Q3 2020 Eagle Bancorp Inc Earnings Call
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I'd now like you on the conference over to one of your speakers today Mr., Charles Livingston, Chief Financial Officer, Sir. Please go ahead.
Thank you Michelle Good morning. This is Charles Livingston, Chief Financial Officer of Eagle Bancorp before we begin the presentation I would like to remind everyone that some of the comments made during this call may be considered forward looking statements. Our form 10-K for the 2019 fiscal year, our quarterly reports on form 10.
Q and current reports on form 8-K identify certain factors that could cause the company's actual results to differ materially from those projected in any forward looking statements made this morning because.
The company does not undertake to update any forward looking statements as a result of new information or future events or developments unless required by law. This may.
This morning's commentary will include non-GAAP financial information the earnings release, which is posted in the Investor Relations section of the company's website and filed with the FCC contains a reconciliation of this information to the most directly comparable GAAP information.
Our periodic reports are available from the company or online on the company's website, where the FCC website.
We'd like to remind you that well, we think that our prospects for continued growth and performance are good. It is our policy not to establish with the markets any earnings margin or balance sheet guidance now.
Now I would like to introduce Susan real the president and CEO of Eagle Bancorp.
Thank you Charles I'd like to welcome all of you to our earnings call for the third quarter of 2020, we.
We appreciate your calling in this morning, and your continued interest in Eagle Bancorp.
As usual Jan Williams, our Chief Credit Officer is also with US This morning, Jan Charles and I will be available later in the call for questions.
I'm very pleased to announce that during this very trying time Eagle Bancorp had a very successful third quarter. Despite the soft and uncertain economy created by the pandemic and the very challenging interest rate and operating environment. Our quarterly earnings were 4.4.
$81.3 million that.
That represents a 13.2% increase over the third quarter of 2019, and an increase of 43.3% over the second quarter of this year and I am proud to say that for the period, we reached the highest level of quarterly revenue and.
Net income our company has ever achieved.
The return on average assets for the third quarter was 1.57%.
The return on average common equity was 14.46% and the return on average tangible common equity was 15.93% at.
At these levels our profitability is among the highest level for community bank in the United States for the.
For the third quarter earnings were $1.28 per fully diluted share, which is a 19.6% increase over the same period last year and a 42.2% increase over the earnings per share in the second quarter of 2020.
The improved profitability in the third quarter as compared to the second quarter of 2020 was driven primarily by an increase in non interest income combined with a lower provision and reduced levels of legal expenses associated with our publicly discuss.
Lowest investigations and class action litigation.
As for the generation of the non interest income we were extremely pleased by the performance of the residential mortgage division, which produced $12 million in gains on sales loans during the quarter.
In addition, we also achieved gains from the securitization and sale of FHLB loans from the successful sale of Oreo property during the period and from the sale of this be a guaranteed loans.
We strive for consistent performance across all financial measurement indicators and are pleased to note that we had continued growth in the balance sheet with facets, reaching $10.1 billion at September 30.
For the third quarter, we achieved strong deposit growth maintain solid credit statistics and very favorable operating efficiency the.
The strong performance in these areas. In addition to the increase in non interest income more than offset the impact of further compression in the net interest margin and a slight decline in loan portfolio balances, notably in the construction loan portfolio.
I would also like to speak in more detail about the results we had for noninterest income in the third quarter not.
Not surprisingly the historically low interest rate environment has been a real boon to the residential mortgage division for both refinance and purchase money loan activity. So the key.
For the quarter gains on sales with $12 million as compared to 1.9 million in the third quarter, a year ago, and 3 million in the second quarter 2020, we did change the accounting methodology for recognizing gains on residential mortgage loans.
Locked on to best efforts basis to align with the gap by recognizing revenue upon alone being the law versus when the loan is close.
This increase the revenue in the third quarter by $1.6 million, but even excluding that impact our residential mortgage division had a very strong quarter loan locks during the quarter were $593 million as compared to 280.
2 million in the third quarter of 2019.
During the quarter, we also recognized gains of $1.2 million from the sale of Oreo assets. The fact that we were able to realize these gains are reflective of the disciplined and proactive approach, we take to managing workout situations a day.
Additionally, we had good production during the quarter by out our FHLB division of $912000 from their securitization sales and servicing activities and $168000.
Premiums on sale of SB eight.
We've spoken many times about how these fee income business line tend to be cyclical like the residential mortgage division or not easily predictable like D.S.B.A.N.F.A.J. group.
But believe that over the long run they add value to our franchise.
We certainly saw that this quarter and I would like to thank the employees in those groups for all of their efforts and congratulate them on a job well done.
I would also like to recognize the impact that our emphasis on disciplined underwriting and conservative credit administration practices have had on our credit quality statistics, which continue at reasonable levels. Despite the slowdown in the economy at so.
At September 30, nonperforming assets were <unk>, 0.62% of total assets as compared to <unk>, 0.66%, a year earlier and 0.69% at June 32020 at quarter end nonperforming loans were points.
Let them, 4% of total loans a manageable number.
Net charge offs to average loans for the quarter for the third quarter were <unk>, 0.26% as compared 2.8% one year ago and 0.36% in the second quarter of 2020, but.
The charge offs in the third quarter were due primarily to two commercial.
Real estate loan relationships.
At September 32020, the allowance for credit losses.
It's 1.40% of total loans offset by eight basis points by the amount of PPP loans in the portfolio.
Also at September 30, the coverage ratio was 190%.
Compared to 128% a year ago, and we feel we are adequately reserved the allowance.
The allowance level was determined in accordance with the Cecil methodology adopted earlier this year. The third quarter 2020 analysis took into account an improved unemployment rate assumption and additional qualitative reserves for seconds deferral as well.
Well as our higher yes.
Yes.
The provision was $6 million in the third quarter compared to a provision of 3.2 million in the third quarter of 2019.
In a 19.7 million in the second quarter of 2020. Additionally, our Cecil reserve for unfunded commitments was reduced by 2.1 million.
As to some of the specifics related to the COVID-19 pandemic as of September 30 balance of PPP loans was $456 million, we are starting to see more activity from our clients now that the Treasury Department and the S. BA has.
Streamline the application process for forgiveness of all loans under $50000, but expect that the attrition of these loans from up our portfolio will take.
Excuse me will take a couple of quarters separately.
Regarding loans, which were deferred or modified you will recall that in June we had 708 loans totaling about $1.6 billion, 20% of total loans in that category at which point, we formed a special task force to monitor work with these customers.
I am pleased to report that as of September 30 that pool of loans is down to 321 loan about $851 million, which is 10.8% of total no.
Which will continue we will continue to work with our clients to remediate these loans.
We also continue to monitor the impact of COVID-19 on the health and safety of our staff and customers. We have a spotlight on the at risk industry exposure in our portfolio our loan portfolio, most notably the accommodation and food services and retail industries.
Which together comprise 11.5% of the loan portfolio.
However, we are still cautiously optimistic about the economy of the Washington, DC Metropolitan area.
Well, there certainly has been an impact from that covert pandemic the most realistic estimates.
Our that the regional economy will shrink about 5.5% this year at that level. The gross regional product would still be in excess of $500 million billion dollars per annum and the Washington Metropolitan area is the fifth largest regional economy.
In the United States.
The rebound in job again in June and since then the region has recovered approximately 100000.
The jobs lost in the spring.
And that we are on track to add another 40000 jobs in 2021.
We are carefully watching the vacancy rates for office space throughout the region would show some softening.
However housing remains fairly strong for both the multifamily and single family sectors in fact.
In fact, there is a shortage of inventory and single family homes through June of 2020 Federal contract awards for covert related matters in that region have been just over $3.5 billion and there is no doubt that federal government spending has been a stable.
Lies in factor for our our economy.
Given the low interest rate environment fostered by the federal reserve and the trend of margin compression across the industry. It is not surprising that in the third quarter. We saw a decrease of the net interest margin to 3.08%.
The margin was down 18 basis points from the second quarter of this year and down 64 basis points from a year ago.
The decrease in the margin was attributable to several factors the yield on our loan portfolio decreased by 17 basis points to 4.46% for the third quarter as average market rates decreased during the period, reducing the yield on new bookings.
And we reacted to competitive pressure to reprice loans currently on the books. We're also feeling the impact of the lower percentage of higher yielding construction loans in the portfolio loan floors on the portion of the loan portfolio did provide a buffer against first.
He says in loan yield.
We were able to reduce the cost of interest bearing deposits and the aggregate cost of funds during the quarter, which fell by seven basis points. However, the total yield on interest, earning assets declined 25 basis points during the period, a significant factor being the.
Increased level of on balance sheet liquidity, who shield to this only 12 basis point in it.
In addition to the very low level of market interest rates relatively flat yield curve and competitive lending environment. The margin was significantly impacted in the third.
Of 2020 by our asset liability mix and the level of liquidity, we carried through the quarter for the third quarter. The average loan to deposit ratio was 92% while average overnight liquidity was above 1.3 billion.
While we did increase our securities portfolio by an average of 86 million over the third quarter. We continue to maintain on balance sheet liquidity as we adhere to our conservative asset liability management strategy as we monitor the effects of the Covance.
Team pandemic.
The efficiency ratio for the third quarter was 38 point, 10% as we continued our prudent approach to expense management.
This is compared to 38.34th person in the third quarter of 2019 and 37.18% in the second quarter of this year, while the efficiency ratio is little changed from a year ago, we need to remember that revenue growth has been hampered.
By the low level of interest rate.
For the third quarter the ratio of non interest expenses as a percentage of average assets was 1.40% as compared to 1.49% in the third quarter of last year of note during the quarter, we enjoyed the benefit of lower legal fees.
As legal accounting and professional fees were 3.1 billion for the quarter as compared to 3.6 million in the third quarter of 2019, and 3.9 million in the second quarter of 2020.
The net legal expenses for the quarter associated with the investigations and legal matters previously disclosed were $957000.
On the other hand, our occupancy expense for the quarter was elevated as we took a $1.7 million charge to properly value a lease extension and our FDIC insurance expenses increased by $2.1 million over a year ago.
Due to the growth in our balance sheet.
Given our asset size exceeding 10 billion, we will continue to judiciously manage expenses, but we'll also make the prudent investment.
Necessary to have our infrastructure meet all regulatory expectations and to support the continued growth of our company.
The company's capital position remains very strong as we continue to build it through the quarterly additions to retained earnings at September 30, the total risk based capital was 16.72% as compared to 16.8% one year ago.
The common equity ratio was 12 point, 11% compared to 13 point, 16%, one year ago and the tangible common equity ratio was 11 point, 18% compared to 12 point, 13% in September 2019.
Okay.
These ratios recognize the impact of the share repurchase program our stay.
Our strong capital position was one of the factors behind our recent decision to lift the suspend the share repurchase program.
The board initially put in place back in the spring at the inception of the pandemic and as you know we did declare another 22 cents per share cash dividend for the third quarter the boy.
The board is committed to maintaining a strong balance sheet and it's very comfortable with our capital position. Thanks.
Thank you again for joining in the call. This morning and for your continued to see your continued support of Eagle Bancorp back.
That concludes my formal remarks, we would be pleased to take any questions at this time.
Thank you and again, ladies and gentlemen, if you do have a question at this time. Please press Star then one on your telephone. If your question has been answered or you wish to remove yourself from the queue. Please press the pound key to prevent any background noise. We ask that you. Please place your line on mute once your question Harry <unk> David.
Our first question comes from the line of Casey Whitman with Piper Sandler. Your line is open. Please go ahead.
Hey, good morning.
Good morning Casey.
So now that you guys have crossed the 10 billion asset sold I guess my first question would be just can you remind us of how big of an impact Durbin would have on your fees or the timing of when that would occur.
Sure Yeah, Casey It you know that impact based on.
Based on my analysis is somewhere in the neighborhood of about $1.3 million pretax. So just just under a million dollars or so.
Again, not not a significant consumer book of business with the bank. So the impact is minimal.
Okay, and that's that's annual correct that's.
That's right that's an annualized number yes.
Okay, and what about the timing of that.
Right you know my most recent read that if we.
Maintain a balance.
Of total assets in excess of $10 billion at year end that will kick in.
On the first of next year.
I think thats right.
Understood. Thank you and then.
I guess was I think about expenses here I mean, it seems like you're going to have you should have a drop in the occupancy expenses in the fourth quarter, but.
I probably asked this every every quarter, but with crossing 10 billion is there any kind of incremental expenses that we should expect.
To come from that or do you guys feel pretty well positioned here.
Yeah, you know I think as Weve mentioned in prior discussions.
Calls we've been building towards.
You know the establishment of an infrastructure that can accommodate a $10 billion plus bank.
And so we feel like we're in pretty good shape I mean that you know that there will be incremental costs associated with you know some of.
Some additional.
People, but most of the.
Most of the systems.
We feel like are generally in place it's.
It's not going to be anything that's going to be.
So exponential in terms of costs, we're growing into it.
Understood. Thank you.
And then maybe I'll switch gears as you think about capital that you guys mentioned restating your buyback can you walk.
Can you walk us through sort of your thoughts about how aggressive you could be with it and then maybe what your appetite might be for announcing a new program. Once I think this one expires at the end of the year.
Right, Yes, I mean, that's something that our board is continually evaluating I note that you know these days we are trading below book value. So any kind of acquisition of a repurchase of our stock is immediately accretive which looks.
Looks looks pretty attractive from my vantage.
But but it is something that our board will continue to evaluate.
Each each time, we come together.
Great I'll, just ask one more and not let someone else jump on in Jan I don't know, if you're on or not but can you maybe.
Maybe walk us through where the watch special mention substandard buckets kind of landed at the in the quarter you know to be see some not negative migration. There you know in particular within the Irish segment.
Yeah, Casey I think you should expect to see significant migration into the watch category as we move anything in a second Kobe admired into a watch status. So that it's getting a heightened profile at the bank. So you.
So you'll see a significant shift probably about.
Mmm, Matt 520 million.
Moving to a watch category.
Got it but not not into the special mention substandard.
Especial mention will be up about 8 million substandard up about five.
Great. Thank you for the questions answers. Thank you Casey.
Thank you and our next question comes from the line of Steve Comrie with GE Research. Your line is open. Please go ahead.
Hey, good morning.
Good morning, Steve.
I appreciate the commentary on the deferrals being 851 million versus 1.6 billion on 630 kind of wondering if you guys had any breakdown as to how many how much of that was second request versus first requests and maybe just some general color on how Eagle bank is handling sector.
Yes.
Yeah to break that out for you had there roughly 620 million are in second deferrals and two thirds of that 620 million on our part.
Apart from the firms their interest only deferrals as opposed to full payment deferrals.
I'll give you an example of what we're doing when we are considering Soc and deferrals working to provide credit enhancements. For example, we had a a large hotel alone that we agreed to do a principal deferral on and in return.
And received a $25 million principal curtail.
And not more than offset.
From our perspective, the risk associated with an additional deferral.
Another.
Large relationship where we granted interest only second deferral also anticipating a 10% principal reduction as part of that deferral.
Well, we're not really in a situation where were kicking the can down the road, we're actually using the opportunity to build a stronger credit. When these are coming through for their second 90 day deferral request.
Okay. Thank you that's very helpful.
Moving on to the margin.
[music].
I guess, so is there sort of a meaningful decline in yields this quarter I get that the press release and Susan you bet. Your prepared comments the incidence of floors or maybe sort of an update on on how much of the loan portfolio has floors and how much how many loans are on the floors and then maybe bigger picture would you.
You expect do you think that the library declines are fully in the run rate here or should we see sort of more coming in Q4.
Yes, there is.
Theres about $3 billion of.
Of the loan portfolio in floors.
That are that are at the floors and that that's pretty much all of the floor. So hum.
So yeah I think.
Yes, I think that that protection does continue.
You know I think and Susan mentioned this in her comments to another challenge that I think we and a lot of institutions are facing is you know having borrowers coming in and looking to renegotiate rates.
Right and so that that can can can be a challenge you.
Wait you weigh the calculus of you know going out.
You know identifying business to replace that versus versus the rate request in terms of what's being lowered so that they can continue to be a challenge and provide some downward pressure.
Did you have another part of your question I'm not sure that I.
I answered that the whole question LIBOR LIBOR. So yeah I I do think you know to the extent that LIBOR only moved down a basis point or.
Over the period.
But a lot of that downward.
Float is baked in.
So yes, I think I think we've seen the majority of that at this point.
Okay. Thank you appreciate that maybe one more for me just sort of a more Joe.
General question on sort of loan demand loans were down on a on a period end basis.
Did that for a decent amount of liquidity in the Securities book is the demand just not there or or is the company being sort of more conservative with the credit it's extending.
Yes, I would say Steve that the demand is certainly a little bit slower and we are being cautious about the kind of deals that we are approaching and self selecting out of or otherwise, giving giving a hard look too.
So yeah, you know our.
Channel or.
Our president of commercial lending, who says they used to be the Gogo days and now it's just the go days.
So yeah, I'd say that there has been a little bit of a pull back in some of some of that.
Some of that activity.
You know to date, but we're still we're still seeing some flow.
Okay. Thank you very much.
Thank you and our next question comes from the line that Catherine Mealor with KBW. Your line is open. Please go ahead.
Thanks, Good morning, I wanted to start on just a follow up pace, Hey, I'm I'll start on just a follow up on the margin I know a lot of.
What's driving the margin lowered its just the level of excess liquidity that you've got the balance sheet. Charles how are you thinking about.
Just the timing of how long it this excess liquidity scale and in any efforts to deploy.
That excess liquidity, maybe kind of how that fits.
Fits into your overall big picture view of the direction of the margin into next year. Thanks sure Yep Yep.
We did see that liquidity picture turn pretty quickly you earlier this year when the pandemic hit.
And also there was this glut of liquidity that remain on the balance sheet we are.
We are being judicious about how we deploy that we don't want it to all be pushed out.
Pushed out into the investment portfolio at one point in time.
And then one.
You know.
Tender if it as it were but.
Yes, I it that we want to be cautious to the extent that it could turn again at some point at the same time, we want to put that money to work.
We are trying to actively manage that excess liquidity to the extent, we can and again on the other side, we still want to be able to bank our customers. So.
So that's a little bit of the tension there.
Obviously, a lever that they can be used is price and you know, we we certainly feel like weve.
Weve pulled on that lever with our top tier money market rate at about 25 basis points. So you know to the extent that there is more room to go down there to manage some of those funds down.
That could be part of the part of the solution.
But in terms of deploying that liquidity I think it's it's at a measured pace.
So over the next several quarters to the extent that it sticks around.
Great. Okay, and then on a more even sound like this is really strong mortgage quarter. How are you thinking about just.
More feasible normalized level on as we look to fourth quarter.
No I would say Catherine that as you well know the mortgage REIT the mortgage volume depends on right now.
Yes, and it's anyone's guess as to what will happen I think the rates will stay low for a while and so our activity will continue to be pretty high. So we're looking forward to that and we feel confident that it will it will continue for a while.
And remind me of the number this quarter how much is.
It's just from the gains on the therapy on the lack of the fair value their fair value Mark on the pipeline and then I know you mentioned that you have a change in that effort.
Methodology, maybe is there a way to quantify how much of this quarter was just kind of does accounting dynamics versus just true rate volume.
Yeah, Yeah that that number was $1.6 million.
Okay great.
Great Great. Yes. Thank you so much.
Yes, no problem. Thanks Catherine.
Thank you and our next question comes from the line of Christopher Marinac with Janney Montgomery Scott. Your line is open. Please go ahead.
Thank you Jan just want to go back to the watch comments that you made earlier.
What happens to move something from watching the special mention going forward and to what extent.
Did watch movement impact the reserve calculation at the end of September.
No because those are good questions and we have a internal metrics that we use to calculate when loans are going to be moved from watch to special mention and I think it depends on the severity and duration of the impact.
Correct.
Right now we're not looking at.
A whole lot.
The second deferrals that are impacted in terms of their ability to make interest payments. So there in the watch category. If there was a complete payment deferral, we would push not forever.
But I.
But I think overall.
The majority about 500 million of the second deferrals will show up in watch.
Okay, and Thats watch now or that be watching and third the fourth quarter reporting.
Well I won't know what we ended the fourth quarter will look like I mean weve.
Reach the essentially the end of the first Earl for all but 220 ish.
<unk> million and first deferrals that are outstanding we're not anticipating that we're going to be going into second deferrals with those at this point, all though circumstances could certainly change I think.
There's probably more upside opportunity there than not as we look at whether a second stimulus package will happen in the fourth quarter. So right now I think we've been fairly.
Fairly conservative in raising the profile and a lot of these loans by putting them into the watch category and having the carbon tax task force.
Focus on whether or not the second deferrals makes sense.
Gotcha, Okay. That's great. Thank you for that background and then Susan just a quick one for you on the legal expenses that we see is there anything that you would expect going forward I mean would those retreat. After what you've spent year to date or just any additional thought about that.
At this point.
We don't have any view into what those legal expenses will be at this point. So we expect them to be ongoing you know we will continue to have elevated legal expenses.
As a result of the investigations in the civil lawsuit, but we can't predict at this point, what they will be.
Got you great. Thank you both for the <unk>.
Information this morning.
Thanks, Thanks, Chris Thank you.
Thank you and our next question comes from the line of Brody Preston with Stephens, Inc. Your line is open. Please go ahead.
Good morning, everyone, Hey, good morning Brody.
Hey, So I just wanted to I'm, sorry, if I missed it in the prepared remarks, I hopped on a little bit late just I. Appreciate I can give is 500 million or so second buffer on I. Appreciate the breakdown that you gave of industry and collateral type, but I just wanted to hone in on the hotels and ask if you had given the the weighted average LTV on that or if I.
Maybe skimmed over it in the release.
He has a weighted average loan to value on the hotel deferrals is 60%.
He highest honor second deferrals is 75%.
Everything else is below that level I think I did mention that we had.
About 25% pay down on our largest hotel lown as a principal curtail as part of the second deferral. So.
So we are actively managing that portfolio.
Okay. Okay.
Okay, Great and then just as I think about you know crossing.
And then I think you said it was like a million Bucks.
A million bucks or so annualized in a in durbin related impacts from crossing 10.
I mean, it just seems like just given how de Minimis that is I guess, maybe assuming there's better growth opportunities. Early next year is there any reason why you guys.
And just I guess, maybe continue to.
Grow the balance sheet, and just push beyond that yourselves without necessarily.
Considering partnering with anybody.
Yes, I think that's right you know where we're going to continue to carry on we'll always be opportunistic you know there may be opportunities that present themselves but.
At this point, we're fully prepared to continue to March forward.
Okay.
Then Charles absent you know I I understand the the floor and renegotiations that you might have to face, but I guess absent any significant amount of re.
Of renegotiations.
As you will as you deploy liquidity is you know it seems like there's still some opportunity to reprice, the CD book, lower and maybe the money market incrementally lower as well and so just as you deploy liquidity would those floors in place. It seems like there should be I guess, maybe a natural mark.
Entails and what you see maybe next year is that how you all are thinking about it.
There's there's some fairness to that.
Certainly we've seen some of the higher price brokered Cds.
That that we booked you know in the middle.
Middle of late 18 Star.
Start to roll out you know I.
I think there is $60 million to $70 million that.
You know round of 260 weighted average or so that that do we were able to.
We were able to unload.
And.
You know that it came to term here.
In the last quarter. So you know we will continue to see some some roll off like that which are which are very helpful.
Okay, all right and.
All right and then you know it.
I understand that loan balances declined this quarter and it looks like a big part of that was due to construction, which which I can understand in this environment, but you all did do a nice job growing owner occupied and income producing CRT. So I wanted to get.
So I wanted to get a sense for for what the what opportunities you're seeing there and what the drivers are this quarter that.
That's a really good question and we are seeing opportunities on deals I think that the big driver right now is interest rates and people looking at re fives.
And that's a really competitive market in terms of pricing for the prime properties that we're looking at so.
So every deal is an evaluation.
And we're not always the lowest price bank in town, we provide the best service and can sometimes command a premium for that but there's an awful lot of price shopping going on right now.
Mm Hmm.
Okay, and then I just had one you know last one you know there's just.
Between the liquidity between the growth profile that you all have historically had.
No really low efficiency ratio strong a strong profitability profile and the potential to buyback a decent slug of stock moving forward with excess capital. It just seems like there's a lot of Tailwinds two story and the the one overhang is the investigation and I understand.
[noise] that you can't necessarily speak to the specifics but.
I was just hoping maybe you could help us better understand how frequent the conversations are under the conversations that you have with the investigators did they ever give you a sense for you know when.
When they feel like the investigation might conclude or not.
We we really don't have a picture into that we would not be able to give you any more guidance on that.
Yeah. There we finished the documentation phase you know we believe we finished the testimony phase.
So you can read into that whatever you'd like to read into that but we can't give you any more guidance.
Okay understood. Thank you all for taking my questions. This morning I appreciate it.
Brody.
Thank you and our next question comes from the line of Eric Slick list than any chatter. Good. Your line is open. Please go ahead.
Hi, good morning.
Good morning, Eric.
Similar to Brody I jumped on late so my apologies.
Addressed this question just curious with regard to the two large commercial real estate relationships that drove the charge offs in the third quarter can you provide any commentary to what industries. They serve or just a little more color around those are those relationships.
Yeah, one was a land loan and.
A big.
Vacation area, a couple of hours from Washington, and that did resolved in charge off that we had reserved for previously of about 1.2 million.
There was also a charge off of about three and a half and.
A ground lease situation with a hotel 10.
Those were the two biggest.
Okay, and where are those something you guys had been watching prior to the onset a pandemic or that and maybe just exacerbated by the current environment or were they both a more recent.
Well the first one that we had reserved for several.
Gosh quarters ago in anticipation of Dispositioning don't learn and we had had some inquiries regarding at the second one was really coated related in terms of.
Virtual cessation of operations for hotels and.
And lack of cash flow to support that operating expenses.
Thanks, Susan I appreciate the commentary that's it for me today.
Thank you there.
Thank you and I'm showing no further questions at this time and I would like to turn the conference back over to Mrs. Unreal for any further remarks.
I would like to thank everyone again for your support and your interest in our company and we look forward to speaking to you again at the after the end of the year.
Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect everyone have a great day.