Q1 2020 Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the first quarter 2020 equity Bancshares earnings Conference call.
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I would now like to hand, the conference over to your speaker today Mr., Chris NASA till senior Vice President Sir you may begin.
Good morning, Thank you for joining equity Bancshares conference call, which will include discussion and presentation of our first quarter 2020 result.
In the patients to accompany our color available by a PDF for down mode at Investor about equity Bank Dotcom.
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From time to time, we make forward looking statements within today's call and actual results may vary following the presentation. We will allow time for questions and for the discussion. Thank you all for joining us with that I'd like to turn it over to equity Bancshares, Chairman and CEO Brett Elliot.
Good morning.
Thank you for joining the equity Bancshares first quarter 2020 earnings call.
I'm joined today by Greg costs over.
Our Chief Financial Officer, Greg Mayo.
Our chief Credit Officer.
Greg Anderson, our Chief operating officer, and our General Counsel Red River.
[music].
Each of our employees.
Our families.
Our customers.
Our companys navigate this challenging environment, let me first day.
Thank you to all the equity Bank associates.
And their families for continuing to work hard.
And extending the effort it tends to be successful and there's Kobe world.
Each of our stakeholders.
No that's the equity based team.
And their employees.
I've got far beyond the call of duty to protect and run the bank.
Every department.
And every location has made me proud to be the CEO of this bank.
We continue to be safe and keep your family safe.
You will notice we have changed our slide deck this quarter.
To assist in the flow of information for today's call.
We will talk about the following topics before we get to the Q anyway.
First Greg will take us through what else first quarter would have looked like without the impact of cobot 19.
And then discuss.
Our desire to increase our reserves for the uncertain future.
Second.
I'll provide an overview of equity banks Paycheck protection program results thus far.
Third Greg Anderson.
Who leads our retail and commercial sales groups.
We'll speak to what we've done operationally with our retail and production teams and how we see the near term in these areas.
Fourth.
Craig Mayo will provide an in depth credit look of our loan and special asset portfolios.
Then.
Greg will discuss the impacts of the near zero rate environment, and our balance sheet NIM liquidity and capital.
Finally.
I will close with thoughts on how we are positioning the company for the upcoming quarters.
Great.
We feel what is important for our stakeholders to here, we had a very good quarter exceeding our pre loan loss provision expectations.
We did take larger alone and no we all Oreo loss provisions to allow for future, primarily cobot 19 unknown potential credit weakness.
How do we taken our plan loan loss provision of $900000. We would have pro forma net income after tax of about 57 cents per share, which would have beat the initial street estimates a 56 cents per share.
Our results were primarily driven by an improved net interest margin stayed at a 3.67%. However, when adjusted for normalized purchase accounting accretion would have been about 3.62%. This is higher than our expectation of 3.52% as we did not fully anticipate the rapidly declining interest.
Great environment and its impact on our liability sensitive balance sheet.
Does that announced its positions on rates in the first quarter, we ask that immediately our cost of interest bearing deposits was 1.09% down 23 basis points from December 30, Onest 2019, and down 52 basis points from March 31st 2019, when it was 1.61%.
As we've stated on recent calls the deposit in retail teams led primarily by Brad Daniel Our Chief deposits officer have worked to responsibly and on the fed rate movements in the past 12 months.
In addition.
Our federal home loan bank advances dropped to 1.60% in the quarter and we have now walked in the majority of our advances at 73 basis points for another five months as such our cost of funds, which was 1.43% at December 31st 2019 decreased a full.
25 basis points to 1.18% in the first quarter and has dropped 53 basis points year over year.
Coupon loans was 4.90% at March 31st and 5.20% at December 30, Onest 2019.
Our adjusted yield on loans was 5.44% in the first quarter as opposed to 5.55% at December 31st 2019.
Our yield on the securities portfolio in the core was 2.49% as compared to 2.51% at 12 31 19.
Total adjusted yield on assets is 4.61% and this compares to adjusted yield of 4.69% at year end in all our cost of liabilities dropped 17 basis points more than our yield on assets.
Noninterest income was below our projections, primarily due to softer transaction fee activity and derivatives reacting to the lower rate environment noninterest expense was slightly better than our expectation on lower compensation than expected offset by modestly higher professional fees for items, such as Cecil and legal.
We provided a 900000 dollar provision for potential future losses on Oreo based on the Cobot 19 environment, which was partially offset by gain on sale of Oreo in the quarter.
Non interest expenses adjusted for these items was approximately $25.5 million up about 1% year over year and in line with aren't expectations.
As shown in our press release, we did take a provision for loan losses of $9.940 million. Although we are prepared to adopt Cecil we believe given the very unusual economic environment, our world is and today and for comparability to our prior periods allowance and provision for loan losses continued utilization.
Of our probable incurred model is appropriate.
Our ready and we'll continue to be ready for seasonal adoption no later than at the time prescribed by the FCC and fast speed.
When we ran the probable incurred model and given the unprecedented nature of Cobot 19, we utilized our experience from the great recession to estimate the levels of loan loss allowance adjusted for our current portfolio.
We then recorded provision to take our a triple well to these estimated levels and arrived at an allowance for loan losses at March 30, Onest 2020 of approximately 87 basis points and a total of 126 basis points with purchase accounting discounts.
We adjusted the provision through qualitative analysis, which we will continue to evaluate along with our quantitative results as we progress through this economic environment.
Actual net charge offs for the quarter were again relatively low at four basis points annualized we will talk about the balance sheet capital and liquidity more in a bit.
Yeah.
When he SPJ launched the Paycheck protection program under the carriers Act.
Our lending and operational teams jump into action to use this platform to help our customers through this economic crisis.
Teams led by Craig Mail, Julie Huber, Greg Anderson.
Jeremy Alan.
Patrick Harbor and Brad Daniel.
Worked tirelessly.
And often through the night.
Provide over 1600 PPP loans.
Rolling $459 million.
Helping to keep employed and estimated 78000 workers.
During the first phase of the PPP program.
Equally important.
As our success it processing.
Completing nearly all the applications received before the funding was ended by the SBK.
Over 1400 of these loans were to businesses applying for less than $350000.
All but 30 of the applications were completed.
And those 30 were in process when the SPJ Tran shut down when he SPJ money ran out.
The impact this has on our communities.
And their families.
By keeping employees productive.
Uh-huh unemployment.
Gives me so much pride in our equity based teams.
And their families.
In our four state area.
We were able to use the PBP program.
With 30% of the loans coming from our Arkansas locations.
70% in Missouri.
11% in Oklahoma.
And 59% in Kansas.
And finally.
39% a bit loans when our metro areas.
And 61% were in our community markets.
Greg Anderson leave the customer facing side of our bank.
And there has been instrumental in not only the PPP initiative, but also all retail.
A commercial operations.
Greg.
Thanks, Brad our top priority has been to keep our employees and customers safe while at the same time delivering the equity bank experience, our customers deserve and I've come to expect as Brad said being able to offer a PPP loan at a critical time for our business customers has been one of the most.
Satisfying experiences of my banking career. It has also been rewarding for me to see our operating teams deliver the equity bank customer experience, what pivoting from standard operations to our branch light drive through first model in March offering lobby access as needed keeping.
Distances from others, showing care and courtesy to fellow employees and continuing to run the day to day banking business seamlessly.
With less foot traffic our online activity has picked up substantially.
You may recall, we overall, our online banking experience in the first quarter 2019 and in March of this year, we saw a 7% increase in digital transactions, such as bill payments and mobile deposits and a 9% monthly increase in total loggins.
As we have modified our brick and mortar experience our customers have continued to receive the equity bank services and support they need and want.
Our branch light strategy has seen a significant increase in calls to our customer care Center. We averaged approximately 500 calls a day during the first quarter and have seen our call volume double in the first three weeks of April.
Our model is we are here for you and our staff have demonstrated that service level through our drive throughs and call Center.
The focus of our bulk management division is building upon the existing relationships within our enterprise.
The introduction of a robust asset management and trust platform, coupled with an enhanced private banking product offering has resulted in new pipelines for loans deposits and fee revenue.
As of March 31st Equity Trust and wealth management had total assets under management of $76 million generating an estimated 274000 in annual fee revenue.
We are expecting our assets under management to increase by 50% and the next 90 days.
We're maximizing our growth winning with an experienced sales team that have long lasting relationships in our community within the entrepreneurial culture of equity bank.
Also and consistent with our ongoing diligence to evaluate revenues expenses and our branch network Tomorrow may 1st we will be consolidating three smaller locations in our footprint into nearby locations.
Our customers will continue to bank with US just at locations that we feel deliver greater economic efficiencies and we will eliminate the expenses associated with those locations, while any associated one time cost will be nominal.
Finally, growing noninterest bearing deposits has been and always will be and ongoing initiative.
It is exciting for me to say that through all the noise in the first quarter, our non interest bearing demand accounts were up 6% and new online deposit account applications are up over 50% in March from February Brad.
Before I turn the call over to Craig Mayo to discuss our loan portfolio.
Let me say our goal is to provide transparency to you today.
Greg and all the leadership equity bank are always working hard to proactively manage any credits we believe to be impending problems.
We work with our borrowers to provide guidance when we see opportunities to help them.
But we also make tough decisions based.
On what we believe.
We'll be the best for our shareholders.
We are proud of our credit portfolio.
And our credit culture.
But also believe both may be tested in future quarters.
We'll continue to adjust our credit management for the long term benefit of our stakeholders.
And we will strive to continued to be the bank of choice for all of our customers.
Great.
At March 31st our loan portfolio totaled 2.5 billion.
As you can see from slides five through 13 in the slide deck.
Loan portfolio is well diversified growth in composition and geography.
I'll highlight some of the different segments of loan portfolio as shown on slide five.
Residential mortgages represent 481 million or 19% of total loans.
This number represents both organic loan originations and mortgage pool purchases.
And the properties are concentrated in the Midwest.
The portfolio consists of three five or seven year adjustable rate mortgages.
Hotels on slide six represent 240 million or 9.6% of loans.
This is made up of 93 loans.
20 loans in the portfolio comprised 202 million.
84% of the segment of our portfolio and have a loan to value a 54%.
The remainder of the hotel portfolio is comprised of 73 loans.
With an average loan size of 526000.
The portfolio is made up a strong.
Marian's to operators.
Who have proven operating results in both good times.
And more importantly.
In challenging times.
The portfolio is geographically dispersed.
Parties located different metropolitan centers slide seven shows agricultural relationships accounted for just over 218 million.
Or 8.7% of total loans.
The bank AG portfolio is diversified between protein.
Cattle swine chickens.
And cash screen.
Corn.
So he beans, cotton and Mylan.
The AG portfolio spread across the banks for state footprint of Kansas, Missouri.
Arkansas in Oklahoma.
The majority of the AG portfolio.
Hundred 30 million or 59%.
Secured by real estate.
The bank PSEG portfolio has remained stable with minimal minimal declines in land value.
Direct government payments under the MSP program supported many farm incomes in 2019.
Crop yields across our four states better than average.
Our AG lenders had been proactively working with our farmers over the past two years.
Just helped mitigate the impact of lower commodity prices on the banks AG portfolio.
The bank has 222 million in construction and land development loans.
95% in vertical construction.
Slide eight shows.
The bank has a 165 million commercial construction.
46 million in residential construction.
And 11 million they can land.
The top 40 commercial construction loans totaled 161 million.
Were 73% of the total construction loan portfolio.
Of the 40 largest commercial construction projects to have been interrupted by Corona virus.
Additionally, construction has been completed on two QSR restaurants.
Which are unable to open.
Due to the states stay at home owner.
No other construction projects have been delayed were impacted by the Corona virus.
The banks residential construction portfolio is custom built spec homes to strong.
Season builder developers.
With which the bank has had a long relationship.
The vacant land is dispersed over 71 loans for an average loan size of 159000.
The bank has 96 million in restaurant loans.
57% in the QSR National concept segment.
The portfolio consists of 170 loans for an average loan size of 514000.
The bank works with experienced strong franchisees.
Had a successful track record owning multiple locations.
The banks total retail exposure is 144 million.
Were 5.7% of total loans as seen on slide nine.
Car dealerships accounted for 48 million or 2% of total loans.
Shopping centers strip malls account for 40 million or 1.6% of total loan portfolio.
Shopping centers are made up of 39 loans with an average loan side of just over $1 million.
Retail stores account for 29 million.
Or 1% of total loans.
Lenient stores or 22 million and are less than 1% of the overall portfolio.
The bank has 132 million manufacturing and machine shops.
Were 4.4% of our total loan portfolio.
As indicated on slide 10.
Aircraft related manufacturing makes up 63 million.
132 million total.
And is comprised of seven relationships.
The aircraft industry.
Has been adversely impacted first by the Boeing 737, Max grounding.
And second by the Corona virus.
In the states stay at home owners.
Aircraft related manufacturing companies at the bank works with our not immune to the issues facing the industry.
The second half of 2019 in Q1 2020.
So to delay and pull back on sales.
We believe these companies have solid experienced management teams.
We are proactively address issues and have solid balance sheets.
Entity and ownership with access to additional capital if needed.
The bank has just over 85 million multifamily properties.
3.4% of total loans.
Made up of 93 loans with an average loan sides of 915000.
As noted on slide 11.
Over 9 million of the banks multifamily portfolio consists of low to moderate income apartments.
As noted on slide 12, the bank has limited exposure to shared national credits.
The six companies and eight loans totaled 45 million.
Or 5.6 million per loan.
This is down 18 million from June 2019, when the bank had 63 million.
Shared national credits.
As noted on slide 13 at March 31st the Bank had no direct exposure to oil and gas exploration.
Has limited related exposure to oil and gas.
19 million in 43 relationships.
Medical and assisted living each at 15 million in their portfolios.
As of April 20 Threerd.
Neither the assisted living facilities, nor the medical facilities.
I have been impacted by the Corona virus.
Our team has continued to work responsibly especial assets.
Net charge offs in the corner of only 257000.
Annualized to four basis points.
The ratio of classified assets to regulatory capital is down to 20.2% at quarter end.
Oreo is down 1.5 million during the quarter.
Before the provision discussed earlier.
To 5.9 million as we sold in large real estate development asset that had been acquired in one of our mergers.
Slide four.
Shows are covered loan modifications at March 30 Onest.
122 million in.
In modifications as of April Twentyth were 430 million.
Representing 17% of total loans.
Of these.
290, we're consumer customers.
And 494 commercial customers.
Our unfunded commitments have been very stable.
In the funded balances are actually down slightly from year end.
Our AG portfolio has paid down with the season in our commercial portfolio has drawn up a modest 10.8 million.
Since 12 31 19.
Brad.
Greg Mayo and his team did another outstanding job in the quarter to continue to improve our loan book.
And reduced special assets.
Clearly the emphasis will be important as we look into the next few quarters.
We recently hired that then he'll as our director of special assets.
His prior experience working for a 5 billion dollar bank in Chicago will be helpful to us as we prepare for what could lie ahead.
Greg.
Equity Bancshares entered the Kovac 19 environment as strong as we've ever been.
Our capital ratios at the bank are very strong with total risk based capital of 13.50% and tier one leverage of 9.39%.
Our holding company capital ratio of tangible common tangible assets is 8.47%.
And tier one leverage is 9.02%.
As noted in our press release, we have also temporarily suspended our stock repurchase program as we believe capital preservation is important right now.
Board of directors will revisit that important initiative as an landscape presents itself more clearly in the near future.
In addition to the loan analysis, Craig Mail presented we also have done a full scope review of our balance sheet. Our securities portfolio today has 83% in government and agency securities and the balance primarily in season Muneeza. We acquired mainly through mergers are bound bank owned life insurance is with very reputable company.
As shown on slide 27.
As Greg Anderson stated, we've seen growth in our noninterest bearing deejays and our signature deposits those that are transactional in nature represent 74% of total deposits in our spread over a forced a geography with both metro and community markets. We do not have a significant concentration of deposits to anyone market.
Speaking to liquidity, our primary and secondary liquidity is very strong at just over $2 billion with approximately $1.2 billion of that as primary.
We consistently test our liquidity sources and have also done so at the end of the first quarter and there were no issues with availability.
We are modestly borrowed at the federal home loan bank with significant excess capacity of over $350 million today.
Our other borrowed money as a modest $63 million and we are established with the federal reserve for the PPP Lf as well as the discount window.
The remainder of our liquid sources is disperse between access to fed funds sale of unencumbered investment securities broker deposits and Boeing.
Although we have discussed capital I feel it is important to note that we expect our balance sheet to be stable. The next two quarters as bankers and customers alike try to understand what and where the opportunities and challenges will be.
That said, we are well positioned in our balance sheet to meet the upcoming quarters with strength and ability to serve our customers needs.
I will also address interest rate sensitivity and then give the Mike back to Brad to finish our commentary our net interest margin did increase nicely in the second quarter as our liability sensitive balance sheet reprice downward faster than our assets.
We were able to reprice all of our interest bearing transaction accounts and in the next 12 months, we have approximately $600 million a time deposits repricing.
In the late third quarter, our FHLB term advances will reprice again, and assuming today's rate of 51 basis points would come down from the 73 basis points I mentioned earlier.
Currently 52% of our loans or $1.3 billion are variable rate and 61% how floors and of those 69% have reached or floors.
Passionately, 65% of loans, which have not reached or floors are within 25 basis points of doing so.
NIM guidance can be a bit challenging right. Now however, I believe we may improve slightly in Q2, two as high as 3.65% as we will have a full quarter of benefit from our liabilities repricing in late Q1.
As our adjustable rate loans continue to reprice at their contractual dates we believe NIM will have a mild contraction down to approximately 355 to 360 in Q3 and four.
This analysis does not include the impact of the PPP program, which will distort from both the PPPC income and it's low coupon Brad.
As I think about the next few quarters.
I know we cannot project.
Or predict the exact outcome.
So much depends on America going back to work.
And on what the shape of the recovery looks like.
I do think about the federal reserve acronym used in examinations.
Camels.
As it simply lays out the components.
Needed to be successful in banking.
We have a solid capital base.
And we believe we have access to additional inexpensive forms of capital if needed.
We are also growing capital organically.
As our bank is doing well today.
We believe it will be sufficient in the future.
We went into this downturn with strong asset quality.
And as a base of strong borrowers.
All of our mergers have onboarded successfully into equities credit culture.
And we feel confident about our customer bases.
Each region, we bank.
There will be asset quality concerns going forward.
And we have the personnel.
Systems.
And decision, making expertise to navigate the issues.
We have taken advantage of these opportunities it passed down cycles.
And we look forward to accelerating again.
During this cycle.
The M in Campbell is for management.
We have an outstanding management team with many years of experience.
In all of our critical functions.
Very capable redundancy.
At an impressive amount of tenure of talent equity bank.
We will also continue to bolster the team if needed in any area.
This operating environment will require a dynamic leadership.
And this management team will step up to meet that challenge.
Greg and I believe we're positioned for reasonable earnings in this environment.
As our balance sheet hasn't changed much.
We have executed the PPP initiative.
And that I believe will help us in the next quarter.
No one really knows what is around the corner.
However, I do know we're diversified an asset base.
Geography.
And product offerings.
We have avoided concentrations of some of the higher risk loan holdings.
It should not face those particular challenges.
Which leaves our resources available to deal with the challenges that will no doubt arise.
As Greg stated.
We have excess liquidity, which will assist.
Planning opportunities.
Reduce risk on both sides of the balance sheet.
And finally.
We have been liability sensitive, which has helped us grow EPS.
As the fed move rates downward.
We'll continue to look at strategies to take advantage of.
And lock in this particular rate environment.
We have built a tool chest, which include enhanced online banking.
And more importantly.
Bankers who are experienced.
And no their customers.
We have reached out to all of our small and large commercial customers in the past 45 days.
Understand their needs and concerns.
We want them to no. We are not just a source of funds or services.
We are advisors and providers.
We'll also continue to manage capital and provide for a triple well to do our best to make sure. We're prepared for whatever comes our way.
We founded this bank with an entrepreneurial vision.
And a spirit.
And we will continue responsibly execute with that purpose.
As always I. Thank you for your continued support.
In the past.
It's certainly right now.
We equity bank cope each of you is being safe.
And that your families and teammates are healthy and positive.
We're happy to take questions at this time.
Thank you.
Ladies and gentlemen, if you have a question at this time. Please press the star followed by the number one key on your Touchtone telephone.
If your question has been answered or you wish or move yourself from the Q.
We make us the pound key once again to ask a question. Please press Star then one.
And our first question comes from Jeff Rulis from D.A. Davidson Your line is open.
Thanks, Greg I think you mentioned the margin was adjusted margin or core was 362 in the quarter what was that in the fourth quarter comparable figure.
Three 352 I believe.
Okay, and the 365 you reference in.
Second quarter is on the same baseline right. So.
It could three six.
That is correct.
Okay.
Then you're going to the.
Maybe the fee income and expense lines.
The.
With the fair value hedge baked into that.
Figure was that offset.
Okay.
Yes, no the fair value hedges a.
As a temporary hit to noninterest income of about $500000 this quarter.
So it but it isn't it said that okay.
Not at noninterest income.
Great.
So within that figure it.
If we're to add that back in I think you talked about a pretty significant spike and you out.
I don't know how much you.
At a turn that said.
Fee income, but any thoughts on if we add back that.
Sort of fair value that.
Gets you closer to 6 million during the quarter.
I think you mentioned mortgage banking should have a better quarter.
Got to expectations on the fee income side, particularly what's driving that a increase.
Let me speak to the overall noninterest income.
And then I'll, let Greg Anderson talk about and assets under management.
Our noninterest income actually held up fairly well during the quarter we're seeing.
Sure.
Debit transactions, which could be to be expected, but overall.
We add the fair value hedge mark to market adjustment back in.
We weren't far off our guidance from before.
As we look out into the second quarter I think we would come off the previous guidance a little bit.
Just anticipating fewer.
You are transactions from the DTA side, which I think that we are experienced a small amount of and so instead of being in that 6 million dollar range and I would look to that to be closer to probably down 8% to 10% from that number Greg you want somebody you Im yes. Good morning, This Craig Andrew.
And we started our trust and wealth management group about 18 months ago hard to very experienced senior professionals that have over 25 years experience and over the last six months. They have really worked hard from a new business development perspective, and we're just starting to see.
He the fruits of those calls and as I stated in our earnings call. We expect our he went to increase by about 50% over the next 90 days and we actually had one of those new pieces of business come in this week. So.
We're right on that schedule.
That we that we talked about.
Okay, Great and then of the expense side, just wanted to make sure again that Oh, Oh Oreo reserve was in was in others.
And we can kind of back that out of of expenses.
That is correct Jeff.
Okay and so.
So I guess implies kind of a low.
25 million kind of run rate any puts and takes you mentioned the branch consolidations upcoming.
How do you see the run rate of expenses impacted.
Yes, good call it's in the low 20 fives.
Is what I think is is a fair comment.
And the branches or our AR.
Not real big.
We probably think its.
Somewhere in that three to 400000 dollar range as far as.
Non interest expense savings.
[music].
Got it okay.
Okay I'll step back thank you.
Thank you Jeff.
Thank you.
Next question comes from Michael Perito from KBW. Your line is open.
Hey, good morning, guys glad to hear do well thanks, taking my question.
Mike.
I wanted to spend an extra may I appreciate all the color in the prepared remarks, but I want to spend an extra men on the the hotel portfolio. I was curious if you can give us a little bit more flavor.
You know how.
Yes, I guess some background as I think about it you know and the economy kind of hopefully starts to recover there. There's no traveled Nike one of the light later things just curious maybe just said the starting point can you kind of give us.
What.
Occupancy typically look like where it that now and where kind of has to move to just to be able for these projects to service their data as you guys see it.
Sure. This is.
This is Craig mail so occupancy.
Traditionally in the hotel industry.
In the 70% range.
To service to service the debt, we're looking somewhere in the 40, 45% range.
We've seen.
Hotels impacted.
Go down to the 10, 15%.
Some have maintained occupancy in the 35, 45% range. So it's kind of over the board, depending upon where the where the location is.
Our whole hotel portfolio by and large.
Reacted very quickly to the to the covert 19 and the declines in in occupancy.
The reduced.
Expenses.
The.
Opted to lower occupancy levels. So they weren't linked to the party they were kind of on the forefront.
So we anticipate continuing to work with them.
The other thing that's good about our hotel portfolio is that we have the loan to value and that is low and that the tough our top 20 largest hotels are in the 54% range LTV. So we have some room to work with if you think some additional funding.
And and again, we have some pretty solid.
Borrowers that that we're working with.
And the public on slide six it says here you guys have a decent chunk in Oklahoma, and Texas and the hotel portfolio was there any concern on your end there that that some of the stuff going on with oil can indirectly impact those those businesses ability to recover.
We don't we don't see any any direct impact on on the oil I mean, there's going to be slow down the economy that will have some impact but the hotels are in.
Major metropolitan areas that aren't.
Reliant the business travel and stuff was not reliant on the oil and gas industry. So so that shouldn't have a huge impact on those hotels.
We don't have anything in EMEA in Midland, Texas, or anything that specifically oil and gas related.
Okay helpful. Thank you.
Just a couple quick one questions one Brad you much repeating what the notional dollar amount was the of the PPP and reminding us we think that be could be on that approximately.
So I've got the numbers given numbers.
Yes.
The numbers on the I got to be coach to your Michael.
I've got the numbers on the total program outstanding through today.
It's about 400.
$560 million.
Of originations.
I think you could use about a 2% number on that to get to fee income number as you blame into three three buckets together I think that would give you something close.
That's perfect and then on the more traditional portfolio.
What I think about that NIM guide that Greg provided what does that assume in terms of kind of traditional commercial lending and where did the pipeline stand there and how did you guys kind of course, the that play on near term.
So the pipeline.
Michael is really hard to understand today the deals that we had in the pipeline in on on the prospect list are still there customers are still evaluating those moves.
We have customer still moving business over to us that we originate from other institutions, but I would say that you know a guidance instead of growth is.
I think we're going to be somewhat stagnant, there's going to be some projects that we don't want to do that customers might want to do there's going be some projects that customers are just going to put on hold for little while to evaluate what's going to happen in the economy. So I'm not.
I'm not very bullish on the fact that there's going to be a whole lot of origination going on.
But our guys are working really hard.
The PPP program is going to open up some doors for us on both the deposit side.
And the lending side, we didn't have before we sell did this like not either and so through the first part of the program. We were able to originate about 6200 50 loans. We only had 30 of them that we're stuck in the queue that didnt get funded.
When they shut off we've got everything approved it's been approved today has been.
As you train number so we'd be able to take business from U.S. Bank Bank of America Wells Fargo.
And regions bank and lots of others. It just couldn't get this stuff done and those customers have told us that we got these things then form they would move their deposit relationships to us. So actually see this as you know there's a silver lining in this and that we've got some opportunities we wouldn't have had before and so I don't know that they come through the next quarter or.
Too, but I think they'll come through in this year and in the sales cycle. So.
That's helpful. Do you guys know how many of the TPP loans that you accrue that were with new customers.
Don't have a specific number on that.
But we can get that we'll get that broken out but.
We did not track that specifically.
Was it a majority of the second wave, though or the second stole.
Oh, the second wave the interesting thing is the second wave the average balances and this is from memory.
Average balances say were $275 million, our $275000 per loan customer in the first wave. The second wave is about 110000.
Yes, so the second wave is actually small proprietors.
You know I mean, it's small business stuff and we really went out unsolicited make sure every one of our customer bases.
Sure.
We're scoured to make sure this and this was spread out from Arkansas to north.
The northwest, Kansas, So I mean, we're really proud of our teams for getting every small business customer out there contacted and making sure. They knew that we we wanted their business. So we've got loans, we did for $1200.
And we've got loans that we did for 10 million so.
That's really helpful. Brad. Thank you. It just one last quick one for me describes the tax rate elevated in the quarter or any thoughts there.
Yes, but not only temporarily we had some discrete items come through on on a very low pre tax income basis, Michael I'm still use in that 22, and a half were centers as well.
My forward guidance.
Perfect. That's it thank you guys appreciated stay well.
Thank you.
Thank you and again, ladies and gentlemen to ask the question. Please press Star then one now.
And our next question comes from Terry Mcevoy from Stephens. Your line is open.
Good morning, guys.
Good morning, Terry.
First off thanks for the detailed investor presentation, I'm sure a lot of time going into that so I appreciate that.
Maybe a question on the hotel portfolio how long.
Have you had relationships with those top 20.
Top 20 borrowers that your reference in the presentation and then.
Maybe give us a perspective some perspective on how quickly that portfolio has grown so what we're balances colt called a year ago and maybe two years ago. If you haven't.
Terry This is Craig Anderson, our top 20 customer listen the hotel space, we've had relationships over five years with most of those operators, they're very proven our largest customers in the boutique hotel space and.
You know has 17 or 18 hotels across the us as Craig Mayo stated earlier, they were very aggressive in furloughing workers and cutting their expenses.
Six weeks ago, and we feel like they are in very good shape and our loan to value on those properties are as Craig stayed at 54% to 55%.
Terry I would chime in that.
You know bread night.
We'll go back that's how we met.
And it was when I was in the hotel business and.
A lot of these.
Folks that Greg Anderson is talking about.
We've known for literally a generation are too.
And that's how they've spent their careers primarily in the hotel business.
And we've been talking to then frequently and it's very enlightening they have the ability.
As most hoteliers do.
Specialty come off the really.
Good good piece they.
Favorable economic cycle.
They've got the ability to.
Getting back.
Some of their offerings in some of their cost structure to where they can continue to be successful.
With lower room rates and lower occupancy simply by.
Managing their cost time, and the good ones know how to do it and they've already reacted to it and so it's still going to be what is an essence a re ramp.
To a certain degree for that industry, but these operators that are in our portfolio.
Our skilled at doing it.
So you had a part of your question Terry is were actually down from June 30 in this category.
About.
Five or 8%.
We actually and that actually included some that's a big changes actually we actually have some better hotel product in there that we didnt a year ago were down seven or 8%, but the mix and that's probably different 20%.
The borrowers we brought in are better than the Broward borrowers. We ran out so we ran out three or four hotel.
Failures, we didn't think we're doing the right things last year, we replaced them with better lower loan to value product and there were about the same we were 18 months ago or so.
And.
That's been the $434 million a commercial loan payment deferrals, what would be the top three industries receptor.
That.
But you don't.
So they would probably is the top two anyway would be the hotel and restaurant groups.
From a from a number standpoint.
The rest of it would be pretty much dispersed over over the portfolio. So those would be the top too.
And then just the last question, but I think of Wichita, I think the aerospace industries and I know you've got this slide in the presentation.
The exposure there could you talk at all.
The ripple effect or what that what that's doing the local economy in terms of.
The job weakness and the overall weakness within that within that industry.
Yes.
So I would tell you that you've got to slide detailing the exposure to direct exposure on that.
Good thing is Terry from.
Indirect exposure you know were fairly geographically dispersed so Wichita is just over 10% of our.
Our assets are in Wichita.
From a company standpoint, so we're not going to have a significant influence your impact we have no I believe we have no builder in Wichita that we finance homebuilder. So we don't have any exposure on the construction homebuilding side there.
And so.
Yeah, we feel fairly unfortunate about that aspect.
But we haven't seem to ripple effect, yet through the economy.
But.
You know if.
This continues for a long period of time, it will I would actually say I've had conversations with several people in the.
Business jet space that.
That space is actually picking up.
As people aren't wanting their employees to travel commercially.
I know that they.
Yeah.
Some of the I'm I'm trying not to divulge information here some of the.
What are they called air share companies have seen substantial spikes in membership over the last four weeks and so.
The hope on that is the business jet market is going to pick back up because as we open back up I think people are going to want their executives flying on.
Airshare type product versus flying commercially.
For safety standpoint.
And so we hope that the.
Business jet market picks back up.
Where this 737 market is probably going to stay slow.
Great appreciate that thanks.
Thank you.
Next question comes from Andrew Liesch from Piper Sandler Your line is open.
Sorry, guys, you've actually answered all my other question I.
That said acute sorry about that.
Thank you.
And we do have a follow up from Jeff Rulis from D.A. Davidson. Your line is open.
Thanks, Greg just a quick question on the assuming you you're running parallel with with C.. So any idea of.
If you if you had adopted what the.
Reserve difference would be.
Yes.
So obviously, that's a great question.
Yes, and because we didnt.
Disclose any of our Cecil numbers I'm going to talk around it for a moment, but I think it safe for me to say as we go back and look.
At our.
12, 31, 19 numbers in the preseason environment.
Remember that we were.
A serial acquirer, that's really part of the cornerstones of how Brad founded the bank and so we had a lot of.
Because of the way you will purchase accounting rules worked on your wiped out.
A triple wells from the acquired institution. So we were running somewhere between 50, and 55 basis points traditional a trip well.
The pre Cecil environment.
When we hit January 1st on had we run Cecil.
I would tell you that I think that we were probably half of the aid triple well that we.
Would have wanted to be in a normal environment.
And then when we get to Threed 31.
Of course things are very different but the way we did our April 12.
Our a trip well provision in in Q1.
As we said on the call we went back and looked at what we thought.
Good gifts to get people as at least a stepping off point to understand today versus the great recession, whether it's the same or not we don't know, but at least it's something that people can understand how we run Cecil I believe that it would that the Cecil results would have been very similar maybe a little smaller actually but very similar.
Okay appreciate it.
The credit marks that you carry on on acquisitions I think you you alluded to that I think trued up it was something like 125 of loans.
That is correct I believe it was actually won 26 that's correct.
Okay. Thank you.
Thank you.
Thank you and that does conclude the question and answer session for today's conference.
Ladies and gentleman that does conclude today's conference. Thank you for your participation you may now disconnect everyone have a wonderful day.
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