Q2 2020 Hanmi Financial Corp Earnings Call
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Ladies and gentlemen, welcome to the Hanmi Financial Corporation second quarter 2020 conference call.
As a reminder, today's call is being recorded for replay purposes. At this time all participants are in listen only mode.
Following the presentation the conference will be open for questions.
I would now like introduce Mr. last week last.
Ladies director Addo Investor Relations. Please go ahead Sir.
Thank you operator, and thank you all for joining US today with me that's got Tommy financial second quarter 2020 earnings a body Lee President and CEO.
After the Kim Chief Banking officer, and long, Santa Rosa Chief Financial Officer.
Definitely will begin with an overview of the quarter Mr., Kim will discuss loan and deposit activities and Mr. Santa Rosa will then provide more details on our operating performance.
At the conclusion of the prepared remarks, well open the session for questions.
In today's call. We may include comments import looking state based on current plans expectations events and financial industry trends that may affect the company's future operating results and financial position.
Our actual results could be different from those expressed or implied by our forward looking statements, which involve risks and uncertainties.
The speakers on this call claim the protection of the Safe Harbor provisions can pay those secured and Securities Litigation Reform Act up 1995.
For some factors that may cause results to differ from our expectations.
Please refer to our FCC filings, including our most recent form 10-K and 10-Q.
In particular, we direct you to the discussion of certain risk factors affecting our business.
Contained in our earnings release.
Our investor presentation, and our form 10-K.
This afternoon Army financial issued a news release outlining our financial results for the second quarter 2020, along with a supplemental slide presentation to accompany todays call.
Both documents can be found on the Investor Relations section of our website at <unk> Army Dot com.
I will now turn the call over to Bonnie Lee body.
Thank you Lhasa good afternoon, everyone. Thank your for joining us today to discuss a mid 2022nd quarter results.
Overall I am pleased with the team consistent execution. During this past quarter in what continues to be an extremely difficult and uncertain operating environment, resulting from the ongoing Colgate 910 pandemic.
The performance into second quarter was underscored by solid loan growth and strong deposit gathering activity.
We also continue to diligently support our customers and our community.
In addition to our efforts under the pay check protection program or P. three.
I remain extremely focused on the management of our loan and lease portfolio by proactively providing individual life support to our customers to ultimately help them get through the crisis.
While we continue to face challenges imposed by the pandemic. The following are some other chief financial and operational highlights what the second quarter.
Net income was the solidly higher on both a sequential quarter and year over year basis.
While credit loss expense arising from the pandemic increase during the quarter, we benefited from gain on sale through the reproducing of our securities portfolio.
New loan production during the second quarter was strong and included significant P. three loan production, while loan payoffs to work like as a result, borrow receivable expanded nicely and both the sequential quarter and year over year basis.
Net interest income before credit loss provision increased slightly quarter over quarter. Despite a 21 basis point sequential quarter reduction in net interest margin that was driven in part by the lower yielding p. three loans.
Deposits increased sharply during the quarter led principally from increase in non interest bearing demand deposit.
While portion of the increase reflects deposits from various government really program and a flight to security.
Remain pleased with the strength the Bahamas deposit franchise.
Perhaps most importantly, homie remains very well capitalized and has ample liquidity.
Our regulatory capital ratios are very strong and I believe we're well positioned to address these challenging time.
Looking at a more detailed in our second quarter results. We reported net income of 9.2 million or 30 cents per diluted share.
This compares favorably to net income of eight cents per share in the previous quarter and net income of nine cents per share in the second quarter last year.
Net income into second quarter continues to be impacted by uncertainties associated with a corbin 910 pandemic.
Second quarter credit loss expense increased to 24 to 24 point Sixmillion, Oh from 15.7 million into prior quarter.
The second quarter credit loss expense include a 21.1 million cobiz affordable, Melissa and a 3.5 million cobiz elsewhere off balance sheet items.
The increase in credit loss expense reflects deterioration during the quarter in some of the assumptions used in determining the allowance for credit losses, including levels of economic activity and employment among others.
Without a doubt this remains a very fluid situation and we'll continue to closely monitored the impact of the crisis and our portfolio.
Partially offsetting the credit loss expense was a 15.7 million gain on sale never securities recorded in the quarter.
The gain on sale the securities reflect a repositioning of our securities portfolio to capture the high level of unrealized gains arising from the very low interest rate environment.
As expected Hamid did not sell and especially loans during the second quarter because of the disruption in the secondary market, resulting from the Koby 19 crisis.
We expect however to resume selling its been loans ended the quarter.
That's a result, there was 17.9 million the guaranteed portion of as they separate loans held for sale at June Thirtyth.
Let's now turn to its equality.
Nonperforming loans increased modestly to 58 point, threemillion or 121 basis points up alone at quarter end compared with a first quarter 2020, nonperforming loans over 52.2 million or 150 basis points of loans <unk>.
The increase in nonperforming loans reflects a dish another three loans totaling 22.9 million and leases totaling one point sixmillion offset by the pay all of the 5.5 billion films Techs credit loan discussed on our call last quarter as well as a two other loans totaling 14.1 billion.
Returning to a coin status.
The covering 910 pandemic cause a number of our borrowers twisted tempur already modifications to their loan agreement.
We approved into second quarter over 2000 applications for 90 day modifications, reaching 1.4 billion.
Since then we have kept in close contact with our borrowers and our guardedly incurred at about 30% of our hotel retail and other real estate secured borrowers diagnostic an additional 90 day modification.
As many of you are aware the circumstances basing our borrowers can change rapidly as in a sense of the virus rises sort of fall.
As we did last quarter, we'll continue to work with our borrowers in these challenging time.
In terms of underwriting we remain committed to conservative disciplined credit criteria.
The second quarter 2020, consistent with the asset quality data from prior quarters, the weighted average loan to value and debt coverage ratio, a new commercial real estate loan originations for <unk>.
5.5%.
1.7 times, respectively.
The entire commercial real estate portfolio, the weighted average loan to value and weighted average debt coverage ratios.
As of the ended the second quarter were 48.7% and 1.9 times respectively.
And then you will provide additional detail and changes to underwriting in light of the coking 19 crisis.
With that I would like to turn to cool Anthony Kim our Chief banking officer to discuss the second quarter loan production results in deposit gathering activities Anthony.
Thank you Bonnie.
I will discuss loan production deposit gathering activities and then turn it over to run. So there was off for additional details on our second quarter financial results.
Amit generated strong loan production volume through the second quarter.
Total loan production was 534.1 million in the quarter and included 308.8 million up you PPP loans.
And 225.3 million of new loans and leases.
We experienced growth across the all major categories, except the equipment leases oil volumes declined as expected.
During the second quarter, we originated approximately one quarter over these volumes as compared to pre crisis levels.
More specifically second quarter production consisted primarily of hundred 29.4 million of commercial real estate loans.
Under 28.3 million to have it standalones and 61.1 billion of loans.
Rounding out second quarter production was 15.3 million of commercial equipment leases.
You'll each anyway loans and leases for the quarter had a weighted average yield up 2.35% and includes a lower yielding PPP loans.
Excluding PPP loans in the quarter yields on new truck production was 4.20% down 68 basis points from the previous quarters weighted average yield on new production of 4.88%.
Of note amendments under commercial lines of credit increased nearly 10% over the prior quarter to 566 million. However, the commercial lines of credit balance at quarter end fell by nearly 40 million quarter over quarter, reflecting a second quarter utilization rate of just 40 point.
0.5%.
Thanks to the solid loan production in the quarter, coupled with relatively low levels of loan pay offs.
Loans receivable at the end of second quarter expended to 4.83 billion up 6.2% from the end of first quarter and up 5.9% from a year ago.
Similar to last quarter I'd like to provide an update on our airports to help our customers. During this time of need.
As of June Thirtyth, we have approve a 20 443 request for payment modification totaling 1.4 billion of loans and leases, which comprises approximately 29% of our total portfolio.
In addition, we have also been very active PPP loan production as I noted earlier.
Suffice to say, we had been very engaged with our customers throughout the crisis.
And are working to help them whether the crisis.
Looking hard from the second quarter up 2020 [noise].
Excuse me will continue to prudently originating new loans.
In light of economic disruption caused quite a pandemic during the second quarter, we tightened aspects of our underwriting which includes limiting origination activities within certain highway industries.
I do expect how many will continue observed is more stringent underwriting.
As we assess the impact of slowing economy and customers over the near term.
Deposits totaled 5.21 billion at the end of second quarter, compared with 4.58 billion at the end of preceding quarter, representing an increase of 13.7%.
Noninterest bearing demand deposits interest bearing demand deposits and money market and saving deposits led this growth with increases of 36.5%, 11% and 10% respectively.
The increase in noninterest bearing demand deposits for the current quarter was primarily due to that deposit increases from customers would the P.P.P. as well as the overall liquidity policy market.
Deposits held with customers with the PPP loans increased 201.1 million to 408.7 billion at June Thirtyth 2020, compared with 207 point Sixmillion at March 31st 20 to 40.
As a result of second quarter loan production and deposit gathering activities, our loan deposit ratio at the end of second quarter was 92.6% compared with 95.7% in the second quarter last year.
No I would now like to turn the call over to Ron Santarosa, Our Chief Financial Officer Ron.
Thank you Anthony and good afternoon all.
Let's begin with pretax pre provision income for the second quarter.
Net interest income of 44.4 million.
Noninterest income of 20.9 million in noninterest expenses of 27.1 million.
Pretax pre provision income was 38.2 million.
Adjusting for security gains and the deferral of PPP loan origination costs pretax pre provision income was 19.4 million up 1.6% quarter over quarter.
Looking at net interest income, we posted 44.4 million up 1.1% from the prior quarter driven by a 30.2% decline in deposit interest expense, partially offset by a 4.4 decrease in interest income from loans against the backdrop of.
Overall lower rate environments.
Average yields for all asset classes decreased in the second quarter, reducing total interest income by 3.2 million sequentially.
Despite a 7.8% increase in average interest earning assets.
In addition interest expense decreased 24.5% into linked quarter to 11.3 million from 15 million driven by the lower rates paid on interest bearing deposits.
Net interest margin for the quarter decreased by 21 basis points to 3.15% or 15 basis points when excluding the effect of PPP loans.
The average yield on interest, earning assets fell by 55 basis points to 3.95% with a corresponding 47 basis point decline and the cost of interest bearing liabilities to 1.23 percents.
The cost of deposits decreased by 37 basis points to 0.74% driven by the lower interest rate environment and the continued mix shift in deposits as of June relatively higher costing time deposits represented 27.5% total deposits.
Declining 3.1% from the prior quarter, while non interest bearing demand deposits were 35.8 percentage of total deposits rising 36.5% from the previous quarter.
While total deposits increased by 13.7% sequentially the ongoing shift in deposit mix in conjunction with the lower rate environment, where the two main drivers of the improvement in interest on deposits.
Turning next to noninterest income we saw a significant increase in the second quarter to 20.9 million from $6.2 million for the first quarter.
The increase was primarily due to the $15.7 million and gains on the sale of 479.9 million of securities.
The gains on sales of securities reflect our repositioning of the portfolio to capture the high level of unrealized gains are rising from the very low rate environment.
Offsetting the increase for the quarter or lower levels of service charges in fees on deposits from lower activity and also from the fact that we did not sell any SPJ loans during the second quarter.
By comparison.
The gain on sales of SP loans for the first quarter of Twentytwenty was 1.2 million.
Looking ahead as Bonnie mentioned, we have resumed SP a loan sales and we will have gains on sales of SP.
Order.
And finally noninterest expenses were 27.1 million.
A 12.7% sequential decline from 31.1 million last quarter.
This was primarily due to a $3 million decrease in salaries and benefits expense.
Here, we see a 2.4 million dollar increase in deferred loan costs, principally from PPP loans and a 400000.
Reduction in payroll taxes drove the decrease overall.
We also realize additional savings from the prior quarter from declines and professional fees and advertising and promotion of 19.3% and 37.8% respectively.
At June 30, the bank had 150 million borrowings from the FHLB with 1.4 billion of remaining unused availability.
As of the ended the second quarter. The bank also had on used secured and unsecured facilities of 163 million in.
In addition, the bank did participate in the federal Reserve's Paycheck protection programs liquidity facility.
During the quarter with 101.8 million outstanding at the end of the second quarter.
We've repaid this advance in July.
At quarter end, the company had 20.3 million to cash on deposit with the bank.
And how many believes it has ample liquidity resources to address the uncertainties as the cobot 19 pandemic as they unfold. It today and we remain vigilant in assessing customer behavior and potential liquidity needs in this uncertain period.
Tangible book value was $17.47 per share at June 30, while our tangible common equity remains ratio remained strong at 8.63% with that I will turn it back to Bonnie.
Ron as we begin into second half of a 2020, we continue to be keenly focused on operating efficiently protecting our portfolio and maintaining a strong capital and liquidity position.
Actively with dentist and damage.
As we move forward, we remain committed to supporting our loyal customers and prior ties into health and safety of our employees and committee to ultimately emerged from these uncertain times, well positioned and as a stronger company.
For two sharing our continued progress with you when we report our third quarter 20, Tony results in October.
Operator that concludes our prepared remarks, we'd now like to open the call for questions.
Thank you, ladies and gentlemen, we will now begin our question and answer session.
If you like to ask your question. Please press star one on your telephone keypad a confirmation total indicate your line is in the question Q you May press Star too if you like to remove your question comes Q for participants using speaker equipment. It may be necessary to pick up your handset before question to start keys.
One moment, please while we pull for questions.
Our first question is from David Feaster from Raymond James. Please proceed with your question.
Hey, good evening everybody.
Hello, David.
Just wanted to start on re deferral rates, how how or.
The early read on modifications I mean, a and then any details on line.
The percentage of these that were 90 day versus 180 day interest only versus the full payment deferral, just and then again the early read on on re deferral rates.
Sure approximately 78% of our overall modification is and the payment deferral and as we had mentioned a as up to 30, we have about a 1.4 billion representing 29.
On the modification, but.
Most of these modifications were put the period up a 90 day so starting in the late June and and part of July.
You know we are going through the.
Second wave review, the modifications and where we have individually contacted and our customers and try to assess where they are on each loan relationship.
So from that come any acacia and debt.
Yes.
Based on the.
Responses.
That we have received from the customer base.
We think that the second wave a.
Thurman I will be about 30%.
Lower than what is in the folks on the current modification.
Okay. That's helpful and then I guess as you as you grant these additional modifications.
Are you requiring any additional collateral a personal guarantees a and then maybe or just any any downgrades the risk ratings okay.
As we speak most of.
Currently or the loans into modifications, most more or less most that doesn't have a guarantees in place took again wed.
In terms of additional collateral we are reviewing in individual cases, so far more set that we haven't had to ask for additional.
Collateral.
Okay, and then I guess just the last one for me just how do you think maybe that translate into additional reserve build I mean, it seems like most of the heavy lifting been done but just.
As far as some of these modifications come through and then maybe negative credit migration I mean should we expect some modest reserve builds or just how do you think about that going forward.
It's a fairly difficult to say that on the each individual.
Loan and.
A reserve impact on these loans, because we still have a debt.
The second wave the modifications to review so I think what can get up more clear number I think towards the maybe at the.
End of the third quarter or even maybe.
Beginning.
Towards end of the third quarter, the beginning of the fourth quarter.
Okay.
Okay and our.
Next question is from Kelly Motta from KBW. Please proceed with your question.
Hi, everyone and thanks for thanks to the question.
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Let's see maybe.
Switching to capital.
So your your regulatory ratios are still pretty healthy.
But you didn't cut the dividend last quarter and absent this fits in particular you gain this quarter.
Yeah.
Again, it would've been had another.
Lower quarter. So I'm just wondering how you guys are speaking about the dividend at this point knitting nclb yet.
What you declare that May is it's something that can be sustained all assets in this uncertain and buyer.
So as you guys you observed Kelly our capital ratios are fairly strong and.
They even are stronger when you start to.
Give effect to the bulge that the PPP program.
Causes some of those ratios.
That said as you know capital management as well as asset quality.
And liquidity are really important matters for both management and the board.
So the board.
Dose deliberate on capital.
It each quarters meeting.
They will do so again, a I think the dividend reduction in light of all the uncertainty was appropriate.
How it will be determined next.
I think we will we will see shortly.
But I think where we're standing today I think we feel good about capital.
You know if you if you think about how the first half unfolded in the dividends paid in the first half I think that demonstrates both being good stewards of capital for the shareholder, but also being good stewards of capital just too to protect the institution. So the board will meet and the board will have its decision.
Okay, and maybe if I can switch back a bit key caught it.
I appreciate all all the color around deferrals.
I understand that a lot of it.
GAAP for change in some qualitative factors, but for us that Theres diesel I was hoping you where you could kind of share what what backdrop, Keith you incorporate David and kind of.
Your modeling and making it the unemployment rate.
Tier whenever I doubt that when she can have a better understanding of.
What that you put up this quarter is it Dr yen.
Sure So as you know.
In the first quarter.
Onset of co bid in the adoption of C. so were.
On the heels of each other.
We.
We're using economic data at that time from.
The federal reserve.
The Fred this is called Federal reserve economic data and they have that adjusted for what may be the cobot environment. In this and we provided for that idea through a qualitative adjustments in the first quarter.
And the second quarter, we've moved to looking at Moody's data.
My recollection is that GDP is pretty much at a.
A 1% or less notion in the forecast period, which for us is about a year.
For unemployment, we're looking at probably numbers just below 8%.
For the one year horizon.
So if we look at those two drivers.
Or at least those two elements to the calculation.
We're probably approaching where maybe current consensus is today, although I've seen different views on.
On that from even the members of the fed.
When they deliberate where they think unemployment might be so.
It would be nice to say that were part of that that we might be at a high point I don't I don't think so I think we still need to see how the economy unfolds.
What was promising initially was disappointing where we might have to have some resets.
How that plays out still not sure, but I I'd like to say that the lions share of the reserve build is perhaps overweight but.
If you can tell me how this is going to turn out I can I can give you better sense of what that is.
Thank you so my fraud.
And our next question is from Gary Tenner from D.A. Davidson. Please proceed with your question.
Thanks, Good afternoon.
Bonnie I wanted to make sure that I heard your comments correctly in terms of the reader for rich did you say that the number of folks exposing the question is taking referral was 30% of those that are expiring or 70%.
So current as of June 30, we have about 1.4 billion and from that.
Original modification.
About 30% of the modified customers from the first wave may not request a second a decent on 90 day modification.
Exactly sure so you're saying that you think 70% rollover question.
Yes, yes, okay.
That's quite a bit higher numbers, we've heard from other banks.
Obviously with the hospitality and retail exposure I'd imagine that.
There was probably overweight amount of those borrowers that will be requesting.
Second round deferrals that yeah.
Among the all the segments the hospitality will be higher yes.
Okay and then.
The long Moderfrota Paydowns this quarter as you pointed out I mean, a big source of kind of the kind of offset to your production for the quarter.
$90 million worth of declined in line utilization you saw us with a wide utilization was at quarter end and.
What your senses of additional downward pressure in that portfolio, So second quarter and buying go to the Jason was a 40%.
In any given quarter line utilization is fluctuate anywhere from.
50% to 55.
So on second quarter was much much lower than our average so I would presume that dividend.
Our economic activity.
Right you have expectations for.
Especially getting down so further amount if at some banks.
Other line utilization is up 30% right now you have a sense of how far that my.
I I would presume it a move from like a 40% to 45% you may not quite ready to 50%.
Okay.
So you think that's a little more stable from this level.
Yeah.
Alright, thank you.
And again, if you have any questions you May press star one on your telephone keypad to answer your question Q.
Our next question is from kind of model from KBW. Please proceed with your question.
Hi.
Just just on the NIM I was hoping Hughes give some color on what new loan yields for looking like in.
Uh huh.
If that pressure there is.
Potentially offset by the repricing ads Fibe TV roll off there.
Continuing on wheels, and the second quarter, excluding Pete three loans were about 4.2.
Percent.
And that's partially offset by obviously repricing of the CD rates.
Going into the third quarter 'em, we have a little over 300 million.
In the CD, that's tied the old or and that over 2% and a and if we price at donlin successfully and off the lows.
60 basis points 55 to 60 basis point, we'll have to savings there in terms of news alone.
With the rate drop dead date, there's definitely more competition it pricing competition or on the new loans, but looking at the just sorry pipeline.
Loan yields are a couple of basis, a point lower not not too much compared to the second quarter, but we still have where at the beginning of the quota. So we still have to a watch how <unk>.
Our pipeline.
Right and not to on.
It doesn't horses deferrals, but I want to you on.
Yes.
Well, we've talked a lot about the re deferral rate, it's new deferrals that lease hats on slowed our split but theres additional borrowers have again.
She may have assistance beyond just I guess, what you had at June 30.
So we did not have a new deferral its a pretty a this is the same customer base that we had existing deferral. So you know one positive is that you know.
That that no new customers are asking for annuity for girls and Ah arch, we're just trying to.
Improve he.
From the existing customer base.
So based on the communication that we have so far from the mid of June to today. What customer has expressed is we think that tell me about 30%, 30% decrease and the second wave of Citi.
Thank you so much.
Our next question.
It is from.
Matthew Clark.
From Piper Sandler. Please proceed with your question.
Hey, good afternoon. Thanks for.
I didn't mean, the Q there I'm not sure what's going on.
On the hospitality.
Exposure as you speak here.
Your your customers what are were occupancy rates look like of late and.
Any sense for breakeven levels I know you're dealing with averages are medians, but.
Any color there would be helpful [noise].
Sure actually.
This is a portfolio that we are tracking on a almost on a daily basis.
We are tracking how the industrys performing overall and.
Well, it's all the industry. So no starting from April where the occupancy was down around 20 mid mid 20% 24, 25% now at the end of June and only part of July.
Since you lever has.
Moved up to 45% to 50% level industrialized and our our portfolio is actually.
Tracking.
Slightly above the industry average so if I think it's a fairly.
Fine in terms of all for all.
Hospitality sector.
Great and then on the the three loans that moved into non accrual the 23 million.
Excluding the leases.
Can you provide some color color there and what drove that increase.
Sure one loan is et cetera, It's a hotel construction loan that there was this is a loan that we mentioned I think the.
Prior quarter is 12.8, knowing that the challenges that they need to customers.
And the general contractor are are at odds and so theres a delay in the construction portfolio.
And that the second one is actually another credit that we mentioned I think a prior quarter, it's 8.7 million dollar.
The tax credits film financing deal.
That's what we're just waiting for the court.
<unk> sale of the tax credits.
And we have tea.
Book value a two to.
To pay a thought.
Okay, Great and then.
Maybe on.
Your deferrals the 1.4 billion do you know how much of that amount got PPP.
I guess, if you are PPP steps most of our credits were at the lowest here I think we only had 17 at the highest here.
And I know the 17 didn't participate so because most of our hotel credits are pretty large nomination. So I don't I, just don't think any received TPP, but.
Really have to get very granular to take a look at some of the lower lower ones, but.
Not not in any large way Matt.
Okay I figured it was just checking and then on the Sta.
Volume going forward in the rush to.
Get approved before I think the end of September to qualify to have six months basically covered.
Are you going to participate in that type of activity should we should we expect kind of outsized.
Gain on sale here in the third quarter, and then maybe normalize after that or not.
So just to be be plain.
When we're talking about gain on sale, we're talking about the traditional seven eight loans not the TPP bones right. So right.
So.
We would expect you know activity through July August and whatever is achieved through September.
I know.
You know you're right here.
Pushing up against.
The government's fiscal end year. So I don't think what we will see anything unusual, but we have to see what September plays out because that's usually.
Its own months with its own dynamic.
And then the PPP side of life, if they should renew the program and things of that short.
It's a whole different question and quite honestly I don't think we've we've taken a look at that at wells, we'll deal with if and when it comes a and then last with respect to the forgiveness element.
You know once they actually have life worked out on on what the borrower needs to fill out in petition for that forgiveness I think we will.
We will we will step up to that place so.
Traditional SPJ, we'll be back onto the third quarter, and then likely in before.
TPP programs I think that's as they unfold.
We will we will address it.
Okay, and the 9% premium that you guys mentioned in the release is that gross or net that you know that we'll see kind of income statement I just cant remember via gross trade premium.
Okay, so something closer to maybe seven net.
Typically depending on the mix of lounge, because we have different types of Oh percentage participations, but you know as a rule of thumb, maybe 75% of of the trade premium would be a booking.
Okay, and then just lastly, only expenses.
Obviously need to adjust for the.
Deferred origination costs for the PPP UBS just over 3 million.
I guess, how do you think about that run rate.
Going forward in your ability to to manage expenses from here.
So we did.
In the and the second quarter.
Trim some staff.
We have address certain expenses so that should.
Allow us to see perhaps a small drift downward.
We do have a spend going the other direction not nearly as much but.
But we do have the spend relative to.
Personal protective equipment, that's now kind of ingrained in our run rates.
So so there are things that that should benefit us but to be.
Conservative at say, it's it shouldn't be higher than the adjusted rate for the second quarter.
With everything that we know today.
Okay, and then I was just forgot one more on the other income other noninterest income it's been trending higher over the last four quarters is there anything unusual on there or is it sustainable.
So two items that came into the second quarter.
One with respect to servicing income on a recipe a loans there was a.
I'll call it a pocket fees.
That that were due to us on some outstanding SB eight loans that were.
I have some conversation with the FDA and they finally paid that in the second quarter.
And then in the second quarter. We also have about a half a million dollars fees on a net basis related to just.
Just under 30 million notional of back to back swaps. So those two items probably.
Wont repeat or not necessarily repeatable.
So we tried to two to identify that for you in the in the table win in the tax. So you could you could work out run rates.
Got it thank you.
And we have no further questions in queue at this time.
Please continue.
Thank you very much for listening the Hanmi Financial's second quarter 2020 results conference call.
We look forward to speaking with you again next quarter.
Yeah.
Thank you ladies and gentlemen, this does conclude today's teleconference. You may disconnect. Your lines at this time and thank you for your participation.
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