Q2 2021 First Bancorp Earnings Call
[music].
Good day and welcome to the first Bancorp to Q21 results conference call.
All participants will be in listen only mode.
You need assistance. Please take note of the conference specialist by pressing the star followed by zero.
After today's presentation there'll be an opportunity to ask questions.
To ask the question you May Press Star then 1 on your Touchtone phone.
To withdraw your question from the queue. Please press Star then to.
Please note this event is being recorded.
I'd now like to turn the conference over to John Pelling Investor Relations Officer. Please go ahead.
Thank you Sarah good morning, and thank you for joining first Bancorp's earnings earnings conference call and webcast to discuss the company's financial results for the second quarter of 2021, joining you today from first Bancorp are of really Waldman, President and Chief Executive Officer, and Orlando, Berges, Executive Vice President and Chief Financial Officer.
Before we begin today's call. It is my responsibility to inform you that this call may involve certain forward looking statements such as projections of revenue earnings and capital structure as well as statements on the plants the objectives of the Companys business the.
The company's actual results could differ materially from the forward looking statements made due to important factors described in the company's latest SEC filings the.
The company assumes no obligation to update any forward looking statements made during the call. If anyone does not already have a copy of the webcast presentation of our press release, you can access them at our website at 1 first bank of Dot Com at this time I would like to turn our call over to our CEO of really all of them I really thank you John good morning, everyone and thanks for joining us today.
Please let's move to slide 5 to to cover some of the highlights.
Before we go into the highlights for the quarter I would like to touch on the macro environment on the progress we made on the integration and the support of customers to to the pandemic.
On the micro from.
<unk> relief funds continues to play a very important buffer for economic activity in the island.
On all of our 3 regions.
Micro indicators continue to show month over month improvements.
Passenger movement, that's on 1 in Puerto Rico to above pre pandemic levels since April.
And despite the recent slight increase in reported cases as of June vaccination rates on the island, a glut of over 60% now.
The significant amount of stimulus continues to strengthen our customers driving growth in the policy on also softening lundin mining of the near term.
The economy in Puerto Rico on Florida continues to show strong signs of recovery.
The economic activity of approaching pre pandemic levels.
Obviously, we have seen improved consumer confidence evidenced by increasing the retail sales credit card activity the weaker activity auto sales and in addition in the case of Puerto Rico or total coupons CNA be ours are now of pre pandemic levels.
The government collections were also on the rise continue to show an improvement of the economic activity.
We also seen in parallel the progress on the fiscal board to making on the Golar when the restructuring which is I think the positive for the macro in Puerto Rico.
Regarding the the adoption on our raised the users continue to increase we experienced a 4% increase this recent quarter on a 20% increase on a year over year basis, which is a good number.
Our day that John has continued to play an important the role in deposit gathering reducing bright transactions growth of Edwards.
It's a very important milestone for us we go to yield is a huge milestone this quarter.
Then the integration and conversion we are on schedule to complete the full integration. This.
During this quarter a few weeks ago in order to do lie we completed all systems conversions again. This for US This was really a huge milestone.
The to move forward.
Actually this this final conversion of allowed Roes for finalizing the branch consolidations in Puerto Rico, we actually did consolidate the 6 branches in this space.
We were really quite pleased with the progress on a look forward to capturing all of the children might get share going forward through our now expanded fully integrate the franchise.
Now we have certainty the most of the pending benefits without the synergies.
Will be reflected in the fourth quarter numbers.
Finally, with regard to to the PPP program.
We know it ended in May and final transaction where process in June.
To the life of the broad on we originated 245, mainly on <unk>.
Over for the sales alone supporting commercial clients, our gross interest regions.
Now the focus to through our fully integrated the Ddos platform self service, we have processed forgiveness to 81%.
Of the clients that participate in and run 1 equivalent to $377 million.
Also during this quarter, we disbursed the last 74 million of new SBA PPP loans and received principal forgiveness remade the us up.
<unk> of 151 million I think this is also important but obviously you know it was of great broad of what obviously was competing with with the day to day quarter basis of both for small business lending.
Now, let's let's let's move to slide 6 to cover the highlights for the quarter.
It was definitely a solid quarter for the franchise to generating $76 million.
The in net income of 33.6 per share compared to $61 million last quarter.
Currently the bromine microeconomic trends are a contributor.
Driving the reserve release of $26 million this quarter, but on the other hand, the core earnings pretax pre provision income increased over 10 million to the new a new high of.
The $96.6 million.
Our efficiency ratio for the quarter improved to 66 and actually if we adjusted that for Meredith on Covid related expenses, we were at 55% level, which is actually our our goal.
Asset quality metrics in all fronts.
Improve npa's decrease on the 9 Malian now to 1.2% of assets inflows inflows to non accrual and also the grease and delinquencies improved our gross on products.
Again, as I mentioned, the significant amount of stimulus continued to strengthen customer liquidity.
The bucket, excluding government grew $558 million or 4% on this quarter.
On the capital from capital ratios are very strong and improving.
During the second quarter, we repurchased 796 million shares for approximately $100 million under the previously announced $300 million repurchase relative to where we're very pleased with with all of the quarter.
Pardon me this is the conference operator.
It appears we disconnected army in the Speaker line, 1 of them and while we reconnect.
Okay.
[music].
Pardon me. This is your operator you May proceed with your presentation.
Thank you.
Yes.
Apologies for not sure of what happened, but hopefully we're back I just want to make sure the.
You know the the everyone who dialed in on its okay with the system, John Blake I'd like Scott Okay. Thank you.
So I was saying that that you know the consumer portfolio on deal in hand.
The grew nicely driven by auto of $98 million increasingly of the portfolio.
We also have from increasing the Florida market.
On the other hand, you know when you look on the commercial line on construction pipeline in really looks promising for you now.
When you compare this to earlier, how we were earlier in the year, there's a lot of the.
Theres a lot of more embarked in the in the loan portfolio side.
Driven by the macro when you look on the mortgage business higher hydro bales driven by rates.
The also the increasing limits on the conforming side that happen some time in order to we're having on effect most of the loans our nonperforming.
Second 1 is an example of the floor plan utilization is at the lowest level.
Due to inventory in the auto in the auto business.
The.
We expect that to actually change for us.
Inventories coming into the pipeline and another contributor on the construction, which is actually good news up for showing of operating units.
Also accelerated.
In creating repayments in those those lines that we have.
Available.
Again on then on the deposit side as I say, you know nice growth.
1.5 billion growth in the in the government segment in the public bonds tied to Puerto Rico on the on the ACL ratio.
So in the in a nutshell the.
On the franchise continued to execute well driving you know a lot of key initiatives in parallel.
In consumer growth supporting our commercial borrowers accelerating digital transformation and really making great progress on the on the conversion of on integration of the acquired operations. We are delivering on the expense efficiencies on P&I continues to improve.
Credit results on delinquency trends continue to perform well given the bromine and the economy.
And we are well positioned for the second half of the year on optimistic on the positive impact of the economic activity in our loan portfolio.
I am grateful to all first bankers for their dedication and commitment overcoming the pandemic challenges and coupled with the integration of activities that we have to dedicate over the past year also really proud of all of my teams were able to support our customer to this pandemic.
So with that I will turn the call over to Orlando to cover the financials in more detail.
Good morning, everyone.
<unk> mentioned on net income for the quarter with $70.6 million or 33 cents a share.
Compared to 61 million on our 28 cents of share last quarter pre.
Pretax pre provision was $96.1 million, which compares with <unk> 86 of <unk> 4 million last quarter.
Hugh.
Probably so on and the release the results for the quarter include a benefit of $26.2 million on the provision for credit losses.
As compared to what we had last quarter was also a benefit of $15.3 million the.
The after tax benefit of this provision on the results represents approximately <unk> <unk>. This quarter. It was about 4 times last.
Quarter.
Results also included $11 million in merger and restructuring cost associated with the acquisition.
Well in this quarter, while last quarter, we had $11.3 million.
Looking at other components of net interest income for the quarter increased $8.5 million.
We saw interest income on investment securities on non interest bearing cash balance has increased by $4 million.
Mainly driven by the $1.4 billion increase in the average balances balances, which is directly related to the increase.
We've had in deposits this year the.
The combined yield of the investment net cash interest bearing cost you to 95 basis points.
4 basis points this quarter as compared to last quarter.
The the.
Thing is that now investments on cash represent our 44% of all interest earning assets.
Which is the high percent of its 5% higher than what it was last quarter, which was 39% of the total interest earning assets.
On the commercial and construction alone interest income grew to 1.5 million.
That includes $2.9 million, we realize from some deferred interest.
That were recognized on our loans at what's paid off in the quarter.
Of that improved the margin by 6 basis points.
On the only had to be income acceleration on PPP loans beta was about $1.5 million, which is $1.7 million lower than last quarter and that reduced the margin by 4 basis points.
Net interest expense for the quarter was down $1.7 million.
The average cost of interest bearing liabilities total interest bearing liabilities was down from 63 basis points.
In the first quarter to 55 basis points this quarter and if we look on the total cost of deposits excluding the brokers.
It was 24 basis points, which is down from the 30 basis points, we had last quarter.
Our margin.
The 10 basis points lower was 381.
Despite the increase in net interest income but.
But we continue to see the pressure on on the change in the mix of assets.
To reduce continue to grow as a result of the deposit flows.
And also combined with the Aurelio mentioned in the.
The loan portfolio residential mortgages.
We continue to focus on on conforming paper and the loans of come down on on the portfolio.
Non interest income was fairly in line.
2 things.
The 3 main thing to number 1.
Last quarter, we had of $3.3 mainly on contingent insurance Commission. We received the <unk> received in the first quarter of every year based on the prior year volumes.
We didn't have any any.
Of that of this quarter.
Mortgage banking revenues worth of bad down.
Based on volume origination of originations, but on the other hand, we continue to see the transaction volumes on debit and credit cards.
Global op getting close to what they were pre pandemic and that increased the fee income based on on.
Those transactions.
On the expense side.
Expenses decreased by 3 million total expenses to $132 million as I mentioned that includes $11 million of merger expenses compared to $11.3 last quarter and includes $1.1 million in Covid related expenses, which was very similar to the 1 point to we had in the first quarter.
On a non-GAAP basis, excluding these items expenses were $118 million for the second quarter compared to $120 million in the first quarter for it to 8 million reduction.
On the water employee compensation is down 1 and half million.
We are starting to achieve the savings from the voluntary and involuntary separation programs that were implemented at the end of last year on during the first quarter, resulting in an out of additional savings of about $800000 to it.
Total savings for the quarter under this.
1.7 million net.
First quarter, we had to say savings of about $900000.
Also we had a decrease in payroll taxes of 1 and half.
The $1.5 million of employees reached to payroll of limits.
Oreo expenses were also down $2 million.
Marley.
$2.2 million write down related to the $20 million write down we had on the value of the commercial property in.
The first quarter.
We also saw reductions in professional fees of 900000.
Mostly associated with the PPP origination platform.
Cost of the viability of variable component.
But on the other hand, we had on increase on David on credit card of course, a combination of the higher volumes and the fact that we we received some some of them.
Incentive payments in the first quarter related to the 2020 volumes.
Our efficiency ratio of Aurelio made reference to was $60.6 million I'm sorry per cent.
But if we exclude the merger related cost the ratio improved to 55, 5%, which as we go continue to complete the conversion process of.
Of those merger related expenses will start to disappear.
The reduction significant reduction this quarter on those cost.
On a question, we get frequently and it's been what.
1 of the difficult components to respond we continue to to achieve savings from the sunk on there as I mentioned on the BSP zone.
And while the voluntary separation on involuntary separations.
Bob.
Give you some indication we believe <unk> expenses, excluding Oreo and transaction expenses.
Will normalize on a range of.
$117 million to $119 million.
Our per quarter in the near term.
Keep in mind that we have several technology projects that are appealing process and that's part of the.
The ultimate cost of this some of these projects. It's been included in our estimate but their skill.
Being fully determine the ultimate cost.
On on reserve levels and credit quality.
We have seen the.
The significant improvement umbrella of current macroeconomic variables over the last 2 quarters.
Both at the national level and in Puerto Rico.
The unemployment rate is projected to continue to improve as well as the home price index in the commercial real estate index, which are more leading indicators.
As a result the.
<unk> for credit losses of the total allowance for credit losses as of June 30 was $339 million, which is down $34 million from from the prior quarter. The reduction on this reduction in allowance led to the 26 million provision benefit in the quarter I had mentioned before.
The quarter. We also had a 5 million recovery on a non performing commercial loans that was paid off.
The answer of the result in net charge offs were selling on at $7.6 million as compared to $12.5 million, we had last quarter.
We look at the allowance Johnson loans, excluding some of the other components was $325 million, which is also down $34 million from from last quarter.
Looking at it by portfolio on the commercial loans the allowance the decline of $22 million.
In the case of residential mortgages the allowance.
On $1.2 million and in the case of consumer loans decreased $10.7 million, which basically was the charge offs that were taken in the quarter, we didnt need to add much in terms of provision small provision in the quarter for the consumer side.
The ratio of the allowance to.
<unk> to total loans held for investment was 285 as of June 30, compared to 3 to 8 as of March 30 <unk>.
We did not allocate any allowance to SBA.
PPP loans since they are basically fully guaranteed of.
We exclude those on a non-GAAP basis, the ratio of the allowance to loans was 294 compared to <unk> 20 in March.
I still we have to.
David can reserve coverage ratios on on the portfolio.
On the asset quality as we continue we continue to execute our strategy, reducing the nonperforming levels.
Total non performing assets decreased by $29.3 million in the quarter to 256 million and total nonaccrual loans decreased by $18.4 million.
To $183 million.
This reduction includes the sale of a $10 million commercial property of Oreo.
Oreo commercial property in Puerto Rico.
And we had decreases of $10.6 million in nonaccrual residential mortgage loans basically.
Collections of non performing loans and loans brought current.
And on consumer loans also we saw a decrease of $6 million part of it related to some of the charge offs.
Inflows to non accruals were down to $16.8 million compared to $32 million, we had last quarter on basically all categories had reductions.
Also improvements we saw improvements in early delinquency 30 to 89.9 days was down by $60 million from $144 million, we had last quarter to $84 million this quarter.
Resulting nonperforming assets now represent 1.2% of assets and loans nonperforming loans represent 1.6%.
For the total.
Loans from the portfolio.
<unk> continued to come down.
<unk> amounted to $450 million as of June we just spent mainly on lower debt we had as of March.
On the capital on front, the Aurelio already made reference to this but not without being repetitive just to mention capital. Obviously it remains very strong we completed the of the.
For the $100 million.
The acquisition overall the.
The capital.
The decrease less because of the revenues, we had in the quarter and on the.
On the OCI improvement on the value of the securities.
If we look at the repurchase.
On.
True through a couple of days ago, we have repurchase of 118 million that includes the 100 billions of repurchase as of June innovation on $18 million, we have repurchased sense.
And the repurchase of June represented approximately 10 cents per share.
Youre just drawing child.
Close to 1%.
But obviously all of our debt all of this was made up by by the revenues. The earnings we had in the quarter and the the OCI improvements. So we ended up with.
Tangible book value per share increasing 30 in the quarter.
With that I'd like to open the call for questions.
Sure.
Thank you we will now begin the question and answer session.
You're asking the question you May Press Star then 1 on your Touchtone phone.
If youre using a speakerphone please pick up on the handset before pressing the keys.
John on your question from the queue.
These cost tied on to you.
At this time, we will pause momentarily to assemble the roster.
Our first question comes from Abraham down of Waller with Bank of America. Please go ahead.
Yes.
Hey, good morning.
Hey, Brian.
I guess just the first question.
On expenses.
So thanks for putting our debt guidance for 107 to $1.19.
Right.
How quickly do you think we reset down to debt level.
And once we get to debt expense level, how long should we think about growth from that point on or do you think that is relatively steady state average.
And obviously on the revenue growth driven.
Expenses.
We were expecting debt by the fourth quarter.
We still have some transaction expenses of the <unk>.
Third quarter so.
Of those out.
We would be we would be.
At similar levels.
We started realizing more of the savings now of the fourth quarter and we're expecting to be at those levels.
By the fourth quarter.
Obviously the.
Excluding Oreo of bad because of the volatility of you could have on some of the components.
But on the other we see that 2020 to 22.
There is a little bit of impact from some of the projects that I mentioned on the technology side of that it's going to come in.
But we still feel that it's going to be in that range of so.
So we are hoping to to reach normalization of an expense base by the end of the year, where we can see quarterly already.
Some of the savings already implemented.
Aurelio mentioned, we're closing some of the branches now and we are also being the eliminating some of the.
Services that were being provided.
We kept to systems running.
All of those those benefits will show up in full of full impact in the fourth quarter.
Understood and do you mind me.
If you could please what was the module cost expensive debt outstanding that you expect to record in the back half of the year.
The merger restructuring charges from the back half of the year of the the.
We're still I mean, the originally we thought it was mostly going to be done through June, but but as we move to some of the conversion on the deposit side too.
To the out to you lie.
We still feel that it could be somewhere between $405 million that is left.
Hum.
Okay.
It's relatively small understood and then.
Just on the capital front I mean, obviously you still have a lot of excess capital you did a decent amount of buybacks.
1.
Talk to us in terms of your appetite to accelerate the buybacks of our upsized of sort of the 300 million dollar amount as we think about the next year.
Remind us in terms of what to do.
And the game or on the targeted capital ratios.
I'm, assuming as the CET 1 that you are targeting.
You want to.
Yeah the.
I think the capital planning.
It is of leaving.
Is it to.
Living creature debt, we go to monitor.
Constantly as we perform.
When we build the plan, we have certain levels of expectations for the year.
We actually are doing better than that so so we'll revisit the plan.
Again, not this quarter, but next quarter.
And it could change it could change depending on how the branches perform we wanted to get done I think this huge step of finalizing the integration. It takes you know the resources of lot of time and make sure of the franchise.
First to perform well on now entering to the third quarter.
We have a lot more confidence on on on the.
On the the prospect of over the next couple of quarters. So so it's something that we will re look again.
I think everything is on the table as we have been progressing.
We did the acquisition we didn't expect it to do the buyback. So so so quick so we move a little faster than expected them and actually to a higher number.
We then expect the so now that continues to be the case, we'll continue to reevaluate.
And decided on again the target capital ratios are are a factor of the environmental the macro the fact of the asset quality of factor of all components of the economy.
In the.
And that will evolve also so we still operating with certain cushions that we haven't we.
We haven't published to the market book.
But we will continue to evolve we see the economy getting stronger.
And we see asset quality metrics.
Getting closer to what you as banks are which we expect that same continued to moving that direction.
Got it and just tied to the asset quality metrics the.
Loan loss reserves, the ex PPP of 3.2%.
Remind us of Orlando.
So even if we get to a steady state environment whats the normalized yourself to levels that you see a bad NPA of Npls.
Sure Nate.
Where do you see that number of kind of bottoming out.
Hopefully it's zero.
Yeah.
Where are they at this point.
What is the amount of time, what we're seeing is sort of if you go back to our day, 1 seasonal reserves that are at.
At that time, we calculated to there, we're not going to be able to 6%.
So we believe that we should be able to hit that target.
So we're in the process based on the way the economy is moving on the project economic macroeconomic variables are so that's the first indication.
The.
We continue to see on.
The relative with the best already employed in the market in Puerto Rico, and so on maybe getting the nonperforming down more clearly.
1.2% of assets look looks really good to the <unk>.
To what we had before but what obviously, we would love to be on on there.
Non performing loan side, which is 1.6% be more on the on the 1% levels on the line. So we'll welcome we continue to to moving that direction.
There is.
The the pandemic did bring up.
Some of roadblocks or delays, let's call it on on things like for closures, especially on the residential side, which is the largest chunk of the nonperforming we now have the delay.
Delays of the process of getting some of those loans resolved.
So we're working to that.
But on the other hand as you saw in the quarter, we have seen.
Better prices on on chart <unk> offers the direct consider of better prices on on.
On people paying for paying down some of the loans or getting them up to date.
So that has a help and also in getting the numbers down.
Got it thanks for taking my questions. Thank.
Thanks Amy.
Again, if you'd like to ask the question. Please press Star then 1.
Our next question comes from Alex for Dol.
Piper Sandler. Please go ahead.
Hey, good morning, guys.
On X.
The first of all I'm, just trying to hone in on.
1 of your comments from the prepared remarks really on you said that the the <unk>.
Loan pipelines really look promising and I was hoping you could elaborate a little bit more on some of the things Youre seeing I know in the past you've been very optimistic about the potential for some construction loan disbursements later this year.
Are you still feeling optimistic on that and kind of maybe help us understand.
The timing behind some of those projects coming on line.
Well, we do expect a yes.
Yes, the the construction piling it's improving.
And is linked to the trillium vessels coming to the island, it's linked to the housing demand is linked to <unk>.
<unk> the debt.
R B.
Being up rules on actually.
The starting to kick off.
I think we I think of.
Obviously, I think every quarters youll get better.
The as we move on and obviously broadly speaking in 2020 to.
The.
I think obviously housing housing demand.
<unk> continues to be of factor that wasn't there before.
And and the other elements of the construction take of that.
It will be longer Budd.
When you look at the size of the of the pending funds to be deployed that on all of reconstruction.
Definitely the is something that ought to continue build up we expect to have.
Improve every quarter from now on and that's what the teams are working for.
The consumer side, we had.
I'll have to say weaker on secured lending personal loans in.
Credit card volume in the first half of that actually is improving and book to May and June recently.
All of the ore is very solid even with the limited inventory and we expect that to continue solid.
By the army solid.
On the mortgage side repayments are higher so as long as rates.
Continue to to be so attractive to refinance on the on the conforming side.
We might be continue to solve for higher pay of them we planned for.
In.
We know that inventory is going to start to increase because factories are and we are of very large auto floor plan portfolio. So so when you out of the pieces, we definitely to expect.
The 2 and we're working towards improving our volume of originations quarter by quarter.
Okay, that's very helpful.
And then a question for you Orlando just as I think about the deployment of cash to securities that you did during the second quarter and the impact to NII.
It has the full impact of the security purchases has been felt in the second quarter or is there some carry through.
Or is there some timing that's going to cause that level of NII associated with cash and short term to actually decrease in the third quarter.
The.
The.
The thing here.
I'd like to set up.
Obviously, it's all tied up to to what what's happening with the the asset flow. So the elements on this quarter, we had $1.5 billion of.
Gorman deposits to come in.
We know that some of those funds are temporary once are related to some of this claim.
For <unk>.
So some of it is going to go away, we still had.
Our <unk> to 1.5 billion of cash.
Some of it.
Most of it it's on the per account.
It does get some interest payments, but it's small amount.
The the.
The question here is for the.
Obviously, we were cautious about extending investment portfolio of life.
Within the policy guidelines, obviously, but even within that extending it because of the.
130.
Sure.
The 10 year note, which is the lower now.
The hunger to attractive income from a.
Again, the extension risk in there. So we are trying to trying to keep at the lower so.
I believe that there is still going to be a little bit more pressure on the margin because of that.
And to the third quarter.
Okay.
And then just wanted to do the follow up on on the question on the buybacks.
Could help it to notice that the number that the.
The bought back in the second quarter was for a fairly round number to $100 million should we expect another $100 million to be repurchased in the third quarter.
Yeah.
We said, we sort of goal of $100 million in the first quarter, we wanted to accelerate and we did that.
We havent disclosed anything we are where we have targets for each quarter of we have set internally will will review those as we go on.
Go along.
I cannot tell you that net.
I cannot answer to you've got really the that's the goal.
We'll see how much it makes sense to do.
Okay and then just final question for me, just maybe a little bit of help on the tax rate and expectations.
And then how should we think about that $64.6 million of DTA valuation allowance still at first bank of you called out in the press release.
The valuation on the per on first bank.
On the on.
Prior to discussions we've had remember that the.
The tax losses in Puerto Rico on for.
Fortunately.
This position that to exempt income has to be consider as part of the.
You cannot use some of some of the Nols because youll have to offset with some of the exempt income. So a large part of what what's there has to do with then there might be a little bit of the DTA that can be used but but we don't we don't expect much of that to be use unless there is a shift.
And what Youre seeing on the tax rate, it's a little bit of a.
The large amount of excess cash is in the domain and investments not all of it it's exempt.
And therefore, the tax rates have gone up because of that so that could help a bit on on that relationship would feel we're having a good chunk of exempt income.
Oh, I I, 1 I am not in a positive position to tell you that much of the $64 million will be realized.
It's most of it probably won't be realized so we are just trying to see how we can maximize and use some of it because of that those levels of exempt income within the bank.
Okay, and then just in terms of modeling of the tax rate should it be closer to that 36% for the third and fourth quarter based on the level of in that sense of et cetera.
Well the effective this quarter was our 33.
Well remember 33, something we disclose that.
We're seeing something should be similar to the had 33% to 34%.
We still have of the assembly of income we still have it sales the relationship Alba.
Remember that.
We had reserve releases the level of charge offs are down so all of that increases that are taxable component.
As we go forward and that increases the effective tax rate, we are coming from from an estimate of 30 just over $30.
<unk> on how for something like that to.
The number on a lot of it has to do with the.
The combination of operational taxable.
Interest income on much lower expectations on on reserves and charge offs.
This concludes our question and answer session I would like to turn the conference back then of Merit to John Pelling for any closing remarks.
Thank you Sara on the IR front, we have Piper Sandler coming down for on Investor field trip in person September 'twenty 3 'twenty for.
We greatly appreciate your continued support and with that we will conclude the call. Thank you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.