Q3 2020 Washington Trust Bancorp Inc Earnings Call
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Monday
Good morning, and welcome to Washington Trust Bank or Banks conference call. My name is Rocco. I will be your operator today. Its participants need assistance during the call. At any time, please press * 0 participants interested in asking the question at the end of the call should press * 1 to get in the queue today's call is being recorded and now I will turn it over to Elizabeth be a senior Vice President Chief marketing and corporate Communications officer. This cycle, please go ahead thank you Rocco. Good morning everyone and welcome to Washington Trust Bank or Banks third quarter 2020 conference call. We'd like to remind everyone that today's presentation may contain forward-looking statements and our actual results could differ materially off from what is discussed on the call. Our complete Safe Harbor statement is contained in Washington Trust earnings, press release and other documents that we file with the SEC. We encourage you to visit our investor relations.
site at i r.
Washtrust to visit the complete Safe Harbor statement and other filings Washington Trust trades on NASDAQ under the symbol wash. Today's call will be hosted by Washington Trust executive team net handy chairman and chief executive officer rosberg senior Executive Vice President Chief Financial Officer and Treasurer and they will review our second-quarter financial performance wage. Excuse me, a third quarter financial performance at the conclusion of their remarks Mark Kim president and Chief Operating Officer and Bill r a senior Executive Vice President and chief officer. Will George and Ron for our question question and answer session, and I'm now pleased to introduce Washington Trust chairman and CEO net handy men.
Thank you Beth. Good morning. And thank you all for joining us on today's call yesterday. We released our third quarter earnings this morning. I'll review the quarters highlights and Ron osberg will discuss our financial performance. We will then answer any questions you may have about the third quarter or our outlook for the remainder of 2020. I'm pleased to report that Washington Trust posted net income of $18,000 or $1.06 per diluted share for the quarter ended September 30th, 2020. Our key performance measures remain strong. We are well-capitalized and Thursday are asset quality indicators improved in the quarter. We continue to be highly focused on our loan portfolios and very close to our borrowers as we work through the challenges of the pandemic.
Our third-quarter performance reflects our success at generating solid earnings during extremely challenging Economic Times. It's amazing to think about what we've experienced so far this year near record-low interest rates Financial Market volatility social and political unrest and a global pandemic fortunately Washington Trust business continuity and pandemic planning diverse business model and strong balance sheet of enabled us to manage our way through these difficult times. I couldn't be more proud of our team in the work they have done and continue to do to ensure the well-being of our Washington Trust family wage customers and our communities. Let me take a moment to review some of the highlights from our key business lines.
Total deposits amounted to 4.3 billion dollars at September 30th up 4% from the previous quarter and nearly 20% from a year ago. We had strong in my direct deposit growth and had seasonal inflows from institutional and Municipal customers during the quarter. We had increases across all deposit categories checking now savings money markets and CDs wage increase in low-cost core deposits allowed us to reduce federal Home Loan Bank borrowings, which helped stabilize the margin.
There's been some indication. The customers are saving more than usual. Perhaps the result of reduced spending during COVID-19 or need to set aside emergency funds. We are fortunate to be in a position to help our customers manage their funds and whatever way they're conditioned mandates.
during the
Pandemic, we temporarily closed our Branch lobbies for health and safety reasons and so an increase in the use of drive-thru digital and telephone banking services. Now, there are lobbies are open. We've seen a number of Branch traffic but haven't seen a corresponding decrease in other delivery Channel usage. We believe a high-tech high-touch service model fits well with our community banking strategy.
We found that our customers enjoy the convenience technology offers, but also want face-to-face conversations with our trusted advisors as needed and during these turbulent times. Our team has been there for them Branch expansion has been a key part of our growth in recent years, and I'm pleased to announce that we recently broke ground for a new branch in East Greenwich Rhode Island. This is one of a handful of remaining vibrant Suburban communities in Rhode Island were watching and Trust does not currently have a presence. We anticipate the branch will open towards the end of the first quarter of 2021.
Total loans amounted to 4.3 billion a quarter's end, which was essentially unchanged from the previous quarter year-over-year. We had double-digit growth has total loans were up 13% from September 30th, 2019 commercial loan activity was relatively flat during the quarter which was not unexpected given market conditions. We continue to work one-on-one with borrowers to help with PPP forgiveness applications and assist with loan deferrals modifications and extensions. Our team has been working around the clock and I've been pleased to speak with borrowers who are grateful for the support and attention, but we provided
It's been a difficult time for local businesses. And as a community bank, it is our responsibility to do whatever we can to help keep businesses open and the economy moving forward. Ron will provide more detail about your credit portfolio including an update on loan deferments.
Residential Mortgage story continues to be a good one is Mortgage Banking activity was outstanding during the quarter both mortgage originations and mortgage loans sold to the secondary Market reached all-time quarterly high levels off with mortgage origination surpassing the 1 billion dollar Mark mortgage revenues totaled 12.4 million for the third quarter up a remarkable 155% over the same period last year year-to-date mortgage revenue is triple the amount earned in 2019.
Housing demand is very strong. But inventory is low in the areas where we originated rates are anticipated to be low for the coming months and we anticipate that there will be continued demand for refinancing as well as purchases month. We continue to be very active in the Greater Boston area where low inventory levels support a robust and fast-paced sales market. We've also seen an increase in second home purchases in our Market as borrowers for Green Space properties been a busy year for a mortgage team and they work closely with borrowers to ensure. They receive the right product and best pricing. We've introduced technology to make the process faster easier and more efficient for employees and customers but personal service plays a key role in retaining and building mortgage relationships. The unprecedented volume and face has been exhausting and I want to acknowledge the hard way dedication of our mortgage team from the front lines to the back office is is they've worked tirelessly to ensure home buyers needs were met while producing record results.
Our mortgage pipeline remains strong going into the fourth quarter. So we believe volume should continue at a good pace.
Through your end.
Wealth management assets under Administration amounted to six point four billion at September 30th up 4% from the previous quarter wealth management revenues amounted to $9 million and we're also up by 4% off as we found with other business lines are wealth management clients continue to seek personal advice and attention during these uncertain Economic Times Are wealth team has done an outstanding job of meeting clients faith in person or through online conferencing to ensure their financial plans and Investments are in order.
I'll now turn the discussion over to Ron for a more in-depth review of our financial performance Ron. Good morning everyone. Thank you for joining us on our call today off and net income was 18.3 million for a dollar sixty per diluted share for the third quarter.
It's compared to twenty 1 million in a dollar twenty one for the second quarter that interest income of 31.7 million increased by $709,000 or 2% from the preceding quarter off. The net interest margin was 2.31% unchanged prepayment penalties were modest in total 33,000 Q3 compared to $21,000 and the second quarter page advert earning assets increased by $63 loans are up by $81 billion in cash and short-term Investments were down by nineteen million. The yield on earning assets decrease wage twenty basis points from the second quarter to 2.98% on the funding side average in Market deposits Rose by 83 million a wholesale funding sources decreased by 120000 million from the second quarter.
The rate of interest bearing liabilities declined by 23 basis points 2.85%
Non-interest income comprised 45% of total revenues in the third quarter and amounted to 25.5 million down $852,000 or 3% from the second quarter our mortgage banking revenues total 12.4 million. These results included net realized gains of 14.3 million, which was by 3.6 million with 34% in the prior quarter of this increased reflected both the higher volume and yield alone sold to the secondary Market mortgage loans sold totaled an all-time quarterly. I have three hundred fifty-four million up by former million or 16% from the prior quarter's record level compared to the third quarter of last year mortgage loans sold were up $169 million or 91%
Now realize gains were offset by a decrease in net unrealized mortgage gains reflecting the lower mortgage Pipeline and a corresponding decline in the fair value of mortgage loan commitments as of September 30th, year-to-date net Mortgage Banking revenues of 33.3 million or triple. The 2019 levels are more a mortgage origination pipeline as September 30th was about three hundred and seventy-two million down about 9% since June 30 what remains 43% higher than at this time of year ago.
Wealth management revenues were nine million dollars up by $349,000 or 4% This was due to a $630,000 or 8% increase in asset-based revenues, which was partially offset by a $281,000 decrease in transaction-based revenues the increase in asset-based revenues correlated with an increase in the average balance of assets under Administration, which were $594 million or 10% the decline and transaction-based revenues was mainly due to tax preparation fees which are concentrated in the first half of the year the September 30th and a. Balance of assets under Administration total 6.4 billion up by $257 million or 4% from June 30th, reflecting Financial Market appreciation of assets wage, which was partially offset by net client outflows.
Loan related derivative income amounted to 1.3 million. This was up by one point two million from Q2 reflecting a higher volume of commercial borrower interest rate swap transactions off.
Income from Bank on life insurance total $567,000 in the third quarter down by $224,000 included in the prior quarter was $229,000 of life insurance proceeds.
Now let me turn to nine interest expenses. Total expenses were up by three point nine million or 14% from the second quarter salaries and employee benefits expense increased by 2.4 months or 12% recall that last quarter we deferred approximately 1 million dollars of direct labor costs, which is a contra expense to defer PPP to originate see. The increase also reflected by and related increases in mortgage originator commission expense as well as some performance-based compensation expense increases
Legal or other professional fees were up $593,000 mainly due to various matters arising in the normal course of business also included here are the cost of obtaining the bond-rating refreshing our Shelf registration.
Outsource Services expanse was up three hundred Seventy-Six thousand mainly reflecting volume related increases and third-party processing costs related to the customer interest rate swap transactions. If a Deposit Insurance costs were down $282,000 reflecting a decline in our assessment rate and other expenses were up by $413,000 from the prior quarter of this increase in 70,000 resulted from the second quarter reversal of a contingency reserve.
Income tax expense total 5.1 million for the quarter. The effective tax rate was 21.9% compared to twenty 20.9% in the prior quarter weaker expect our fourth quarter effective tax rate to be 21.9% and our full year twenty-twenty effective tax rate to be 21.5%
Turning to the balance sheet total loans were down by six million essentially flat compared to June 30th and up by $504 million or 13% from a year ago total commercial loans wage by five million in the third quarter the increase in the commercial portfolio included a net increase increase of $35 million, which was partially offset by a net decrease of 30 million in cni presidential low wage increase by 1 million and Consumer loans decreased by nine million investment Securities were down by twenty five million or 3%
in Market
It's four up by a hundred twenty hundred and $29 million or 4% from the end of the prior quarter and buy $546 million or 17% from a year ago. Wholesale brokerage CDs were up like fifty six million and fhlb borrowings were down by 291 million.
Last quarter we elected to participate in the PPP liquidity facility with the FED at September 30th advances under this program total 106 million.
Turning to ask a quality non-performing assets declined by 1.3 million from the end of Q2 not approving loans were point three or four percent of total loans and compared to 3 7% at the end of month too and Loans past due by 30 days or more work to 4% of total loans compared to .34% in Q2 net charge-offs were 96,000. To 308,000 you to the allowance for credit losses on loans total 42.6 million or 1% of total loans and provided npl coverage of 289% excluding people who owns the allowance coverage was a hundred and five basis points.
Finally the provision for credit losses was 1.3 million, which compared to two point two million recorded in Q2 total shareholders' Equity was $527 Million at September 30th, 7.5 million from the end of Q2 Washington, press remains will capitalize the total risk-based Capital ratio was 13.9% compared to 12.78% at June thirtieth tangible Equity to tangible assets was 7.91% compared to 7.74% Our third quarter dividend Declaration of $0.51 per share was paid on October ninth month. Finally. I'd like to update you on our COVID-19 lending impact loan deferments as of October 14th, total 336 million or 8% of total loans outstanding excluding people.
This was down from 16% in June and this includes 253 million of 342 million of c and I forty 1 million of residential in 1 million consumer a breakdown of commercial deferments by industry categories presented in a table in our earnings release and we will be happy to get into the details during Q&A as of September 30th. We have recorded, 1770 PPP loans, totaling $217 the average PPP loan size as of September 30th was approximately 120. Mm. My name or ties fees i p p p loans setup underwriting costs amounted to approximately 5.1 million at September 30th.
The timing of the recognition of these net feeds into the margin will depend upon the pace of loan forgiveness as a cruise has approved by the SBA approximately $300,000 of net fees are amortizing into the monthly an absent any forgiveness in 2020. Approximately four million dollars would be recognized at some point in 2021. And at this time I will turn the call back over to Ned.
Thank you, Ron. We're pleased with our third-quarter performance in light of all the challenges we faced and we know we're not out of the woods yet as we know there will be challenges with the ongoing pandemic as well as resulting from the upcoming presidential election. We believe in our business model and our team and will continue to do what is in the best interests of our shareholders our communities our customers and our employee wage. We thank you for your time this morning and now Mark Ron Bill and I are happy to answer your questions.
Thank you. We will now begin the question-and-answer session to ask a question. You may press star isn't one on a touchdown phone. If you're using the speaker phone. We ask that you please pick up your handset before pressing the keys to enjoy your question, please press star them to today's first question comes from Mark Fitzgibbon with Piper Sandler, please. Go ahead. Hey guys. Good morning. Good morning. Mark humor one more question on the deferrals. Do you have a sense for what percentage of the loans in deferral or in their first ninety-day versus sort of seconds need a deferral we do if you wait one sec. I'll give you that.
Can I guess you know?
So in the crease base $83 excluding 56% are in in their first deferment 35% or eighty eight million or in their second twenty one point five million or in their third deferment. That's 9% of the total pre-booked on the cni side 77% or in the first deferment and 23 or in the second. They're not in a third deferment at this point.
Okay, great. And then I mean I know this is hard to say but I'm curious whether you think that we're kind of plateauing a little bit with the federal levels or do you anticipate will suck of a steady decline in those and in coming months or quarters? Yeah, we we will we will definitely see a decline and I know you've done some some work done that and run, you know, we would expect to go from here to Something in the 4% range around year-end and and we've got a pretty good handle on what what's going to need, you know, the hospitality bookmark will need a bit longer. There are a couple of retail deals that that we you know, we know we'll need a little bit more time to come back a couple have movie theaters. We're going to take a while to come back home. So so I think we've got a good handle on what's included in what will go beyond 12:31, but I think we're going to be in you know in in in really good shape certainly by year-end.
Okay, great. And then I wondered if you could give us a rough breakdown of the maturities of the roughly 750 million time deposits that you have. It looks like the rates obviously are pretty high on those. I'm just curious on a n Roll. Yeah some markets run. So so we have between various wholesale funding as well. As CD maturity is about 723 million coming due in the fourth quarter at an average rate of 1.2%
and another
340 million in the first quarter at 1.1% So so we expect to get a you know some additional lift on on the margin as as those as those liabilities repriced. I I'm sorry, Ron you said 728 at 1.2 and 1.1 billion in the first quarter at what rate?
So ten 7:28 in the fourth quarter and another 3:40 in the first quarter. I'm sorry, 3:40 got you in at one point one 1.2% off. Okay, great. And and so and and obviously probably carrying a little bit of excess liquidity. How are you thinking about the outlook for the margin maybe in pork you do we still see some continued decline? No. No. Yes. We'll see some expansion mark it'll be somewhere between 2:35 and 2:40.
Great, and then that's that's that's exclusive of any PPP forgiveness at this point. We're not even factoring that in because the timing of that has been so uncertain so our internally we're thinking that's a huge event, but we'll see what happens.
Okay, and then lastly on on the wealth management business, maybe this is from our you know, there was looked like about $78 million of outflows. You know this quarter. Was that a function of those employees that laughter is it just sort of normal flow?
Yeah mark, this is Mark that is really routine distributions more than anything else. We've the the outflows from those employees of West Palm you mentioned is is very limited and not really a factor now. So we're on I don't know if you have any additional color to add on that but primarily the decline in in a non market-driven was routine distributions. Yes. So so we really haven't seen any material outflow related to the two consoles since the beginning of the second month.
Great. Thank you.
Thanks, Mark.
No, next question comes from David Del Monte KBW, please go ahead.
Hey, good morning, guys. How's it going today? Morning Damon. Did my friend. Just wanted to Circle back the morning. Just wanted to Circle back on the the numbers you gave for the cre referrals, You said there's fifty six percent that are still on their first. The first. And what were the other two 35% in in their second deferment and 9% in their third Department?
Now the the third deferment. Is that basically just $99 or they you know, they have a 270 day deferral or wrong. I mean, I guess how comfortable do you feel what that portion of the portfolio that they're requesting a third deferral have you done additional, you know due diligence and underwriting and on those do you do you feel like there's limited lost content or is it still too early?
So I
I'm going to I'm going to speak in general terms. We we did a lot of six months to Farrell's in in that say in the hospitality space, but there may have been a few that we did 90 days thinking that things were going to turn sooner. And and so so these could be just three ninety days that are 390 day deferment. It could be a a wage and then 90s. Typically we we try and shorten deferments as we go from first to second to third. Typically, we we try and change the the payment structure under that deferment. So if we're going for p&i to start with we'll try and try and modify to to principal only so so, you know, I I don't have the specifics in front of me and but but I would guess that that that probably captures bill. I don't know if you have other color on that sure. I mean I would add that we do underwrite every deal. So these aren't you know borrow a month.
Sup, and we grant them something we take them to our loan approval process. We take them to the finance committee. They get a lot of discussion. There's a lot of care put into it and we want to make sure our box and sponsors are equally engaged as we are. So the good news is the numbers are coming down into the dozens now and so there's a lot less uncertainty that they're used to being we're very much focused on the ones that are going to need some help to get them through the winter. And that's why there's a concentration on the hospitality side, but we're doing deferments to borrowers who are found in to Collateral that sound and now it's a matter of structure and patience and working with them helping them conserve their cash until they get back to stabilized operations.
Okay, that's helpful. But I'll just I just I just looked it up and and that the twenty 1 million or 33% I think are no excuse me, the 21 million dollars and it's uh, 9% of the Creed deferrals. They're all Hospitality deals.
Okay. All right. So we'll just they're just going to take a little longer to come back.
Okay, thank you. And then kind of I'm the credit front, you know provision kind of the outlet for provision, you know, do you feel that? You know, your birth level and was up xtp was at 3 basis points. I think 105 is quarter. You guys still feel uncomfortable with that based on you know, the way you you know interpreted Cecil and whatnot.
Yeah, yeah that demon we we've obviously have another quarter under our belt now we've seen the deferments come down. We've had a chance to to you know, learn some things that we maybe 3 months ago. I I think we feel very comfortable with our Reserve levels where they are, you know, if they increased modestly the coverage ratio this quarter, you know, that that could happen again in the fourth quarter, but we don't need any we haven't seen anything that we didn't expect to see
Okay.
So, you know the last two quarters you've you know, you've averaged well 2.2 and 1.3. So you think kind of somewhere in that range as you go forward reasonable? Okay? Yeah. Okay, and then I guess just last year and expenses. I mean, I think the understandable why expenses are up this quarter and just kind of from a run-rate run, excuse me, run rate perspective, you know, you think Thirty you know, thirty-two or thirty-three million per quarter is reasonable or we're going to take a little bit higher as you start to, you know, encourage some costs with it. Then you Branch you're putting on
Yeah, you know that we we have you know fifty thousand in the fourth quarter for the new Branch. I think the expenses could take down a little bit because we would expect mortgage originations off to come down somewhat on the fourth quarter and and that's a variable cost, you know, our our core expenses, you know, the non variable piece is is on track with what we've seen all year long.
Got it. Okay, I guess my last question regarding capital. I think you guys mentioned you hit update yourself during the quarter. You know, what are your thoughts on tapping the month, you know the debt markets and maybe adding from tier 2 Capital. It's been a pretty common Trend I think throughout the industry and the last two or three or four months just kind of wonder what your thoughts were on that, you know, so so we went out we got a debt rating the summer which we thought was a good thing to do. But but really that was just to have another, you know, another option. We don't see the need at this point in time to be raising additional Capital debt. We're not exactly sure what we would you know do with that Capital to be honest. So we we have the tools in place and the the event that it's needed if you know if m&a were to happen often we would reconsider that but at this point, we we really have no intention to go out and raise up that
Okay, that's all that I have. Thank you very much. Thanks Damon. Next question today comes from Bennington Scattergood, please go ahead real. Good morning. Everyone morning morning guard follow up on Damon's question in terms of expenses and kind of fact that legal and Consulting line you mentioned there was the cost of obtaining the bond-rating and then refreshing the self-registration. So my guess is those drop out a little bit. So that is that another area where off of the run-rate expenses could take down a little bit for Q. Yes. Yes, I think so. Are you able to quantify what those costs were either individually or combined for the fundraising and shelf? Yeah. I woke 150,000.
Thanks, and then just thinking about kind of the loan loss provisioning as well. And you kind of gave me the comment that for you could be in line with the two and three Q levels and I guess it sounds like you're pretty confident with there's no changes in the economic Outlook or the deferral trends that any provisioning going forward. You should be potentially tied to just organic growth in the in the loan portfolio and just kind of curious if if one if that's true, you know, what are your expectations for a potential organic growth? And and how does that that Lifeline look today? I think you know when we talked three months ago you thought maybe potentially low mid single-digits could be possible in the back half of the year and maybe didn't hit that Mark in the three Q. So just kind of curious on bulb two fronts organic loan growth and how that might impact provisioning as well.
Yeah, so maybe I'll let you just take the the loan growth. Peace. But as far as the provisioning, yes, I would say, you know, unless something.
You know unexpected happens. Yes, our provisioning would be more along the lines of of organic growth at this point. Yeah, and and the organic growth peace. I you know, we we definitely have six markets cool down on the commercial side. We may be looking to add some residential if that's possible. But yeah, I'm in that. I don't know if you have any commentary one of them. Yeah, I I would say on the on the loan growth side. The commercial pipelines are are are okay. They're down a little bit from from normal times as one might expect. I would say will see moderate growth in in the in the fourth quarter. I think we'll we'll kind of hit are you know, low mid single-digit growth for the year. But but lack order obviously was low. Next quarter will be I think load the origination Czar. Okay. We're going to have some payoffs in the fourth quarter. So so and we met later in some dead.
So mortgage growth we can always we can always it's a balancing act on the mortgage side. We can put more in portfolio at the expense of taking gains. So we always consist of that option, but I I think I would I would say that the loan growth in general would be kind of like the third quarter of kind of B-flat.
Got it. Okay. Thanks and just Switching gears to credit you mentioned as you're doing the second third-round deferrals, you're doing full underwriting on those loans and those relationships just curious how that's impacting kind of your internal risk ratings and have there been any material changes to the the special mention and and the classified buckets.
So you want you want to talk about the sort of the COVID-19 list process and and and kind of how we're how we're handling the incremental deferments sure did so from the beginning we always obviously had a watchlist process already that with you know are criticizing classified assets and certain lower grade pass trading assets. We started a COVID-19 process where every month we look at all loans that are in deferments that are above $500,000. We have a separate one for small business. We also look at any other loans we are concerned about and we grade those thoughts on what our thoughts are about when whether they might need a second deferment et cetera. Once we we also follow loans on the watchlist once they're out of deferment until they've made 3 payments. So we don't drop anything off the cobit watch list until they've shown that they can operate successfully post deferment. And so now that watch list has become substantially name.
Down as deferments roll off and which is why we feel comfortable with our with our thoughts on where we're going to be at year end. We can pretty much name the deals that are going to be in there. Those deals are off being underwritten with cash-flow forecasts. And so we're very closely tied to our borrowers into the collateral as we make these these next deferments off and as we mentioned earlier the the composition of the deferments is changing from what was almost entirely principal and interest to include a lot more interest only page where we might only be deferring principal. So we feel that again the fog of uncertainty is still out there and kind of a macro basis for where things are going to go but in terms of our Commercial Credit portfolio, they were very focused on the
dozens of loans that are going to continue to be
Permit, we know why they're in deferment. They've been under written there. There are committee level decisions being made on these and again we feel obviously we'd rather have them fully paying her all the time, but we feel very comfortable about effectively the handful that are left to deal with and we understand why they needed a firm it and we support it. And we also know that we're working with the right people, you know, we know the sponsors and the borrowers are the right ones to be at the helm of these and Eric it's not I'll just add that. We consider the loan rating on each of those loans at each of those monthly meetings. So so we're we're adjusting ratings at least monthly on those deals if if needed,
Right and I I should have mentioned that we didn't we've had any only nominal increases to special mention and I would say we probably moved some of these loans to the lower grade of page rating making them if they were a for making them a five if they were five making them a six that's been more common, but there's been very little move into criticized assets.
That's great color. I appreciate that commentary from both of you guys. And then on the PPP loans, it seems like across the industry. The expectations for windows are forgiven has been pushed back. I know a couple of months ago. There was some initiatives from some of the lobbyists to push for a automatic forgiveness. And I think the number was $150,000 and loaned value or less. I guess have you heard anything similar as your expectation now that that all loans will have to go through the formal forgiveness process.
Yep, bill bill has the the pleasure of managing our whole forgiveness process. So I'll let Bill come on on that. It's been it's been an interesting ball to follow and our team is done a great job any specific comments on so far the only formal threshold for forgiveness that's been set out has been 50,000 or below which is about 60% of our loans by accounts far less in terms of dollars. So we're gearing up with an expedited process with those borrowers who would love it as with our borrowers if they end up doing something at a hundred and fifty thousand because that would cover about 85% of our loan accounts. Meanwhile, we have a game.
We've we've invited over 60% of our total dollar volume into the Forgiveness process that represents less than 10% of the borrower is so we're starting from the top off the process them through our review process. We're making submissions to the SBA so far. We have one tiny deal of $15,000 deal, but it's gone all the way through and been funded. So there's our our pipeline is up its active we're starting with the larger borrowers cuz they know that's where the focus is going to have to be and we're hoping that that $50,000 threshold that's been laid out both be a may get extended 250, but we're certainly not counting on at this point.
Great, and then just one last one for me. I missed some of the tax rate guidance on I think he said 21 and half percent for for year 2021 and was there a four Q number as well? I think that's where I might wage. Yeah, the four Q number is
21.9
great. Well, thanks guys for taking all my questions today. Thanks Eric. Thanks Eric. Thanks Eric question today comes from Lori hunsaker with compass point please go ahead.
Yeah. Hi. Thanks. Good morning morning morning morning. Lori bell bell. I just wondered if if we could go back on the on the I mean, what is what is your expectation that sending them in a fast track in terms of how quickly it will roll through the process to forgiveness.
How many how many cents potentially how how are you thinking about that? Hey remember the SBA has 90 days to turn all these around so you have to factor that in this is going to be a 2021 event. And I think it's hard to say within that time frame when it will happen. But certainly it won't happen until 2021 and I wouldn't be surprised if it doesn't start, you know move into the second month or potentially even the third depending on how quickly the SBA decides to move. But I I'll defer to run in terms of what that'll mean for our numbers. But this it's a it's effectively a non-event for 20 28.
Perfect. Okay, that's what I was looking for. And then just just one question. So you said you had a $15,000 loan that moved all the way through how how quickly start to finish did that go through?
From the time we submitted it to the SBA. It was literally about a week, but that's the only one that's gone through of I think we've probably submitted on the order of thirty million dollars for so to them. So I think at this point it's kind of a random process and we haven't gotten any real sense of flow. We just know that between the time we have to read these in the ninety days the SBA has the turn them around that fourth-quarter is going to be again a non-event in terms of forgiveness.
Okay. Thanks. And then Ron just to confirm the amortized cost. The potential see recapture is 5.1 million.
Yeah, that's as of September thirty as of September Thirty. Okay, perfect. Okay, and then just just on on to loan books. I was hoping for a little more money on on the hotel book. If you could give us a refresh LTV, and then potentially if you if you also have a refresh LTV on a $89 million that's modified or or maybe that's similar any any additional color. You can give us around the hotel book. Thanks. So you want to kick off on the the TV side and then I'll I'll give some some details sure. I mean are weighted average yield TV on the commercial Hospitality book. What is 45%
Has it moved?
From last quarter. We haven't been doing updated appraisals unless they're necessary as part of underwriting because at this point appraisal estimates are like the rest of that one's quite sure when things will turn around. So what we do is we make appraisal reduction estimates when we go through underwriting just based on picking a factor for the timing of stabilization wage is 49% is the number on that. So in that do you have an lt2 on the $89 piece that's modified.
So I have I have a few here the I'll run through a few of the larger ones. So so in that hotel book than the $89 million there are 21 loans on a lot of properties Laurie. They're thirty two million in in the first deferment thirty-five million in the second deferment and twenty two million in the third deferment. That's the twenty two million. We talked about earlier almost all of them remain on excuse me, p&i deferment a couple of them are on interest-only or or principle only but but I'm a seven point five million of the 89.4 million is on P and I deferment obviously this is a book that's going to take a while some of the larger deals. I'm just looking at four or five of them one in Connecticut 54% loan-to-value another one in Connecticut. That's kind of driver is is the casinos that's 61% loan-to-value dead.
1 a residence in that is a 62% loan-to-value that one actually had eighty 1% occupancy off in the month of August. But it was we we think it was due to some environmental issues that cause people to have to leave their homes. We've got another Hampton Inn. That's got a 65% loan-to-value that most of the survivors our corporate. It's 40% corporate 60% Leisure. So that's that's some color, you know, we have details on monthly on all 11 were very close to these customers, but I think you know, it's it's just plain going to take take a while for these things to get back to to the point where they're you know, they had their kind of we think 4:40 somewhere between forty and fifty percent to break even on the occupancy side and and they're just they're just not there yet.
Okay. Okay same question on the retail side. Do you have a refresh Sheltie on the retail book? And then can you just comment a little bit? I guess you're totally wrong. It's 404 million, but I guess how much of that 404 million or even how much of the the creepies the 336 million is affected by movie theater chains or just how you're thinking about that. Yeah, so
Will you jump in if I'm wrong on this but I know of three properties total that have movie theaters on them and they and they're two of them are are I think solely movie theaters in one of them movie theater as part of a larger retail development that retail development is food anchored. It also happens to have a a gym in it, which is another
Type type type of tenant that's not not doing so well. So so we're we're uh, you know, obviously those are going to be on longer deferments. It's going to take a while for movie theaters to Thursday and figured out whether whether they're going to come back as they were or in some different shape Laurie. I just I don't know it's it's hard to tell a lot of our retail is is food anchored some of our larger ones are are you know, our our food anchors and and those the ones the ones that are mostly reliant on their food anchor look like them to come off the deferment in the we've got we've got a number of deferments that are rolling in November, you know, the some of these retail deals Will Will Roll in and and November and have told us they don't need additional deferments.
Let's see Bill on the LTV side. Yeah, that was the weighted average for retail is 57%
Okay, great. And then just do you have the dollar amount of of the three properties that you flagged with the movie theaters?
Your dollar amount of exposure on that bill. Do you have that? I don't have it in front of me Lori we can get back to you on that. I can follow up with you offline. And then I'll just to clarify when you say food. Anchor. That's the grocery store, right? Okay. Okay. Okay, that's helpful and then just go back a little bit to the to the capital question. I mean your your Capital certainly looks very healthy into your to your point that you don't need additional tools. Obviously. You've been placed it. Can you talk a little bit about how you think about BuyBacks here and what you're thinking in terms of where you would feel comfortable revisiting that or you know, is it a question of following your modifications? Is it a question of credit? Is it a I mean just how you're thinking about that? Yeah. So are we think of it as as I guess as a function of our stock dead?
And you know has you know, we we did dabble into this in the first quarter and then kind of put you know stopped when scolded him it off. I don't think I wouldn't say we have a big appetite at our current price to to be to be buying stock at this point. Like I said, we have done it. I think we'd like to see just a little bit more clarity on the economy before we we were to start thinking about it seriously again, so I I wouldn't expect to see anything on that front.
Okay, okay, and then last question since you mentioned a physician's or the possibility of Acquisitions, can you just talk a little bit about how you're thinking about Acquisitions? And do you mean wage type Acquisitions or do you mean Bank acquisitions?
Yeah that alternate to you. I guess I would just say it could be both and and we would be you know, looking to make an opportunistic deal if if one were to present itself in in that way if you want to elaborate on that. No, I think that's right. We're always looking for for wealth opportunities Laurie and and and if a bank deal became available and and made sense. I think we're we're putting ourselves in a position with all that we've done to to take advantage of that if it if it happened to become available. I think it's you know, our Outlook hasn't changed. The price has to be right we got to we got to convince ourselves that we can do something with it. Once we own it and it's got to solve solve for a problem. Obviously are shouldn't say Obviously, you know, we still we still think positive growth is our number one strategic Challenge and and finding ways to go deposits includes includes bank m&a if if if it becomes available Thursday.
Under the right terms.
And Lori, this is Mark. I'll come in a little bit on file, a little bit on the wealth m&a side of the house. We are always very active and in seeking opportunities and monitoring the market as you're probably aware off. There was a lot of interest in alternative to margarine based revenues and so price and value which is a which is an important gating factor for us is something that we are dead. Yeah, you have to you have to make sure that you are not paying above what's useful from an internal rate of return perspective. Even if Market is leading you there. So I am definitely more competitive pressures more buyers compared to just you know, non-bank fires pushing up prices in that area, but we are actively monitoring would be ready to pull the trigger on those if we found one that made sense.
Great. Thank you very much Laura. I think I think bill has some information on the theater question that you had we can give you that now. We have a total of five or three relationships that have theaters in them, totaling about 22 million dollars in outstanding value of that. Most of it probably about 65% of it. The theater is just 1/10 among others. So it might be eight to ten per-cent of the total rent. There is one relationship where theaters are the only tenant and soul that's again a much smaller part of the 22 million dollars, but those are obviously the ones that are going to have a bigger impact given structurally. No one's quite sure where the industry is going that get off. You want to learn
Apologies Lori has left the queue. Oh, that's a question concerning the call back over to mr. Remarks. Well, yeah. Thank you everyone for participating on today's call log for your continued interest and support of the bank. We we surely appreciate it, and hope everyone is well and stays well, and we will certainly talk to you soon. So, thank you everybody.
Thank you, sir. This concludes today's conference call. We thank you all for attending today's presentation. You may notice that your lines and have a wonderful day.