Q1 2023 UMB Financial Corporation Earnings Call
Ladies and gentlemen, welcome to the <unk> financial first quarter 'twenty three financial results Conference call.
My name is gone and I'll be the moderator for today's call.
If you would like to ask a question. During your presentation you may do so by pressing star one contact when key pad.
I would now handful flow over to Kay Gregory Investor Relations K. Please go ahead, good morning, and welcome to our first quarter 2023 call Mariner, Kemper, President and CEO and Ron Shelton CFO will share a few comments about our results.
Jim Rine CEO of <unk>.
I'm sorry.
There will also be available for question and answers.
Before we begin let me remind you that today's presentation contains forward looking statements, which are subject to.
Those risks and uncertainties.
Risks are included in our SEC filings and are summarized on slide 47 of our presentation.
Actual results may differ from those set forth in any forward looking statements, which speak only as of today, we undertake no obligation to update them, except to the extent required by securities laws.
All of our earnings per share metrics discussed on this call are on a diluted share basis.
The presentation materials and press release are available online at Investor Relations.
Uh huh.
Now I'll turn the call over to Mariner Kemper.
And good morning, Thanks, everybody for joining US today 2023 is certainly shaping up to be an interesting year.
We've all had a front row seat to the recent volatility across the industry sparked by the failure of FCB and exacerbated by a few market participants in the media.
While the events of the past several weeks that put banks in the spotlight may not have been anticipated.
And in the latter part of 2022 in early 2023 have pointed to coming challenges.
We expected the continuing inflation changes in the yield curve.
Outflows in excess liquidity built up during the pandemic and the resulting deposit beta acceleration in response to the <unk> raising an unprecedented nine times in the last 12 months would likely present, some inherent but manageable risks to the industry.
By design. This would also lead to eventual curtailment of credit and the slowing of the economy.
At <unk>, we're always prepared for different environments with our variable asset base diverse deeply entrenched deposit base ample sources of liquidity growing fee income businesses and our long track record of conservative underwriting, resulting in excellent asset quality.
And we've taken the additional steps to enhance that risk profile over the past few weeks.
Okay.
Even with a more challenging environment in March we had a strong first quarter like others, we saw rising deposit costs.
Which we're already beginning to materialize before the recent market turmoil the flexibility we've built on the asset side of our balance sheet, including a low loan to deposit ratio, 67% of total loans repricing within 12 months and nearly $1 $6 billion of securities cash flow expected over the.
Same time will help mitigate this impact on liability pricing.
Our first quarter results included average deposit growth of two 4% and average loan growth of 19, 3% on a linked quarter annualized basis.
We had continued momentum in our fee businesses and credit quality remains excellent with net charge offs of just 0.09% of average loans nonperforming loans further improved from year end. We're at just 0.07% of total loans as of March 31.
As Youll see in our 10-Q criticized loans were flat our watch list levels, which are still pass loans will bounce around as we manage our book were quick to recognize trouble take action and address any issues. This proactive management has been consistent and historically, we've seen very little <unk>.
<unk> to us.
Turning to the balance sheet the drivers behind our 19, 3% linked quarter annualized growth in average loan balances. This quarter are on slide 24.
Total top line loan production as shown on slide 25 was $934 million for the quarter payoffs and Paydowns represents three 3% of loans in the first quarter. The average for the past five quarters with just under 4% in line with our longer term trend.
Commercial real estate and construction growth in the first quarter came predominantly from industrial and multifamily categories. This quarter, we provided additional disclosures on our CRE portfolio and our line of business section on Slide 37, and 38 credit quality is strong across our book and the portfolio is well diverse.
Suffice it by property classification tenant type and geography.
As it relates to office CRE, our portfolio of just under $1 billion represents just four 5%.
Of total <unk> loans, the average size of an office credit is $8 2 million and approximately 70% of the portfolio matures in 2025 or later.
The office portfolio is 82% recourse and has a weighted average loan to value of approximately 65%.
The smaller non recourse portion is a lower LTV ratio of 61% and as either leased to credit tenants long term or with our strongest sponsors.
We've generally limited our office lending to our strongest and most experienced sponsors and we adhere to conservative standards, which include underwriting to imputed or stress interest rates and moderate loan to value ratios.
The majority of our office portfolio is located within <unk> Midwestern footprint and we have no office exposure in major coastal markets.
Given our Midwestern focus our borrowers are seeing continued leasing interest and increasing return to office activity. This is supported by the makeup of our portfolio, which is 55% in suburban office parks and an additional 17% in medical offices.
We continue to monitor the portfolio closely and stay ahead of any emerging risks.
Looking ahead to the second quarter, we see opportunities in our various verticals across the footprint. We will continue to remain disciplined on our pricing and further emphasizing lendings that come with deposit relationships.
On the other side of the balance sheet average deposits increased two 4% on an annualized basis compared to the fourth quarter as we shared earlier in our 8-K since March 9th balances increased more than $1 billion at quarter end for comparison purposes. The peers, who have reported through the end of last week reported a median increase in average.
Just over a 0.0% to 5%.
Looking at DBA, we saw a shift of less than half of what our peers reported.
Importantly, as we pointed out each quarter activity in our commercial and institutional customer base differentiates us from our peers with larger retail customer basis.
On any given day, and particularly at month end and quarter end deposit balances fluctuate for normal business purposes, such as payroll dividends and other expected activity. This is why we focus on average balances over the quarter.
Slides 30, and 31, so the composition and the characteristics of our deposit portfolio.
We have a very diverse deposit base across various industries lines of business and geographies.
55% of our deposit accounts spanned 10 years or more.
Additionally.
We have deep business relationships with depositors with many using other products and services such as asset servicing corporate trust payments and Treasury management.
Uninsured deposits adjusted to exclude affiliate and collateralized deposits were 43% of total deposits as of March 31.
We have the opportunity to reduce this ratio even further.
As much as 10 points by using sweeps.
Additionally, we continue to enhance our already strong contingent liquidity sources, while increasing our proportion of insured deposits as a result, our liquidity covered approximately 115% of uninsured deposits as of April 20.
Lastly, before I turn it over to Ron I'd like to mention that I've appreciated the efforts of the research analyst community, including those of you on this call.
You've made an effort to educate market participants and avoid contributing to unfounded fears.
From Thanks, Mariner I will share a few additional drivers of our first quarter results then I'll discuss some of the key balance sheet items that are top of mind in the current environment related to deposits securities liquidity and capital.
Net income for the first quarter was $92 4 million or $1 90 per share.
Operating pre tax pre provision EPS for the quarter was $2 78 per share compared to $2 44 for the first quarter of 2022.
Net interest income decreased one 4% versus the fourth quarter as the positive benefit from asset repricing and the benefit from loan growth was offset by the mix shift and liabilities and the impact of fewer days in the quarter.
Net interest margin for the first quarter was 276% a decrease of seven basis points from the linked quarter drivers included negative impact of approximately 51 basis points from deposit pricing and mix and 16 basis points related to changes in fed funds purchased repurchased agreements and short.
Term borrowing levels.
Offsets include a positive 34 basis points from loan mix and repricing and 29 basis points from the benefit of free funds and changes in liquidity balances.
While deposit costs continue to increase our earning asset beta of 49% is outpacing our total cost of deposits and total cost of funds betas of 36% and 41% respectively cycle to date.
We continue to benefit from the shorter tenor of our asset base, including the fact that 67% of our loan portfolio re prices within 12 months.
On a linked quarter basis, our loan yield beta of 61% outperformed our total deposit beta of 48% and total cost of funds beta of 59%, but were lower than our cost of interest bearing deposit beta of 69%.
As I noted earlier the beta on our cost of interest bearing deposits increased due to mix shift, including our issuances of brokered Cds with different tenors prior to and subsequent to the failure of SBB.
In the first quarter approximately 38% of our average deposits were interest free DDA down slightly from 40% in the fourth quarter.
The flexibility embedded in our balance sheet from variable rate loans that repriced at a higher proportion of DDA provides us the ability to absorb and mitigate increases in cost of liabilities in the current high interest rate environment.
As we've noted before given the larger corporate and institutional nature of our deposit base, our deposit betas are more pronounced than many of our peers.
And the current interest rate environment, we've taken additional steps enhancing asset pricing discipline and further emphasizing lending that has deposit relationships as well.
As we look ahead there are many factors that play into our expectation for net interest margin, including the shape of the yield curve anticipated changes to short term interest rates continuation of mix shift higher cash level and competitive pressures from other financial institution and off balance sheet products.
There is a greater degree of uncertainty today, given the confluence of all these factors.
Looking ahead, we would expect mid single digit growth in net interest income on a year over year basis. Additionally.
Additionally, we expect to generate positive operating leverage in 2023.
Our reported noninterest income of $130 2 million contains some market related variances, including in company owned life insurance income of $4 million versus just 21000 in the fourth quarter and a $1 $8 million increase in customer related derivative income.
Coli income has a similar offset in deferred compensation expense.
Customer acquisition and solid performance in corporate Trust Fund services and private wealth drove a five 3% increase in trust and securities processing income quarterly income in that category exceeded $62 million and we continue to see opportunities for growth.
The $5 million decrease in net investment security gains related to an impairment in the value of one off our bank sub debt holdings.
The detailed drivers of our $237 million in noninterest expense are shown in our slides and press release.
A few items of note employee benefits expense increased $13 2 million largely due to typical seasonal reset of payroll taxes insurance and 401K expense.
As previously noted the industry wide increase in FDIC assessment fees added $1 3 million and we had a full quarter of increased amortization expense related to the HSA acquisition in the fourth quarter as we discussed last quarter, we expect approximately $4 5 million of additional amortization expense annually.
These increases were offset by a normalization of accruals related to various incentive plans and timing of marketing and other spend from elevated fourth quarter levels.
Considering builds variances, we would put our quarterly starting point closer to $227 million or noninterest expenses.
This slight positive trends and credit metrics provision for the first quarter increased to $23 3 million and included approximately $9 million related to forecasted changes to key economic variables and 7 million for growth in our loan portfolio Rick.
Quality of our loan portfolio remains excellent at Mariner mentioned, our coverage ratio increased to 97 basis points of total loans from 91 basis points at year end.
Our effective tax rate was 17, 2% for the first quarter compared to 15, 7% in the first quarter of 2022.
The increased rate was driven primarily by excess tax benefits related to equity based compensation for.
For full year 2023, we anticipate the tax rate will be approximately 17% to 19%.
Now looking at more detail at the balance sheet I'll start with the details on our investment portfolio slides 28 and 29.
Our average investment security balances remained relatively flat from the fourth quarter at 11 6 billion, excluding the $1 $2 billion of industrial revenue bonds in the held to maturity category.
During the quarter $250 million of securities with an average yield of 242% rolled off.
The yield on our <unk> portfolio increased 15 basis points to 269% and the HTM portfolio excluding of the IRB as I mentioned had an average yield of 236% for the first quarter, an increase of seven basis points.
The portfolio split roughly 60 40 between available for sale and held to maturity and the <unk> book has a duration of four years.
Additionally, the portfolio is expected to generate nearly $1 6 billion of cash flows in the next 12 months, providing further funding flexibility the roll off of these securities will also improve our LCI position over that period.
Our unrealized loss position has improved from year end benefiting from the reduced mark on the <unk> portfolio in HTM portfolios as interest rates have come down since December 31.
As of March 31, the unrealized pre tax loss on the portfolio narrowed to $678 million or eight 9% of the amortized cost for.
For the HTM portfolio. This loss was $490 million relative to the amortized cost.
As we've shared previously we transferred securities with an amortized cost of $4 1 billion from <unk> to HTM in 2022.
The remaining balance of the unrealized pretax losses related to the transfer was $237 million as of March 31.
Additionally, an after tax gain of $57 million related to fair value of hedges was included in OCI.
We have no need to sell bonds, which could result in realized losses, we intend to hold these securities as they are important asset class used to collateralize municipal and trust deposit and can be used to bolster our liquidity.
Slide 33 highlights our liquidity position along with the contingent sources of funding available to meet customer and operational needs as.
As of March 31, we had $13 4 billion in available liquidity sources.
As Mariner mentioned liquidity coverage of uninsured deposits have increased to 116% as of last week.
Also on that slide we've included our regulatory capital ratios. Our CET one of 10, 57% compares favorably to the peer median or tangible common equity ratio improved five basis points from the fourth quarter to six 2% and 8% excluding the ALC.
TCE was 783%.
That concludes our prepared remarks, and I'll now turn it back over to the operator to begin the Q&A portion of the call.
Okay.
Thank you.
Ladies and gentlemen, if you would like to ask a question.
Please press star followed by one on tackling key Pat now.
Ask your question.
Our focus on mute locally.
We have our first question comes from Jared Shaw from Wells Fargo.
Your line is now open.
Yes.
Hey, everybody good morning, Thanks, Hey, Jed.
<unk>.
Yes, good job during a difficult environment.
The deposit balances.
Nice to see the resilience.
The model there.
As we look at deposits I think in the past you've talked about DDA as a percentage of total maybe trumping dropping around 35% is that still.
Good.
Florida too.
Do you expect on the zero cost deposits.
Okay.
Well this is mariner.
We watch it closely we still expect to maintain the overall.
Outsized balances.
Who knows exactly what the pressure short term will be on higher interest rates.
It is possible that a little bit could move.
From where we are at 38 today.
We don't necessarily expect that we just can't really.
I'll tell you one way or the other if there is a little more movement because of the higher rate environment don't expect it to leave the balance sheet. However.
Hey, this is Rob the only thing I would add is last cycle, we bottomed out at 32% and since then we have a lot of new business.
Slide corporate trust on the aviation side that contribute a lot of Tas as well. So arguably you would assume that it would be higher than where we bought in that last time, but I've never said.
This is unprecedented rate environment and rates are much higher than anybody ever force foresaw that.
I mean, it's been more stable than it has been more stable than we would've expected it to be really given the higher rate environment. So I don't we don't expect a whole lot of movement.
Okay, and then as we as we look at the data.
So the cumulative beta through the cycle.
Could we.
Expect for our peak.
Peak through the cycle data on overall cost of deposits.
Or interest or where you want to look at it.
Yes.
36, as I said in my prepared comments, we're probably assuming another rate hike than we.
Stay at five in a quarter I would expect our total cost of data to be around 40% Jarrett.
And Darren I would just add we like to focus everybody on.
The whole balance sheet anyway.
We.
We expect our asset pricing to remain strong and disciplined.
And obviously our asset base.
It's very flexible and with 60% of our loans.
Repricing with interest rates and 70 within 12 months is really really important from our perspective and not just focus on deposits.
Maybe once we once we see rate cuts at some point in the future.
What's the what type of way.
How quickly can that pass through margin or what type of lag should we expect.
Once we actually see see cuts in the future.
Thank you. So this is such a different environment I guess, it's hard to tell I mean, if you look at past cycles.
Positive so move faster on the way down which is the opposite on the way up right. So on the way down historically we've benefited.
<unk> faster.
Because the deposits move first on the way down so if that's any if the past is any indication of the future.
We're positioned pretty well for that it's probably too early to talk about.
How much is how prepared we are with the assets on whats term in what.
What floors are and all that I mean, it's awfully early in the cycle moving on that but we will be prepared for you when it counts.
Okay, Alright, and then just finally for me I appreciate that.
The color on the office space.
Yes.
The detail around how high quality it is as you're talking to sponsors.
Better may be coming due in the next 18 months is your sense that.
So it has come to you that they would be.
That there is access to additional equity to put into those deals as they come to you to keep those strong.
Strong metrics or would you do you think that there are more willing to sell a property you said.
At renewal now.
Now I'll take a stab at that and Tom can add to it I mean, these are very very strong borrowers with low loan to values.
Stressed interest rates on the front end and we do all our work on the front end is probably the best answer I can give you we stress these upfront.
Two very very strong liquid sponsors with big portfolio of other real estate and strong cash flow coming off of other projects.
To add anything offices, we just.
If the ROI or the wrong bank to be focused on the office portfolio, it's less than four 4%. It's super strong we don't think about it over here, but Tom Yes. This is Tom Terry.
Just to reiterate the four 5% of our total portfolio and we are more suburban.
In terms of more mellow and medium rise office as opposed to downtown office.
And so we have very strong sponsors.
Sure.
We don't have any worries about their ability to put in more equity.
Required at the time of renewal.
And I think in our remarks, he talked about how much of it.
Prices in 'twenty, five and beyond when you think about the cycle and the changes in interest rates, I mean, thats, probably pretty well protected in any way by the time 25 rolls around.
Great I appreciate the additional color. Thank you.
Thank you.
As a reminder, ladies and gentlemen, if you would like to ask any further question. Please press star followed by one on telephone keypad now.
We have our next question comes from Chris Mcgratty from <unk> you Chris Your line is now open.
Good morning, Chris So great.
Hey, good morning, everyone.
Just going back to credit obviously this earnings season has been a lot about office real estate.
Mariner or team is this where we need to focus for your company. The most or is there other portfolios that perhaps are getting more attention.
Just a moment ago I tried to reference we don't worry about our hospice at all here again, it's a very very small part of our portfolio.
That we don't worry about office here.
I don't if you go to our provision expense $9 million as we mentioned in our comments $9 million of that is tied to the seasonal.
A process that we now use with economic factors $7 million of though is based on loan growth. We had zero expectation that we fall outside of our historic charge off metrics, regardless of what the environment is.
We've been asked this a long time, you've got in this room with me I've got Jim Ryan and commentary the three of US have been doing this together through the last three cycles and we've had outstanding credit metrics, we're really proud of and we don't expect anything different.
Thank you.
In terms of.
Maybe a question on the on the ratings downgrade, which has gotten a lot of attention to the group.
Does this change your business at all.
Other deposits that either.
Tied or correlated to your rating.
Obviously, we could argue if it's backward looking or even right to begin with but is there any effect on your deposits from.
From what happened.
Not no not long term we had.
There was a little disruption at the very beginning that Monday after SUV.
Failed, where it's cost us a little bit with a few clients, but since then thats all recover I would point you to.
Something pretty important which is.
When the interest rates go up nine times in a year and the expectation of the fed is that we slow the economy I guess, what happens we slow the economy.
So a big part of that there's going to be a contraction in loan growth for the industry. All of this is anticipated all of it is expected. It is a cyclical outcome of what the federal government is doing intended to slow the economy.
Was it exacerbated slightly by what happened to SBB sure, but we are way way overblown.
The impact of two failed banks and expecting that that has something to do with the rest of us.
You guys on this phone are way smarter than some of these market participants U S way better questions that our research and.
I would just suggest that we move on and start talking about the rating agencies, which added value.
Yes, thank you for that.
That's good context, and then maybe one for Rob if I could I think you said.
I'm not sure I got my notes mid single digit growth in net interest income that's on a full year 23 over 22.
Correct.
In terms of what to get to that number.
You mentioned $1 six coming off the bond portfolio I assume that we'll get.
Redirected into the loan book is.
Is the is the assumption still there even with your slowing economy comment I mean last quarter, you talked about double digit grower, regardless is that is that still kind of baked into that or did you kept tempered that at all.
I might just make sure I got your question right. We expect the same kind of loan growth.
Is that the question, yes, like what are the assumptions to get into that mid single digit growth in NII.
I assume it's a remixing of the balance sheet a bit.
Yes.
Everything that you said in terms of we talked a little bit in our prepared comments about how we're going to be really disciplined on asset pricing, making sure that our asset betas are exceeding what we do on the deposit side, so whatever that nature of the market Magna also talked in his prepared comments about the expected contraction in gist.
A credit.
That said one of our tenets of our investment thesis has always been outperformance in terms of loan growth. So we still see opportunities, we still see expansion opportunities at our verticals our pipeline looks pretty good. So it's just.
No real.
Softening of demand from our from what we see yes.
Think naturally loan growth will slow that doesn't mean, we stop growing I don't think that nationally systemwide load growth will slow a little bit.
But thats off a pretty decent growth base anyway and you include.
Solid asset pricing our ability. We believe we can continue to have strong loan data and strong pricing discipline, which coupled with a what we believe will be a flattening.
Expansion on the deposit side will allow that mid single digit expansion that turnaround side, yes.
And you mentioned the $1 $6 billion Securities book, Rolling off, but slightly north of two to handle them.
Being reinvested into new loans that'll be a big part of net interest income driving as well.
Got it that's great. Thank you.
Yes.
Yes.
Okay.
Thank you Chris.
As a reminder, ladies and gentlemen, if you would like to ask any further question. Please press star followed by one on telephone keypad now.
We have our next question comes from Nathan race from Piper Sandler Nathan Your line is now open.
Yes, hi.
Good morning, everyone.
Appreciate the questions.
Good morning.
Going back to the NII growth assumptions or guidance for 2023.
Does that contemplate one more fed rate hike.
And then Tom.
The fed on pause from there.
With that that's right yes.
That's correct.
Okay, Great and then just in terms of some of the.
<unk>.
Balance sheet dynamics in the quarter looks like you had about $2 8 billion in short term debt I guess I'm just curious what the impetus behind that was and kind of what the near term or intermediate term plans are.
Got it.
Yes, I'll take that so if you look at our balance sheet. If you look at on the asset side, our interest bearing deposit at banks was also elevated.
Close to $3 billion, which is up to $1 billion on a quarter over quarter basis. So it's just out of abundance of caution that we have both sides of our balance sheet. We did have some some excess borrowings they were.
Parked at.
But the fed accounts so.
Going to evaluate that periodically based on the current climate and environment, but it's not a long term obviously strategy for us to be dependent on a whole lot of wholesale funding. We're watching it close to our expectation is that things continue to improve and normalize and we reduce those levels.
<unk>.
Okay great.
I guess on.
Those kind of.
Is the expectation that youre going to internally fund loan growth, which it sounds like the pipeline is still pretty strong.
Second quarter with both cash flow coming off the securities book and deposit growth going.
Going forward.
Yes.
We expect that we can continue to to fund loan growth with deposits.
We're re centering I think as everybody is around relationship banking, which is what we've always been.
I think it's <unk>.
Somewhat important to note.
Over the last decade, you come off of the great recession banks like us benefited pretty handsomely from flight to safety. So our balances grew then and then you go into the pandemic and the government pumped money into the system and there was an enormous amount of excess liquidity dumped into the system, which has been absorbed.
And during that time.
Banks like ourselves and many others I think.
Started placing some high quality loans on our balance sheet that maybe you didn't come with as much deep relationship in deposits.
If there's anything we reminded ourselves over the last 45 days, it's who we are and what we've always been which is in a fantastic relationship based bank, but really deep relationships and.
And so I think.
How we're going to go forward with funding our loans as we'll just be more recenter around.
Deep deeper relationships and Thats, how we expect to fund loan growth going forward.
Okay, Great and then turning to <unk>.
Some.
Yes.
The income drivers in the quarter. It looks like you guys had a pretty strong quarter, we've come to fund services and the corporate growth.
Institutional segment.
The rate of growth that we saw on those.
Your line is kind of sustainable as you look out over the next few quarters.
What were some of the underlying growth drivers that you guys are scheme in terms of new client adds and just overall.
Pipelines with the move.
Segment, Yeah, I think Nate I think largely that.
A lot of it is just coming from multi year investments made in those businesses. So we've talked actually in the last few quarters about what the pipeline looks and fund services for example, based on <unk>.
Consolidation in the space and private equity backed firms being sidelined for new business.
So we benefited a lot by some of that pipeline, how many actually coming to fruition on the fund services side. For example, and also obviously private equity has because of what's happened to the public in liquid markets private equity has been really strong over the last many years and continues to be and that's a strength for that space.
All of our investments in corporate Trust.
Are paying off and we have that new office in.
In Europe that allow in Dublin that allows us to do business with 72 more states as it relates to an airline business and any of you have been in an airport recently you know that.
The travel business is on fire, and therefore airlines or investing in so.
Just really kind of across the board the investments we've been making over the past many years paid off.
We bought some healthcare accounts from old national.
Health care business is expanding growing and broadening it just really across the board I'll let.
I'll, let Jim talk is probably going to set everything but he.
He did but it's a combination of new client acquisition, but we've also had.
Fees turned on Mariner really to cover it but that business has been extremely steady and growing for us.
The real contributor to our fee income growth and we don't see that slowing down for us anytime soon.
Our credit card, we didn't mention this in the comments, but we saw.
Spend go 4 billion for the first time in the last quarter. That's in our deck you can find that in there. So it's really just kind of I would suggest hitting on all cylinders and you know as far as our business model goes you talked about the tightening of credit in the cycle that we're in right now what we have said forever, it's our fee income.
It leaves us in.
Diversity of our business model is what takes us through economic cycles like this and allows us to outperform against our peers and we don't expect that to be any different this time.
And whereas other banks are more reliant upon their mortgage operations for they're seeing.
Just a friendly reminder.
Completely different.
Yes that latter point is not lost.
Okay.
If I could just ask one.
One final one just going back to the.
CRE portfolio I appreciate all the disclosures there.
Two kind of how receptive.
Across the portfolio to get to that average LTV.
Disclosed in the deck and just generally how rent rolls are trending across that portfolio.
I'm not sure I heard that totally well did you hear that well, if you're asking about loan to values.
Thank you again.
Our average loan in the office portfolio was $8 2 million.
We we don't when we underwrite out of the gate, we don't trend rents and so we're underwriting these to a lower sizing.
Then a lot of our competitors too.
And so we.
By virtue of how we underwrite on the front end, we do have lower loan to values that I think some of our competitors would have and again back to the nature of our portfolio being more suburban.
More low and moderate size versus a high rise type.
Type product.
We've not seen a lot of change in rental.
Thus far but again a lot of our portfolio goes out past 2025, 2026. So we haven't we just haven't seen it yet but they are today they are performing.
As expected and our borrowers are all pretty large.
First the five borrowers are big portfolios of other.
That have cash flows.
Has a demonstrated capability to resize, if they need to but the real point about all of this is how we do on from the beginning and how we underwrite from the beginning which is.
Worst case, we underwrite some of the beginning with a worst case scenario type thinking and it gives us a lot of room.
Okay great.
Are you a little color thanks, everyone.
Thanks, Nick.
Thank you Nathan.
We have no further questions on the line I'll now hand back to the management team for any closing comments.
I don't think we have anything else to say I appreciate it.
Great quarter and.
Look forward to.
C N yen next quarter.
And the replay will be available on the website shortly.
Any follow up questions you can always reach us at 81686071.
Thank you for joining us and have a great day.
Thank you.
Ladies and gentlemen. This concludes today's call. Thank you for joining you may now disconnect your lines.
Yeah.
[music].
Okay.