BankUnited, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the Bank United, Inc. first quarter financial results conference call. At this time, all participant lines are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star, then 1 on your touch-tone telephone. Please be advised that today's conference may be recorded. If you require any further assistance, please press star, then 0 to reach an operator. I'd now like to hand the conference over to your host today, Ms. Susan Greenfield. Please go ahead, ma'am.

Thank you, Liz. Good morning, and thank you for joining us today on our first quarter results conference call. On the call this morning are Raj Singh, our chairman, president, and CEO, Leslie Lunak, our chief financial officer, and Tom Cornish, our chief operating officer. Before we start, I'd like to remind everyone that this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect the company's current views with respect to, among other things, future events and financial performance. Any forward-looking statements made during this call are based on the historical performance of the company and its subsidiaries, or on the company's current plans, estimates, and expectations. The inclusion of this forward-looking information should not be regarded as a representation by the company that the future plans, estimates, or expectations contemplated by the company will be achieved. Such forward-looking statements are subject to various risks and uncertainties and assumptions, including, without limitations, those related to the company's operations, financial results, financial condition, business prospects, growth strategy, and liquidity, including as impacted by the COVID-19 pandemic. The company does not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments, or otherwise. A number of important factors could cause actual results to differ materially from those indicated by the forward-looking statements. Information on these factors can be found in the company's annual report on Form 10-K for the year ended December 31, 2019, and any subsequent quarterly report on Form 10-Q or current report on Form 8-K, which are available at the SEC's website. With that, I'd like to turn the call over to Raj.

Thank you, Susan. We're coming to you in strange times. This is the first call that we've ever done where the management team is not together in one location. So Leslie and Tom are in Miami, I'm in New York, and we are doing this virtually. Also, I've never done a conference call where I've had more than one or two pieces of paper in front of me with some bullet points on them. And today, Leslie has put in front of me a 27-page deck and talking points that are several pages long. So forgive me for all the shuffling that you might hear on the call. Let's do this. Instead of jumping straight into the earnings for the quarter, I would like to take five minutes of your time to first talk about exactly, you know, give you kind of a state of the union for Bank United. What is it that we've been doing over the last six or seven weeks as the situation has evolved? What are we prioritizing? And give you just a lay of the land, and then we'll get into the numbers and discuss in detail what first quarter was like. So let me start by first and foremost giving a big shout out to the Bank United team. Every person who comes here calls this home and works hard. You know, a crisis reveals character of people. I think that is true not just for people but also reveals a true character of an organization. I'm very proud to say that what I have seen over the last six or seven weeks it really fills me with great pride that I'm leading this organization. People have come together, helped each other, worked ungodly hours while they were under immense amount of personal stress. So there are too many examples to get into, but I just want to give a big one shout out to everyone in the company, not just people working in PPP or the branches keeping our call centers up, but everyone, you know, right down to the person who's making sandwiches in the cafeteria all the way to the last day when we shut down the cafeteria. So a big shout out and thank you, a big thank you. We have, as you can imagine, going through this early in March, we made our employees' well-being and safety our number one priority. We enabled 97% as of now, 97% of our employees are working from home. This is 97% of our non-branch employees, of course. We have extended our paid time off policy. We have increased our health benefits to cover any expense associated with COVID. We have not furloughed any employees. I'm a very superstitious person, so I say this very carefully. We were recently awarded by South Florida Business Journal an award for being one of the healthiest employers in South Florida. And I hope that we can claim this again next year. So far, we've had only one confirmed COVID case in the employee base. We do think there are a couple of others who could never get tested but have overcome COVID as well. It sounds like it, but only one confirmed COVID case, which is pretty good given what is going on. When you take care of your employees, they in turn then take care of their customers. And if you take care of your customers, that takes care of the company. That's sort of the chain that I follow. So quickly, let me tell you what we've been doing to support our customers. The most obvious thing is offering the operational resilience plan, we beefed up all the back office IT infrastructure that is needed to run the company from afar with no really any significant operational issues or customer service disruptions. And if you had asked me this, you know, how I felt about our ability to do this in the first week of March when we were preparing to do this, I was pretty nervous, but I'm happy to say that everything has gone without a glitch and the bank is working fine from an operational perspective. Our employees, several hundred of them, have worked tirelessly now for about three weeks to deliver the PPP program. We, I think as of last night, are close to 700 or maybe over 700 million in loans that we've done through the PPP program. And our estimates are that we've helped retain about 85 or 86,000 jobs in our footprint through this program. And we're not done. There's more going through as we speak. The team has been working around the clock and we will help a few hundred more small businesses before eventually the money runs out in the VPP. We have approved deferrals for many borrowers who have contacted us and asked for assistance because of the pandemic. And equally importantly, we have honored all our commitments, whether they were lines that we've had or business that was in the pipeline where we had made a commitment to close another loan. We did not back away from anyone. and that is equally important. We have waived select fees, and we have also temporarily halted new residential foreclosure actions. By the way, while all of this is happening, I just want to clarify, when I say 97% of our employees, non-branch employees, are working remotely, 76% of our branches are still open. They're open on a limited basis, of course, drive-throughs and appointment-only methods, but they are open and we are serving clients. The traffic, as you can imagine, has gone down substantially. Also, we have from somewhere in the second week of March or mid-March, we have made sure that we had enough liquidity to take care of any client needs in case somebody would need it. We continue to hold an excessive amount of liquidity. but we now feel the time is right to start taking it down, and I think beginning next week we will take down this excess liquidity that we've been sitting on to serve our clients. Now, turning back internally, as you can well imagine, we're prioritizing risk management and credit quality and credit quality risk management. We have identified portfolios and borrowers that we believe will be under an increased stress in the environment. I call these sort of the sort of, you know, you're in direct line of fire type of portfolios. we have reached out to every single borrower in these segments, and we will talk in detail about what these segments are and how big they are, but we have reached out to all borrowers in these segments, and in other segments, we have reached out to everyone over $5 million in exposure to understand exactly what the impact will be to our balance sheet. While we always do stress testing so that it's a routine business for us, in this environment, we have significantly enhanced these processes you would expect us to. But through all of this, it's important, you know, while you're managing a crisis, not to forget what the long-term plan is and to keep those long-term core strategic objectives in mind. And we're doing that while we're fighting the immediate economic crisis. So, again, so I think the biggest question here that you probably have is, what does it mean for our balance sheet? I will start by saying our balance sheet is you'll see at March 31st, our regulatory ratios, no matter which you look at, bank, holding company, they're all significantly in excess of well-capitalized thresholds. We are committed to our dividend, which we very recently increased by 10%. I think it was in the middle of February. We did, however, stop our share buyback program. We had an authorization from, I think it was the fourth quarter, it was authorized $150 million. We executed about $101 million, and we stopped that, and we're going to put it aside at least until the dust settles on the economy. A question that we have seen a lot of other bank teams have been asked who have presented earnings in the last week or so, anticipating the same question, we did some analysis for you. By the way, there's a slide deck, like I said, this time around. We've never had a slide deck in our calls, but this time we have provided a lot more disclosure, and there's a 27-page slide deck. So from time to time, I'll make references to certain slides. I'm not going to flip every page. but I will make the references. So, for example, right now I'm talking about page four in the slide deck, which takes the DFAST severely adverse scenario for 2018 and 2020 and runs that on the March 31st 2020 portfolio to see what the would be, and by the way, not just nine quarters of losses, but lifetime losses. You know, DFAS is a nine quarter exercise, but for this, we actually used lifetime losses. And we had used those, which we don't think are really relevant, but nevertheless, since that question will probably be asked, we did that analysis anyway. We used both 2018 and 2020 DFAS, severely adverse scenario. and said, okay, what are the losses that are generated? And you can see them on slide four. And if those were to be used now, would we still be well capitalized and our capital ratios hold up? And the answer is yes, they do. Quickly, one question so I don't forget again about liquidity, which is the next slide. We have tons of liquidity. We currently have over $8 billion, I think it's $8.5 billion of liquidity, same-day liquidity available. A lot of it is in cash. We will take some of the cash position down as we think things are settling down in the marketplace. But with that, let me switch over quickly and talk about the quarter. We reported a net loss of $31 million, 33 cents a share. Not surprising, this is driven in large part to the large provision that we took. The provision for the quarter was, excuse me, $125 million. This increased our credit losses to 251 million, which is 1.08%. So we used to be, at December 31st, we were at 109 million, or 47 basis points. On January 1st under CECL, that number bumped up to 136 million or 59 basis points. And now at the end of March, we are at 1.08% or 251 million. And that obviously was the biggest driver in the $31 million loss that we are posting this quarter. I will ask Leslie to give you some more detail around CECL and the assumptions that went into calculating that provision. But I will say, before I hand it over to her, is that we believe this, on March 31st, our reserve estimate is based on both data that is current and conservative at that core end, and it reflects our best estimate of lifetime credit losses in the portfolio. In second quarter, we will go through the same exercise. There are three big areas which will impact our CECL estimate for the next quarter, which is going to be an update of the macroeconomic outlook, an update of our portfolio, especially our high-risk sectors, and also the assessment of the impact of government stimulus because we've seen more stimulus this time around than we've ever seen in the history of the republic. So two and a half trillion in accounting and fiscal stimulus and God knows how much in the monetary side. But let me turn it over to Leslie, who can do a much better job of describing the underlying CECL assumptions than I can.

Thanks, Raj. I'll try. So I'm going to refer you to slide 8 in the supplemental deck that talks a little bit about our CECL methodology. Fundamentally, for the substantial majority of our portfolio segments, we're using econometric models that forecast PDs, LGDs, and expected losses at the loan level, and those are then aggregated by portfolio segment. Our March 31st estimate was largely driven by the Moody's March mid-cycle pandemic baseline forecast that was issued on March 27th. This forecast assumes an approximate 20% decline in GDP in Q2, unemployment reaching about 9% in Q2, the VIX approaching 60, and year-over-year decline in the S&P 500 approaching close to 30%. The forecast path assumes a recovery beginning in the second half of 2020, with unemployment levels remaining elevated into 2023. I know there's been a lot of focus on GDP and unemployment in all the discussions taking place around these CECL forecasts, and those are certainly important reference points. But I do want to remind you that these are very complex models, and there are in fact hundreds if not thousands of national, regional, and MSA level economic variables and data points that inform our loss estimates. Some of the more impactful ones are listed on the right side of slide eight there for you. Another thing I want to point out about our CECL estimate at 331, we did not make a qualitative overlay. We don't think our models really take into account fully the impact of all of the government assistance that's being provided to our clients, PPP, other deferral programs that we might have in place. We did not make a qualitative overlay for that at March 31st. The reason we didn't is we just felt it was premature to really be able to dimension the those things at March 31st. And as Raj pointed out, that's something we'll take into account when we consider our second quarter estimate. I want to refer you now to slide nine. Just one second.

I just got a text from someone saying that the call cut off for about 20 seconds and they couldn't hear you for the first 20 seconds. So you may want to just repeat what you said because I think those are important points. I want to make sure everyone gets those.

Okay, so back to start on CECL. Maybe I'll do it better this time. Hopefully I won't contradict myself. So again, I'm referring to slide eight in the deck about our CECL methodology. So fundamentally, for the substantial majority of our portfolio segments, we use econometric models that forecast PDs, LGDs, and expected losses at the loan level, which are then aggregated by portfolio segment. Our March 31st estimate was largely driven by the Moody's March mid-cycle pandemic baseline forecast that was issued on March 27th. That forecast assumes an approximate 20% decline in GDP in Q2, unemployment reaching about 9% in Q2, the VIX approaching 60, and year-over-year decline in the S&P 500 approaching close to 30%. The forecast path assumes a recovery beginning in the second half of 2020, with unemployment levels remaining elevated into 2023. And while there's been a lot of focus on GDP and unemployment in the discussions taking place around these CECL forecasts, and those are certainly important reference points, these are complex models, and there are in fact hundreds if not thousands of national, regional, and MSA level economic variables and data points that inform the loss estimates. And some of the more impactful ones of those are listed for you on slide eight. I also want to mention briefly that we did not incorporate in our CECL estimates at 3.31 any significant qualitative overlay related to the impact of direct government assistance, PPP, deferral programs that we may put in place. At 331, we felt we just didn't have enough data to properly dimension the impacts of those, so we did not reduce our reserve levels to take those into account. And as Raj mentioned, that's something we'll be considering in more detail in Q2. So now I'll refer you back to the deck and look at slide nine. And slide nine provides for you a visual picture of what changed our reserve from 12-31-19 to 3-31-20. We started at $108.7 million. You can see here the $27.3 million impact of the initial implementation of CECL. The most significant driver of the increase in the reserve from January 1st after initial implementation to March 31st is, not surprisingly, the change in the reasonable and supportable forecast, which increased the reserve by about $93 million. We've also taken an additional $16 million in specific reserves this quarter The majority of this related to the franchise finance portfolio. While the credits driving these reserves had been identified as potential problem loans prior to the onset of COVID, we believe the underlying issues and amount of those reserves were certainly further aggravated by the COVID crisis, and particularly as workout solutions have become more limited. I want to reemphasize that we ended the quarter at 331.20 with a reserve of 1.08% of loans, and we certainly don't think that's outside in comparison to other banks whose results we've seen released. I want to take a minute and just focus you on slide 10. It gives you a distribution of the reserve by portfolio segment at March 31st. And you can see here that on a percentage basis, the franchise portfolio, not surprisingly, carries the highest reserve, followed by the C&I portfolio. One more thing I want to touch on before I turn this back over to Raj is a little bit more on the stress testing results that we did that Raj mentioned at a high level a couple minutes ago. You can see the results of those on slide four in the deck. And what we did here was we took our March 31st, 2020 portfolio, and we ran that portfolio through both the 2018 DFAS severely adverse scenario and the 2020 DFIRS DFAST severely adverse scenario. And the table here is showing you total lifetime, not nine-quarter, projected credit losses for our significant portfolios, CNI, CRE, BFG, residential, under each of those scenarios, as well as the bank's pro forma regulatory capital ratios. Now, those were calculated as if all incremental losses were applied to the March 31, 2020 capital position. so they don't take into account any PP&R that might offset losses over the course of the forecast horizon or any actions management might take to reduce risk-weighted assets during a period of stress, both of which would have been taken into account in a DFAST regulatory submission. So you can see that our reserves at March 31, 2020 stand at about 44% of severely adverse projected losses under the 2018 DFAS and about 56% of severely adverse projected losses under the 2020 DFAS severely adverse scenario. And you can see in the box there that all of our capital ratios remain in excess of all well-capitalized thresholds under those stress scenarios. So with that, I will turn it back over to Raj to talk a little more about quarterly results.

Yeah, thanks Leslie. Let's talk pre-PNR, pre-provisioned pre-tax net revenue. It came in at 85 million this quarter and that compares to 104 million last quarter. So what was that delta of that 19 million? Really three buckets. First, NII was down about $5 million. NII really is for two reasons. One, margin contracted by six basis points from 241 to 235. And the reason for that is asset yields came down faster. Deposit pricing really wasn't changed much until pretty late in the quarter. You will see a very meaningful impact on deposit pricing going forward. But for this quarter, that basis risk between which is what caused margin to come down. Also, first lowest quarter, so we didn't see that much in terms of asset growth. So you combine little to no asset growth. And by the way, a lot of other banks are seeing asset growth coming from line draws. Our business is not built around that kind of business, and we did not get that benefit, did not see a lot of line draws. I don't think it's a benefit. I think it's a good thing that we did not have that business, but that creates six basis points, leads to a $5 million reduction in NII. Also on fee income, last quarter we had $7.5 million or so of securities gains, but this quarter we had $3.5 million of securities losses. So that's an $11 million or so swing in fee income. By the way, in the $3.5 million securities losses this quarter includes $5 million of unrealized losses on equity securities. We haven't sold them, but the accounting makes us take it through the P&L. And lastly, expenses. Again, first quarter expenses are always higher because you start to fight the cycle all over again, HSA contributions, 401k contributions, If you compare it to expenses from a year ago, that's probably a better way to compare, and those expenses were obviously much lower. Our first quarter this year was much lower. So what does it really mean for next quarter? Well, for next quarter, we expect asset growth to pick up. For no other reason, we're doing a lot of PPP loans. We'll probably do some mainstream lending loans. We expect margin to expand. Deposit prices have come down very, very aggressively, not just in the middle of March, but also the beginning of May. And that should feed into margin. And we are very positively biased towards our margin. that I talked to you about will be behind us after the first quarter, and actually expenses will get better next quarter. So that's what all the guidance will be able to give you, but I do feel that it's important to mention these things in some level of detail. I've mentioned a little bit about PPP program. I think you could rename Bank United for the month of April as Bank of PPP. That's all we've been doing. To give you a little comparison, we have an SBA business where we probably do roughly about 200 units of business in a year. We are now in the process of trying to do over 3,000 loans through the SBA in less than a month. So it has been a very large operational challenge that people across the company have been recruited to help in. And so far, we've already close to $700 million of loans have been done, and we're not done yet. We still have a few more that we will do over the course of today, tomorrow, day after, until the money runs out. We're also on a case-by-case basis providing deferrals to borrowers who are being impacted by the pandemic, and that started somewhere in the middle of March. Those requests have tapered off somewhat in the last week to two weeks, and Tom can talk about that a little more. But before that, Tom, why don't you spend a little time talking about loans and deposits, give a little more detail around that.

Great. Thanks, Raj. Happy to. So let's start off with deposits, where we've continued to make good progress on our deposit growth initiatives. As you can see, deposits grew for the quarter by $606 million, and just over 50% of that, or $305 million, was non-interest EDA. which now stands at 18.4% of total deposits compared to 15.9% a year ago. And as we've talked in all of these calls, growing non-interest DDA is one of the most important things that we're trying to do in the bank right now. And unlike what some other banks have reported, most of this DDA growth was really core DDA growth. It wasn't related to draws on lines of credit, and I'll go into a little bit more detail about that. We've consistently been moving down deposit pricing as the Fed has reduced rates. The cost of total deposits declined by 12 basis points this quarter. from 1.48 to 1.36. Additional moves by the Fed in late March had minimal impact on our ability to move cost of funds down further in Q1, but as Raj mentioned, you'll see that impact much larger in Q2. To give you a better idea of this, the spot rate on total interest-bearing deposits, including our certificates of deposit, declined by 36 basis points from December the 31st, 2019, to March 31st, 2020. And then by another 27 basis points through April the 17th, So a total of 63 basis points declined during that period of time. And if you go to slide 7 in the deck, you'll get a little bit more information in detail on that. You know, on the loan side, as Raj mentioned, loans are relatively flat for the quarter with net growth of $29 million. There were some parts of the portfolio where we actually saw very good growth. The C&I business had total growth of $353 million. which was good quarter for that segment. Mortgage warehouse outstandings also increased by $84 million, but offsetting that, our CRE book declined by $315 million, which is pretty much in line with what we expected, primarily driven by the continued decline in New York multifamily, which was $249 million. And unlike a lot of banks, particularly some of the larger banks, we've not experienced any real growth in line utilization since the onset of this crisis. The majority of our CNI growth, as I mentioned, was not as a result of draws. Our utilization ratio, which we track consistently throughout this process, really hasn't moved too much during this entire thing, only by a few percentage points through the total period of time, and has generally remained in line with our three-year averages with the exclusion of the mortgage warehouse business. So with that, I'll turn it over to Raj for some discussion on credit quality trends.

Thanks. I would like to just flip to page 16. This is what I was talking about at the beginning of the call. These are the segments that we have sort of circled around and saying these are the portfolios that will have increased stress based on our estimation. This is retail in the CRE book, retail in the CNI book, franchise finance that we've talked about here in the last six months, hotels for obvious reasons, airlines, cruise lines, and energy. So total, it's about 14% of our portfolio. What we're trying to show you here is as of March, what part of these individual portfolios were pass rated and what were classified, criticized, and non-performing. Now let me say something which is obvious, loans, these portfolios are going to go bad. We expect a large portion of these loans will be just fine. Sponsors with these pockets will be able to bear the brunt of the pain here. But in terms of monitoring, we are calling these the ones that we will monitor on a heightened basis because we think these are in harm's way more than other parts of the portfolio. By the same logic, let me say, it doesn't mean that anything that is outside of this portfolio is all parts of the business as well, and we will monitor them too, but this is where the heightened monitoring will be. So it's too early to really see the impact of the COVID situation on risk rating migration. You can see that with the exception of franchise finance portfolio, you know, substantially most of these segments are pass-rated. at March 31st. We did move a bunch in the franchise portfolio into those lower categories in the quarter. Let me talk a little bit about NPAs, a little bit about and then charge-offs. NPAs and NPLs for this quarter, they were basically flat. NPAs were down a little bit, a couple of basis points. NPLs were also down a few basis points, from 88 basis points to 85 basis points. And just to remind you that these numbers in NPAs and NPLs, the way we report them, include the guaranteed portion of non-accrual SBA loans. Just keep that in mind. The criticized classifieds this quarter went up by $269 million. 207 of that 269 was in the franchise portfolio. And 90% of that 207 was really attributable to COVID as that kind of played itself out in the month of March. Charge-ups were 13 basis points, a little elevated from last quarter, mostly because of one credit in BFG equipment where we took that charge-up, but we're already seeing recoveries from that situation this quarter. So, more detailed metrics are towards the end of the slide there, page 22, 23. Tom, I mentioned these portfolios for heightened monitoring. Why don't you spend a few minutes and just get into them with a little more detail.

Sure. Thanks, Raj. So we'll refer you to slide 14 in the deck, which provides some additional detail around the level of deferrals and segments. But through April the 20th, we have received requests for deferrals from almost 800 commercial borrowers and approved modifications for about 500 of those borrows, totaling a little over $2 billion. We've also processed about $500 million in residential deferrals, excluding the Jenny Mae early buyout portfolio, which would represent about 10% of that portfolio. These deferrals typically take the form of a 90-day principal and or interest payment deferrals for commercial loans, and those payments are generally due at maturity. For residential borrowers, these payments are typically at the end of the deferral period, consistent with deferral programs being offered by the GSEs now. We'll obviously be reassessing each of these loans at the end of the 90 days and looking and making the best decisions we can at that point in time. As you can see, the largest amount of commercial deferrals is in the commercial real estate portfolio, particularly the hotel subsegment where 90% of the borrowers buy dollars. have requested and been approved for deferrals, followed by the retail subsegment. We have also received a high level of deferral requests from borrowers in the franchise finance portfolio, as we've mentioned, where 74% of the borrowers have been approved for deferrals. Other C&I portfolio subsegments where we're seeing higher levels of deferral requests include accommodation and food services, arts and entertainment, and recreation and retail trade. At this point, in those of today, modification requests appear to be slowing over the last 10 to 15 days. Starting on slide 17, we provide a little bit deeper dive into some of the higher risk portfolio subsegments that Raj has already mentioned. In the retail segment, the Cree book contains no significant exposure to big box or large shopping malls. We estimate that about 60 percent of the Cree retail exposure is supported by businesses that we would categorize as essential or moderately essential, and the remainder that we would categorize as non-essential businesses. Within this segment, LTVs average 57.5%, and 84% of the total are below the 65% level. Retail exposure in the CNI book is well diversified, with the largest concentration being to gas station and convenience store owner-operators. Referring to slide 18, we can see further breakdown of the franchise portfolio, which is a fairly diverse portfolio, both by concept and geography. We saw over a $200 million increase in criticized and classified athletes in this segment during the first quarter. Approximately 90% of these downgrades were directly related to the COVID-19 crisis. I'll also mention that the current environment, the fitness sector, which up until now has been really the better performing sector in this book, is coming under stress as most of these are now closed with the social distancing guidelines. Some of the restaurant concepts actually may fare better, particularly those with heavy drive-through exposure and good digital strategies. On slide 19, you can see that most of the hotel book represents well-known flags and is within our footprint. Clearly, revenues in this segment have declined dramatically with the social distancing measures and travel restrictions that are currently in place. LTVs in this segment average 54%, and 78% of this segment has LTVs under 65%. And finally, referring to slide 20, our energy exposure, particularly in the loan portfolio, remains minimal. The majority of this exposure relates to rail cars in our operating lease portfolio. So with that, I'll go back to Leslie for a little more detail on the quarter.

Thanks, Tom. I want to take a minute to discuss the unrealized losses on the securities portfolio that impacted other comprehensive income and our GAAP capital at March 31st. I'll remind you that these unrealized losses do not impact regulatory capital, and I'll be referring to slides 26 and 27 in the deck for this part of the discussion. The available for sale securities portfolio was in a net unrealized loss position of $250 million at March 31st. These unrealized losses were mainly attributable to market dislocation and widening spreads reflecting the reaction of the markets to the COVID crisis. As you can see on slide 26, 90% of the available for sale portfolio is in governments, agencies, or is rated AAA. At March 31st, we stressed the entire non-agency portfolio at the individual security level, modeling collateral losses that we believe to be consistent with levels reflecting the trough of the 2008 global financial crisis. Based on that analysis, none of the securities in this portfolio are expected to take credit losses. The majority of the unrealized losses, as you can see, are in the private label CMBS and CLO portfolios. On slide 27, we show you the ratings distribution of these portfolio segments along with levels of credit enhancement compared to stressed losses, illustrating the high credit quality of these bonds. We also priced the March 31st portfolio as of April 22nd, and you can see the results of that on slide 26. And although unrealized losses remain significant, you can see that valuations have started to come back and to recover some. I also want to point out that none of our holdings have been downgraded since the onset of the COVID crisis. To provide a little more color around the MIM, the MIM declined by six basis points this quarter from 241 to 235 compared to the immediately preceding quarter. To get a little bit into the components of that, the yield on interest earning assets declined by 18 basis points. That reflects the decline of nine basis points in the yield on loans and a 37 basis point decline in the yield on investment securities. These declines related to, obviously, declines in benchmark interest rates and also reflect turnover of the portfolios at lower prevailing rates. The decline in the yield on securities reflects the short duration of that portfolio and, to an extent, increases in prepayment speeds, which contributed about five basis points to the decline. The cost of interest-bearing liabilities declined by 14 basis points quarter over quarter. I'll remind you that reductions in deposit costs that we had done in response to the Fed reducing rates in late March were not fully felt this quarter. A couple of items I want to mention that impacted non-interest income and non-interest expense for the quarter. Raj already pointed out the unrealized loss on marketable equity securities that negatively impacted non-interest income this quarter. The largest contributor to the $6.8 million decline in the other non-interest income line compared to the immediately preceding quarter was a reduction in income related to our customer swap program. And this was really attributable just to lower levels of activity in that space during the quarter. Employee compensation and benefits actually increased by $3 million compared to the immediately preceding quarter, and as Raj pointed out, there are always seasonal items that impact comp in the first quarter. A better comparison might be to the first quarter of the prior year, and compensation expense declined by $6.3 million compared to the first quarter of 2019. With that, I will turn it back over to Raj.

Thanks, Leslie. We'll try and wrap this up and open this up for Q&A, but let me say regarding guidance, we are withdrawing our guidance that we gave you at the last earnings call. We generally have a pretty good idea of what we're seeing in the business and the economies where we operate. We can look out about six months or so, but at this time, it is it's very hard to look past a month or two. So to try and give you value at such an uncertain time, it's very hard. What we can say is, you know, we are, you will see a growth in PPP loans. Like I said, roughly somewhere in the $800 million number is what we will end up with. Main street lending facility, we're still waiting a lot of details on that, but we hope to do some of those loans, but it's hard to tell you how much we will be able to do or we would want to do. And even deposit growth can be hard to predict, but our priority in the deposit side will maintain, which is grow DDA and bring down cost of funds. NIM will expand, we feel fairly confident of that, into this quarter, and in fact, I would even go as far to say that NIM for the full year will be higher than what you saw for this quarter. That's our expectation. Any questions that you ask about CECL, the only thing we can say about CECL and provisioning going forward in the second quarter or the rest of the year is that it'll be very volatile, given the fact that the economic environment is extremely volatile. And very importantly, we have not lost sight, once again, I will say, we've not lost sight of what we're trying to build in the long term. Yes, we are. fighting this healthcare crisis in the short term, but in the medium and long term, we're still focused on building what we set out to build. So whether it's Bank United 2.0 or all the other things that we're working on, they continue. Some of the initiatives around Bank United 2.0, especially around revenue, might get pushed out by a couple of months simply because it's new products that are being launched. It's going to be hard to try and launch them in the next couple of months when we are going through social distancing the way we are. But overall, the numbers don't change and it just gets pushed out a little more. With that, I will turn it over to the operator to take some questions.

As a reminder, ladies and gentlemen, if you'd like to ask a question at this time, please press the star, then the number one key on your touchtone telephone. To withdraw your question, press the pound key. Our first question comes from the line of Jared Shaw with Wells Fargo Securities. Your line is now open.

Hi, good morning. Jared, how are you? Good morning, Jared. Thanks. We're just starting on the credit side. When you look at the franchise finance loan specifically, what percentage of those credits have some type of protection from PPP or anticipated to have some protection from government stimulus?

Kyle?

Yeah. Right now, obviously, we're still in the process of working through all of the loans that Raj mentioned. A portion, well, it's difficult until we finish processing all the loans. to say the exact numbers but we're certainly seeing you know a fairly high level either come through us or in many cases the franchise credits are a little bit different than some of our normal credits and that this being part of the national group of client bases. Many do not actually have, you know, they're in Utah or California or wherever they are. So the only PPP applications that we see are the ones that are actually applying through us, whereas the vast majority of them are applying through banks that might be community banks in their own local neighborhoods. But I would say that, you know, we will probably see a very large percentage of them either apply and receive PPP assistance through us or through other banks that they bank with in their communities.

Okay. And then when you look at the growth in criticized loans, are you classifying any of the loans that are in deferral or if they go through the formal deferral application, then are they excluded from being classified at this point?

So, Jared, each time we process one of these deferrals, we do review the risk rating of the loan. So a number of the franchise loans that we spoke to that were downgraded this quarter were the subject of deferrals. That's not to say that every loan that receives a deferral will be downgraded. That's not the case. But we do review the risk rating every time we process one of these deferrals. So you're seeing some of that reflected in those downgrades.

Okay. I would also add you see a broad difference in the performance across various concepts as well. They're all not exactly equal depending on what type of concept it is and where the venue is. Okay.

Thanks. Just shifting a little bit, looking at the deposit growth, the strong DDA deposit growth you saw this quarter, are you starting to hit the stride there and do you think that that's going to be sustainable and should we be looking at DDA as a percentage of total deposits continuing to march higher, sort of all things being equal?

Yes, that's, you know, as I see the deposit numbers right now, you know, I feel pretty good about DDA growth, though some of that, you know, that we're seeing so far this month is probably PPP loans that we funded that are sitting as DDA. But overall, the momentum in DDA growth continues, and prior a top priority. Okay. Thank you.

Our next question comes from Brady Gailey with KBW. Your line is now open.

Hey, thanks. Good morning, guys.

Good morning, Brady.

Good morning. If you look at the activity under the SBA TPP, you know, say with round two you do $800 million. I think most banks have seen fees off of that production of around 3% or a little under 3%. So 3% of $800 million, that's about $24 million. Is that the right way to think about the earnings potential from your involvement in PPP?

Yes. Brady, one thing I'll remind you is that these fees are being deferred, just like any other loan origination fee, and are being recognized over the term of these loans. Obviously, to the extent that these loans are forgiven, the remaining unrecognized fee will get swept in through the margin at the time that the loan is forgiven, so it's hard to dimension the timeframe over which these fees are going to hit the P&L until we understand a little bit better when and how many of these loans are going to be forgiven. But, you know, obviously that 3% is, you know, probably in the range of what's average for this portfolio in the aggregate. But the timing of income recognition is still pretty uncertain.

Brady, another thing, another data point I would give you is that the average tickets There's obviously a distribution from, you know, very, very small, you know, $2,000, $3,000 loans to much larger ones. But the average is about $260,000 or $270,000 in that range.

All right. That's helpful. And then I appreciate all the color on CECL. You know, I know Moody's came out with their April baseline, which instead of having unemployment at 9%, I think it's up to a little over 12%. I know some of the banks have been talking about what the April baseline impact looks could be to low-loss reserves? Any idea how much Bank United's reserves would have to increase assuming the April baseline for meetings?

Peggy O' So, Brady, what I can say about that is by June 30th, I don't know what the forecast is going to look like, but I'm pretty sure the April baseline is going to be in the garbage can. I don't know if it's going to be better or worse at June 30th than it is at April, but our second quarter provision and reserve level will be based on what these forecasts look like at the end of June, not what they look like on April 15th. We did not completely recalculate our provision based on that April 15th baseline. Obviously, if that holds, running that forecast through will result in an increase in reserves, as I mentioned earlier. the impact of PPP, government stimulus, deferrals and whatnot will pull in the opposite direction. And so all I can say right now is that the number on our balance sheet at March 31st, 2020 is our best estimate at that date of lifetime losses coming out off of that portfolio. And we will update the estimate in June based on what the world looks like to us at that time.

And then lastly, for me, Raj, you laid out Bank United 2.0 before anybody even knew what the coronavirus is. We're in a different backdrop today with more earnings pressure than we thought, evident by this quarter. But is there an opportunity to revisit Bank United 2.0 on the expense side and potentially try to harvest some more expense saves out of the franchise in the future? I think there will be.

I don't think it is going to be this quarter. I think right now everyone, when I think about the capacity of the bank, just the number that I gave you, we're trying to do 3,000 loans in a month when we usually do 200 in a year, tells you how much just physical work there is. side, we will look at everything and if there are opportunities, we will go attack them. Absolutely. Great. Thanks, guys.

Our next question comes from Lana Chan with BMO Capital Markets. Your line is now open.

Hi. Thanks. Good morning. A couple of questions. One, just on the expense side, I guess last quarter you gave guidance saying expenses could be pretty flat this year versus last year. And since, you know, expenses is one thing that you can't control, is that still a reasonable estimate, Leslie?

Go ahead, Leslie.

Lana, you know, there's just a lot in the hopper right now and a lot of things going on. If I had to give my best guess right now, I would say they would be down. But I'm a little hesitant to quantify that very specifically because we're in such a an unprecedented time. But if I had to give my best estimate, I would say they would be down somewhat from last year.

Okay, thank you. And the guidance around NIM for the second quarter, does that include the impact of the PP pay loans, which are lower yielding?

Yes.

It does. Okay. And then I just wanted to really say the disclosure on the loan portfolios are, I think, one of the best that we've seen with banks so far this quarter. So I really appreciate it. On the CRE side, you know, if I look at the reserve allocated to CRE, it seems relatively low to me. And I know that you guys have had very low losses in that portfolio typically. But if I look at, you know, where some of the potential COVID exposures are, the hotel CRE, retail CRE, and how much has been deferred of those portfolios, I'm curious why the reserve allocated to theory isn't higher at this point.

So I spent a lot of time looking into that question, Lana, believe it or not. You know, the hotel portfolio did get – penalized pretty significantly when we ran the models this quarter as a part of that CRE. It's some of the other portfolios that are actually lower. But really, Lana, I would attribute that to the LTV cushion that we have throughout that portfolio is probably what's driving those reserves to be a little bit lower than you might have just But we're still very confident. They're modeled at the loan level. We've dug in pretty deep. But I think the driver is that we have a pretty significant LTV cushion going in across the spectrum of that portfolio.

Okay, great. Thank you.

Our next question comes from Dave Bishop with DA Davidson. Your line is now open.

Yeah, good morning. Hey. Probably the same question in terms of the reserve, but maybe in the equipment finance portfolio. I think that that actual reserve came down a bit. Just curious in terms of the methodology there and directionally why that fell as well.

So the methodology is the same. You know, we're running these at the loan level through these econometric models. I would say, you know, that's just reflective of the fact that, for the most part, what's sitting in that portfolio are loans to some pretty strong borrowers and some pretty strong companies with stronger balance sheets.

Got it. Then, Leslie, I think of the preamble you walked through, and I might have missed a slide here, but... the impact under the various DFAS scenarios. Is that broken out, one of the slides?

Yes, Dave, it's on slide four.

I think you gave some other details that I could not get to. If you could just go over that again.

Slide 4 shows you that under the 2018 DFAS severely adverse projected lifetime losses would be $575 million. And our current reserve at 251 sits at 44% of that. kind of a metric or a barometer that a lot of the analyst community has been looking at this earnings season. The 2020 BFAS severely adverse losses are projected at $445 million, and our reserve sits at 56% of that. I understand why people are looking at this metric, because everybody's sort of searching for anything they can to try to provide a comparison from bank to bank. But I do want to emphasize that the purpose of CECL and the purpose of DFAST are very, very different. And these DFAST scenarios are not forecasts. They're hypothetical scenarios that were designed by the Fed for stress testing purposes. So I don't know that there's really, you know, the comparison between DFAST losses and the losses that we actually expect to realize in the current environment. It's tenuous at best, but I do understand why people want to look at this.

Okay, great. Appreciate that detail. And then, Lawrence, Leslie, Tom, sounds like you guys have obviously a lot of confidence in directionally in terms of the net interest margin. It sounds like on a core basis. Just curious, you know, you give some good color in terms of the deposit side, the funding side. On the asset side, just curious, you know, what you're seeing there in impact. Maybe a floor is taking hold. Why isn't there maybe a bigger impact in terms of the asset side from what's happening from the separate cuts?

On the asset side, listen, spreads have widened, right? And based on which asset class, some have widened more than others. But they're fluctuating quite a bit. What I am still nervous about is while the healthcare data is beginning to trend better, capital markets are beginning to trend better, risk is down, market is up, you know, spreads are tightening a little bit in the fixed income market. I'm still not calling this that the main street recession is behind us or that we've bottomed out. I drove this morning and I took the long way down here just to see what it feels like. I think we're somewhere at the bottom, but we may be a few weeks away from it, a few days away from it. Things haven't opened up yet. So when it comes to doing more new business, we've got to be a little careful. Obviously right now we're just doing PPC, but that's a different animal. And we'll do Main Street lending, which will also be a different animal, but just going out and saying, okay, everything is fine, let's pretend everything is okay and underwrite loans the way we were three months ago, I think that's a little too early. We might be there next quarter, maybe sooner, but we're not there today. So we're not leaning into and taking risks and saying, happened. You know, it's hard to get an appraisal done. It's hard, you know, you can look at a cash flow of a business from last year, it means nothing right now. So that's why we haven't said much about spreads. Of course, spreads are much wider, and across the board, we could do better business. You know, I think when I think about the long-term aspects of what this recession does. It'll cause a lot of harm. It'll do a lot of damage to the economy, to various businesses. But here's the silver lining to a recession, which is once the recession is behind us, the new business cycle starts, and the best kind of business you can do is all this done in the first two or three years of the next business cycle. The last three, four years, all the things that we've been suffering from, irrational capitalization, But to get there, you have to first get through it. And I'm not willing to call it that it is behind us. I'm hoping that next quarter when I talk to you guys, I'll be able to call it. But right now, we're still in the middle of this. And we need to see this economy open up. We need to see people get back to work. We need to see some social activity. Even if it's not anywhere near the levels, but we haven't yet, we're at the very cusp of it. So that's why we're a little careful in saying anything about the asset side.

Dave, I'll make one more comment on your, you know, back to your question about the NIM. You know, as LIBOR came down ahead of Fed funds, we saw a lot of our assets reprice earlier in the first quarter. We saw very little impact of the work we did at the end of the quarter and into April in repricing deposits in our first quarter NIM. And we expect the repricing down of deposits that we have been aggressively engaged in in late March and the first half of April to have more of an impact on the second quarter NIM. So that also is part of the reason for our confidence or our expectation, I should say, that the NIM will probably expand in the second quarter.

Dave, I would also add that when we look at the market today from a new business perspective, There's clearly plenty of spread in loans we don't want to make. You know, there's a lot of that out there. What we're doing today beyond the PPP program tends to be, you know, new credit for existing clients that are long-tenant clients that have strong financial positions and are generally in essential related positions. businesses, that's what we're seeing today. But, you know, this is also a time, I think, to be, as Raj said, you know, careful around credit quality and making sure that we're not, you know, straying into areas that, you know, could be problematic. So as we see recovery, you know, that will probably change a bit. But right now our credit posture is fairly highly selective within our existing client base and within essential businesses. Got it.

Then one final housekeeping question, maybe some guidance in terms of the effective tax rate.

I think it's probably going to be relatively stable with what you saw this quarter, somewhere around 23%. I don't think I see anything unusual coming in the effective tax rate.

Okay, great. Thanks, Leslie.

Okay. Our next question comes from Stephen Alexopoulos with J.P. Morgan. Your line is now open.

Hey, good morning, everybody. I want to start on the criticized and classified. And if we look at the franchise finance loans, you guys reported a pretty sharp increase quarter over quarter. We've seen other banks report really a marginal increase. I'm trying to understand, is your exposure more challenged than peers, or did you just approach this differently in terms of the accounting for these loans? Yes.

I think we've pretty aggressively reviewed the risk rating of these loans this quarter as deferral requests came in. And we may or may not, I don't know what other, I can't speak to what other banks did, but we may or may not be a little bit ahead of the game there in terms of some of the downgrades that we took this quarter as these deferral requests started coming in.

A lot of this happened literally in the very last week of the quarter. So, you know, if we had just waited a week, it would have fallen into April, but we were on this towards the end of March.

Yeah, I think that's why some peers are saying they're not recording it in classified because of how late it happened, but it sounds like you were able to move that in.

Yeah, yeah, we were.

Yeah, okay. And then the DFAS losses you're providing are helpful. If we were to use, or you used a nine-quarter loss assumption similar to other banks, would that have materially changed that estimate?

No. You know, materially, I mean, certainly. Whenever you run these, it's hard to say. I mean, you would certainly think at least more than half of the losses would probably emerge in the first nine quarters. But a lifetime loss, particularly for a portfolio that has a longer average life than that, you know, some of the CRE portfolios, some of the owner-occupied real estate, the BFG equipment, so the ones with the longer average lives, it would be material. The C&I portfolio is probably not a material difference, for example. Yeah.

And then if we look at the COVID-exposed loan segments, which are clearly on slide 16, which is helpful, to the degree that some of these deferrals become defaults, where on that slide do you feel like you're most protected from a collateral view and which portfolios are most vulnerable?

I think the most vulnerable is going to be franchises. and when it comes to CRE, whether it's hotels or, you know, retail or what have you, it depends on how valuations hold up. I mean, we feel pretty good from the starting point, right? These are, you know, very low LCBs. A BFG business, you know, that's not a real estate business, so that's where the biggest risk is. But anywhere in retail CRE or hotels, and we feel pretty good. Even cruise lines, we feel good because these are highly rated companies. Despite the extreme amount of stress they're going through, we feel okay. And, you know, for a Miami-based bank, you would have thought we'd have a lot more cruise line exposure. We just have never really liked that business that much. We have a small amount. But I would say franchise is number one.

Yeah, also, Raj, I would add that some of the entities like cruise lines are companies that have significant access, as you've seen, to other capital markets and have been able to access those successfully. you know, over the last couple of weeks. So Roger's correct. Our exposure to that industry segment, given where our headquarters is and where we see these ships passing very close to our offices and homes, is relatively modest for our size of bank. You know, I would also say that, you know, there's a lot going on in the New York market as it relates to what's happening in, you know, rent abatement dialogue and, you know, what – the entire legislative market for multifamily. So that's, you know, one that we're continuing to watch very closely.

I also would add a couple things to that. You know, in the CREE portfolio, there is significant LTV cushion there, as you can see from the slide. But certainly the duration of this crisis or recession or downturn is will be a big factor that drives what ultimately happens to valuations here. You know, if the economy opens up relatively soon and relatively quickly, I think it's reasonable to assume there'd be less impact than if this is drawn out much longer. So that's an uncertainty there. I will also mention on the airlines, most of these airlines that are exposed or have either already received or expect to receive significant amounts of direct government assistance. So those are just some things.

Thanks for the color, and I just want to echo Lana's comments. You're really providing great color in the slides today, and it's very appreciated. Thank you.

You're welcome.

I'm glad it was useful. Our next question comes from Stephen Duong with RBC Capital. Your line is now open.

Hey, good morning, Stephen. Morning. So just a question on your stress test and for your PPNR in your stress test, did that decline, meaningfully decline at all during the stress period? And if so, how much, what percentage?

Yeah, we did not. Okay, I'm glad you asked that question. It gives me an opportunity to clarify something. So the way we did this, as you know, we're no longer subject to DFAST. So we did not actually submit DFAST. The way we did this, we took the credit losses and we said, what are the credit losses? We didn't give any impact to PPNR here. So this is increased losses as if we don't have $1 of PPNR over this forecast horizon. We did not set any of these credit losses with PPNR in this exercise. So it's a pretty severe or punitive way of looking at this.

Got it. So basically your capital decline is not offset with any PPNR?

Not $1, correct.

Okay. Not $1, correct. Okay, great. And then just a last question. Just on the restaurants, do you know how much of the restaurants have drive-thrus?

I don't know the exact percentage. so much what your drive-throughs, that's an important component, but when you break down the composition, businesses that have high delivery models are the ones that are really performing well. So if you look at like QSR Magazine, if you look at Q1 and early April numbers for revenues, it's the digitally capable delivery models that are really doing well. The drive-through impact is clearly important. It also tends to be, you know, how modern are these drive-through facilities if you have the two drive-through facilities and also its venue. heavily traveled, you know, highways is different than, you know, any QSR restaurant that may be on Side Street or may not have quite the same, you know, location, you know, capabilities. So, you know, I would say in the quick service space, you know, a high percentage of them would have drive-throughs, but I think it's really more the delivery model right now and the digital capability that is separating, you those that are actually reporting same-store sales increases versus those that might be off 25% or 30%. Great.

Really appreciate the color and great job on the slides. Thank you.

Our next question comes from David Giaverini with Wedbush Securities. Your line is now open.

Hi, thanks. I had a follow-up question on the multifamily portfolio. So on slide 13, it's showing how about two-thirds of your portfolio is rent-regulated. And I see how the LTV is pretty low at 56%. I was just curious, and it was alluded to earlier about how You know, there's a lot of tenants with the rent strike going on. I was curious if you had an idea of how much, even before COVID, you know, leading into earlier this year, how much multifamily values, building values have declined, you know, post the rent regulation law changes last year. Do you have a sense of that?

That's difficult to tell. You know, conceptually, obviously, it has declined, but there have been so few actual sales in the market to be able to rely upon in terms of looking at values. And even some of the ones that were sold, you know, you're seeing a very, very wide variation in sales. and, you know, declines in values. We saw one that was in Queens that had a larger decline, but that property had, you know, certain characteristics to it that people in the market, you know, were following, and that made it less valuable, whereas we saw declines of, you know, low single digits for property that was well located in the Manhattan, you know, borough. So it really has not been enough activity in the sales market from our perspective to be able to pinpoint, you know, yes, this is what we think an average decline would be from the rent regulation that passed, you know, the New York legislature in July of last year or late June.

In the 56% LTV, that's as of the time of the loan origination?

It's as of the most recent appraisal date that we have, which in some cases would be at origination, in some cases would be more recently, but it is whatever the most recent appraisal that we have on file is. So obviously they aren't up-to-the-minute valuations, but it does give you some idea of how much cushion is there.

And how often do you guys do appraisals? Is it annually?

Not necessarily.

Yeah, we do an annual review of all loans. Those do not necessarily give us a full appraisal at that time, but we annually review every loan.

Great. And then shifting gears, you mentioned about how the DDA momentum is continuing into the second quarter. I was just curious, given the unique environment with COVID and everything that's going on, how have you been able to win new business given that backdrop?

I think right now it's just a matter of converting the pipeline that we've had. If I think out further, let's say four months, six months out, I do, that's one of the challenges I think all companies are going to face, is that if social distancing is with us, is here to stay for a long time, how will this change our selling processes, right? How does it change face-to-face selling, B2B sales, and how do you pitch to a client which has been robust. But if we're not going to get on a plane for another year, God forbid, then we have to find a different way of getting in front of our clients if it's not industry conferences and other events or wining and dining. All B2B businesses, not just banks, but all B2B businesses are going to have to rethink how they actually do the sales part of their jobs.

You know, I would add to that, though. When we started, you know, voicing this and Raj really, you know, laid it out as a number one objective for the organization, part of our success is really shifting the priorities of industries we focus on. And I think a lot of the success is due to that as we think about, you know, you know, who are our top potential clients, what industry segments we want to develop, you know, treasury management capability around where we're focusing. You know, over the last couple of years since we laid this out as a top priority, we really have executed well around those strategies within those very specific industries. And I think we'll continue to do that. It will clearly be a challenge to do it in the future due to some of the things that Raj just mentioned. But it isn't sort of like it's accidentally happened. It's been a very well thought out process of what to focus on in specific client relationships and specific client industries. So we'll have to retool our tactical sales process, but I think the strategy is in place.

Thanks very much.

I'm showing no further questions in queue at this time. I'd like to turn the call back to Mr. Singh for closing remarks.

Listen, guys, this has been a tough quarter. We are living through unprecedented times. The balance sheet, the company is strong. We will do fine through this. Like I said, we're not calling that we're on the other side of this. Hopefully I can say that at the next call. But everyone at Bank United is hard at work trying to take care of our clients. The relationships that you build during tough times are the ones that last the longest. So I keep telling the sales people, this is your opportunity to shine in these relationships and what you do to help them through this time. They will remember this and they'll be with the bank forever. And the last thing I will say is that while we are dealing with the crisis at hand, we are absolutely focused on the long-term as well, and we haven't lost focus of that. So with that, I thank you, everyone, for joining us, and we'll talk to you again in three months. Thanks.

Bye. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.