BankUnited, Inc. (BKU) Q1 2020 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by and welcome to the BankUnited, Inc First Quarter Fiscal Results Conference Call. At this time, all participant lines are in a listen-only mode. [Operator Instructions] Please be advised that today’s conference maybe recorded. [Operator Instructions] I’d now like to hand the conference over to your host for 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 reflects 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, uncertainties and assumptions including without limitations those related to the company’s operations, financial results, financial conditions, 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 and Form 10-K for the year ended December 31, 2019 and subsequent quarterly report on Form 10-Q or current report on Form 8-K which are available at the SEC’s website www.sec.gov. With that, I’d like to turn the call over to Raj.

Thank you, Susan. Welcoming 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’re doing this virtually. Also I’ve never done a conference call that 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 here 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 talk about exactly give you state of the union for BankUnited. What is 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 the lay of the land and then we’ll get into the numbers and discuss in detail, what the first quarter look like? So let me start by first and foremost giving a big shout out to the BankUnited team. Every person who comes here calls this home and works hard. Crisis reveals character of people. I think that is true not just for people that also reveal the true character of an organization. I’m very proud to say that what I’ve 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, help 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 or keeping our call centers up, but everyone. Right down to the person who’s making the sandwiches in the cafeteria all the way to the last day when we shut down the cafeteria. So 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 employee’s wellbeing and safety our number one priority. We enabled 97% as of now. 97% of our employees are working from home and 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’ve recently awarded by South Florida Business Journal 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 couple 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 to what is going on. When you take care of your employees, they in turn then take care of your customers and if you take care of your customers, that takes cares 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 that is needed in the time like this. We activated our Business Continuity Plan. We’ve 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’re asking me this, how I felt about our ability to do this in the first week of March when we’re 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. Our estimates are that we’ve helped retain about 85,000 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 is been working around the clock and we will help few hundred more small businesses before eventually the money runs out in the PPP. We have approved deferrals for many borrowers who have contacted us and asked for assistance because of pandemic. And equally importantly we have honored all our commitments whether they were lines to be passed [ph] or business that was in the pipeline where we’ve made a commitment to closing a loan, we did not back away anyone and that is equally important. We have grade [indiscernible] and we have also temporarily halted new residential foreclosure actions. By the way while all this is happening, I just want to clarify when I say 97% of our non-branch employees are working remotely, 76% of our branches are still open. They are open on a limited basis of course, drive-thrus and appointment only method. But they are open and we’re serving clients. The traffic as you can imagine has gone down substantially. Also we have from somewhere in 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 excess amount of liquidity. But we now feel the time is right to start taking it down and I think beginning next week, we’ll take down this excess liquidity that we’ve been sitting on to, to serve our clients. Now turning back internally. As you can imagine we’re prioritizing risk management and credit quality and credit quality risk management. We’ve identified portfolio and borrowers that we believe will be under an increased stressed environment. I call these sort of you’re in direct line of fire type of portfolios. We have reached out to every single borrowers in these segments and we’ll 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’ve 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 sort of a routine business for us. In this environment, we’ve significantly enhanced these processes you would expect us to. But through all of this, it’s important while we’re managing a crisis and not to forget what the long-term plan is and to keep those long-term objectives in mind. And we’re doing that, while we’re fighting the immediate economic crisis. I think the biggest question here that you probably have is, what does it mean for our balance sheet? Right. I will start by saying our balance sheet is strong. I feel very good about our balance sheet, our capital levels, our liquidity levels and you see at March 31, our regulatory ratios no matter which you look at bank, holding company. They’re all in significantly in excess of well capitalized threshold. We’re committed to our dividend which we very recently increased by 10%. I think it was in middle of February. We did however stop our share buyback program. We had an authorization from – I think it was 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. Questions that we have seen a lot of other banks seemed to have been asked to presented earnings in the last week or so, anticipating the same questions we did some analysis for you. By the way there is a slide deck like I said this time around. We never had a slide deck in our calls. But this time we have provided lot more disclosure and it’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’m make the references. So for example right now I’m talking about Page 4 on this slide deck. Which takes the DFAST severely adverse scenario for 2018 and 2020 and runs that on the March 31, 2020 portfolio to see what the losses would be and by the way not just nine quarters of losses, but lifetime losses? DFAST is a nine quarter exercise. But for this, we actually used lifetime losses and we’ve used those which we don’t think are really relevant. But nevertheless these are questions we’ll probably be asked. We did that analyses anyway. We’ve used both 2018 and 2020 DFAST severely adverse scenario. And that’s okay. It’s one of the losses that are generated and you can see them on Slide 4 and if those were to be used now. Would we feel the well capitalized in our capital ratio is hold up and the answer is yes, they do? So 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. 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. With that let me switch over quickly and talk about the quarter. We’ve reported a net loss of $31 million, $0.33 a share not surprising. This is driven in the large part to the large provision that we took. The provision for the quarter was $125 million. This increased our credit losses to $251 million which is 1.08%. So we used [indiscernible] at December 31, we were in $109 million or 47 basis points. On January 1, under CECL that number bumped up to $136 million or 59 basis points and now at the end of March we’re 1.08% or $251 million and that obviously were the biggest driver in the $31 million loss that we’re 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 31 our reserve estimate is based on both data that is current and conservative at that quarter end and it reflects our best estimate of lifetime incurred losses in the portfolio. In second quarter, we will go through the same exercise. There are big areas which will impact our CECL estimate, but for the next quarter which was going to be an update on the macroeconomic outlook and update of our portfolio especially our high risk sectors. And also the assessment of impact of government stimulus because we’ve seen more stimulus this time around then we’ve ever seen in the history of the republic. So $2.5 trillion counting in fiscal stimulus and god knows how much in monetary side. But let me turn it over to Leslie, who can do a much better job of describing the underlying CECL that I can’t.

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 segment we’re using econometrics models that forecast PDs, LGDs and expected losses are the loan level and those were then aggregated by portfolio segment. Our March 31, estimate was largely driven by the Moody’s March Mid-Cycle Pandemic Baseline forecast that was issued on March 27. 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 the 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 and all of the discussions taking place around the CECL forecast 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 national, regional and MSA level economic variables and data points that inform our loss estimates. Some of them more impactful ones are listed on the right-side of Slide 8, there for you. Another thing I want to point out about our CECL estimate 3/31. 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 been 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 31. The reason we didn’t, is we did feel it was premature to really be able to diminution those things at March 31 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 9 and.

Leslie, just one second. I just got a text from someone saying that 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 said those are important points. I want to make sure everyone gets those.

Okay, so that’s the start on CECL. Maybe I’ll do it better this time, hopefully I won’t contradict myself. So again I’m referring to Slide 8 in the deck about our CECL methodology so fundamentally for the substantial majority of our portfolio segment we used econometrics models that forecast PDs, LGDs and expected losses at the loan level, which again aggregated by portfolio segment. Our March 31 estimate was largely driven by the Moody’s March Mid-Cycle Pandemic Baseline forecast that was issued on March 27, 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 S&P 500 approaching close to 30%. The forecast has assumed 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 and the discussions taking place around the CECL forecasts and those are certainly important reference points. These are complex models and they’re in fact hundreds, if not thousands of national, regional and MSA level economic variables and data point that informed the loss estimates and some of the more impactful ones of those are listed for you on Slide 8. I also want to mention briefly that we did not incorporate in our CECL estimate 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 3/31 we felt we just didn’t have enough data to properly mention the impact of those, so we did not reduce our reserve levels to take those into accounts and as Raj mentioned that something we’ll be considering in more detail in Q2. Now I’ll refer you back to the deck and look at Slide 9. And Slide 9 provides for you visual picture of what changed our reserve from 12/31/19 to 03/31/20. We started at $108.7 million. You can see here, the $27.3 million impact of the initial implementation in CECL. The most significant driver the increase in the reserve from January 1 after initial implementation to March 31 is not surprisingly the change in the reasonable and supportable forecast which increased to 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 have been identified as potential problem loans prior to the onset of COVID. We believe the underlying issues and a manner 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 03/31/20 with a reserve of 1.08% of loans and we certainly don’t think that’s outsized in comparison to other banks, whose results we’ve seen released. I want to take a minute to just focus you on Slide 10. It gives you, distribution of the reserve by portfolio segment at March 31 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 before I turn this back over to Raj, is a little bit more on the stress testing results that we did that Raj mentioned on a high level, a couple minutes ago. You can see the results of those on Slide 4 in the deck. And what we did here was, we took our March 31, 2020 portfolio and we ran that portfolio through those to 2018 DFAST severely scenario and the 2020 DFAST severely adverse scenario. And the table here is showing you total lifetime, not nine quarter projected credit losses for our significant portfolio, C&I, CRE, BFG, residential. Under each of those scenarios as well as the bank’s proforma regulatory capital ratios. Now those were calculated as all incremental losses were applied to the March 31, 2020 capital position. So they don’t take into account any PPNR that might offset losses over the course of the forecast horizon or any actions management might take to reduce risk weighted assets during the 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% severely adverse projected losses under the 2018 DFAST and about 56% severely adverse projected losses under the 2020 DFAST severely adverse scenario and you can see in the box there, that all of our capital ratios remain in excess of all well capitalized threshold under those stress scenarios. So with that, I will turn it back over to Raj to talk a little more about quarterly results.

Thanks Leslie. Let’s talk PPNR, pre-provision pretax net revenue. It came in at $85 million this quarter and that compares to $104 million last quarter, so what was that delta effect $19 million. We have three buckets. First, NII was down about $5 million and that really is for two reasons, one margin subtracted by six basis points from 241 to 235 and the reason for that is, asset yield 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 base is risk between how assets are priced and what things that are tied to versus deposits, there was that gap of a few weeks which is what caused margin to come down. Also, first quarter is not a very strong asset growth quarter for us. The nature of our business is first quarter tends to be our slowest 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 the 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 draw. 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 little to no asset growth and NIM that contracts 6 basis points leads to $5 million reduction in NII. Also, in fee income, last quarter we had $7.5 million or so of securities gain while this quarter we had $3.5 million of securities losses so that’s $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 it takes this through the P&L. And lastly expenses again first quarter expenses are always higher because you start the cycle all over again HSA contributions, 401(k) contribution and all that stuff hits in the first quarter, so that is what drove expenses higher. 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? While 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 in the beginning of May and that should feed into margin and we’re very positively biased towards our margin into second quarter and beyond. Expenses should come down as well because all that [indiscernible] and the stuff that I talked to you about will leave behind us after the first quarter and naturally expenses will get better next quarter. So that’s about all the guidance we’ll be able to give you. But I do feel that’s important to mention these things in some level of detail. I mentioned a little bit about PPP program. I think you could rename BankUnited for the month of April as BankPPP, that’s what all we’ve been doing, to give you a little comparison. We haven’t actually [indiscernible] where we probably do roughly about 200 units of business in a year. We’re now in the process of trying to do over 3,000 loans through the SBA in less than a month. So, it’s 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 begun and we’re not done yet. We still have a few more that we’ll do over the course of today and tomorrow, day after until the money runs out. We’re also on a case-by-case basis providing deferrals to borrowers who will be impacted by the pandemic and that’s started somewhere in the middle of March. Those requests have tapered off somewhat in the last week, two weeks and Tom can talk about that 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 continue 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 is $305 million was non-interest DDA 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 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 later. 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 stock rate on total interest bearing deposits including our certificates of deposit declined by 36 basis points from December 31, 2019 to March 31, 2020 and then by another 27 basis points through April 17, 2020. So, a total of 63 basis points decline during that period of time and if you go to Slide 7 in the deck, you’ll get a little bit more information and detail on that. 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 a very good growth. The C&I business had total growth of $353 million which was good quarter for that segment. Mortgage warehouse outstanding also increased by $84 million, but offsetting 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’s multi-family 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 C&I 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 you to flip to Page 16. This is what I was talking about in 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 C&I book, franchise finance that we’ve talked about to you in the last six months, hotels for obvious reasons. Airlines, cruise lines and energy. So, in total it’s about 14% of our portfolio what we’ve tried 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. So now let me say something sort of which is obvious, but I’ll mention it anyway. Just because we have highlighted these portfolios, I’m not trying to say that loans of these portfolios [indiscernible] go back. We expect a large portion of these loans will be just funds. Sponsors with deep pockets will be able to bear the brunt of the pain here. But in terms of monitoring. We are calling these sort of the ones that legal [ph] monitor in a heightened basis because we think these are in harm’s way more than other parts of the portfolio. But with same logic, let me say it doesn’t mean that anything that is outside of this portfolio is all fine. We have to monitor everything because they will be second, third, fourth order impacts in other parts of 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 COVID situation on risk rating migration. You can see that with the exception of franchise finance portfolio. Substantially most of these segments are pass rated at March 31. We did move a bunch in the franchise portfolio into those lower categories in the quarter. Let me talk a little bit about NPA. Little bit about [indiscernible] charge-offs. NPA and NPLs for this quarter they were basically flat. NPAs were down a little bit couple of basis points and PLs were also down few basis points from 88 basis points to 85 basis points. And to just remind you, that these numbers NPAs, NPLs the way we report them into the down three portion of non-accrual SBA loans just keep that in mind. The criticized and classified this quarter went up by $269 million. $207 million of that $269 million was in the franchise portfolio and 90% of that $207 million was really attributable to COVID as that kind of plays itself out in the month of March. Charge-offs were 13 basis points elevated from last quarter mostly because of one credit and BFG equipment where we took that charge-off that we’re already seeing recoveries from that situation this quarter. So, more detail metrics are towards the end of the slide at Page 22, 23, 24 and 25. So I’ll encourage you to spend some time on those as well. Tom. I mentioned these portfolios for heightened, why don’t you spend a few minutes and just get into them with a little more details.

Sure, thanks Raj. So, I’ll refer you to Slide 14 in the deck which provides some additional detail around the level of deferrals in the segment. But through April 20 we have received request 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 [indiscernible] early by our portfolio, which would represent about 10% of that portfolio. These deferrals typically take the form of 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 deferral period consistent with deferral programs being offered by the GSE’s now. We’ll obviously be reassessing each of these loans at the end of the 90 days and looking at making the best decisions we can at that point of time. As you can see the largest amount of commercial deferrals is in the commercial real estate portfolio particularly the hotel sub-segment where 90% of the borrowers by dollars have requested and then approved for deferrals followed by the retail sub-segment. We have also received a high level of deferral request 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 sub-segments with where we’re seeing higher levels of deferral request include accommodation and food services, arts and entertainment and recreation in retail trade. At this point and as of today modification request appeared 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 sub-segments that Raj has already mentioned. In the retail segment, the CRE book contains no significant exposure to big box or large shopping malls. We estimate that about 60% of the CRE 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, the LTV’s average 57.5% and 84% of the total and below the 65% level. Retail exposure in the C&I book is well diversified, a largest concentration of being to gas station and convenience store owner, operators. Referring you to Slide 18. We see further breakdown of franchise portfolio which is a fairly diverse portfolio both by concept and geography. We saw over $200 million increase in criticized and classified 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 fair better particularly those with heavy drive-thru 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 the segment as LTV is 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 railcars 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 31. 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 within net unrealized loss position at $250 million at March 31. These unrealized losses were mainly attributable to market dislocations and widening spreads reflecting the reaction the markets to the COVID crisis. As you can see on Slide 26, 90% of the available for sale portfolio is in government, agencies or is rated AAA. At March 31, 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 [ph] 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 portfolio. On Slide 27, we show you the ratings distribution 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 31 portfolio as of April 22 and you can see the results of that on Slide 26. And although unrealized losses remain significant you can see the 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 NIM. So the NIM declined by 6 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 point that reflects a decline of 9 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 rate and also reflect turnover of the portfolios at lower prevailing rate. The decline in the yield on securities reflect the short duration of that portfolio and to an extent increases in prepayment fees which contributed about 5 basis points to decline. The cost of interest-bearing liabilities declined by 14 basis points quarter-over-quarter. I’ll remind you that reductions in deposit cost that we have - 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 a marketable equity security did negatively impacted non-interest income this quarter. The largest contributor to $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 is really attributable just to lower level 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 that 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’ll turn it back over to Raj.

Thanks Leslie. We’ll try and wrap this up and open this up for Q&A. So, let me say regarding guidance we’re 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 very hard to look at the month or two. So, to try and give you guidance at such an uncertain time, it’s very hard. What we can say, is we are – you’ll see a growth in PPP loans like I said, we’re up to somewhere $800 million is what will people end up with. Mainstream lending facility, we’re still waiting. A lot of details in 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 the deposit growth can be hard to predict. But our priority is deposit side and we’ll maintain which is grow DDA and bring down cost of funds. NIM will expand with yields fairly cost [indiscernible] 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 question that you ask about CECL. The only thing we can say about CECL is provisioning going forward into second quarter and the rest of the year, it will 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’ve trying to build in the long-term. We actually 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 is BankUnited 2.0 or all the other thing you’re working on, they continue, some of the initiatives around BankUnited 2.0 especially around revenue Bank has 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’ll turn it over to the operator to take some questions.

[Operator Instructions] our first question comes from the line of Jared Shaw with Wells Fargo Securities. Your line is now open.

You were just starting on the credit side, when you look at the franchise finance on specifically what percentage of those credits have some type of protection from PPP or anticipated to have some protection from government soon or else?

Tom?

Yes, right now we’re obviously we’re still in the process of working through all of the loans that Raj mentioned. A portion will – it’s difficult to until we finish processing all the loans to say the exact numbers. But we’re certainly seeing a fairly high level either come through us or in many cases the franchise credits are 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 - 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, the community banks in their own local neighborhoods. But I would say, 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 within 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 applications and 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 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 reflect in those downgrades.

Okay, excellent. And then just.

You see a broad difference in the performance across various concepts as well. They are all not exactly equal depending upon what type of concept it is and where the venue is.

Okay, thanks. Just shifting a little bit looking on the deposit growth. I mean the strong DDA deposit growth that you saw this quarter. are you starting to hit the stride there and do you think that’s going to be sustainable and should we be looking at DDA as a percentage of total deposits continuing to march high share of all things being equal?

As I see the deposit numbers right now. I feel pretty good about DDA growth though some of that, that we’re seeing so far this month it’s probably PPP loans that we funded that are sitting as DDA. But overall, the momentum in DDA growth continues and that priority still remains a top priority.

Okay, thank you.

Our next question comes from Brady Gailey with KBW. Your line is now open. Q –Brady Gailey: If you look at the activity under the SBA, PPP say with around two you do $800 million. I think most banks have seen fees off of that production of around 3% or little under 3%. So, 3% of $800 million that’s about $24 million, is that the right way to think about the earning’s potential from your involvement in PPP?

Leslie?

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 mention 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 obviously that 3% is 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 data point I would give you is that, the average ticket size that we’re seeing isn’t in the 260, 270 off 270,000 range. I mean we’re still not done with the program, so it might move a little bit. But it’s under 300,000 is the average and then there is obviously a distribution from very, very small $2,000, $3,000 loans to pretty much [indiscernible] ones. But the average is about 260 or 270 in that range. Q –Brady Gailey: All right, that’s helpful. And then I appreciate all the color on CECL. I know Moody’s came out with their April baseline which instead 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 could be to loan loss reserves. Any idea that how much bank and on its reserves would have to increase considering the April baseline for Moody’s?

So, Brady what I can say about that is, by June 30 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 30 than it is at April. But our second quarter provision and reserve levels will be based on what these forecast look like at the end of June not what they look like on April 15. We did not completely recalculate our provision based on that April 15 baseline. Obviously if that hold, 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 31, 2020 is our best estimate of at that date of lifetime launch is 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. Q –Brady Gailey: Okay. And then lastly for me, Raj you laid out BankUnited 2.0 before anybody even knew what the Coronavirus is. We’re at a different backdrop today with more earnings pressure than we thought evident by this quarter. But is there an opportunity to revisit BankUnited 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. The number that I gave you we’re trying to 3,000 loans in a month, when we usually do 200 in a year. It tells you how much just physical work there is, but this will pass and as we get out onto the other side. We will look at everything and if there are opportunities we will go and have them absolutely. Q –Brady Gailey: Great, thanks guys.

Our next question comes from Lana Chen with BMO Capital Markets. Your line is now open. Q –Lana Chen: Couple questions. One on, 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 expense is one thing that you can’t control, is that still a reasonable estimate, Leslie?

Go ahead, Leslie.

Lana, 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 an unprecedented time. But if I had to give my best estimate I would say, they would be down somewhat from last year. Q –Lana Chen: Okay, thank you. And the guidance around NIM for the second quarter does that include the impact of the PPP loans which are lower yielding?

Yes.

It does. Q –Lana Chen: Okay and Leslie 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 really appreciate it. On the CRE side, 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 where some of the potential COVID disclosures are in the hotel CRE and retail CRE and how much has been deferred of those portfolios. I’m curious why the reserve allocated to CRE isn’t higher at this point.

So, I’ve spent a lot of time looking into that question Lana, believe or not. The hotel portfolio did get penalized pretty significantly when we ran the models this quarter as a part of that CRE and some of the other portfolios, they’re 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 guessed. But we’re still very confident. On their model, that 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. Q –Lana Chen: Okay, great. Thank you.

Our next question comes from Dave Bishop with D.A. Davidson. Your line is now open. Q –Dave Bishop: Probably the same question in terms of the reserve, but maybe in the equipment finance portfolio. I think that actual reserve came down a bit just curious in terms of the methodology there and to actually why that as well.

So, methodology is the same. We’re running these are the loan level through these econometric models. I would say that’s just reflective of the fact for the most part we’re sitting in that portfolio, loans to some pretty strong borrowers and some pretty strong companies with stronger balance sheet. Q –Dave Bishop: Got it. And Leslie I think of the preamble you walk through and I might have missed the slide here. But the impact under the various DFAST scenarios is that broken out in one of the slides or.

Yes, Dave it’s on Slide 4. Q –Dave Bishop: So why not you gave some other details that I cannot find [indiscernible] just go over that again.

Yes, Slide 4 shows you that under the 2018 DFAST severely adverse projected lifetime losses would be $575 million and our current reserve at $251 million sits at 44% of that. I know that is a kind of metric or a barometer that a lot of the analyst community has been looking at this earning season. The 2020 DFAST severely adverse losses are projected at $445 million and our reserve sits at 56% of that. I will say, I understand why people are looking at this metric because everybody is 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 the CECL and the purpose of DFAST are very, very different. And the DFAST scenarios are not forecast. They’re hypothetical scenarios that were designed by the fed for stress testing purposes. So, I don’t know that there is really 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. Q –Dave Bishop: Okay, great. Appreciate that detail. And then [indiscernible] sounds like you guys have an obviously have a lot of confidence in directionally in terms of net interest margin. It sounds like in a core basis, just curious you gave some good color in terms of the deposit side, the funding side. On the asset side just curious what you’re seeing there and impact and maybe a floor is taking hold, why isn’t there may be a bigger impact in terms of the asset side, than what’s happening in the fed rate cuts.

On the asset side the spreads are wide, right? And based on which asset class some are white more than others, but they’re fluctuating quite a bit. What I’m still nervous about is while the healthcare data is beginning to trend better. Capital markets are beginning to trend better, rates are down, market is up, spreads are tightening a little bit in the fixed income market. I’m still not calling this the main street recession is behind us or what we’ve wound out. I drove this morning and I took a long way down here just to see what it feels like. I think we’re somewhere in the bottom. But we maybe a few weeks away from it or few days away from it, things haven’t opened up yet. So, when it comes to doing more of your business. You got to be a little bit careful. Obviously right now we’re just doing PPP, but that’s a different animal and we’ll do mainstream lending which is also 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 gaining risk and saying let’s grow the portfolio like nothing happened. It’s hard to get an appraisal. You can look at our cash flow from business from last year, it means nothing right now. So that’s why we haven’t said much about spread. Of course, spreads are much wider and across the board we can do better business. Well I think about the long-term aspects of what the transaction [indiscernible]. It will cause a lot of harm; it will do a lot of damage to the economy to various businesses. But here’s a silver lining to recession which is, once the recession is behind us. The new business cycle starts and the best kind of business you can do, is always better 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 competition, tight spread, non-bank players, all that stuff gets fixed, post-recession. But to get there you’ve 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 it 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 anyway near the levels. But we haven’t yet, we’re the very [indiscernible]. So that’s why we are little careful in saying anything about the aftertime.

Dave I’ll make one more comment on your back to your question about the NIM. As LIBOR came down ahead of fed funds, we saw a lot of our assets repriced earlier in the first quarter. we saw very little impact of the work we get at the end of the quarter and into April and repricing deposits in our first quarter NIM and we expect the repricing down of deposits that we’ve been aggressively engaged in, in late March in 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 we’re moving look at the market today from a new business perspective. There’s clearly plenty of spread and loans we don’t want to make. There’s a lot of there out there. What we’re doing today beyond the PPP program tends to be new credit for existing clients that are long, [indiscernible] clients that have strong financial positions and are generally in essential related businesses that’s what we’re seeing today. This is also a time I think to be as Raj said careful around credit quality and making sure that we’re not straying at areas that could be problematic. As we see recovery that will probably change in mid. But right now, our credit posture is fairly highly selective within our existing client base and within essential businesses. Q –Dave Bishop: Got it. One final housekeeping question, maybe some guidance in terms of the effective tax rate.

I think it’s probably going to be relatively stable of what you saw this quarter somewhere around 23%. I don’t think I see anything unusual coming in the effective tax rate. Q –Dave Bishop: Great. Thanks Leslie.

Your next question comes from Steven Alexopoulos with JP Morgan. Your line is now open.

I want to start on the criticizing classified. And if you look at the franchise finance loans; you guys are part of pretty sharp increase quarter-over-quarter. We’ve seen other banks report really a marginal increase. I’m trying to understand does your exposure more challenged than peers or did you just approach this differently, in terms of the accounting for these loans.

I think we’ve pretty aggressively reviewed the risk rating at these loans these quarters as deferral request 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 the deferral request started coming in.

A lot of this happened literally at the very last week of the quarter. So, we have just waited a week, it would have fallen to April. But we were on this towards the end of March.

Yes, 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.

Yes, we were.

And then the DFAST losses you’re providing are helpful. If we were – are you using the nine quarter loss assumptions similar to other banks, would that materially change that estimate?

Materially, I mean certainly when every run these it’s hard to say. I mean you would certainly think at least more than half of the losses which probably emerge in the first nine quarter. But a lifetime loss particularly for a portfolio that has a longer average life than that so you know some of the CRE portfolio, some of the owner-occupied real estate, the BFG equipment. So, the ones with the longer average life it will be material. The C&I portfolio is probably not a material difference for example. Yes.

And then if we look at the COVID exposed loan segments which are calling on Slide 16 which is helpful, to the degree that some of these deferrals become defaults, where in 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 franchise. And when it comes to CRE, whether its hotels or retail or what have you, it depends on how valuations hold up. I mean we feel pretty good from starting point, right. These are very low LTVs. We have few businesses that’s not real chain 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 they’re highly rated companies despite the extreme amount of stress that going through with the low pay and from Miami based I think you would have talked lot more cruise line exposure we just have never really liked that business that much, we have it small amount. But I would say franchise is number one.

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

I also would add a couple things to that. In the CRE 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 will be a big factor that drives what ultimately happens to valuations here. Once the economy opens up relatively soon and relatively quickly, I think it’s reasonable to assume there’s 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 in the exposed or either already received or expect to receive significant amounts of direct government assistance.

Okay.

So those are just some things.

Thanks for all 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 Steven Tu Duong with RBC Capital. Your line is now open. Q –Steven Tu Duong: 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, but what percentage?

Yes, we did not. Okay, let me – I’m glad you asked that question. It gives me an opportunity to clarify something. So, the way we did this, 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 the sector side. So, it’s a pretty severe or punitive way of looking at this. Q –Steven Tu Duong: Got it. So basically, your capital decline is not offset with any PPNR.

Not $1. Not $1 correct. Q –Steven Tu Duong: Okay, great. And then just last question, just on the restaurant do you know how much has you know much of the restaurants have drive-thrus?

I don’t know the exact percentage and it’s also not so much which are drive-thru because that’s an important component. But when you breakdown 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 in early April numbers for revenues. It’s the digitally capable delivery models that are really doing well. the drive through impact is clearly important that also tends to be how modern are these drive-thru facilities if you have the two drive-thru facilities and also, it’s venue. Like heavily traveled, highways is different than any QSR restaurant that maybe on side street or may not have quite the same location capability. I would say in the quick service space a high percentage of them would have drive-thrus, but I think it’s really more the delivery model and the digital capability that is separating. Those that are actually reporting same store increases versus those that might be off 25% or 30%. Q –Steven Tu Duong: Great, really appreciate the color and great job on the slides. Thank you.

Our next question comes from David Chiaverini with Wedbush Securities. Your line is now open. Q –David Chiaverini: Had a follow-up question on the multi-family portfolio. So, on Slide 13 it’s showing how about two-thirds of your portfolio is rent regulated and I see how the LTV, it’s pretty low at 56%. I’m just curious and it was alluded to earlier about how 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 leading into earlier this year. How much multi-family building values have declined post the rent regulation law changes last year? Do you have a sense of that?

That’s difficult to tell. 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’re seeing a very, very wide variation in declines in values. We saw one that was in Queens that had a large decline, but that property had certain characteristics to it the people in the market were following and that made is less valuable. Whereas we saw declines of low single digits for property that was well located in the Manhattan borough, so it really has not been enough activity in the sales market from our perspective to be able to pinpoint, yes this is what we think in average decline would be from the rent regulation, that past the New York legislature in July of last year or late June. Q –David Chiaverini: 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 it will 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 valuation. But it does give you some idea how much cushion is there. Q –David Chiaverini: And how often do you guys do appraisals, is that annually?

Not necessarily.

Yes, we do an annual review of all loans those do not necessarily give us a full appraisal at that time, but we annual review every loan. Q –David Chiaverini: Great and then shifting gears. You mentioned about 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 you’ve been able to win new business given that backdrop?

I think right now it’s just a matter of converting the pipeline that we have, in fact I think out further let’s say four months, six months out. I do – that’s one of the challenges that all companies are going to face, is that social distancing is with us it’s just – it’s here to stay for a long time. How will this change our selling processes? How does it change face-to-face selling, B2B sales and how do you pitch to a client? So what you’re seeing right now is the pipeline which has been robust and but if this is – if we’re not going to get enough plain [ph] for another god forbid, then we have to find a different way of getting in front of clients, if it’s not industry conferences and other events, the wining and dining, all vis-à-vis businesses, not just banks, but all vis-à-vis businesses are going to have to rethink, how they actually do the sales part of their jobs.

I would add to that, when we started voicing this and Raj really laid it out as a number one objective for the organization. Part of our success is really shifting the priorities of industries that we focus on and I think a lot of the success is due to that as we think about, who are our top potential clients? What industry segments we want to develop? Treasury management capability around, where we’re focusing 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 and it will clearly be a challenge to do it in the future due to some of the things that Raj just mentioned. But the – it is a sort of like is accidently happened that it’s been a very well thought out process of what to focus on and specific client relationships and specific client industry. So, we’ll have to re-tool our tactical sales process. But I think the strategy is in place. Q –David Chiaverini: Thanks very much.

I’m showing no further questions in queue at this time. I would 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. We’re like I said – we’re not calling that we’re on the other side of this, hopefully I can say that in the next call. But everyone in BankUnited is hard at work, trying to take care of our clients. The relationship 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 will be with the bank forever. And the last thing, I would say while we are dealing with a crisis at hand. We’re absolutely focused on the long-term as well and we haven’t lost focus on 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.