Q1 2020 Earnings Call
Ladies and gentlemen, today's conference is scheduled to begin shortly please continue to standby. Thank you for your patience.
[music].
Ladies and gentlemen, today's conference is scheduled to begin shortly please continue to standby. Thank you for your patience.
[music].
Welcome to Wintrust financial Corporation's first quarter 2020 earnings conference call.
Following a review of the results by Edward Wehmer founder.
In Chief Executive Officer.
David Dykstra, Vice Chairman and Chief operating Officer.
There will be a formal question answer session.
During the course of today's call Wintrust management.
It may make statements that constitute projections expectations.
Lease or similar <unk> forward looking statements.
Actual results could differ materially from the results anticipated or projected in any such forward looking statements.
The company's forward looking assumptions.
Could cause actual results could differ materially from the information discussed during the call are detailed in our earnings press release and in the company's most recent form 10-K in any subsequent filing.
On file with the FCC also our remarks may reference certain non-GAAP financial measures earnings press release slide presentation.
Include a reconciliation each non-GAAP financial measure to the nearest comparable GAAP financial measure as a reminder, this conference call is being recorded.
Now, let's turn the conference.
All over to Mr. Edward Wehmer.
Thank you welcome everybody to our first quarter earnings call.
I actually did as well with me, obviously, what Dave Dykstra.
Jim Gray and our new Wintrust, President Rich Murphy, Vice chair and Chief lending Officer, Capel, Our general counsel.
Start Chief Financial Officer.
Okay bogey is very worried because we're all different places in her shop color doesn't come that far out so Kate I will behave I promise.
As you can see we do have <unk> additional wintrust exactly on the call I think it's important to get to know that better I think they'll be a lot of questions a rising just because of the times and.
What's going on.
So I thought it better to have.
They have a more reinforcements around.
Format will be for most part as usual.
No trend at the parent which already in the release to leave more time for the questions as I said it I'm sure you'll have a number of them.
I'm going to give some general comments.
Regarding our results, Dave Dykstra will turn Doug will provide a more detailed analysis other income other expenses and taxes that could be for a summary of comments. It talks about the future we'll have time for questions.
Before I get into the details I'd like to do a heartfelt shout out.
What I'd lose the absolute best grew in the banking business.
Case in point, a couple of cases employed.
Cruise move seamlessly into the remote locations well should be able to grow the bank.
Take care of our clients, it's worked extremely well our technology crews on a wonderful job.
Also in and seven days, a we stood up.
For a front end portal for P.P.B. from scratch.
We opened the portal where are the only ones opened on the evening of April Threerd, firstly available and actually work flow flawlessly.
Two weeks thereafter, with all working from remote locations that processed 8900 applications for $3.3 billion.
That put us in a top 15 of banks in the country in terms of total volume medium size. These launches $85000 resumes fees to wintrust.
For around to approximate approximately 80 $85 million.
Our debts are cleared for around two already have close to 2000 applications. Another.
Eight $9 million and for use in their applications again or in the lower area and the lower end area. So we know we're taking care of all of our customers across the board.
I couldn't be prouder team, that's been able to do this.
One point in time, we had a.
A need for more quality control people.
We had 300 people volunteer people worked tirelessly all night, one guy they called the Wolf after up it was helpful. Pulp fiction he would get involved and he can screw up other banks passes so quickly was unbelievable.
Now onto our first quarter earnings.
As you can see we made close to $63 million down 27% from.
In the fourth quarter, but.
But for obvious reasons earnings for sure dollar for you take our pretax pre provision pre MSR valuation income, so or $150 million, which is almost a record for us it's a pretty darn good in terms of core earnings and that's before really any.
One of the probably close to $100 million will have in P.P.P. income, which will act as a reserve for us.
A question for US we believe running eventually they may come along.
Net interest margin or.
Held up pretty well those were able to drop our deposit costs rapidly you still have.
Room to go there as indicated on page 18, the press release, the five basis point margin decrease was due to really a four basis point drop in the free funds ratios you expect as the overall rate environment goes down.
And one basis point difference between the 12 basis point drop in order to guess ideal 11 basis point drop.
And liabilities.
Yeah, that's it that it should interest income was essentially flat.
Well really one less day was offset by $925 million average, earning asset growth.
We expect a core NIM, a that being net interest margin without the effect to drop to the levels.
Previously disclosed and fusion.
In pairs in the past.
For future quarters wherever the amortization of the P.P.P. the terms of which are a question, but no longer than two years.
I expected to be much shorter will have a bit material positive effect, both emerging in the net interest income.
Even in the worst case.
Areas.
Under the provision of credit quality adopted Cecil until they really I think is I picked the wrong quarter to quit a stiffen glow phase, we certainly picked the wrong quarter to pick a put c. so in effect.
Well, we adapted c., so that they want adjustment of $47 million first quarter.
Revision of $53 million, which exceeded the fourth quarter provision by $45.2 million or any reserve was up 95 million from year end to dial $253 million I'll leave it from here as I'm sure you have a number questions.
On the Cecil calculations, so I'll leave that to Archie.
Experts, who are here to answer your questions, but the charge off rate basis points or $5.3 million.
Q1.
Credit quality remained relatively in good shape of the same period over period, an apples to apples basis and feels increase through the three factors first the pool accounted for acquired loans.
Went away with these apps and the Cecil adding about 35 and a half billion dollars total second approximately $21 billion and do not accruals were added normal course of business largely these being and SBH alone.
We should get good recoveries, but we supported non accrual.
These assets have been marked appropriately it'll be resolved relatively quickly.
Finally, commercial print finance loans over 90 days delinquent, so accruing about $5 million to the state impose restrictions on canceling policies. During the current crisis as you know our commercial print finance portfolio is regulated individually by all 50 states in the case of crisis like we have now many of them.
Preclude you from canceling policies. However, in the past, who I seen minor tick ups because they will go back and honor. The actual cancellation date in most states are a critical backing out of that but.
So really the insurance companies take to hit on that but we do expect a minor.
Tick up in charge offs, but I'm not as much as you would imagine that's always been the case the past food Hurricanes fires 911 et cetera.
Do you have to see a material effects of the credit crisis at our credit quality.
PPP loans, coupled with interest and principal deferrals have been granted to custom two granddaughters.
Borrowers and other customers.
Regulators are really cooperating on this and we believe that there should be able to weather the storm.
At least by time for up our borrowers coupled with our highly diversified portfolio and history of loan losses, and troubled times vis-a-vis peer group.
Cautiously optimistic.
Mystic.
However at this point is a toss up is too if and when the stressful appear in the portfolio.
With our expected core earnings augmented by PPP earnings adequate reserves and capital we feel adequately situated to take out whatever comes our way look forward to your questions in this area.
Dave is going to cut there are other.
A couple other expense a detailed but I'd like to suffice it to say that they had a great mortgage quarter, notwithstanding the 10.4 million mortgage servicing valuation expense.
Jason This but I think they can't go down much more they have to be close about around mortgage servicing rights.
Net overhead ratio was 1.33% down 20.
<unk> basis points from fourth quarter 19, more than made up for the drop in in the net interest margin.
The balance sheet from [noise].
We grew.
Total assets is 2.2 million <unk> billion dollars average, earning assets were up 925.
$25 million.
Our loans were up a billion dollars, which Murphy will take you through the core that but after that was probably related to draw a line draws which happened very quickly weve seen a bait I'm pleased to get the.
The initial fear of everybody's got draw their lines is kind of abated, a little with the work of the.
The other opportunities.
The rest is across the board and we're happy to break that out for a little bit later.
We start to quarter with an $870 million of Oh loans or where the period end exceeded the average Silicon Assembly the head start the.
Second quarter that doesn't include the P.P.P. loans, which as you know or.
Now with a round two coming on would be closer to three point, we funded about 3.3 billion and way up we'll have about 3.7 up to $4 billion, depending on how quick the window closes and round two.
Deposits grew a billion three in the quarter.
We feel very good about our liquidity position right now.
We will be able take advantage of you know we had good liquidity to begin with that bulked up in anticipation I was going on but our of NEXAFED loans, where we offer 50 times.
Yes, she coverage because of our <unk> or a 15 charters and other wealth management opportunities.
Who didn't see deck, which we expect to whoa slow down a little bit, but I'm sort of $1 billion to see that are so different exchange money at the end of the corridor.
So.
We feel very good about the where we are loan deposit ratio is 90%.
And well.
Well, obviously grew up with P.P. loans, but between our liquidity at our ability to take advantage of up.
The fed's lines are related to PPP, we feel very good about or liquidity, where we.
Stand right now.
So all at all we Oh, it was our balance sheet.
Our loan pipelines believe it or not remain very strong.
I did have a halo effect coming out because of other banks dropping the ball and PPP, we were able to pick up a number of prospects and customers.
For Duke.
And just the word of mouth is spreading the wintrust came through in our relationship style banking really works so.
Our pipelines are good we have to remember good loads are made in bad times. So we feel very good about where we are right now and the balance sheet side, we think we're well prepared.
Let's turn over to Dave who is going to provide some detail and other income other expenses in Texas Dave.
Alright, Thanks, Ed.
As normal I'll, just briefly touch on the non interest income and noninterest expense actions.
And the noninterest income section or wealth management revenue increased 942000 to a record.
25.9 million in the first quarter compared to 25.0 million in the fourth quarter of.
Last year, and it's up 8% from the $24 million recorded a new year ago quarter.
Overall, we believe in first quarter was another solid quarter for wealth management unit asset valuations declining towards you know the quarter.
Create some headwinds in the second quarter, but trading volume is also fairly solid right now so we'll see how that comes out in the second quarter, but the first quarter was a solid quarter for us.
Mortgage banking revenue increased by 1% or $466000 to eat 48.3.
<unk> million in the first quarter.
On a 47.99 recorded in the prior quarter.
And was up a strong hundred 66% from the 18.2 million recorded in the first quarter of last year.
The company originated approximately $1.2 million of mortgage loans for sale in the first quarter of 2020.
This compares to a similar $1.2 billion originations in the prior quarter and $678 million in the first quarter of last year.
The increase in revenue from the prior quarter results, primarily from $17.4 million of a derivative income associated with the mandatory commitments to fund mortgage.
Compared to a 1 million dollar derivative loss on similar activity in the prior quarter.
It was offset by negative MSR adjustment net of the hedging contract during the first quarter of approximately $10.4 million and that compares to $1.8 million positive MSR adjustment in the fourth quarter of 2019.
And we also had $5.1 million less some capitalized mortgage servicing revenue compared to the prior quarter I think we had one less sale of our no bar loans during the quarter. So there might be a little bit of a timing difference there.
The derivative income and I talked about really is associated with the surge or the refinancing.
In activity.
Where we had mandatory commitments to fund approximately $1.4 billion of mortgage loans at March Thirtyth aren't March 30, Onest of 2020.
And that's roughly a billion dollars more and mandatory commitments to fund than we have averaged over the past four quarters. So it hasn't really been a big.
In the prior quarters because of the amount of loans that we.
I had the mandatory commitments to fund were always fairly stable and around a few hundred million dollars and that just jumped up by about a billion dollar. So it's a positive momentum in the mortgage business and.
Obviously that pipeline bodes well for.
Closings in the future quarters.
So the mix of the loan volume originated for sale was that was related to refinance activity was approximately 63% in the first quarter compared to 60% in the prior quarter. So the refinance volume increased slightly during the quarter in the pipeline and still predominantly.
We filled with a refinance applications. We currently expect second quarter originations are to be a stronger than the first quarter.
And that's a result of the continuation of the refinance activity and the strong pipelines table 15 of our earnings release provides a detailed.
Relation on the components of the origination volumes, yeah, and the production revenue and MSR capitalizations pay downs and valuation activity.
The company recorded losses on investment Securities approximately $4.4 million during the first quarter.
Primarily related to unrealized.
Losses associated with equity funds at the holding company has investments in.
Which were a initially used to seed money for proprietary mutual funds and as you all know equities had big drops at the end of the first quarter. So those valuations decline.
Other noninterest income totaled 18.2.
<unk> million dollars and the first quarter up approximately $4.2 million from the $14 million recorded in the prior quarter.
The primary reasons for the higher revenue in this category includes $3.9 million some higher swap fee revenue in $2.1 million of net gains related to sales from certain loans and leases.
And this was offset by 2.7 million dollar.
Of lower BOLI income was moly investments that's supported deferred compensation plans were negatively impacted by equity market returns.
But I should note that the decrease in the bullion coming up on first quarter resulted in a similar decreasing.
Compensation expense during the quarter. So the net effect of that is is washed out.
In total.
Turning to the non interest expense categories noninterest expense totaled 234.6 million in the first quarter, non approximately $15 million or 6% from the prior.
Quarter.
A number of factors contributed to the decrease salaries and employee benefits expense were down $9.2 million from the prior quarter.
Lower levels of advertising and marketing expenses of 1.7 million compared to the prior quarter.
We had $1.4 million less of Oreo expenses.
Yeah, we had $3.1 million some charges in the fourth quarter.
Last year that didn't recur related to legal settlement charges contingent purchase price payments and costs and terminated two small pension plans.
And then those have aforementioned changes I just discussed were offset by.
By $2.8 million of higher FDIC insurance assessments.
To do them rebates from the FDIC substantially subsiding and the current quarter compared to the prior quarter.
I will talk in more detail about the the major categories now salaries and employee.
Benefit to expense categories, I said declined by $9.2 million from the prior quarter. The majority of the Cline and that's expense category related to reduce incentive compensation accruals.
Which were approximately $8.7 million lower than the prior quarter would that change being driven largely by long term incentive compensation.
Rooms, which are forecasted to be negatively affected by the impacts of the current economic conditions brought on by the pandemic situation.
Additionally, salaries expense were down by $1.6 million from the fourth quarter. The primary caused the decline was EUR 2.2 million dollar reduction in deferred compensation costs that were really.
They did two people investments I previously discussed.
And then offsetting those decreases were employee benefit expenses were up approximately $1.1 million during the quarter due to higher amounts of payroll taxes, which tend to be elevated in the first quarter the year.
Data processing expense.
Greece by $804000 in the first quarter compared to the fourth quarter of 2019. This was due primarily to approximately $1.4 million de conversion charges related to the countryside acquisition versus only 558000, a conversion charges related to the FCC capital Bank system.
Version that happened in the prior quarter.
Oh, the additional operating cost of data processing related the franchise also contributed to the increase.
For your information, we also expect to incur slightly more than $3 million of additional conversion related charges in the second quarter related to the just.
I Didnt come version of the countryside Bank transaction.
And by the way our teams did a terrific job of completing that this past weekend given they were working in a remote work environment and social just been seen requirements et cetera. So our first virtual conversion.
Northwell.
No FDIC insurance expense as I mentioned was up $2.8 million in the first quarter as a result of the assessment credits substantially going away, we had roughly $200000 an assessment credits yet in the first quarter of 2020, but we're essentially done what those and agreeable a little less than 100.
$1000 I could still be no credit did.
Professional fees decreased to $6.7 million in the first quarter compared to 7.6 million in the prior quarter.
Professional fees as you know can fluctuate on a quarterly basis based on the level of legal services for acquisitions litigation problem loan workouts as well as.
Then it consulting services.
This category of expenses came down from prior quarter to due to a decline in legal fees associated with litigation collections and acquisitions.
A category also experienced a slightly lower level consulting engagement costs.
And if you look at the professional fees.
Over the past five quarters, it's averaged $6.8 million. So the 6.7, we incurred this quarter is a relatively in line with our typical amount.
Advertising and marketing expenses on the first quarter decreased by $1.7 million when compared to the prior quarter.
That's Klein was primarily related to lower.
Mass media advertising costs, which tend to be lower in the first quarter the year.
We also had some medium media spending a that was associated with various sporting events that did not occur due the cancellation events cancellation of those events later in the quarter.
More Oreo expenses were actually negative by approximately.
$876000 in the first quarter as a company recorded a gain of $1.3 million on the sale of a piece of Oreo property in that game was an amount that exceeded the aggregate cost of Oreo expenses and negative valuation charges on the other pieces of Oreo.
And the miscellaneous expense.
Worried totaled $21.3 million in the first quarter compared to $26.7 million in the fourth quarter of 2019.
The decrease of approximately $5.3 million.
The decrease was impacted by approximately $2.7 million some charges in the prior quarter for legal settlement charges additional expense accrued lifts contingent purchase.
Just price payments.
That did not occur in the current quarter and the current quarter also had a lower level of travel and entertainment expenses or as you can imagine and a variety of other smaller fluctuations.
So other than those categories I just discussed all other categories of Ah noninterest expense for.
Down on an aggregate basis by $19000 from the fourth quarter 2019.
And so they were essentially flat.
The net overhead ratio as Ed mentioned, instead of 1.33%, which is down 20 basis points from the 1.53% recorded in the prior quarter.
The ratio benefited from strong balance sheet growth strong.
Mortgage banking results in lower noninterest expenses, and we would expect that net overhead ratio to stay.
Well below what the 1.4 in the near term due to the <unk> continuing strong mortgage market the strong balance sheet growth, including the lending related to the P. P P and focus on expense control.
So with that I will turn it back over.
<unk>.
Thank you Dave.
I mean, the guy at the end of a mortgage commercial talks really fast.
Anyhow back to me for some somebody thoughts and thinking about the future.
These are really Crazy times, I kind of feel like Bill Murray Groundhogs day in fact bilateral clock.
Which is all exit will play.
She didn't turn out to play Sunny and shares I got you pay of every morning, when I get out that purpose.
Quarter at all it was really it was really a pretty good quarter given the current environment.
A this is they said the fed to be picked out of a quarter to adapt Cecil.
I think that our bill we've adapted well to the current environment as well as can be I think our as crews working extremely well our ability to service our clients' needs as it relate to PPP loans credit modifications, new credible hopefully a big credit issues going forward piece the financial effect. So those will not nave enough to think that.
There will not be as some credit or applications. The situation past history over would say these should affect us less there appears due to our portfolio diversification conservative underwriting culture. So are these losses will be a function of how fast we get back to work.
Earnings from Pvp laws right, a wonderful cushion I guess he is unknown.
And.
I will tell but we feel feel pretty darn good about where we're at we said before the crisis that we'd need to grow through this is low rate environment, which is exactly what we're doing some of it show we didn't anticipate but our core growth we anticipate to be very good.
We think our expenses would be in check you, saying, but.
Let her team that I know baseball season, and save a lot of money there, but I again, I can't say enough about the Wintrust crew and our ability to ride this out and do it well shareholder although all our pillars of minor shareholders are customers our employees and the communities that we serve.
And you can be assured are best efforts.
And I'm getting through this crisis and continuing to go when trust in the salad way you've done we've always done it that I'll have some turned over for questions.
Ladies and gentleman to ask a question you will need a press star one on your telephone to withdraw your question press the pound key please standby while we can.
Oh, the Q and a roster.
Our first question comes from Jon Arfstrom with RBC capital markets. Your line is now up.
Hi, Thanks, good morning, everyone.
You still it's difficult to John.
[laughter].
I Hope you have your mask on had been doing that and 95.
Baby.
[laughter] I want to talk about credit, but I guess first Dave.
He has talked about with rubber door pretax pre provision that mortgage I just want to make sure I understand what you're saying.
You had a $17 million commitment so I guess again.
Yeah because.
The big pipeline and I think you're saying that may or may not recur in Q2.
Likely you may not have the MSR headwind as well in Q2. So you know it's possible those same this kind of revenue.
Well that them and mortgage is that's there.
Yeah, why you know I think I think the pipeline is still pretty.
Along so I think we're still going and it looks like we saw our building the pipeline purchase activities going on fall off a little bit, but we're going to we're going to probably close more loans in the and the second quarter. So we'll have a you know production game, there, but that will be offset by probably that derivative going down a little bit so.
I think.
We're sort of looking at X.M.S. ours, and that sort of being you know a relatively.
Stable revenue quarter.
First quarter to second quarter.
Well driven a wash itself out and then we'll have to the the regular gains from this quarter, especially with the hanging over us over quarter.
From folks who.
From a lot to close yeah. It would we expect you know and usually don't have that much visibility going out, but the the walk terms of linked that now because there's so much volume. So we think we'll still have a fairly decent pipeline on those loans that they have mandatory commitment that deal in the corner, we'll have to see but it's <unk>.
I I expect that will be down a little bit, but then the actual.
Gain gain on sale a higher level of production that we sold will be up a little bit so probably off offsetting two great degree yes, okay.
Okay, and then a bigger picture credit at one of your comments I don't know so this is for you were rich but.
Yes, and when stress shows up in the portfolio.
With the comment that you made and I can give US you know the actuarial review were kind of the near term medium term portfolio stress.
They did you expect [laughter] well I'll give you the 20000 foot level at Merck and kind of jump in and I'm sure.
Some of the areas that you want to cover.
It's kinda like time is stopping for two or three months I mean, we're giving two or three were given three month deferrals of principal and interest to a lot of clients regulators are okay with that decadent and that he had.
They don't become TDR is really until after two of those.
Six bought.
The P.P. loans that we did go up almost $3.8 billion are those out there to our clients in that clients are like but to the majority to our clients buys them too much of a little over two months of breathing room.
Stimulus comes at a price people couple of months. So if you figure it.
I don't think you're going to see the stress until that if we can get out of this in two months distressed <unk> will be mitigated if we all get out of in two months, you're going to have delayed stress it will come into the portfolio.
We are fortunate we don't.
Have a lot a credit cards or consumer debt on the books.
Well.
Where things could do where things go get little dicey.
But do you think about him a guy if you have more a have you ever mortgage you give a three three month deferral guys. Okay.
They especially they gotta PPP always get paid its put on the had no problem you think about commercial a multifamily guy.
I need ideas rent abatement, okay, I need perpetual abatements, so oh world stop it for two or three months I think that any stericycle. She was going they have over at the end event that we can't get out it's going to take six months to get out of where we're at then I think your they have issues unless the government comes in it provides more money in this situation.
The system. So I think they'll do it say really caused that a lot of respects by the shutdown I think that they're committed to keeping this going then you've got to worry about rates increased worry about for higher rates down the road and we're acutely is going to take all academy for if you want to get into some of the specifics on the Harrier.
For the fourth worthy what I consider the the a the more.
Vulnerable parts of the portfolio by the community.
Yeah, Hey, I'm I would echo and comments to begin with I think that if we can bounce out of this pretty quickly you know we have programs in place here that have helped our customers and I think though.
Well respond accordingly, but.
Obviously, the longer it takes to or get out of this and for customer behavior and the consumer behavior to really go back to normal I think and that's that's the big question that everybody's asking me on one of the examples I uses for yeah, we have.
A long time movie theater, operator in Chicago that we have a reasonably sized not a big long too, but you know for him. You know you just have to question how long will be before people want to go back into a movie theater and that's that's a good example, where the uncertainty is pretty big but as it relates to.
Our high impact industries, the broad and we have give you a lot of detail there and obviously the one that jumps out at you is the franchise portfolio. Generally speaking you know we think the franchise portfolio is in pretty good shape for a couple of reasons one is that we.
Have a mostly quick service restaurants that are.
85% of that portfolio. Most of those are still open most of those are two.
Really strong operators with.
I'm good franchise wars I'm, so yeah, we feel pretty good.
We also have seen a lot of those customers take advantage of some of the deferment and a p. beattie.
Opportunities. So generally speaking you know those are holding in pretty well, but you know clearly that is a large segment in the portfolio at just about a billion dollars and a you know, it's obviously, a very impacted industry as well as it relates to hospitality in oil and gas and some of the other you know areas.
That are.
Areas for concern you know those are relatively small for us we have not typically played in those spaces at all that much the oil and gas is really a function of some of the leasing a work we've done over the last couple of years, but you know I would just really go back to you know Ed's comments that you know right now that.
Diversity in the portfolio you know gives us a lot of comfort, we generally pick very strong operators that we want to finance, but the ripple effects in the length of those ripples. Yeah. We just don't know right now so time will tell.
And then just one small wonder premium finance.
Yes.
Nonperformance, just kind of keep creeping up is that the administrative or is there anything new there yeah, that's where I was saying earlier that.
Do you what you have when you have these crises and again your governed by each state regulation. So.
Florida whenever there's a hurricane they you cannot cancel policies.
So what you've got as policies that are.
You know people haven't made the payments you would normally be cancelled you're not allowed to cancel most that'll allow you to go back and cancel them as of that date.
The.
The date that it would have been canceled retroactively you can't take.
There you can't lose your gut businesses insurance, so you're going to see those creep up as I said earlier, you see a minor tick up in losses really from maybe 2020 basis points to 23 basis points or something you go back and look whenever we have had those types of issues, though this is a.
Not every state is done and I think maybe 20 states have done it but so far in terms of not allowing cancellations. During this period of time, but they always put electrical back. So you get your principal back maybe not all your interests are late fees, but you get a lot of that back anyhow, so you're going to see those pipe, but keep popping up both a little bit until.
The crisis is over but again, it's not usually a loss situation for us.
Okay.
Okay.
[laughter].
You bet.
Thank you. Our next question comes from David Long with Raymond James Your line is now open.
Hi, good morning, everyone.
Hi.
As a as a fellow fan of airplanes.
You have to a menu on your choice of remarks, the Lloyd bridges, calling from the English So oh, sorry to price, we're calling it out.
So I kinda like the Wolf, what better, though if you ever see pulp fiction the Wolf is awesome.
Okay, you don't need.
Yes, Indeed, so you see I wanted to follow up on National and the premium finance business I know, we just talked a little bit about be seeing a bit of an uptick there, but what's the reserve levels. In general are always ferry boat for that business life I think you're on a basis point, maybe 20 basis points of reserves.
On the commercial side, maybe just.
That's why you carry such a low reserve in that business and and maybe give US an example of the situation.
Absent coping 19 that you me or could lose money in that business [noise].
Well, Okay life insurance business knock on wood was never lost the diet. So on the on the commercial business.
I'll let.
Dave and Murph take you through that.
Yeah, So Dave on the commercial business generally.
Yeah, you're we're financing and the commercial insurance policies for workers comp you know building a coverage liability coverage or whatever it has some they're generally annual policies. So we.
Since those policies.
Generally taking a percent down some 15, 20% down as sort of a a standard a down payment and you finance those over generally nine to 10 months I think are averages the slightly over nine months. So yes. It that the your your collateral Lizzie on earned premium held.
By the insurance carriers, which are generally high rated insurance carriers that we do business with so yeah. If if that premium which is your collateral amortizes, one 365, or one 366 and a leap year, you know a per day and amortizes away in earns out.
That collateral is deteriorating on a daily basis, but since you took 10 15, 20% down on that policy that your initial question and since we pay that have that loan payoff monthly over nine to 10 months it our long pays off faster than the collateral deteriorate. So that's generally why you.
Don't have losses in that industry, sometimes you could have losses, if if you take a lesser down payment <unk> and you don't have as much collateral cushion and then if they don't make their payment the states.
Require you to generally give them a notice of time.
That to tell them that they've been delayed or are the defaulted on their long and then you can cancel the policy. So that may be 20 or 30 days.
On the state and and so then your collateral continues to deteriorate during that notice period. So if you cut your collateral position too.
Sure then because you took less down payment it may eat into your collateral enough when they when they default on their payment that you'd have some small losses and then like a there there are losses, sometimes from audible policies workers comp you know fleet auto some of those policies are ordered a.
Hello, and to the extent that the estimated pre me on the front end was off a little but from what the actual premium was oh.
One thing audit audit the payrolls or the.
Fleet size and you can have some losses those are the general reasons for it so.
And what does your dad.
Potential fraud or insurance company.
Bankrupt.
But in case of a bankruptcy [noise].
Yes.
We we monitor the M. best reports it no credit demonstrates insurance company.
With nine months, we'll pay out it usually takes more nine months for.
Insurance coming to go down so we can stop doing business and with them and that mitigates. It you can't have agent fraud, but we've developed a number it systems do the past we've had some large ones relatively large.
You know for our time, maybe 678 million Bucks.
We have not had one at a long time.
But if we're doing a much better job electronically of screening for those but I'm not gotten what do we haven't had one of those so that's where you could lose money now what I was saying is Dave was talking about cancellations. So they don't allow cancellations you feel your and your collateral is going to run off but the cancellations that allow you to backdate once we get to it.
They always a light it back to enter would've been the insurance companies want to really kind of loses on that situation, but not so much because claims usually are are dead high so, especially in something like this and in terms of Oh hurricane into like maybe a little bit different way of higher claims but.
That's how it usually happens than we've ever.
<unk>.
No route 20 anywhere between 15 25 basis points normally on that and that's always something that number I get a life knock on wood 7 billion busway lost a dime. So I think we're okay.
[noise] excellent like really appreciate D N. The color there that's a that's.
And then when it raised its release the franchise finance side of things you indicated that about 85%. Our quick service are there any other of the remaining exposures.
That you consider much riskier you know anything that you can point there there at the remaining part of that portfolio.
Yeah, I mean, the dining restaurants is really where I think you're gonna be most impacted you know for us. That's about 150 million you know all well known names, but it just you know obviously during the most profoundly impacted by this.
Many of them have taken the p. payloads from us or from other.
Their bags because many of these are syndicated deals.
And and they also gone for a deferral, so again as a situation where a couple of months sell look fine and hopefully they get out of this if people are going out either again.
Will be fine I'm, there when it gets pushed off and very logical way to look at however.
And you don't get back to business until.
September October is there some issues.
Got it and then just discussed on last when you kind of hinted on this but you know if no one attends wrigley field summer or the sell those are marketing expenses.
I'm, assuming you guys would not be spending.
That is correct Cups White Sox you name it.
We would not be spending that money, but I'd, rather spend I go to ballgames myself, but.
We actually have.
Growers and some minor league teams around Chicago.
With that.
To be a we were not to pay that can be a significant amount of money.
Got it thanks, guys appreciate it.
Thank you. Our next question comes from Terry Mcevoy with Stephens. Your line is now open.
But more Terry.
Hi, Good morning can't believe it took this long Gascon net interest margin question. So I'm going to ask one just just taking a step back as you think about the second quarter you have the full impact to the March rate cuts I, but then you've got multiple or more quarters, just lowering deposit rate so under that big picture view.
Dave just a net interest margin bottom out here in the second quarter, and then likely you were potentially move higher in the second half the year as deposit prices come down.
Well, if you're talking about the core net interest margin, yes. It would go down but remember we're gonna have almost $100 million, a P.P.P. fees will be bringing in.
Over two years, but the longest.
For the shortest it'll be people, if and when they go for a relief for the funds because these are all.
You know every one of these can be is for two months it come into and have been chicken apply that to the S.P.A. and have them forgiven their forgiving.
We take the money upfront showing a worst case scenario for two years. If we if the whole thing ran out for two years the margin would be okay, right around where it is.
If it if it comes into people at the end of this quarter and beginning of the.
Third quarter.
Get those get their funds for their loans forgiven.
We have $100 million coming in during that period of time, so that's going to positively affect the margins of margin. The core margins going end up like I said, where youre going to 270 to 80 range somewhere around that if based on where we are right now.
But the P.P.P. loans, they're going to protect us.
For two years or one year or something.
Derivative between two months and <unk> and in two years, you tell me, but they will help the margin and obviously out that interest income.
To grow nicely.
So between that and our growth.
Oh I would expect you know to 80 and start bouncing back from there and of course.
But the P.P.P. loans are are gonna be very helpful.
Well the income side to help cushion any long term credit issues, we have but also from the margin standpoint.
Hello, I'm, saying, they're kinda <unk> drifted a little bit.
Yeah I understand.
And your your thought process on P. and how that plays into the March and I'm, just thinking about the revenue related to PPP and what that can be building capital I know you have to 85 million in this in that you mentioned in the release and I just want to make sure that night billing to just kind of whats in the pipeline. My guess is you if you assume that grows.
As a increases on PTP round, two and then what are the expenses that we should think about related to PPP. Just we can calculate a bottom line impact that obviously will help your capital ratios I think it largely expenses are absolutely zero I mean, we set up the system on our own and these.
These are people, we had oh people from all over the at home, but jumped in and help them. We didn't add much any outside vendor I don't think there's any issues related do you think of any davor do star.
No I think I think it's just generally just the people issues our staff that we already.
Onboard that a deed to declare up the backend Youve Abbvies. Obviously, you have some minor you know data processing charges, because you have more pounds out on the F.I.S. system, but.
Oh, gosh shouldn't be that that much of additional expenses.
If any really.
Exactly.
And then just on the round two with PPP and he said 9 billion that that that's going to be higher is as yeah or wildbrain Terry I'm only having a pipeline we have 350 $60 million there will be waiting for B Tran Tonight. Once you get your Retran committed later, that's about $9 million.
Fees.
That's a rough numbers because some doing that as you go through the process.
Which we will have done today on the current we should have done today.
And the stuff that came in we opened the portal last night.
There was some duplicate sort of like so roughly around $9 million more and 350 more so tape.
Well, it's nice that present maybe.
Well no better at the end of the day.
But and then and then we May open the portal again once we get to that it we kind of think that this next round is because.
Many of the banks were not would drop the ball on this they have a number of customers that are waiting go up but she said.
26 billion come in they only funded 14 or 12 between say a 14 billion, they're going to hit the dual I've been with.
We had 98% of ours, all the way through the process.
And round, one I'm gonna get there.
Fully funded today.
The other guys.
Did so they're going to this is going to last maybe 48 hours at the most so it'd be there. This slide decks allotment it'd be very careful we don't overextended and and tell you only for customers hanging, but we think we can get these through and plus minus 10%, whether we get anymore on top of it'll be a.
Function, where we sit at the end of the day terms of our production or where we are in the and ER and in our manufacturing process. If you will.
That's great color. Thank you.
Thank you.
Our next question comes from Michael Young with Suntrust Robinson Humphrey Your line is now.
I'll open.
Hey, Thanks, good morning.
What I am I wonder.
Hey wanted to start just with the Cecil reserve, a little lower than peers, and I understand there's and mix benefits from those opinion finance book, but can you just maybe talk about kind of be.
Economic assumptions that are currently underlying.
The adjustment you made this quarter and you know any any kind of outlook you know going forward from here and it seems you on on you know you need to continue to build this reserve.
Well I you know we put in the slide deck, what our macroeconomic Ah.
Scenario factors are the ones that are the key drivers for our models.
So it's you know the some of the credit spreads partial relisting price and the sees the GDP growth et cetera. So those are the ones that that impact our our portfolio. Some also I'd have to the best correlation on them and when work.
So if you look back through the.
The cycles. So those are the factors that most impacted but.
I got to tell you I was reading you know some of the sell side analyst reports last night I thought I was reading like gold relaxing. The three barista you know some people thought I had too much. Some people thought we had two little and some people.
I thought we were Charles right. So you know I'm not sure that I I as I look out there you may have a different view, but it seems like.
I mean were more towards the top of the bell curve and there are some outliers on either side, but as you said our mix with premium finance loans, I think help set out quite a bit and I think our diversity.
He helped set out quite a bit. So you know we think we're comfortable with where the seasonal reserves are out you know it's substantially more than what our run rate was that you look at the total reserve build.
And right now we were comfortable with where our SAP yeah. We've gone through all the business lines, we've done all that.
With that heavy lifting and others more more stimulus that's that's coming that hopefully should help.
<unk>, except arrest. So I don't know if you can look into your crystal ball any better than or anybody on this call our us and know how long this pandemics gonna last than what the lasting effects are so I'm not even going to take a shot.
Q2 reserves, they could be higher than it could be lower but well have to see how quickly the economy reopens and how quickly you know things start getting back back to normal but.
Our view is probably is not a V shape. Its you know it's not a complete U shape its probably some place in be.
Tween there you know I I've heard like every what are the alphabet I, it's probably like a de shape. What you know some goofy shape out there, but I'm not nobody has talked about but you know we're monitoring the portfolio well or managing <unk> well, we had a credit team that put up there with anybody and we'll.
We weren't goes but I'm not sure we're going to try to make a prediction on on Twoq right I mean could be better could be worth its as Ed said, it's just wanted to time for Cecil to come in it is not transparent to I think from a booking company the company, but if you look at some of the metrics that I've been looking at it seems like we're sort of in the middle of the.
Pack and has but we certainly didn't tried to do that just seems to be where we're landing and I understand people can take a.
More dark view of where this is going and some people can take a more favorable view, but we took what we thought was the best reasonable viewed that we could using our modeling and our subject matter experts in the credit side.
We think we're okay for now.
[music].
Thanks for all that didn't though and and maybe just following up I. Appreciate the breakout on Covidien packet industries, specifically, but also just wanted to get some high level thoughts on on commercial real estate and construction I'm, particularly retail and just kind of you know any.
He mitigating factors that you guys I'm looking at or or any portfolio analysis that you've done thus far.
I think rich and yeah. I mean, it's theory is a bit of a wildcard I mean, we've spent some time kind of thinking through what it means what it might mean, and we're pretty well diversified into C. I read book Yeah.
Multifamily being the largest segment you know in multifamily you know generally speaking you know, it's a Chicago Metro. Its you know it performed very well very good long time operators I think that that you know I'm feeling pretty comfortable about that industrial you know is a decent sized.
Folio for US say, you know I feel pretty.
Pretty good about that I mean, obviously, the overall business impact will determine ultimately how that performed areas that you know you give me. The most concern is a retail and office I think office because you know I think that this work from home model.
All that we've all adopt it is something that we really won't know what it's going to look like you know a year from now two years from now five years from now, but it's it's gonna be different and how that impacts our portfolio you remains to be that being that again, we we tend to be very granular in in those deals and we tend to you know really big.
Very strong operators, so again I'm feeling okay. There retail is the segment that probably concerns me the most in general.
Yeah, we as we said in the past our approach towards retail as Ben to really try to reduce that portfolio over the last five years.
We've been pretty successful at but where we do have exposure, it's none of the the big box.
I wouldn't say, none, but I mean very little of the big box regional type retail exposure, where where are the great majority of our retail exposure exists is in the towns and you know.
Studies that we have banks and so these are the downtown.
Yes, yes suburban type of operators and I think that they are still going to be you know a viable operations going forward, but I don't know when but generally speaking.
I feel that that's going to rebound better than most but it is one of those with that I. You know people are shopping on Amazon you know in the numbers are obvious, but you know dramatically higher levels and I don't think that you're going to see a reversion back to you know what we'd seen in the past I think yeah those people shopping habits.
But they're going to change in a pretty meaningful way going forward that merchandise talking about that a lot I see you're going to keep my wife had a shopping you're crazy.
And you're going to keep me here at the office I'm going to the office.
It could be out so.
There's a lot of schools of thought we have to wait and see but I think is more says we're diversified enough nor borrowers.
Fair enough I think we will know you know to everybody spot two three months with it appeals with deferrals and alike.
Even in offices in one area.
Well no two or three months, how this is going to shake out where it's going to go and how it's going to work. So I think that we're kind of in limbo.
So we got to get out of this and then we'll see if all this happens, but we'll be very cognizant of it already and then the underwriting we're doing work on some of the do stuff is go to very cognizant, but.
We'll be very careful for sure because.
<unk> Bad times, but you got to you have to have a better crystal ball of.
The type of assets that you will take as collateral.
Okay. Thanks.
Thank you. Our next question comes from Chris Mcgratty with KBW. Your line is now open.
Hi, good morning.
Hey, Ed <unk> question, it kind of.
Hi level question in the past few you've talked about the rope, a dope and and not the need to go there what would it would it take created to pivot is it. This two to three month and we don't get the outcome. We're looking for I'm just interested in your thoughts in what May pivot the bank strategy.
More significantly.
Oh.
The rope a dope before was really brought on by two things. One is we couldn't get paid for the risks we were taking its always didn't meet our profitability models that pretty much any deals out there and secondly.
We were seeing way too many critical exceptions to loan policy and we just so I can do that.
We have that is spreads are actually moving up on the lending side, which is a good thing.
So we are beating our profitability miles there.
And we are very closely monitoring exceptions.
That's that's a good slows down a little bit if.
It's it's.
ER in terms of making new loans and the like is if guys are committed to may exceptions, but were I think we're seeing people pull back enough that.
This may of this sounds good news to me, but a timely crisis, because we had started seeing people scrounging for yield as rates went down to zero again.
And taking more risk, but now this is brought everybody back and now they're thinking I think we're actually about pricing and collateral or whatever well should we got out of this if they revert back to the up to the goofy stuff but.
Oh, who knows murph.
Yeah, I absolutely agree.
I think you know while it wasn't rope a dope in the back half of 19 in the you know the first part of 20, you know we were having trouble you know really growing see an eye opportunities I'm because there were just a lot of people in that same space fighting and structures.
And pricing that just made no sense for us.
And you know this the CMBS market was very active in the theory space. So you know in <unk> I I would agree with what Ed said I mean, you know the market had gotten goofy and and wait too aggressive and at this this crisis certainly get snap back a.
Those trends pretty dramatically.
What's pretty interesting for us is the.
Of the Halo effect that we got from our for the PPP work, where our competitors are unable to service their clients and they'd call laws that maybe Oh, we do the owner or whatever had a personal account or what have you had some relationship with them we're able.
To get them on and services.
So a large bank a town highly did any of the oldest largest back to where our competitor.
And do any hardly have that's opened up an opportunity for us it pick up really solid opportunities going forward.
And at reasonable.
So it could be a little bit of a concept. So Robert off right now who knows will we see opportunities for growth right now at our pricing our parameters for good solid long term companies that are in the higher impact risk areas that.
The other who do a lot autos right about now.
A lot more restaurants, but a lot of really solid other businesses that.
We're going to have shots and we never would add before so kind of mix right now, but we're always see very vigilant in terms of.
What's going on because as Dave pointed out earlier about c., so those were going to them.
[noise].
Thanks for that that's a call. It just it just won't just one more question on on the PPP. Obviously, they were all may try to make our assumptions on where the economy is going but it seems like you know the banks are going to generate a tremendous thing he said up almost $100 million fees.
I guess the.
Actually becomes I know you're bound by the models, but but wouldn't it seems conceptually the right thing to do to just to put this back in to the reserve and make people feel little bit better about adequacy for the industry.
Uh huh.
Well, we got it.
They gotta go with a black box and see where it goes but I'm, just saying that we who knows.
And then by their public it's been over two years over one year over six months I don't know, where it's coming in I look at them independently. The a reserve will be what it is and the PPP fees will be what they are and never Twain CHMP made I think we have the.
The luxury of playing that game anymore, we've got to we've got.
I really look at the data and to be consistent.
<unk> committees that need that everything from you know.
Every day and.
So you really don't have a lot of hurt left at it anymore, it's all going to be out of the boxes.
And well see where it goes but I would imagine the things turn bad <unk>.
You could and you're feeling it turns bad you can do some qualitative things it would.
Go over the top and match it up nicely who knows.
Look I mean independently as my point, Oh, I get it yet I got no.
Campus gap, Chris So you know.
Cabins Gabby I was looking for the qualitative comment that.
I referred to so that's helpful.
Dave I have you did.
Going forward, how should we think about it relative to Q1.
Yeah, Yeah, and I I still think you think about it sort of it 20.
Six and a half the 27% the first quarter because the stock price was down so much that benefit we usually get.
First quarter from stock based compensation was actually negative a little bit and the beauly adjustment was actually negative a little bit. So I I think I still look at that's sort of a normalized tax rate to be 26 now for 27%.
That's an effective yep Yep, Paris I've a question for you.
Can I ask the well absolutely.
Why is our stock at so Pete up all the time [laughter] [laughter] don't understand why we trade so much lowered everybody else in such a discount appear.
Yeah, I think well I think the I. I think the market is.
Is that a lot of the volatility any stock lately as Ben.
I think somewhat less fundamental in somewhat technical but but I agree that's why.
If I were constructive.
Thank you.
Thank you. Our next question comes from Brock Vandervliet would you be US your line is now open.
I think you can you hear me.
Yeah, Brian well good how are you.
I'm doing well I wondered if I had a managed pop in the Cuso's great.
I was I was wondering given your comments about the outlook and a number of banks I've talked about you know how their outlook squared with Moody's is Moody's is working on with.
So much of the industry.
You know and whether they use the it a base case or the adverse outlook.
Could you could you touch on that what you consulted outside for kind of a reality check on the outlook.
Oh definitely.
Right.
Yes, I mean, so we bought kind of lot of different things I mean, you look at the base case, you. If you looked at the severe you look at you know them as a.
Long end of the pandemic one we run the models on all of it we talk to where our business people. So.
We look at Blue Chip you know the Blue chip economists models and we look.
At the consensus Moody's models, and so but we have to pick it yet the ended the quarter you have to pick a scenario and run with it but then your informed by those other models that you, Ron and Mike and the consensus Blue chips and.
Yeah, as a consensus and the Blue chip models that we compare and contrast against and then we get the.
Qualitative <unk> input from our our business leaders. So you don't you have to pick one to base. Your model off but then there are there or qualitative factors that you had to layer on because at some point you had to it did pickup scenario and run with it at a weak because you can't it Moody's was change in.
Oreos you know.
You know weekly almost for for this for this thing. So then you took some you ran some other models to find out where the guardrails were on the ups and the downsides and then you square that with the business leaders that haven't.
Their fingers and to the pulse of those scenarios and.
Yeah and.
And your and your run out the process. So I I'd say, we were informed by a number of different Moody's models and other models out there.
Okay.
And in terms of forbearance I I saw the reference in the press release I believe in terms of it it tailing off here in April.
You released a percentage on commercial and see area deferrals that you did did grant.
[noise].
Well.
So I didn't know said I don't know if you have those I think we noted in the press and in a in the release and we had a Bob.
A $300 million of Ah.
Outstanding balances for commercial commercial.
Real estate loans that we.
We had some sort of modifications to.
And that's that's what we have that's what we have right now so yeah. Those are ones that are actually booked and there's ones that are going through the process that you know, we're still evaluating and we have not yet that.
Will show up over the course of the.
Next couple of months, but we know the detail in that.
Okay and on and on our retail residential real estate mortgages. We leave you know we saw most of that Ah. So we do do a servicing portfolio and then we have some in our portfolio. We are tracking so far we're tracking better than the.
M.B.A. averages are putting out there on that so.
Yeah, we do.
No well, but the numbers are sort of our numbers or are little more current than the M.B. aid and numbers. So I haven't seen the most recent M.B.A. wants but we are we are better than the M.B. average on that.
Okay. Thanks to the color.
Thank you. Our next question comes from Nathan race with Piper Sandler Your line is now open.
Thanks, Hi, guys good morning.
When I asked the question just updated thoughts on capital planning and priorities, obviously with total.
Oh risk based capital coming down a 30 basis points are so sequentially.
And I understand some certainty kind of project what protocols are going to look like but just curious kind of get some updated thoughts on capital deployment priorities and how you guys Gonna see capital levels for Jackups extend you can kind of particularly just given all the uncertainty that exist today.
[noise].
Well I mean, if we look we look at our capital levels, all the time and when we go through stressed analyses on them you know the the P.P.B. loans are are going to be capital you know free from a risk based perspective.
So that's not going to impact on is gonna be short term in nature anyway, you know we still are.
You know [laughter] generating positive earnings this quarter and expect to do so going forward and.
We we suspended the share repurchase thought that was prudent to do.
Still believe the dividend a is appropriate but what the board of directors decide that as.
As they move forward, but you know we continue to think capitals adequate.
We would look you know we would look I mean, it's if we if we continue to grow or are there you know a you know we have these opportunities that talks about and and we have growth opportunities out there.
In the equity markets opened up you know we could look at some prefer an or some sub that but it's not critical that we do that right now, but we're always watching those markets. Because we do expect to continued to grow. So yeah. You know we won't be spread on the lighting cash on acquisitions, where stock prices can move it to make much sense. So.
I think that they laid out a nice their growth is leveraged zero based a risk ratings and.
We we keep a close eye on the whole thing and we do we run more stress test and they've done a most people do and we feel very comfortable where we are right now but.
Depends on ARPU growth prospects.
Then they.
Non.
The zero based or risk rating stuff. So we feel very good about where we are.
Well, that's where we are.
Understood that's helpful and speaking to stress tests I think when you guys last admitted de fast in 2017 you guys.
You did that you could have you know 2.8 percents cumulative losses, you know in a severe adverse scenario so.
Well I guess I'm just curious as you guys, it's kinda stressing.
Yes, that's the book more recently I mean.
Any kind of thoughts or guidance in terms of kind of what you guys could seem that kind of adverse scenario under the current circumstances that.
Today.
No. We haven't done we haven't disclosed that Nathan so I mean people can look at that stress test, but you know that was the it's <unk>.
I I'm not sure you can compare that any environment to this I mean, it maybe a good the environment or has your best one dog <unk> cat, but you know Oh, we haven't disclosed distressed.
A couple of years either in you know you know.
ER to give you something on this call like that but we'd have to.
We'd we'd have to get that Mark Saad because we haven't done a de past stress test per se that we've made public so far so we do them internally, but I don't I don't have the numbers all.
Other than to tell you right now that we believe with of a tremendous modest stresses we see it that we're fine.
Yes, hi from a general statement, though that we do stress the portfolio and we feel that right now or are pretty good shape.
Understood and if I could just.
That's one more on a DPP you know I appreciate all disclosures in the diagnostic you guys have no funded relief to the PBB for call. It 15% of those like time packed industry. So I'm just curious based on the pipeline of PPP loans, you have where do you expect that number moving forward in terms of you're providing that added.
For those of selectively hi, hi impact industries.
[laughter].
Well not possible.
The first round for our for our clients most somewhere down at around one.
Going forward, we're actually.
We've actually been reaching out.
End of the neighborhoods are too low to moderate neighborhoods to people, who say they feel they can't get to the loans.
Really reaching out to our customer said, hey, Mike will get yet because we really have the system nailed that feel were pretty good shape. So.
No we basically hit the portal open from now for now.
If hours baby in total.
Total we've taken income over 10000 applications. So.
Yeah. We tried we tried to we close it's a little rather do some direct work to make sure that we covered people, who maybe not have been as a fortunate to be there but are have their data and understand what.
It is really reached out to do that because.
But really when you think of it most of our most of the guys who are air travel.
And then the severely impacted industries for the first guys and they're not done they're very smart people.
I will say that you might ask what motivates our people to do this.
I think.
We've had a number of of great notes from people that have you think about it we were going to keep 10000 businesses from probably bankruptcy and a lot of cases.
I think that they each have maybe average 30 40 employees. That's 400000 people they all have for.
I am.
Average was therefore defendant that's a million six people that were affecting you, let let sleep easier.
Every night, because you know for two months are going to their salaries or benefits and that's what keeps our kept our people working until midnight 123 in the morning is doing a good we're doing in how often do you have a chance to.
Such that many people in your life much less than two weeks. So we feel very good about what we're doing here. We think we're doing our contribution and as it relates to the impacted industries. They read right out of the box and we got to make sure those who really don't get it or get so that's what the that's one of our focus has been in the last rounds.
I would add that from the <unk> release date through 420, which does not include this space to a we're up about another 15% to highly affected industries.
Understood that's great to hear I appreciate that color. Thanks, guys.
Yeah.
Thank you.
As a reminder, ladies and gentlemen that Star then one to ask a question.
Our next question comes from David.
For reading with Wedbush. Your line is now open.
Yes.
Hi, Thanks, I wanted to ask you about how's it going so I wanted to ask you about expenses so.
In the past you've mentioned.
About keeping the net overhead ratio below 1.5% I think I heard you mentioned that it should be well below 1.4%. So I was wondering is that the new bogey now less than 1.4% did I hear you right.
Yeah.
But one of the half has always been this.
Well a rough bag.
I think that with.
Growth in what's going on with their asset growth.
And ER expense control based you know just what's going on here.
Our inability to open branches into things like we normally do right now the rest of the business.
The mortgage markets.
Well, we're doing there I think today, you should be well below what 40 I think as you can be put even make up a little 130, if things go right.
But the bogey will always be 150, 150 or better.
We're not changing it yet but.
Again expected for the next few quarters it be below what 40 and.
During the 131 40 range and hopefully lowered 130 of were good.
Yeah, I am I thinking right I think when I go set in my in my comments were within the girls of the balance sheet related to PPP and the strong mortgage market and the lack of some of the expenses that are going to flow through just due to the situation.
And you know travel entertainment or some of them no spots out sponsorship some some of the summer events et cetera, we should be below 140 for the time being met I agree with that that's a general.
Target yeah, yeah in a normal environment is still sort of below the 150, but yes, I did say below 140.
I think in the near term quarters, that's still going to be the case.
Great. Thanks for that and that's your Denovo outlook changed at all previously you were planning about a dozen branches over the next 12 to 18 months since the backdrop kind of shifted your thinking on that not really slowed it down although again were.
Taken the basically a couple of months off well well we're all in this.
Hibernating, if you will but.
Our areas, we're committed to we have space were.
Growing and were elsewhere.
There are opportunities for us accused to build and grow and we've always invested in our business we are growth.
Company.
Oh, the acquisitions aren't a bonus plan or not the markets not giving us good priced acquisitions, we will turn to de Novo growth. These are basically all the stuff, but the but the timing will be probably more spread out there.
Before.
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Okay and then the last one for me on loan growth and you touched on out little bit earlier, but to be clear, you're still expecting mid to high single digit growth and in the context of line utilization rates in the drawdowns did kind of you know surge at the end of the first quarter could that be a headwind to to loan growth.
If things start to normalize in these companies start to pay down those dropdowns.
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Yeah, I think you know overall economic activity is certainly going to be you know muted in the remainder of years. So that that's going to have an effect I do think you know a couple.
Things that are gonna be interesting to watch will be I do think that this halo effect is real that I think that we.
And we'll have some real opportunities with customers that you know in the past. We just haven't had a lot of success with that we would really like the bank. So I think that'll be a good opportunity I think.
Yeah. There. The first insurance groups also will you know way I continue to do reasonably well.
Sanitizers move up their nicely.
So I think that there is gonna be some some good opportunity there, but you know clearly the you know that the economic growth you know going.
And forward is gonna be a bit of a headwind.
I think those airlines rose only what four or $500 million, we figured out murph is that right yep.
So, but we also we also have warehouse lines or you know in as the mortgage industry. You know, we're seeing really good usage on those right now.
And the second half of the year, you know that that probably will be.
Under some pressure so we'll keep an eye on that too, but so we'll see.
So your question about high single digits, it could be affected by.
Those.
Those fluctuations we with it.
Yes.
That makes sense, thanks very much thank you.
Thank you I'm not showing any further questions at this time.
Now I'd like to kind of call back over to ever women for any closing remarks, thanks, everybody Ah stay healthy and a if you have any other questions. Please feel free to called me or Dave or Tim Crane got off easy you didn't have to answer anything today, but I want to call in that Pepper [laughter].
Thanks to everybody stay healthy and until next time, but by.
Ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect [noise].
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