Q2 2020 NBT Bancorp Inc Earnings Call
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Ladies and gentlemen, you comes calls scheduled to begin momentarily teams continue standby. Thank you for your patience.
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The coal from Ericsson <unk> day, everyone welcome to the NBP Bancorp second quarter 2020 financial results Conference call. This call with your record. It has made a sports at public in accordance with the Fccs regulation FD.
Well, it's funny presentation slides can be found on the company's website at <unk> T Bancorp dotcom.
Before the called against every two to match the muscle Mindlessness that as noted on slide two todays presentation may contain forward looking statements as defined by the Securities <unk> Exchange Commission.
Actual results may differ from those projected inhibition certain non-GAAP measures will discuss.
Reconciliations for these numbers are contained within the appendix of today's presentation.
At this time, all participants are in listen only mode.
Later, we'll conduct a question answer session.
Structures will follow at that time.
Acquiring operator, [laughter] snarky and until your touched on telephone as a reminder, just call the smell recorded.
Ill now like turn the conference over to empty <unk>, President and CEO John inch what junior for his opening remarks, Mr. what piece again.
That's the what please begin.
Please standby.
[music] at our chief risk credit officer anywhere else.
Joining me in reviewing all highlights for the quarter.
And then we will take your questions.
The second quarter was an extraordinary core brand B T. Our employees, our customers and our communities.
We managed for the long term as you all know we are open for business and we are lending.
Our strong balance sheet allows us to do so.
Due to rising stalled a pandemic at the beginning in the quarter and through the reopening in most of the markets. We serve NBT performed very well.
Because it is back end markets, we serve which are relatively less dense allowed for reopening to began in early may.
During the quarter, we leaned into the FDA Paycheck protection program funding 3000 loyalty customers across many segments.
Preserve over 60000 jobs.
The function of our participation in the DPP, we crossed the $10 billion threshold early in the core John Moran will talk about that later in this call.
We thoughtfully cautiously reopened our branch lobbies in mid June.
We are optimistic but realistic about inviting our team members back to our facilities and are comfortable with the resiliency of our IP infrastructure to support our current remote work environment.
Finally on April one in our retirement plan services administration line of business. We closed the acquisition of Peoria based a BG to further strengthen that platform.
Let me review certain financial highlights for the quarter net income was $24.7 million or 56 cents a share after a seasonal provision and charge offs.
Observed asset quality remains strong and we will hear more about that from Amy This morning.
We opportunistically topped off our total capital when we raised $100 million in sub debt in June which has been substantially downstream to the bank.
Under almost any scenario this gives us maximum flexibility and optionality to pursue our strategies and to take advantage of new opportunities.
Our current capital ratios are disclosed in the earnings report.
Finally yesterday, our board approved a 27 cents dividend payable on September 15.
Also reaffirmed our dividend strategy for the rest of the year, which of course will be governed by the impact of the virus on our economy in the back half of the year and beyond.
So with that said at this time I'll turn it over to our Chief Financial Officer, John Moran, who will provide some greater detail on the second quarter financial performance, John I'll turn it to you.
Thanks, John So following along turning to slide four.
As John highlighted our second quarter GAAP earnings per share were 56 cents.
Modest security gains were offset by $650000 of real estate repositioning charges, that's recognized down in the other line at together those items netted to about a penny for the quarter, putting core operating EPS at 57 cents per share.
You can see the provision for loan losses, while down from first quarter levels did remain elevated as compared to 20 Nike.
Similar to the first quarter, our underlying operating performance continued to hold in very well pre provision net revenue of nearly $51 million was 13% higher linked quarter, 8% higher year over year NRP PNR return on average assets held fairly steady at just over 190 basis points.
Results were driven by lower expenses and higher spread revenue on a larger balance sheet, we generated over 400 basis points of positive operating leverage year over year, we demonstrated good expense flexibility during the quarter.
Tangible book value per share was up 2.6% NRC T. One ratio improved 44 basis points as compared to the first quarter underscoring that our strong PPNR generation provides a buffer for future provisioning needs.
Turning to slide five you can see trends in outstanding loans ended period loans were up just over $380 million that was driven by $510 million of net PPP loans, excluding TPP, our core loans decreased $130 million or 2% mostly on.
Managed runoff in our indirect auto book.
We also saw a decrease in commercial line utilization and that was really driven by excellent client cash as well as a handful of larger paydowns.
Commercial activity has reset lower as compared to the robust levels that we experienced in last year's fourth quarter and the first two month of this year and you can see that slowed down reflected in our quarterly commercial originations, which decreased $20 million from the first quarters levels excluding TPP.
That said, we are continuing to see some early signs of increased activity.
Extensively all parts of our footprint continue to reopen more fully.
As John pointed out we do operate in markets that are less dense and relatively less tobin impacted certainly as compared to downstate Metro New York.
We're cautiously optimistic around the returned to a new business as usual in the coming weeks and months.
Shifting to loan yields the full impact from the change in short term rates can be seen in the relatively sharp decline in portfolio yields during the quarter in that the gradual rollover a fixed rate assets, which is obviously more sensitive to the belly. If the curve would be expected to continue to pressure asset yields in the back half of the year.
The moving to slide six deposit stood at $8.8 billion, which was up nearly $1 billion point to point for the quarter.
Increased came despite a $135 million of run off in the CD book.
And in noninterest bearing deposit growth was especially robust up approximately $685 billion from the prior quarter deposits were boosted by the increased liquidity associated with funding PPP loans and various other government support programs.
We have continued to actively manage our deposit costs. Both in our exception price book ended rack rate and those actions combined with the higher levels of demand deposits are evident in the decline in total deposit costs to a low 23 basis points at looking only at the cost of interest bearing deposit we were able to drive a 50% decrease.
From one Q levels to 34 basis points.
We continue to evaluate additional pricing adjustments and have some opportunities remaining in the back book around exception pricing and Cds.
Core deposit funding has obviously long been a hallmark of being BT franchise, and we're really pleased with the results of our active repricing strategy, which has driven a meaningful reduction in deposit cost in a short period of time, while maintaining our client base.
Next on slide seven you'll see the detailed changes in our net interest income at margin.
Earning assets increased during the quarter, driven by PPP loans, and a meaningfully higher overnight cash position.
As you'd expect the net impact of these assets was margin dilutive Eni dollars were up despite 14 basis points of margin compression and the net drag from excess cash in PPP was responsible for approximately half of that decrease with core underlying margin compression at approximately seven basis points.
And what you see there the drop in asset yields partially offset by lower funding costs.
As you look to the third quarter. In addition to the asset yield dynamics that we spoke to earlier, we would remind you that our recent sub debt issuance is expected to negatively impact quarterly margins by approximately five basis points over the near term.
Slide eight shows trends in noninterest income, excluding modest securities gains and losses, our fee income decreased $1.4 million from last quarter and was stable from last year.
More broadly non spread revenue roughly 30%.
Our total revenue and continues to be another key screening for NBT as compared to peers.
On retail banking fees, a slowdown in transactional velocity and higher cash balances resulted in notably lower service charges, although ATM in debit card fees demonstrated better resilience than we would've expected.
The RP a line benefited from the first quarter of our recent LPG acquisition and new business pipelines for epic remained robust.
Wealth was soft on market volatility and limited retail cross sell via the in store channel and insurance demonstrated typical TP seasonality.
Swap fees for me to strong contributor to the quarter.
Turning to non interest expense on slide nine excluding the $650000 of real estate repositioning charges and other our total operating expenses were just under $65 million for the quarter down more than $5 million. As a reminder, last quarter was somewhat elevated due to normal seasonality on the comp line and we did have.
The $2 million increase in first quarters other expense for unfunded commitments under Cecil that was not repeated this quarter, our net overhead ratio improved to a low 111 basis points and while we're very pleased with that outcome. We continue to think through the appropriate level of operating expense as we adjusted the new economic reality of a co.
Good world over.
Over the last five years, we've consolidated 12 branches and realize several million dollars and cost saves, while continuing to show growth and retail deposits.
As client associated behavior continues to evolve we remain focused on opportunities to optimize both our retail and our corporate real estate portfolios consolidation of a handful of branches. Later. This year is expected to result in slightly over $1 million an annual savings next year.
On slide 10, we provide an overview of key asset quality metrics.
As you can see we remain very good shape this quarter, excluding the impact of PPP net charge offs were 30 basis points, that's down from 32 basis points linked quarter.
Favorable migration trends in Nonperformers were driven by the resolution of a single larger 4.2 million dollar commercial credit that we had referenced last quarter.
Both NPL NPK have returned to year end 2019 levels in dollar terms and there continues to be only one relationship in the bank above a million dollars nonperforming status.
We believe that the diversity and the granularity of our loan portfolios are long established track record of conservative underwriting and the left in nature of our upstate New York in New England footprint should help us whether the current environment better than most.
On slide 11, we provide a walk board of our second quarter reserve build and the reserve allocation by loan category. A full reconciliation of our allowance from year end 2019 is provided in the appendix of today's presentation.
Loan loss provision was $19 million for the quarter, which took reserves to just under 160 basis points of period and non PPP loans. That's an increase of 21 basis point linked quarter, and it's up 57 basis points from end of year.
Quick word on the Cecil models themselves to key macroeconomic variables use were derived from the Moody's June baseline forecast I think everybody on the line is probably familiar with what's in that forecast at this point I would just kind of point out there is still a great deal of uncertainty around the path of the economy, the ultimate path at the pandemic info.
Future government actions, but the model assumptions are now fairly well aligned with the observed economic reality.
If the current outlook more or less holds we would expect that the path of charge off activity and our balance sheet growth are going to be the heavier factors of future provisioning needs versus model driven reserve build per se.
Lastly, before we turn it over to Amy on the credit side I was just provide some quick updated thoughts around that $10 billion cross.
Obviously total assets finished the quarter closer to 11 billion than they did 10 billion.
And while we continue to maintain significant liquidity and flexibility on the assets out of the balance sheet. Our optionality on the right inside has become more constrained given unprecedented levels of deposit inflows and we would now expect to remain over $10 billion at year end.
Because we prepared for this over the course of many years, we would not expect any material increase in operating expense as a result, however, and as a reminder, that we will absorb 50% reduction durbin related revenue, which works out to approximately $5 million pre tax in the back half of next year and.
Accidently $10 million on a full year basis, beginning in 2022.
PPP lending fees are clearly going to be a meaningful offset in the expected to accelerate later this year and into next and then also natural growth in transactions and the ship from cash.
Reasonably be expected to provide a partial offset.
Finally, we intend to deploy excess cash into more productive earning assets over the next year, we will continue to evaluate fee based acquisition opportunities.
And as the dust settles around credit would look to reengage more actively it selective whole bank M&A.
With that I'll turn it over eating whilst our chief credit risk officer for some additional details on the credit from any.
Thank you John in terms of deferrals, we've been working very hard on these and we've seen significant progress.
Our deferrals across all lines of business. They peaked in may where we flattened the curve and roll forward to today, we've seen over 475 million and customers returning to payment or over 40% reduction from peak.
As of July 22nd total deferrals stand at $622 million or 8.8% of total loans down from close to 15% and the reductions continued to trend downward and currently we're down to 608 million.
We have reached 56% of initial loan deferral maturities and we're seeing strong results with an average 74% returning to pay bank wide, which demonstrates strong resiliency and as you can see on the side. We're seeing similar returns are paying all lines of business.
This is a name by name effort with strong outreach each of our lenders with their customers. We also worked to strengthen our positions where we could and we were able to ship pmnine deferrals from 55% of total deferrals to 39%, which means 61%, we're principal only deferrals and return to paying interest.
And our commercial businesses those industries that did not return to pay requiring an additional 90 day deferral are centered in high risk industries that are shown on the next slide.
As we know certain segments had been impacted to a greater degree than others, specifically hotels restaurants entertainment healthcare general retailers and auto dealers.
Industries have experienced a disproportionate impact for us the overall exposure to these industry remains low overall at 9.6% of total loans in terms of total deferrals. These interest these represent 191 million or 31% of total deferrals and only 2.6% of total loans.
Hotels, our largest exposure with 88 million a deferral.
Representing 40% of our exposure to this industry on deferral down from 69% at peak.
We have seen improvement as a number of customers in our footprint have vacation and drive to destination and are seeing hi bookings closer to pre cold and levels.
Also most of these sit in legacy markets with strong sponsors season properties low loan to value in strong debt service coverage. So well some will take longer to turn around to normalize operations, we have solid loan structures and strong performers pre Kobe and we've always had had a conservative posture in underwriting on these high risk industry.
Similarly, as you can see on the site leasing progress and all of our hiring sectors as things open up and the economy the impact of PPP money in other fiscal stimulus have taken effect.
Just a final thought the nature of our footprint, our conservative lending policies and our diversified portfolios help us with resiliency and let me give you a few examples.
The family in our markets is generally mid level properties with high occupancy. So recollections are leasing have continued strong with a low percentage on deferral today versus luxury projects and urban markets, where oversupply and absorption maybe an issue.
Our retail theory, it's primarily small strip centers in our communities with essential businesses anchor tenants, such as grocery and drug stores with greater resiliency versus big box.
Our history and strategy has been to build strong long term multifaceted relationships with clients that we know well and it performed through the cycle and it's worth mentioning that we don't do leveraged finance and generally avoid deals with equity sponsors. So we know our customers well, which helps us navigate and make informed decisions.
We don't have exposure to oil and gas or oilfield service companies and finally from a cold in perspective, all states in our footprint are in the reopening phase so far and overall had had fewer cases, which has also helped.
With that I'd like to turn it back to John to wrap.
Thank you John Thank you Amy.
As we begin to take your questions I want to make you aware that our chief accounting officer net ferns joins us as to what does our corporate treasurer Mark Mearsheimer in our.
Financial planning and analysis manager Bill Whitaker, operator, I'll turn it back to you for questions.
Thank you anyone with a question at this time can press Star then one key are you touched on telephone.
If your question has been answered where you wish my yourself in the queue. Please press the pound key.
Yes that you limit yourself to one question and one follow up.
One moment for questions.
Our first question comes from Alex Twerdahl.
Piper Sandler.
Good morning.
Good morning, Alex.
First question I appreciate your comments around the $10 billion threshold and crossing Edna intending to stay above it but correct me if I'm wrong that over the last couple of years you guys had some strategies in place to kind of size.
Fourth focus more on sort of more profitable lending areas and.
Yeah, including things like that planned runoff of the auto portfolio, which you cited in the a in the press release, but now that you're above $10 billion to some of those strategies shift and and potentially will allow for loan growth the pickup a little bit more.
Obviously wants the environment normalizes.
So thanks.
Alex and you know you're absolutely right.
As you know we were optimizing our performance last year and the prior year, knowing that we were in the $9 billion to $10 billion range.
And growth in certain of our businesses was probably more muted then it needed to be a as a function of.
Making sure that we were prepared to cross.
Now that Weve crossed a as you know we have a very diverse portfolio of businesses with opportunity to grow.
And that's a function of in this rate environment.
And analysis of what kind of yields we can.
Squeeze out of those businesses and also the risk environment. We're in but I think you can expect to see that on the consumer side in our mortgage business and in our.
Indirect auto business that will continue to allocate capital and grow on the commercial side. You'll also see that we'll continue our growth in new England, we have opportunity in Connecticut. As you know weve hired a team of bankers there that are ready to go in our.
Ah coming out of the Ur Cobot crisis in Connecticut ready.
We've also hired bankers in Western Massachusetts, and we're seeing a in our core markets cnine opportunities.
Present themselves or as well so we feel pretty good about our ability to continue to organically grow John talked about a the capital raise and our ability to deploy that capital and whole bank acquisition as well as fee based businesses anybody who's fall.
All the us knows that we're very disciplined about that but when we determined to execute we do execute and we think that there is opportunity there for us as well so I set it up front, we plan for the long term, we have a long term strategy, a we pulled different levers at different times.
James and we'll continue to exit create execute on that strategy and and drive the growth in an appropriate way in the environment. We're in so thank you.
I'd appreciate that answered just as a quick follow up when you said M&A opportunities and you guys have been a good quieter in the past do you feel like you can do due diligence in this environment or do you have to wait for the next six months this sort of play out in sort of see how the economy reopens or are sort of what happens with the pandemic et cetera before you can actually.
Please go into a bank and and kind of get really comfortable with its loan book.
So.
Again, I think you're absolutely right. It's it's a little early to suggest that we have the opportunity to understand a potential partner deeply enough to come to a valuation that makes sense and understand all the risk, but that doesn't mean, we can't.
Be a relationship building in the short term and then after the storm passes are being in a position to execute and that's probably what will happen here as we said in the past a we're more interested in.
Small our bite size opportunities or this is not a in environment or nor do we have an interest in doing something transformational.
And those opportunities the smaller ones existing relationship building continues virtual as it is.
And once the.
Rain stops and it clears a little bit, we'll be able to get in and and have more meaningful.
Opportunity to understand the potential partner deep more deeply.
Perfect. Thank you for taking my questions sure.
Our next question comes from Collyn Gilbert with KBW.
[noise], Thanks morning, guys.
Oregon [noise].
Maybe if we could start John Moran on on the Opex discussion on [noise].
Obviously, you know some some improvement there this quarter kind of how do you any sort of alluded to it in Europe in your opening remarks that potential there to always be looking at that you guys. It's obviously consolidator branches in the past, but just trying to get a sense of maybe what you see is kind of the near term opex trends and then longer term, maybe what and where you see potential leveraged.
Paul there.
Sure, Yes, I'm wondering calling thanks for thanks for the question.
So you have you when you look at Twoq levels, obviously, we benefited a little bit from from two things one is.
Pretty in one Q1, Q tends to run a little bit high for us both on the comp line and on the occupancy line because it does it gets cold and snow is where we where we operate.
So we had a little bit of a tailwind coming into two twoq you to begin with and then.
No shelter in place and some of the some of the changes in in operating model.
We ran through a good chunk of of April May you see some of those lines down more than they might otherwise. It then I think that that will kind of normalize a little bit. So I don't view to Q in the in the very near term as a sustainable run rate I think we'll have a little bit of lift as we get the branches more kind of fully open.
And things a little bit more back to business as usual.
We did say.
Real estate repositioning charges, we've identified a handful of branches that we'll we'll take a look at the end up and that should drive some season into next year I think longer term you.
No.
Clearly there could be an opportunity to kind of addressed some of that we operate a.
You know.
With somewhat greater branch density certainly as compared to peers I think it's something that we have done a good job at overtime, it's sort of business as usual to continue to kind of look at that network.
Your out with that with changes in customer behavior, how many do we need where do we need them. In then and then I think the longer term sort of interesting compelling opportunity on the corporate real estate side.
Materialize, you know, we sent 90% of the bank home.
And and things have gone pretty well, it's I think we've learned a lot from that experience.
And and we'll we'll revisit corporate real estate overtime that that's probably a more three to five year kind of opportunity for us.
Okay. Okay. That's very helpful. And then just in terms of.
You know the liquidity situation here as you would indicate I mean, you guys dropped your funding cost to the floor.
You mentioned, some maybe exception pricing you can do but overall it doesn't seem like there's nearly as much do there is some managing that asset side is gonna be key how do you sort of see door to sort of the liquidity deployment evolving on and and again kind of sort of near term and then longer term.
There, which then ties into I guess the question of where you see.
Maybe organic loan growth going.
In the back half a year and then maybe as it normalizes next year.
Sure Yeah, so on liquidity $1.2 billion deposits have come into the bank from the end of last year I certainly when we drew up 2020, we wouldn't have imagined that.
No I think the interesting thing is is that shows no real sign up of leaving and so there's some portion of that I think we'll we'll be really careful around because as TPP kind of winds down and those funds get spent I think it's reasonable to expect that that a portion of that ultimately leads the leaves the bank, particularly in parts of the footprint, where we don't.
I have.
No sort of sort of dominant market share right.
But in terms of redeployment opportunity you know a securities or our AR or certainly an option and that'd be 90 to 100 basis points of sort of yield pickup versus 10 basis points in cash and then John I think did a good job alluding to some of the opportunities we see in front of us on the on the loan side.
No I agree with your with your comment there's there's there's some levers left on the funding side, but there's not a ton of juice. There I mean, we've got 250 million Bucks in a in higher cost CD that'll that'll roll the balance of this year are those are 150 basis points are so today I think the highest CD rate that we pay in the bank is something.
80 basis points today, so it will certainly picked up something there but.
But the funding side I'm not as much juice there as you think through asset yield I think a securities every every bit of 150 basis point lower.
And then and then depending on the loans that were putting on those are those are kind of coming in.
With spreads that are a little bit below book yield today.
Okay. Okay. That's helpful. And then just I'll also sort of tied to that I know, it's hard to two projects, but just for you. As you guys are looking at it internally for modeling and for US on on on this side, how should we think about the forgiveness schedule on the PPP mountains to thanks.
Yeah, you know I think I think that will start to so the FDA is opening up the portal here in a couple of weeks. So early August I think that'll start to clean up in Threeq you I think we'll start to get more of that in Fourq you, but initially we were kind of thinking that most of that was gone by end of year I think under the <unk>.
Way that that the program, it's sort of shifted a little bit.
Our expectations are ultimately that drives larger amounts of total forgiveness, but it's going to stretch out a little bit longer than what we would have anticipated. So so we would think that you know.
A portion of that program kind of stays with us over year end, and then and then kind of cleaned up in one Q2 Q.
Okay. That's great and then my last question is for Amy, perhaps the hardest, but just to tie into your point.
John as you know kind of your think obviously think about the reserve right. So if he should present provisionings couldn't be more about loan growth in charge offs. So any for what you see today right and that deferral trends that you're seeing which was great detail than the slides. Thank you [laughter] any sense of where you think.
Net charge offs could go in the next few quarters.
And I know I know, there's so many uncertainties I guess just based on what you see in your book today in kind of what you know about your borrowers and maybe the stress testing you've done and kind of collateral types you've done.
Any range you could offer us there on that.
Yeah, I'll speak to that a little bit.
You know maybe speak a little bit how I think things are going to cycle through you know we will expect some increase in charge offs in the second half of the year relative to the first half the year it'll cycle through first you know with our consumer businesses and because of deferrals are delinquencies and charge offs were lower in the second quarter than normal.
So we would expect an increase.
At the end of the deferral period, which is largely by the end of Q3 in Q4, you know we've been very encouraged by the high return to pay we've seen on a deferrals, particularly on the consumer but when you see where those are running in the 3% range.
Overall, and as the economy reopened and the stimulus money.
Has had an effect you know that's kind of how we see it cycling on the consumer side, but the exact levels. You know in terms of getting you a range are still so uncertain, depending on employment levels and the conditions a in the economy in Q3 and four you know on the commercial side, we see credit losses. Similarly.
Oh hiring you know 2020, then 2019, which where as you know it very historical lows, but we see any potential losses. There you know really cycling in late two foreign into 2021, you know we do feel that we've identified you know what is most vulnerable so far.
And but it's really too early to determine a specific forecast Ah so far but again similarly as to consumer were further ahead and we thought in terms of the deferrals.
Okay. Okay that is helpful. I will leave it there thanks everyone.
Hi, Dan if you have a question. Please press Star then one key are you touched on telephone.
Our next question comes from Matthew Breese with Stephens, Inc. Your line.
Good morning.
Good morning, Matt.
Hey, I thought it was notable on page 11 that you know the commercial real estate reserve next to other consumer is now the highest of all the buckets.
And so I was hoping you could talk about the portfolio a little bit in terms of Ltvs and debt service coverage ratios and then especially within that the higher risk categories, maybe provide the same metrics for hospitality and retail.
Sure Matt.
You know in terms of the hotels generally speaking as I mentioned.
We've got long standing relationships either season properties. So the loan to values are well.
They're typically.
Having amortized down in the.
50% range on average of course that very you know across across the portfolio. So I'm pretty cold bad debt service coverage very strong properties and jet generally within there as I mentioned, it's really a mix mix a different property types and some are saying come back and do vary.
Well that are within state that our drive to and kinda in vacation so.
It's really the business side that are that are near the airports and support those customers and you know coming in typically we had guarantees where we could not in every case, but we had strong underwriting. So we feel were reasonably well positioned there on the theory retail side.
Thats not a large component you can see I think in the appendix.
At 16% of our nominal amount under occupied CRT, a and we do track large.
Tenet and typically what we see as I mentioned is you know there strip center centers with essential business home centers gas stations I C stores are on the other area in terms of general retail on the C and I side, where we have exposure so.
You know we're in we're in.
Good shape typically on the CRB retail side, we have guarantees from strong sponsors are and you know we have essential businesses as anchor pharmacy grocery that kind of thing so they're seeing good collections holding up and you know they're not you know a large category in terms of our deferrals.
And then I I just wanted to confirm could you say that you know of the loans coming off deferral are coming to the end of their 90 days, 74% of those are returning to pay was that accurate, yes definitely average across bank why and what I.
Said prior to that is that work a little more than halfway through the first deferral period.
At 56% and what we're saying is on average 74% returning to pay.
And just thinking about that 74% as you look at the loans and the customers that require an additional 90 days do you think that's 74% is a good cure rate for the second batches, we get into the fall and those loans come off they are doing other second 90 days.
And could you give me some of the puts and takes around that.
So yeah, we're still working through the first deferral phase and that will still take us through.
August or so so you know well we're encouraged by what we've seen so far.
And we'll continue to monitor that I really wouldn't want to forecast, that's but you know we'd like to think things will continue I'm in a similar vein, but we you know, we'll just see really how that comes forward.
So you know that you know, we're doing well when we get to the end of the deferral period. I think is what you're asking is when we get to the second deferral round of deferrals most of those sit in the high risk.
More sensitive industries and it really is a function of the reopening and the performance most are trending better than they were but we'll have to see where we are at the time and we'll be able to come back and speak to that.
I appreciate that that's all I had thank you.
Thanks, Matt.
Hi, Dan if you have a question. Please press Star then one key ARIA Touchtone telephone.
I'm not showing any further questions I will now turn the call back to John watch for closing remarks.
Thank you operator, so Ah. Thank you all for participating in this free format. It earnings call a little bit of life and the age of Corona here with our technology, but a were used to that.
Well I know just finally state that a 2020, obviously is going to be a very different a year than we expected, but it's all about our team it's risen to the challenge it's there to support our customers our communities and importantly to position and B T to.
Take advantage of new opportunities as we discussed here.
So we again appreciate your participation and if there's any follow up you all know to reach out to John a one on one.
Thanks, everybody be safe.
Thank you to everyone who participated on this conference call for your interest in MDT Bancorp. This concludes today's program you may disconnect have a great day.
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