Q3 2020 BankFinancial Corp Earnings Call
Ladies and gentlemen, thank you for standing by welcome to the Bank Financial Corp, Third quarter 2020 earnings conference call at.
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I would now like to turn the conference over to S. Morgan Gauger, Chairman and CEO. Thank you. Please go ahead Sir.
Oh, good morning, and welcome to the Investor Conference call for the third quarter 2020 financial results.
At this time I would like to ever forward looking statement run.
The remarks made at this conference May include forward looking statements within the meaning of section 20 Onee of the Securities Exchange Act of 1934.
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Forward looking statements involve significant risks and uncertainties and are based on assumptions that may or may not occur.
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And now I'll turn the call over to chairman and CEO of more feature.
Oh. Thank you I note that all filings are complete and we are ready for questions.
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Just one moment, while we compile the <unk> roster.
Our first question comes from the line of Brian Martin with Janney Montgomery. Your line is open.
Hey, good morning Morgan.
Good morning, how are you not too bad. Thanks. So just wanted to get maybe just start with if you have a chance on the just the loan growth it was down a bit more this quarter and just kind of your your sense of you know kind of the pipeline and how you're thinking about the next several quarters and just the new initiatives you announced earlier this year and just kind of how how they're playing out.
Maybe just an update there and then on the loan portfolio and outlook for growth, Okay, well, let's let's.
Let's start with third quarter.
We had a very good quarter in equipment finance.
So those initiatives are starting to bear fruit.
Approximately $58 million of originations and third quarter comps.
Compared to about 18 million in second quarter.
And we got contributions from all sides of the division our governmental.
Corporate and middle market, and even a little bit of small ticket small ticket didn't launch until late September you know.
Less than a million dollars of originations.
And we're taking small ticket very carefully because obviously the smaller business segment has taken the brunt of COVID-19, and we're still working our way through how that market feels to us right now, but the transactions that we have done Oh, we tend to like we like the metrics that we're seeing I'm sorry.
Debt to gradually expand over the next couple of quarters.
Middle market for example did about 5 million, it's got about a 15 20 million dollar pipeline going into fourth quarter.
Oh governmental did well and corporate we'll probably see a little bit more activity given that the liquidity that we've seen throughout the year.
Seems to be staying with us and we even saw more liquidity in third quarter.
We're working to open up some additional channels on the corporate side, probably the higher end of corporate shorter duration assets. So it will put some of the excess cash to work on at a reasonable duration with good credit quality yields will not be particularly exciting probably high twos maybe.
Maybe low threes, but it'll put some cash to work contributed to the net interest income maybe not quite so much the net interest margin, but it'll help and so we'll work to get some growth. There we are seeing some some activity on that side and.
The credit quality looks pretty good at.
At this moment so sold.
So we'll continue to push forward. So right now equipment finance it grew about $20 million in the third quarter alone and it looks to be our engine for growth over the next two to three quarters.
Real estate.
It's going into the fourth quarter with the bids both pipeline and probably 12 months.
The new bankers, we've we've put out into the markets.
Are starting to see some new opportunities a bundle.
But I'll also tell you that we're also seeing pay offs, we as we've said before we're not in the market for maximum proceeds cash out refinances.
And we are seeing pay offs on those types of assets.
Also we're just seeing some borrowers so.
And and pay down either their loans are their lines. We have one borrower that sold the building we didnt have.
Sitting on a lot of excess cash and kind of like some of our commercial borrowers.
He is going to pay the lines of paved lines either down or off.
You still thinking it through.
So I would expect real estate to to trend at best maybe neutral to up one or 2%, but it easily could go down by two to 3% to 5% if the payoffs continue and given the uncertainties in the markets and also just the extreme valuations.
Every seller thinks their property is worth a five cap or better.
Not all the buyers agree so there is some some gaps there.
But we would expect people to either.
Either take advantage of the market and realize their return.
War hang onto the asset, but get every bit of cash out they possibly can.
And the maximum cash out requests I, we see him every week.
Some we can handle if they're a little less aggressive on it others, we have to either take the capital markets, where they find another lender that's willing to do it.
And on the commercial side.
We're seeing we saw some pay downs in the third quarter of just being due to activity in the lesser credit side.
Some of the transactions were ready to fund into the lease portfolio and so the associated lines pay down.
We will see those redraw it during the quarter right now the activity is a little quieter in the early part of the quarter, but it usually picks up in the latter half of the quarter.
As the equipment invoices come in and they pay the equipment invoices in preparation to install the equipment and deliver it to the lessees.
So we'll see some recovery in the balances on the lesser credit side.
We also have a pipeline of about three to five new less source.
That are interested in lines of orders came in yesterday.
And we're going to get those in place in the next 30 days to 45 days they may contribute in fourth quarter, but more likely will contribute and 21. So I'd say on the commercial side. The the growth is going to be the lesser credit side. We are seeing some recovery limited recovery in the health care side.
Those borrowers are still sitting on cash less cash flow. They are starting to consume it. So we could see some recovery in the fourth quarter on health care more likely though we'll see it in 21, whether we get all the way back to the balances we had pre coven.
Is a function of what their occupancy is look like in their cash flows look like.
But we will see some recovery so I'd say in the commercial side pretty much upside from here.
Equipment Finance has got some string real estate as you saw decline last quarter and again, because the payoffs could continue and and sometimes there's just nothing you can do about it. It's a sale is a sale at a price that would only support 65% LTV somebody wants to do it at 80.
Now within our underwriting will get the payoff.
Okay. When you sum it all down Morgan I mean, I guess, just kind of your outlook for net growth as you kind of factor in some of those potential payoffs with some of the positives I mean I guess.
And we would hope we would hope to grow somewhere between one and 3% in the portfolio for fourth quarter. If we get the closings that are currently in the pipeline even against the payoffs that were expecting.
But yes.
Yes, do we get the closings and do we get any more pay offs that we're not currently seeing it.
When you get into 21.
And we get more cylinders firing the whole sales side of equipment finance of we've have.
One new Bagger in Midmarket now we're working on a second one we're adding another one on the corporate side. Hopefully later this quarter. So I'd say in 21. If you. If you said you grew $20 million in the in the third quarter and equipment finance, we'd like to see if we can do that every key.
Quarter in 21.
We should also give some more contributions from small ticket. So we did well enough to get to $50 million to $100 million of growth ought to come out of equipment Finance next year.
That appears to be sustainable if we can consistently get the pipelines to the level. They are now.
Commercial financing thing.
And we could see from where we are today easily 10% to 15% growth out of that portfolio real estate I'd say best cases, it stays flat.
Okay, and you thought about I guess, if depending on how this growth materialize, it's just getting the excess liquidity today to work.
Absent I mean, if you don't if you don't have the net loan growth I guess, what what are the plans on I guess, we look to reinvest some of that in.
In the short term to help that the Eni or I guess that's.
That's what that's what that's what the wholesale initiatives are for we don't know how long if you think about excess liquidity. There is about there's some quantity. This is a smaller piece of it maybe a third of it that is run off from a loan portfolio that we have to put back to work. The rest of it is just excess liquidity that's come in as a result, the cobot so our.
First priority is to take the the smaller piece about a third of it and put it back to work in the permanent portfolio, which was that was the business plan all along the second component of that is the excess liquidity that showed up during the course of 2020, that's where the wholesale plan comes in.
Keep it very short duration, we could do quite a bit of growth in that in those portfolios, but we haven't done it yet and that's why I'm reluctant to put any kind of predictions out there as.
As we deploy these capabilities, we'll see what the growth looks like and ill be in much better shape to tell you. What we think about 21, when we actually get to 21.
But we think that given given the fact that one the deposit seem to be with US right now they're not running in and then running back go into there could be another stimulus. So that this excess liquidity could be with us for the foreseeable future putting together a wholesale program.
As with an average duration of 12 to 18 months.
Well pick up a lot of yield.
But it could pick up enough yield to contribute to net interest income.
And push that EPS forward without a great deal of investments in expenses are people, we already have that capacity.
Gotcha, Okay, and that that wholesale piece Morgan I guess could that began in earnest this quarter or is that more likely 21 event you know it's.
It's already essentially November onest, so we could see some activity of it particularly on the equipment side.
By the end of the year I'd say, it's more likely to start.
In the first half of 21 by the time, we get all the pieces in place. So if we got a little bit down in the fourth quarter that would be a pleasant upside right now it's not in the pipeline.
But we're working to put it in place. So we can start funding things in the early part of 21.
And it's just too hard I can't give you a number right now because it's not in the pipeline and until we get it up and running it's just it's just too speculative to tell you, but notionally. We would have we certainly have the cash of the capital capacity to do 50 to 100 million of this stuff or more if we get it running even if its rowley.
Yields.
It's worth do and for the reasons, you say and contributing to net interest income.
Gotcha, Okay, and then just last one on the loans with the health care you talked about the pay down of what's going to come back maybe it wasn't a permanent decline I.
I guess this is your expectation that that still it's not permanent it.
Sounded as they will maybe you anticipate some of that coming back in 2001.
I think so I think the wild card for US right now is what happens in future legislation.
A significant amount of this liquidity.
Was related to advances in Medicare payments.
And those were originally intended under the program to be paid back.
There is some discussion and some movement and some lobbying talk.
Towards forgiving those advances.
And if that's the case that money will be around a while obviously they'll just keep it.
As a result than they would have more liquidity for longer courtesy of the federal government.
And have less demand for credit.
What they choose to do with that liquidity do they start acquiring other competitors, who are struggling and put it to work in terms of M&A and therefore need line activity at that point possible, but.
But right now that's one of the big uncertainties is will they have to pay the money back if so when.
What liquidity position does that leave them in at that time and that will drive the recovery of those line of those lines.
Got you okay.
Appreciate all the color will be just the last maybe one or two for me that I saw the buyback news. This morning, just kind of curious on capital I guess, how I know you had taken pause or at least kind of suggesting you might think that this in the third quarter, but just your appetite in the buyback or just your outlook on that versus.
Ill.
Essential M&A or however, you are thinking about capital.
Let me, let me first say that the capital for the company is very strong.
We were pleased with the EPS a quality results at the end of the quarter.
We were pleased with the borrower performance on the cares Act 40 13 deferrals.
If all goes well at this point.
We'll have about $43000 of principal payments left over at the end of December of 20.
From those deferrals, so people are getting themselves caught up.
Pretty effectively at this point.
Obviously, we're starting to see some rollbacks in economic activity.
But especially here in Chicago very recently.
There is also still inhibition in foreclosure moratorium in place that order was just extended indefinitely by the Cook County courts last week.
So while I think we are in very good shape at this point.
Not necessarily think that everybody's out out of the woods.
And specifically in the Chicago market.
So with that said, we got back into share repurchases in the latter part of the third quarter.
And when we did the analysis of what we think we're capable of doing over the next six months. The 400000 dollar share repurchase afforded thousand share repurchase program sales.
Seems a sustainable level of activity.
And we'll probably as we did in the third quarter, probably wait that activity more towards the end of a quarter as we see how the quarters unfolding, making sure nothing is trending in a different direction were inspecting expected and at that juncture, we can get the benefit of where the shares are trading right now so we'd probably do that in the fourth.
Quarter, we'd probably do that in the first quarter.
And then if you just looked at rate of repurchase which might be relatively de minimis sided on a daily basis, but it adds up overtime.
And then ran that through the end of 21, you could see us getting closer to the 14 million shares outstanding by the end of 21.
Not at all guaranteeing anybody that we'll get there, but if everything played out like we hope it those that would be a reasonable goal.
That would still leave us with strong capital.
The bank it would still leave us with good liquidity at the holding company.
But whether we get all the way there is.
He is uncertain, we will do as much as we think is feasible keeping all the interest in balance.
Gotcha Okay.
Perfect and then just the last one or two here the expenses were up a little.
So this quarter I guess, you kind of mentioned in the Q a couple items, but just see.
The profile going forward on the expenses you should think about them if.
Do you have any commentary.
Commentary and that'd be helpful.
Well on the expenses for the third quarter we.
We spent about $100000 looking at an acquisition a small acquisition. We had said that last quarter that there were a couple of opportunities out there.
There was one smaller bank.
That would have netted down to a nice little usher contributor to the franchise. If it all worked out so we engaged an outside firm to do the.
Loan due diligence, we had investment banking expenses as I said about 100000.
Unfortunately, when we got the loan due diligence in it.
It was not going to work out like we hoped.
The loan files were not as complete as they should have been or could have been and then taking the impact of cobot on the portfolio on top of it the timing was just not right.
Could not make that deal work.
Safely and therefore, we took a pass on a boat that was $100000 worth of expenses.
Second expense category.
Our frontline associates in the branches.
Have absolutely done a terrific job working through this.
We're working with customers and paper and cash every day.
The health protocols are in place.
And we're doing well with that but nonetheless.
Dealing with all the impacts of Cobas and changing customer behavior and expectations.
We wanted to make sure that we recognize their contributions so that was approximately 100000 in the quarter.
That we accrued it's actually paid in two installments.
But.
The us there was an absolutely necessary expense.
Isn't necessarily going to happen every quarter, but it was absolutely necessary to do.
And then we had some severance expenses, we looked at performance in all the different.
Divisions.
We are also making room for new people and candidly we looked at when we look to performance we saw opportunities to to bring stronger performer zone and we unfortunately had to separate people who were not performing as well so.
So we recognize those severance expenses in the third quarter, we'll get a benefit from that in the fourth quarter and maybe a little bit in the first quarter before the new people join us of total impact would be about $800000 over the last.
Per quarter in terms of hub.
But we will put that money back to work so.
So I would expect expenses in the fourth quarter to run somewhere around nine board of 95.
If we do get the loan growth there said before fourth quarter, we might need a little bit more accrual and incentive.
At the end of the quarter for that activity.
And then going into 21, I would see it about those same levels that might pop up or down depending on what we're adding at any given point in time.
We'll get some benefit from repricing technology contracts as we have throughout the year, but we're also going to be deploying new technology to support commercial loan growth adds for the Treasury services and commercial deposit growth initiatives. So right now nine four to nine five for the fourth quarter. He will also look ahead.
And see.
What the run rate will be on the compensation side and on the technology side, when we get to the end of the year.
And in terms of branches. We note several competitors have announced plans to close branches.
Right no if anything we're seeing more customer demand for the branch offices.
So we're actually be opening up and expanding our hours and get a better handle on what the usage is actually going to be and for what transactions.
We're doing that mindful of the fact that there is a spike in case COVID-19 cases in our market here and so the risks of doing that are somewhat elevated at this time compared to say August and September when the case counts were down a.
But having said that we'll be in a better position in the early part of 21 to get a handle with the expanded hours of where the customer demand will be and we will look at greater efficiencies in the branch network. If it turns out that the customers are just not using the facilities like they used to and if there's opportunities to consolidate.
Services and still retain the customers and and make sure they are taken care of.
Got you Okay. That's helpful and the last one more in just big picture I guess the quarter look like you know at least somewhat from profitability standpoint somewhere in the 50 basis point range on assets.
You think about kind of your outlook for next year and kind of roll everything in I mean, do you have kind of a sense of what you think you know.
Any and how it plays out you know what the range would look like as far as where you where do you think thats heading I mean is this kind of the level you're going to be at I guess I had my assumption is if you take if you see some of this reallocation of the liquidity into loans. If he could just kind of get a sense for how you're thinking about the hour away next year.
You know what I think we're more focused on earnings per share.
If the metric we can control more.
If to the extent that we can control.
With the you know in the third quarter alone we grew core deposits.
We're unloading wholesale deposits to reduce liquidity, but theres really just know predicting what's going to happen with deposit growth or deposit withdrawals and obviously there has been significant balance sheet growth in the liquidity that's come in during the year that was completely unexpected and work thinking of ways to.
To deploy that cash and improved net interest income, but the yields on that won't be particularly helpful. Return for a return on average assets. It will be marginally helpful, but not particularly helpful. So we're really focused on earnings per share right thing.
And again our goals remain the same.
We want to get back first of all into the 20 low 20 for a 20 cents a share range and then we're going to move right on into try to get to a bucket share year.
Obviously that would support continued strong dividend it would further support share repurchases.
And with that kind of deployment of capital.
Auto performed relatively well in the market. So first goal is to get back to the 20 low Twentys second goal is to get to a buck a share.
Got you, Okay, and you're talking run rate and that and the dollar share yes.
Yes got it.
Okay and gold and the good news is that you know the balance sheet movement is less relevant to that if we continue to work on focusing on generating assets with the appropriate income.
In response, we continue to monitor expenses and.
And get a little bit of help from share repurchases dawn carefully as.
We can make pretty good progress towards those goals as the year work as the year wears off.
Got you Okay. I appreciate you taking the questions. Thank you. Thanks.
Your next question comes from the line of Amy Conrad with D.A. Davidson. Your line is open.
Yes. Good morning, a lot of questions have already been asked but just had a follow up on liquidity here.
The Securities book versus your Cds is actually at a negative carry it looks like so.
Should the yield curve steepened and 2021.
Just curious on your appetite to maybe extend duration on the securities and then secondly is there room to get more aggressive on running off the Cds given given the outsized liquidity. Thanks.
Well I think both those things are true.
The.
Most of our most of our liquidity portfolio is in fact Cds, we don't have that much in the way of.
Securities per se.
And we would to the extent that those opportunities returned to the market.
Certainly take a look at generating some additional interest income from that portfolio.
In terms of Cds, especially on the wholesale.
We would absolutely continue to reduce those portfolios.
And we know that.
Competition for Cds continues to be relatively low some.
Some customers are simply rolling into core deposits.
Add waiting for a steepening of the curve as you say.
Others have.
Our trying to find as much yield they can somewhere else. So we will we're obviously not going to be particularly aggressive in defending the CD portfolio with the exception of our very core customers that maintained virtually all their banking relationships with us those are our VIP customers and we will do our best to take care of them. So to the extent, we can eliminate the negative carry.
Three we will.
We'll see how those opportunities unfold obviously they are on scheduled maturities for interest rate risk purposes. So there is a limited amount we can do at any one moment in time, but it's certainly a focus every quarter.
Thank you.
Our next question comes from the line of Kevin Rock with all State. Your line is open.
Hi, Morgan.
Quick question, you had mentioned earlier in the call that you guys were contemplating an acquisition, which didn't come to fruition could you talk for a minute about what the parameters of that acquisition might have looked like.
Just in terms of valuation because I, given where the shares are trading today, obviously its.
At a pretty low valuation one.
One would think that they had to have been something pretty compelling either on a valuation basis or from a strategic standpoint to move forward on something like that so.
Any comments would be appreciated as well.
Well for starters, it was going to be a cash deal.
And because to your point, an equity transaction at any kind of a premium to book would not make economic sense for us right now.
Two it was.
For confidentiality reasons, there is a limited amount we can tell you.
What I can tell you that it was a smaller bank in the Chicago area.
They had some pressure.
To get into the market due to their capital structure.
And it was therefore, if it would have worked out.
It would have been a low cost acquisition for us in terms of the purchase price.
The entire key to what was what would the loan portfolio perform it has performed relatively well historically, but COVID-19, it was primarily commercial real estate weighted.
In COVID-19 was going to take its toll.
So at the end of the day.
Yes.
The bank was bitter.
Between 100 and $300 million in size, we saw an opportunity that we could have made as much as $2 million to $3 million pre tax on it which would be certainly a nice boost income on a relatively low dollar investment.
At the end of the day when the due diligence came in it was just not worth taking the asset quality risk on that portfolio for that return.
So we'll see.
I wouldn't say, we would not look at something like that again.
There may be smaller banks that white running.
Run into some challenges there margins compress they don't have the same asset generation capability. We do their expenses are going up and they might look for an exit that could partner with somebody.
So we wouldn't rule anything out right now, but in that particular case.
When we got into the loan portfolio, we had our concerns but we thought it would be compelling enough. If it did work out to take a look and invest the money in the review and Unfortunately, the review did not come out like everybody would have liked it to come up.
[music].
Okay. Thank you I guess my other question is is there.
I appreciate that Theres, a lot of uncertainty out there both in the short term and even arguably in the medium term, but is there upside to this the share buyback program from from the current levels.
I think once.
I think part of it as as we want to continue to strengthen pre tax pre provision.
Income.
And as these different initiatives take hold.
And those numbers.
Recover.
Then obviously that creates more resources for share repurchases.
And that's one of the reasons why we wanted to put the extended expanded buyback in place so to the extent there are resources available to do it.
And asset quality and all the other metrics on cash management remain constant.
Where they are now that would certainly be an initiative, we would want to pursue I would believe that's why we set ourselves up to continue to do it.
The scale, we felt comfortable with and to the extent that our resources expand.
Expanding that repurchase program, especially at these levels would make sense.
But there are a number of factors in that including regulatory preferences. So we're going to have to take all the stakeholders views into account.
From going to go beyond where we're currently at.
Okay, great. Thanks, maybe one one last one are there any.
Other lending lines of business that you're not in right now that you you that the board would.
Consider getting into.
Any any thinking there would be appreciated also.
Well I would say that we already have started some material expansions.
Of the lines were in now so if you went back to the beginning of 2020.
Our principal line in the equipment finance was corporate.
And in the course of 2020 alone we have had a material expansion in the governmental space.
We had a middle market and we added small ticket in really middle market and small ticket are just getting going and even noteworthy through the middle of COVID-19, So right now in equipment finance, we have a capacity to go all the way from a 10000 dollar equipment finance transaction.
$20 million and.
And all the way from federal government through state government through local all the way down to small business.
So that's a material expansion over capacity right, there and it's already starting to pay some dividends in terms of volume that's how we got to $58 million of originations just in the third quarter.
And that's with a shutdown pretty much of the second quarter.
And commercial finance.
We started to lay the groundwork for moving the asset based lending portfolio beyond health care.
And that work continues.
We have the capacity to continue to expand health care in the supply chain.
We've taken some steps towards that already.
And services, so whether its medical labs, whether its medical transport we've done transactions on both those now they're small, but we're getting started so I would say for 21, expanding the commercial finance side is the next big is the next big opportunity, we we will get equipment finance.
Yes.
Up and running the rest of the way.
Probably in adding another two or three people in the middle market in the corporate side there.
Small ticket is up and running we just need to accelerate the volume consistent with market risks and then commercial finance next year will be the big focus.
The lesser credit side as I said earlier.
Added 20% to 25% more or less orders this year than we have in the past four years.
Demand for that those commercial finance products continue.
We have some new ideas to expand beyond commercial less or credit and health care.
And as we get into 21 will start deploying those.
It is too soon to make any kind of intelligent predictions about what those volumes could look like we still have to go through the risk assessments, but.
But that is the next step.
I think the way I would tie this together for you is this.
Our commercial finance products.
Match, and our Treasury services.
And our equipment finance and our real estate tie well.
So for example.
We have a new customer in equipment finance, we would immediately reach out to them and see if they are interested in the working capital line, including an asset based lending capacity one of those opportunities just showed up in the last two weeks, whether we do it or not.
Is a function of where the where the borrower wants to go but what we're building here are synergies between the different lines of business.
And now that we've got some of these lines of business up and running the synergies can fall. So we have some construction work to do not in the construction lending sense, but the business building a sense in commercial finance.
If you ask us in January and really in May as we do our calls we'll be able to talk much more intelligently about how those fit together and what will be capable of but we're not sitting on our laurels here.
To say the very least we did quite a bit of work in equipment finance. This year, it's showing some positive returns commercial finance is underway, but further not as quite as far along and when we put the two sides together plus what we're capable of in the Treasury services area.
It can produce a meaningful synergies and some meaningful growth overtime.
Okay excellent I appreciate that commentary and keep up the good work. Thank you Sir.
And as a reminder, ladies and gentlemen, if you have a question at this time. Please press Star then the number one.
Our next question comes from the line of Ross Haberman with Arlington, That's much your line is open.
Morning, Morgan How're you.
How are you.
I just wanted to follow up in terms of getting a sense of what is your overall exposure to out of state loans.
By category and.
Could you go over that thank you.
Okay, well the first thing is I would point you to our corporate profile.
That we published a couple of quarters ago.
The.
A lot of our growth Ross is outside of Chicago by design.
So equipment finance is equipment finance as a national business, so right off the bat, that's approximately just under 300 million.
And virtually all of it is outside of Chicago.
Obviously, the federal government exposure alone at about $70 million as nationwide.
But we work with governments of.
State and local governments across the country, if anything we'd rather finance state local government outside of Illinois that insight, Illinois for obvious reasons.
The corporate portfolio is nationwide the middle market portfolios nationwide's multichip portfolios nationwide.
The real estate portfolio and we break these balances out every quarter in the 10-Q.
The majority of the of the.
Multifamily portfolio is now outside of Chicago.
And.
And that will likely remain.
That way in fact, it will probably continue to increase slightly overtime, we probably get more payoffs outside of Chicago, because the markets are stronger.
But the majority of the multifamily portfolio now is outside of Chicago.
In the commercial finance portfolio is also outside of Chicago.
The lesser credits are nationwide health care. The majority of those commitments are outside of Chicago compared inside because the reimbursement rates in Illinois are comparatively worse. The occupancy is for residential care are comparatively worst to other markets across the country. So we go where the growth is.
So we're very geographically diversified in the EPS of portfolio and it will continue to develop that way over time.
So overall what portion of your portfolio would you say is out of state in total.
Well do you want to talk about real estate or do you want to talk so.
A little to help.
Thanks.
Oh, I'd say, probably about 65% to 70% right now we.
We don't do any commercial estate outside of Chicago, and we don't drag residential lending outside of Chicago those are the legacy portfolios.
Enlist in Illinois.
Everything else.
We don't do those assets outside of Chicago, but multifamily commercial multifamily equipment finance and commercial finance our old nationwide platforms.
50 states whenever however, no matter, what they're all carefully tied to risk assessments of but they are all eligible depending on the risk assessment in the United States.
So 600 million, plus and and and the default or the.
Full rates on those over all.
Any better or any worse than your tenure.
In your local multifamily.
Sure.
Well, specifically in multifamily, they're all better than Illinois.
Yes, that's one of the reasons. We did it is you have population growth in places like the Carolinas, and Texas and Florida, you have population shrinkage in Illinois, but even then because of the competitive environment, we easily pick up 25 to 50 basis points on multifamily.
Those markets over what Chicago does.
In part because of the competition in Chicago.
Theres a couple of large people, who price down and then everybody follows them and so we went one where the growth is.
Which you saw in better rents and better pricing and better population growth and two we went where the pricing was.
And just one follow up.
To what you just said who is the big banks, who are sort of pricing being most competitive on the multifamily down or just a couple of local.
Thanks, I wanted to try to win tries to someone like that who who's sort of most competitive in that.
I would tell you that chase dominates the market in Chicago, where chase wants to go.
His where everybody else goes.
Multifamily in Chicago can be as low in the low threes, whereas outside yes, three to three and a quarter to three and a half.
Other people follow them, maybe not exclusively but thats, where the market will trade and outside of Chicago, you're seeing high threes to low fours pretty consistently.
So right off the bat, but as I said 50 basis points.
So that among other things allows us to get more competitive in those out of state markets for the strongest quality credits and that's why the portfolio has the credit strength the dose.
Okay. Thank you Barry Thank you very much best of luck.
Thank you.
Thank you and I'm not showing any further questions. So I'll now turn the call back over to Mr. Green shirt for closing remarks.
Well. Thank you all for a great array of questions and your continued as a bank financial we'll work to move the company forward in this environment consistent with our discussion enjoying your remote Turkey and holidays, and we look forward to talking to you at 2021.
Ladies and gentlemen, this does conclude the press.
You may now disconnect. Thank you for participating and have a wonderful day.
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