Q1 2020 Earnings Call

Multifamily loans have served. I'm exceptionally well in times of economic crisis New York city multi families or by far the best performing credit during the financial crisis that began in two thousand a year after year. Had one of the lowest lowest rates in the nation based on the performance of New York City moved apartments. In fact for the six years between 2007 and 2013 Dodge Charger us were only 130 basis points of loan balances at the start of the crisis, which was approximately five pounds lower than the overall Bank index.

given the low LT

Be nature of our multifamily portfolio, which was 52% and March 31st, 2020. We anticipate our Stellar track record to continue even though conditions are now much different.

Due to the city's limited geography multi-family apartment buildings are the primary form of housing a large percentage of our borrowers have remained with them through intergenerational family ownership across various economic owners will know how to manage through this crisis. We view this as a liquidity event for building owners having nothing to do with vacancy levels or credit deterioration is important to remember that prior to the lock down every regard economic conditions in New York were outstanding going into lockdown vacancy levels where near all-time lows as we saw after nine-eleven when real estate values tumbled, but that's hard to start a 2002. We don't want to try to mind read the market but rather focus on the facts.

The only material abandonment of New York City multi-family housing that I can recall occurred in the nineteen seventy s during the city's financial crisis that was during and after the John Lindsay a demerit off in order to believe that the current housing situation and badly you'd have to believe that New York City jobs and economy will not recover. It was a time when housing Sportsman's were mainly dependent on financial sector in New York today. We've had significant investment in what's known as The Family Center Technology advertising media and information company as mentioned on a press release. The best thing we can do for our loyal borrowers right now God help them get through their liquidity crunch. Our owners were current on their payments before the government locked down economic activity and they will manage their properties back to health after the lockdown. So for now we share our tap the benefit of both landlords and tenants used to be supported as of April 21st. We had approved forbearance request $559 of loans plus all of our portfolios, which represents a job.

Percent of the total loan portfolio the weighted-average LTZ on the loans granted for balance was 55% You see more detail in the press release.

In our press release we've also outlined certain affected areas in our commercial loan portfolio that we are monitoring and every proactively namely hotels 173 million and restaurant loans and 27 month thats to lube Archie's banking officer to join us on the call today to help answer any questions on any of your loan questions or more granular fashion in summary, give them the low LTD nature of our multi-faith and the long-term demand for housing stock in New York City. We remain optimistic that our credit performance will again outperformed the peer group average right now in terms of the mix of our portfolio took a solid blend of safety and yield slightly less than 2/3 our broker driven multi-family loans and 1/3 our multi family relationship long that came with the business banking though that

Your earnings and balance sheet advantages of the relationship loans continue to drive Improvement asset yields deposit course and and non spread revenue and you'll see when I'll be discussing. This quarter's earnings wrong account also believe that we have built the balance sheet with significant Capital strength and we are entering this uncertain economic. Living extremely strong capital gain, the strength of our Capital based can't be on the left quarter basis and currently 9.4% a Consolidated 2. 1 risk-based Capital ratio is in excess of 12% off.

consolidate

Consolidated total risk-based Capital ratio, which is in excess of 15% ranks among the highest of our peer groups.

No management began preparations for most most during our Capital base back in December of 2019 which led to the successful issuance of $75 and preferred stock in February of 2019.

It looks like oppression moved today. It was simply the continuation of our focus on building a safe and sound Institution for the long-term. Next. I would like to talk about X involvement in the sba's paycheck Protection Program. What commonly referred to as p p p should get a lot of kudos for the work that they've done in for an organization that not used to this level of of laundry really are experiencing a very good with them.

Depends Emma has made it clear to everyone just how important small businesses are to ensure Full Employment and to support a well-functioning economy over the past several years. We have taken numerous deaths including hiring personnel and add a new prosecution system and put it in a secure position to help our business customers in short span of Time Bomb has now one of the most productive SDA operations in the New York area and prior to the truck roll out the rank among the top ten SBA lender $5 of dollars of origination in New York district for a deeply committed to being a source of capital for businesses in our footprint. This initiative has been a quite priority many of our staff work around the clock and over the weekend to ensure. We kept credit flowing to businesses.

As of April 21st, we registered $163 a month would be a total fee income from processing. These people are expected to be around five million dollars of the application registered with the FDA 32% were existing time clients and 68% were new clients successfully onboarding these new clients after PPP book celebrate the birth of our business deposits with many of these new clients remembering that they were first introduced it as a source of help to them in a time of need as you'll see from our results this quarter. We're on a path to create instructional a higher interest margin plus other improved profitability metrics are pre-tax pre-provision for the first quarter was a 2020 with 18.7 million dollars representing the 20% year-over-year growth.

Like I mentioned in the past sound strategic plan is built upon improving five fundamental metrics one rowing our checking account balances to increasing lost business deposits three growing relationship based commercial loans for reducing our CRV concentration ratio and five growing sources of and the contribution of non squared Revenue now, click the update on each of those starting first with the growth on our checking account balances on a year-over-year basis average non-interest-bearing and interest-bearing checking has increased by 22% off the $626 every dollar of low-cost deposits that we raise increases the franchise value of the company.

second metric

Is increasing low-cost business deposits total Commercial Bank Commercial Bank deposits from our business banking division plus our Legacy multifamily position increased by almost 24% from $509 on a year-over-year basis commercial deposits now comprise 13.4% of total deposits compared to approximately 10.4% of total of five years ten years ago about the next financial objective is growing relationship based commercial loans, the business banking division currently stands at one point approximately 1.4 billion dollars. It's busy can use to be significantly created to our overall name and have contributed to six consecutive quarters of coral and expansion, of course targeted metric the lowering of the commercial real estate concentration ratio, but now we do see that ratio to $5,589 percent at March 31st, 2020 with many of you may remember Don was well over 900% only a few years ago dead.

Lastly non spread Revenue, we grew annual non spread Revenue, excluding security gains and losses and a one-time boldly claimed by approximately 65% on a year-over-year basis in summary. We continue to make quantifiable progress at all five strategic objective.

No satisfying to me in the purpose of our business model transformation would be a significant progress that's come out of the side of the balance sheet deposits the loans for the business banking division are running at 27% off the loan portfolio compared to approximately 5% for the Legacy multi-family business. We were making tangible progress progress on improving the quality of our deposit base, which was perhaps design a business model transformation looking at the 2016 just prior to the build out of the Commercial Bank ignition sign was almost the highest Amar appeared from a course of the proper perspective home. Now, of course, the deposit is lower than many of those tend to your competitors with the decline across the department witnessing the first quarter of 2020. We expect to be at the meeting and once we once everyone finishes reporting I wanted like to turn the conference call over to our Chief Financial Officer. I will probably ready will provide some additional power on our first quarter results.

Thank you, Kevin. Good morning. Everybody. UPS was $0.24. This quarter compared to ninety-nine cents for the linked quarter included in this quarter's results was an eight million dollar rebuild the million dollar provision for the first quarter of 2020 was entirely associated with an increase in the general loan loss Reserve due to the adjustment of qualitative factors tied to the bank errors occurred last framework to account for the effects of the covid-19 pandemic and related economic disruption Diamond elected under section four zero one four of the care that to defer the implementation of Cecil until the earlier of when the National Emergency related to covid-19 and or December 31st, 2020. The deferral will provide time to better assess the impact of the covid-19 with unexpected lifetime credit losses.

As all of you are well aware by now.

That was significant forecast uncertainty as it relates to the economic variables at the end of March which continued into April and actually still remains to this day. We believe that prudent to wait there was more certainty in the economic forecast before implementing Seafood. We continue to run and validate different models, but we will not be providing a Cecil estimate at the current time as we believe that is a given the uncertainty in the forecast assumptions as the year progresses We Believe they'll be more consensus on the economic and we hope to use more realistic consensus scenarios to provide you better off.

Has kind of alluded to earlier in the fourth quarter of 2019. We made the proactive decision to diversify our Capital stack by introducing preferred stock into the mix given a perfect nature review the replacement of common Equity with preferred Equity as a prudent Capital Management practice that will remain belongs to reduce the overall cost of capital while maintaining the quality of our Capital base with actual instrument. So that end we raised $75 of preferred stock at a very attractive rate of five and half percent in early February. It was practically one of the last Capital raises afterlife Capital markets conditions changed dramatically given a free plan intention to replace common Equity with preferred Equity. We repurchased $21 worth of shares at a weighted average price of $16.22 in the first quarter of 2020.

Strategic plan is based on re mixing our loan portfolio and not drawing the asset base. So by definition we will generate excess Capital. We will of course be very prudent with Sherry place in the times ahead for all the capital actions. We ended the first quarter with the tangible equity ratio of 9.4% which is a meaningful increase from the 8.6% If you're a 2019 pretax pre-provision earnings for the first quarter of 2020 Was Eighteen point seven million dollars representing 27% linked quarter growth and 20% off. We continue to demonstrate that we don't have to go the balance sheet to grow our core earnings per share power.

According them increased by 12 basis points on a linked quarter basis to 2.59% S10 mention driving a structurally higher name is one of the key tenets of our business model transformation, and we are pleased with this quarter's results.

The increase in Corning was driven by a 14 basis-point decline in our cost of deposits. We continue to hold our loan yields fairly steady the quarter and weighted average rate on our total loan portfolio. Took my only four basis points on a link quarter basis.

The weighted average wait on the 1.4 billion dollar business banking portfolio was 4.62% at the end of the first quarter and it was accompanied by three hundred eighty six million dollars of self-funding deposits off the weighted average rate of 49 basis points. This leads to an implied business banking portfolio name of a proximately 3.75% Which is far above the name on our own no balance sheet today.

over the

Remainder of 2020 we have approximately $970 of CDs at a weighted average rate of $190 that are maturing the pricing these CDs at lower rates provides an opportunity to continue reducing our cost of deposits.

A charter conversion from a thrift store Commercial Bank has enabled us to accept Municipal departments and in a short span of time. We have built the municipal deposit portfolio 278 million bucks a quarter end.

This help reduce our loan-to-deposit ratio to 122% at the end of the first quarter in terms of access to liquidity. We have significant unused collateral at the fhlb which totaled 1.5 billion dollars at the end of the first quarter of 2020.

Our efficiency ratio was fifty seven and a half percent and the extent to assets ratio of 1.68% remained relatively well-controlled compared to other commercial Banks offer a critical part of the business banking build-out is the addition of non spread income in 2019. We saw promising early signs of increasing not spread revenue and this trend continued in the first place as we recognize 1.2 million dollars of customer-related loan-level swap income disappear of your fee income grow by approximately 65%

We want to participate in the PCP and expect a book approximately five million dollars received from that program in the quarters ahead.

Non-performing assets are loans 90 days or more past few increased by seven million in the quarter. The increase was entirely attributable to a single real estate relationship with a very low LTV. We have a contract in place for the sale of the property. This is expected to close at the end of the month of April and we expect zero-loss content with this particular loan.

As you well know by now. We don't provide quantitative name guidance. We won't be providing any specific guidance as it relates to balance sheet growth targets. It is a bit early to do so given the unfolding economic conditions. That's that we remain committed to re mixing a balance sheet gradually over time with good solid credits that are accompanied by higher levels of deposits at this point. We don't expect material balance sheet looks for 2020 On a related note. We may see more of a real estate borrowers waiting until the reset. Before refinancing are taking the option to replace their loans rather than prepping while this could lead to a decline prepayment see income from the two million dollar figure. We have seen over the last couple of quarters. It will mean we retain solid credits at low ltvs for longer with the coupon rate, but fairly attractive in the current low-rate environment.

We're projecting non-interest expenses for 2020 of approximately $99. And finally with respect to the effective tax rate for the remainder of 2020. We expect it to be approximately 28% with that we can turn the call over for questions.

And now begin the question-and-answer session to ask a question. You may press star done one on your touchtone phone. If you are using a speaker phone, please pick up your handset before pressing the key.

Who is Charlie?

Question, please. Press * then two.

The first question today comes from David Bishop with d a Davidson.

Hi guys, this is Chris Keith on for David. How are you? Good good great. So I'm just curious on the page and fees would that run through the margin or will that actually be in non-interest income?

I mean that's you know, accounting question. We're working through, you know, at this point we're going to do it. You know how everybody else does it? I mean at this point, you know, it's expectation. You know, it would be it would be in fee income, but we'll just have to see you know how that works overtime.

Okay, great. So and then I guess just looking more toward overall Outlook, you know, I know that things will be likely choppy over the next couple of quarters as we have an increase in, you know, average earning assets from the PPP loans, uh coming on and and then and then a reversal likely in I think three Q. So, I guess I guess taking kind of isolating the the Fed rate movements over the last the last few months off. How do you see the the kind of constant deposits reacting? Do you think we we have that built-in or do we have some some further room to move over the next quarter?

So I think that I'll take that one step. So I think on the PPP program that's around $150 to $160 million that we've that we're going to be funding and you know, I'm assume that you know you put on that that particular program at 1% and a fifty basis points spread that by itself if it if it stays in the margin of its in if it's in the full quarter's worth on a balance sheet of six billion, that's probably five basis points negative on the name. But again, as you said that's that's a short-term impact, you know in terms of the month or deposits that is for the room over there as I mentioned on the Seedy side. There's a significant amount of CDs coming up and we continue to reduce deposit cost. So there's definitely more over them. At least we know for the next quarter or so, we would say we continue to look at our money market base. We have the opportunity to raise Municipal deposits now, so on a marginal basis when a birth

No deposits and you know fifty to sixty basis points are at this point, which is lower than our overall cost of fun. So it actually helps us produce a lot of the other deposit categories. Um, that way, you know, in terms of these floating-rate aspects of the balance sheet on the CNA side, there's around a hundred fifty million dollars of loans that still that's floating without floors. So awful extent, you know, Libor goes down of time goes down even further, you know, there's you know some opportunity for for that going down but you know, I'd say by and large the lonely old, uh, you know, obviously need to change the month of March. So you're going to see a bit of a decline in the next quarter, but the deposit costs decline should sit offset, so we should see, you know, a little bit of margin for margin expansion pack in the quarter I had as well. It's tough to predict how much

Okay.

Right. Thank you, but that's it for me.

Our next question comes from Mark Fitzgibbon with Piper samples.

Hey guys, good morning. And and first off Kenny, let me say congrats on for decades with time does first question. I had for multi-family and Commercial Real Estate building owners giving you any sense of you know, what percentage of their tenants have paid rent during the month of April and what that's like a look like in May. Yeah, when part of the request for forbearance is for them to give us a granular picture of the the tenants that are paying what the level is. I mean, you see a lot of them. I would say it hovers around the 50% range. I'll be agree with that. I think that's kind of where what we see in on it's doing anything to plan as well. I think it's generally speaking on a lot of our own modification request are on smaller multi-family or mixed-use properties. And so what you're seeing typically is the Dead

The first floor commercial on the mixed-use is retail and those customers are not paying and then it's between 30 and 50% on the month on the residential units from overseeing at this point Institute. That was for sort of April. I mean, you think it the numbers changed dramatically for Thursday, you know, in terms of from the you know, the end of March through yesterday, we're seeing those numbers fairly stable and we're seeing requests down over over that. As well, obviously the the the first onslaught of flurry of those came in the first ten days of the month, so we haven't really seen a a big change in terms of percentage of you know non-payment in terms of tenancy.

Okay, and then just curious on that 7.1 million dollar relationship, you know with the low LTV. What what was the Catalyst for that to to gain? This is one individual. It's a four-unit co-op that is partially owner-occupied individual has his birth his own liquidity issues. This has been going on for a bit of time and you know, obviously it's starting to back in June December 31st, when the payments stopped so we had put it on non-accrual and begun the process of selling the know cuz there was just so much value of the properties up on a brief side and uh even within this Market we were easily able to sell the note and as Avi mentioned earlier. We're going to that deals going to consummate dead.

Lock the other thing with that property is, you know, just because of some of the disruption we weren't able to sell it by March 31st in the normal course of events. It won't even have shown up as an empty. It's not delayed because people are not able to go and you know, you know close close the transaction or you know, get this stuff in order so gotcha and and as it relates to Cecil, do you have a sense that I I know you're still working through a lot of the numbers but have a sense what the impact is Cecil would have been if you had adopted it.

And we put out a number Mark at the end of in our ten key, you know at the start of the year it was, you know range of -2 plus two back then I mean see so obviously it's the life of loan contract. You know, it it you know, it's probably going to be more than what it is, you know right now, I think beyond that it's hard to say what it is, you know, I would say in a we do we did make adjustments to our qualitative factors. I know this quarter, you know, there is room to make you know more changes to that as we adjust over time. You know, we're also going to look at these, you know forbearance requests over time and kind of see how they perform and come up with it. I think I think at this point it's it's pretty hard because the assumptions are just saw all over the place.

Great. Thank you.

Our next question comes from Chris O'Connell with KBW.

Morning, Chris filling in for column. So I just wanted to get into kind of the overall business plan going forward and see if that's changed it all just given the uh, you know change in the right environment and you know the overall kind of credit environment at this point. Um, I mean, is there any way you know. To you know, keep a little bit more of the multi-family on the balance sheet or kind of slow down some of these transition given the kind of you know, relative attractiveness that you know, in terms of um, you know, how much of the you know, great movement has um, kind of brought the two sides of the balance sheet as in the multi-family and, you know newer banking kind of yields closer together.

Well in the past when we've gotten that question about that would be what do you see multi families as a percentage of portfolio when we get through this process. We used to answer about 5% to someone now. It's a little bit about sixty I think moving it down to 40 from where we sit today is going to take a little bit longer because a lot of those bars will just want to sit tight. The rates are a little bit range for them. So they're not going to gain anything by moving and getting going to a lower rate at this point. There's a lot of discipline around multi pricing for a bunch of people. So the is obvious said you're not going to we don't expect this to maybe three payments that are coming on this that's the only thing of it slow it down course is just our inability to convert the portfolio, but there's still opportunity and there's always something going on topic like this is something turned off the property just more slowly. Yeah, and and and, you know, there's still opportunity out there where obviously being cautious and we're dead.

In a way to from certain sectors.

In terms of non multi family relationships. I just want to mention also on the multi family relationships. We are seeing some opportunities their relative to refinancing existing customers who are looking at this rate environment as an opportunity and looking at swaps. And so what we're looking at being able to take existing customers that have good credit loyalties good debt service coverage and convert those took a floating-rate asset and we are inserting the floors on those so that there's limited downside risks in terms of interest rates to us. We get the fee upfront and and and turning off a traditional short-term fixed-rate asset into a longer-term Foley rate asset. So there is some opportunity there and we're seeing quite quite a bit of opportunity going off.

In the near-term got it. Thank you for the color still. So I guess you know moving on to the p p p program. Uh, you know, I think you guys said you had about

$163 million so far is that inclusive of the second round or urge you expect more to come in at the second round know we we have obviously in the midst of around I mean at this point, I've just gotten the hot off the press update. We you know, we were prepared we had applications in place Thursday. We've we've approved nearly seven hundred applications at this point the dollars a much smaller this time around but the fears will be still fairly significant cuz obviously on the smaller transaction or getting five in in and three point in terms of profit processing fee so long, so I still think they'll be fairly substantial in terms of the number in around 2. Obviously we're

We're still in the midst.

Got it. And then just just a little circle back on the fees in terms of the swap these I mean, are you still seeing those, you know strong strong going into the second quarter here or is there you know, it's going to be pretty volatile. But just, you know, given the Outlook of activity for the year. Is there a doctor to to where that level could kind of you know normalize going forward?

I think right now we're still seeing pretty strong levels of of swap interest in our Pipeline and and it really it goes back to the comments. I made before somewhat on a family in the real estate. Obviously, we're only doing on real estate and and so there's more opportunity given the current rate environment for our customers to lock in long-term fixed-rate off and so and US turning those assets into floating-rate assets. So I I think there's a lot of strength in that that market today.

Got it. And then I appreciate the color. You know, you guys gave you know around the Nim and then and the Dynamics there in that, you know all in Corning, you know, probably opt in the second quarter. Just just you know, very broadly I guess given the dramatic shift in the rate environment. I mean, you know at home at twelve-thirty one kind of looking at 2020 as a whole I think you know expectations were given the balance sheet Dynamics the name was going to go up during 20/20 sounds like that's G expectation. Um, but given all the moving Parts just broadly do you think you know, I guess more than what you were originally expecting at 12:31 a.m. Or less at this point.

Yeah, cuz that's a hard question to answer but you know, it's the way I think about it is the margin on the business banking portfolio is around $375. You know, it's pretty similar last quarter to so answer as we transition the portfolio a little bit more to that. There's obviously going to be an expansion from that, uh cost of deposits continues to go down we have access to Municipal Market as well at this point which takes away some of the pressure from some of the retail funding that we see and but by and large it's a fixed-rate portfolio that we have and you know, the purpose of business model transformation was for name expansion. I think, you know, the biggest piece here in the near-term. Is that CDs over the course of the year of close to a billion dollars. And right now the cost on those is $590 and we'll probably retaining College, you know, sixty to seventy percent of that at a rate of you know, let's say 120 at this point. So, you know, we'd expect them the limit of continue growing up, you know, I take

You know as Ken has mentioned in the past, you know on a on a linked quarter basis and the next quarter basis, it's tough to predict this stuff. But you know, what is trying to create a structurally higher name over here going forward, obviously the PPP the five basis points it from that, you know, you know, I would exclude that from from the core margin going forward cuz that's going to be a 1/4 type impact, but absent that you know, we should continue to suck, you know, grinding higher here. I mean, that's the whole purpose of the of the transformation.

Again, if anyone has a question, you can press * then 1 or next question will come from William Wallace with Raymond James.

Thank you. Steve was a quick follow-up. You said seven hundred applications on part two, but you didn't give a dollar amount of those. Would you be willing to share that? Yeah, I mean at this point it's off. I'd say between 70 and 100 million.

Okay are much lower in this round?

Okay, and then in is the fees on part one that goes all those are 1% I think obvious said 1% of that at some point during the full no. No the fees on that is is a black and so, you know, the 5 million dollars is a blend on a hundred and sixty million dollars so you can do the math. Okay? Yeah. Yeah. Yeah. Okay. All right. Yeah, you would expect the the weighted average fee percentage for part to be higher because the Lawns are a lot smaller, correct? Okay on the buyback, you didn't say that it had been suspended. I believe you said that you would monitor markets or something. Can you can you repeat what you said and then maybe explain specifically with what's going on with the buyback. Did you suspend it at any point in March is it suspended now? And and what are your thoughts on when it would start back up or if sure so, that's why so the comments were you know God.

with be purchased around.

$21 worth of shares. We had raised $75 million from the preferred stock cuz you know, so there was kind of, you know, fifty-five million dollars of excess Capital there that we you know at some point in time. We were planning replace, you know, the the the common Equity with preferred Equity. We we were in the market in the month of April, we've actually purchased $10 worth of shares in April at a price of $14.81. So it's actually below Book value and we still see some value over there. You know that said right now are tangible equity ratio is 9.4% I think we'd like to keep that ratio 9 and 1/4 and above and just keep that in mind, you know, I mean 9 and 1/4 tangible equity for a bank, you know, like us with a loyalty portfolio. We we think it's pretty safe, but we don't want to rush into anything and you want to see how these conditions play out over time. But that's kind of our internal bogey that you know, we don't want to dip the low 9 and 1/4 on the tangible equity ratio. I mean with the T program.

You may see, you know for 1/4, you know, the balance sheet a balloon a little bit but you know by and large, you know, I think we'd like to keep that 9 in the quarter tangible equity ratio and test at least. Okay. Thank you. I appreciate that. And then on the comments that you made about the opportunity to to refinance some of these fixed-rate multifamily loans using swaps long. Will that does that help generate the prepayment penalty income that you you suggested could could slow if if people decide to wait till the refinance. Ends dead.

On certain occasions. Yes. I mean it depends on if the customer wants to take swap or not. In other occasions. These are just you know, existing customers of ours elsewhere that you know, she come to us for a swap deal. So it it depends, you know on the sophistication of the borrower.

Okay, okay, and then lastly on on Cecil, it's our understanding that that the those that opt to delay are going to have to restate earnings to include Cecil. When that when you adopt it, which would suggest that you would be running Cecil concurrently are you you're saying that because of the uncertainty of of the economic situation and and I believe we said said the estimates or or uh inputs are all over the place. I mean is that to to say that when you get back to restate you can you can decide what adjustments to input at that point in time rather than running it concurrently today?

Yeah, I mean we're running different models, you know at this point in time, you know, the issue is, you know, you're not we close the books right now with the conditions at hand. So we've not had to report on the Cecil right off. You can't go back in time and change same stuff over time. What I was trying to say is the the assumptions are you know all over the place and you know, by the end of the year will you know have better assumptions to provide guidance office, you know the street in terms of you know, what what it would be but in the near-term, you know this working through some of these models over here.

How aggressive do you?

Feel like you are with the key factors with the incurred loss, um model that you that you opted to use. So we there's a couple of factors is nine different factors that people look at the the ones that we took up were the economic Factor. So we moved them to the highest range in the scale in the existing scale that we had and then there's another factor for external factors and we took that off to you know, one of the highest sales in the in the range that we have but there's obviously there's no room to you know, paying through these you know as time goes by so as I mentioned earlier in the call. We're going to monitor conditions and and you under the extent, you know, it may require adjustments in the part of the head will have cost make them. I mean, we think you know, look when we put in eight million dollars in the in the reserve this quarter we offer which is a conservative view the conditions are unfolding, you know right now, so we'll just have to see you know, as time goes along, you know, I think it's 10:00 mentioned you go back to the last crisis and you know over a seven-month

Time frame a cumulative losses 130 basis points. I mean over over six years straight and and right now, you know 60% of the portfolio is still under it and according to those standards. So with that said rumali over time, you know, I think you know once it's all settled out, you know, six to nine months from now, you know, everybody's resolved will be appropriate and then we'll have to actually see what type of lost content there is, it's a bit of a theoretical exercise.

Okay. All right, that's understood. And then last question, I believe you said the business making them was 375 in the first quarter. It sounded like you were suggesting that's going to be the same in the second call. I would have thought they would have been a lot more floating rate loans in there and was fed at zero and and Libor down that that would be lower. Well, we what I was saying that was in in the previous quarter. We were above 375. So this would have been in Q4. So we did have you know, the the rate dropped back in in in December and then you know, obviously the drops in March, but at the same time the cost of thought this was also down so that particular segment right? So we we had a cost of the past around 80 basis points there. And right now we we've taken it down to around fifty and there's you know a little bit more room for that going forward, So yeah, I mean, it's I mean the margin on that business again, the overall point is that it's significantly above the existing margin and and you know, if you put on if you put on a margin of three-fifty three seventy-five on a Thursday

Of 250 on the overall bank. It's going to help it's going to help with the overall module going forward that makes more sense. Okay. Thank you. I'll be I'll step out appreciate it.

This concludes our question-and-answer session. I would now like to turn the call back over to Kenneth man for any closing remarks.

Thank you operator his first want to take the opportunity to thank our staff and Our IT department for enabling us to carry on business as usual during the the lockdown was nice to know the business continuity plan works, but most surprisingly how quickly we were able to transition to to work from home help the staff remembers how to transfer it back to work from the office again at one time comes home. Thank you all for that and thanks for joining us this morning.

Have a good day.

The conference has now concluded thank you for attending today's presentation. You may now disconnect.