Q2 2020 Berkshire Hills Bancorp Inc Earnings Call
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Ladies and gentlemen.
Good day and welcome to the Berkshire Hills Banc Corps second quarter earnings release Conference call.
Since we'll be in listen only mode.
Would you need assistance. Please signal conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note. This event is being recorded I'd now like to turn the conference over to David Gandossi Capital market Director. Please go ahead.
Good morning, and thank you for joining this discussion of second quarter results.
Our news release is available on the Investor Relations section of our website procure bank dot com and will be furnished to the FCC.
Supplemental information is provided in an information presentation.
At our website and IR that Berkshire Bank Dot com.
And we may refer to this in our remarks.
Our remarks will include forward looking statements.
And actual results could differ materially from those statements.
For detail on related factors. Please see our earnings release and our most recent FCC reports on forms 10-K and 10-Q.
In addition, certain non-GAAP financial measures will be discussed on this conference call.
References to non-GAAP measures are only provided to assist you in understanding our results in performance trends and should not be relied on as financial measures of actual results or projections.
The comparison and reconciliation to GAAP measures is included in our news release.
And with that I'll turn the call over to CEO Richard Marotta.
Thanks, Dave Good morning, everyone and thank you for joining us today for second quarter earnings call, we'd be this morning, as Sean Gray, our president and Chief operating Officer, Jamie Moses our CFO along with other members of our executive team.
With many of our customers employees and communities, we serve and live confronting devastation of the chrominance, Dan Dan root shares doubling down on our commitment and values are investing to make our services in capital more accessible and more relevant to our customers and ultimately we are building long term value for all our stakeholders.
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In fact, I believe our actions so far this year are accelerating our transformation into a new kind of 21st century community Bank.
Hey provides an authentic banking experience in doing so bill wealth in our community and long term valuable banking relationships.
This can be seen across the bank as a response these challenges.
Including how we've approached protecting the safety of our customers employees during the pandemic, while ensuring we continue to serve our customers support our staff and advance the transformation of the bank.
And then make for struck we quickly shifted to remote work for most non branch in 40, instead, a careful procedures to mitigate risks for our customer facing staff closing branches in store traffic, while maintaining drive through services.
For those employees, whose outwards were reduced as a result that these actions we maintain opaque and in fact added benefits to help address hardships, resulting from the panda.
But the situation is also presented an opportunity to leverage our online owned channels as well as our my banker concierge services.
Migrate retail traffic and build deeper relationships with our customers.
That infection rates have declined throughout our service area.
I've been able to reopen most branches to retail traffic as a result of our team diligent work.
I'm optimistic we have also gain valuable increases in customers using our digital and Mybankrate channel, which is a critical part brochures transformation into an accessible and relevant 21st century community Bank.
Second brokers principles can be seen in our effort to ensure funds from paycheck protection program or assessable small businesses across all of our community.
The majority of our PPP loans were under $50000 or made available to all of our channel as our teams reached out across all of our markets.
Third last quarter, we continued to advance our innovation strategy with respect slabs.
Vision of 21st century banking brand is built around community co working spaces and socially responsible banking.
We accelerated the launch of rebates last dot com brands online manifestation in response to social distancing mandate.
Your next labs that comp is an online hall that brings together a welcoming inclusive space in a new connections explore collaboration opportunities and accent resources to help us within or small businesses and nonprofit organizations.
To succeed.
Marking a launch we also announced an inaugural partnership with walked through public libraries Christian business Library Innovation Center, which will provide access to the library expert staff and business resources.
Now, let me turn to our result.
Second quarter, Berkshire generated solid core PPNR and positive cash earnings despite the challenging environment.
Continued to strengthen our regulatory capital ratios liquidity, while growing our loans and deposits.
Strategy has been to reduce our leverage and renew our focus on end market relationship businesses to support long term profitability improvement.
As we noted we will earnings release, we subject, our capital and liquidity distressed debt, including severely adverse scenario and our analysis indicates that we are well margin in all scenarios to maintain strong metrics, including the well capitalized regulatory designation.
As a result of the pandemic, we recorded a non cash loss due to goodwill impairment and the provision for credit losses unrelated to the banks activity during the quarter.
Our previous strategy over the last decade Banqueting number of bank acquisitions. These are stock field carried on our balance sheet based on market valuations that time in excess of tangible book value.
A market for bank stocks is now trading well below tangible book value due to the pandemic macroeconomic factors.
The necessary accounting consequences to write off goodwill with no impact to tangible equity regulatory cast capital liquidity for cash flows.
As you know we've been focused on our core return on tangible common equity, which excludes goodwill and is therefore unaffected by this action.
The loan loss provision as our current estimates of future loan losses.
We recorded a large provision first quarter due to the pandemic.
The incremental provision the second quarter reflect the further downturn and forecasted economic conditions. We believe were properly reserved for losses based on the current estimates.
Shifting that focused on credit our low our loan performance metrics remain within normal historical ranges.
This includes the benefit of federal relief measures, including the PPP loans as well as loan modifications within regulatory guidelines.
We're working closely with our borrower that the economy in the northeast moved into a recovery from the rapid drop during the second quarter shutdown.
And request for additional modifications are carefully underwritten.
We expect the total balance the PPP and modified loans decreased significantly from here on out and borrower cash flows improved.
We have strong we have built strong lending credit and workout team since I joined the company as Chief risk officer about a decade ago.
Confident that these teams will effectively manage our way through its pandemic, while we work with borrowers to respond to the extraordinary conditions. Our investor materials include further details on our borrower support program then the more sensitive industries that we lend to.
Turning to overall operations, we recorded strong loan originations in deposit growth in the second quarter.
The loan originations were driven by the PPP loans, which are included in commercial and industrial loans.
These loan help maintain employment during the shutdown throughout our market.
We expect that most of these bars were applied for forgiveness under the program guideline during the second half of the year and were geared up to service those requests and receive payment from the government as they come through.
Project growth with concentrated in checking account balances, both retail and commercial accounts accumulated liquidity during the shutdown and this included.
Amounts from the PPP alone.
Before I turn it over to Jamie, let's take a minute to comment on our investor deck, which is at or website.
Decks summarizes some of the quarters highlight it also includes additional information about our loan portfolio.
Provided information on slide nine about the commercial loans to industries that we initially identified as potentially more sensitive.
Social distant thing in the pandemic.
Excluding PDP loans these balances have not changed materially since last quarter.
We note that most of our retail stain either either owner occupied or two properties anchored by stores, which have performed comparatively well during that pandemic, including groceries.
Pharmacy.
Paul improvement and wholesale.
We also note that our constant construction loans had generally continue to build out and are mostly for properties not viewed as having elevated pandemic sensitivity.
Turning to slide 10, we note that our total phase loan modifications were $1.5 billion.
And reflected our outreach to support customer liquidity as shutdowns were spreading through our market.
These 90 day modifications are currently expiring and the information from the field causes us to expect 60% to 70% of them to return scheduled payment based on current conditions.
Any customer requests for another round of 90 day modification in phase two are being underwritten and approved on a case by case base.
With that I'll turn the call will review, our CFO, Jamie Moses to discuss some of the financial details for the core Jamie.
Thanks, Richard as we discussed last quarter, we're focusing on the measure PPNR and assessing our operations. This measure it looks beyond the variability of the loan loss provision, which is based on estimates of future events and the uncertainties of the current pandemic situation.
Due to the 564 million goodwill write down GAAP PPNR from continuing operations with a negative 529 million or $10.53 per share.
Our main focus is on core PPNR, which excludes goodwill and net charges from discontinued operations.
Core PPNR was a positive $24 million or 47 cents per share.
This was down by about $7 million or 14 cents per share from the linked quarter.
In part this was due to $2 million in bonuses and discretionary costs accrued to expedite PPP loan processing.
The main driver was the decrease in net interest income, which reflected the decline in the net interest margin.
There were several drivers arising from the pandemic, which contributed to this decline, including the impact of lower rates on variable rate loans runoff of higher rate loans and higher volumes of lower rate short term investments and PPP loans.
Also we extended duration on some of our deposits near the started the quarter as a risk management decision to protect liquidity when markets were influx, which limited the downward benefit of lower deposit rates.
We have $19 million in net deferred PPP loan fees as a midyear and we expect much of this to flow into interest income in the third and fourth quarter.
Demand for other commercial loans has been soft in the current environment and we had also planned on some further runoff as part of our balance sheet restructuring.
At midyear, we had $43 million an aircraft loan balances and held for sale.
The sale of this piece of our portfolio closed earlier this week at a small premium.
The remaining portfolio of private small aircraft was down to $55 million at quarter end.
At this point, we have completed most of our restructuring strategy.
Excluding PPP, we expect that commercial loans will stabilize and that the runoff of mortgage and consumer balances will slow for the rest of year.
Reevaluating, replacing some of these balances with investment securities.
Excluding PPP, we believe that we have 15 to 20 basis points in margin opportunity in the back half of the year as funding sources priced out.
In addition to that the PPP fees will add some margin and will be accelerated as loans are forgive and are fully recognized in interest income at that time.
Addressing the rest of the income statement fee in Inc. fee income picked up as anticipated in the second quarter and we hope to see this normalize on the $19 million to $20 million per quarter range.
On the expense side, excluding the goodwill impairment noninterest expense decreased by 1%.
Excluding the PPP processing costs that I mentioned expenses were down 4% quarter over quarter.
We will continue to look for ways to trim expenses, where we can and so we expect quarterly expense to remain roughly flat to the current level X PPP during the back half of the year.
On the balance sheet, we expect about 80% of the PPP loans to be off of the books by year end with a total of all other loans to be flat or down a little.
We expect to see some pickup and regular commercial loan originations and line usage and we're hoping to moderate the downward trend in mortgage balances.
On the deposit side, we had originally expected balances to be steady as we focused on reducing deposit costs.
We expect the mid year surge in liquid deposits to run down, but this will depend on conditions in public health and the economy.
We expect to be reducing wholesale funding as PPP loans come off the books.
The bottom line included noncash charges for goodwill on the loan loss provision as Richard discussed.
Like the goodwill charge the loan loss provision is not related to anything we did during the quarter, but it does reflect baseline forecast of losses due to pandemic conditions.
Due to the decrease in loan balances and net charge offs that provision expense was a reduction from first quarter.
The mid year allowance coverage of loans was 149 basis points and was 161 bips, excluding the PPP loans, which are government guaranteed.
Our net charge offs of $4 million in the second quarter were in line with our normalized pre pandemic expectations.
While we are currently provisioning for higher charge offs, we would expect most of that to show up next year, depending on how stimulus is managed from here on out.
Moving to the tax line, while most of the goodwill write off was not tax deductible, we did record a tax benefit on the did see deductible portion.
For the second half of the year, we're expecting a tax rate around 10%.
Finally, as anticipated the charge related to the sale of discontinued operations decrease from the prior quarter. We only expect a couple of cents a share for these charges in the third quarter and less than that in the fourth quarter. When we plan to complete this sale with that I'll turn the call back over to Richard.
Thanks, Jamie I'll wrap up by reiterating that we continued to make progress with our long term strategy.
Transforming britcher bank to a new kind of community bank sensible relevant and authentic for all members of the communities that we serve.
Excluding the non charges, we discussed non cash charges. We discussed we generated solid cash earnings and core PPNR in the second quarter and expect to see stronger PPNR that second half in part driven by the anticipated income from the PPP loans, we strongly improved liquidity and regulatory capital metrics.
We believe we are well buffer to get the anticipated pandemic impacts as well as severe adverse stress is not expected we're targeting to maintain these buffer is based on our internal capital generation.
And balance sheet plant.
We suspended stock repurchases in light of the regulatory emphasis on maintaining the strength of capital within the banking system.
Strategies continue to generate excess capital beyond that is needed for operations.
First happy new year, our core PPNR $54 million generally cover related taxes charge offs and dividends.
Our original plans call for us to continue to return this excess capital through repurchases.
While repurchases are suspended I would comment that we would find repurchases to being attracted based on our current market conditions in our own internal projections and analysis of value.
As noted in the earnings release, it changed the banks dividend procedure and we will now make those terminations later in the quarter to allow us to more seamlessly coordinate with federal and state regulators level role in assessing our results.
While the pandemic has kept us off the road.
Jamie and I reached out to conduct numerous virtual meetings with our investors in recent weeks I believe we're able to speak convincingly led to strong management of our credit environment, but our view of our strong capital standing and our strategies to strengthen our franchise as a 21st century community Bank.
Or strategies have also been recognized with higher SGT scores from Bloomberg and I asked that.
More importantly, these actions are the right things to do for our stakeholders and offer a tremendous business opportunity for Berkshire.
As a community bank fruits as long term success truly depends on the success of the communities. We live in insert our commitment to providing value for all of our stakeholders Creek the foundation to deliver sustainable long term perform.
This completes our prepared remarks, and I invite the operator to open the lines for questions. Thank you.
We will now begin the question and answer session to ask a question you May Press Star then 100 Touchtone phone if you're using speakerphone. Please pick comprehensive before pressing the keys to withdraw your question. Please press Star then too.
First question is from Merck fits given from Piper Sandler. Please go ahead.
Hey, guys good morning.
I know mark.
Good to Richard given the elevated reserve ratio and I heard which you had said about credit and provisioning but.
Should we expect that provisioning levels will likely be lower in the back half year.
I think mark and I'm going to have Jamie can chime in here, but I think that really is as you know a lot of this was driven off of.
Economic forecasts and it really depends on what where this pandemic goes I mean right now I think we're comfortable that towards the end as the year it should stabilize but but again, if if if and when does pandemic takes a different term that's going to.
Force reserves to be built throughout the banking industry gaming anything to add.
Yeah, I think mark the way that we're thinking about that is this quarter's provision was generally driven by well worsening economic forecasts.
And on a go forward basis or at least I'll say it this way since.
Since we since we last looked at this in our models that forecast is relatively stable.
So from that perspective, I don't I agree with you that provisioning levels could be lower.
Again, this is going to be determined by what actually happens in the broader macro environment, we aren't seeing any of these potential losses flow through to actual results at the moment.
And so I think at them the way that we're thinking about is that provisioning levels at least as.
At this point are going to be driven by.
Realization of any of these losses that we have forecasted.
Okay, and then changing gears a little bit on the dividend I guess I'd be curious how you think about the device and do you think the regulators will look at the noncash charges when they determine your dividend paying capacity.
Mark I think they're going to look at everything.
You know and again the noncash charges are part of our results.
I think that we are trying to look at the dividend from a holistic perspective I think the regulators also we'll look at it from a holistic perspective.
While we do have these results in our in our past and so they will impact the sort of federal.
Regulatory guidelines.
We think that we are.
We are and continue to have a strong capital base.
And we will evaluate the dividend in the context of that strong capital base as well as our future projections of earnings.
Okay, and then I guess.
If we were to look at the balance sheet state 12, or 18 months in the Easter would you expect it to be significantly smaller than it is today do we generally see continued run off in sales while portfolios here in there.
So the balance sheet keep shrinking.
I don't think so mark the ways that we see it right now is generally speaking the reduced the balance sheet restructuring that we had set up to two a year and a half or so ago I think were largely.
Finished with that there will still be some run off for example, our indirect auto book.
But.
The rest of the balance sheet growth I think is gonna be dependent.
Odd and markets on the macro environment.
And whether or not we find good lending opportunities.
In our markets so.
I don't think that theres going to be any concerted effort to run off more necessarily than where we're at at the moment.
So I think thats, how we would think upset.
So would you characterize this quarter is sort of a clearing the decks and you know getting the balance sheet in a position where its.
Good place going forward and we start to see sort of books are more predictable earnings.
So the company.
I think thats. So that's a fair assessment there mark that would be my expectation on a go forward.
Thank you.
The next question comes from Dave Bishop from D.A. Davidson. Please go ahead.
Yeah, Hey, good morning, guys, Hey, Hey, Dave theme you did.
Jamie in the and the preamble I think I heard you sort of layout.
Potential for.
Sort of organic so to speak core.
Margin expansion, maybe 15 to 20 basis points in the second half of the year, maybe you just walk through some of the some of the things you're seeing that could be the drivers you think maybe asset yields with sort of reached the floor here in the interim.
Yeah, I think a I think that is.
Highly probable mark to sort of on the for fourth quarter, we still have.
LIBOR has reprice down even further from second quarter into third quarter I think the main driver that we're going to see on the benefit of the margin is going to be two things.
One of those is that are we don't expect to have as many short term investments on the books as we get towards the end of the year.
We think we have a little bit of excess liquidity liquidity here in the second quarter.
And so that was a driver of that was a partial driver of the lower and then we expect to have less of that going forward.
And then the other thing is obviously the funding costs.
We expect to see.
A significant improvement in our funding costs driven by changes in deposit costs over the back half of the year as our time deposit book continues to reprice overtime.
Anyway to ring fence, what up the impact from the liquidity drag was this quarter.
The liquidity drag was about four basis points on the on just that liquidity piece that excess liquidity.
Got it and then maybe appreciate the disclosure in terms of the sort of the cobot sensitive segments on the commercial portfolio. Just curious maybe what part of that on deferral and maybe an update in terms of what you're seeing in terms of rent rolls rent collection efforts across some of these segments.
Just any sort of details will provide on some of those segments, how the holding up.
Yes, So then I think.
We're seeing a.
Again. This is as these things start to roll off. We're this is the trend that we're seeing from conversations in the line as in the field with our clients or seeing these things drop by 60, 70% in in the into some of the sectors that were listed the one that really hasnt bounce back yet.
It is really the hospitality sector I think that is going to need another round of.
Deferrals that thing that makes us comfortable there is over 70% is flag.
It's really out and so as a suburb based kind of portfolio. So that metrics are very strong event and that seems to be the own sector.
Where.
That that's not to patients still seeing everybody else the retail and all the other sectors right now the models are dropping I either materially or significantly.
Yes.
Got it sounds like you said in the second round during these looking for a little bit more skin on the gain a little bit more diligent on driving is that correct.
Yes, I mean.
Our modifications.
We are building five and we were very proactive.
Reaching out I mean, I've been doing restructuring work my entire career and one of the things over the long time ago is if you. If you if you reach out to a clients, especially when it's not there conservatism as a macro issue.
They remember that and they remember it many different ways and so we were very aggressive reaching out and so now as we get into the second round.
We're starting to look at things individual by individual basis, and we're going to start asking for.
Other issues that we could potentially grab onto or those types of things, but right now what we're seeing is the asks are dropping materially.
Got it that's good color the JV just real quick I think circling back to the operating expense outlook. I think you said X PPP expenses expense.
Loan core expenses were down 4% doubling quarter is that correct and that sort of the baseline to use from Oh, yeah. That's the baseline you got to tick.
Got it thanks, Jamie.
Yep.
The next question comes from Collyn Gilbert from KBW. Please go ahead.
I think on winning guy good morning, and make them on I guess, just Jamie just quickly on the on the fees I just want make sure I heard you correctly did you indicated that the fee income could be running at 19 to 20 million a quarter or is that right. Thanks.
Yes, that's right on that side, that's I think where we think those levels are going to shake out in the back half of their okay. So that's a material improvement.
You know from from this quarter, just try and in the wake of what kind of compress activity et cetera, et cetera, and just not what we're seeing from others. So what do you what is driving that.
Kind of that optimistic view.
Yeah. So so we see that we're gonna have a few a few million more maybe in the deposit fee line.
We also have just general economic conditions are sort of stabilized and so again last last quarter, we talked about that fee income drivers being sort of macroeconomic in nature. So we think we'll be able to see we'll be able to get some more.
Gain on loan sales from our 44 Bcf team as well.
But the way that we're reporting that externally to you I think the large driver is going to feel seat on the deposit fees.
Okay. Okay. That's helpful and then yep okay.
Oh, Okay, and then just on the [noise].
On the expense side kind, there's more broadly.
Is there opportunities I mean, you know the balance sheet. Obviously is considerably smaller then it then it's been and you're done with that but are there and I know I I think I know asked this question you guys last quarter. Obviously, if that's just the bonds in my head, but is there is there more that you can kind of do longer term on the expense structure.
You know I think that we are always evaluating that talent.
We are in the process of going through that down on a consistent basis.
I think there are opportunities too that we can look at on the expense side of things.
At the moment I I don't think that we have anything to promise, but I think that we are constantly looking at that and were very vigilant on the expenses that we have and we're going to we're going to be looking at those things.
Yes, Alex ill, just add that you're you're right I mean, as we've shown bank. We've moved the expenses down we're very.
Diligent on that and we're always looking at ways and we continue to look at ways to reduce our core expense.
Okay, Okay, and then [noise].
On the.
The just thinking about that they did the dividend or capital in general. So Richard is founded in your opening comments, you mentioned kind of on potential interested in repurchases. How are you evaluating repurchases versus the dividend.
Well I think.
You know obviously the dividend at this point repurchases have been suspended dividends are Paramount I guess the point I was trying to make is that when I look at our stock in comparison to other uses of capital.
It's a very attracted by and so if and when youre in the middle pandemic.
The use of capital would be to continuously buying back our stock. So that was the kind of point of the of the comment.
Okay got it and then on the dividend so recognizing obviously regulators.
Having input your board has an input but in terms of what your actual available cash is at the holding company is that is at an issue will that be an issue now kind of on a go forward basis.
No no value on that talent.
Okay. Okay.
Okay. That's a that's helpful I'll leave it there thanks guys.
Thanks account.
The next question comes from Laurie Hunsicker from Compass point. Please go ahead.
Hey, Bill Hi.
Hi, good morning.
Just wanted to see where Kolon wise and what is your available cash at the holding company.
You know Laurie.
I don't have that in front of me right now.
Oh I can I can follow back up with you on that later on.
Okay sounds that and then and then sort of similar similar question in terms of in terms there in terms of your Florida protests.
Just thinking about dividend paying capacity can you help us think about.
You know where the line in the sand is with respect to me loan loss provisioning or some broader credit metrics that you're watching.
Where you would say hey, we really need to pull back.
Can you just how thats so about that more broadly in other words, where where your benchmarks that you're you're closely watching.
So Lori you know I don't think that we have any lines in the sand you know we're not we're not thinking about it in those terms I think it's a holistic discussion.
About our ability to.
Generate internal capital on as just as well as you know what we expect to see in terms of loan loss provision.
And as you know, it's not really provision I guess, it's the charge off that we would expect to see overtime through a pandemic cycle. So you know I think we we and the board I really thinking about it at those levels Holistically.
Around us as a company and what levels of capital our regenerating So theres no real wind in the sand I don't think at this point and the board will make its decision later on in the quarter was input from from regulators and we'll make.
An announcement them.
Okay and then on your your billion five of loan modifications, Jamie can you help us think about.
Some of them more.
Sensitive categories, where we stand on those such as hotel.
These are on including Firestone restaurants retail.
Yeah, I get a.
43, now I mean, so yes, however, you want to run through at or I can.
I can lifted out that would be great.
So I think that if you. If you took all of those categories that you mentioned are the ones that are listed on the ones I think every sector right now is trending materially down with the exception.
Hospitality.
And then.
Players still in Firestone, even in of itself is trending down.
So hospitality seems to be the one.
Where it's not and if you just kind of step back and think about it.
Hospitality is really driven by vacation, Dan or more importantly business travel and there's not a lot of business travel.
Indication. So so that seems to be the one that ill is in all it is above and beyond everyone else seems to be significantly during the down as the things come up even Firestone Firestone is probably tracking 30, 40 50 per se.
San somewhere in there of where they were.
In the in phase one so again I don't know if that helps you, but we see the significantly down overall with those two sectors still above where everybody else's.
Okay. So have you ever hotel block of 260 million how much of it has modified.
Phase.
Phase one was about 75%.
And so we anticipate and that's the hospitality I think you asked for and so I think that is probably going to be slightly lower.
But not material that is still driving a lot of our modifications that we anticipate in phase two.
Okay, but as of as of June 30, you are 75% or some modified in your hotel in hospitality that cracks.
In phase one yes.
Okay and then.
On the leisure pod that 398 million.
How much of that was modified and then how much of that typically.
Is your fires down, but I think of a 266 million last quarter I bet you.
How much of that was modified to last quarter that was 80% modified.
How are we thinking about that so sold will break that up right. So if you look at.
If you look at Firestone first though running in on high 80% My application last in phase one that right now it looks like it's tracking 40, 50%. So there's been some improvement there.
In the other pieces of the leisure, which is about 130 $540 million.
We probably it's tracking that was about 40% in phase one and that is.
Tracking I would say significantly lower than that so overall those numbers are coming down Firestone is still stick in and 40, 50% range for phase two.
It was that what we're seeing as things.
Customers start to ask and our lenders have conversations with them. So everything is coming down hospitality is the most sticky and Firestone is probably the second most sticky is trying to get these companies back into their normal payment.
Okay, and what was what was the balance on Firestone hasn't seen Q. I have the ones you balance of 266 million.
To 61.
Okay, and then do you have the amount that delinquent or noncurrent.
I'm going to ask Georgia for those that specific information, Georgia can you kind of walk through that with the Laurie.
Yeah, Lori at the end of the second quarter delinquency was about 3.3 million.
Okay, great, Okay and then.
Same question on on restaurant.
Where do you where do you stand on modifications there on your hundred 33 million stock.
So the phase phase one were about 60% modified we're seeing that trending much lower again as as in our footprint.
Most restaurants are open now and they've been open for curbside. It then open for take out and now they're starting to open all the way around so that cash flow seems to be.
Improving in that so we anticipate that being down and the delinquency level at the ended the quarter if that was up $5 million.
And if you remember.
The other touch piece and that is but 20% of that book at Dunkin' Donuts and another 20% had some level of espeed guarantee on it it's a 40% of the restaurant is booked between Dunkin' Donuts.
And Espeed Garrett.
Okay, great Okay.
And then same question on retail and maybe any kind of update you can provide on on it.
Round numbers are killing a 50 million a mile exposure so of the billion how much has modified and.
You know maybe whats so Somalia, yes, so silgan 901.
$90 million.
760 million roughly is I'll call it investment right investment.
Folio and then with the balance is owner occupied when you look at our retail sector.
It it's grocery it's big boxes drug store, you know it its national or credit tenants and you can a warm fall that together. These are the anchors you're in 70, 80% of of that pieces of the portfolio. The overall.
You know up.
Phase, one deferrals or around high 2028, 29% phase two again right now it seems to be tracking significantly below that and we don't have any significant I'll call closed mall exposure.
So our malls are big box, there grocery stores home depot and those.
BJ age and those kind of think whereas if you know the traffic.
As we kind of come out of this pandemic. The traffic has increased and if anything grocery stores have been going gangbusters, because none of them going out to eat or not as many people are going out. The so you know what hurts the restaurant actually helps the grocery store and a lot of people are doing home improvement projects because they got nothing.
There was so high.
Loads and home depot fine, so thats kind of.
Stepped book.
And so liquidity now just to clarify of of your billion or so in retail I thought you had 255 million ourselves a mall those are some not talking about the grocery not talking about not knowing them for store anchors is that correct is that a crack number.
But it's not 250 of closed small exposure.
Right, but it just 250 million or so of malec.
With that craft.
On Georgia with the exact number.
Well 274 million and and I and Lori when we differentiate between malls and neighborhoods, we basically break it up by square footage. So again, so with your point, it's not a close mall.
It is in many cases.
For those outdoor malls with the lungs doing what the Wal Mart.
Or low and then you know several other stores in between each having their own entrants. Some discrete that is the power of that okay.
Okay. So that is more sort of service laid on them as opposed to sort of that traditional mom.
Yeah, I I thought I can follow up I can call. It with you offline okay aircraft.
Thank you so 43 million that's great that's down to 55 million.
What do you what are you doing what that you're just going to keep that going forward.
Rick I'll, let it run off.
Well I mean, we go ahead Richard.
Again, I mean, the book was a healthy original.
Book wasn't so weve sold it off in two tranches were actively looking.
To sell the last tranche, we don't see any credit issues in there. So we're not going to take a loss on that to sell it.
We're looking at taken premium on this and so it's it's it's it's being looked at it to actively look that like the last tranche was it we've got the right price and we took it we don't see it as credit issue.
Got it okay, and how much of that 55 million as modified.
Yes, sorry that I have to get back to us.
Okay. Okay, and then just sort of to Mark two more questions here on credit I'm taxi I know, it's small it's probably down to about 5 million. Just wondering if you have an updated number there.
It's really more.
I'm sorry, Richard.
Oh, yes in the theory, and a happy down to three yeah.
Okay, and then your leverage loan, but how much of that.
Our leverage loan book is about 173, so when we get it will break down on that Oh with 115 of it.
His deal that we purchased in an active secondary syndication market, which has a lot of liquidity in it as a little bit of a touch point. That's one of the portfolios that we decided to run off when we started the strategy a year and a half ago. So at the end of 2018. It was probably 280 485.
Billion dollar so we've actually run that being down by about 170, and we actively look at moving those things out as the market stays where it is the rest of it the balance of it.
Our deal that we underwrote two existing strong customers and we financed acquisition or we find that other things, we're very comfortable with the overall cash flows.
Of the oncology the parent.
And so we will do the that's an accommodation don't do very many outcome, but we do them, but the bulk of within here was purchased in a very active and robust and liquids secondary market.
Okay and do you have a modification number on that book and I realize some of its probably included any other categories that you just said we have an overall snapshot.
I think the at the modification numbers and that is is zero I mean, I know the up to the secondary market. There's no modifications to that and Georgia is there anything in this book.
In the core customers. There is the there is some modification and that smaller piece, but yeah on the on the larger piece there isn't any.
I don't have the exact number but there is something that 57 million component.
Okay. That's helpful. Okay, and then my last question I guess, what's your view can you talk a little bit more about.
The goodwill impairment I mean, I realize that it's somewhat of an on event it doesn't impact or tangible buckets of generally would suggest you know you paid too much for past acquisitions are you missed something on the merger math and I. Appreciate your stock prices down everybody stock prices down, but we're not seeing other banks across the country.
Goodwill impairment can you just help us think more broadly about that just any color you or Jamie can provide yeah, I mean, I'll I'll I'll give you my spin on it which I did in my and my in my statement and Jamie can can backfill or I think.
The sectors up stock price. These are soc deals above what tangible that we bought hence the need to book the goodwill.
And also stock prices right now including ours.
Are you know below tangible assos and accounting adjustment that we have to do it kind of puts that stuff off the into the rear view mirror and again I know you know I don't I don't say a lot of banks, but inquisitive banks like US did this in the first quarter.
And when I imagine there with some in the second quarter. So it's not it has nothing to do a with US misreading an acquisition overpaying for an acquisition mapped in work is basically an accounting function where are our stock was above tangible and now is significantly below and yeah.
You got to do you guys would shed bill Jamie anything that.
I think you got to that Richard.
Great. Thanks, Lori just before he just before your hop off just wanted to get to that holding company number it's about 100 million and holding company cash and that is about six quarters of cash coverage at the Holdco.
Okay, great. Thank you out so much.
Thanks, Laura let's say.
Next question is a follow up from Collyn Gilbert from KBW. Please go ahead.
Thanks, just two more quick things, Jamie what should just what how do we think about the accretion income going forward I just didn't know with.
All the moving in the balance sheet in and write downs and stuff does that change the accretable income trajectory at all.
I'm not really Collyn I think it continues to be sort of a minimal number.
On a go forward.
Okay. So I think if I think with a 2 million this quarter.
Yeah, I think that's about right yep, okay. So what should we hold at that level or just I don't know what you have last there I know it that'll keep going down you can sort of thinking about that is kind of straight lining down.
Independent of you know a run off of those loans, which may accelerate some of that but generally speaking it's going to go down.
Okay.
Okay. Okay, and then and then just you want to make sure I heard you correctly on the provision comment that you made.
You had indicated that you, but did you know we should expect well I guess you didn't say provisioning, maybe said reserve, but that's my question. So in terms of defeat if.
Just trying to reconcile right. So undersea sold the expectation is that you will see we would likely see reserve levels start to decline, but you had indicated you noted that the charge offs that the charge offs are gonna matched provision or that what's going to drive the reserve is gonna be charge offs.
Yeah, no that there's there's a couple of things going on that right. If the if the macroeconomic environment is continue to stabilize and we don't see a need to reserve for the macroeconomic forecast what you would see the provision being driven by is that is the charge offs right. So if we have a normal level of charge offs.
We would replenish the reserve so with that and that's really what I'm just trying to get Oh that said the reserve is still going to come down.
But.
Potentially yeah, that's right yep, yeah, but it just takes but you're just talking about the a quantitative part of the reserve methodology will be driven mark yeah charge offs and the macro part okay. Okay.
Just trying to clarify okay. Thanks.
Thanks.
This concludes our question and answer session I would like to turn the conference back over to Richard Marotta for any closing remarks.
I just wanted to take any by everybody for attending and we look forward to seen everybody on our call in October. Thank you.
Conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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