WASH (2020 - Q1)

Good morning and welcome to Washington Trust Bancorp Inc.'s Conference Call. My name is Chad. I will be your operator today. [Operator Instructions] Today's call is being recorded. And now, I would like to turn the call over to Elizabeth B. Eckel, Senior Vice President, Chief Marketing and Corporate Communications Officer. Please, go ahead. Elizabet

Thank you, Chad. Good morning and welcome to the first quarter 2020 conference call for Washington Trust Bancorp Inc., which trades on the NASDAQ under the symbol WASH. We'd like to remind everyone that today's presentation may contain forward-looking statements and actual results could differ materially from what is discussed on today's call. Our complete safe harbor statement is contained in Washington Trust's earnings press release and in other documents we file with the SEC. We encourage you to visit our Investor Relations website at ir.washtrust.com to review our safe harbor statement and other public filings. Today's call will be hosted by Washington Trust executive team Ned Handy, Chairman and Chief Executive Officer; Ron Ohsberg, Senior Executive Vice President and Chief Financial Officer and Treasurer, who will review our first quarter performance as well as the bank's preparedness, response and the impact of the COVID-19 pandemic. At the conclusion of their remarks Mark Gim, President and Chief Operating Officer will join Ned and Ron for a question-and-answer session. Bill Wray, our Senior Executive Vice President and Chief Risk Officer will also be available to answer questions about the new CECL accounting standard which went into effect on January 1, 2020. For the health and safety of our executives, today's call is being held virtually, as our executives are participating from remote locations. We appreciate your patience during the call, as there may be delays in audio as we transition between speakers. And now, I'm pleased to introduce Washington Trust's Chairman and CEO, Ned Handy. Ned?

Thank you very much, Beth. Good morning, everyone, and thank you for joining us on today's call. As Beth mentioned, today's call is a bit different for us, as we've been working remotely since March. Fortunately, we're all healthy and hope that everyone on today's call is doing well and that your families are all safe and healthy. This morning we released our first quarter earnings. But before I review our performance, I'd like to spend a few minutes discussing Washington Trust's preparedness for and response to the COVID-19 pandemic. Washington Trust has weathered many storms during our 220-plus-year history and has always been there to help our employees, our customers and our communities through difficult times. The COVID-19 pandemic has caused an unprecedented disruption to our economy and has likely changed our lives forever. Today I'm proud to report the Washington Trust team is here once again to help those who have been impacted by the COVID-19 pandemic. I couldn't be more proud of the way our team has come together to recognize the severity of the crisis, establish appropriate measures to manage all aspects of its impact on our community and to take all necessary and prudent steps to protect the well-being of our employees and our customers. Approximately 90% of our non-branch staff is now working remotely from home offices and kitchen tables. They've adapted to a new life work balance, juggling video conferences and online meetings, while homeschooling children and caring for elderly family members. Despite all the necessary adjustments, it has been a seamless and successful transition. This didn't happen overnight or by chance, Washington Trust was prepared. As news of the COVID-19 virus spread, we quickly put our business continuity and pandemic plans into action. First and foremost was the health and safety of our employees and customers. We identified employees working in key operational areas and separated them physically. We closed branch lobbies and promoted alternative delivery channels, such as drive-up digital and telephone banking services. We offered appointment-only services for those customers who needed access to safe deposit boxes, closings or other services. Bank employees were redeployed to assist areas of the bank that needed additional support to service customers. It has been an honor to recognize our employees who remain on-site to assist customers and ensure our bank continues to run as smoothly as possible. We consider them our first responders and the frontline heroes of banking. We've made significant investments in technology in recent years and those investments have paid off. We've effectively managed -- excuse me, maintained our service levels as our employees communicate and engage with coworkers and customers by telephone, e-mail and through videoconferencing. As a community bank, Washington Trust plays an important role in the communities we serve. As the health crisis began to impact our area, we made a financial contribution to the United Way of Rhode Islands COVID-19 Response Fund and provided donations to our local community food pantries to help our neighbors in need. We worked one-on-one with consumer mortgage, small business and commercial borrowers to provide payment deferrals, business line increases and other needs-based payment relief. As of today, we've documented deferments on 250 loans with $199 million in outstanding balances. Ron will provide more detailed information, and we'll be happy to answer any questions you may have on deferments. In addition, when the SBA announced the Paycheck Protection Program on March 31, Washington Trust responded. We pulled together a team of employees from throughout the bank, put a process in place and we're ready to take the applications on April 3, when the program started. In phase 1, Washington Trust secured SBA authorizations for 762 borrowers existing and new, totaling $160 million. As of today, we have a phase 2 pipeline of 682 borrowers, totaling $58 million. And again, Ron will provide more detail on PPP in his comments. Washington Trust's response to the COVID-19 pandemic has been nothing short of extraordinary and I am tremendously proud of the commitment, spirit of teamwork and genuine sense of caring that our team has displayed during this crisis. While it's uncertain when this pandemic will be over, we're looking forward to the time when businesses reopen, employees return to work and the economy gets back on track. As of now, Rhode Islands Governor has taken an aggressive position and stay-at-home orders have been extended through May 8. We will continue to work closely with health and government officials and future decisions will be made based in the best interest of our employees, customers and communities. Having highlighted our deferment and PPP activity, I want to make a general comment about credit. Our commercial portfolios are local, uncomplicated, well secured, conservatively underwritten and built on solid relationships. Our consumer loan book is local, high FICO, below 70% LTV and secured by homes. Ron will provide some more portfolio details in his comments. And again, we'll be glad to ask any -- answer any questions you have. So let me turn to the first quarter results. Ron will present a detailed financial review so I'll keep my comments fairly high level. Washington Trust reported net income of $11.9 million or $0.68 per share for the quarter, which is down from previous quarter due to several extraordinary events including the implementation of CECL accounting methodology, the Federal Reserve's continued interest rate cuts, the historic stock market decline and the COVID-19 outbreak. Total revenues were up 8% from fourth quarter and we were on track to have another good quarter were it not for the previously mentioned events. Let me take a few moments to describe some of the highlights from the quarter. Total end market deposits reached a record $3.3 billion at March 31, 2020. Deposit generation remains an industry challenge, so we're pleased we were able to attract a good mix of core deposits. We also lowered money market and certificate of deposit rates in order to ease margin pressure. Turning to lending. We reached an all-time high of $4.1 billion in total loans at March 31, 2020 led by growth in the commercial and residential mortgage portfolios. Commercial growth in the quarter was split evenly between CRE and C&I with $25 million of the combined $140 million in growth due to increased line utilization. The current commercial pipeline is somewhat reduced, given an increased level of caution in the market on both the lender and borrower sides. Our residential mortgage area had a strong quarter as low interest rates spurred origination activity. Demand remained strong throughout the quarter despite fears surrounding the spread of the COVID-19 virus. This continues to be a good story for us and is a great example of the benefits and importance of our diversified business model and generating income during difficult economic cycles. Turning to wealth management. Assets under administration were down from year-end primarily due to the decline in the financial markets in March corresponding with the fear of the spread of the COVID-19 virus. We're working closely with our clients to advise and guide them through these difficult times. At this time, I'll ask Ron to join us and provide a financial review of our results. Ron?

Thank you Ned. Good morning everyone. Thank you for joining us on the call today. I'll review our first quarter of 2020 results in more detail. As Ned mentioned, net income was $11.9 million or $0.68 per diluted share for the first quarter. This compared to $15.5 million and $0.89 per share last quarter. Net interest income up from $32.6 million increased by $608,000 or 2%. The net interest margin was 2.61%, unchanged from the fourth quarter. Fee income from prepayment penalties was modest and totaled $125,000 compared to $189,000 in the fourth quarter. Income and margin were affected by the decline in average LIBOR rates during the quarter as compared with Q4. The average balance of interest-earning assets increased by $164 million on a linked quarter basis. Average loan balances were up by $137 million, while average investment securities were up by $31 million. The yield on earning assets decreased by 10 basis points from the fourth quarter to 3.76% due to lower market interest rates. On the funding side, average in-market deposits rose by $49 million while the average balance of wholesale funding increased by $117 million. The cost of interest-bearing liabilities declined by 12 basis points to 1.41%. Non-interest income comprised 38% of total revenues in the first quarter and amounted to $19.9 million, up by $3.3 million or 20% from the fourth quarter. Wealth management revenues were $8.7 million, down $205,000 or 2% due to a $376,000 or 4% decline in asset-based revenues which was partially offset by seasonal tax-related revenues of $171,000. The decline in asset-based revenues was in line with the average balance of assets under administration which decreased by $239 million or 4% during the quarter. The March 31st end period balance of assets under administration totaled $5.3 billion, down $898 million or 14% and from December 31st, mainly as a result of the decline in financial markets late in the quarter. Our mortgage banking revenues totaled $6.1 million in the first quarter, a record high. The linked quarter increase of $2.4 million or 66% reflected an increase in the mortgage pipeline and a corresponding increase in the fair value of mortgage loan commitments and loans held for sale as of March 31st. The increase was partially offset by a lower sales volume and sales yield on loans sold in the secondary market. Mortgage loans sold totaled $162 million in the first quarter of 2020, down by $14 million. Our mortgage origination pipeline at March 31st was approximately $330 million, up by almost 90% since the end of the year. Loan-related derivative income amounted to $2.5 million in the first quarter. This was up by $1.3 million or 120% from Q4. Now, let me turn to noninterest expenses. Total expenses were up by $1.7 million or 6% from the fourth quarter. The linked quarter change was impacted by a couple of items. In the first quarter, we established a contingency reserve of approximately $800,000, largely due to a potential loss associated with counterfeit checks drawn on a commercial customer's account. This arose at the end of March and remains under investigation and this item was included in other non-interest expenses. In the fourth quarter, a write-down adjustment on an OREO property of $1 million was recognized and classified in other assets -- excuse me in other expenses. Also in the fourth quarter, FDIC assessment credits of $235,000 were recognized. These credits are all fully utilized in 2019. Excluding the impact of these items, non-interest expenses for the first quarter increased by $1.7 million or 6% on a linked quarter basis, reflecting increases in salaries and employee benefits expense as well as outsourced services expense. Salaries and benefits were up by $1.1 million, reflecting merit increases and payroll tax resets associated with the start of the new calendar year. Outsourced services expense was up by $248,000 from the preceding quarter, mainly reflecting volume-related increases in third-party processing costs related to customer derivatives. Income tax expense totaled $3.1 million for the quarter and the effective tax rate for the first quarter was 20.9%, down from 21.8% for the prior quarter. We currently expect our effective tax rate to be about 20.5% for 2020. Turning to the balance sheet, total loans were up by $197 million or 5% compared to December 31st and up by $352 million or 9% from a year ago. Residential loans increased by $61 million or 4%. This included purchases during the quarter of $51 million. Total commercial loans were up by $140 million or 7% in the first quarter. The commercial real estate portfolio increased by $70 million and the C&I portfolio also increased by $70 million. Included in C&I was a single significant line advance of $25 million. Other than that one commercial advance, line utilizations for both commercial and home equity are flat since year-end. Investment securities were up by $18 million, or 2%. In the first quarter, we purchased $116 million of agency mortgage-backed securities. Total securities represented 16% of total assets at March 31. In market deposits were up by $60 million, or 2% from the end of the quarter and by $254 million, or 8% from a year ago. Wholesale brokered CDs were up by $147 million and FHLB borrowings were up by $57 million. Turning to asset quality, we chose to proceed with the adoption of CECL in Q1. This resulted in a day one transition adjustment of $6.5 million, or 24% for loans and $1.5 million for unfunded commitments as compared to December 31. These increases to the allowance resulted in a $6.1 million after-tax decrease to retained earnings. In the first quarter, a provision for credit losses of $7 million was charged to earnings. Approximately $6 million of this was an adjustment attributable to the significant change in the economic forecast due to COVID-19. We used the baseline unemployment rate forecast for Moody's COVID-19 economic scenarios published on March 27 for our CECL modeling. Continued uncertainty regarding the severity and duration of the pandemic and related economic effects remains and it is unclear to what extent various governmental initiatives will be able to mitigate future credit losses. Non-performing assets declined by $571,000 from the end of Q4. This included a $1.1 million decrease in OREO, as we sold our one large commercial property at essentially breakeven. This was partially offset by a $510,000 increase in non-accrual loans. Non-accrual loans were 44 basis points of total loans, compared to 45 basis points at year-end and loans past due 30 days or more were 40 basis points of total loans flat compared to year-end. Net charge-offs of $623,000 were recognized in Q1 compared to net recoveries of $17,000 in Q4. And the allowance for credit losses on loans totaled $39.7 million or 97 basis points of total loans and provided NPL coverage of 221%. Total shareholders' equity was $509 million, up by $5 million since year-end. Washington Trust remains well capitalized with a total risk-based capital ratio of 12.42% and a tangible equity to tangible assets ratio of 7.89% and our first quarter dividend declaration of $0.51 per share was paid on April 9. Finally, I'd like to provide some details concerning our overall loan portfolio, where we see some COVID-19 exposure and where we stand in our customer assistance efforts. As Ned noted, we have a simple, local and secured portfolio of loans that year-in and year-out has performed well from a credit standpoint. This quarter, we added commercial real estate and C&I segmentation tables to our release, and you will note that we have no exposure to credit cards, auto or student loans. Loan deferments as of Friday, totaled $199 million or 5% of March outstandings. This includes commercial real estate of $114 million or 7% of CRE outstandings, C&I of $26 million or 4%, mortgage of $57 million or 4% of that portfolio, and consumer at $3 million or 1%. Taking a deeper look at segment data, I'll start with commercial real estate. Office and multifamily, totaled $770 million and make up almost half of our portfolio between the two property types. Our properties tend to be for smaller footprint suburban tenants. Our multifamily properties are solidly located and of top quality and any disruption here is likely to be short term. Closed deferments total approximately 4% of these two segments. Retail totals $311 million and makes up about 19% of our outstandings. The retail properties generally have strong tenant anchored --strong anchor tenants, often national grocery store chains and closed deferments within this segment total about 10%. Hospitality in total is $137 million, and makes up about 8% of our commercial real estate outstandings. We underwrite this at an LTV of 65% or less, and our portfolio is largely made up of smaller properties with national flags. So far, we have closed deferments of 29% of our hospitality loans. We have two properties under construction that are planned for opening next year both appear to be on track for completion. Health care has total outstandings of $115 million or about 7% of total CRE. This is composed of senior housing and nursing homes. While there will be short-term disruption in senior housing, we expect that this sector will continue to be attractive. Actual deferments at this point are 8%. And then finally in construction, there are currently about 50 active construction loans with $337 million in commitments, 52% of which have been drawn. For the most part we expect these projects to proceed. No projects have been shut down because of COVID-19. We generally get significant upfront cash from our borrowers, so any deals that have yet to fund will only occur preceded by equity. We have never had a loss in our construction portfolio given our careful underwriting and strong partnerships. Now turning to C&I. Our portfolio is very diverse being spread across a dozen-or-so industries, none of which thankfully are energy-related. Educational services at $59 million makes up 9% of total outstandings. These schools are well secured but obviously have -- cash flow will be a short-term concern and the effects on education in general are yet to be determined. We have no deferments at this time. Accommodation and food services totals $44 million and makes up 7% of the portfolio with 24% of that being deferred. Over 50% of this segment is in a single credit in the gaming sector and that credit is not deferred at this time. The deferments are related to a variety of restaurant and food establishments. Education and recreation totals $32 million and makes up 5% of the portfolio. 4% of these loans are deferred. This sector consists largely of golf courses and marinas and the deferments are largely of the golf courses. The largest C&I category is healthcare, which consists of medical and dental practices, orthopedic, medical imaging, et cetera. The deferral rate on this portfolio is less than 1%. As I previously mentioned, we have processed residential deferments totaling $57 million and comprising 4% of outstandings. The average size of these loans is $515,000 and they have an estimated current LTV of 63%. In terms of other customer assistance, as of Friday we had underwritten 762 SBA-approved loans under the PPP program, totaling $160 million at an average size of $209,000. We have another $58 million in process for phase two. Net fees related to SBA-approved loans are estimated to be about $4 million and phase two would add about another $1.5 million. The average fee on these loans is 2.6%. And at this time I will turn the call back to Ned.

Thank you, Ron. These are extraordinary times for sure but we believe Washington Trust is well positioned to handle the challenges and repercussions resulting from the COVID-19 pandemic. We have a strong capital position, a proven business model with diversified revenue streams, a disciplined credit culture with historically strong asset quality and an experienced leadership and management team dedicated to achieving continued corporate profitability, growth and shareholder returns. So this concludes our prepared remarks. And Chad, if you wouldn't mind, we can open up the lines for questions.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And the first question will come from Mark Fitzgibbon with Piper Sandler. Please go ahead.

Hey, everybody. Good morning.

Good morning, Mark.

Good morning, guys. I wondered if first off, you could give us any more color on that $800,000 reserve you set up for -- in the quarter related to the check fraud. Any specifics on the industry or kind of what happened there?

Yes. Ron why don't you go ahead and...

Yes. So Mark, the matter is still under investigation and we're still researching the fact pattern. I can tell you it was isolated to a single long-standing relationship with a valued commercial customer. It's non-systemic. It came up very late in the quarter. So we set up a reserve that we felt was prudent under the circumstances. But we're still working on the details. We can -- we'll provide some updates as they become available.

Okay. Thank you. And then second Ron, I wondered if you could help us think about the margin. Obviously, you'll have some drag on the margin from the PPP loans in the second quarter. That's sort of knocking down 253, 254 in that kind of a range and then it comes back as you push those off the balance sheet. Is that a fair way to think about it?

Yes. So I think the thing that we're most concerned about is the 150 basis point Fed funds cut that happened in March, which some of that was anticipated I think in our LIBOR over the course of the quarter. But most of it's not reflected in the margin yet. So I would say, just on that basis of loan, we have about $2 billion of prime and LIBOR-based loans that would have reset on April 1. We will offset that with repricing on a bunch of our wholesale and -- wholesale funding and promotional CDs, starting in the second quarter. But we're probably looking in the low 240s, low to mid 240s -- I think for Q2. This is exclusive of anything related to PPP. We'd expect that to stabilize in the third quarter and we'd start to get a little margin expansion in the fourth quarter. That's kind of where it is. And so PPP, it doesn't have much of a spread, but it does have some fees related to it. Those are being amortized over the term of the loans, which is initially two years, but we expect most, if not all of that to be prepaid/forgiven in the second quarter. So those fees could be running through the margin in the second quarter and the program could be over. So I don't -- we're not seeing any kind of sustained impact on the margin related to PPP.

Okay. And then, lastly, of the $125 million of client outflows in the wealth management business this quarter, how much of that was related to the previously disclosed staffers that had left?

Yes. So step -- about $73 million. So we're thinking that we're pretty close to the end of that. That $73 million was kind of earlier in the first quarter and the attrition has really slowed. I would say most of the run rate impact is baked into the first quarter results. I would say maybe there's an extra $50,000 straggling into Q2 based on the -- on what we know right now.

Actually just one more if I may. In terms of your capital ratios, how are you thinking about those? Does it make sense to slow growth a little bit to conserve capital given the uncertain times that we're in?

Yes. So we look at our capital management very carefully. By the way, I would say we have no plans to adjust the dividend. So the dividend is we feel at a sustainable level. We did do a modest level of share repurchases in the first quarter about $4 million worth. And then we suspended that once things started to look a little more uncertain because of COVID-19. And we'll come back and revisit that at some point in the future if that makes sense. We think that we have ample capital and expected earnings going forward to support the growth that we have.

Thank you.

Yes.

Thanks, Mark.

And the next question comes from Damon Delmonte with KBW. Please go ahead.

Hey, good morning everyone. Hope everybody is doing well these days. First question is kind of more of a housekeeping item. Ron, could you just repeat the details on the PPP again? The number of loans? The dollar amount? And the fees for the first round?

Yes.

762 borrowers.

Yes 762 for $160 million Damon.

Okay.

And the fees -- so the fees are tiered according to loan size. And then there's a possibility that there's some agent costs associated with that so we put a little estimate in for that. But on a net basis, we're saying maybe just over $4 million related to that...

$4 million of net interest tranche? Okay.

And then, we'll see what happens in phase 2.

Got it. Okay. That's helpful.

Yes.

And then, the mortgage banking was very strong and I think you guys commented that the pipeline was around $330 million going into the second quarter. What are your expectations? Do you think you could replicate what you did in the first quarter here in the second quarter?

Yes. It's a little hard to say. And Mark maybe you can jump in, in a second. But -- so the way our revenue recognition works is it -- it's really geared more on the originations side, because we've got the hedging program and we have the kind of the fair value accounting that we're doing. So those originations will eventually convert into sales in the second quarter. So I would expect a good sales revenue quarter in Q2. Yes I mean -- yes, it should be a strong quarter. I don't know if it will be quite as much revenue as we booked in Q1, but the activity is very strong. It remains to be seen how long that will sustain. And that's -- Mark, I don't know if you have any sense on that.

Thanks Ron. Yes, this is Mark. And Damon you mentioned the size of the pipeline. It has remained very robust. Roughly 70% of it is referred for refinance versus purchase activity and accordingly about 70% of it is salable as opposed to destined to the portfolio. And we tend to work through our portfolio about 75% which is salable would close in 30 days or less. In New England in general and in the Boston Metro area, housing has been surprisingly robust. There is still strong demand for housing. And while, we expect that social distancing will cause purchase activity to slow down as we head into the second half of the year, it does look like the second quarter will remain a strong one as we work through the large amount of refi that is going through the pipeline. The second half of the year is really anybody's guess as to how COVID will continue to affect the residential housing business. But at least for the second quarter, we feel it will remain strong.

Got it. Okay. Thanks. I appreciate that color. And then what about -- in terms of the derivative income that you guys are seeing -- do you think that -- does that pipeline remain healthy? Do you think that will kind of pull back a little bit from this level?

Yes, I suspect that we won't maintain that level. I think it's probably more reasonable to think that going forward it will look more similar to what we did last year. But we certainly had it kind of a knockout first quarter on swap income. A lot of it is going to depend on commercial loan originations going forward.

Yes. Damon, it's Ned. Just to add a little bit to that. The commercial pipelines are down a little bit. I think there's caution on all fronts. And so -- and we've swapped a lot of what was available to swap. So we're working with a lot of those borrowers in deferments and putting lines in place to help them with swap payments to keep the swaps intact. But I think the additional swap fees will probably slow down a little bit just based on general volume.

Okay. And then did you say that the -- a good portion of the C&I growth this quarter was tied to a single borrower who drew down on a line of credit?

Yes. Just -- yes one borrower local one of the participations that we're in drew down on their line of credit. So all of that was in one borrower.

And was that in response to their own personal response to COVID 19? Or was this related to a project that they're working on? Or I guess said differently was this something that was anticipated or expected? Or is this kind of just come out of the blue mid-March?

I would say it was -- it's COVID-19-related wanting to have liquidity on hand for what may come. We're very close to the borrower. They're in an industry that has closed so they wanted to have cash on hand. But it's not related to any specific project.

Got it. Okay, that’s all that I had for now. Thank you very much.

Thanks Damon.

The next question comes from Erik Zwick with Boenning and Scattergood. Please go ahead.

Good morning, Erik.

Good morning everyone. First maybe just trying to think about the wealth management revenue going forward, the first quarter was -- it was bleed a little bit by the tax preparation fees. I think it was $171,000 and a majority of those fees are generated by asset sizes. And curious, are those calculated on an average size or a period end? Just kind of curious how much of the decline was reflected in the first quarter numbers the decline in the markets?

Yes. So I would say on a technical basis, it's probably a mix. But I think for your purposes I'd think of it on an average basis. So yes, we did not feel the full brunt of the market correction within our revenues in the first quarter. That being said markets have rebounded, thus far in April. So a good bit of that downturn has reversed. What markets do between now and the end of the quarter is anyone's guess at this point. But I think it's fair to say that revenues would be lower in Q2 than Q1 just based on what we've seen.

And Erik, this is Mark. Just for some color on the underlying segments of the AUM base for purposes of broad classes, a little less than 50% would be equity based, a little more than 35% in fixed income, about 9% in cash and the remainder in other asset classes. So while the movement in equity markets is certainly going to capture most of the reason for decline, a little more than one-third is fixed income. And as Ron had noted too, the average balances for the quarter were down about 4%, but period-to-period first quarter versus fourth quarter was down by more, so.

That's helpful. I appreciate the additional color there. With regard to the PPP program, I appreciate the color on the number of remaining, kind of, borrowers and applications and remaining value there. Just any confidence in your ability to fund all of those, I've seen some wild pictures this morning in the media with cars lined up around the blocks at banks with drive-throughs with people trying to get in their applications. I'm sure you were accruing those applications even after phase one ended. But just again curious about your thoughts of funding that remaining $58 million you've got in your pipeline?

That's a great question Erik. It's Ned. Yes, so the whole program has been a little bit on the run, hasn't it? And we have people that have been geared up and ready to go. Obviously the starting bell went off at 10:30 this morning. They were ready to input as many -- there's some talk about giving some of the larger institutions ability to do things more electronically than they had in the past. So it's really hard to predict how long this particular pool is going to be available and how the SBA is going to sort through the just flood of applications that they're bound to get. We're as ready as we can be. We've got more than 650 applications lined up ready to go. They're generally smaller in size. We're trying to take care of the local small businesses as is our job. But we'll have to see. I don't -- we don't know how many -- there's a pool that's reserved for smaller banks, $60 billion of it. So maybe that will be enough protection from the larger banks flooding the process. But look at the end of the day this is about getting money to customers. So as long as many customers as possible get money whether they're our customers or other customers that's the key. And we'll do as much as we can to get our customers access to the program in a sensible way and we'll see. I think we'll probably know the answer to that question in 48 hours this time around. I think it's going be a little faster.

You're right. Yes, it seems like it's going to go -- this round will go fast too. And then thanks for the additional breakout in the press release with the CRE and C&I balances. That's helpful. I'm curious with regard to the hospitality segment of your portfolio, do you have a sense, or do you have the numbers of what percentage is in Providence? And I guess the reason I'm asking is you may have seen over the weekend Brown University put out a proposal for reopening in the fall and mentioned that they would potentially utilize, kind of, local area hotels there for certain uses with their reopening plan curious if that may benefit? And I realize it's still a proposal on a long way out, but curious about your exposure there?

Yes. So we have a little bit in Providence. We have one of our construction projects is in Providence. We've got some area hospitality I'm looking at the list now, 21% of it in the greater -- in the Rhode Island marketplace not the Providence marketplace, very little of it in downtown Providence today. But as I said we've got one in process. We've got 5% of the book or five -- $6 million is in Warwick Rhode Island near the airport. So we don't have a -- we have a huge exposure period. We've got some coverage in Rhode Island. And if Brown opens up that will be helpful. The one that is under construction is right near the Brown Medical School. So we're ground zero for anything that goes on a Brown.

Great. Thanks for taking all my questions.

Not at all. Thanks, Erik.

[Operator Instructions] Our next question is from Laurie Hunsicker with Compass Point. Please go ahead.

Yes, hi, thanks. Good morning.

Good morning, Laurie.

Just wondered, just going back to the C&I, the $25 million drawn looking at this table and it looks like where you had the big increase here was a combination in food services. Is that the category that it came from?

Yes.

Yes.

Okay. And is gaming in that category? Or does gaming fall down in entertainment and rec?

We have it in that category.

You have it in that category. Okay. Was it a gaming loan? Or can you say or...

Yes.

Okay. Okay. Fair. And then, just going back again -- I also just want to echo that really appreciate the detail. Going back up to commercial real estate you -- I heard you say that your hospitality or hotels were 65% LTV. Do you have what LTVs were on just a few more categories you have multifamily retail and health care and office? Or if not, I can follow-up with you offline.

Yes. We can follow-up. I mean our credit policy is -- we can certainly give you. And Bill Ray is on the phone. Bill, I don't know if you've got our policy. So, we don't update LTVs in the commercial portfolio as frequently as we do on the consumer side. But Bill, do you have a comment on underwritten LTVs?

Yes our origination LTVs never exceeds 75% for multifamily, 70% for other classes other than lodging and 65% for lodging. So, the actual LTV today would be under those just because of the way they get underwritten and with trends in value, but we can't give you a spot number for right now.

Okay. I'm certainly going to follow-up with you offline. Yes, I was looking for current LTVs. I guess the same question on residential and home equity. If you happen to have current LTVs on your portfolios there and also average FICO?

Yes Laurie. So current LTVs on residential is 58. FICOS have got three buckets of categories. Over 750, we're at a 57%, 660 to 750 is 36%. Under that is 7%.

Okay. And then, do you have home equity as well?

I -- yes, I don't think I have that separately.

Okay. I'll follow-up with few offline. Okay. And then on C&I, do you have any leverage loan exposure?

Very little Bill, HLT’s we have a handful.

Yes. I think, we have three relationships all of which are local. And a couple of those are shared national credits. So, very modest exposure I think on the order of $40 million or so.

$40 million. Okay. Great. Thank you. I'll leave it there.

Thanks, Laurie.

Ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over to Ned Handy for any closing remarks.

Well, thank you all. We appreciate your taking the time this morning and certainly hope that all of you are well and stay well. And these are unusual times and we appreciate your patience with us in this remote fashion. I'm sure most of you are remote as well. So we're all getting used to the new world order. But thank you for being with us this morning. And yes, you know how to get to us. And if there are other questions, we'd be happy to answer them. But again, thank you. Have a great day and we'll talk to you soon.

And thank you sir. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.