Q2 2020 First Foundation Inc Earnings Call
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Speaking today will be Scott Kavanau first foundations, Chief Executive Officer.
Kevin Thompson, Chief Financial Officer.
David Depillo President of first foundation.
John who Cobian President of first Foundation advisors.
Before I hand, the call over to Scott. Please note that management will make certain predictive statements during today's call that reflect their current views and expectations about the company's performance and financial results.
These forward looking statements are made subject to the safe Harbor statement included in today's earnings release.
In addition, some of the discussion may include non-GAAP financial measures.
For a more complete discussion of the risks and uncertainties that could cause actual results to differ materially from any forward looking statements and reconciliations of non-GAAP financial measures She's a company filings with the Securities and Exchange Commission.
And now I would like to turn the call ever just got cabinet.
Hello, and thank you for joining us.
We would like to work on all of you towards second quarter 2020 earnings Conference call.
Well, we'll be providing some prepared comments regarding our activities and then we will respond to questions.
As highlighted in the press release. This morning, we experienced another strong quarter across all key financial metrics of the firm.
Our earnings for the second quarter were 17.9 million, a 44% increase over the second quarter of 2019 were 40 cents per share.
Total revenues were 57.4 million for the quarter, an increase of 13% year over year.
Or efficiency ratio for the second quarter was 53%.
Fair fight and 47% at the bank.
And our tangible book value per share ended the quarter at $12 in 16 cents per share.
We can also report that the company's board of directors has declared a quarterly cash dividend Oh seven cents per share and at this time, we anticipate the continuation of the dividend in future quarters.
I am extremely grateful to all of our employees, who have helped us produce such strong results this quarter.
Ben remarkable to see or team performed amongst all that is currently going on.
As I've said in prior calls we've been focused on the health and safety ever employees and our client.
Providing excellent client service has been a core value of hours and we remain committed to offering support to those than me.
We participated in the small business administrations Paycheck protection program, and Dave will touch on that more in detail.
We have suspended any further participation in the PPP and currently do not intend to participate in the mainstream lending program.
I'm also so please that all of our branches and been able to safely remain open to support our clients throughout all the data.
And as you're aware, we rolled out or digital platforms in October of last year, which proved to be good timing with the pandemic.
These digital platforms have performed well.
Both for our clients, who meet vital services as well as our employees who have relied on virtual technologies to conduct many of their day to day functions.
This quarter's results or another testament to the strength of our business model.
We are strong so strong loan and deposit growth and despite volatile financial markets are assets under management returned to near peak levels.
I'm very grateful for all of our employees and I want to thank all of our clients, who entrust us with their financial needs.
This time, let me introduce and turn the call over to our newest member the executive team or CFO, Kevin Thompson.
Thank you Scott, it's great to be part of the team.
In spite of a challenging economic environments, we experienced strong profitability in the quarter with a diluted EPS of 40 cents per share.
As Scott mentioned, the efficiency ratio decreased to 53% of death by and 47% at the bank with a return on assets of 1.06% and a return on tangible common equity of 13%.
Our track record during this quarter is a testament to our business model, we benefit from fairly consistent fee income from our financial Advisory group, a strong loan portfolio, especially focused on a conservative multifamily book and the liability sensitive balance sheet that is poised to benefit in this rate environment.
And even as we grew deposits by 12%, we witnessed a decrease of interest expense by 30% in the quarter.
Which helped boost net interest income by 8% and the net interest margin to 2.96%.
The ratio of allowance for credit losses to loans increased to 55 basis points this quarter, even with strong credit metrics and trends, we used more severe economic scenario assumptions under the Cecil framework to help boy up our reserve levels.
With strong expense management and continued operational leverage of the investments we've made in our business pre provision net revenue increased an impressive 17% in the quarter.
This is despite the lower noninterest income as a result of lower transaction volumes and advisory fees in the quarter.
At this time, we still believe our third quarter multifamily loan securitizations should occur as planned.
All in all it was a strong quarter and I want to thank everyone on the first foundation team for the warm welcome.
I'll now turn the call over to David Depillo President of first Foundation.
Kevin first I want I reiterate our gratitude to our team members. Thanks to their efforts, we have been able to maintaining consistent pace with our business plan projections and support our customers. During the second quarter. We originated 701 million of loans as expected loan demand have softened somewhat in many of our markets, but we.
Well remain on track for a strong year pending any additional unforeseen circumstances.
Composition of our loan originations for the quarter is as follows.
Multifamily, 55% commercial including owner occupied commercial real estate, 38% single family, 6% and other one for Scott.
The second quarter, the weighted average rate on our loan originations was 2.86% excluding PPP loans origination we're at three point by 5%.
I wanted to also reiterate some items about credit quality of our loan portfolio does occur as Kevin mentioned, our asset quality remains strong with mph remaining at 22 basis points.
Approximately 85% of our portfolio secured by real estate.
Across all segments the loan to value is slow averaging below 60% our debt service coverage ratios on our multifamily non owner occupied commercial real estate are strong.
In our commercial business loan portfolio, we have low exposure so industry.
Hit hard by the pandemic, specifically hospitality and restaurants, representing 51 million or less than 1% of our loan portfolio.
In addition, we have no meaningful exposure to oil and gas aviation or crews industries.
Our owner occupied commercial real estate portfolio, we have exposure to hotels and retail bellevue, each representing $26 million and $156 million, respectively for a combined total of 3% of our total loan portfolio.
Okay.
As mentioned, we participated in the PPP program and funded 604 loans for a total balance of 171 million.
The forgiveness portal the system, we used to receive evaluate track and process PPP loan forgiveness request has not been turned on at this time as we're still waiting or the guidance from the FDA.
We anticipate the majority of these farms fee forgiven in the fourth quarter 2020, and the first quarter of 2021.
We have also handled request for forbearance, which remain low and we have not seen any significant need for for banks in our multifamily portfolio at this time.
During the quarter deposits grew by 617 million, which is an increase of 12% compared to the second quarter of last year.
We saw growth on both retail deposits in in our specialty deposits and our online deposit activity had contributed an additional 370 million since we launched.
During nine months ago.
Now I'd like to turn the call over to John a cookie unprecedented foundation advisors. Thank you David and good morning.
Our assets under management closed the quarter at 4.3 billion.
We added 157 million of.
Okay assets under management from new clients, which has had a case that is ahead of last year also client terminations are trending much lower than bass quarters.
This is a testament to our team continues to perform even amidst this pandemic.
Our investment philosophy, which relies on on a value based investment at came into preserve capital and manager downside risk has performed well for our clients.
Our balance portfolios have done well this year.
Also our trust Department continues to be instrumental in our ability to build and maintain relationships with our clients.
Our Trust Department allows us to work with clients that have financial needs beyond beyond our traditional investment in wealth planet offering.
We have been able to eliminate some positions and do not feel the need to replace them at this time.
With a U.M. at peak levels and with the recent reduction in staff, we anticipate margin improvement going forward.
We are looking at ways to even further strengthen our efficiencies by making it had enhancements to our core technologies and improving the client experience. This was a project that was already well underway, but has been validated by the pandemic given the benefits we could realize in the near term.
Whether we continue to operate virtually with clients for the foreseeable future or.
We returned to the in person model soon we are becoming better positioned to serve our clients in either scenario. However, they may prefer.
We also have uncovered some new opportunities to efficiently capture assets from clients, who are more inclined to leverage technology, when working well with our wealth and met with a wealth manager.
With these elements in place we are seeing a strong pipeline and expect to continue to be successful and attracting new clients in the future.
At this time, we are ready to take questions and I'll hand, it back to their operator.
Thank you the floor is now open for questions. If you would like to ask a question Press Star then the number one on your telephone keypad.
Your first question is from Matthew Clark with Piper Sandler.
Hi, good morning.
Good morning, Matthew.
Can to give us the contribution to Eni this quarter from PPP.
The the actual dollars.
I don't have that with me to actual contribution but the.
It because of the low rates as you know Matthew.
It did impact our net interest margin by about four basis points had to our net interest margin. So I don't have the full amount, but you could take the average loans were out there about 171 million.
Average the rates 1%.
The fees are amortized over two years do you kind of back into that.
Okay, Yes.
Okay.
And then.
The reserve.
Was up on a dollar basis.
You know about.
Seven and a half million doesn't look like it came through the provision can you just.
Give us some color on.
That was reallocated.
Sure. Yes, there are couple of things going on there.
So.
As part of Cecil.
You take your purchase credit impaired loans.
And what happens is those become automatically under the see there's that thats. The former name for them they automatically become purchase credit deterioration deteriorated loans under the seasonal framework.
And there's a process you're supposed to go through a called it the a gross up where you look at those those loans and decide what portion of the discount that you've had out there is related to credit and what is non credits and we went through analysis and it is all credit related as we appropriately disposition those loans in.
To the Cecil reserves, so that doesn't impact the income statement you saw a number of our peers that have been acquisitive.
The past due that same thing last quarter.
So thats one item.
Yes, and the other item is under Cecil there's this new thought that as you have what would have traditionally been called the Ltd TT by the other than temporary.
Impairment on securities when cash flows.
When you have some impairment going on historically that you would have had an evaluation allowance against that security under Cecil guidance actually that run through your credit provision now and so what you do as you take the present value.
Some of your cash flows compare that to your fair value are amortized cost and you saw that last quarter. We had an an io strip adjustment that appropriately was run through our.
Our through Cecil This time and there was a small increase to that.
Quarter, as well does that make sense Matthew.
That's great color. Thank you.
And then just shifting gears back to the margin do you happen to have the spot rate at the end of June on your interest bearing deposits and the and maybe the interest bearing liabilities as well just given the dramatic drop in funding cost trying to get a sense for where they might be headed in three Q.
The interest bearing.
Deposits.
I have.
Yes deposits interest bearing deposits were dipping into the low 1% by the end of the quarter. So we as you see were 1.18%.
For the quarter cilia with dipping down quite quite a bit of movement and we're seeing more to come there's a lot of movement. We still anticipate yeah, we still think that theres going to be an adjustment in interest expense lower.
In the third quarter and slightly into the fourth quarter and should be fully adjusted.
Going into 2021 remember we also have described half a billion of home loan bank.
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Borrowings that will mature in September I think it's mid September and that currently is at a rate of 177 and when that wears off im not sure given our loans to deposit ratio and the securitization that will need to replace it but if we did it would be.
And that team in terms of.
With the rate adjustment would be.
So.
I think one of the things that we're also trying to do.
As a.
Between home loan bank advances, we want to see a decline.
And we've been very strong in the deposit gathering mode.
And then also brokered deposits were letting a lot of that were off.
And I think we can reduce that quite a bit maybe as much as four or 500 million. So if you look at it this way Matthew typically this quarter is the one we kind of give you a margin with and without our wholesale leverage going into the securitization.
This year, it's particularly prominence in the fact that as Scott mentioned that one year term borrowing that we're matching again see loans available for sale is at a rate that significantly higher than borrowing cost today.
Equivalent borrowing costs. They are probably 20 basis points that effect on the margin will be immediately impact.
The third quarter, and then full benefit going forward in the fourth quarter. So the if you kind of do a margin.
Build up to 96 of those three basis points for PPP.
Net effect so call it 330% there it's kind of our.
Right today and then.
Kind of including the effect of the wholesale leverage set another 10 basis points. Another eight another eight basis points. So you can kind of back into where we're at.
Excluding those items.
It's in the past, we've talked about having a higher than three margin I think we'll be able to attain that next quarter.
Yes.
Okay, great and.
And did you buyback any stock in the quarter and if so how much at what price.
No we did not I.
I think for the foreseeable future Matthew.
No real intent when our stock was trading below tangible book value, we're close to tangible book value.
It made more sense.
I'm sure you can look at the capital levels and say it looks like it's close.
So I think for the time being we're just going to accumulate capital will pay our dividends.
But I don't really unless the stock dips hard I probably will not.
Buy any stock back anytime.
The next several quarters.
Okay last one for me just on on the multifamily portfolio haven't seen much in a way as deferrals whatsoever.
If the unemployment benefits get kind of data should we start to should that be more of a concern as it relates to the underlying rents and.
And the need for.
Some forbearance.
It's kind of interesting.
Theres a lot of electricity and the cash flows are multifamily borrowers so even if they.
Say, 10% on collection variance, maybe as high as even 20% most of them would cash flow positive towards that because of the.
The nature of our underwriting so.
Could there be some impact potentially.
Becomes severely protracted for a long period of time and there is.
Safety net.
But at this point.
We've done some pretty severe stress.
Analysis through our seasonal modeling and.
Because of the richness again of the cash flows.
Take something beyond just.
Yeah.
Non.
Continuance of unemployment benefits to dramatically impact.
To the point of any.
Need for forbearance or any form of default.
Great. Thank you.
Thanks.
Thank you. Your next question is from Steve Moss of B. Riley FBR.
Good morning.
Good morning, Steve it's.
Starting with so perhaps loan yields here just kind of wondering where they ended up at the quarter I think I heard we 55 for the quarter average just wondering if spreads are tighter today than they were during the quarter here.
So interesting the last summer funded out and obviously the ones that are impacted the mode.
Side of PPP, which at a kind of an aberration today than that.
Typically multifamily.
Those came down from 371 in the first quarter two to 355 and that the majority that pipeline was built up when the fed dropped rates and there was.
Kind of what we call pre locked down so there was high demand.
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No risk adjusted return.
Our expectation is that's probably where we're going to probably normalize on most people have figured out that multifamily is somewhat a safe harbor in the market most lenders have returned.
And so weve from an internal modeling standpoint, Steve look at that run rate as kind of consistent going forward. We had a I would say brief period of time of wider spreads in the market, but certainly from what we see all the way from the agencies through portfolio lenders those spreads of my.
Carla.
Adjusted themselves back to where they were in the first quarter.
That kind of answer your question on that.
Yes and.
Interestingly the pipeline kind of curious here I mean, you mentioned some moderation in the pipeline and slower.
Loan growth any extra color kind of what you're thinking about for the backdrop in this area would be helpful.
So we modeled the kind of a slow July then starting to pick up a little bit in August and then September and then fully ramped back.
Up to our normal production levels in the fourth quarter.
Summers typically is slower season.
Kind of that plus covidien.
Our family of ours can be a little more conservative.
Some of them, we're sitting on the sidelines.
Less sensitive to rate and more of just wanting to see what's going on that's kind of subsided and we're starting to see momentum and pickup back in the pipeline. So I would say we're ahead of expectations for July and August from where we had modeled internally. So thats. Good news and we expect to probably be back to fully ramped.
Probably by the end of September going into the fourth quarter.
The market seems purchase activity is picking up.
A refinance activity is picking up and then obviously on the consumer side and mostly in the residential mortgage market.
That seems to be fairly robust so multifamily is kind of catching back up to that.
Kind of general.
Pace I would say.
That's helpful and then in terms of funding cost, perhaps going to customer service costs.
Yes, pretty good crude growth here I think on an ERP basis.
Just kind of curious as to how to think about that line item for the back half material.
Well, it's a confluence of two things one lowering costs, but higher balances. So I would say that I would probably run at flat.
Because we are seeing huge demand by a lot of our customers park money so to speak and.
I think you've probably heard this from just about every bank theres a demand for a home for deposits now that we haven't seen for quite some time. So I don't think the relative absolute dollars will decline the rates of kind of finally, well a little bit but balances.
Pretty sick balances are high but they costs themselves have come down substantially the way I would look at its Steve is even with those higher costs the banks already on the forties and efficiency.
That should continue to improve as our revenues continued to improve as well. So we're I would say we wanted to be at about 50% efficiency by the end of this year.
We're already kind of ahead of schedule, even including higher balances in that.
Customer service area.
Okay. That's helpful.
Once again for me in terms of the wealth management business. Good rebound just with regard to the new clients coming on board.
Is there further pipeline of new clients to add and just kind of.
Incremental color there would be great.
Yes, no great question.
So what we're seeing is.
The quality of the new clients coming on board seems to be larger.
Larger relationships relationships that also include our trust company and so were the volume is probably a little less but in terms of quality and size of relationships, it's probably a better in.
Larger client relationships.
Is that a shift in the.
I'm sorry go ahead go.
Go ahead, Steve.
Okay. Okay. In terms of just is that as in terms is that a result of hiring of new relationship managers or just kind of.
What's driving that that's shifting and larger clients.
No I think if you look back over the last several years, we've definitely been moving upstream try to go after a larger relationships and so.
As a result.
We just got to I think a 25 million dollar.
Relationship that came through here in the last few days and so both through the Schwab channel the TD channel as well as our own channel we've been.
We've definitely been.
Hi, bringing on larger relationships and it's just something we focused on the last couple of years and the platform is really built for larger relationships and so we've worked closely with our trust company, Our Nevada Trust offering has helped a lot in as well as just the California Trust towers also I think you had some.
Important deploying now you know we did have a reduction in staff, we really have not added relationship managers, we've actually pared back a few.
And.
I would tell you that in quarters past.
Margin has not been where we'd like to see it and I think.
On a go forward basis, you're going to see margin start to improve and we'll continue to improve we're kind of hunkered down.
Yes, my most of our EMS are working off site or remote.
So to have that type of.
Pickup in new assets is actually pretty good but I think it's just equally is important and talk about the expense savings.
Rich or at least a couple of million dollars so far.
And as soon as we can bring our new operating system online I think we can create more efficiencies on a go forward basis and.
And.
No not feel the need to increase understaffing.
Yes, and lastly, just I think when you get more volatility in the markets people.
Tend not to want him manage their assets on their own and so the route engaging.
The wealth manager like ourselves and so we usually see a pickup in business when when we see the volatility we've seen in the last couple of months.
Great. Thank you very much and nice quarter.
Dave.
Thank you as a reminder to ask a question press Star then the number one on your telephone keypad.
Next question is from David Feaster of Raymond James.
Hi, good morning, everybody.
Hey, David How're you doing.
Well I'm well thank you.
To start on deposit growth.
Posit growth was tremendous but when I look at it look at end of period versus the average is like a lot of it happened late quarter. Just curious how much of this deposit growth and think was from PDP or stimulants first is true organic growth from the digital brand or specialty deposits or anything and then how deposits and trended early in the third quarter.
And maybe just how its expectations might be for how speaking some of the deposit growth will be.
It's interesting the we did analysis on PPP.
About half the dollars have already left which is.
Yes. Good then.
And it's probably 60, a little over 60% so.
The 170 million, there's maybe half of that left so there was a so we funded into there was 171 million funded.
PPP about 160 actually went into a first foundation account as opposed to maybe a different bank.
And then like Dave, saying, you know over half that has already left the bank.
So.
Really when you look at it it's not a significant impact versus the 600 million that we took on board.
And it really came across a broad stroke I mean, we the branch network was very successful the digital.
Network was also very successful was huge.
And then our specialty deposits.
Also picked up and like Dave was alluding to earlier, we've had lot of clients.
Call up and say Hey, we want to give you more dollars and we've definitely been the beneficiary of that is as well as new related minutes I think if you look at our balance sheet.
At the end of the quarter traditionally this would be our highest fund to deposit ratio because of the hotel leverage we typically carry by having the Texas loans on our books.
And it's.
A level, we haven't seen basically one to one.
For that period of time plus.
A lot of the balance sheet growth is sitting in cash right now.
As well.
The traditionally we havent.
Then sitting on a lot of cash so deposit demand is.
Is significant as Scott said across all the lines our expectations are is.
The digital channel continue to grow.
The question is.
For every one is how sticky is that business well.
We started that program our rates were significantly higher than they are today, and we keep ratcheting down ratcheting down ratcheting down and it keeps growing and growing and growing our decay rate.
Is very minimal as long as your quotes.
In the market.
Which we can afford to be because we don't have a thousand legacy branches sitting around that we have to support so we're almost to the point of collapsing those on top of our branch rate.
I would be the first time, we've seen not in a long time and again as Scott stated French growth has been pretty significant too.
In the specialty side for us is.
Really where a lot of.
Our expectation for growth will continue.
So.
And just to let you know the pipeline still is very robust on on the deposit front.
That's terrific.
Terrific and then just on the multifamily portfolio I'm, just curious what you're hearing from clients Theres, obviously investors are a big concern about the market we're seeing different.
Data about rent collections, you're obviously, well positioned and rent control markets, but just curious how rent collections are trending in June in early July and how they can see rates are trending.
So we haven't seen significant deterioration in collections period over period month over month.
July was typically.
It seems to be the same as what weve seen engine and in May.
Talking to us.
Our clients typically we'll get the majority of the rents in the normal collection period, and then we'll have a few tenants that work with through the end of the.
But outside of that we haven't seen any major tenant defaults I think a lot of the municipalities have changed their tune in regards to hate don't pay your rents don't worry about it because they've been sued over that in their spend.
On cases in California, also so theyre being a lot more mindful on telling people go payer handsets are an important thing theres, probably a couple other factors one has to come out with some rental assistance programs in some of our major cities.
Bournias, specifically outlay that will help parameters.
And this whole anomaly of people working from home as you know we have a high percentage renters.
It's not like you want to sacrifice your ability to.
Maintain your job from your dwelling and one of those are apartments. So we see this kind of hyper.
Pardon.
Housing beyond what Weve traditionally seen in the past.
Where.
The mobility is certainly there, but the demand is certainly still high so.
Talking to our apartment owners, which we talk to every day.
Through the process of securitization, we're getting updated rent rolls.
Say that.
We don't really see any stress any any different from July to June from May.
For walk down continues in perpetuity, another shoe drops, yes that could change, but if you kind of stays where we're at.
On.
It feels kind of everyday is groundhog day.
I told you anecdotally I own units myself and the month of April May June and July it's been 100% collections and you would say those are more traditional work workforce housing which is.
Exactly the type of stuff that we do.
That's helpful and we'll just kind of following up on your point gave on on.
Working from home, maybe more of a strategic question as it stands I know the answer to this is this market really.
Basically just a firms are business model, but I guess as you guys step back and think about your positioning in the market in the.
The business model.
Any changes in strategy in the midst of this environment given increased remote workers and more digital adoption in changing consumer behaviors.
Not only just on the expense saving side, maybe office space JV, but even opportunities for growth in places that you might want to advance to drive additional organic growth going forward.
So we embarked on the I would say four years ago and said.
We're not going to be solely dependent on bricks and mortar we want to invest in technology, we want to upgrade our systems, we want to have scale and efficiency that.
Most institutions set the size, we were four or five years ago wouldn't have made those investments and quite frankly, we got beat up for it for a while because our efficiency ratio was running a little bit higher on those investments we feel are paying off in a few areas one is.
The from the in section of the business.
Scott at the bank together it was built in a time where.
Distributed technology was a lot more efficient that most banks were built 2030 years ago. So this bank has always been has the ability to have distributive workforce from day. One we haven't had the need to disseminate everyone now, but we've always had that ability. So that was the strategic advantage on the.
Core systems.
And our digital delivery.
Commercial side.
The from five years ago, we built out a robust commercial side, because we knew the client base that we're going after requires significant technology to perform the task and then we made the strategic decision to really kind of push the consumer side on digital delivery platform. So we kind of feel we.
Sure.
Well, we called the cutting managerial digital delivery on the consumer side and not the bleeding edge. So we let the big banks spend the.
Hundreds of millions of dollars and figuring out how to deliver this and then we take more off the shelf product side.
Our cheapened efficient for us soon.
You just look at our digital branch growth.
Three from zero to 380 million in less than what nine months, yes.
We grew the size of a community bank in that period literally with a few people.
No cost effectively on the margin to us.
Our strategic partnerships with our technology providers are some of the best in the industry right now they're using us says.
Kind of the.
Poster child for other banks Weve won several awards around our distributor delivery as well as our internal efficiency use of business intelligence. So we've we feel going into this.
Next leg, we were just lucky to make those investments oneness pandemic hit because.
We sit around going with 50% of our staff on site going were asked sufficient or more efficient than we've ever been I keep using the word serendipitous I mean, it it really was serendipitous look.
Looking forward on longer term basis, and I think it's important to really talked about we have very little office exposure. If any when you look at RC Erie concentrations. Its multifamily we're not the only bank I mean I've been reading all the big banks are in no hurry to bring their employees back.
We were initially phasing some of our employees back and Weve halted that.
And.
I think.
For the foreseeable future, we're evaluating with our needs are in terms of office space.
And you know come time for the renewal I have a feeling we won't be near the office space.
That we currently have which will be further cost savings for first foundation.
And I would bet that not just banks, but a lot of different companies out there are facing the same.
Thing that we order and realizing that you can still get good productivity from people.
Working remotely as well.
Just to see the ability to to reach different demographics, and we've historically been able to do over half of our customer base through their digital delivery new customer acquisition.
40, and below which is very unique this institution typically.
From an age.
Graphic perspective as.
Kind of 65 above so we've kind of transform.
The customer base as a bank to be a lot more broadening want to continue to do that.
Thats, where all or energy is really.
Through.
Expansion of our product offerings digital delivery and that goes all the way through our high touch customer service side. So at the end of the day.
If you need a high touch customer service you want to do it digitally we want to be the.
Default option.
Okay. That's that's great. That's extremely helpful. Thanks, guys.
Thank you have a follow up from Matthew Clark with Piper Sandler.
Hi on the topline drop there I guess, how much of that was driven by the deferral of origination costs tied to PPP if any.
It's not terribly impactful you have a little bit of decreased during this time is lower commissions and lower transactions happening in branches and things like that in the course in first quarter is when you generally have the highest.
Benefits and salary costs so.
We anticipate going forward is as things.
Kind of normalize that line coming up slightly.
Matthew.
Just we've been very from about hiring practices throughout kind of this area.
You know plus or minus one or two bodies. We're at 500 employees and we feel that thats sufficient for the workload that currently we can handle.
So I think for the foreseeable future you should expect to see the head count remain very close to 500.
On the deferral side that as you probably heard US say, we've been historically I would say fairly conservative on the low end on the deferrals.
Jeff.
A lot of folks play that game of deferring a lot of expenses, but we don't want to have our basis.
To be honest written one.
So now I would say on all business lines, including PPP, we've kept that number relatively low.
Okay. Thank you.
Sure.
Thank you. This concludes our allotted time for today's question and answer session I will turn the call back over to Mr., Scott, Kevin All for closing remarks.
Thank you everyone for taking the time today, we certainly appreciate it.
Overall, we're pleased with our results and we look forward to speaking with you next quarter.
Has been an extraordinary time and our team has been up to the challenge Im. So proud of how everyone has responded. Thank you again and have a great remainder of your day.
Thank you. This does conclude today's conference call you may now disconnect.