Q2 2020 Heritage Financial Corp Earnings Call
Ladies and gentlemen, thank you for standing by a welcome to the Heritage financial second quarter earnings Conference call.
This time all participants are they listen only mode. Later, we will conduct a question and answer session instructions will be given at that time. If you sure require assistance during the call. Please press Star then zero.
As a reminder, this conference is being recorded.
Let's now turn the conference over to our host President and CEO Mr., Jeff do please go ahead Sir.
Thank you Selena welcome to all who called in and those who maybe listening later this is Jeff tool.
Attending with me are Don Hinson, Chief Financial Officer, Bryan Mcdonald, Chief operating Officer, and Tony Shelton, Chief Credit Officer, you will recall, Tony took over as Chief Credit Officer effective July one.
Following the long planned for retirement of Dave's Sperling.
We're pleased to have Tony join the executive team and bring his deep credit experience. The table also we're pleased to have Dave remaining with us on a part time basis through January to provide extra capacity on the credit team well, we sort out the effects of cobot 19.
Our earnings release went out this morning, Premarket and hopefully you've had an opportunity to review it prior to the call. We have also posted a Q2 investor presentation on the Investor Relations portion of our website.
Please refer to the forward looking statements in the press release.
It's good to have another cobot 19 quarter behind US we continue to operate the bank effectively with all but three branch lobbies closed.
When we'd be island moved to phase three we opened lobbies and three of the six locations there.
The experience has been okay, but uncertainty around infection rates in our parts in other parts of the footprint are causing us to move cautiously from here about 40% of the team is still working remotely and we're not rushing to bring them back into the bank.
How about 90 days ago, the Washington, and Oregon Governors implemented staged approaches to reopening the economy in each state.
They are not identical plans, but fairly similar and as it stands now many businesses are operating in the more rural parts of both states, whereas the metro areas of Seattle, Bellevue, and Portland have been slow to reopen and many companies still have employees working remotely.
We've learned a lot about ourselves in the habits of our customers during the last five months.
We're in the process of Reassessing our branch heavy model as a result, we're also formulating policies for remote workers post coded 19.
And we are using the current environment to continue to optimize our up operations by integrating systems with automation, which we.
Which will also allow us to do more with the same people and to better serve our customers as we move forward into the future.
Well now moved Don Hinson, who will take a few minutes to cover our financial results, including color on our core operating metrics with some specific comments about credit quality.
Thank you Jeff.
As reported our earnings release, we recognized a loss was 17 cents per share in Q2.
Primarily through a 28.6 million dollar provision for credit losses.
However, our pretax pre provision income increased to 21.5 billion in Q2 from 20.8 million in Q1.
Moving on to the balance sheet.
Loan balances increased 790 million in Q2, Oh that amount 856.5 billion was due to the SBH PPP loans.
Offsetting the impacts of the PPP loans was the decline in utilization rates for operating lines of credit on senior loans.
To 26.2% at June 30 from 37.5% at March 31.
Bryan Mcdonald will further discuss this animal production in a few minutes.
Deposits increased 950 million in Q2.
Due primarily to the deposit accounts that increased or were established as a result, or the PPP loans.
The most significant increase.
Noninterest demand deposits, which grew $585 million during Q2, thus increasing noninterest demand deposits to 35.9% of total deposits at June 30 from 30.6% at the end of the prior quarter.
In addition, we also experienced a significant growth in other non maturity deposit categories.
Leaving Cds as the only deposit category showing a decline.
We continue to have very strong balance sheet liquidity.
At quarter end, we maintain combined credit facilities at the federal home loan Bank Federal Reserve Bank.
Over $1 billion.
And fed fund lines or other banks totaling 215 million.
In addition, we have Unpledged investment securities totaling 619 million and brokerage suit brokered deposits currently make up less than five basis points of total deposits.
Our loan deposit ratio is 83.8%.
We continue our long standing strategy of operating.
For the balance sheet with low leverage, which we believe will service well during our current economic situation.
We have also been approved to use the feds PPP liquidity facility in conjunction with our PPP lending, but we have not yet needed.
Regarding credit quality Barnett charge offs for Q2 were approximately $2 million.
Oh substantial portion of this amount was due to one charge off any amount of 1.7 million related to a borrower was experiencing financial difficulties not related to covert 19.
The entire loan balances charge off due to issues with the collateral.
So we're hopeful that we will recover a portion of this amount overtime.
Even during this pandemic or non accrual loans.
No problem loans actually decreased slightly from the prior quarter as we continue to proactively manage the portfolio.
We are carefully monitoring our exposure to high risk industries. During this pandemic.
Our commercial exposure to outsource categories, excluding PBP is relatively low.
564 million or just less than 15% of the portfolio.
And primarily includes outstanding balances in the fall in categories.
Healthcare.
251 million or 6.6% of the portfolio.
Tells $126 million or 3.3% of the portfolio.
Restaurants, $76 million or 2.0% of the portfolio.
Oh or high risk categories, our senior living recreational entertainment.
Transportation, including ground in there.
Page 21 of our Investor presentation has more information on our at risk industries.
Moving onto loan modifications.
At the into Q2, we had modified 839 commercial loans for a total of approximately 527 million.
With approximately 56% being interest only deferrals.
36% being full payment deferrals and the remainder being other modification structures.
Almost all modifications were for 90 days.
While consumer loan modifications in number are higher than on the commercial loan portfolio. The dollar amount of consumer loan modifications is less than 5% of commercial loan modifications.
Well, we're taking a conservative approach to risk rating and leaving modified loans at their pre pandemic risk rating. If it is clear that's the operating at sea will quickly return to its preprint performance.
In total.
As of June 30, we have modified 591 million or 12.7% of old portfolio.
15.5% X PPP loans.
Oh this amount 28 million have been granted second modification as of.
June 30.
We have downgraded 124 of these modified loans totaling 122 million in response to endemic related issues.
Most of these downgrades occurred at the time of the modification.
In addition, we downgraded another 50.5 million of loans due to covert 19 that did not receive a modification.
Most of our cobot 19, dungarees or to watch.
And are not included in potential problem loans numbers.
Our expectations for the next round of modifications isn't we'll see deterioration borrower sustainability and some downgrades to substandard.
However, we also expect to see if your modifications in the second round since some businesses such as medical dental practitioners are back up and running.
We're just now reaching the expiration of the first round of modifications, but so far.
Second request have been nominal.
The provision for credit losses for Q2 was 28.6 million compared to 7.9 million in Q1.
The total provision for Q2 included a provision for unfunded commitments in the amount of 2.6 million.
Due to a combination of an increase in forecasted loss rates and the lower utilization rates I previously mentioned.
The increase imprudent for loan losses was due mostly to worsening economic forecasts from the one used for the Q1 allowance for credit losses.
At the into Q2, the allowance for credit losses on loans increased to 1.53% of total loans for 1.23% at the end of Q1.
Excluding PPP loans, which are guaranteed not provided for the allowance for credit losses on loans was at 1.8%.
30.
As a result of the increase in the allowance.
The decrease in non accrual loans, the allowance to nonaccrual loans increased 213% at the end of Q2 from 139% at the end of Q1.
The magnitude of future provisions will be dependent on a combination of factors, including economic forecast charge off experience and loan growth.
Our net interest margin decreased 42 basis points in Q2.
This occurred due to combination of factors, including.
The impact on floating rate instruments from the 150 basis points of rate cuts in March.
New loans and investments, having lower than current portfolio rates due to a lower yield curve.
A higher percentage of lower yielding overnight cash balances.
And the Pvp loans, which have a much lower yields and the rest of loan portfolio.
Partially offsetting the lower loan and investment yields was a decrease in the cost of deposits.
Cost decrease in all categories of deposit with the cost of total deposits decreasing 11 basis points in Q2.
Although we experienced margin compression twoq.
Net interest income increased 3.6% from the prior quarter due to the impact of the PPP loans.
Non interest expense decreased slightly from the prior quarter due mostly to $579000 decrease in comp and benefits.
This decrease was the result of the deferred costs of approximately $900000 associated with the.
PPP loan originations.
Partially offsetting the expense benefit from the PPP loan originations was an increase of 212000 or time expenses due mostly to PPP loan processing.
And $410000 and bonus paid a retail branch death due to customer facing interactions during the cold 19 pandemic. We do not expect these Q2 expenses to repeat themselves in Q3.
Professional services.
Priest.
So 192000 from the prior quarter due to the implementation of heritage direct.
Our new mobile and online commercial banking platform, which we discussed last quarter.
Although initially expected to be completed in Q3, we were able to complete this implementation of heritage direct in Q2.
Approximately $1.1 million are the 2.2 million a professional service expense in Q2 was through the implementation and won't be recurring.
And finally moving on to capital.
We remain well capitalized for all regulatory capital ratios.
Although our Tc ratio dropped to 8.5% at June 30.
The ratio was 9.9% when you move the impact of the PPP loans.
Yesterday, the board declared a 20% dividend, which is unchanged from the prior quarter based on our capital position and long term outlook. We do not believe the loss in Q2 should impact that dividend level for this quarter.
However, we are continually monitoring our capital position and our ability to pay dividends in the future.
Prime Mcdonnell will not have an update on loan production and the Pvp status.
Thanks, Don I'm going to provide detail on our second quarter production results, starting with our commercial lending group.
For the quarter, our commercial teams closed 200 million and new loan commitments up from $167 million last quarter, but down from 308 million close in the second quarter of 2019.
The commercial loan pipeline ended the second quarter at 421 million down 17% from 506 million.
Last quarter and down 12% from 478 million at the end of the second quarter of 2019.
New loan demand has been impacted by coven 19, with many customers putting capital projects expansion plans and bank transitions on hold.
Loans, excluding PPP balances decreased 43 million during the second quarter due to a 97 million dollar decline and Cnine line of credit balances and a 25 million dollar decline in indirect loan balances due to the bank suspending new originations.
Of indirect loans early in the second quarter.
Consumer production was 18 million for the second quarter down from 47 million last quarter and 45 million in the second quarter 2019.
The decline was due to the bank discontinuing our consumer indirect lending business line in March.
Moving to interest rates, our average second quarter interest rate per new commercial loans, excluding PPP loans was 3.4 or 5% a decrease of 78 basis points from 4.23% last quarter.
In addition, the average second quarter rate for all new loans, excluding PPP loans was 3.58% down 88 basis points from 4.46% last quarter.
The mortgage department close to $53 million of new loans in the second quarter of 2020 compared to 31 million closed both last quarter and in the second quarter 2019.
The mortgage pipeline ended the quarter at 51 million versus $54 million last quarter, and 39 million in the second quarter of 2019.
A strong pipeline is due to a spike in refinance activity caused by the drop in long term rates refinances made up 65% of the pipeline at quarter end.
Moving on to PPP.
As of June Thirtyth, we had 4498 PPP loans totaling 856.5 million.
Included in these numbers are 150, PPP allowance for 6.5 million originated with a five year maturity.
We continue to fulfill PPP loan requests primarily for existing customers, but the volume is very low.
Roughly 20% of the total PPP volume was to new customers and we are actively pursuing this group and in many cases transitioning all our portion of their banking business from their current provider.
Ill now turn the call back to chat.
Thank you Brian.
Given all the variables, we feel good about where we stand right now.
We had a good experience with PPP.
As one Investor said, you kick tail on PPP, which we did do and that effort helped our customers. It bolstered our credit quality in the loan portfolio had brought us a large number of new customers and it will also help to offset the sale billed.
Ill is now at a healthy at 188% of loans ECP and we believe this reserve along with our capital position provides appropriate support for our current environment.
We have had the chance to delve into our higher risk portfolios over the past few months and we are seeing customers, making the right moves to successfully navigate the current environment.
As Don mentioned earlier, the healthcare segment, which is primarily doctors and Dennis benefited from PPP and deferrals early in the process and are now back in operation.
Excluding healthcare are higher risk exposure drops from 14.8% to 8.2% X PPP.
Several of the remaining high risk category showed promise as well.
Our primary concern at this point, our restaurants and the smaller businesses in general we have a lot of granularity in our loan portfolio, which is good by most measures, but that granularity also provides a narrower view of this specific performance of this smaller businesses.
In the final analysis, our customers go forward performance will be somewhat predicated on the coded 19 infection rate in the region and the potential for repeat shutdowns.
Like I said right now we are remaining cautious while we wait for more clarity.
Overall, we believe heritage is well positioned to navigate the challenges facing us and we continue to benefit from the stability of our core deposit franchise and historically.
Conservative credit culture, which helped us during the great recession and should help US again as we move through the second half of the year and into 2021.
Furthermore, our robust liquidity capital position provides us with a solid foundation to address challenges and take advantage of opportunities.
That's the conclusion of our prepared comments, so Selena, we're ready to open up the call now and welcome any questions.
Ladies and gentlemen, if he wants to ask a question. Please press one zero.
If you're using these speakerphone, please pick up the handset before pressing the numbers.
Once again, that's one and zero to ask a question.
And one moment so far first question.
Our first question comes from the line of David faster with Raymond James Your line of Goldman Sachs.
Good morning, good out Hey, How's it going good Oh I just wanted to start on deferrals I appreciate the detail on slide deck I guess early read on re deferral rates is that pretty low.
I guess you know as we go forward do you think the this is sustainable rate that it's going to be this low or.
Would you expect referral rates to kind of an accelerator just any any thoughts on that topic.
Well, yes I.
I think that you saw this in our deck that were at 24 second coded modifications 21 of which are tied to commercial.
It is.
We are early in the process. This is just about the time that the first round of.
Yeah.
Modifications would be coming back if they were going to ask for a second round.
We're and Tony you may want to add this but I think in our most recent conversations David where we're thinking maybe 25% are probably going to come back, but we do believe it will be much lower than where we had the first time around Tony anything you might want to add to that.
Yes, Thanks, Jeff I would say that where we're expecting the restaurant and hotel portfolios to have a pretty high percentage of second round deferral requests, but as we mentioned earlier in the.
In the conversation, we do think that the the Dr. Dennis portfolio will be much much lower so it's hard to put a percentage on what we think the second around deferrals will be but we do expect them to be much much lower than we had in the first round.
That makes sense and I guess.
On the flip side of this I got on that provision the reserve build was a lot larger than we are expecting.
I guess I got to assume that most of the heavy lifting has already been done.
Just how do you think about reserve builds in light of dish.
[music].
You know more modest pace in re deferral is I guess I mean.
Pretty modest additional reserve builds in the second half of the year, assuming that they're going to be some risk rating downgrades with referrals and potential migration.
[music].
David and Don May want to jump in on this too but.
If you recall I.
I know you recall this that the first time, we did as our seasonal.
Analysis in the first quarter was probably the worst time possible, but at that time. We also indicated that we thought to build this quarter was going to be significantly higher we said that more than once during the quarter and.
And I think that based on what we see in our portfolio right now we feel like we're in a good spot. We also were saying that we felt that given the view that we have now which could change any long gate.
We feel that future provisioning would be.
Would be much lower than this quarter.
Got anything you want to Atlanta, I agree I again, our modeling is based off.
Numerous factors one being the economic forecast if the economic forecast.
It Doesnt worsen and we.
We have yet to experience. So we don't experienced charge off I don't we could.
We see a lot lower provisioning going forward if for some reason we start seeing a lot of lot of charge offs.
And and the economic environment worsens I think we can stay elevated I don't think bring see thing is.
Margins this quarter, we've had but it could be more in line with what it was in Q1.
Okay.
It's helpful. And then just just last one from me that deposit growth that you saw was tremendous.
Just curious the trends that youre seeing early in the third quarter.
So how much of this do you think is sticky and it's going to remain on the balance sheet and then maybe thoughts on how you're going to deploy it or plans to deploy that excess equipment.
Paul I'll, let.
Talk about deploying it but I think I'd say you David.
If we knew the answer to how the deposits were going to flow, we'd be really happy about that but.
It's it's hard to tell because.
We have existing customers they got PPP and just put the proceeds in their deposit account, we have new customers, who did the same and then added too.
As they move their accounts over to us so.
I think we'll all we can we can really tell you is that we have not seen an enormous amount of outflow as a result of tax payments. There was a notable amount, but we're still at a pretty high level.
And we know that some of that TPP money that is in the deposit base. Some of it was spent so that the difference would theoretically be that the new stuff as we put it.
There were any number of new customers that were in the process of bringing across I think deposits for the time being are going to probably stay on the high side.
Don you want to add to that.
Well the business not as you know, it's not a great investing environment right now we did a lot of investing win win there with spreads widened at the end of Q1, we did very little in Q2, I think right now we're just being opportunistic on the investing side and we're just going to see as you see we're sitting on a lot of cash at the end of quarter.
With with some tax payment that has come down some.
But we'll continue to look for opportunities.
But again, it's really hard to tell.
When the use PE funds are going to start flowing out so we're a little little hesitant to do.
Down our cash position at this point.
Okay, then on since I'll hop back into queue. Thanks, everybody.
Thanks, David.
Thank you and our next question comes from the line of Jackie Bohlen with KBW. Your line is open.
Morning, Jackie.
Good morning.
Ill just start with indirect auto and just see what's the driver was at the decision Stacy originations bearing if that temporary unrelated to the pandemic or more of a longer term business decision.
Brian you want to take that one.
Sure Jackie it was.
When we look at that portfolio, the default rates or are very well aligned with employment levels and as we've gotten a pandemic Ken.
Was unsure how long it was kind of goal we saw high probability that unemployment would remain elevated.
For some period of time and.
And when you look at the loss given default and the overall yields on the portfolio. We just didnt feel like it was it was worth the risk.
Continuing to originate we've had had a great history.
And interact in terms of our our loss rates, but looking at what we are facing into.
We just didn't feel the risk return.
Was good.
And so we did decide to permanently exit.
That that business line as you know its.
It's not our customers that comes through the dealers and so.
We didnt see has a big impact on existing customer base by making that business decision.
Okay, and how much of that consumer bucket.
Is classified at that.
John do you have that number in front area.
[music].
I don't have in front of me, but I can look it up I think it's around 200.
30, I think without talking about going up.
Okay.
So then should we just think back.
Consumer line item, just continue to trend down as those loan payoff and new ones are coming back on the but.
Thats correct, our run off rate.
During during the second quarter.
$25 million decline.
But if you adjust out for the originations that we did at the beginning of the quarter. It's about 10 million a month of runoff on from that indirect portfolio that was the actual Anthony.
In the second quarter.
Okay, and that's a pretty good go forward rate in terms of anticipated right now.
Yeah, you know you always it's you always have the am and then typically people are also trading in their vehicles and you have some payoff activity I think thats thats the wildcard.
As we go through the pandemic does does the rate of turnover.
Change how we saw sales fall way off and then of course came way back opsahl, So little hard to read but I think it's a reasonable estimate.
Jack you were actually we're still at 200 ended the quarter, we're still at 250 million approximately of indirect auto.
But thats again that ran that ran down.
23 million over the quarter.
Okay.
So in terms of your growth discussions and I understand that these discussions are happening with a lot at play with PPP alone.
Hi, behaviors influx and also operating in the middle to pandemic.
How how much of a headwind.
Do you anticipate does having Ted portfolio balances.
Loan portfolio balances.
Yeah.
Yes, we're approaching at Jack is loan growth is just going to be generally flat.
The the the situation, we find ourselves and as.
Obviously, it's a difficult time to be approving new loans.
With all the uncertainty around.
So that 19, but they're as Brian pointed out in his comments there is absolutely a pipeline there and.
We have had as steady flow deals over the last.
The last couple of months because that we have been able to do because theyre well healed.
Borrowers probably ones that we've known for a long time, maybe ltvs are relatively low so we're going to continue to do business.
Just think that we've had that over arching.
Impact of the run off on.
The lines of credit et cetera, and they're there have been some payoffs along the way, but it's not like the payoffs we were seeing for the last couple of years. So we're estimating flattish.
For the foreseeable future mainly the through the end of the year.
Okay.
And then I. Thank you very attuned to concentration within categories anybody concentrations within those concentrations have there been any other changes that you've made over the past couple of months.
In terms of what your company policies will be.
Well we have.
Provided the frontline with additional guidance for all the food groups that we lend on.
But just the concentration management system that we have is has kept us in good stead, I think with our portfolio and.
Really the only one that we had made adjustments on a couple of years ago was retail and then in and in anticipation of the.
Amazon the ongoing Amazon effect, but.
Probably put us in a good position for this scenario because at that time, we had limited deal size to below $2 million. That's one of our our levers as deal size. So that's still stands.
And no I think we're still moving forward with the conservative approach we have.
Around the various concentrations and also be reminded on.
On term deals real estate deals, we tend to use and underwriting rate. So often times, our underwriting rate is maybe 300 basis points higher than the going rate.
Which is why we have.
Relatively.
Hi.
Basically low LTV across the various food groups.
Okay. Thank you for any additional color.
Thank you.
Thank you and our next question comes from the line of Matt Clark with Piper Sandler Your line is open.
We met Hey.
Okay.
Hi.
[laughter] Yumi both.
Maybe on the expense run rate first I guess, how much of the comp decline related to the deferral of origination costs under Fas Fas 91, with the PDP loans.
No I guess what are your overall thoughts on expenses going forward with the additional tech spend I think you were planning on having.
Yes so.
Again on the comp side.
We were able to take back and reduce expenses by about 900000 through the PPP loans.
But we also spent an extra 620000.
Related to.
Kind of bonus pay and.
Overtime related to PBP.
That won't be recurring.
So if you net those it's under $300000.
Kind of savings on the that will be higher I guess work for comp going forward, but the again for the heritage direct which is to the.
The new online system, we have.
We may see Expensed 1.1 million in Q2 that we won't be seeing.
But it won't be recurring so.
There's overall.
On a flat rate would be our expenses actually going down quarter over quarter, just based off those.
Judgments.
You never know, what's gonna pop up from quarter to quarter, but on a run rate, we see some favorable movement on expenses.
Great Okay.
And then just on the dividend and with the C car banks, having to deal with that.
Trailing 12 month earnings relative to the amount.
Dividends paid and can you feeling any pressure.
From the regulators too.
Ill have to deal with that type of calculation just given the loss in the quarter.
We have not.
Don I don't know if you have that I have met and prudently antibody no. We are monitoring the for one thing the definition of retained bank eligible retained earnings that make sure that we're we're within that.
Guidelines.
So we can pay dividends.
Should we continue to do so and we are well within that for Q2 and like Jeff said, we're not doing any pressure from regulators at this point.
Okay.
Okay great.
That's it for me. Thank you appreciate it thanks, Matt.
Once again, if you wish to ask a question. Please press one in zero.
It's one zero.
And we do have a question from the line of Jeff Rulis with D.A. Davidson. Your line is Okay, Hey, Jeff.
Hi, Jeff.
A couple of questions on the well.
Wanted to clarify the.
You got 14 eight at risk and then 12 seven non modification did either of those balances include PDP I thought the at risk did not that.
I just wanted to clarify those two.
The at the higher risk category.
Does include Pvp right on.
You're on mute no so.
Yes, I think it does.
14, the 14.8.
Does include PPP I'm, sorry, sorry, we prefer it excludes pvp to 14.8.
So have higher is going to 14, great exclusive pvp from the denominator.
Okay.
Hi, Jeff It was just sort of the tail end of your prepared remarks.
Stated restated number maybe it was on the modifications or maybe I just.
Almost all together so.
We can move on.
The.
I wanted to that 24 loans that were granted.
Second round of modification.
Oh, what percentage of loans that had reached that exploration has that you mentioned I think about 25%.
Where do you think we'll see re deferral.
Did you have roughly 100 loans that that reached saturation in 24 were.
Granted that.
6%.
Jeff I don't have a view into that and I don't know Tony if you do either.
Yes, I don't think we have a good deal into that yet.
We're just kind of reaching the beginning of the of the expiration of the modifications. So we'll be I think we'll see a lot more of that as we go through July.
Okay, I guess I'm referencing the those loans that did reach.
Exploration you granted 24, I thought maybe how the census.
A larger portion.
Returning to full payment.
It maybe broadly speaking I don't need a number but.
I'm, assuming that a larger portion did not seek a second round or it's just again very early.
I think it's probably safe to say that Jeff.
Okay, I think there's some categories, we talked about being the healthcare that we're not expecting nearly as many second rounds.
That's when you take that category out that that lowers it.
Quite a bit the overall personal care modifications.
Right.
And then maybe veering into more questions you have it's actually I'm answering the.
PPP forgiveness pace anything you're modeling in house in terms of.
How long a stick on the books Q3, Q4 kind of end the year what.
How long these hang on.
Well I think initially we're modeling a lot of Q3 activity in but with everything the rules getting postponed and and the forgiveness period being extended.
I think.
We may see some of it in Q3, but I think we may see the biggest quarter probably in Q4.
It's really hard to say how much will get good overall will get done this year.
Well, obviously have some that will go two years and of course this view going five years at this point.
Okay.
Thanks.
You have.
And we do have a question for the line of Jackie Bohlen with KBW. Your line is open.
Hi, Thank you guys.
Hello.
I just wanted to clarify without us under 50 million.
You said with on a five year period and not a two year period for TPP can I write that down correctly.
Hi, Jacking no assets.
I'm just looking at as our pilot.
Hi number there.
No we had 150 PPP loans for 6.5 million so very little.
Okay that makes much more sand.
Thank you.
And then my next one in terms of her vision for the quarter well is the bigger driver at that was a mix shift.
Shifting between credit rate within the portfolio or was that model driven.
Jackie This is Don it was model driven.
Again, most of the had to do with the the economic forecasts worsening from the one we used in March.
We mentioned this previously but the one in March things happening so quickly.
Do we actually had to put some qualitative factors to make up for for the Oh.
Some of the lag time in the economic model in Q1.
We remove those qualitative ones in in Q2, because we felt like the model have kind of caught up with the current.
Economic environments, but it was it was very much economic driven.
Okay. Thank you that's helpful. We'll go ahead.
And that was our last question Sir.
Well, thank you very much Selena and thank you for everyone.
Who is on the call.
I will wrap up.
Appreciate your time your sport and your interest in our ongoing performance.
And we look forward to talk with many of you over the next coming weeks and thank you and goodbye.
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