Q2 2019 Earnings Call
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Hope Bancorp.
It is every name.
Jason Hormann HR and then.
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The era A.I.E. arias.
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Operate these statements constitute forward looking statements within the meaning of the U.S Private Securities Litigation Reform Act of 1995.
These statements are not guarantees of future performance actual outcomes and results may differ materially from what is expressed or forecasted in such forward looking statements. We refer you to the documents the company files periodically with the SEC as well as the Safe Harbor statements in our press release issued yesterday Hope Bancorp assumes no obligation to revise any forward looking projections that may be made on today's call. The company cautions that the complete financial results to be included in the quarterly report on Form 10-Q for the quarter ended June 32019 could differ materially from the financial results being reported today.
In addition, some of the information referenced on this call today are non-GAAP financial measures. Please refer to our 2019 second quarter earnings release for the reconciliation of GAAP to non-GAAP financial measures now we have allotted one hour for this call present presenting from the management side today will be Kevin Kim Hope Bancorp, Chairman, President and CEO and Alex Ko, Our executive Vice President and Chief Financial Officer, Chief Credit Officer. Peter Koh is also here with us today and will participate in the Q and a session with that let me turn the call over to Kevin Kevin Kevin.
Thank you Angie good morning, everyone and thank you for joining us today.
Let's begin with slide three in the second quarter, we noted positive trends in a number of key financial metrics, we recognize a higher level of loan production, while continuing to focus on originating credits with more attractive risk adjusted yields.
We continue to do a better job in managing our deposit costs.
And we have substantial improvements in asset quality, which further supports that the one off credit issues that we experienced in the first quarter were not reflective of the overall health of our portfolio.
From a net income perspective, we generated $42.7 million in net income during the second quarter or 34 cents per diluted share, which was compatible which was comparable with the $42.8 million or 34 cents per diluted share in the preceding first quarter.
Moving on to slide four.
We also recognized increases in loan production across all of our major lending areas in the second quarter with a particularly nice pickup in CNS originations, which is consistent with our balance sheet diversification strategy.
We booked $597 million in new loan commitments and funded $504 million during the second quarter. This is up from $462 million in new loan commitments and $442 million in loans funded during the first quarter, However, payoffs and pay downs were significantly higher this quarter at $599 million compared with $364 million in the first quarter. This higher level of payoffs was largely driven by aggressive pricing among mainstream banks. This aggressive pricing picked up midway through the quarter as the probability for lower interest rates increased.
We took advantage of this market dynamic to exit some of our lower rated credits from the bank, which Alex will discuss later in the call.
We also continued to sell loans out of our retained mortgage portfolio. This quarter as we look to reposition our portfolio.
Towards higher yielding assets.
In the second quarter, we sold $50 million of loans from our retained mortgage portfolio with the impact of higher level of pay offs and the sale of the residential mortgage loans. Our total loan portfolio declined by approximately 1% from the end of the prior quarter.
Looking at the breakdown of our loan production by major category commercial real estate loans comprised 50% of total production this quarter commercial loans accounted for 35% and consumer loans comprised primarily of residential mortgage loans accounted for 16%.
We originated $253 million in CRT loans for the quarter up modestly from $236 million in the preceding first quarter the aggressive pricing among mainstream banks that resulted in higher pay offs also impacted our CRD loan originations as we declined a number of deals that did not meet our pricing criteria.
And the overall market for new CRT transactions continues to be sluggish, which is impacting the number of available lending opportunities for us looking at our CIO originations, we had $176 million in new production in the second quarter up from $135 million in the prior quarter, we have a nicely diversified portfolio of commercial customers and we are pleased with the consistent progress we are making in our CNS lending business over the past year. We have had success in two particular areas.
Subsidiaries of Korean companies operating in the us and supermarkets in the north Eastern United States.
The reputation and expertise we have built up within these areas is producing a consistent stream of new business development opportunities that has contributed to driving the higher cnine loan production that we are seeing.
As a percentage of new loans Cnine continues to represent a larger component within our overall mix of loan production in the second quarter Cnine loans accounted for 35% of our total loan production up from 31% in the first quarter and 23% in the fourth quarter of 2018.
Turning to our SBS business. Our total production was impacted by a number of loan loans that have slipped into the third quarter, we originated $37 million in SB loans compared with $48 million in the preceding first quarter. The average rate on new SP originations continues to be approximately 7%.
And since we are retaining this production we are seeing the positive impact on our average loan yields given the loans that slipped out of the second quarter. We have a strong pipeline that should lead to higher SP a loan production in the third quarter in terms of residential mortgage originations. We have benefited from the seasonally stronger trends in the second quarter, which pushed up our originations to $74 million compared with $64 million in the preceding quarter with a lower interest rate environment for residential mortgage loans. We have also seen an increase in refinance transactions and expect solid mortgage origination volumes in the third quarter. We continued to see the positive impact on average loan yields from our shift in loan production strategy. The average rate on our new loan originations was 5.46% in the second quarter.
Down six basis points from the preceding first quarter, but still up considerably from our average rate on originations of last year.
This is the first period since the third quarter of 2017 that the average rate on new loans has decreased quarter over quarter. This decrease in rates was primarily due to the rapidly changing rate environment with LIBOR rates moving down throughout the quarter and the five year swap rate.
Down by more than 50 basis points. During the course of the second quarter. We believe these events led to the very aggressive pricing environment that we have been experiencing since the middle of the second quarter with that as an overview of our business development efforts I will ask Alex to provide additional details on our financial performance for the second quarter Alex.
Thank you Kevin.
As I review, our financial results I will limit my discussion to just some of the more significant items in the quarter.
Beginning with slide five our start with our net interest income.
Which totaled $117.2 million compared with $119.6 million in the preceding first quarter.
The reduction was primarily due to a slight decrease in our average loan balances coupled with lower net interest margin.
Our net interest margin declined by eight basis point to 3.31%.
On a core basis, excluding purchase accounting adjustments.
Our net interest margin declined by six basis points, which was an improvement from the seven basis point decline in the first quarter of 2019.
The decline was primarily due to a five basis point increase in our cost of deposits.
While.
We are still seeing a modest increase in deposit costs, we saw a significant moderation in the rate of increase this quarter.
The five basis point increase was down from a 17 basis point increase in the prior quarter and reflects the progress we are making with our various initiatives we are employing to enhance our core deposit gathering.
And better manage our deposit cost.
We also continue to see positive trends in the repricing gap on time deposits are in euros or the delta between the Cds expiring rate and renewal rate.
During the second quarter, the repricing gap was 18 basis points down significantly from the 50 basis point repricing gap in the preceding first quarter.
The moderation of the repricing gap should lead to further improvement in our ability to manage our deposit cost going forward.
Our average loan yield excluding purchase accounting adjustment was relatively flat quarter over quarter.
Now with regard to our net interest margin projection for the year.
In the past couple of months this.
The prevailing sentiment has now turned toward the expectation of interest rate cuts in 2009 Chen.
If interest rates decline in 2019, this will have an adverse impact on our net interest margins.
Based on our projections, a 25 basis point decline in interest rate or initially result in our.
The decline in our.
Net interest margin of approximately five to eight basis point.
As loss repriced to lower rates.
Some of this is Claude decline, obviously would it be offset as deposits also price lower in the following month.
Now moving on to slide six.
Our noninterest income was.
$12.3 million.
Up from $11.4 million in the preceding first quarter.
The primary variance from the preceding quarter was attributable to a higher net gains on loan sales.
During the quarter, we sold.
$76 million of residential mortgage loans to the secondary market.
Approximately 65% of which represented sales from our seasoned mortgage portfolio.
We recorded $1.1 million in net gains this quarter versus.
$741000 in the preceding quarter.
Also during the quarter, we repositioned.
A portion of our investment securities and recognize a gain of $129000.
This compares with no sales of investment securities in the comparable quarters.
All of our other major sources of non interest income were relatively consistent with the preceding quarter.
Moving on to non interest expenses on slide seven.
Our noninterest expense was $71.4 million in the second quarter, which is up by a little more than half a million dollars.
From the prior quarter.
But still within our projected range of expenses.
We have done a good job in controlling our salary and benefit expenses.
Which was down by approximately 3% from the prior quarter.
Our full time equivalent employee count.
Decreased by 21 quarter over quarter to 1446.
As of June 32019, and was down by 45 year over year.
But this decrease was offset by increases in a number of other expense items.
Most notably.
Our professional fees increased by approximately $600000.
Which reflect a higher expenses related to our CFO implementation efforts.
And ongoing investments that we believe enhance the operations of our bank.
We also had a 900000 dollar increase in credit related expenses this quarter.
Which tends to be volatile line item quarter to quarter.
The higher expense level combined with a lower level of average interest earning assets.
Raised our annualized non interest expense to average assets to 1.88%.
Up three basis points from the prior quarter.
Looking ahead to the third quarter.
Well, we'll start to see the positive impact of our recent branch rationalization plan, which was completed at the end of the second quarter.
We have consolidated six branches and we'll all see the benefit of a full quarter of cost savings.
Beginning in the third quarter.
This will help offset higher expenses in other areas.
Now moving onto slide eight.
Our total deposits declined by approximately 1%.
From the end of the prior quarter, although we saw a very favorable shift.
In our mix of deposits.
We have nice increases in all of our lower cost deposit categories, which reflects our increased focuses on core deposit gathering and the initial result of our more aggressive sales effort.
For our Treasury management services.
Our non interest bearing demand deposits increased 2%.
From the end of the prior quarter, while money market deposits were up approximately 5%.
As part of our deposit strategy, we have become more competitive on our money market rates.
Chris has made them an attractive alternative to certificate of deposit is for our customers.
As a result.
A time deposits time deposits are maturing we have been able to successfully convert.
Some deposit customers into money market accounts.
This has been a factor in contributing to our improved deposit cost management.
Given our success in other deposit gathering areas. We were also able to be more strategic in our CD pricing.
This led to a decrease in our time deposit balances during the second quarter and the overall improvement in our deposit mix.
Now moving on to slide nine.
Our review our asset quality.
As you May recall, we had a noticeable increases in non accrual loans.
And criticized loans last quarter that were driven by a handful of unique credit relationships that presented minimal potential loss exposures.
We are confident that the underlying health of the broader portfolio was solid.
And our credit trends that we experienced in the second quarter provided strong support for that perspective.
We had across the board improvement in all of our asset quality.
Categories with significant declines in non performing assets criticized and classified loans and past due loans.
The primary driver of the decline in problem loans was pay offs and pay dollars much of which resulted from our workout efforts.
That encourage those borrowers to seek refinancing from other banks.
Specific to the handful problem credits that we discussed on our last conference call.
We were paid off on two loans related to one large relationship there was placed on non accrual in the first quarter.
These pay offs totaled approximately.
$15 million.
We also received a pay off on the $16 million CRD loan for mixed use condominium there was downgraded to a criticized loan in the first quarter.
There was no additional deterioration in any of the other loans that we discussed on our last.
Quarter call.
The combination of pay offs and a modest inflow into our problem asset categories resulted in the strong improvement we saw in the credit metrics in the second quarter.
With Nonaccruals style by 25% and the criticized.
Loan balance down by 9%.
We also had another quarter of very low credit losses, we had $1.4 million in net charge offs.
Which represented just five basis points of average long.
On an annualized basis.
On our year to date basis, our net charge offs are just three basis points of average long.
Our provision for loan losses of $1.2 million.
Increased our allowance to total loan ratio to 79 basis points from 78 basis points.
With that let me turn the call back to Kevin.
Thank you Alex.
Let's move on to slide 10.
While we have experienced a flatness in our balance sheet during the first half of the year.
We remain positive with respect to the initiatives that we have in motion.
To provide a brief recap.
We have embarked on a balance sheet diversification strategy.
And we expect to continue to see a favorable shift in the mix of new loan production.
We are very focused on continuing to gain more traction with our deposit gathering initiatives, improving our deposit mix and enhancing our ability to control our deposit costs.
We also expect to see our good credit quality to continue and we will continue to improve our expense management.
Now in terms of our outlook in a rapidly evolving and more challenging business environment for banks.
We expect many of the positive trends, we have experienced in the half of the year. We will continue as we progress through the year.
Given the strong pipeline, we have in SPD and the consistent production, we are getting in commercial lending, we expect to see stronger loan origination volumes in the back half of the year. However, due to the highly competitive environment that is driving elevated pay offs, we are facing stronger headwinds than we initially expected at the beginning of the year. As a result, we now expect loan growth for the full year to be more in the 2% to 3% range now.
As we announced yesterday, our board of directors authorized the repurchase of up to $50 million of our Companys common stock.
We believe having the plan in place gives us greater flexibility to create additional value for our shareholders, especially in times of market disruption. It also enhances our ability to maintain a balanced capital allocation strategy, while providing a steady return of capital to our shareholders through our quarterly dividend.
All together with our quarterly cash dividend that has a payout ratio in excess of 40% our management and board are committed to delivering solid financial performance and enhancing shareholder returns.
With that let's open up the call to answer any questions. You may have operator, please open up the call.
We will now begin the question and answer session to ask a question on a per store I'm wondering your touchtone phone.
Sure you can speak speakerphone, please pick up your handset before personalities.
Anytime recourse against uninterested Youd like to withdraw your question. Please press Star then too.
At this time, we will pause momentarily to assemble roster.
Thanks.
[noise] [noise] at this time, our first question comes from Gary Tenner of D.A. Davidson Gary. Please proceed.
Thanks, Good morning, everybody.
Oh, yeah yeah.
Hey, I wanted to ask I guess first off on the project side, you talked about some of the initiatives. This this quarter and kind of the repricing gap narrowing in that in the in the second quarter and I think also maybe expecting for the third quarter, but wonder if you could actually talk about where you do you expect it in the third quarter based on what you know today and then the follow up to that is what the margin impact of five to eight basis points based on a 25 basis point cut I wasn't clear if that was inclusive or not of the expected.
Our ability to work in deposit costs.
[laughter], Okay, Dan Hi, Gary This is Alex deposit initiatives as I indicated that we are making progress is especially for Treasury management services and also our deposit cost management strategy by shifting the mixture of the deposit component, especially for lower cost. The pause is D.A. is increasing while we have a cannibalization between ER.
CD and money market, we saw reduction on the CD, while those core deposit money market and a D.A. It was increasing so we are making good progress in terms of our.
Initiatives and we'd like to continue to see.
Those progress is.
Relate to repricing gap as we sat in a C.D., especially maturing very says the new offering me the gap has substantially narrowed especially for this quarter and as you recall off the euros. So there was a rapid and a big gap between those Cds maturing and a new offering rate, but I think in that that has come down substantially and I would expect to see the narrowing gap continue as to our CD pricing will be stabilized and if the actual market rate goes down we might be able to lower a little bit so that the repricing give again I would expect to continue.
[noise] decrease.
Related to the margin, we view to say not.
If the case of a 25 basis point reduction.
We would expect about five to eight basis point further compression on the margin.
Because we see the pricing on the loan side will be a kind of a pressure while not the deposit pricing can be we can proactively manage but we would expect to have further compression.
From the rate decreases.
Okay. Thank you for the detail and then just one quick follow up on the expense side, you mentioned the branch consolidation I would benefit the third quarter I wasn't clear from your comments it sounded like that was sort of largely be offset by growth in other areas or do you expect an actual absolute decline in operating expenses in the third quarter.
Sure No I would actually expect.
The run rate for the non interest expense for the third quarter of 2019 to be.
Approximately the same as we saw in Q2 this is around like a $71.5 million.
I think we would expect slightly increase on the salary and benefits Q3. However, as we indicated the branch consolidation we completed in the second quarter and we'll we'll have a full benefit of those cost savings are starting Q3, so those will.
Decreased our overhead cost about $390000 on a quarterly basis.
And for other expenses and though.
I don't expect after Q4 of this year.
Any substantial professional fee increase but for the rest of the year. You know we are working very hard on the Cecil and the Cecil fee, we would expect to.
Continued to be a same level elevated level for the.
Third quarter, and 2000, a fourth quarter, but again.
After the year end wants to see sale is completed we would expect to have.
Those professional fee it remains flatten or decrease.
So with that and all we did have a little bit increases on the noninterest expense to average asset ratio in Q2.
But I think you know going forward.
The rate.
We still expect to add between 1.5% to 1.88% going forward.
All right that's great. Thank you.
Thank you.
Our next question comes from Chris Mcgratty KBW, Chris. Please proceed.
Hi, good morning, Thanks for the question.
Alex if we could just go into the margin a little bit you still working off and I want to make sure I understand the guy working off the the second quarter of 331.
I think the forward curve assumes a couple a couple of cuts this year.
So that would kind of put the margin you know and exiting the year in that 315 to 320 range roughly.
I'm interested if that if that scenario plays out.
And your deposit costs eventually catch up to your assets, how we should think about margins.
You know entering 2020.
I know it's in it it's a lot of assumptions need to be made but is there.
In a static rate environment do you get nims to isn't instability kind of the goal given what you're doing with the balance sheet or do you think there will be pressure or expansion in one way or the other thanks.
Yeah, Chris you know that's a really tough question to answer at this moment because so much. So many variables you know as you mentioned the rate curve inventory all those kind of thing it does impact significantly on our projection on the net interest margin. So that's why we were comfortable giving the immediate impact of 25 basis point reduction how does that impact in our 2019 net interest margin increased over like a five to eight basis point reduction, but moving on to 2020 forecast.
It's again kind of a tough given the number of variables, but I think in a we are making a success on the deposit cost control.
And also for margin.
No we'd get to say Oh about one basis point improvement in terms of contraction in Q1, we had a seven basis point reduction by in Q2, we have only six basis points. So we're still our priority is to deposit cost control so with a health on the deposit cost control.
Oh, we would like to see in 2020.
There will be in a better margin, but I think it is important for me to mention that our previously expectations for the second half of the margin kind of trying to wrong to improve.
I think it might be some changes necessary given all the macro economic and interest rate environment. We would expect is extend.
That margin compression puria to no no a few more quarters. So we'll definitely see and the 2020 I am hoping better margin, but I would like to continue to see in 2009 Chan from margin to be further compressed.
Okay, if I could add another one on the on the margin the accretion outlook.
You know it's been.
Ticking down slowly.
In the last couple of quarters, you or how should we be thinking about.
Accretion contribution for the next several quarters and obviously.
When when seasonally it's any kind of thoughts on impact there.
[noise] Yeah, you know, we have about $23 million of accretive Lady on discount, even though accretion or if Cecil is effective in a 112020, those 23 million will be added on to allowance for loan losses and will have a slight reduction on the accretion of course, not discounts off which will have an impact on net interest margin, but no I don't think that's a big impact.
To our margin.
Okay, and then maybe one for Kevin and how about the Kevin the buyback announcement, obviously the balance sheet was was flat to down a little in the quarter and.
It sounds like the growth whatever growth are going to have in the balance sheet is going to be you know clearly be be able to do in order to buy your capital levels. So should we think of this buyback.
As as being a flexibility or is it something where given where your stock is you know the analysts and investors should just assume that this is going to be executed in kind of the next couple of quarters.
Well.
We are in a very rapidly evolving market for financial institutions and.
We will be actively monitoring market indicators and world or do the repurchase when all these factors taken into consideration indicate that a repurchase any given time is in the best interest of the company and our shareholders. So there are.
You know so so many moving parts that uncertainty is but so we will be quick when's the right time comes.
So it's hard to answer whether the execution will take place within the next few months or within the next few quarters or we will closely monitor the market situation.
All right. Thank you very much.
Thank you.
Our next question comes from Matthew Clark of Piper Jaffray.
Matthew Please proceed.
Hey, good morning.
Good morning on [laughter].
Just on the expense to average asset ratio I'm, just want to make sure I heard you correctly one inside when it is the expectation in the upcoming quarter and.
Wanted to get your thoughts.
As it relates to outlook looking beyond.
The third quarter was that we could get back down to that 180 185 range again.
Yes, I think that's our expectation or the reason why we have a little bit higher.
For this quarter was in combination of half a million or so no increase on the expenses, but also a denominator average earning assets slightly decreased.
However, we are projecting our average balance will continue to go up and also the cost management is one of our priority, especially when the Cecil. These completed no I'm not aware of any big ticket items that would be required in a substantial investment on the professional fee or other expense items. So I would expect normalized after you know a one or two quarters and also including Q3, our run rate will be between 1.85% to 1.88%.
Okay, and then just on SPJ any.
[laughter] an appetite there based on the premiums you're seeing are you going to consume just to retain the foreseeable future.
Well the the as you may.
See the premiums have increased in recent months and the economics of selling to loans is now back to the level.
Well it is a more attractive option, but.
We will consider it in the overall scheme of our 2019 priorities that favor higher yielding loans in our portfolio.
And the we have not yet made any change in our strategy to retain as SBA loans in our portfolio.
Okay, and then just on the gain on sale this quarter the margins look better.
Anything unusual there or is.
Do you think that that's a good a gain on sale margin to use going forward.
Well, we have the gain on sale of our mortgage loans or if you look at that we have or the sale of loans in the second quarter that includes a bulk sale from our existing portfolio.
And whether we will continue to sell our loans from the retained mortgage portfolio I think the key word is opportunistic in our decision making process for selling our retained a mortgage loans. So.
If you want to have a run rate for gain on sale of mortgage loans I would probably focus on the new loan originations volume and Oh, we have produced about $74 million in the second quarter, and we expect a comparable a production level in Q3, so I I think.
You should you should expect a lower number than the second quarter because the second quarter number included the bulk sale and we do not know at this time, whether we will have the bulk sale into third quarter.
Okay, great. Thank you.
[noise].
Our next question comes from Tim Coffey Janney.
Tim Please proceed.
Thank you good morning, everybody.
Good morning.
Well, Kevin the competition for the mainstream banks. So you mentioned during your prepared remarks is that a function of banks coming down market.
Yeah, we have a tremendous competition from.
The national banks, and and money center banks, even money center banks for our customer base.
And.
I think we have a lot more competition from the larger banks than the pure space banks in terms of our lending opportunities in terms of our deposit efforts I think we have severe competition from a space peers, but in terms of lending during the several quarters previous quarters, we see a lot more competition from.
The mainstream banks, then then the.
Space <unk> peers.
Okay and the content from the main mainstream banks does feel any different than it did a couple of years ago when rates were declining.
Or is it about the same.
Well I think there are they are more aggressive in terms of pricing these days.
Then they used to be.
Okay.
Okay, great. The rest of my questions have been answered. Thank you.
Thanks.
And just as a reminder, if you have a question. Please press Star then one.
Our next question comes from Tim O'brien, Sandler O'neill and partners Tim. Please proceed.
Thanks, just one question little follow up on.
On the credit situation you guys had good progress this quarter could you give a little color on.
If the remaining workouts related to the loans that you guys talked about in the first quarter.
Is on track to.
Exit or resolved fairly quickly or what your thoughts are there for.
Credit outlook here in the second heading into the second half of this year.
Sure. This is Peter So you know the first quarter credits that we described.
That popped up I think we really didn't see any further deterioration in any of those credits that remain I think from the overall portfolio look I think we have been.
Very attractive indentifying potential problem credits I think as we move forward into the third quarter and there will be some just natural lumpiness in terms of quarter to quarter. Our results, but I think we do anticipate credit quality to continue to improve.
Alright, thanks for the help.
Thank you.
Our next question comes from David She a variety of Wedbush Securities. David. Please proceed.
Hi, Thanks, a question on.
Loan growth So you mentioned about.
Hi, you're expecting stronger originations.
Going forward, but yet you did lower loan guidance now is.
Is that a function of expecting continued elevated payoffs or is that more of a function that the second quarter was weak. So it will be kind of making up for the weakness in the second quarter.
Well.
First of all I want to say that I'm not that much concerned about the flat balance of our portfolio during the first half of the year because.
We don't think it is not a result of a lack of new loan originations, but it is more attributable to unusually high payoffs during the second quarter.
As we commented.
We were able to take advantage of the aggressive lending of some other banks.
To move a significant amount of lower rated.
Credits off.
Our books during the quarter and.
Those those relationships amounted to approximately $75 million.
Uh huh.
And we don't have as many loans now that we are looking to proactively access so that eliminates one of the factors contributing to the higher level of payoffs during the second quarter.
Although we expect payoff levels to remain high.
I don't think it's likely that they will remain at the level that we saw in the second quarter.
And at the same time, we have a stronger pipeline in SP. A we are gaining traction from our C.N.I. efforts. So I think our second half a loan originations will be stronger than the first half of the year.
So that is why I am not that much concerned about the flat balance of the loan portfolio during the first half of the year.
Great. Thanks for that and then a housekeeping were related to that the 2% to 3% loan growth guidance is that period and like December 31st 2018 to December 31st 2019 or is that average yes that is correct that is correct.
Okay. Thanks very much.
[noise].
Once again, if you have a question. Please press Star then one.
The next question comes from Don Worthington of Raymond James Stockton.
Please proceed.
Thank you hi, good morning, everyone.
Good morning, good morning, Don.
Maybe just to clarify are or a little more color in terms of the credit related costs.
This quarter was that largely related to the the problem assets that were cleaned up in the quarter and therefore, you'd expect that to drop back down.
Yeah that is actually the fluctuating quarter over quarter and this quarter. It happened to have an elevated level of flow closure.
I'm sorry, the first day insurance.
And also a kind of legal fees related to collection effort.
So you know as we expect to have a credit improves those credit related expenses.
This naturally and expect it to go down.
Okay.
And Alex you mentioned raising money market deposit rate.
What did that go to and then what was it before.
Yeah, we were very strategically or had a money market pricing be competitive Kip because we did expect is some cannibalization from the Cds to money market.
We were sensitive on the controlling.
The overall deposit costs, so we weren't competitive in the money market rate for comparative for competition purposes, I will refrain from that disclosing exacting offering rate.
There was a slight increase on the money market rate that we offer it in Q2 compared to previous quarters.
Okay.
All right. Thank you.
Thank you.
This concludes our question and answer session.
I would like to turn the conference back over to management for any closing remarks.
Thank you once again, thank you all for joining us today, and we look forward to speaking with you again next next quarter. Thanks to everyone. So long.
Thank you.
The conference is now concluded. Thank you overtime todays presentation you may now disconnect.
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