Q3 2020 Financial Institutions Inc Earnings Call

Good day, and welcome to financial institutions, Inc. third quarter earnings Conference call.

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Please note this event is being recorded.

Now I'd like to turn the conference over to Shelly drain director of Investor Relations. Please go ahead.

Thank you for joining us for today's call, providing prepared comments will be president and CEO, Marty Birmingham and CFO Justin backup.

<unk> financial planning and analysis, Mike Gerber will join us for Q1 <unk>.

Today's prepared comments and she will they will include forward looking statements actual results may differ materially from forward looking statements.

Variety of risks uncertainties and other factors.

I refer you to yesterday's earnings release, and our historical FCC filings available on our Investor Relations website for Safe Harbor description and a detailed discussion of the risk factors relating to forward looking statements we.

We will also discuss certain non-GAAP financial measures used to supplement and not substitute for comparable GAAP measures like.

Reconciliations of these measures to GAAP financial measures are provided in the earnings release, which was filed as an exhibit to a form 8-K.

Please note that this call includes information that is accurate only as of today's date October Thirtyth 2020.

I'll now turn the call over to Marty.

Thank you Shelly good.

Good morning, everyone and welcome to our third quarter earnings call.

As I stated in yesterday's release.

Past seven months of tested us.

We have weathered many challenges yeah, we've continuously delevering essential products and services to our customers.

Well preserved thousands of jobs to the PPP program.

If I did community support.

Learn new ways to work together, while being apart.

I continue to execute on our strategic initiatives.

What are the launch of a new digital banking platform to improve.

The customer experience.

We continue to lend prudently and are working closely with our customers to help them through these turbulent times.

Right all the challenges we generated net income of 12.3 million for the quarter or 74 cents per diluted share as compared to 11.1 billion or 67 cents per share in it.

Second quarter 2020 at 12.8 million or 78 cents per share in the third quarter of 2019.

Pre tax pre provision income for the third quarter was the highest in company history at 19.2 million 1.9 million increase from the second quarter 2020, and a 283000 increase from the third quarter of 2019.

These strong results were made possible by the dedication and adaptability of our associates.

Approximately 1.6 million of restructuring charges were included in the third quarter results in connection with six branch closer and staffing reductions announced in July it's part of our enterprise Standardization program.

Excluding these nonrecurring expenses our efficiency ratio was just below 57% for the quarter.

As I have shared previously the enterprise sterilization program is focused on improving operational efficiency and future profitability, while enhancing associate and customer experiences.

Opportunities identified by the program have resulted in the implementation of robotic automation automation and the streamlining of processes and operation throughout the organization as well as the branch transformation announced in July and additional branch closures announced in October.

The program is not yet complete and we continue to identify operational improvements Act.

Back in January when we announced the launch of this initiative, we indicated that we expected to generate annualized expense savings once implemented within a range of five to 7 million.

<unk> Cobot did delay the implementation of certain components of the program. We continue to expect annualized savings in this range.

We anticipate that some of these savings will be reinvested in our two new branch openings scheduled in the city of Buffalo and the first half of next year.

After quarter end, we completed an initiative to raise capital in the form of subordinated debt seizing upon opportunities created by historically low interest rates and ready access to the capital markets.

We were confident that we already had appropriate capital levels to effectively run our business, we determined that it would be prudent to access the debt markets at favorable rates.

Capital for use in serving our customers, taking advantage of organic and strategic growth opportunities and strengthening the banks capital ratios.

We also did it was wise dad capitals, we continue to operate and COVID-19 environments, where the long term impacts of the pandemic and the economy remain uncertain.

In October we sold 35 million of 10 year fixed to floating rate subordinated notes.

Institutional investors.

The interest rate is fixed at 4.375% for the first five years and thereafter, it becomes floating rate debt redeemable at our discretion.

This structure provides important flexibility if interest rates are significantly higher in five years or we determined that this is no longer an attractive source of capital.

Our subordinated debt offering was very well received demonstrate the financial strength and viability of our company.

Investor demand exceeded the amount of notes offered and the interest rate obtained was lower than we anticipated.

The execution of facility resulted in a fixed rate well below similar offerings conducted by upstate New York peers in the past several months.

Our enterprise securitization program digital platform upgrade and conversion and the successful completion of our notes offering are the most recent examples of the many ways. We are working to strengthen our institution and support its long term sustainability and performance.

We continue to deliver tangible results with the hard work that is transforming our company.

Now my pleasure to turn the call over Justin for a discussion of results for the quarter Justin.

Thanks, Marty good morning, everyone.

I'll be providing comments on several items with comparisons to the second quarter of 2020.

Net interest income for the quarter was 35.5 million an increase of 1.3 million from the linked quarter.

The increase was driven by a higher level of interest, earning assets, primarily loan growth, which benefited from the P.P.P. loan program.

Net interest margin was 3.22% down one basis point from the linked quarter.

The average yield on interest, earning assets was 3.6%.

A decrease of 16 basis points from the linked quarter cost.

Cost of funds was 38 basis points, a decrease of 15 basis points.

The margin compression, we've experienced as compared to the linked quarter and prior year quarter is largely attributable to excess liquidity and elevated cash levels.

The low interest rate environment, and overall challenging economic environment has made it difficult to deploy cash in investment alternatives with attractive duration adjusted yield.

The decline in interest, earning asset yield was driven by elevated cash levels, coupled with the impact of a lower rate environment.

On commercial loans and mortgage backed securities.

And the impact of a full quarter of lower yielding PPP loans.

The impact on interest, earning asset yield of heightened federal reserve interest, earning cash M.P.P. loans was approximately two basis points and one basis point, respectively, when compared to the second quarter of 2020, and approximately six basis points and five basis points, respectively, when compared to the third.

Quarter of 2019.

The decline in cost of funds was driven by lower deposit costs and wholesale borrowing costs driven.

Driven by lower market interest rates and a favorable funding mix.

Provision for credit losses for the quarter was 4 million comprised of 3.6 million a provision for loans and 461000 provision for unfunded commitments.

Credit losses were minimal for the second quarter in a row with net charge offs totaling 488000.

However, as we stated last quarter, although we remain cautiously optimistic the long term impact of the pandemic remains to be seen.

Our allowance for credit losses on loans increased to 49.4 million at September Thirtyth.

From 46.3 million at June Thirtyth.

The higher allowance for credit losses considers the impact of COVID-19, and the economic environment on our primary loss driver, which is national unemployment.

We use the Bloomberg economist weighted average unemployment forecast, which now forecasts fourth quarter national unemployment at 8%.

Which is down from 13% peak.

Level of unemployment reached during the second quarter.

Which was at the height of the pandemic.

We forecast unemployment out six quarters and overall the forecast is now lower than it was last quarter.

In addition, our Cecil quantitative model.

Estimates expected credit losses, using a reversion to the mean of the company's historical loss rates on a straight line basis over two years.

Our seasonal mile also includes qualitative adjustments and given the uncertainty associated with the long term impact of the pandemic on unemployment.

And ultimately credit losses, we increased our qualitative factors to more than offset the decrease.

In the unemployment forecast in establishing the higher allowance.

The allowance for credit losses on loans to total loans was 1.38% at quarter end as compared to 1.33% at June Thirtyth.

If you exclude P.P.P. loans the ratio increases to 1.49% annex.

An expansion of five basis points from the linked quarter.

Non interest income was 2.6 million higher than the second quarter of 2020.

The key drivers were first.

Net gains on sale of mortgage loans was $850000 higher.

Due to an increase in transaction volume and margin.

Second service charges on deposits were 774000 higher.

Because of our cobot relief measures of waving or eliminating fees for the entire second quarter, most of which ended on July nine.

Third insurance income was $538000 higher due to the timing of commercial renewals typically received in the third quarter each year and fourth investment advisory fees were $192000 higher as a result of the impact of market games, new customer accounts and increases in existing accounts.

On assets under management.

Well a relief programs related to waiting.

Or elimination of Steve has ended we are still seeing lower than historic levels in service charges on deposits. This.

This is likely the result of the positive impact of stimulus programs on consumer account balances combined with changes in consumer behavior.

We continue to see strong performance from our interest rate swap program.

Our commercial banking customers with revenue of $1.9 million in the quarter consistent with the second quarter.

We sold securities in the second quarter that we believe have a higher propensity to prepay, resulting in 554000 of gains down 120000 from the linked quarter.

We remain focused on managing premium risk in the portfolio and monarch monitoring securities with increased prepayment characteristics.

Non interest expense was $20.7 million, an increase of 2 million from the linked quarter the largest contributors to the increase were.

[noise] nonrecurring severance and real estate related restructuring charges of 1.6 million were incurred in connection with the July announcement of branch closures on staffing reductions.

$224000 is included in salaries and benefits expense.

And 1.4 million is included in restructuring charges.

Computer and data processing expense was $551000 higher primarily due to costs related to the second quarter launch a five star digital banking.

And advertising and promotion expense was $410000 higher also related to the launch of our new digital banking platform.

Partially offsetting these higher expenses was a $338000 decrease in professional services expense.

The decrease was the result of the timing of feeds for consulting and advisory product projects, including our improvement initiatives.

Income tax expense was $2.9 million in the quarter, representing an effective tax rate of 19.3%.

Moving to the balance sheet.

Growth in total loans was $83 million or 2.4% from the end of the second quarter of 2020.

Commercial mortgages grew 5.4% residential loans increased 2% and consumer indirect was up 1.5%.

Commercial business was relatively flat compared to the linked quarter.

Originations and see and I continue to be soft largely due to P.P. loans and the resulting cash that borrowers have on hand.

Third quarter commercial loan closings included select new financings.

For existing developers and draws on existing construction lines of credit.

Residential lending demonstrated continued strong performance during the quarter.

Largely due to increased refinance volume driven by the low rate environment Salable portion continues to grow increasing $422000 in the quarter.

And as I noted before gains on the sale of loans increased 850000 over the linked quarter.

Total deposits at quarter end were 371 million higher.

Then the end of the second quarter of 2020, and 779 million higher than September thirtyth of last year.

The increase from June Thirtyth was primarily the result of seasonality in our public deposit portfolio combined with growth in both our reciprocal and brokered deposit portfolios.

We are flush with deposits and remain cautious of chasing yield and investment purchases.

Purchases during the quarter were focused on cash flowing agency rapt mortgage backed securities with yields and dollar prices reflective of market demand for this paper.

The increase from the year earlier period, primarily in demand savings and money market accounts was largely the result of the impact of government stimulus programs pandemic related changes in customer habits and growth in our risk reciprocal and brokered deposit portfolios.

Our brokered deposit portfolio was 128 million higher than the end of the second quarter and 280 million higher than September Thirtyth 2019.

In February of 2020, we entered into a long term brokerage sweep arrangement.

Are they stable collateral free alternative funding source to reduce reliance on FHLB secured borrowings and improve our available committed liquidity.

The stable funding raised through the brokered deposit relationship was utilized to pay off 100 million of higher cost FHLB term advances during the third quarter.

Decreases in the common equity to assets ratio and TC ratio were the result of heightened federal reserve interest, earning cash and the impact of lower yielding payroll protection program loves.

At quarter end, both ratios would have been higher than the previous period, if not for these factors.

During the third quarter of 2020, the company paid a common stock dividend of 26 cents per share.

Returning 35% of third quarter net income to common shareholders.

Men and the board of directors will continue to closely monitor the economic environment and business trends and.

And we will prudently manage capital levels going forward.

There are no current intentions to reduce the dividend.

At this time I will turn the call back to Marty for closing remarks.

Thank you Justin.

We benefit from a very stable Western New York and finger lakes market within upstate New York and our commercial customers are generally conservative in nature.

Many of them learn valuable lessons in the great recession, and we are better prepared coming into the current COVID-19 environment.

We continue to see significant improvement in loan deferrals.

At June 3500, 25 billion of loans or 60% of total loans outstanding were on deferral.

As disclosed in the third quarter Investor presentation posted on our Investor Relations website yesterday.

As of October 20, Threerd deferrals were down 86% to approximately 76 million or 2% of total loans.

We continue to stay in close touch with our borrowers.

After their operating environments as well as overall market trends.

While we generated strong results in the third quarter and are seeing positive economic trends.

We remain cautiously optimistic about the coming months.

In quarters, but.

The economy will hinge on the impact of coal, but on businesses and communities as the country managers through an increase in cases and a possible second wave.

We continue taking great care of our customers and supporting our communities through these challenging times.

Many of our support initiatives are described in the five Star Bank 2020 community report, which is now posted to the five Star Bank website in our Investor Relations website.

I encourage you to read this report to better understand the many ways our company and our associates are giving back.

Our outlook is positive and we remain focused on driving strong outcomes supporting our customers financial well being.

Quality of life for the communities, we serve and building long term shareholder value.

Operator. This concludes our prepared comments and we are ready to open the call for questions.

We will now begin the question answer session to ask a question you May Press Star then one on your Touchtone phone.

If you are using a speakerphone please pick up your headset before pressing the keys.

If at any time. Your question has been addressed than you would like to withdraw your question. Please press Star then too.

At this time, we will pause momentarily to assemble our roster.

Our first question comes from Al.

Alex Twerdahl of Piper Sandler. Please go ahead.

Hey, good morning.

Morning out.

First off just wanted to start on the on the an Eni and on the margin you guys. I think have done a very good job keeping the mortgage and relatively stable and as I look at the balance sheet with excess cash and it looks like you still have some room to bring deposit costs down I mean could we see margin stability from here and maybe even a little bit of expansion in the fourth.

Ordered into toward 2021.

So Alex Yeah, I think the way I would.

I'm thinking about that as I I'm pretty comfortable.

That our margin has become relatively stable, but saying that beyond the fourth quarter is kind of tough.

At some point deposit costs are going to bottom out and then we might be subject to potentially some additional compression depending upon.

What happens what spreads in the market on commercial loans et cetera et cetera.

And depending upon what happens to the shape of the yield curve, which I always like to talk about as well. So I'm only really willing to talk about it at this 0.4th quarter and I do think that.

No again barring anything unusual I think we do have the opportunity to continue to maintain a relative relatively stable margin into the fourth quarter.

Great and then maybe I was hoping you could comment a little bit on the loan pipelines and you guys grew a little bit of the <unk> consumer indirect this quarter.

I know that's been.

A little bit less of a focus recently, but just sort of given what's going on in that market does it make sense to turn those engines back on and more force.

So Alex the loan pipelines are continued to be grounded and very strong customer relationships strong sponsors from a theory perspective, and a good operators and the Cnine small business perspective, and we continue to work with with those customers you know the background in upstate New York is I.

Just mentioned, it's been relatively stable economically and that's rather than the fact that you know the coded up in this part of the world wasn't as severe or a significant in terms of infection rate and therefore disruption to the economy. So we continue to see good activity coming from our customers.

We were one of the first economies to open up first regions to open up pursuant to Governor Cuomos management and early in the pandemic or late spring et cetera. So we'll.

We'll continue to to support those relationships add incremental businesses generated oh pursue it as far as indirect is concerned you know I think it's down around 23% of our total loan portfolio, which is consistent with kind of our overarching management of the balance sheet in the last several years.

And as you point out it has been a terrific business for US we've never changed our approach in terms of grounding it and fundamentally strong credit a in the regions that were serving and contiguous regions that are very similar to our.

Our geographic footprint in terms of the underlying economy and business trip. So you know in the great recession, a it was a real opportunity for us because it was a lot of volatility in the space.

Large cap does did exit a we are seeing some of that type of activity today and you.

You know the spreads continued to be a actually very favorable right now for us. So that option is open for us as a lever to continue to push performance to drive performance.

Great and then just final question for me you guys raise a little bit of sub debt earlier. This month added about almost 100 basis points to total capital.

Just wondering if you could kind of go through sort of the priorities are the other uses for that capital and at 70 ish percent tangible book value to buybacks play a role in those capital priorities as well.

So we spend a lot of time since the onset of the pandemic as a management team and as well a working with and communicating with our board in terms of what you know our capital outlook and long term performance for the company in light of a.

You know this event that we're all working through and as we continue to analyze and as we've talked about the decline of deferrals, we continue to become increasingly comfortable with Oh, our capital capitalization of the company and well can but you know we'll consider the options in terms of.

How to use it as we talked about it in our prepared remarks, you know we want to support the continued growth of the company, we want to support opportunities strategic organic and we are well aware of a and had been evaluating.

You know the impact of a potential share buyback program and when we finish our valuation ultimately that will be a call that our board will have to make with us.

Yes.

Great. Thanks for taking my questions.

Thanks.

Our next question comes from Marla Backer of Sidoti. Please go ahead.

Thank you [laughter].

[laughter], Oh, I'm trying to get my arms around like.

How things might be changing now in your specific markets if they're changing at all you know where we're seeing spikes in cases in the New York City region, we're moving into colder weather wood.

Might impact some of the businesses that we opened during early the early or portion of the pandemic, but reopened primarily outdoors.

What are you seeing in your specific markets in response to some of these changes.

Well, we have like I guess, the rest of the country are starting to see.

The development of some hot spots in the markets that we're serving but generally the.

Communities have been very responsive and you know have defensive measures in place in terms of Ah Ah distancing shutting down a school systems whatever it might be so overall, the economy and the market and the communities continue to function as normal as possible our.

Infection rates remain relatively low I think it's around a 4% as we speak and you know direct action is taken when there appears to be a as I said hot spots or increasing outbreaks direct outbreaks.

[laughter].

And in terms of.

Far off.

I mentioned it in your prepared remarks, and there's a slide in the slide deck. So they were down significantly since the.

Beginning of the pandemic, but are you.

Well, what's your you know what is your approach to.

Individual request for.

Customized you know relief, if if you're getting that and how are you. How are you handling that I do expect to see that go up potentially.

So yeah, reflecting the no improvement in the deferral rate and the decline across all of our portfolios that as referenced in our investor materials. You know we're encouraged by that however.

This remains a key issue for our company for the banking industry and you know for our communities and for our country relative to the impact of coal that on these industries that are you know severely impacted by the pandemic and so talking with our regulators as well.

As a grounded in our own policies and our own management and governance actions. We are prepared to continue to try to support our customers are consistent with what the cares Act is calling for what the intention of the care Act is and doing it in a safe and sound manner.

Okay. Thank you and then my last question is about the the non bank revenue.

And it was a little bit higher than I expected, which I thought was very positive can you talk to where you're saying.

Activity, perhaps you know increase beyond what you had expected or you know that's not the case. This is just normal business as usual can you talk to you know how those other businesses seem to be operating right now.

Justin.

Yeah, Marla I think one of the things to keep in mind is we do have some seasonality to some of our.

Call it fee income for covered as a total broad category when it comes to things like our wealth management income.

Which is investment advisory income.

You know we did see some strong growth there in the quarter, a and a lot of that is really driven by increases in a way that quite honestly is not entirely driven by just market increases we're seeing a good.

Good inflows of cash into into our customers' advisory accounts, where they're adding new funds.

We also have a somewhat seasonal increase I'll call it seasonal increase in the insurance income.

You know if you look back at the trend over time in the third quarter tends to be one of the highest quarters for our insurance business Dude.

Due to commercial renewals and other aspects of that of that business. So we are seeing strong growth and some of the other areas that are you know pretty obvious I think our our mortgage banking gain on sale revenue has been very strong as well.

That's really driven by the low rate environment and a lot of the refinance activity that's taking place.

And we've also increased the percentage of our mortgage business that we sell to the secondary market, we retain the servicing them of the loans.

Loans that we sell but we do sell loans into the secondary market and we've been able to increase that percentage, which has also helped us increase the fee.

The income recognition.

Okay. Thank you that's that's it from me.

Hey, Marlette smart export and I, just want to jump back in I.

We viewed my notes and relative to a infections.

The hot spots that we have in our geographic footprint.

The infection rate is around 4%, but generally in the in our entire footprint, it's still remains low below 1%.

[noise] part because that's holding infection.

Thank you.

Our next question comes from Damon Delmonte with.

KBW. Please go ahead.

Hi, Good morning, guys up everybody is doing well or somebody my first question regarding expenses in kind of the outlook. There you know just in any any insight on you know the trending level on data processing or any other categories as the as you kind of look forward.

Yeah. Thanks, David appreciate the question.

So the increase that we saw in the quarter, if I remember correctly was somewhere around.

$600000 in that computer data processing category.

You know I try not to get too specific to individual categories. Because as you know Damon. There's so many puts and takes in the expenses seasonalities and things like marketing spend et cetera that just kind of bump around a little bit.

But I will tell you that that's the total $600000 is not a run rate increase there is some [noise] sort of onetime type expenses in there associated with the digital banking launch if you can think about it as being about half of that increase it's probably more run rate in nature and what's interesting about you know the did you know I think it goes.

For probably all software. These days, it's most of it you know I'll call it subscription service type software.

You know you pay by volume. So we are going to see a little bit of volatility in that line item as well just based on volume increases and decreases as.

As we get moving with that platform.

I will also tell you that that platform is clearly delivering increased and increased customer engagement I'll, just say that broadly a and it significantly increased a lot of our capabilities. So we are anticipating to continue to be able to grow revenue as you know as a result of that platform. You know we did a pretty.

Lengthy business case on that particular digital banking platforms. So having.

Having said that I am willing to give you some guidance for fourth quarter expenses from my perspective as I look at it pretty closely you know, we're thinking that we're going to hover around and you know plus or minus a couple of hundred gram, but hover around the $26 million Mark.

For the fourth quarter expenses.

Okay. That's very helpful. Thank you and good insight on the at the data processing.

I appreciate that Oh. My next question you know as we kind of look at the credit quality trend. They continue to be very strong. You know you took the reserve up you know five basis points or so ex the TPP or what's your thought process on on where you go with the provision on a weekend.

Provision and reserve levels from here you feel you like you've built that an adequate.

Reserve level I know you know caveat that with I know that you know those factors you have to consider and you'll see some modeling, but you know based on what you're seeing the underlying trend you know do we look for provision levels similar to like second and third quarter or do you think you could actually go back to you know kind of 2019 levels, where it was like maybe half of that.

Yeah, it's a it's a conundrum.

We we've been obviously very cautiously optimistic as we keep saying about the performance you know of our book relative to deferrals et cetera, but we've also been clear that you know the result of this pandemic have yet to really play out. So if you think about what happened this quarter.

The unemployment rate going down and as you know national unemployment is our primary lost driver.

It drove our quantitative model down so the quantitative output that we got from our model said that we should be producing reserves.

And frankly as a company we didn't feel comfortable that that makes sense at this point because we didn't feel comfortable that we really knew.

You know, what what things how things were going to play out we.

We obviously still don't know what we did was we used are are you know we already had developed our qualitative factors they had been in place.

And then when we saw this reduced forecast for unemployment.

We had to make some adjustments from a qualitative perspective to ensure that we were recognizing the other factors that are driving a reserve need outside of those aren't that unemployment forecast and so when we did that.

It did help us better understand sort of that our reserves should in fact grow a and as you know it grew by about four basis points on the quarter, four or five basis points on the quarter.

As far as next quarter is concerned you know it does that's in a really difficult one to predict.

You know if unemployment rates go down dramatically from a forecast perspective.

You know it could drive banks models down so far that it's really difficult to.

To even qualitatively.

Hold the reserve, where it is or or increase the reserve.

So it's just a really difficult thing to project for US just given where unemployment is and where it could go having said that if it does that forecast go down that much you would hope that that's driven by some really good news in the market that you know that will be favorable to our portfolio. So.

It is difficult to predict Damon I appreciate the question, but unfortunately, that's about all I can give you at this point.

That's fair enough that's good color and it wasn't diesel supposed to make this process a little better for everybody [laughter] apparently not show Okay. And then just one more quick question if I if I can so when you talk about the margin outlook and you know the optimism of keeping it.

It's kind of sad study or flat here in the fourth quarter does that take into account the impact from the sub debt or raise that you guys did earlier in this month.

Yes, it Oh.

Okay. All right. That's all I had thanks, a lot guys I've got a weekend.

Thank you Dan.

Again, if you would like to ask a question. Please press Star then one.

Our next question comes from Kevin sponsor.

I've have de group. Please go ahead.

Hi, guys.

Hi, Kevin Kevin Good morning.

Good morning, I, just wanted to maybe follow up on the credit discussion I appreciate the color but.

But thinking about the stimulus and maybe the potential for a second round <unk> do you think that it's simply delayed losses or do you think it's actually.

Gone a long way in and saving some of the businesses and and I'm kind of helping out.

I do think it's had a very positive impact on the business and I would say that the coordination between the legislative executive and Federal Reserve system has really been superb a in terms of helping provide lead relief efforts as Justin talked about in his comments you know our balance sheet has been impacted or with.

Cash balances that are sitting there. So that you know I recognize that the proceeds of the PPP and cash is fungible, but you know I think our customers to participate in that program are sitting on some liquidity in some dry powder, if you will to up to navigate a future challenges with.

The pandemic in which way. It goes we are looking at our credits you know those that have been impacted it and it's going to come down to hospitality really probably in.

For the most part as well as some forms of retail and you know we will look at these credits in an individual basis and determine ultimately the sustainability of those credits.

To bridge, the pandemic and to kind of pick up where they were all except for credits pre pandemic when it's over and that's the process that we're going through it is a work in process and you know it's part of the uncertainty that Justin was talking about.

Okay I appreciate it and then maybe just one more.

Just thinking about ltvs, assuming the portfolios that origination.

Oh no. It's is it have you guys had any I guess price clarity whether through you know market sales or transactions that you can kind of say, okay, well, here's the new L. LTV number the valuation for that business or is it still too difficult to see.

It's still probably too early but you know one of the things we've talked about consistently and we're seeing it through this even this cold environment. We just don't have the highs and the lows and the extremes of up kind of the economic performance and so our underwrite underlying real estate values, whether you're talking.

About you know consumer individual houses residential mortgage or the commercial properties you know is.

Trades in a very narrow range is relatively stable.

So, but as we go through this process that I. Just described we will you know get some very good discovery in terms of a new appraisals and.

Seeing what happens to the market and our approach will be to try to you know man. It's true if we end up providing bridges you know.

Structures that help our customers bridge, the pandemic would be to try to maintain the integrity of the loan to value ratios that are you know.

Crowded and called for in our credit policies.

Okay, great. Thank you.

This concludes the question answer session I would like to turn the call back over to Mr., Birmingham for any closing remarks.

Well I, thank everyone for their participation on the call. This morning, I also want to acknowledge our associates once again for their hard work and commitment to helping US produce these results and we'll look forward to continuing this conversation.

At the end of the fourth quarter. Thank you.

The conference is now concluded. Thank you for attending today's presentation you may now disconnect.

[noise].