Q1 2020 Earnings Call
[music].
Good morning, ladies and gentlemen, and welcome to amalgamated Bake first quarter 2020 earnings conference call.
During today's presentation, all parties will be any listen only mode.
Following.
The presentation the conference will be open for questions with instructions to follow at that time.
As a reminder, the comp is being recorded.
I'd now like to turn the conference over to Mr.
Through the bid.
Chief Financial Officer. Please go ahead Sir.
Thank you operator.
Good morning, everyone. We appreciate your participation in our first quarter 2020 earnings call with me today is keep Mastrich, President and Chief Executive Officer.
As a reminder, a telephonic replay of this call will be available on the Investor section of our web site for an extended period of time.
Additionally, a slide deck to complement today's discussion is also available on the Investor section of our web site.
Before we begin let me remind everyone that this call may contain certain statements that constitute forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.
We caution investors that a number of factors some of which are beyond our control could cause actual results to differ from the expectations indicated or implied by any such forward looking information or statements.
Investors should refer to slide two of our earnings slide deck as well as our 2019 10-K filed on March 13th 2020.
And our other periodic reports that we file from time to time with the FDIC typically under cautionary note regarding forward looking statements and risk factors.
Further description or explanation of those items that could cause actual results to differ materially from those indicated or implied by any forward looking statements that we make.
Additionally, during today's call, we will discuss certain non-GAAP measures, which we believe are useful in evaluating our performance.
The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with U.S. GAAP. A reconciliation of these non-GAAP measures to the most comparable GAAP measure can be found in our earnings release as well as on our website.
At this point I'll turn the call over to Keith.
Thank you drew and good morning, everyone. We appreciate your time and attention today.
On today's call I will start with an overview of our operations given the rapid spread of coded 19, and its impact on New York City before reviewing our results and accomplishments in the first quarter.
I will then turn the call Liberty drew to discuss our first quarter financial results in more detail.
I'd like to start by thanking our employees for their extraordinary efforts during this challenging time.
They have worked tirelessly to ensure that the banks operations, they run smoothly and our support to our customers and communities remains uninterrupted.
The safety of our employees and customers is our top priority.
I want to share with you all a brief storied how we found ourselves of the doors in the Kogut crisis I.
I had been attending a bank conference in Switzerland in February as the pandemic was getting to flare uncontrollably in Italy, where I was also scheduled travel for meetings.
Needless to say I can't my trips around and headed back to New York as my proximity to the pandemic open my eyes to the risk that how not only to the U.S., but New York City in particular.
This was truly a case of being in a long place at the right time and I knew that our crisis management he needed to put our pandemic clan into plates as I believe is shut in of New York is eminent.
Our crisis team implemented plans to move to almost 100% of our employees to a work from home environment by the middle of March and we have quickly adapted to this new normal.
Our managers are checking with their direct reports daily to ensure that our operations continue to run smoothly and I'm very pleased to report that our staff it seamlessly handling transactions and making new loans I'm very proud of their efforts and we have not meant to be.
Since our founding almost 100 years ago, we have had a commitment to the greater good which is shaped the business model and our values. We believe that a financial institution mission should include using its resources money and influence to help move its customers, it's community and society forward.
Well, we find ourselves in an unprecedented environment, our mission and values are unchanged and they continue to guide our senior leadership team in the decisions that we make as we navigate these unchartered waters.
First and foremost we remain committed to our employees, having reposition branch staff to other areas of the banks operations that have seen an increase in activity.
We are committed to the physical emotional and financial health of our team.
And have no plans to lay off our employees during this uncertain time.
We also remain committed to our communities and those who need I'm amazed and thankful for the efforts of those that are battling this crisis on the front lines and I'm very pleased that we were able to create the frontline workers fund, which offers direct assistance to nurses and healthcare workers grocery workers cleaning service workers foodservice workers laundry workers in our hospitals.
And retail workers to name just a few.
We also launched.
Families and workers fund in partnership with the consortium of foundations, whose goal is to provide financial resources to vulnerable working families across the country.
This fund has initial commitment of $7.1 million and the goal is to raise $20 million in order to provide flexible funding to organizations striving to prevent workers and families from sinking deeper into levels of poverty. During the initial months of this pandemic.
All of this would not be possible without the strategic transformation that amalgamated has undergone in the last six years when I was appointed CEO in 2014, our team undertook a broad plant.
And designed to unlock the profit potential the bank, which included recruiting talented executives from from across the banking industry growing our customer base instilling, a disciplined expense culture and improving the quality of both our assets and sources of funding.
This has led to a stable low cost deposit base. We have also closed on profitable business lines and significantly reduced our branch footprint.
Most importantly, we've instilled a disciplined credit culture, which has resulted in strong credit performance of our loan portfolio.
As part of our comprehensive credit risk management process, we made the decision to run off or indirect he and I portfolio and significantly de risk our balance sheet over the last two years, which I'm very grateful for a given the current market backdrop.
They the bank is on from financial footing with a strong capital base and a well underwritten loan portfolio as can be seen in our first quarter results, which provide confidence in our ability to weather. The storm for the first quarter. We reported first pretax pre provision income of $21.5 million, which compares to $16.5 million in the.
2019 fourth quarter.
We grew average deposits by $400 million or 36% annualized as compared to the fourth quarter of 2019.
Our cost of deposits was 33 basis points down from 36 basis points in Q4, and noninterest bearing deposits were 48% of ending deposits.
Our net interest margin expanded three basis points to 3.46% from the 2019 fourth quarter.
Importantly, our efficiency ratio improved to 59.97% and we remain well capitalized with a common equity tier one ratio at 12.74%.
[noise] as drew will discuss in more detail, we recorded a provision expense of $8.6 million, primarily driven by $3.4 million in our indirect see an eye portfolio and $3 million and qualitative factors both largely due to.
Impacted code at 19.
We are watching our loan portfolio carefully and are proactively were pretty with our bar.
On payment deferrals to help them through this time period, while we expect provision to go higher we remain confident our strong credit culture and believe we are well capitalized to handle and even more severe recession.
It is important to emphasize that our core customers. Our union nonprofits are not primarily credit customers. These customers and their relationships with us are primarily on the deposit side of the bank. Additionally, though we are based in headquartered in New York City, our credit exposure is more broad based geographically.
We have also been aggressively reducing expenses to ensure we remain well positioned to handle and extended downturn, while not sacrificing the underlying fabric of our business.
Our focus has been on reducing some deposit expense initiating hiring freeze beginning in April cutting back on non essential projects shifting resources internally, most specifically at the branch level, improving call center operations and canceling unnecessary services.
We expect these steps to help mitigate the impact of lower interest in equity market values our revenue.
We haven't experienced team in place that is executing the necessary adjustments on not taking out costs that will affect the operational capabilities or competitive position of our business on a go forward basis.
Looking forward, we understand that the future is uncertain and we are opportunistically, managing our noninterest expense to maintain our financial flexibility and ensure the long term success in the bank.
One growth initiative that we have moved forward with is the opening of our commercial banking office in Boston I'm very pleased to announce that we've hired Mark Wallace had the office and oversee had a team.
Mark has over 13 years experience as a leader in the nonprofit and political factors and the Boston area and brings a wealth of local knowledge to the bank.
Given that pandemic in shelter in place orders that continue to exist. We expect the ramp of our Boston office to be more gradual though we are already starting to see new client acquisition and we will delay the opening of our Los Angeles office until the environment begins to normalize.
Turning to our capital allocation priorities, we have suspended our share buyback given the uncertain economic environment, and we will evaluate our dividend with our board of directors each quarter that said, we announced yesterday, a second quarter dividend of eight cents per share.
Additionally, we are watching the economy closely and aggressively managing our business to adapt to this new environment.
Well M&A has been a growth driver for the bank, we will remain on the sidelines until we have more clarity on the recovery given our positioning.
Capital, we would look to take advantage of opportunities that present themselves as a recovery takes hold and the economy begins to normalize.
I'm also very proud of our mission aligned initiatives and accomplishments that we have achieved thus far in 2020.
Of note, we launched our corporate social response.
Ability to report on April 13th which provide the comprehensive overview of our CSR policies strategies and initiatives are CSR report provides a wonderful overview of all the good that amalgamated you're doing in a way.
Well and we continue to build on our reputation as Americans socially responsible bag everyday.
Hi, I'm also pleased to see that our initiatives in efforts are being recognized as and let's see I raised our SG score from Triple B to single eight and we improved our certified be corporation score to 115 from 87.
To conclude I'm very pleased with our first quarter results and the positioning of our loan portfolio as a country.
Works together to defeat the spread of covert 19.
We remain well capitalized to successfully weather the storm and take advantage of opportunities that we believe will exist when the economy begins to normalize in line with Herman.
Mission, we continue to put our people clients and customers first and we'll work with them through this period of uncertainty I.
I would like to thank all of our employees.
Yes, we will have worked tirelessly over the last eight weeks to make our mission possible and together we will see this through.
I'd now like to turn the call over to drew for more detailed review of our financial results.
Thank you Keith I.
I will begin by reviewing our first quarter results before turning the line back to the operator to open for questions.
Turning to slide seven in the fourth quarter, ending deposits increased $435.6 million or 37.5% annualized to $5.1 billion from the fourth quarter of 29 team while average deposits for the quarter were $4.8 billion.
Average non interest bearing deposits increased $276.5 million from the prior quarter, primarily due to seasonality related to the election cycle and now represent 48% of average deposits at quarter end.
Our cost of deposits decreased to 33 basis points down three basis points compared to 36 basis points at year's end.
As Keith mentioned, we expect the cost of deposits to continue decreasing as a result of repricing in reaction to the fed cutting rates to near zero.
Pauses from politically active customers such as campaigns packs and state and National Party committees increased $196.2 million from $578.6 million at December 30, Onest 29 team ending the first quarter at $774.8 million as outlined on.
Slide eight.
The election environment continues to be a source of growth for our deposit franchise. The focus for this year will be the presidential race.
We have and continued to be a partner supporting the business needs with the majority of Democratic candidates.
It is worth noting that in April we continue to see an influx of deposits and balances have increased another $247 million since the end of the first quarter of which 47 million were from political deposits.
As a result of the deposit growth the bank just crossed the 6 billion dollar Mark and total assets.
As seen on slide 11, we delivered loan growth of $76.2 million or 8.9% annualized as compared to December 30, Onest 20.
Not to match the terms of other lenders to retain the loans.
As a reminder, our balance of pace assessments is now report.
Quoted in the held to maturity securities portfolio, which is inclusive of approximately $255 million and purchase pace assessments.
Our new investment in pace funding group will allow the bank to continue adding pace assessments in the future.
So the trend maybe slower than originally anticipated due to the ongoing pandemic.
As part of the cares Act the bank.
Because implemented a payment deferral program for consumer and commercial customers. The standard agreement allows for three months of differ.
Barrels of principal and interest.
These loans are not reported as delinquent on our financial statements and are not downgraded solely due to the payment deferral program.
In total we have set up approximately 9% of our loans on a deferral program, which is Sloane shown on slide 14.
We expect that number to grow over the coming weeks, particularly for commercial clients, who are still going through the process.
On slide 15, we've highlighted our residential loan portfolio by origination source all portfolios have strong loan to value coverage and is worth noting this was compared to the original appraisal on them.
Property and not adjusted for H.P.I. increases over time.
These requests in the residential portfolio were heavy in the first part of April but doesn't slow down.
Moving to slide 16, we are showing the portfolios in C. N I can see everywhere, we expect to see covert 19 impacts in the scene I portfolio, we have $112 million or 3.2% of total loans that are in industries that are more susceptible to impacts.
Of the total see an eye portfolio approximately 30 million have received payment deferrals.
Multifamily and commercial real estate, we've had many inquiries from property owners on payment for all options.
As of April 24th $155 million of balances have receive payment deferrals.
Unlike the residential portfolio the request from commercial clients have been slower and we expect this number will continue to increase throughout the second quarter.
Our investment Securities portfolio has also seen impacts on the mark to market for the available for sale securities during the first quarter.
The last few weeks in March the fixed income markets for non agent.
See securities was particularly volatile and the fair value of the available for sale securities portfolio decreased by 25 million compared to year end 2019, which was an improvement from the lows of Mitt.
In March.
Since the end of Q1 values have continued to improve but there may be more volatility in the future.
Turning to slide 18, <unk>, our net interest margin was 3.46% for the quarter, an increase of three basis points from the fourth quarter and a year over year decrease of 19 basis points.
The increase in then compared to linked quarter was primarily due to the lower cost of interest bearing liabilities as a cost of interest bearing deposits dropped by five basis points and borrowing costs were essentially zero due to the <unk>.
Yes in fact cuts to zero.
Which were partially offset by deposit cost reductions.
In addition, the inflow of deposits has been more heavily deployed into floating rate agency securities or held in cash in the second quarter and that will also pressured net interest margin.
Net interest income for the first quarter 2020 was $44.7 million, which compares to $42.3 million in the linked quarter and an approximately 3.9 million dollar increase as compared to $40.8 million and the same quarter of 29 team.
Now onto non interest income.
Non interest income for the first quarter of 2020 was $9.1 million increasing from $7.8 million in the fourth quarter 2019, and a 1.7 million dollar increase compared with the first quarter of 2019.
The main factor for the growth in the quarter was the sale of our treatment branch for a gain of $1.4 million, which has been excluded from core net income.
Steve mentioned the initiatives to reduce non interest expense on a go.
Forward basis for the first quarter 2020.
Our net interest expense decreased to $32.3 million compared to $33.5 million at the end of the fourth quarter.
This quarter's expense included $1.4 million of noncore expense, primarily related to branch closures, which will not recur next quarter.
On a core basis, our expenses were $30.8 million, which reflects our ongoing expense discipline.
As Keith mentioned earlier, we are focusing on expense management as part of our pandemic response initiatives and we expect to run expenses below $32 million per quarter for the remainder of the year.
It's keeping it had to slide 21, the credit quality of our portfolio is held steady throughout the first quarter as nonperforming assets totaled $65.6 million or 1.14% of period end total assets at March 30, Onest 2020.
Compared to 1.25% as of December 30, Onest 2019, a decrease of $1.1 million from the linked quarter and an increase of $9.1 million as compared to March 30, Onest 2090.
Criticized and classified loans increased by approximately $16 million in the first quarter compared to the linked quarter driven primarily by the downgraded one construction loan on the west coast $7.9 million and an increase in see an eye retail.
The provision for loan losses in the first quarter of 2020 told and expense of $8.6 million, which compares to the two inexpensive $83000 into fourth quarter of 29 team.
Provision expense in the first quarter was primarily driven by an increase in specific reserves of $3.4 million on two loans in the indirect cnine portfolio, which were impacted by covert 19 issues and the addition of $3.3 million to the qualitative reserves.
The indirect seeing eye loans were previously Tdrs and we're now eligible for the payment deferral treatment afforded by the cares Act.
We do expect to have an elevated level of provision in the second quarter as we continue to update qualitative factors based on information available in the second quarter.
Charge offs on currently delinquent consumer loans may also be elevated in the second quarter as those loans are not deemed to be impacted by kogan 19, and they're not eligible for deferral.
Skipping to slide 21, our GAAP and core return on tangible common equity were 7.6 and 7.7% for the first quarter of 2020, respectively.
Core return compares to 10.7% for the fourth quarter, 2019, and 10.2% for the comparable period in 2019.
The decrease in core return on tangible common equity in the linked quarter was primarily due to the previously discussed provision taken related to covert 19.
Lastly, we remain well capitalized to support future growth.
Include we're pleased with our first quarter 2020 results given all the events that have occurred given the fluid environment today and the uncertainty that exists we have decided to suspend our current full year outlook until the economy begins to recover and normalize from today's events.
Thank you again for your time today, we look forward to updating everyone on our second quarter results in July.
With that I'd like to ask the operator to open the line for any questions operator.
Thank you.
At this time, we will conduct a question answer session. If you like to ask a question. Please press star one when your telephone keypad.
Confirmation tone indicate your line is in a question Q.
At any time, you would like to we moved your question. Please press star to.
All participants use this week, we quit maybe necessary to pick up your hands that before president Starkey.
Once again that star one to ask a question at this time.
One moment why we pull my first question.
Oh My first question comes from Steven Act next problems with JP Morgan.
Please proceed with your question.
Hey, good morning, everybody.
Hey, good morning, Steve.
I wanted to start on the provision and regarding the commentary that you expect an increase in the two do you reserve tied to payment deferrals. So you guys are not on Cecil yourself into the incurred loss model and then the that regime, what do you need to see to change.
Further to drive an increase in the reserves and just new deferrals coming in.
So so Steve the keep in mind, we in this is specifically the qualitative reserve that that I was talking about and may not have talked about here just to be clear. So when we add 331, we did not have a lot of differ we hadn't actually know deferral activity, though we were starting to have inquiries come in at that point and starting to get our process into place.
So when we set a qualitative factors at 331, yeah. The only thing we really had to work off of where it whereas the downgraded the economic factors, which we took from pretty much the lowest levels to the highest level right. So we did kind of the maximum qualitative impact on economic factors and we use the same.
Standard nine factors that I think many other banks use you know the factor that will probably just that we will be looking at this time in Q2 is the trends of you know it normally be the trends of past dues in the portfolio, but the trends of deferrals past dues et cetera in the portfolio, which again I think we'll move from pretty low levels to depending on the.
Portfolio.
Somewhere between medium and high but if we went from the lowest level to the highest level that would again to be a 3 million dollar impacting qualitative and that that's a Q2 event, it's not a Q1 event. Unfortunately.
Okay.
Yeah.
Other banks are saying that they're seeing material drop off in new deferrals, though I mean, the terms of the pace have you seen any abatement in terms of their phase for requests are those still increasing.
No I'd say as I was just saying on the call residential has basically slowed to come over actually but last few days, we've had no deferral requests at all come through or new deferral requests.
So so that part of the portfolio has pretty much stopped now you know we're coming up to a new set of payments. So I don't know what that's going to mean right I don't think anyone knows what that's going to mean for the next round it might it might mean, absolutely nothing it might mean that we see some in incremental deferrals come in but I think the majority of it has.
It has probably already happened.
On the multifamily commercial real estate I think general commercial real estate and see an eye has reacted pretty quickly I think multifamily you noted but lot of April payments were made I think there are probably wait and that the landlords that as they're probably waiting to see the may payments and we may see some more differ.
Barrels coming through that and <unk> it would not surprise us at all to see more deferrals commend.
Particularly in multifamily.
The other thing I'll add is the processing on the commercial side at least for US is slower because on on on the consumer side. The residential side, we ask the customer to describe their hardship, but we don't require any proof because to do so would be difficult and unreliable on the commercial side, we actually asked the borrowers to.
To document for us there.
There are decreasing cash flows before we granted deferral so that process takes a little longer to work through.
Okay. That's helpful. And then on slide 16, the coven 19 expose sectors I'm curious what worries you most in terms of what you're calling out and maybe in the Cree book, how much of that as rich as retailers.
[noise] a in terms, while overall, what what worries me is probably more of a there's a lot to worry about Steve. So let me just pick the one that you know probably worries me and I know keep the most because we've talked about it is.
You know our portfolios that are based on real estate, whether its residential or you know multifamily commercial I think have very strong loan to values.
And you know in implicit in that underwriting is that it we will be able to control the property overtime if needed to work out the credit and I think given how widespread the impact of this pandemic as Ben you noted it's quite possible that the rules change in terms of a you know foreclosure or how fast.
Properties or tenants turnover and that could mean that to you know the normal time to work out a credit across the industry changes I I'm not saying it will but that is you know I think what.
No worries me maybe more than.
Then then I would normally be worried about if that makes sense. Okay. Yeah, I totally agree with through on that I mean, I mean look within hotels and restaurants. Obviously you know every bank that has though is on their portfolios going to be concerned about those individual names.
Not a huge percentage of the portfolio, so well I don't love it it's not the big worry I think Bureau is exactly right, what we can't predict, particularly with the New York City centric multifamily portfolio. Another thing is when the questionable really because come on landlords right well well the impact of stimulus.
Payments and potentially new stimulus payments individuals people starting to receive on him enhance unemployment benefits are they able to continue to make their rental mortgage payments and.
And you know what will be the other con you know countervailing political pressure that will be on you know the ability for.
Anybody could be able to sort of deal with the property that they have in work it out and then in a normal way it is a big big unknown to us.
And while I think we've built a portfolio that in <unk> in a in normal periods of economic stress should be well positioned to do to do well. The that's a very the of the and <unk> and the unknown you know as you look a month out into the future here, we're there to be extended double digit unemployment kinda crash.
Sure as it is just the biggest worry I think that we ask that bagger [noise].
Okay and then thank you and then just finally drew and deposit growth running so strong sounds like the pace demand has slowed a bit given the pandemic maybe loan growth too.
He is seeing what do you see for investing this cash and what kind of yield should we expect thanks.
Yeah. So it's all happened very quickly admin and clearly we haven't been able to.
Oh awfully and carefully deployed out so we've you know in the near term we've purchased a lot of floating rate agency securities. Yeah. We do have a very strong residential pipeline from Q1 that we're working through and so I think for Q2, and I think pace assessments that come on the books in Q2 as well.
The strong so Q2, I think we're okay, but we're going to end up with a lot of cash and and a lot of floating rate agencies on the books now keep in mind. We know we're also expecting to have the political deposit start to run off.
Maybe a little bit I don't know that at the end of Q2, we'll see that but I think we're going to want to stay more liquid in the near term just to being a great position to be able to offset that upcoming run off and not have to not necessarily have to go into borrowings. Although we may choose to do that as well just continue to grow the balance sheet.
But our first and foremost thought here and I think probably most banks are in the same boat is be extremely careful with deploying.
Deploying cash and capital into credit right now and make sure we understand what we're getting into as best we can in the in that new environment that we're all dealing with.
Okay, great. Thanks for all the color yeah.
Thank you.
Our next question comes from Chris O'connell with KBW. Please proceed with your question.
Morning.
So this morning.
I was hoping you guys could dive into a little bit.
The PBP program Youre going on a and just how it is logistically work in in terms of.
Providing your customers you have the referral.
Yeah, Yeah, perhaps to Chris so so we're not an SBH verified lender.
And as you know, we're not a bank that particularly geared up to do small business loans has never been one of our progress we don't really have the.
The capacity to be able to handle the origination requesting a loan servicing request to handle a small business portfolio.
And over the past several years, we've had a renewal relationship with a one of the country's largest nonbank guess BA lenders that has worked very well for us in normal times.
We made a decision early on probably not anticipating unlike a lot of banks quite what the demand would look like.
And to do referrals for mostly small nonprofit organizations, who are eligible for the P.P.T. long, they're not normally eligible for us the evolves, but work for that PPD program. We got about 850 referrals into that program. We were referred them onto our partner on to be able to handle those those loans.
Our bankers have helped people you know through the process and continue to fill out their applications, but our partner has really handled.
The underwriting in the origination of those a of those longer to classes.
Got it and you don't get dollar amount is on.
The amount that you prefer.
I do but Chris I'm going to happen gets you that more accurately because they don't have that at my fingertips.
Joe do you know offered up your had.
How many are funded.
With a total loan request volume was.
In in units I mean, it was over 800 I think in dollar amounts. It was it was probably.
Yeah, I don't know the number actually I don't want as.
We'll get it will get to that number yes, yes, the other place where where we are going to participate in PPP, which is really the only way that that we had the ability to do so is from a new tech we will we will or we do plan to.
Purchased some of their sales of the P.P.P. loans, which you know it it actually the duration of those.
Of those loans matches very well with the political run off cycle. They were anticipating so that say you know risk free short term use of cash that a you know we should be able to due to its kind of our way of helping the PPP program.
Work got it.
Got it.
And then if we if we could shift to the balance sheet.
Particular.
Loans [laughter].
I think you mentioned in the press release, a that there is some loan purchases. This quarter. If you could just go through maybe the amount and what type of loans those were and then just overall.
You know your outlook on loan growth for the for the rest of the year given.
Just a big shift in the environment from last quarter to now.
Yep, so enter in terms of loan purchases first of all we did purchase 35 million of residential loans on the West coast, which normally you know we haven't been doing but where we're doing that for crj purposes. So those are gonna be.
High quality loan high quality residential loans, it's more about the geography that their end than than anything else.
We did do some more solar loan purchases I think the amount there is probably about 35 million a there was one transaction and we had been working on for a while that that did finally close I think for residential solar purchases is at least for now that's probably a it for us in terms of what will be doing same for residential loan.
Purchases.
And then you know as <unk> as well, we you know every quarter, we seem to be purchasing some SB eight or maybe more so I should I should say SP and you Sta their government guaranteed loans that show up in our see an IDE portfolio.
So we did do support purchases for those as well our total government guaranteed loans <unk> sitting in Sienna is now about 150 million so to place we'd like to deploy capital risk free.
Got it may or May Chris and just the credit Chris just a follow up on your past question I I emailed really quickly our head of commercial banking. The total loan request were approximately $65 million.
Under the PPD great.
Great.
And then just finishing up on the loan side you'd be.
I'm going to the outlook for the rest of the year just given some of them you know changes in the economy.
Yeah, I'll looks cloudy <unk> I'll be honest I mean, what we what we are seeing is I think there are more opportunities now in high quality loans and there were before this began I think the multifamily space has loosened up a little bit, but obviously you know we're being very cautious there only doing the highest quality deals are so we're requiring.
Six months of P. and I reserve for anything that we're currently underwriting.
But those deals you know are now moving forward.
Residential we we you know we had so much come through.
In Q1 before all this happened as as a result of just rates continuing to go lower that yeah, we actually sort of effectively turned off our pipeline I think we're now looking at turning it on again I'm in a very conservative manner. So I think that you know we should still see some growth there, but it's probably slower than we anticipated and pace will come.
They need to come on as well in the securities portfolio.
I'm actually pleasantly surprised.
Without pace originations are going with our partners, it's certainly down but it's it's not out so I think those will be some of our growth areas. And then you know we continue to have a pipeline of seeing eye loans as well that that we're looking at but we've obviously turned the dial several notches in terms of the risk that we're willing to put on the balance sheet at this point, but but we're also still in.
Business to originate.
Got it and then on the on the deposit side I mean, obviously put political in politics.
Really strong this quarter it in a much stronger again I think you guys were expecting you're going to outlook on kind of you know.
I mean, it's been shown coming into the second quarter as well it seems like I mean is there any outlook I guess, you can provide or is it still kind of murky given the election cycle.
[noise] really you know look one thing I I would emphasize it is you know we seen as we have in the past couple of quarters nice deposit growth across our sector is not just in the in the political sector in our commercial bankers you know even though they are in a work from home environment. They remain active in terms of talking to you know a number of our of our existing customers and looking for new.
Relationships, so that that activity you know, there's not a has not stopped or or or slowed at all the election. You know the election cycle. Obviously is also a bit of a murky environment, it's gotten a little bit more clarity on the presidential side now that we have a demo, but presumed democratic nominee and I think you'll start to see.
In that piece of the Rachel start to see a consolidation as Bob of contributions there that well well that will help in that and we should continue to see some some growth there.
You know Democratic vulnerable Democratic candidates, who are in their first term had very very good fourth quarter of fundraising dissipate them, having a good second quarter is well on but we stood as in past years start to see I'm, a plateau start to happen where people as we've talked about before or Reagan spend at an equal clip than I think as campaign make adjustments.
Let's figure out how to spend money on in this environment. We should we should start to enter into a plateau phase and then again see the run off of the of the deposit portfolio towards the end of the third quarter beginning in the fourth quarter as we've seen in past election cycle. It's.
Oh, that's not the best Crystal ball I have at this point I could be you know long by a little bit, but I think that will be the general pattern that we'll see Chris.
Great.
Thank you.
And then just one last one on the NIM.
Sure you know the guidance you know probably down.
The next quarter and I know, there's a lot of moving parts here, particularly with the political deposits and kind of unknown.
How that might end up for the for the quarter.
But assuming maybe they stay flat here chosen for the remainder of two Q.
You know at at the balance sheet. They are you guys gave them a.
In the deck and.
Just given all the movement.
In short term rates.
No.
Can you give any looking to just maybe a range or you know how ah how that might factor into the to the quarter over quarter NIM.
For two Q.
[laughter], it's gonna be it's it's tough to see where it is this early in the quarter given all the movements that that it that have happened I mean, I think you're probably going to be looking at just and it's a combination of a little bit of and I met starting to flatten or may be drop a little bit.
And then the balance sheet growth, just expanding very rapidly because keep in mind the averages that you're looking out for the Q1 NIM are probably just given all the end of quarter activity are probably 200 million light.
Compared to where they would be if you just take the April or the kind of end of March average if that makes sense, but it's going to be on lower yielding assets because of where we've deployed it.
I think maybe you know in terms of anti which I'm a little more comfortable talking about at this point just given all the volatility.
When we model you know we have obviously had our disclosure last quarter, where it was I think about 13 million down for 100 basis point drop which just happened I think we're looking at more like 7 million down.
When we factor everything in which is a pretty pretty decent solid improvement and that's a combination of I think a little better performance in terms of prepayment speeds.
You know lie bore that assumes LIBOR comes out a little bit from from where it was which it's already doing and I think our deposit repricing has been.
More effective than <unk> than we thought it would be in the model in part of that is just how fast it happened and you know money market yields which are sometimes competition for US you know effectively going to zero. So <unk>. So I'm very pleased at least with our outlook, which it was always subject to some error in terms of where an ice gonna go versus.
What we originally projected with the down scenario.
[noise] got it and that's 70 million that's coming off those 44 seven.
The number this quarter.
No no no annually annually. So so so yeah just wanted to yet another yeah. Yeah. That's it's a good wanted to confirm Chris [laughter], Yeah, Yeah, let's call it will call I wanted to.
[laughter] call it call I wanted a million a quarter.
Great.
All right that's all I. Thank you.
Once again, ladies and gentlemen, who asked a question at this time, Please press star one well your telephone keypad.
There are no further questions in queue I would like to turn call back over to management for closing comment.
Thank you operator, I just want to thank everyone, who joined our call today, we hope that you and your family continue to face to stay safe and Com, We're certainly living through a challenging time and I wanted to leave you with just a few concluding thoughts first I continue to be very proud every day of our employees, who worked so hard to support our customers since we moved to remote working environment.
Secondly, our commitment to our employees customers and communities remains true to our mission and values third we have many levers for growth, including our sustainable lending geographic expansion new product development <unk> named Us the view.
Fourth we also have the ability to drive additional operational efficiency and a reviewing opportunities to further reduce our expenses without impacting our competitive positioning and taken together and despite challenging backdrop. We're optimistic that we can continue to grow the bank and are confident in our financial positioning such that we will be able to take advantage of market dislocations as the.
I want any begins to normalize again.
And as a reminder, we anticipate filing our 10-Q. This evening. So thank you again for your time today and everyone. We will see you soon thanks.
This does conclude today's teleconference. You may disconnect. Your lines this time and have a great day.
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