Q2 2020 Bridge Bancorp Inc Earnings Call

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Good morning, and welcome to the Bridge Bank Corp, second quarter 2020 earnings call.

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After today's presentation, there will be an opportunity to ask questions to ask a question. You May proceed star then one on your Touchtone phone to withdraw your question. Please press Star then too.

Please note this event is being recorded.

I'd now like turn the conference over to Kevin O'connor. Please go ahead.

[music] 40, and thank you for joining us more.

I'm joined on this call by our CFO John Mccaffrey.

He and I will discuss your quarterly performance as well as our PPP performance and the planned merger we have a documentary scheduled to close sometime in early 2020.

To begin with I'd like to share some high level metrics in the second quarter.

Net income for the quarter was 10.7 million, where we P.S. up 54 cents with net interest income growing to 40.4 million an increase of almost 5 million versus second quarter of last year.

We experienced positive growth total assets coming in at $6.2 billion worth 30% increase first last year same period.

Significant increase in long growth a $1.2 billion.

35 per cent compared to the second quarter 2019 was largely fueled by our P. P. P.

Sure accounted for nearly six $950 million told.

Many of these loans rolled into our non public non brokered deposits, resulting in an 849 million dollar increase.

This quarter's net interest income net interest margin was 3% decrease of 26 basis points compared to the prior quarter.

This decrease was largely due to lower rates.

Loan portfolio higher P.P.P. loan volumes and increased deposit liquidity, earning a low interest rate.

Pretax pre provision in comes through the quarter was $18.2 million in an increase of $1.2 million was 7.4% versus second quarter 2019.

As evidenced by our second quarter release, our results for material impacted by the P.P.P. program has that affected not only our financial statements, but drove business initiatives elected.

Our strong performance in originations placed a number two behind only JP Morgan Chase in Suffolk County for loans issue and effectively job States. We're actually number five on long Island again, following only nationally mice only national money Center banks.

Our leadership position and longstanding reputation put a thousand new business customers via PPP would be in B.

Allocation of the banks importance in value to businesses across long island.

Along these lines being be bank was also named by the banking Choice Awards at the top long Island Bank for overall quality. This the survey of customers potential customers again reflects the market perception of be it'd be bankers.

I make these points as I tried to give won't give a bit more texture on our merger with documented.

As those of you have been following the bank no growing our footprint, if it's an ongoing strategic priority for B.

Well, you've achieved incredible growth over the past 12 years, both organically and through acquisition the opportunity to create the largest community bank based on what else is very excited.

We have found an ideal partner and die bank and can manage his team.

From a strategic perspective alone there was a compelling case to be made based on non overlapping footprint and complimentary business strategies. In addition to aligning wash. In addition to align you want to share focus to positively impact our communities, we're perfectly positioned to deploy would've been a highly effective strategy for bnb lever.

Getting their branches the sales hubs from which to one just prospect for local businesses. This practice has been hugely successful for being <unk> branch network expansion in Western that's one Queens and we anticipate anticipate similar success the times higher branch penetration across New York City boroughs.

Sean will now walk you through a more details around the second quarter results.

Thank you Kevin good morning, everybody.

Kevin said or he P.S. numbers for the quarter, where you four cents acorda that had more than a little noise I do my best to walk you can you just heard me a check occurs.

He just to say our balance sheet grew substantially during the second quarter.

We began funding PPP loans during the first week of April every part of the bank or tirelessly until we funded almost $1 billion alone.

At the same time, many of our customers who were drawn down to align the first quarter as an abundance of caution eight points down various reasons.

Excluding PPP loans originated close to 270000 gallons during the quarter.

Year over year, excluding PPP loans outstanding were $241 billion or 7%.

If I had a strong showing on many fronts [laughter] [laughter] loans.

You can't use accounts were up 59% year over year.

<unk> all deposits are up in excess of <unk> funding, you'll get to the downside of this in a bit.

Funds are up over $300 million year over year, as we've added new our public cloud customers over the past year.

[laughter] income, it's close but up close to $4 million quarter over quarter.

Not translate into higher NIM, owing to the increasing the size of the Bouchie PPP loan yield it's true.

And in the quarter, including the amortization $30 million unbeaten.

We also had $365 million, an overnight cash, earning a basis point.

These two factors depressed the marketing by 16 20 basis points respectively.

At market rates came down and you can manage our deposit rates.

We trimmed our fourth of interest bearing deposits by 40 basis points.

Over or under the first quarter, you continue to assess what I consider opportunities to lower rate as we move forward in this environment.

Non interest income.

I get it back to wafer get taken additional write downs one loan held for sale. You got this was prudent given you real discussions with prospective buyers is relevant situation other than negotiating with the bar.

Certainly the downside to firecrest, an odd there's no repeat especially NSF fees during the quarter may seem to be the low point for service charges. So we look for that trend to continue back to normal level, that's going forward.

I'd like to fit just below the market, including title swaps and ask you a gain on sale choke quarter over quarter growth.

Non interest expense have flat versus previous quarters outpaced expense was the driver Judith alright, and doesn't decline compensation expenses. There was a combination of lower incentive accrual payroll taxes medical insurance, along with slightly higher girls originations extensive always continued contributing to drop competition.

Yes.

I guess in credit provision for the quarter was $4.5 million $4 million related to the economic impact on going and then again and then trip down.

Offsetting this was released a million dollars yesterday after much eight ounce United lines of credit during the war.

The increase in nonperforming loans during the quarter because he had to why do we make if that was previously performing TDR.

I'd like to point out that our past due loans were down $1.7 million or whatever.

One more flat.

It makes you didn't really we have granted even more towards a 500 loans totaling $630 million from determine crisis.

Okay slalom slaughtered when we got what they've reached a 90 day maturities.

Sure $30 million for now paying in accordance with their original notes.

Agreement and 141 million I've asked for an extension.

Overall, approximately 90% of a moratorium on stepped back a realistic.

Oh, the high risk industries that we're certainly keeping an eye on such its hotel, we help office et cetera. The weighted average LTV is 53% with only $500000 $500000 a look in loans reagents everybody personnel.

Oh.

We are.

Targeting for the rest you're actually a 22.7%.

Now kind of call back over to branded the stuff.

Thank you we will now begin the question answer session.

To ask a question you May proceed Star then one on your Touchtone phone.

You are using a speakerphone please pick up your handset before person the keys to withdraw your question. Please press Star then too.

This time, we'll pause momentarily to assemble a roster.

Our first question comes from Alex Twerdahl with Piper Sandler. Please go ahead.

Good morning, guys.

Yep.

Just wondering I appreciate the statistics you gave on loans that were trying to paying versus the ones that we're getting the extensions on the deferrals or can you.

There was any consistencies just in terms of the types of loans.

Our kind of going in each direction and is it possible to apply that to to kind of the remainder of the deferral portfolio in terms of what the expectation should be for windows one's a role I guess probably in August.

Sure.

So actually we for the moment that haven't yet mature at some of those has actually come in and already asked for extensions.

By enlarge the by and large ski portfolio that parts of the portfolio that are asking for extensions are the ones that have degraded concentration, which is our multifamily and non owner occupied real estate I also want to see nice they actually medallions that we still had have also asked where extension so oh.

The.

Of the loan that had at war additional extensions.

Some some portion of that more problems or promote that haven't.

$60 million or from those that haven't reached maturity. So we expect given good applying that kind of percentage across the board an additional 20 $25 million moratoriums that would be a has to be extended or any kind of hold outcome could turn out and that's really most of.

Yeah, well here has been her.

Okay, great. Thanks for that and then I noticed a couple of categories of loans actually grew during the quarter multifamily see Ari was that.

Can you maybe just elaborate on that and it was that just sort of pipeline that had built into the quarter that was closing and maybe kind of what we should expect for the core non P.P. loan trends as we continue to the rest of the year.

Sure.

So I.

I just got different pipeline long that I still never had beaten to close I mean, we got been done during the quarter. Oh, you know there's been a big focus I'm all lenders on the PDP programs for the last quarter. The pipeline is strong you know a lot of the.

Customers, who.

Great customers before it became customers. The PDP program are now coming in and looking to move over airline rather than any other.

Business from there the banks that they do business before Oh, so we do well.

Targeting 7% to 8% no overall loan growth for the rest of year, but I'm here. This quarter, there really isn't part of distraction. So the pipeline is so small you know obviously, we've been having different look at right.

As the effect of these loans going forward, but you know.

Mitch maybe a little bit up mid single digits.

Okay, and that's exclusive Oh, what happens with outside the P. P. P forgiveness programs.

Yeah, Yeah, Yeah, I mean I.

No it's going to happen there I don't think if we right now and actually apply for forgiveness I wanted to get launched yet supposedly the recent guidance coming out to people are talking about it likely forgiveness well $1000.

It should only be about.

I didn't $50 million of all numerically, it's a high percentage of the won't be Murphy by dollar wise.

$50 million.

Okay, Great and that's the final question as it relates to the margin, a which seem to be flat exclusive of the liquidity and the P.P. as you kind of look forward.

And the ability to reduce the deposit costs and funding cost is it isn't enough to offset continued repricing on on the loan side or do you anticipate some core margin compression over the rest of the year.

Well I think would be under pressure I think the you know what on the floating rate loans finally, Mike work on it than where they are it's if you have to five year treasury to 25 basis points and no and are you looking portfolio holes and <unk> you know.

That's great that's in freshman repricing there and.

Coming along with that you know typically those long term.

Certainly your price too.

As stated in prior to becoming a Nick one yeah.

[laughter] deal. So I would also have an impact.

Have you positive one really kind of been holding a pricing there and well be pricing Mitch we eat my multifamily Jerry I'm. So yes.

Great. Thanks for taking my questions.

Right. Thanks out.

Our next question comes from Cowen Gilbert with KBW. Please go ahead.

Thanks, Good morning, guys [laughter] warning.

Good morning, John My first question for you just on the P.P.T. loans, what what do you anticipate any overall income contribution to be.

From the program.

Overall income contribution yeah.

So we had so we had.

So right now again program is but I think it's about $2 million per month.

Yeah, They watch amortization and yeah, ballparking, it like $1.3 million amortization, even $700000 Uh huh.

Okay.

Okay. All right that's helpful and I know you know a lot of uncertainty, but just for modeling purposes for what you guys are doing internally and maybe we should be doing here what should we assume on on the forgiveness schedule.

I notice you think [laughter].

So right on.

On the forgive me itself I think.

I don't.

Much in the way forgiveness until the first quarter next year.

Much of any kind of like it gave me some lower bound wasn't it.

I mean, all of our 950 million so.

Kind of what I'm thinking about.

Maybe I know we're on.

[laughter] there there are so there's a there's different proposals out there to actually do a second round that this but certainly these customers. So it's gonna be interesting see how that plays out too. So I would I would not expect any forgiveness in this year I think most of the forgiveness will happen at 2021.

Okay, Okay got it and then [noise].

Sorry, if you just covered it John I apologize, but just in terms of the on the outlook on lowering deposit costs can you just to remind us sort of what your strategy is there and how how much lower you think you can go.

Based on what's kind of maturing and just what your appetite is for liquidity right now.

Right, so well pretty wide <unk> got a lot.

Yeah. So it's interesting now you know deviate too high.

Trying to.

We're trying to figure out how much youngest still in the portfolio I mean, obviously everything is fungible and some people need to that money market. Some people have put it into existing accounts. So you know we think there's still substantially whenever that might is still sitting there yeah, we did lower quarter over quarter was 40 basis points worse.

Yeah, well already a anymore I mean, we already had but.

We don't have a big TD books, a repricing not as much.

This year.

Yeah, we'd be kind of look at individual really.

Trucks that account that happened out between ever increasing 10, 15 basis point for 25, 35 basis points and any kind of Brexit happened and target you know some I'd.

Got it all the way through yeah, we do not all the branch match them at a time, keeping some watch [laughter] may push back on what down you know, it's still there's still room to lower so.

We do have a couple of wife relationships that you know, we maybe let go because they're kinda well I think it's more money, but yeah.

Yeah, that'd be a 40 basis points on [noise].

We didn't do that attending in 15.

Hi, Matt.

Okay.

Okay, Alright got it and one other housekeeping item before moving to credit the out you had indicated John about that [noise].

The benefit to expenses on the bone deferral cars high loan origination costs <unk>, what was that actual dollar amount and the corridor.

Well with how much did drop quite what was the yes, what was the or or a quarter it dropped about $400000.

First quarter versus second quarter.

Okay, originally ordered that Dallas larger so I'm sorry.

Yep.

Okay.

Did you do you happen to have the actual number.

I don't know if I. If you gave it in the first quarter [laughter] at the actual no I used that.

Okay, Alright, and then just just shifting to credit.

So how what sort of how are you thinking about the a their trajectory of their reserve from here kind of what will be the drivers of increasing that reserve ratio.

Or subsequently decreasing and are just just sort of how you're thinking about qualitative and quantitative parts of the reserve.

And per encouraging from here.

Oh, I guess [laughter] additional shut down in New York seems to be kind of doing better than right I agree and generic.

Oh, no because into your you know we are again I think we I.

I wouldn't say, but when we would take a minute ratchet down here I mean, there another notch next coming quarter, it's going to be more about I think individual problems that are going to bubble up at the moratorium.

<unk> for their definitely ramped who's going to be able to start eight again I'll just be more.

Individual names that are overall factors.

Okay, Okay, and what you see now I know, it's hard to chairman S., but just based on you know what you're looking out within the deferred park.

And just borrower outreach et cetera, et cetera, do you have a sense of what you think that charge offs will do in the next few quarters.

I would I would think any pollyannish <unk> revenue.

Yeah. There there are some you know there are some conversations around.

Name to people, who were no relief and but I couldn't give me a dollar.

But we've been pretty low always up until this point and.

It could be added we lower than our peers.

One one.

One long and kind of a check that out because I know nothing right now that's never be significant as far as a sharper focus.

Okay. Okay.

Okay, Great I will I'll leave it there thanks.

Thanks.

As a reminder, if you would like to ask a question. Please press Star then one.

Our next question comes from Eric Swick, with Boenning and Scattergood. Please go ahead.

Good morning, guys.

Where more.

First just wanted to let me take the discussion on your outlook for for loan growth in the back half of the you're a little bit further I'm curious what industries, you are you're saying kind of the pipeline building the outlook for mid to high single digit growth would be very healthy positive result at this point, especially just as I think about some of the comment.

Other banks have made a you know kind of looking there for maybe something more flattish.

As points on the I'm curious, what kind of where the strength is coming from and to just how you're thinking about underwriting today, given the unknowns and the economic environment at this point.

Sure I mean I might be.

Fortunately I think I kind of what's really report bike industry.

I think that there will be.

Certainly know east.

Well the real estate in there that's kind of you know individual properties that.

No we're performing the catalog, especially younger in long island, where certainly the multifamily space here is a pretty strong.

Yeah, I was pretty strong basic winding down the track I am coming in this morning workings are really.

Getting back to normal.

Well I think we're gonna be careful I mean, it's I think yeah.

Your credit people are all no kind of talking about what to look at as far as higher cap rate.

Our loved it no.

Well our.

Yeah Okay.

In our pipeline, we've got about $40 million it she and I mean money [noise].

It's also multifamily in Reno kind of follow up on a younger that mid Atlantic construction I think you know and see you know I know you down to 37 is.

Our exposure not necessarily outstanding so yeah.

Yeah, I guess NSP Savvis wrong, yes, Oh, he was well yes the anything.

Yeah, Hey pipeline.

Okay.

He now that you know was coming back online.

Okay. Thanks for that for the color there I appreciate that and then looking up the decline in service charges and fees and into Q I'm curious how much of that was due to fee waivers versus you know the lower customer activity and higher balances you mentioned and.

How much would you expect that to potentially rebound in threeq into fourq.

The fee waiver is actually if you look at the fee waivers.

[laughter].

As a whole percentage of waivers nurses.

I think really it's almost entirely due to higher balances.

[laughter] fees were down by 80% again in one of them up so that's really where what what's driving it going to be driven by activity going forward as people get begins to spend money abstracts and.

Additionally, on our customers who are heavier counseling analysis, when they're Dallas and higher Yeah, Hi earnings press. It just was no shortage of you said there as well. So it did you see no or liquidity driver liquidity go down and our balance declined somewhat then we should see.

And then you don't necessarily.

Phebe.

Got it and then just one last one from me a bit of a follow up on Collyns question Dot expenses.

24.4 billion dollar.

[noise] run rate in Twoq was lower than the first on the mix with different as well with lower salaries and benefits and then higher that other category I just curious about your expectation for the run rate going forward at this point.

Yeah, I think we're probably drift back up was 25 million dollar range overall aggregate probably be a year any right around 25 million got more.

Great. Thank you for taking my questions.

Thank you [laughter].

This concludes our question and answer session I would like to turn the conference back over to Kevin O'connor for any closing remarks.

Thank you.

I appreciate this opportunity to talk about the quarter.

Obviously, the PPP, it's been a driving a lot of what we've done here.

And if there's any further questions of specific things please reach out to whats afterwards.

Not everybody have a great day. Thank you.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

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