BPFH - Earnings call transcript Q1 2020 | Boston Private Financial Holdings Inc

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Operator

Good morning. And welcome to the Boston Private Financial Holdings First Quarter 2020 Earnings Call. [Operator Instructions].

I would now like to turn the conference over to Adam Bromley. Please go ahead.

Adam Bromley

Andrew. you, Thank everyone. morning And good This is Financial of Private Investor Bromley, Director, Holdings. Relations Boston Adam you call We First this to welcome conference Financial Quarter to Results. XXXX our discuss

which to Our section Relation website earnings includes this our found references call presentation the morning of and can bostonprivate.com. Investor be in an

Officer; Banking. Jim President me Banking, of Joining Executive Wealth morning Brown, Financial Chief & Anthony are Gaven, this and President Private Commercial of Officer; Chief Trust; DeChellis, Steve Paul Simons,

objectives strategic based and for call belief contains certain regarding This uncertainties. financial management are statements of risks results They and Private's and to upon expectations operations are Boston forward-looking future current subject and and expectations prospects. of the

also earnings may contained those Actual differ and to material which the release, expectations set forward-looking from or forward-looking actual between statements cause a anticipated that in could in results factors qualifier other number refer differences of our results forth the identified you statements. I expressed.

cause to the SEC. be factors company's to found submitted Boston can Additional filings Private's in statements from could differ those in forward-looking results that the the described materially

All acting statements does are obligation our are circumstances or update Boston after forward-looking attributable qualified occur subsequent, Boston the expressly on statements. these any statements by made. cautionary behalf statements not or any undertake and to reflect written, Private oral Private forward-looking any forward-looking person to to events that

I that, over will to With now turn DeChellis. Anthony it

Anthony DeChellis

these you for your challenging during morning you quarter call everyone. joining Good and results. discuss Thank Thank well times. uncertain staying families XXXX and on Adam. hope us first you, and and are We healthy today's

the related few response COVID-XX thus to our like discuss in the our we first Before of impact company's I'd XXXX company. results, our to broad far pandemic to a address topics quarter and

X. Slide comments on begin will My

Boston employees, unprecedented its has during protect and well-being local measures First to and truly moment. reasonable taken clients, the all Private communities foremost, of a

word, What ever and not in uncertain. times often this unprecedented current all still is themselves obviously have very crisis. this when environment impact I -- spectrum. the end ultimate it is time. need agree firms environment seen might of is remains different its our clients that us when familiar to we the help think A overused an is This remains we and anyone the on most what distinguish required is clients moment is of either our performance unlike

From Boston the completing platform I'm managing It our have SBA within to Boston partnership the we team standing the in storm note, the that applications possible. never has way Private have majority successfully up aspects Boston it's bring dreamed program more spirit all fabled of technology vast loan perfect very fronts. managing On to a at assisted couldn't very in have thankful relationship. for where that our Private could PPP I have days clients a our manner successfully been of at effectively managed remotely storm. adapted business multiple the they for been and Private they team some of the a be clients proud way for In with

Thanks outstanding working Every I clients, employees our challenges platform, employees current demands like as day unwavering adaptable capabilities have clients more our team. constraints. especially our to and functions we add to their only business would able to technological business technology more clients but to the have and the our help normal behalf meet to result of presented Private's been pandemic. and all continue a not commitment managed the new our to operations within and acknowledge and Boston also able enhancements to of of become On the our and the work

at proud to perform the has of different highly challenging and highest Relationships employees, Boston we The our our business our and confidence the physical, tireless Private the focused times. these great financial by the challenges on the reinforces the of in that team in through health extremely and have our through ability means. are emotional, communities. functions clients. Private commitment steady during shown employees and of strengthened clients the recent events, and albeit been its has remained may serve clients, side we our the highly Through our unified constituents. meet crisis, confident dedication come minds team to Private advanced my other employees I'm course levels this prepared Boston Boston of of with our lay to all Again, of ahead. brand have that I'm also will the our of response

threat I'd stands business primarily far, from conditions. now fairly increased. transition Thus operating our as Private of financially. remote like firms is a and operationally January the many it to move dramatic thoughtful continuity Boston environments. a today smooth COVID-XX been in company has a Thanks in on Like working refined that through to change was to other where plan

simultaneously reduced select interaction. and office in-person others in able -- clients to services and banking temporarily need have offices hours they We closed while limiting execute order other are ensure in to

For personal protective practices, we and supplies clients offices plastic increased that remain equipment, employees. of installed those protect open, have hygiene and barriers enhanced to

our benefits enabled our platform remotely. services Our banking investments to proved recent timely has banking have immediate new and to be technology clients access as shown digital

and nearly have increased and of investments enrolment, We by clients. improve employee have the use have business and both mobile rates infrastructure of log-in their has business deposit doubled activity, our January since enrolment our productivity. process of and and clients operations seen mobile to daily XX%. Likewise, clients private improved across efficiencies activity our private the banking of particular, In increased rate

uncharted our truly navigate territory. fuel support our to and it has results tax unrelenting many of served environment an continue especially renew to the energy our While and ways, as creation also has the source clients energy our and value emotions they being continued new source to and current provide of for commitment community, in to to

our options last During host private available few business made a clients. have we the payment months and of for relief

are accounts Specifically, debt instituting reserve have moratorium late waiving deferment, charges, providing we we and when warranted, in a foreclosure payment effect.

access clients helping SBA actively been Program. Protection the Paycheck commercial have our We

get clients $XXX our than in our XXX to members approved clients weekends staff been have to needed throughout technology. and helped have loans, worked our totaling of deliver for by capital more million. order this tirelessly Many and efforts We much aided our

succeed, that actively agencies, We stopped. sources and ensure municipalities, with have been when has working affordable to housing development government construction projects especially other and funding community will

funding to development established We organizations while investing community in development have have organizations expedited also funds. that non-profit three community COVID-XX

disciplined and management wide-ranging culture The team credit our have years to to that review process lay led team vast knowledge, fortunate has asset in industry net senior has with may credit overseeing quartile top recoveries. challenges the As quality been many continuing experience. company the I of ahead, in a and a impact about company's expertise, conservative, seven think that ranking and on am pandemic's years managing reassured for straight I feel place

Our on CFO Steve call. Gavin culture about this will credit the have portfolio say more later our and loan to

is advisors I current in In targets think a will impact our our surprise of to learn the the anticipate hiring need coming will environment to reassessed. objectives. Finally, rate slower strategic if current it anyone months. company's be slowdown growth prolonged, that the don't we XXXX -- and through Even the the persists pandemic will

However, position the of in the competitive we future financial will have our state improved business strategy our industry. remains intact believe services and

our in laid intelligent and technology build are changes we core will Again, We to by the the we we continue Investor strategic empower advisors solutions. to are will committed targets principles able deliver which address quarters. in our to specific knowledgeable forecasts that platform who XXXX coming better advice-based of remain to vision out Day, to

on We remain recruiting, retaining developing, talent. the industry's focused and best

as of to management AUM. more higher we higher We profile of revenue result will operate a relative will contributions in a has efficiently pursue returns to on higher continue equity. that common order And achieve wealth revenue

I the our have current Steve to every more reinforce and of planning, has to for role. I never earn believe to of is term an Before XXXX me comment been I value help programs. inspire the relationships first close Private. them needed on become business capacity and CEO clients rework like higher. trait doubt opportunity through navigate quality this government will succession. them portfolio and Private's in during help that been Boston our has and up that quarter transfer, day And us that firms the market volatility, who would our step the for those service that trusted to truly excellence the clients turn is most clients had is financial level client them Boston I most long and seen no when core results, a over never to a engagements as will helped always remember DNA a for has unprecedented. company that about walk the it estate with management, that to long one been regulatory clients deeper that of This have moment construction, environment to and risk of to wealth I they quickly topics in positive engaged it with help evolving consequence we decide working advisor our plans, over client result

I will to turn that, With over it Steve.

Steve Gaven

comments highlights Thanks, our X, a first quarter. good from show on financial My Anthony. begin the morning, we Slide consolidated of summary And everyone. where

on the the significantly per This and X in January that $XXX,XXX quarter by incorporate includes million or reserve we March. during standard $X.XX reported net outlook adoption of the were income building economic of decline accounting steep of the share. to occurred CECL Earnings $XX.X impacted

sheet billion, at XXX% average a quarter Total growth XX%, by quarter year-over-year equity quarter. of end loan $XX.X lower market from Our liquidity ratio year-over-year March declined XXXX of XX, of balance to the to was as improved X%. the of as growth linked the year-over-year, outpaced deposit driven and X% AUM values on dropped the primarily during loan deposit

equity XX% share linked first million, quarter Total tangible $XXX attributable positive segment. The were million ratio management year-over-year trust X% share. flows wealth & the and were to per to quarter common for while XX.X%, net which book Tier-X the increased $X.XX of value was $XXX per

of million reflects that completion the quarter, we was initiated million the XX.X During XXXX. $XX repurchased in which program existing our shares,

Going economic uncertainty anticipate shares while repurchasing of forward, we do the current common remains. environment not the

for XXXX was $XX.X decline million, Slide Pre-tax, statement. quarter income of first $X.X pre-provision a X quarter. linked shows the consolidated million income

expense provision $X.X finally, on of total of company's And and is deferred the other of captured affiliate. negative contributing which to XXXX of securities reevaluation related Some related include in primary during the compensation and receivable non-interest divested the a $X.X to derivatives marks to decline of the expense includes of total which factors a plan. $X.X million income to commitments, gain unfunded related quarter fourth million million the

effective a as The the for impacted of the of was than and quarters rate be forward by the during tax negatively rate rate reserve lower quarter approximately taxable anticipate will lower on tax levels Pre-tax of effective loan approximately the XX%. income of effective The income going for we full-year was XX% the quarter. building. rate result taxable an to second effective depend quarter XX.X% tax But previous tax income.

trends. net of residential company's that consolidated core banking The fees with first management income declined and investment primary associated quarter and fees income Total Slide revenue fees of in quarter private fourth fees sales. shows X% linked revenue sources result higher total quarter. sum interest included the the linked income X quarter loan declined as lower of earnings, core and and

million linked $X.X to revaluation the on affiliate income the quarter marks and fourth costs outpaced in a and driven of first million was quarter securities a receivable decline as divested gain primarily miscellaneous by funding derivatives in in decline interest in in for quarter increased negative of The million $X.X related earning a non-interest quarter. the linked a of decline assets. Net income $X.X

our $X.X Total the X, which related quarter Slide On million, provision loan million breakout for of a we the of non-interest as expense. XXXX expense detailed of other non-interest expense to was unfunded show $XX.X first expense. categorized commitments includes

provision Excluding of linked primarily expenses. seasonal expense, was result quarter quarter total X% million, the compensation impact first a $XX.X increase as of non-interest expense

type increased by past during balance as of on declined X average the the loan deposit deposit to average to Slide ratio shows sheet average quarter. five loan and balances liquidity the quarters XX%

as end on and declined in balances previous However, of linked sheet the as year deposits communicated the left we we of balance of first end deposit quarter as quarter the temporary our earnings had period anticipated call. the on

historically business the during you our related seasonal recall, second tax has As quarter outflows payments. may experienced

similar anticipate deadlines upcoming filing in delayed, tax occur Although, have we the been outflows to quarter.

quarter during loans Overall average and the X% primarily to commercial was growth. year-over-year increased real by $X commercial loan industrial Total billion. growth estate driven

loan by category over the the were in fourth sales quarters quarters Although, two XXXX. residential the loan for prior of the decline driven and third

X% Average decline to increased growth accounts Total XX% and quarter by related average growth by deposits certificates partially deposits during in $X.X accounts in growth primarily the market offset to of driven in deposit off and year-over-year was money X% deposit billion. the linked brokered run demand quarter of X% CDs. a

of Core linked margin. a funding net consolidated interest previous in decline income a recovered X% interest assets. which interest quarter excludes earning net net Slide income, X five-quarter in as trend on costs interest increased decline shows interest loans, outpaced and non-accrual the on

deposit funding the including yield The average of basis basis margin points and bottom decreased quarter. rates X.XX%. lower money changes balances to and the interest costs of borrowing market lower points. net points the cost Linked basis funding of net linked XX result slide, On core the funds cost the decreased quarter total show table a during costs. lower in volumes include The by asset as XX stronger we increased deposits earning a supporting interest quarter, margin factor of X and

to move the XX, credit we the culture. loan bank's a of As would Slide like discuss aspects portfolio, to which key our discussion few I of include

to managed to lending a forced California, New not We focus organic terms are digit rate, loan markets, our growth achieved rates. We have geographic relationship on asset quality reach to mid-single Northern we California. so growth on outsized historically England, and Southern in disciplined or

who crisis. company's company are evolved with you our history, considerably of familiar those For less the the XXXX since financial has

Company five Boston who on & Jim holding us separate function that place has In affiliates and and been our today. which we Private appetite a Trust each over maintaining a the the bank and Holdings company banks Going was in operating joining owned credit XXXX, years XX consolidated led and into credit Buffum Brown manner under is that in legacy bank Bob separate risk Bank decentralized approval by the Private Boston and is crisis, financial processes. merged team, call for Financial

merged recognized Boston million gross Private the Company were XXXX Trust from XXXX. $XX in Bank until of total of a & affiliates charge-offs bank

of drive integration, Following classified first criticized loans, loan the bringing this and million recoveries seven assets down the years. the for from quarter for XXXX in the team remixing past working and and $XXX helping was net portfolio out responsible ultimately

total In profile consolidated key Another Today's reflects XXXX, disciplined with composition company. credit the of XX% represents of the to capital. a capital, loans tangible percentage and of is balance sheet or larger construction total our conservative XX% tangible represented respect difference more balance XXX% today today's balance and of of sheet loans compared which sheet loans only underwriting. X% of of third quarter

construction lower of loans projects include multi-family government-supported with development addition, land levels In today's risk. inherently and

stands overview it balance of shows XX -- an today. our profile Slide overshoot as sheet

Our four our portfolio. represent types largest of loan total XX% loan

of in jumbo a XX%. XX% includes category portfolio. loan worth loans, of LTV net which geographic largest high loan our average comprise loans clients are Our These primarily residential total carry our weighted These to loans markets. primary

cumulative this since in beginning recognized the losses have We portfolio of of XXXX. million $X

loan estate, commercial we which the real category on next detail second includes further slide. Our largest

schools. loan commercial total of estate practices. are private types professional fourth exempt equity, colleges, category real conservative and and segments businesses balance high clients include portfolio and while These public firms, represent as Commercial privately underwriting charter private services these and tax industrial collateral diverse non-for-profit largest Our XX% quality sheet loans such to schools, includes held commercial loans loans. the reflects the

low history losses loan the our tax experienced have segment. We in exempt commercial in

breakdown contains our XX commercial portfolio. Slide of estate real a

real $X.X XX, billion As of loans. commercial had we March estate of

estate to that in loans are well-known strong underwritten to our geographic primarily are bankers. as Our real our commercial sponsors properties, stabilized markets

our include, the multi-family with rate represents growth key takeaways exposure largest XXXX. end in the of the since highest our of portfolio Some

Our end retail declined since region. X% exposure has diversified the are XXXX. by annually of Collateral types

We hospitality in have exposure no Southern California.

of breakdown and Slide be impacted a the that XX likely COVID-XX contains exposure industries are to client pandemic. overall to most our by segments

and and we uncertain, not cruise most at cards portfolio loan consumer credit risk. We that on have to the immediately several not ultimate our or since remains impact limited to movie portfolio any be we residential do we loans. exposure loan airlines, While may exposure our theaters, exposure limited casinos auto material pandemic's outside lines, highly have energy, industries do have have

the retail We related within portfolio monitoring exposure hospitality. are to potential CRE closely and

estate our secured underwritten While real do our geographic exposure from certainly we believe is by clients in and pandemic. to markets, conservatively we be expect our immune not the

weighted size the million $X.X factoring portfolio total and LTV in Our current the average is retail loan average balances approximately million. is $XXX is The XX%. exposure portfolio

exposure. represents Our of hospitality portfolio million $XXX

hotel increase that partially current, remain is Though We agreed properties and for and XX%. balances which to of have hospitality to classified continued caused factoring locally-owned be criticized downgraded all the portfolio risk, we our current high pay average deem quarter. loans LTV to these independent portfolio boutique, the the during weighted as loans approximately

The third $XX area less totals of or than X.XX% -- loans, X% which restaurant exposure total million includes loans. or of less than

at adopted we we Slide which primarily subsequent $XX.X by net low of provisioning the on loan XXXX. model. $XX.X realized the implementation was our the of result $XXX,XXX than through which of This on of driven January the CECL deterioration charge-offs, nature On was economic as million. pandemic adoption, release in the outlook accounting first rather review of we quantitative reserve CECL The quarter. based history a primarily reserve million the during X, remain building loss the XX, Upon low standard, impacting initial

the and weighted Notable scenario SX prices. downside from oil recession includes and second rate expected than reflect persist the XX.X% the longer markets equity baseline forecast The The by negatively assumes sudden a is unemployment and a second economic double-dip the of comprised scenario an resulting the primarily Moody's plunging of quarter. addition in COVID-XX where economic GDP scenario. data scenario to COVID-XX catalyzed sharp probability of in Our crisis, X.X% baseline annualized the composite recession. scenario the on global quarter U.S. based contracting a COVID-XX turmoil in SX the scenario the the an composite impacts and baseline deepens environment Moody's in

the a from basis of slightly XX doubled points. XXX After provision percentage basis loans as to first quarter points our reserves declined

portfolios rate percentage the a ratio. coverage industrial, commercial while estate, a and on reserves Our resulted on under consolidated highest in the exempt and commercial CECL higher are and and as land, of and loans real tax commercial residential rates construction lower lower of residential loans

our detail and of Overall provides basis non-performing The points at special on criticized graded remain adversely loans XX loans. Slide increase loans loans. performing mention classified accruing classified categories. low increase and the loans independent in special to CRE hotel and mention relationship non-accrual XX downgrade The primarily of to the reflects that total $XX be to of result mentioned boutique the were by an incident. to at the believe credit we which million single deterioration, downgrading that previously increase classified risk experienced higher be loans deemed accruing and was a isolated driven was loans

show excluding increased ratio private with we bank. portion as -- banking bank including wealth to private XX% efficiency & the The XX, to related the provision segment revenue coupled other categorized management commitments. unfunded Slide income trust our of by expense On negative driven

trust to turn now discuss & to will management Paul it I wealth Simons segment. our

Paul Simons

Thank you, good Steve. And morning.

Lower negative. highlights slight and AUM and equity values for linked wealth decline quarter a management performance compensation be reflecting to $XX.X March market the XX for was margin shows XX% seasonal the of in the segment. revenue quarter year-over-year as & segment billion. trust The was segment's comparisons expenses. to XX caused EBITDA for Slide

and XXXX. outflows reduction advisors to net time, for in advisors million added the Continued seven $XXX both new while the At in no quarter strength existing source first new same of combined of the positive from a we led quarter with attrition. experiencing flows business in

That prepared first on XXXX reported concludes quarter results. our comments our

for will questions. now We your open the line

Operator

Instructions]. [Operator

The first Young Michael question comes of Please SunTrust. from ahead. go

Michael Young

with into forbearance. not start Good been this We've either move seen borrowers quickly they've morning. on most as other to just downgrades. or downgrades forward I wanted the necessarily deferring allowing payments banks

other of So other looking and just location, size those these loans? specifically reason you at can factors, some if on opposed curious color were mitigating these to why provide of there's as a any just downgraded

Steve Gaven

Sure, Steve. Michael. This is

we just situations. I think, Private these credit to kind type start it's culture and off, revisit of the of approach how Boston

minimize and goal in see Our rate manage key where then loss. identifying to minimizing pockets risk that's is the risk early, early identify last loss And risk those pockets of is appropriately problems what those you that a to of pockets part of really way we and here.

hospitality XX% with special but three all below and past loans which downgraded So very the obviously that low three of backed strong XX% have segment Those in we range mention. had two LTVs range, XX% challenges. from loans, nevertheless the experiencing sponsor third liquidity, we those that by a strong the is

identify really downgraded we $XXX you of of as in presentation, downgrade that a So where how we strong appropriate, just our had do, the in loans or what layout we Slide point we that quarter. and problem million would appropriate. this of thought and upgraded and loans, it I kind was think slide XX, this typically we is it to I think million example to where that investor payoffs XXXX I as that's XXXX, seeing you're approach of bucket, it $XXX between

Michael Young

lending shared credits quick or on any you-all the a And national follow-up. leveraged have Do Okay. books? credit any

Steve Gaven

have number. that detail, it's national I'll come Leverage to credits, Shared you lending, no. a back with to small

Michael Young

Okay.

bigger laid still of But year. Anthony, kind just one then, pace to outlook kind some picture that acquisitions question was the so. is and/or was point, the to be slower this I essentially, likely communicate know at there hope trying map RIAs that. Assumed you're some what you're of is and hiring on much think out. of kind And I maybe road updated originally reevaluating of a that for

to that additional Is an line. right the about the adds things, that year out So think time to of maybe it? kicks way kind

Anthony DeChellis

or to lasts. whether all think year mean I it trying adds I we're a Yes. this figure out not, long how

to their require surprise spent things of or It obviously that a in-person anything considerable those buy contact. we're just it's in presence. you or firing activities two whether So unless hire know that going lot time anyone a not to an to wouldn't the are RIA, anybody going we've referenced, not two of hiring amount

that's a the felt advisors meetings seven obviously of had lot in third was in that getting even meetings a able to them saying lots though to firm. the So about really in we first us we the and were fourth and of to we of quarter getting add know them out that front build-up with know face-to-face and getting quarter,

that clearly we we We do clearly as now, can. will actively but can't resume it as as soon

thinking so a that's see six be we we'll really things if because And will minimum lasts, it it -- it's were right, months, clearly us that back pushed or got at whether how kicks due the you've not a but something to just this things basis year, with acquire a long our we're business and has hiring going lot has of diligence been to back hampered. do growing thinking you're

Michael Young

earnings a about Obviously, dividend. one on the understand how the the dividend for bit in of just the maybe or buyback. reason for build, thinking you But And last suspension here quarter are that context? two a just little maybe one, reserve just the with share but I Okay. depressed lowered

Steve Gaven

Yes.

So right – now

Anthony DeChellis

Yes.

So…

Steve Gaven

right go on you that? Anthony, saw now we -- don't ahead, So Why

Anthony DeChellis

Steve. doing but we're Go same Steve. the is of not call ahead, go This a difficulty ahead, room, the in where

Steve Gaven

So repurchases. you saw share the obviously us suspend

capital our pretty and We what happened as work to through quickly. This we crisis. as pay all the makes have in all dividend return We'll see previous at options look we continue continue sense the quarters. to

make coming on that. we'll it's better decision the not dividend continue economy our So I sense outlook, the to But We'll to is re-evaluate the makes going too a of how analyze quarters. over to to develop sense. definitive or whether think forward get early a continue

Anthony DeChellis

I don't anything more to to that. have add

Michael Young

Okay. Thanks.

Operator

comes next Peter question Wedbush ahead. go of Winter from The Please Securities.

Peter Winter

and what was the talk seeing of I plans terms about what wondering deferrals you loan are? forbearance and in you're can

Steve Gaven

Sure.

a $XXX of program X.X% Residential, about option of portfolio. there's that's million the months, in a we about loans the -- So place. so for three extend is have three-month been deferral couple or there with of programs different

of C&I been the a deferral six-month On and it's the principal, XX.X% portfolio. program's that portfolio total about

to were we them LTV for or one a a basically the then second little with where worth went CRE, first out we the the And we and our of something of enable a with out LTV mortgage to to year's -- set lesser take that going some XX%, proactive different. would took did we combined P&I. second, clients approach and We qualifiers more

So that's if by About About or our above project not XX% qualify there's was ways program obviously already. LOC there's of commercial other If would LT and estate clients. was support it. not loan if an XX% already been so qualified a basically well of policy. participation disqualifiers being where kick and if place accepted LTV received And in for community that that support a real XX%, in were of development did which place, it is is out they you in loan on. if clients place the that accept. qualified that -- liquidity there existing can draw If was it your

Peter Winter

liability And you deposit costs. secondly, helpful. level nice did bearing I what wondering, drop outlook is the March. the have just potentially and Got it. had very then That's both costs the and that second in in was quarter? is interest for And what margin a you in

Steve Gaven

Yes.

get think to late deposit see So probably when continue year. last lower. little first when this cost push rates I a started We're cut happened we'll to

catching through more zero-bound room to lower. rates there's pushing those And obviously back been we've with push environment So the up.

will seasonally more challenge. I entering second margin our think liquidity to period be deposits, probably to look the the the sheet. in we X.XX% quarter, borrowing fund going NIM's be range. we're sheet And weak as We'll in think the I where to balance balance reason on really X.XX% at be for a is little that

on compression. pronounced that the given see there as that isn't so pushes then for in X.XX% quarter, probably the you of so delay the quarter the as a the that off really and fourth then liquidity low bat half towards as maybe and X.XX% extend the as depending additional some That's can And tax the balance second of year. sheet half point short-term right that the a assets longer-term, into you main just get can NIM a or to to At you next of or how downward back deposit cost recovers the re-pricing NIM month to is Now, driver day quarter compression. get probably you they could in year, still the have the chance shape year maybe of two. on that second bias back then and for third but the seasonality curve get lower,

Operator

question next The ahead. KBW. from McGratty Please Chris of go comes

Chris McGratty

back Steve, how profitability ratio? be this for like goes to crisis. great. rate more banks I is But more even would for that's payout dividend exiting we come could quarter the just credit then this probably long to you it Because to to the it dividend from challenging heavy like question is a quarters. the the discussion perhaps going when seem year, pretty be banks couple moment. would and or the to manageable about payout most thoughts environment kind reserve a Understanding that of built dividend. for the a earn a lower wanted Again, ratio, managing emerge seems interest Any

Steve Gaven

Yes.

long to changing think, as capital I our and about it we and day. this earlier think we're to quickly we source mentioned how so just well-positioned of while where every Chris, of seems this trying be because feel obviously kind dividend a perspective kind And assess underwriting, a I of we're from good happened capital. is goes

forecasts scenario tell probably only just given about off would we in -- work ago second two to returning of but through right forward seeing it to decision that office out was June. I out for here was six office my are of sometime weeks, and until a or not in make outlook thinking now, we means as Boston, four a still not be and So be work, sitting that time of spending lot weeks out on the outlook the only forward based to quarter, the where I'd our we'll that. analysis it's what credit of earnings But then from we'll work and say too early updating a the I

tell is So just this so to just too quick. moving early and

Chris McGratty

And a then Thanks. Great. maybe as Okay. follow-up.

for comments the think in how of rest do expense the about pace combining hiring, slowing the of kind environment of Just progression about this the year? we

Steve Gaven

undergoing. going operating talking but far we on in kind $XX range mean, I hiring, as million fall pace the to too where range quarter I that well have I'm as not think initiatives some kind $XX of million next of that of of to on be dictated dictated be other -- comfortable will probably Yes. we will out, And of expenses.

on weeks too because seen the I development, platform, haven't a in just largely here initiatives, page tech couple challenging certain on-boarding just our are our right push can of as slow of environment. maybe back we're imagine hiring tech things on and you much think We and in Really there. delay a but little the be pace the it's now process there given

Chris McGratty

different how these think over what's portfolios? its versus out trend could Yes, where you great. about ultimate talk you if attention your And the loss low, is then tests have Maybe on the obviously balance of losses separate the you years books this stood content how Thanks. about internal just environment two for been running, think perhaps, ago, on stress some of the XX persisted? couple Even next guys commercial commercial this if book very own portfolios, have any you do content loss you drawing about and today and of more, if is of resi kind one the years could. sheet I if

Steve Gaven

Yes. precision equity positioned can Tier-X credit We're think next over trend years couple that say we're and with we're effectively. that mean, much of the these say I just comfortable low-to-middle we where manage we've again, comfortable would given where to where that tough how XXs. are. I portfolio the common I and we with it's loans losses underwritten with

over real is commercial feel time, also it portfolio happens So comfortable The put has putting as to tax strength has that years, time. resi strength real of plays that, say over I kind that about next we same demonstrated the again, tough aside out but but good thing in where demonstrated of we couple exempt, where that, today. do bucket, over would what feel CRE

Operator

comes Janney go of next from Scott. ahead. Please Montgomery question Marinac Christopher The

Christopher Marinac

change and of Hey, thanks. about missed are you Good morning. those may sort going where deferrals it said further. earlier I if those if and

Steve Gaven

Yes.

through run I'll Chris, that again. So just

deferral, a a $XXX that months three-month little which And a its three a is executed on commercial P&I, that up portfolio. clients six-month that's so banking we standing. to making one they're principal to portfolio. of out which the talked different residential, deferral and little to about and that to was at we plan months where in bit in their place, we them second about extend, six million, our other option them come and able have which C&I offered of program worth is tenants mortgage that's went team out to focus three-month total, enables CRE of end So good if the the to XX% X% to our about in or the that then X.X% they a in cover sure qualified really year's and effect side a was proactive program against

about XX% XX% book the didn't disqualifiers qualified had was that the XX% the less. of program XX% to or the LTV qualified combined accept. accepted, that So And of for be qualified,

have or that credit couldn't you other was like that a didn't have in You community already an for those support have participation project. combined a been providing your is have LTV qualify existing if an or been facility development It program. place less and But features, couldn't couldn't XX% LOC. liquidity

Christopher Marinac

helpful. That's it. Got

a extent positive. little sounds more is banks, proactive some which we've bit on initiative the a And from CRE P&I than the heard other

of think my criticized that what criticized deferrals we other now? do of back the similar you churns would backs some question, kind think have it at the on keep sort which or actually higher you level that some lead to ultimately to of as a level these down of assets is So you lead that

Steve Gaven

Yes.

what something they respects buys it think I And necessarily liquidity think don't is that or really that is in But risk pressure. is exactly separate you together, -- credit. that's saw that you it, that we of think hospitality we and real LTVs, to -- think with you end loans credits day, I time. something three the in what at a you this under of just whether the that us boutique that is have the out inflated, with lot I that deferral three have accordingly. support I of relationship whether to I behind should quarter go risk strong strong you because not think that And deferred sponsor risk or downgraded but right? of think rate there's have really is underlying I strong a lot

you So loan backdrop when it's tough they about to a that sit there face. and something four-rated think call that

rate even So think loans can I there's deferment you appropriately to the still exclusive, place. in think programs I don't be they have if

Christopher Marinac

but the the is because at Yes, flow cash the it to is negative it back negative, may moment. That change, patterns. fact goes

Steve Gaven

Correct.

Christopher Marinac

So good.

than is Okay. That times. makes then that it a the enough just me cover dividend. seem to would still and to dividend But strong more And question of kind we've pre-tax it back sense. pre-provision on that to beat couple your the

it lead curious that are you do change big or interest of to you envision have that enough to more So to margin I non-accrued strategic do guess have and changes in evidence? is I'm that kind

Steve Gaven

that mean evidence. we'll as information things reveal And information a point. said, think lot manage more really to firmly try the quarter sense a Like to I have we play continue give to we us at to better anything lot forward more and a and that commit decision, make need think we that's evidence, going but before a quickly. I going out we to next look over is more quarter. it better going we get I happened until I I at this second how think so of this just

Operator

of Capital Please question Markets. Chan next Lana ahead. go from comes The BMO

Lana Chan

question or second the that on doing that. the modifications loans? CRE Just actually are terms much How Pretty generate you it unique follow-up in did mortgage. guys new a of

Steve Gaven

$XX loans. million new about of That's

Lana Chan

Okay, for segments the great. that deferrals, And were accounted in within deferrals? any there of C&I industry particular the C&I most

Steve Gaven

market of So that's of the lower middle business that base can thus C&I was in as that includes to it, tax pandemic most Most book, during you, the data kind exempt. small you it's the far. where total hit talked line acutely commercial and been client our I business imagine,

Lana Chan

Okay. -- And just

Steve Gaven

specific broadly of No bucket but that end clients. market, speaking just

Lana Chan

are that Okay, And question quarter include second loans of got the which addition the was my impact for it. margin. the yielding? the guidance around lower third PPP Did of

Steve Gaven

No.

impact, but, you to the does can get margin back If you me let bear that moment include one that. no, me with the not I PPP get call. you Lana, after

Lana Chan

Okay.

Steve Gaven

you XX it right if I had I'm points, but -- don't that include have can't sorry. somewhere, I now. PPP. basis

Lana Chan

Okay. in And -- that's

Steve Gaven

assumption assuming fully going these we're and X% getting just we're -- we're the on that we're to And origination up. in fee, that that the analysis assume loans the -- doesn't facility funding Fed with that's and set that

Lana Chan

That second very Okay. Thank much. Great. you was my question.

Operator

question Anthony for to remarks. and our would back over turn concludes This answer any to DeChellis like closing the session. I conference

Anthony DeChellis

you. Thank

to in as on to we're incorporated the this heard we're we've managing. think of who we kind scenario like a of all few regardless one talking the I call industry probably hear models continue is all that

the steady end through the I we than more you, we're mean the that believe there the looks my remarks, crisis. as quarter out in like come given us, we continue, try how out to of to were side I will we to so current adjust of immediate I truly like crisis what when all said the year. think And to and But earlier even forecast able this especially be more to other available to opportunities

families. it's we safe journey ever and I for all two more forward next what to the want till to than us see the certainly person. or in get quarter time look time today I hope of brings. thank the each a you to taking And we your join next for other you all regardless

great you thank a again. I day. all And wish you So

Operator

now has concluded. for attending presentation. conference The today's Thank you

disconnect. now may You

Boston Private Financial (BPFH) 2 May 202020 Q1 Earnings call transcript