeline.
There are some uncertainty around what's going to happen in the economy and people reopened.
There are some pent up demand.
Thanks, we'll see those materialize.
Thats going to depend on reopening how quick that happens is quite like this back to earning revenue.
Well, you probably you probably directionally correct, there's certainly going to be more difficult.
And Chris you discuss PPP little bit in your prepared remarks, but I'm not sure. If I caught total balance is do you have that and I'm. Just how are you heard you guys thinking about funding those balances I guess with securities not really being reinvested can you find a lot of that with deposits or are you going to look to outside sources.
We have the ability to funds, we will look at all available options to include.
The ability to align those.
And as far.
As one of the options as far as discussing totals.
In the second quarter, we don't provide guidance on AD preparing to discuss the totals, but I will tell you that.
The team has been hard at work.
And lots of long hours 90 days showing up at nine PM to hit 12 PM East Coast time, Reopenings things of that nature, and we said, we feel that we'll do more than our.
Hi, good share based on our size.
And I would tell you that to demands outstripped our expectations.
Okay.
I guess, Andy you're quoting to release talking like noted credit might migration going into a deep dive on the impacted in industries.
I guess, the deep dive was probably warranted by Cove, it but I'm wondering how much of the negative migration that you referenced is specific to cobot issues or maybe underlying issues that you might have seen but were identified as a result of the deep dive you took.
Or is it are there any correlated beyond just general cobot issues that you saw.
The vast majority of the downgrades were as a result of of our.
I guess part dive into specific portfolio.
So you know you look at airlines at 150 million that was all pass rated it all moved to special mention.
That's all coal good related.
Well there quite a good.
The downgrades were all our hotel retail areas.
Thats pretty much colder related.
So we're there credits in there there probably had underlying weaknesses sure I mean, I can't argue against that but I would say that because of our focus on those portfolios those drove downgrade.
Yes.
So I do believe it's predominantly focused on.
Okay. Thank you I'll step back thank you.
Your next responses from Jon Ostrower. Please go ahead.
Thanks, Good morning, guys.
John.
Andy anything new or notable.
The AG portfolio.
Anything more notable.
Yeah, New newer notable I mean, I know we're focused on these other areas, but you can give us your assessments.
Well if things are performing I get this point.
Yeah, I think that.
The area that has been a struggle for us for now.
Couple of years has been the agricultural portfolio and of course I'm sure you're all aware of commodity prices.
There is certainly you know the great news reports.
Coming out of the Midwest borrowers following things underground and dairies pouring vault all on to the ground and so we are concerned about the AG portfolio.
We're gonna have to see how that plays out most of.
The book came through the 2009 to cycle Okay.
There's some still have some some product to off low.
But for the most part it's really going to be a functional.
What do we get in production in 2020, and then do we see any kind of a rebound in commodity prices by the time, we bring the 2014 crop to market.
Absent that well the one portfolio, that's not going to have the ability to enjoy such a calendar or timeframe is our cattle book, which is about 150 million in exposure and we are also watching that very closely.
Okay.
Good that helps and then.
The the dental deferrals I think I'd call, what you were saying, but.
It sounds like you're.
Most of these loans would come off their deferrals in August is that.
Did I catch that right in your prepared comments.
Correct. So our standard deferral programs were four month.
And that was on purpose to take us into the latter part if you will or at least the middle part.
Over the summer so give those offices tying to.
Adjusts to the reopening of the economy gets some revenue under their belt before they would have to start making payments.
So again, we think thats the prudent thing to do.
Both for the dental practice for ourselves.
Okay. Okay.
And then just kind of must be a subtle question here more on the piano, but what are you seeing on the card revenue trends are you seeing I'm, assuming you saw dropping it looks like it's down a little bit year over year, and certainly sequentially, but are you seeing stabilization there are changes in activity trends.
John I think that.
You know there certainly is.
We saw a drop.
Thank you will start to see as he said some stabilization based on will shift so from in person purchases to more online purchases things of that nature. We're also looking and expecting some pent up demand has been start to become reopened.
That.
People will get back out there and want to spend money, but.
You know certain parts of the industry through this process has continued to do very well and those are places where people are using their card. So that takes care of Stifel.
Okay. Thanks, a lot.
Thank you your next responses from Jackie Bohlen. Please go ahead.
Hi, good morning, everyone.
On the Jack and Andy I apologize, Hi, Hi, Andy I apologize if he mentioned that's already in your prepared remarks, and I just missed it up but the the migration from the portfolio. They went on to non accrual in the quarter, what my sectors that from.
Primarily from the fishing industry.
In the state of Alaska.
Well last fishing season is primarily that what they call the pink sandwiches.
A lower quality lot of it goes as I say slamming into can.
They delays in opening of that.
So the quality of the.
Was left.
So we had.
A couple of fish processes.
As a result.
They have lower quality.
Attracts a lower quality price.
And that puts stress fraud loss.
Okay and is that what the charge off in the quarter related to.
No the charge off what was related to a row crop.
Operation in Eastern Washington.
Okay, and I would guess that even though it was a little bit elevated in both these metrics in the quarter. It's just kind of normal course of business.
Yeah, we had one barge off 4 billion, which really drove though.
Charge offs for the quarter.
It was an extraordinary situation with this row crop farmer.
And I were dock characterizes as normal business spraying.
I'll, just say here's some stuff.
Second.
So much more micro issue than a macro issue.
Yes.
Hi.
And then also I wanted to talk a little bit about and the press release noted some efficiency initiatives that where I'm going and I know that you gave a range of where you anticipate I expenses to be and just in light of investments and coping related costs.
But maybe just a little bit of color on what kind of initiatives you're looking at right now.
From an efficiency standpoint.
Well.
With regards to the digital.
We're essentially done with or oversized digital spend infrastructure, Jackie yes, just become part of a run rate.
That being said, we're going to continue to invest and innovative solutions.
Keep us competitive and remain relevant.
With our with our clients.
But some of the things that are coming.
Ill.
We've got.
The small business lending platform coming.
And the new account open end fund there.
They're tracking and but were just offsetting I mean, it's just part of our run rate right now.
Oh I had the other things that we've done its.
Uh huh.
A combination of the things we've been doing over the past few years and starting to get higher adoption rates and others. There's obviously some of that has accelerated with.
People learning how to to conduct business differently.
And through digital channels, but also it's it's that some of the things that are have always been ongoing and thats. What Eric was getting at is part of our DNA is looking for how we can do something better I'd say in the last six months, we've taken a look at functionally how we're aligned and we've been able to.
Eliminate reduce some redundancy and that has some efficiency or some some improvement in terms of our noninterest expense run rate.
There's there's still some some of the things that we've learned actually as we went through the Oh Paycheck protection program project.
Theres some other areas as we talk with our bankers. They say they you know they they've learned how they can do things more efficiently. That's a silver lining in this cloud that where we're under now.
With Colgate 19 is that people are finding different ways and when we come out the other side I think we're going to leverage some of the.
Spend that we had focus that we've had.
As well as you know some new opportunities that we've uncovered true. This so that's that's kind of a high level 90000 foot overview of.
The types of things that we've been working on we will continue to work on.
Provide some color on that to Jackie just with regards to the PPP program.
We digitize the whole process from the loan application all the way through Oh.
Fulfillment and we used our existing capabilities that we have and we did it rapidly and other similar we would've been able to keep up with the demand and be 10 day funding requirement without having the all hands on deck and that digital backhaul really helped helped us get this over the finish line.
Okay, and understanding that you're not going to provide guidance as to the the number of loans or the dollar value you know when you get the PPP program with that opened to existing customers or was it existing and some potential new relationships.
Jack we chose to follow the process to work with existing clients and not use that as an opportunity to prospect, but this is a man and the most important thing. We can do is take care of our clients.
Throughout this process.
Okay.
Great. Thank you very much.
Thank you no further questions in the queue at this time.
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