Q1 2020 Earnings Call

Thursday

off

Dead dead dead dead.

Turn off Erin. I'm sorry it looks like our website called music is still playing into the car. Okay, I don't see it yet.

Yes. So, that's the hold music coming from the main call. So all the people that are dialed into the main hallway listening to just

Good morning, and welcome to the Atlantic Capital Bank first quarter 2020 earnings conference call. All participants will be in listen-only mode should you need assistance, please press conference specialist by pressing the star key followed by zero after today's presentation. There will be an opportunity to ask questions to ask a question. You may press * then one on your telephone keypad wage to withdraw your question, please press * then two, please note this event is being recorded. I would now like to turn the conference over to gray Fleming Chief risk officer, please go ahead.

Thank you, Chad, and thank you all for joining our first quarter of 2020 earnings call with me today to discuss. Our results are Doug Williams chief executive officer and Patrick Oaks Chief Financial Officer. As a reminder of the Atlantic Capital earnings release is available in the investor relations section of our website wish to caution you that we will be making forward-looking statements during this call, and that actual results May differ materially would encourage you to review the disclaimer in the earnings release dealing with forward-looking information. This disclaimer applies equally to statements made and this call in addition some discussions may include references to non-gaap financial measures information about those measures including reconciliation to gaap measures may be found in our SEC filings and in our earnings release with that I will turn the call over to the CEO of Atlantic Capital Doug Williams.

Thank you gray and good morning, and thank you all for joining us.

I will make a few remarks highlighting. Our first quarter results explaining how Atlanta capital is managing through the pandemic and summarizing what we are doing to help our clients wage adults will review the financials for you and gray Fleming. Our chief risk officer will provide an overview of our loan portfolio and our provision for credit losses after birth marks. We will all be available to answer your questions.

Atlantic Council entered the covid-19 crisis in a position of strength with solid first-quarter operating results Fortress balance sheet and Sound business continuity plans with that strength. Our company will provide needed assistance to businesses in our community add new client relationships and strive to continue to build mean a shareholder value through the crisis.

As reported yesterday after the close of the market Atlanta Capital posted first-quarter net income of 2.1 million dollars or ten cents per diluted share.

Pre-tax earnings before provision for credit losses were ten point seven billion dollars for the quarter a 7% increase 28% annualized from the fourth quarter of 2019 and 19% above that in the first quarter of 2019.

The provision for credit losses was eight point 1 billion dollars reflecting the adoption of the current expected credit loss methodology and the prospect of potential deterioration wage equality from the curtailment of economic activity in response to the pandemic.

The increase was attributable to credit migration observed at the end of the quarter due to the pandemic and forecasted deterioration in macro-economic conditions.

At quarter-end the allowance for loan losses was 1.29% of loans and 3.8 * non-performing loans compared to ninety-nine percent of loans and 2.5 * non-performing loans at twelve Thirty One nineteen.

That charge off were four basis points of loans for the quarter and non-performing assets were 27 basis points of total assets.

Atlantic council's credit quality results have been consistently among the best in banking since its Inception in 2007 and our evidence of strong credit risk management of competency.

Longfellow for investment increased 12.7% annualized from the fourth quarter of 2019 and we're up 11.4% from the first quarter of 2019.

Most of the loan growth during the corridor was ordinary organic growth across our various businesses and was unrelated to the pandemic.

C & Islands 55 million dollars While most of that was normal organic line usage. Some of those drawers were probably pandemic related. We're still making good lungs, but if assumed a more cautious underwriting posture given the prevailing economic uncertainties.

Average deposits from continuing operations grew 26% from the first quarter of 2019 as we added new client relationships and expanded existing ones off average non-interest-bearing deposits demand deposits increased 24% year-over-year and were approximately 32% of total average deposits during the quarter.

With this strong reliable and growing core deposit funding base plentiful balance sheet liquidity and access to significant wholesale funding Atlantic Capital will maintain a robust funding capacity for future client needs.

As you know, Atlanta Capital completed its $85 million dollars a share repurchase program during the first quarter and announced a new $25 million dollar authorization.

We paused that second authorization to preserve strong holding company liquidity at quarter in tangible book values Rose to $14.54 per share casual, and Equity pencil assets was 11.57% And the estimated total risk-based Capital ratio was 14.9 per month, but the very stressed scenarios. We model indicate Atlanta capital S capital ratios will remain significantly above wall capitalized standards.

Our incident Response Team began meeting regularly in early February to Taylor of business continuity plans to the developing crisis.

Not essential business travel and attendance at large meetings was suspended in early March.

Since March 16th, except for essential staff at our to deposit-taking offices over 95% of our Associates to function smoothly and effectively a work-from-home Arrangement and can continue to do so for as long as necessary.

My associates have been flexible resourceful and committed throughout the crisis their priorities help our clients and communities navigate through the crisis to the better days of a return to prosperity.

As soon as reports of the coronavirus surfaced our bank is against talk to their clients about the potential effects on them. At first the concerns were primarily about Supply chains long as we moved into early March it became clear that all aspects of economic life would be affected and many of our borrowers would suffer liquidity constraints.

we initially

A program of 90-day principal and interest payment deferrals for those who asked for it as of Tuesday of this week. We've deferred payments on $389 billion dollars of loans or about 20% of total loans for 311 Borrowers.

We are participating in the paycheck Protection Program and received a authorization and disperse funds for over 600 loans or about 75% of our locations ability to us totally more than 220 million dollars before the first round of Appropriations was depleted.

Additional applications are pending and we hope to receive off authorization for those when the program is opened up again, and we Now understand that will be Monday morning.

With limited Clarity on the spread of the virus and the pattern in times of economic recovery.

Will not be offering full year Guidance with respect our dreams Outlook credit metrics or balance sheet growth.

We will have her tell you what firm resolve and strong conviction that Atlanta Capital will remain a fortress for our clients and shareholders and we will do whatever is necessary consistent with South you practice to get them and our company through the pandemic and return to prosperity.

Help adults will review the financials for you.

Thanks, Doug and good morning everyone with our solid Capital position strong core funding and access to significant wholesale funding we're in a great position during this period of uncertainty are averaging deposit ratio improved again to 84% compared to 87% in the fourth quarter and 95% in the first quarter of 2019. If you include are significant bar and capacity with ample liquidity available to manage this pandemic and the items such as the PPP loans.

I met him just margin expanded three basis points to 341 as the eighteen basis point decrease in loan yields was more than offset by the 27 basis point drop off in the cost of interest bearing deposits.

As most of you are aware the drop-in fed funds rate during the first quarter did not initially include a similar decrease in 1-month Libor.

What about 50% of our loans tied to Libor disallow loan yields to remain higher and March and April.

Spread between library and fed funds has now started to normalize resulting in low. Neil's trending down there the second quarter.

I am pleased with our Banquets ability to reduce our cost of deposits during the first quarter and expect further decreases in the second quarter. But this reduction to deposit costs will most likely not offset the impact from the drop in loan yields. This this will result in some margin compression over the next few quarters, excluding any impact from the PVP loans.

interesting coming to say

One quarter will benefit from the funding of the PPP loans, especially if a portion of the loans are forgiven during the quarter and we are able to accelerate the recognition of the fee income.

I'm interested in coming. The first quarter was two point four billion dollars this included another strong quarter for service charging come across our commercial lines of business.

SBI income decreased from last game on sale income due to slower Loan Production lower loan SEL premiums, which led to our decision to hold some of the government guaranteed portion of the 7 a loans.

R. S b a team is currently focused on assisting our Bankers with the PPP program. Sorry conditional. SBI income will be impacted again in the second quarter.

Salary benefits expense was eight point five million in the first quarter unchanged compared to the fourth quarter as the seasonally higher benefits expense was offset by a decrease in our incentive accrual.

The provision for credit losses was eight point 1 billion dollars in the first quarter. This included a seven point four million dollar provision for loan losses and a $671,000 provision for unfunded commitments. The increase is primarily response to the expected impact from the economic slowdown caused by the epidemic.

Now, let me turn it back over the gray to walk you through the loan presentation. We posted without running short lease Gray.

Thanks Pat. I will start on page 3 of the presentation that hopefully everyone has this is just a general overview of our credit situation as Doug and Pat both mentioned our credit quality remained very strong in the first quarter with low charge-offs and non-performing assets that said covid-19 and the resulting shutdowns across the country or affecting almost every industry. And we like other banks are really scrutinizing the entire portfolio our allowance as Pat mentioned was 1.29% of total loans compared to ninety-nine percent at December 31st after the day one impact of adopting Cecil which resulted in a small decrease in the allowance. Our first quarter was seven point four million. That was as Pat said mostly driven by heavier weighting of both adverse and severe economic forecast scenarios.

On the borrower assistance front Doug mentioned both the paycheck for protection program and payment deferrals that we've offered the other one that I will highlight is the cares act subsidy for sure be a loans SBA will be making the next six monthly payments for all existing SBA Loans and for us that affects about $125 million dollars of our outstandings on our books.

Like I mentioned we're monitoring the entire portfolio very closely and in light of the current environment, but we're also closely monitoring the hotel restaurant and retail segments of our portfolios and we'll go into some more details these portfolios are the results in each case of targeted strategies with specific loan products provided to top-tier borrowers and

managed by

Specific business units just a couple of quick highlights before we get into those details 39% of our hotel outstandings are either sba-guaranteed or low loan-to-value SBA 504 loans 87% of our restaurant outstandings are in our franchise Finance group, and that's primarily split between Duncan and other qsrs.

And sixty 3% of our retail outstanding are in industries that have been determined or deemed to be essential businesses by most States.

Finally on credit overall. I'll just say that we're cautiously considering any new loan exposure outside of the triple P across all Industries.

Excellent page for this is just a brief summary of the overall loan portfolio as a reminder for a commercial Focus bank and and have a commercial Focus loan portfolio. We're about 58% commercial 36% commercial real estate and 6% consumer. I will note on the consumer about 40% of that as cash secured.

We have a granular portfolio average loan size of 616000 and we have about twenty one loans that are larger than ten million dollars or a Southeast Focus lender 65% of our outstandings are with georgia-based borrowers. If you remove the national businesses SBA franchise and trying to that number in Georgia is about 80%

And the bottom couple of charts you can see commercial real estate concentrations by property type and then our commercial concentrations by industry and I will touch on a few of those in the next slide.

On page five this goes through our hotel outstandings. All of this is as of 3:31 in terms of outstandings, but we've got some information about deferrals that are a little bit more current in hotel. We have a hundred and thirteen million outstanding 53% of that is commercial real estate in that group with a handful of Select known developers. And the other 47% is in RS be a group most of that is you can see in the bottom right chart is either guaranteed or those Long Island value SBA 504 loans 90% of our hotel outstandings are with large National brands.

Were you two million or 37% of this book or under payment deferrals and pre pandemic as of 331 we had no non-accrual or classified loans in the hotel phone not turning over to page six. This walks through our restaurant outstandings. We had a hundred and Seventy-Six million dollars about standings with restaurants, as you can see the the bottom right chart. This is very much a targeted franchise Finance strategy with Concepts that we know well and with experienced multi-store operators 97% of the month, so exposure is qsrs and about half of that is Duncan a brand that we know very well and feel very good about the other qsrs are comprised of approximately twenty different concepts and none of those are over ten million dollars an outstanding.

vast majority

Party of rqs. Our customers are open and operating by a drive-through takeout and delivery and in pretty much all of these cases the franchisors were seeing providing very good support to their franchisees are average loan size and restaurants is $748,000. And as you might expect to further requests were fairly common in this Palm with about 74% under deferral again free pandemic as of 331. We had no nanak rules in the restaurant booked and less than a million dollars in classified.

Next on page seven this slides a little busier because retail exposure is a broader definition and is spread out ever more grew from a total retail perspective. We have 289 million dollars outstanding just includes commercial and Commercial Real Estate types of of loans, but if you look at the phone number for categories in the chart at the bottom this represents 63% of the retail portfolio, and these are the industries that again by Most states have been deemed essential and so if you look at just non-essential retail that comes out to a hundred and six million dollars in total and that's the the lower part of the chart example of the essential versus non-essential good example is the TriNet column in that bottom chart which is our largest portion of the retail book 85% of our TriNet exposure is dead.

Drug stores or dollar stores and those are open and operating in in a lot of cases quite well, if you hold down a little bit on the non-essential categories you like most of that is in the commercial real estate book. And even though we've called that non-essential a lot of those are centers that are anchored by essential business like grocery stores. Most of the rest of the non-essential categories are in our shared National Credit portfolio. And these are some large strong National brands that we feel well certainly being impacted have a better chance than smaller companies of getting through this situation.

About 45 million or 16% of this overall retail book is under deferral if you that really is in the commercial real estate and franchise columns. And so if you looked at just those two totals, it's closer to 38% of those balances that are under deferral again free pandemic. We had about two hundred thousand dollars in non-accrual and a 2.4 million in classified loans in this book.

And finally, I just wanted to touch on the shared National Credit portfolio. We have a hundred ninety million as of 331 outstanding in this book. This is across 22 borrowers with an a commitment of twelve million dollars. Most of these are Southeast based companies 17% are highly leveraged transactions as defined and as of 3 a.m. We had no rules and no classified loans in this book. You can see in the bottom chart that it's fairly spread out in terms of industry and business types off and with that I will turn it back over to Doug for some closing comments.

All right, Chad. We're ready to open the clients the questions now, certainly. Thank you. We will now begin the question-and-answer session to ask a question. You may press * then one on your telephone keypad. If you're using a speaker phone, please pick up your handset before pressing the keys withdraw your question, please press star them to at this time. We will pause momentarily to assemble our roster.

And our first question today will be from Steven Skelton with Piper Sandler, please go ahead.

Hey guys. Good morning. Good morning, Stephen.

I'm curious relative to your loan loss reserves looks like it's up to $129 loan. I'm wondering relative to the whole build out of those reserves. If it's more highly allocated to some of these loan categories that you've outlined in the presentation. And if so, if you have any, you know details around some of those more specific allocations with Stephen. This is grey we haven't really gotten to the point of allocating by industry. This is really call code based and and and model-based and so long is it naturally flows as we have a grade changes within a certain category, but beyond that right now we're relying on the Cecil methodology and the Thursday the forecast that the influence that and those apply across the board and so before that it's still driven by individual grades and individual, you know, Thursday.

LTD history

Okay, no problem. And then maybe thinking about the name for a second. You know, you guys noted that you made some Municipal security Investments. I'm wondering if you can frame those Investments up in terms of the size and the timing and in the yields potentially just to give it to view for how that could help too.

Minimized compression from here sure. So a lot of that was done in March obviously with the sell-off in the municipal markets. We try to take advantage of what was going on there. And you know, how long was uh,

Yeah, basically, you know about 60 million inch or so in the late in the quarter and we are able to pick up, you know yields 4:50 to 5 % in that General range. So you're right going forward that will help the margin hopefully.

Okay, great. And then just maybe last question for me thinking about the subject. I know you guys have talked about maybe that could be a Pursuit for you moving forward with capital planning with with the I guess lack of of subject deals that we're seeing being done right now and pricing expectations of may be increased a little bit relative to where they were. Is that still on the table for you guys down the road or is it really too early to even think about things like that? You know, it's probably a little bit too early. So what I'm hearing is the market is open, it's functioning obviously nowhere near the level. We saw, you know even earlier this year. So the debt said what sticks in a quarter now, well, I'm being told if we were to issue, you know, now, you know, we could probably do a little bit better than that but probably significantly so you're right. It's not as attractive as it was. So the question is if when we get to September race where they are now today, what do we do? You know, we have the option of refined off.

Think it's obviously we have the option of Let It Go.

For floating-rate which would be you know, probably in the low fives but we start to lose Capital trim at that point. So it's probably too early to say what we're going to do, but we'll keep you guys updated great choice for the color right now. Thanks for all the detail in the presentation very helpful.

Thank you, Stephen.

The next question will be from Michael rose with Raymond James, please go ahead.

Hey guys, how are you?

Hi, Michael. Thanks for joining us. Of course. Yeah, so good to see Personnel expenses, you know relatively flat assure, you know. I know you guys have made some home buyers. Can you just talk about some of the opportunities as you as you kind of move forward? Um, you know, I know probably all trying to contain your expenses at this point, but, you know, there's probably an opportunity to to opportunistically at your so you know, what should we what should we think about in terms of hiring plants? Thanks.

Barbie are hiring plans for before the pandemic are hiring plans for 2020 were more modest than the hiring we did in 2019 and I just say well we're going to be more cautious going forward until there's more clarity around the course of the pandemic and and you know, the economic timing of the economic recovery, but we if we find good Bankers will hire them, you know, we'll probably need to continue that some support positions here and there but I think generally are hiring activity will be more constrained this year. There was last year and that will contribute to our ability to manage not insert expects, maybe more tightly than we had anticipated for this year.

Okay, that's helpful. And then just wanted to I'm sorry address to send the prepared comments. I got a little bit late, but I just wanted to talk about the PPP program. Looks like you guys had some good vegetables looks like we're going to get round to hear beginning next week. Can you talk about kind of where you stand in the pipeline and then you know, maybe pad if you can kind of walk us through what you'd expect in terms of the fee impact and you know how that's all going to kind of flow through the the income and balance balance sheet. Thanks. Yeah, Michael. I don't know what you heard. But we we received authorization for a little over six hundred loans. It was over 220 million dollars and that was about 75% of our applicant backlog. So we've got you know, another 200-plus to to have approved if we can log.

We understand the the programs got open up against again Monday morning, and we've got them lined up ready to go. So hopefully we'll be able to get all those authorized and and dispersed over the next week or so. Here we

We've only done this for clients both borrowing and non-boring clients and we seem to have gotten through that pretty pretty efficiently compared to some others.

And Michael around the fees, you know, the average rate so far has been about you know, 2.9% So that's you know, six six and a half million dollars in income and then with the additional, you know fifty million or so, you know, that could be another million and a half or so just rough numbers.

Okay, the remaining $200 plus applications. We think are worth about fifty million dollars.

Okay, that's that's exactly what I was looking for. Very helpful. Thanks guys, and maybe just one more for me. You know, I appreciate the the collar around the the kind of at risk, you know portfolios at this point understanding you guys are relatively healthy, you know Southeast Market where where you know in migration is has been relatively strong in the demographic Trends or a strong, but, you know, the numbers are a little bit heavier than you know what some of your peers have reported, you know, obviously it's apples versus orange in terms of an exercise, but you know, how can you help us feel, you know comfortable that, you know lost contacts in some of those more at risk categories, you know, won't be, you know, if I if I go back and look at industry Trends, you know relative to those categories wage. They were in kind of the Great Recession. Thanks.

Michael this is gray. And and you're right to point out that the the numbers from a percentage standpoint do look a little higher price since we don't have a retail book to to to be kind of be a part of that calculation. Um, you know, I just say these are certainly areas that are that are having stress. We feel very good about the borrowers and develop that we've worked with and these areas and while we certainly under right to recession. It's it's hard for anybody to say they underwrote to what's going on right now, but with with you know, good operators that have multiple locations when you talk about restaurants and in in good brands for restaurants and hotels off, you know, we we really think particularly if the country can start moving again, you know without this dragging out too long these these for the most part all of our borrowers in these areas wage.

Most of our borrowers are well-positioned to come out of this, you know it it's right to focus on on these at-risk portfolios. A lot of these can come back fairly quickly. We're trying to make sure to that we look at the rest of our portfolios. I mentioned commercial real estate cni if you have consumer, that's that's supposed to pay attention to too. It's a lot of it comes down to how long this lasts and as we're all seeing a lot of different industries that you might not have expected are being impacted in strange ways. So we we feel pretty good about these segments because of the targeted nature of how we've approached them, but we're we're being cautious about these as well as just about everything else that you know isn't seeing the the few rare bumps from what's going on.

Michael

Would have had that, you know within each of these apparently vulnerable categories. We think we're positioned very well, you know, when restaurants will ruin quick-service wage quick service, but we're with strong operating like Duncan in the retail category, where were heavily weighted toward essential and near essential businesses off. So again, we think there's a lot of resiliency there and we think these companies are these businesses are likely to recover quicker as the economy gets re-engaged.

Hey guys, this great, Thanks for taking all my questions. Appreciate it.

And our next question comes from Brady Kaley with KBW, please go ahead. Hey. Thanks. Good morning, guys.

Good morning, when you look at there was a fairly robust. I think. And balances were up about 13% annualized correct outside of the PPP. How do you envision loan growth trending for the remainder of this year?

Yeah, that's a really hard question to answer Brady. I you know, we we are making new loans, but will be very cautious and doing that until the the economic picture is clearer. So, you know, I think you would expect a c loan growth slow. But you know we continue to to add new business. We're all seeing some Fallout from the PPP at other institutions and we're having some flies indicate interest in in moving their business to Atlantic Capital. So I think we'll continue that. This is I think that will tend to be more treasury management and depository business than borrowing business, but I'm sure we'll continue to Dad some new new borrowers ass well, so we'll see but we're we're we really don't have any confidence level in terms of offering a an outlet for the year with respect to loan growth.

All right, and then moving on to the net interest. Margin, I'm just wondering that the sensitivity here. Do you happen to know what you know by how many basis points your name will drop off every twenty-five basis point cut. I realize you know, it sounds like the Muny purchases and the P3, we'll help offset that and I'm just trying to figure out the the sensitivity there. Yeah. I'm a little tough. Right but the 25 basis-point the basis point move every twenty five basis points a little difficult with we're library is it all depends on how much Library drops is that 50% of our loan portfolio, you know that was at 1% at you know, March 31st compared to you know, fed funds twenty five basis points and that's already come down to 44 basis points. So it gets real difficult this quarter to kind of predict what that's going to do, uh, and and the level of how could we take deposit costs down, so I can't really get much guides for the second quarter to tell you.

it's going to drop but I don't think it's

Could be really significant the second quarter. I think we'll continue to see it decrease in the third quarter. Um, when that loan yield levels off and deposit cost level off. Um, so at this point it's really really difficult to tell you how quickly it's going to drop and what that magnitude is.

Okay, that's fair. Thanks guys.

The next question will be from Freddy Strickland with big Partners, please go ahead.

I think they forgot to ask the name of the firm being like the morning guys. How are you all good morning.

Was just wondering what happens with the referrals and recognizing these is new special mention or substandard. Can you just give a little bit more color in your process for rating changes and kind of what the wage tank U.

Probably this is this is gray. So we were pretty liberal with our offering of deferrals to any of our customers who felt that they were being impacted. And so I don't think it's a good indication right now of anything as it relates to grade changes or problems situations, and we've had very few of those and as you know, The Regulators home and fast, we have given very good guidance that deferrals related to covid-19 do not need to be classified as TD ours. And and so we and other banks are taking that approach, you know, as we get further into this if we get to a point of customers needing to ask for further deferrals, we might look a little harder at the specifics behind it, but we really have been trying to be very open and quick in this initial round with offering deferrals. And so have a lot of good customers that just are nervous wage.

And you know wanted wanted to be able to preserve some capital and we have wanted to accommodate that so I don't think at this point. It's a it's a good correlation at all for where we see the grades or the problems.

Got it. I appreciate it. And just one more follow-up real quick. Was wondering if you give us a quick refresh just regarding your fintech customers. Do you still see some more opportunities here in the digital business office? Yeah, we we do that, you know, we that business continues to grow both our payments business, which is largely payroll companies and then the tech business which is partnership with Iraq continues to grow. We've got a nice backlog of new business coming online over the next couple of quarters. And that seems to be very resilient wage particularly in the in the payments business the ACH volumes that we have historically seen seem to be holding up very nicely. We would expect a little deterioration in those on those in those item volumes, but we really haven't seen that yet. So that seems to be

quite resilient at this point

course

That's great. I appreciate it. Thank you guys for taking my question.

The next question comes from Jennifer Demba with SunTrust, please. Go ahead.

Hey, this is Brandon King Alfred Jennifer. I just previously you guys stated that you expect deposit growth to outpace loan growth, but I just wanted to update on how you view that going forward in this environment and also can give more color to your pipeline of new treasury management clients.

Yeah, we we continue to expect strong deposit growth this year and we saw tremendous deposit growth in the corner and it really is driven across our various businesses. We continue to add new clients in our commercial segment in Atlanta a business and not-for-profit banking segment and in our payments and fintech business, which is is more National and character and we don't see any any interruption in those jobs at all. This paycheck Protection Program money is mostly showing up in our deposit accounts. And of course that will be drawn down over time, but I think will continue to grow grow deposits. We've got my Spike why don't do treasury management opportunities which tribe those deposits levels and you know, this is a rebirth

Stable aspect of our balance sheet and stable aspect of our business generally.

Okay, and with the PPP program do you expect to find that mostly with deposit growth or do you expect to use some of the facility as well? I don't think she doesn't we're going to get all the paperwork finalized for the pet program. But I don't think we'll need it between what we had the borrowing capacity. We have liquidity. We have we we can send it on balance sheet.

Okay. Thank you very much.

Next question will come from Steve Camry with Gene research, please go ahead.

Yes, good morning. Yeah, I appreciate the color on on Nim going down and future quarters as loans reprice month following the the rate Cuts. I mean just kind of wondering if you get your thoughts on the effect of this through and I I like it will affect be large enough to push nii down obviously growth matinees, but just holding it flat for a second. Yeah, it's going to be it will put pressure on it. I definitely a lot of us get depend on growth that we see and as Doug mentioned, we're not really giving guidance around loan growth particular with all the certainty around that but obviously we don't see the loan growth. Yes. Obviously that will impact in I I

and good opportunity to help.

Okay, and then similar topic, you know fifty percent loans index to live. We're kind of just wondering about the presence of floors. And and if any of those are active at that point.

Yeah, so we have about 150 million in between swop and Floors on that portfolio and they're all obviously in the money that you know, they're in the 2% range wage some 175 some up to 2% but it's all done through the derivative not on the customer side.

Okay fair enough and then just just finally this was on the the presentation slides about cautiously considering new loan exposures outside the PPP program. I guess just you know, not necessarily what you guys are accepting or rejecting but I guess kind of what what sort of inbound interests are you getting and then sort of what what kind of process are you going through now that maybe you would have gone through, you know pretended. Yeah, I would say in the first instance sort of the inbound flow is from you know, clients and long-standing aspects that have indicated an interest in moving business to us.

I think we're going to get sort of another wave of of opportunity and and the opportunities to consider its Fallout from PPP issue at other institutions, you know, they didn't feel like they were well-served there weren't able to get the funding or whatever and it would just say well now's the time to move our box and that will tend to be more treasury management and depository type business. I believe, you know, we obviously as we look at new credit requests, we have a live birth of an uncertain economic environment and that enters into our underwriting considerations.

So I think it would be safe to say that any new loans that were making are from borrowers and resilient industries that we don't expect to age be affected in any material degree by the the economic conditions.

Okay, very good. Thank you.

Once again as a reminder, if you have a question, please press * then 1 the next question will come from Ross Haberman with rlh Investments, please go ahead.

Sohaib room in your lines open perhaps your loan is needed on your end.

I have remember. We're still unable to hear you.

All right at this time I'm showing no further questions. So I'd like to turn it back to you mister Williams for any closing remarks.

Thank you, Chad, and thank you all for dialing in this morning. We hope our comments were useful to you. I would just remind you in closing that bath Capital has a fortress balance sheet. We've had fundamentally Sound Credit quality throughout our history. We have plentiful liquidity, and we have a very robust Capital level. We believe that that will serve us. Well sort of our clients well through the crisis. We we think we'll we'll come through this and be even stronger have a more significant market share and then very meaningful things for our clients. So, please let us hear from you. We'll we're available to answer any questions you might have with you again. Goodbye.

Can't thank you, sir. And thank you for joining today's presentation at this time. You may dial disconnect your lines.

Thank you, Jeff.

Dead dead dead.