Q2 2020 Eagle Bancorp Inc Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the Eagle Bancorp Inc. second quarter 2020 earnings Conference call. At this time all participants are in listen only mode. After the speakers presentation. There won't be a question and answer session to ask a question. During this session you will need a press star one on your telephone if you require any further assistance. Please press star then.
I would now like down the conference over to one of your speakers today, Chief Financial Officer, Charles Livingston, Sir. Please go ahead.
Thank you Michelle.
Good morning. This is Charles Livingston, Chief Financial Officer of Eagle Bancorp before we begin the presentation I would like to remind everyone that some of the comments made during this call maybe considered forward looking statements.
Our form 10-K for the 2019 fiscal year, our quarterly reports on form 10-Q, and current reports on form 8-K identifies certain factors that could cause the companys actual results to differ materially from those projected in any forward looking statements made this morning.
The company does not undertake to update any forward looking statements as a result of new information or future events or developments unless required by law.
This morning's commentary will include non-GAAP financial information the earnings release, which is posted in the Investor Relations section of the company's website and filed with the FCC contains reconciliations of this information to the most directly comparable GAAP information.
Our periodic reports are available from the company or online on the company's website or the FCC website [laughter] I would like to remind you that is our policy not to establish with the markets any earnings margin or balance sheet guidance now I would like to introduce Susan real the president and CEO of Eagle Bancorp.
Thank you Charles.
As is our customers Chief Credit Officer Jan Williams is also on the line with US This morning.
Charles Jan and I will be available later in the call for questions.
Before I begin a discussion of our financial results I would like to extend our thoughts and hope for all of those on the call. Our community here in the Washington, D.C. Metropolitan area, and especially our customers and employees. During this time of stress caused by Q.
Over 19 pandemic <unk>.
The impact on the health, social and economic aspects of our community has been significant causing us to change the way, we live and conduct business. However, we are committed to providing excellent relationships for service, we are known for while maintaining a safe and.
Firemen for all customers and employees, we are equally committed to our role as a supporter of I local communities as we all work together to define the new normal.
The second quarter results of 2020, we reported last evening, what's the first full quarter operating in the covert 19th pandemic environment.
That environment was both unusual and challenging.
Considering all factors, we feel our company performed well the net income for the second quarter of 2020 was $28.9 billion as compared to $37.2 million a year ago.
Both basic and fully diluted earnings per share or 90 cents to the second quarter as compared to $1.80 cents for both measures in the second quarter of 19.
The net income of $28.9 million in the second quarter represented a 25% increase over the first quarter 2020 earnings of $23.1 million.
The level of profitability and quality of our earnings remain strong and we believe above peer group averages as the second quarter resulted in a return on average assets of 1.12%.
Return on average common equity of 9.84% in a return on average tangible common equity of 10.80%.
The financial results for the second quarter were driven primarily by growth in average loans and deposits.
Topline revenue growth.
Non interest income maintenance of credit quality and improved efficiency and operating leverage however, during the quarter. We did see a decline in the net interest margin, which was impacted by the abundance of for liquidity on our balance sheet by substantially lower interest.
Strikes during the quarter due to the actions of the federal reserve in March and by our participation in the payroll protection program.
For the second quarter 2020, total revenue grew by 7% as compared to the second quarter of 2019.
Over the same 12 month period non interest expenses increase only about 5%.
The efficiency ratio was 37.18% in the second quarter 2020, as compared to 38.4% in the second quarter of 2019 and 43.83% for the first quarter 2020.
The significant improvement over the second quarter of 2019 was primarily.
Due to increased levels of non interest income primarily gains in fees generated from the sale of loans and modest growth in non interest expense.
Our continuing attention to operating leverage with strong revenue growth combined with lesser growth of our non interest expenses has traditionally been a key factor for up for our profitability and it certainly was in the second quarter. This year.
Compared to the first quarter 2020, our second quarter efficiency ratio improved to 37.18% from 43.83% due to both higher non interest revenue and lower legal expenses.
We're pleased to report that the level of non interest income was $12.5 million corridor, which is a 96% increase over the second quarter of 2019.
And 128% increase over the first quarter of 2020.
The growth as compared to this second quarter 2019 included a 1.2 million dollar increase in games on the sale of residential mortgages.
2 million, two and a half million dollar increase in fees from the securitization sale and servicing essay Tayloe.
In a $1.3 million increase in higher SB eight SB I see income as we have seen across the industry. The low interest rate environment has created tremendous demand for brief by mortgages and we have capitalize on that.
Our residential mortgage division close $308 million of loans in the second quarter this year as compared to $152 million in the second quarter of 2019 and $193 million in the first quarter 2000.
20.
We are particularly pleased for success achieved by our FHLB division during the quarter as we have discussed previously there the revenue streams FHLB division is not smooth from quarter to quarter, but tends to be irregular almost lumpy due to the.
Size of the transactions as compared to the high volume business of smaller transactions like the residential mortgage division.
We were pleased with the mix of transactions during the quarter as we saw loans that were street refinance to allow the borrower to refine finance at a lower rate as well as where the FHLB loan what's the permanent financing to take out or construction or bridge loan we had a rich.
Finally finance.
The small business investment Corp.
Income recognized.
From our investment in mezzanine financing of various small business projects for which the bank also with cheese community Reinvestment Act regulatory benefits.
The trend does loan growth continued as the average loan balance for the second quarter increased 10% over the average loan balance in the second quarter 2019.
And 5% over the first quarter 2020.
About 90% of the loan growth during the quarter was from loans generated under that pay check protection program, which was part of the Cures Act authorized.
Congress in March of this year.
As reported earlier, we approved almost $500 million in loans.
Just over 1400 businesses under the program.
The balance of of PPP loans was $456 million at June 30.
Other than the PPP loans, we had a net decrease 276 million in the loan portfolio during the quarter.
Decreases were seeing him, but she and I loan and income producing series alone.
As new loan activity was impacted by the Cove at 19 environment.
We believe this see an eye portfolio decline was largely tied to repayments of lines of credit advances that were initially drawn.
In an abundance of caution by many businesses at the end of March as the co fit 19 pandemic began to show more signs of business concerns.
We continue to see some demand in the marketplace, but are being very selective in bringing new relationships into the portfolio at this point in the economic and credit cycle.
Our lending teams are spending most of their time tending and nurturing existing relationships.
As we mentioned in the press release.
And have discussed many times on these earnings calls we focus more on average balances deposit then the end of period balances because our earnings capacity is more closely aligned with the average balances for any period.
Our experience during the second quarter really demonstrates that.
The point to point end of period analysis shows a decrease in deposit a $206 million during the quarter they balance of $7.9 billion at June 30.
However, the average deposit balances for the quarter were $8.5 billion, which comprised an increase.
Of $786 million were 10% over the first quarter of 2020 and increased $1.6 billion or 23% over the second quarter 2019.
In part we attribute this second quarter 2020 disparity between average deposit balances changes in period end balances changes to the large amount of deposit gains that occurred in the first quarter 2020.
Plus 13%.
Which remained in the bank for much of the second quarter and we believe was withdrawn late in a second quarter as the stock market recovered strongly in June and balances moved out of bank deposits.
This increase in average deposit is likely the result of the flows liquidity into the banking system created by the policy decisions of the federal reserve over the last two quarters.
We have the benefit of these deposits because of our strong customer relationships with financial intermediaries asset managers law firms and title comp.
However, these deposit balances do fluctuate in this case the average balance for the quarter was significantly higher than the period ends balance.
On the asset side of the balance sheet loan yields dropped 44 basis points during the second quarter with about seven basis points attributable to that low yielding PPP.
The rest of the decrease in the loan yield is attributable to market conditions.
So 100 them five basis point decline in average one month LIBOR during the quarter.
At June 32020, the significant portion of our long portfolio that is variable or adjustable rate, 55% had a mid jordi of its loans.
Interest rate floors, which we feel gives us far protection against the further declines in loan portfolio yield.
The yield on total average, earning assets decreased 64 basis points during the quarter. In addition to the drop in loan yield the returns in the securities portfolio, which negatively impacted by substantial repaying prepayments of mortgage backed security.
He's in the quarter.
The average loan to deposit ratio for the second quarter 2020 was 94% which is at the low end of a range we feel is prudent.
We continue to maintain demand deposits at a very favorable level up 30% of average deposits for the quarter, which certainly benefits the margin.
The efficiency ratio improved to 37.18% as compared to 38.4% in the second quarter of 2019 and 43.83% in the first quarter 2020.
Earlier mentioned consistent with our focus on operating leverage the improvement in the second quarter as compared to the first quarter 2020.
Was due to both the increase in non interest income combined with a reduction in non interest expenses.
For the quarter, we incurred a more reasonable level of legal expenses and to reduce the CRO accrual for expenses related to the resignation of our former chairman and CEO.
The previously disclosed government agency investigations in class action lawsuit or ongoing however, the associated expenses were lower in the second quarter as subpoena production and testimony subsided and we've recovered on certain defense.
Cost against an insurance claim for items otherwise expense in previous years.
We are maintaining our disciplined management of all other expenses.
Keeping in mind and need to continually improve our human capital and our IP infrastructure as we have their near to the 10 billion assets rise and evaluate the additional regulatory requirement, which are effective above that level.
We're very pleased that in June we had two additions to our aware our executive management team.
Sam Pepper, who is our new Chief operating officer has extensive experience with community banks in the Midwest ending in new England.
Jeff Curry, our new Chief risk Officer succeed Susan Cooker, who retired in April just joins us from Deloitte, where he was an advisor to many bank clients on compliance and risk management function.
Since the acceleration of the covert 19 pandemic in mid March we have been constantly reaching out to our borrowing customers to assist.
To assess the risk level of each borrower and offer support and where appropriate negotiate loan modification.
We feel that the credit quality of the portfolio. Its manageable at this point, but continue to monitor potential deterioration and we'll adjust our assessments depending on the severity and duration of the economic downturn.
Through June 32020, we have to prove payment deferral on 708 loans totaling $1.63 billion or approximately 20% of belong portfolio.
During the second quarter, we saw modest uptick in some of the credit quality statistics consistent with the current economic environment and we are reacting accordingly.
At June 32020, and P. AIDS as a percentage of total assets were 0.69% as compared to 2.45% at June 32019.
0.56% at March 31, 2020.
The absolute level of Npis was $67.2 million at June 32020, as compared to $38.8 million at June 32019, and $55.3 million at March 31, Chief.
Thousand 20, the bank has consistently taken an aggressive approach to reviewing individual loans for impairment and accrual status.
The allowance for loan losses was 1.36%.
Total loans at the end of the quarter and has increased from 1.23% at the end of the first quarter 2020.
Disallowance levels have both.
Have been derived using the new Cecil accounting standards no allowance has been provided for the $456 million PPP loans.
Given that those loans are fully guaranteed by the U.S. more United States small business administration, which has to lead diluted the allowance ratio by approximately eight basis points.
Annualized net charge offs, the second quarter with 36 basis points of average loan.
As compared to eight basis points in the second quarter of 2019, and 12 basis points in the first quarter 2000.
The charge offs in this second quarter were primarily from one commercial relationship in the personal service industry.
At June 32020 coverage ratio reserves to nonperforming loans with 185% as compared to 193% in June 2019.
Given the uncertainty about how long the cofins, 19th pandemic will impact the Washington, DC Metropolitan area, We continue to monitor the economy and our customer base. The most recent reports from the Fuller Institute and the Bureau of Labor statistics indicate.
Yeah that during the period of March through May the region lost about 337000 jobs or about 10.2% of our employment base most of the jobs lost and business closing we're in the accommodation in foodservice industries. So we.
We'll continue to closely monitor our exposure to that sector, which was 10% about 10% of the loan portfolio at June 30.
Our exposure to the retail sector is about 1% of total loans.
While the Coke is 19 pandemic has certainly had an impact on the income statement, we feel our balance sheet remains resilient.
Our capital position was again strong as of the end of the second quarter. The total risk based capital ratio was 16.33% at June 32020, and the tier one capital to average assets ratio or leverage ratio was 10 point.
Six 3% at June 30, as compared to a year ago at 16.36% and 12.66% respectively.
The reduction in the tier one capital average assets ratio was largely the result of share repurchase activity.
Our capital ratios remain well in excess of both regulatory measures and internal policy level.
Like many we are concerned about the recent resurgence of Covance 19 across several areas of our country.
However, we remain cautiously optimistic about the strength of the regional economy.
While we continually month monitor that our strong balance sheet continued profitability and our dedicated customer focused employees.
Our why we feel we are well positioned to work through today's challenging environment.
This concludes my formal remarks, we would be pleased to take any questions at this time.
Thank you ladies and gentlemen, if you have a question at that time. Please press Star then one on your touched on telephone. If your question has been answered every wished remote yourself from the Q. Please press the pound key to believe in it to prevent any background noise. We ask that you. Please place your line on mute. Once your question has been stated.
Our first question comes from a line of Christopher Maher, Ken but.
Ginnie Montgomery Scott Your line is open. Please go ahead.
Thanks, Good morning, I'm, just wanted to ask about the charge off all in the quarter I know you give a little bit of color here. This morning on the press release, just want to know if that is something that is repeated by all the borrowers or will be more one off as you see.
Well at this point, Chris It appears that and it's a one off I'm all now.
Depending upon the duration and severity of Cove Ed.
Things could change, but as up right now this with a chain of hair salons and they were.
[noise] completely closed down and ultimately filed for bankruptcy. So we went ahead and took the loss.
Got it and do.
Do you have any I guess preliminary trends or you can share with us about classified and criticized and kind of how they have changed from last quarter to now and then maybe kind of what how that may play out as modifications go another core.
[noise] criticized are up modestly.
Classified are down modestly and overall, we have a slight uptick we are keeping our eye on it as we go through deferrals and evaluate loans on ongoing basis were pretty scrupulous about rerisk grading and adding to that.
Such list where necessary.
Okay and then finally just wanted to ask if there's any kind of updated trend as we had late July or modifications unit would they have been different than what you reported at the end of core.
It's not materially different it's been relatively flat through.
Last Friday, we.
We had 718 modifications as opposed to the 708 that were through June 30 of the dollar increase was roughly.
$15 million trick rounding at $17 million.
Okay, great. Thank you for the for the background I appreciate it.
No problem.
Thank you and our next question comes from the line as Steve Comrie with GE Research. Your line is open. Please go ahead.
Fitch, a multifamily I know the press release, a quarter order the numbers can be uneven and I I. Appreciate that maybe is there like a way we can think about maybe for you.
Your revenue opportunity to your revenue opportunities similar to like undertook to like handicap, what the what the revenue opportunities there.
Sure.
I'm sorry, Steve we only call a portion of that question, but I think I got the gist of it.
You know.
Unfortunately, you know we've we've we've learned to exercise some caution when it when it comes to counting on on revenues associated with that line of business as it as we telegraphed that it can be.
Pretty pretty lumpy.
You know, we do feel good about our pipeline we think we've.
You know, we've got some or building some traction there.
Certainly what we experienced during the second quarter was was a pretty healthy pop.
No I wouldn't necessarily.
Pete those those kinds of levels.
You know going going forward, but we are expecting some kind of contribution.
From that from that business over the next next several quarters, whether or not it all gets kind of baked into two quarters from our three quarter from now is really tough to say unfortunately.
Okay fair enough.
Maybe if we can.
Move onto the deferrals.
So should I understand these deferrals is mostly like 60 or 98 referrals and then should we expect some of them to expire during the third quarter. Then if that's the case I guess kind of what's what's the process since deferrals expire.
Yeah. This is Jan we are expecting that deferrals, well, which were originally predominantly 90 days I think the SPJ were a little longer they were a 180 days because of a sps, making the payments but.
The overwhelming majority of everything else with a 90 day deferral, yes, we would anticipate that those would be terminating over the next couple of months haven't seen a lot. So far because most of them were done either.
And.
April or may.
Possibly Jan so rolling into September rolling into July not that many have come up at this point, but we have stood up an independent task force within credit area that is devoted to evaluating the portfolio for Kobin Graham and fix.
Patients it is handling all of the request for deferrals at this point.
And in evaluating whether or not it's prudent to move forward with a second potential 90 day deferral, whether that be on interest only basis or a complete payment deferral. The task force a map of folks with strong credit skills, we'll be looking at.
Mediation plans and whether those plans effectively.
We'll be able to return the credit to performing status at the end of a potential additional 90 day deferral and that's really going to be determinative of whether that its or even offer it or not.
I can give you a little additional color on our deferrals.
We have at July 17th 1.65.
In outstanding that's about 20, and a half a percent of the portfolio.
87% of those deferrals are secured by real estate cash or marketable securities the weighted average loan to value on that 87% is 62%.
So.
We feel like we have good protection there a fair amount of room to move on loan to values. The more immediate issue is whether they're going to become nonperforming loans are not as.
Cash flow and liquidity may be strain for some of these businesses.
Hotels, we have 482 million deferred.
The weighted average loan to value on those 63%.
Restaurants, 156 million deferred 47 of that is secured by real estate cash or market of both the average loan to value on the real estate securing that portion of restaurants is 61%.
We also have pulled some other statistics churches, we have 87 million with deferrals.
The weighted average loan to value there is 51%.
Our entertainment and recreation, we have 50 million deferred.
37 million is secured by real estate with a weighted average loan to value of 38%.
Healthcare, we have 46 million deferred.
38 is secured by real estate and marketable skills.
The real estate weighted average loan to value is 64%.
And then we have a very small amount in education 4.5 million.
And 3 million or that secured by real estate with a weighted average wanting to value of 70%.
But that will give you a little more.
Color I think on loss potential in the deferral area.
I think we're fortunate that we do have 87% of with the deferral secured by real estate cash and marketable and as we move through the evaluation of whether or not a second deferral is deemed prudent we'll be looking at when we could expect these individual loans.
To cash flow and support ongoing performance.
Okay that was that was extremely helpful. Thank you for that that's it for me.
Okay.
Thank you and our next question comes from the line of Brody Preston with Stephens. Your line is open. Please go ahead.
Hey, this is actually Andrew Terrell long for Brady This morning.
[noise] Barney Frank.
Right I, just maybe to start on the.
The accommodation Foodservices portfolio I guess, taking the the different numbers you just gave.
Relative to the outstanding balances I get a call it close to 70% <unk> I'm curious do you have handy what the what the reserve.
Thank you currently out against those loans are.
Not on a specific loan basis I don't have that information with me.
I guess just in aggregate for the accommodation and food service portfolio.
Let me take a look and see if I have it split out that way Charles I don't know if you have that went silent on hand no.
[noise], yes, maybe we can get.
I may be able to get back to you on that that's not.
Information that we typically are provided in the past nope, that's that's totally fine [noise].
Maybe moving over to the.
Commentary you guys provided on loan originations <unk> can you give us maybe a sense of how far below normal levels. The originations this quarter and then maybe what the current pipeline looks like.
Yeah sure I you know.
In terms of new loans generated.
In the quarter just as an example.
You know we've typically originated somewhere on average is just over 300 $325 million a quarter over the last call it five quarters.
And in this quarter, the new loans originated were about 115 million.
So it's a it's about you know little a little more in the third.
Got it thank you and maybe last one for me just kind of housekeeping question do you have what the average PBP balances loan balances were in the quarter.
Well the average PPP alone.
Yes.
Yeah, I mean, it's just a little over I believe a little over $350000 is my best recollection of what that numbers.
Has.
Hey, good just breaches that threshold of that at first tier of the of the fee.
Level, but im sorry, I meant the the I'm on the average balance sheets for the quarter, what the average outstanding WPP ones for.
Yeah, it's $328 million.
Okay.
That's it for me thanks for taking my questions.
Thank you and our next question comes from the line of <unk> lots with KBW. Your line is open. Please go ahead.
Hey, guys good morning.
Good morning warning.
Charles.
Yes question for you.
Looking at the margin this quarter, just made great progress lowering deposit costs and obviously.
Some of that was helped by deposit inflows how are you thinking about.
You know as some of those noninterest bearing deposits start to flow back out how are you thinking about deposit costs.
Into the back half of this year.
Do you think we've reached a bottom or do you still have some more wiggle room to to get deposit costs down.
Yes, if if so it's incremental.
Our top tier money market rate right. Now is is 30 basis points. As you suggested we did get out in front of it when we when we saw a lot of this activity happening.
Obviously, we saw significant drops in short term rates you know LIBOR was down.
Oh period end called <unk>.
60 basis points hundred 50 basis points so.
Actually I'm, sorry, more 160 basis points from 12, 31, I believe so.
No I we've seen.
Obviously some of them online banks.
Start to come in our direction.
Which which you know puts continued pressure on on on those folks there. The only other aspect of our funding mix, where where I do you see a lot of room is certainly in our term deposits.
And our Cds as those roll off and reprice I would expect some some additional relief there, but on the money market front. It does look like those those me rollout.
We also talked to are you also mentioned you know DTA flows.
Noninterest bearing flowing back out yet to your point you know a lot of the PPP loans that were funded funded in the operating accounts. So we did see D balances push up.
In the quarter as a result of that I would expect is those funds get utilized it did that those would as you suggested flow back out all all things equal.
You know may reduce that DTA balance on average, but yes.
Yeah, you provided there is obviously a significant amount of liquidity sloshing around there in the marketplace the weekend.
Counter that outflow of Pvp non interest bearing deposits with actually collecting new deposits.
You know that that could certainly be helpful element as well.
We're able to accomplish that.
Thanks for a color there and then how are you thinking about the PPP.
I know this quarter, if you've got us to 90 year old how are you thinking about realization that.
Of the of the PPP season, do you expect some of your peers kind of saying majority that will make a lot is still uncertain, but a lot of that will probably flow through and threeq and fourq you.
How are you guys modeling that.
Yes, you know that would be my hope I'm I guess I would say right. It's it it is going to be dependent upon the to the details of the forgiveness process and I do think that there are some rails in there that that that would suggest that it that's not a bad bet.
If we can get a lot of those through here in the in the in the third and fourth quarter.
There is also certainly we've been having discussions there's a lot of banks have about the you know the.
Potential that we could do we could sell the portfolio that no. No decision has been made there, but but it's something that that certainly we're having internal discussions about as as we get a little smarter about what process is going to before forgiveness and the kind of.
Operational strain that that that might have.
So yeah, I think I think third and fourth quarter is a reasonable assumption at this point.
Okay.
Got it and sorry last one from me I'm, sorry, if I, if I missed that what what percent of your book, which floors is now at the floor following the fed moves.
In March.
Yes, I would almost yeah, it's almost 100% you know about $3 billion, a little over $3 billion.
Okay.
So.
Putting that altogether.
You know loan yields could probably stabilize by year end, even what the churn of the portfolio hurt.
Is that how you're you're kind of thinking about right [laughter] PPP obviously.
Yeah, I mean, where you know we're putting on loans now.
You know again it was it was a modest quarter for production as we as we discussed earlier.
Got a $115 million in loans, including the.
You know deferred fees and costs caught a 460, a that they're being originated at.
So we could see some some stability there.
All.
Great. Thanks for taking my questions and.
Congrats on nice quarter guys.
Thank you. Thank you. Thank you.
Thank you and our next question comes from online, Eric Eric with Boenning and Scattergood and your line is open. Please go ahead.
Good morning.
<unk>.
I missed the out the first few minutes or the cost of my apologies.
It's been asked already I seem to recall.
So the legal fees this quarter.
We're about two and a half million and I think when we.
The conference call last quarter, you mentioned that those fees could potentially kind of slow in the summer months and then tick up in the back half of your is that still the expectation and then how should we be thinking about.
As expenses Threeq and Fourq.
Yes, I think Thats right Eric.
We kind of discuss the potential for a little bit of a a summer low here and as activity might might pick pick back up after those months you could see some additional expenses although at this point, we don't anticipate.
Fees at the level that we certainly saw in the in the first quarter.
You know with a week.
We anticipate did or did it that the lions share of the.
Peter production in witness testimony aspect to this which are which are costly half wrapped up and as we've talked about you know internal investigations that we conducted to have had been concluded in the first quarter.
We don't necessarily expect anticipate.
Those kinds of levels, although again I have to caveat my channeling My council here that.
That we did they it is impossible to predict a you know what what what the outcome might be so.
With that caveat.
Thanks for that for the color there and then just I appreciate that some of the earlier discussion on the deferrals and that's using a detailed description you gave us how youre.
Look to kind of evaluate those borrowers who ask for extensions and I guess it sounds like an important part of it will be whether at the end of a second extension you think those businesses are back to you know more normal cash flows I guess are there potentially other considerations as well in terms of.
Those borrowers other assets they have or for some businesses that might take a little bit longer to get back on their feet.
<unk> at what point do you decide to continue to extend or have to take some sort of charge off or even you know repossessed from some real estate at some point just kind of curious what you're thinking as how this plays out as it may be you know multi quarter.
But even extends into 2021 at this point.
Well I think you're correct that we're looking at more than just projections of the business being able to return to.
A cast flying operation that can support that that in considering any second modification, we are I'm going to be adding generally speaking credit enhancements in the form of additional collateral.
And guarantor support.
However, that's a possible we want to try to put.
He.
Bank and the customer in the best position to continue to operate well without taking on equity risk at the bank. So we are pushing through that process and I do think.
Evaluating the opportunity.
To continue to have payments made whether from guarantors or pledged liquid assets is one factor we're not interested in kicking the can down the road if there isn't a viable exit we'd rather just push something into nonperforming status sooner rather than later so all of that.
Timing will depend on what we see as we start processing second request as it and at this point, we haven't seen very many it's too early in the quarter.
Thanks, so much for taking my questions.
Thanks, Eric.
Thank you and I'm showing no further questions at this time and I would like to turn the conference back over just isn't real for any further remarks.
I want to take the time to thank all of you for joining US today hope that you and your family stay healthy and I look forward to speaking to you at the end of the third quarter.
Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect everyone have a great day.
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