Flushing Financial Corp (FFIC) 2021 Q1 法說會逐字稿

Good day, and welcome to Flushing Financial Corporation's First Quarter 2021 Earnings Conference Call. Hosting the call today are John Buran, President and Chief Executive Officer; Susan Cullen, Senior Executive Vice President, Treasurer and Chief Financial Officer; and Frank Korzekwinski, Senior Executive Vice President and Chief of Real Estate Lending. Today's call is being recorded. (Operator Instructions) After today's presentation, there will be an opportunity to ask questions. (Operator Instructions) A copy of the earnings press release and slide presentation that the company will be referencing today are available on its Investor Relations website at flushingbank.com.

Before we begin, the company would like to remind you that discussions during this call contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Such statements are subject to risks, uncertainties and other factors that may cause actual results to differ materially from those contained in any such statements. Such factors are included in the company's filings with the U.S. Securities and Exchange Commission. Flushing Financial Corporation does not undertake any obligation to update any forward-looking statements, except as required under applicable law.

During this call, references will be made to non-GAAP financial measures and supplemental measures to review and assess operating performance. These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. For information about these non-GAAP measures and for a reconciliation to GAAP, please refer to the earnings release and/or the presentation.

I'd now like to introduce Mr. John Buran, President and Chief Executive Officer, who will provide an overview of the strategy and results. The floor is yours, sir.

Thank you. Good morning, everyone, and thank you for joining us for our first quarter 2021 earnings call. On today's call, I will discuss our first quarter highlights and our strategic objectives before turning the call over to our CFO Susan Cullen, who will provide greater detail on our financial performance. Following our prepared remarks, we will address your questions along with our Chief Real Estate Lending Officer, Frank Korzekwinski.

After a challenging year for all in 2020, we were cautiously optimistic heading into 2021. With an accelerated vaccine rollout, improving local economic activity and a steeper yield curve, the environment is better than it was 3 months ago.

We continue to support our customers to get through this challenging but improving period. The best example of this was our efforts around the PPP program. During the quarter, we originated more PPP loans than we did in all of 2020.

We're also guiding our customers through the forgiveness process. Loans and forbearances declined in the quarter, and this will continue throughout the remainder of 2021. Our support of these customers was rewarded as less than $10 million of loans that were on forbearance migrated to nonaccrual, and we've only recorded $100,000 in losses to-date.

Turning to Slide 3, we outline our strategic objectives and how we measure up against them. Our first objective is to ensure appropriate risk-adjusted returns for loans while optimizing the cost of funds. By focusing on this objective, we reported our fourth consecutive quarter of record net interest income. We expanded our net interest margin during this quarter as funding costs declined more than loan yields.

Average noninterest-bearing deposits increased 91% year-over-year and now comprise 14% of deposits. Our second objective is to maintain strong historical loan growth.

Net period-end loans rose 2.6% year-over-year, excluding Empire, as we focused our attention on supporting our customers by originating PPP loans and assisting in the forgiveness process. Our third objective is to enhance core earnings by improving scalability and efficiency. While our GAAP earnings per share improved to $0.60 from a loss of $0.05 a year ago, our core earnings of $0.54 increased 184% year-over-year.

Additionally, our core pre-provision net revenue improvement was 79% year-over-year and 6% quarter-over-quarter. This improvement in earnings per share and core pre-provision net revenue was due to the Empire transaction, net interest margin expansion and lower loan loss provisions.

Importantly, essentially all of the Empire cost savings are in the run rate in first quarter '21, and we're on-track to achieve the expected benefits.

Also, we remain confident in achieving our 20% earnings per share accretion in 2021. Our less strategic objective is to manage asset quality with consistent and disciplined underwriting. Credit quality has always been a hallmark of Flushing.

While we had 17 basis points of net charge-offs this quarter, 16 basis points were from charging off the remaining Taxi Medallion portfolio.

Our reserve coverage is strong at over 200% of nonperforming loans, and our nonperforming assets are low at 26 basis points. The average loan-to-value in our real estate collateralized portfolio is 38%.

Overall, we performed well against our strategic objectives during this quarter and are encouraged by the outlook as well.

I'll ask Susan to provide more details. Susan?

Thank you, John. I'll begin on Slide 4.

Our first strategic objective is to ensure appropriate risk-adjusted returns on the loan portfolio while optimizing our cost of funds. Average deposits rose 23% year-over-year. Excluding Empire, growth was about 8%.

Our average noninterest-bearing deposits increased 91% from a year ago, and our core deposits comprised 83% of average deposits, an improvement from 75% in the first quarter of 2020. Our total cost of deposits declined 108 basis points over the past year to 39 basis points and improved 8 basis points from the linked quarter.

Our digital banking metrics continue to improve, and we expect this trend to remain.

In addition to the 64% annual increase in the monthly active mobile users in March, active online banking increased 120%, monthly mobile deposit items processed increased 310%, and monthly mobile deposit volume process climbed 850%.

On Slide 5, we show the net interest margin trends. As John noted, we reported our fourth consecutive quarter of record net interest income. Core net interest margin expanded 3 basis points during the quarter as the cost of interest-bearing liabilities decreased faster than the decrease in the yield on interest-earning assets.

Our net interest margin can have some noise, including net gains or losses from fair value adjustments on qualifying hedges and net amortization of purchase accounting adjustments. To try to make your analysis easier, we have removed these impacts, plus the effects of prepayment penalties and the net reversals and interest recoveries from nonaccrual loans in the base net interest margin. We encourage you to model beginning with the base net interest margin.

I want to take a minute to discuss the steeping of the yield curve and what it means for Flushing. On Slide 6, you can see the spread between the 2-year and 10-year treasuries. The spread has widened during 2021, and the current spread is greater than the average for the first quarter. This should bode well for asset pricing and help keep funding costs low. Overall, a steeper curve should help protect and possibly grow the core net interest margin.

On Slide 7, we discuss our interest rate risk positioning. We are liability-sensitive but have tools and time to help mitigate the sensitivity to rise in short-term rates. For example, we will continue to lengthen the duration of our liabilities through one of several channels. We have and will continue to shorten the duration of our assets by continuing to grow our commercial portfolio and focusing on the origination of other adjustable rate assets.

We have $480 million of forward starting swaps that pay a fixed rate of 73 basis points compared to our Federal Home Loan Bank advance rate, including the existing swaps of $233 million for the first quarter. On average, these forward starting swaps begin in late 2022, which is ahead of the Fed's timing on rate increases in 2023. So while we are liability-sensitive, we have levers to pull when short-term rates rise to complement the protections currently in place.

Our next strategic objective is to make historical loan growth. On Slide 8, you can see the composition of our loan portfolio and our growth. As John mentioned earlier, we focused our attention this quarter on the PPP loan program.

We originated $123 million of PPP loans in the first quarter, which is greater than the 2020 originations of $112 million. To-date, we have helped to process $49 million of loans for beginners and have another $34 million pending SBA approval. Net PPP fees collected for forgiveness in the first quarter were minimal. And if the remainder of the portfolio were forgiven, we expect to collect $5 million of net fees.

While overall loan yields declined slightly on a linked-quarter basis, when netting out the PPP loans, we were encouraged that yields on new originations improved as the quarter progressed. However, new origination yields are still lower than the current portfolio yields.

We were very successful this quarter with our customer swap offering program, but with higher rates, the offering is less attractive to customers.

Our third strategic objective, as shown on Slide 9, is to enhance core earnings power by improving scalability and efficiency. So far, the merger is progressing in line with our expectations. We are on pace to achieve our cost savings target.

Growth in deposits at our legacy Empire branches was 14% since closing. We also are committing a significant portion of our marketing budget to Suffolk County, which is a new market for us.

As we deal with all of our markets, we are looking for ways to support our communities, and we are off to a good start in Suffolk County. We remain confident in achieving the 20% earnings accretion in 2021 from the Empire transaction.

Slide 10 has our fourth strategic objective, which is to manage credit risk with consistent and disciplined underwriting. We have supported our customers during the pandemic with various forbearance programs.

Loans in forbearance totaled $296 million and 61% of these loans are making interest payments, leaving only $115 million or 1.7% of loans on full P&I forbearance. We remain well collateralized on these loans as our borrowers have approximately 60% equity in the properties. These forbearances will remain throughout 2021. However, over 80% are scheduled to resume normal payments by the end of the year. Most importantly, less than $10 million of loans that have exited forbearance have migrated to nonaccrual or loss status.

We have recorded only $100,000 of loss on all loans that have entered forbearance. This further demonstrates the strength of our borrowers and the quality of our underwriting.

Hotels are the largest segment of our forbearance loans at $108 million or about 1/3 of the balance.

Some important points to make on this portfolio. First, occupancy rates in general are rising and should continue for the remainder of the year with continued vaccinations. Second, most of the hotels are outside of Manhattan, where economic activity is relatively better. Third, greater than 90% of hotel balances are making at least interest payments.

We remain convinced that these borrowers just need time for economies to normalize so they can resume regular payments. With an average loan-to-value of 50%, we view our risk of loss as low in this portfolio.

On Slide 11, we provide the details of our allowance for loan losses. Our provision for loan losses was $2.8 million, primarily due to the net charge-off of the remainder of the Taxi Medallion portfolio charging totally $2.9 million. Going forward, we expect loan loss provisions to be primarily influenced by non-PPP loan growth, overall loan mix and economic factors. The reserves to loans remained at 67 basis points.

Slide 12 is a reminder that our loss history has been significantly better than the industry for the past 20 years; and even during the Great Recession, our losses were 4.5x below the industry's peak. We see no reason why this trend would be any different this cycle as weighted average loan-to-value on our real estate portfolio is 38%, and there's minimal exposures to loans with loan-to-value exceeding 75%.

Slide 13 outlines some additional credit quality statistics. Our coverage ratio remains strong at over 200% of nonperforming loans. Nonperforming assets were flat linked quarter and the overall level remains low. The average loan-to-value on real estate nonperforming loans was below 31%. Overall, we remain comfortable with our credit risk profile and continue to expect minimal loss [contact].

Before I wrap up my comments, let's review capital on Slide 14. Our capital ratios have improved linked quarter, and we remain comfortable with our position. Book and tangible book value per share increased to $20.65 and nearly $20, respectively. We continue to expect to build capital during 2021 with our tangible common equity ratio approaching 8% by year-end. Our current dividend yield approximates 3.8%.

Lastly, let me remind you some items that could impact the second quarter. The steeper yield curve should help asset repricing at the margin and help keep funding costs low.

We benefited from CD repricing in the first quarter and while additional opportunities exist, the impact will be lessened going forward. We expect core net interest margin to have modest expansion in 2021 as it will take time for the steeper yield curve to impact asset yields, and we have extended the duration of our liabilities. Additionally, loan growth will be a key driver of net interest income.

While our loan pipelines are strong, we have a headwind from the PPP forgiveness. We are planning to use the benefits from the steepening of the curve to make investments in our business.

Purchase accounting accretion is expected to remain below $1 million per quarter. The strong fee income we had in the first quarter from the customer swap program totaled $1.6 million is not expected to repeat given the change in market conditions.

The $3.3 million of the compensation-related expenses in the first quarter are also not expected to repeat in the second quarter due to seasonality.

Our effective tax rate in 2021 should approximate 27% since New York passed the law, increasing the state rate on April 19.

Lastly, note that our period end outstanding shares are higher than the average for the quarter.

With that, I'll turn it back to John.

Thank you, Susan. On Slide 15, we provide our outlook. Clearly, we are a beneficiary of the steeper yield curve, and we have leveraged the pull if short-term rates rise. We also have forward starting swaps that should help mitigate any impact of a rise in short-term rates.

We are more optimistic about the operating environment given the steeper yield curve, fiscal stimulus and accelerated vaccinations, which should improve the local economy.

Our community outreach, especially in our Asian markets, should accelerate in 2021. As Susan mentioned, we are using some of the benefit from the steepening yield curve to invest in our business and better prepare for our next stage of growth. This includes investments in our digital offerings.

Our loan pipelines, which do not include any PPP loans, improved during the quarter, and we should return to more normal loan growth later in the year as we work through PPP forgiveness headwinds.

We remain comfortable with our credit risk profile. Our support of our customers throughout this pandemic has increased customer loyalty.

Empire is on-track to deliver the 20% EPS accretion in 2021, and we will continue to leverage this franchise to generate returns.

Overall, we're on the right path to achieve our long-term goals of an ROAA greater than or equal to 1%, and an increased ROAE.

With that, we will now open it up to questions. Operator, I'll turn it over to you.

(Operator Instructions) And the first question we have will come from Mark Fitzgibbon of Piper Sandler.

First question I had for you is, you referenced in the press release you extended out some borrowings. I guess I'm curious how much you extended out, how far out did you go? And is there a plan to do more of that?

So let me answer the last part first. Yes, we plan to take advantage of spots on the curve to take advantage of pricing, where we see it opportunistically going forward. We extended out. As you may recall, we prepaid Federal Home Loan Bank borrowings in the fourth quarter and had those at the end of the quarter kind of sitting in overnight and we extended those prepayments back out a preponderance of them over the curves and laddered them out.

Okay. And then secondly, Susan, I'm curious, are we likely to see any additional merger charges in the second quarter on Empire? Or is that all done now?

There's still a little bit of hanging over. It's not big charges.

Okay. And then next, I guess, I know that you all have recently reconfigured the branches. But given the increased digitization of the business as a whole, I guess I'm curious, are you rethinking the size of the branch network at all today?

Well, right now, in terms of the overall network, we do see a couple of spots here and there where we can actually add branches. We don't have a branch network that blankets the area that we're in. And despite the fact that we've got a nice improvement in the Suffolk County market, there's a couple of areas there where we can do some fill in. And then there also is another area in -- another couple of areas in the boroughs that look attractive to us.

We recently put in a branch in Jamaica, Queens. That seems to be doing well. So while we do -- we are clearly leveraging our digital -- our new digital assets, we also feel that as a community bank that having a reasonable number of branches is positive as well.

And these branches, Mark, are in the 2,000 square foot or less area in terms of their size, and they are also in the -- they're also limited in staff, usually around 4 FTE or so. So we expect that we'll probably do another branch or 2. But largely, we're pretty well set with our digital and our branch network as it is. We may see some other opportunities to reduce the size of some of our branches as leases come up.

Okay. And then lastly, John, we've seen a bunch of consolidation in the Northeast. It feels like the pace is picking up a little bit. Could you share with us, at a high level, your thoughts on sort of what role Flushing plays in that? What kinds of things you might be interested in? And just a general view on sort of how things are likely to play out in your market?

Sure. So we clearly are aware that the need for scale and the need for size sufficient in order to deal with the technology imperatives of the institution going forward are there. So I think in the short run, we feel very confident we can take advantage of some disruption that's taking place with respect to several rather large mergers that have taken -- that are taking place in our market. So I think in the short to intermediate term, there's a significant opportunity there for us to pick up business.

That said, a little bit longer term, we certainly are looking to continue the process that we started with Empire of improving scale in market and on the fringes of our market.

Next, we have Steve Comery of G. Research.

I appreciate the detail on loan closings in the press release. It looks like they ran ahead in most of the quarters last year. Just any thoughts on net growth and sort of what the headwinds may have been to net loan growth in this quarter? Are there any like prepayments or payoff type things going on there?

So the headwinds we would expect in the upcoming quarter would be the -- if we have a lot of forgiveness on the PPP loans. Those loans averaged about $209 million for the quarter. And if we lose all of those loans, and that would be a significant headwind to overcome for the loan growth that we have projected and previously announced.

So that said, of course, in substituting those loans, we would wind up picking up margin because they are fairly low-yielding loans. But I do think that our expectation is -- and what happened in the last quarter of the year was kind of a slowdown in what's happening in New York City, a slowdown due to increasing concerns with respect to the pandemic during the fall and early winter season. And that impacted our ability to close some of the loans because of the availability of various other entities that we rely upon, including the courts to pull these things together, including legal areas.

So I see that opening up as time goes on throughout the year. Clearly, we're already seeing more things opening up in the New York market. And we just recently saw a 75% occupancy coming up with respect to office space.

So our expectation is, as we approach the second half of the year, we'll start to see some more generation of significant loan activity.

Okay. Susan, I want to make sure I got this right, your comments on net interest margin expanding modestly. I just want to think about the breakdown there. Like, is the trajectory for loan yields continue to be maybe slightly down, offset -- more than offset by deposits? Is that the right way to think about that?

The loan yields, the interest-earning asset yields will be lessened as time goes on in the short run. And as we talked about, we have taken advantage of the ability to reprice liabilities, and that will be lessened as time goes on. We have most of our CDs repricing this year. We're front-loaded. So there's less opportunity going forward to reprice.

Okay. But net-net, the deposit opportunity is still bigger than the potential decline in earning assets, is that fair to say?

Yes. That's fair.

Okay. And then just kind of on the loans close disclosure, I appreciate that as well. So ex-PPP, it looked like loan yields on loans closed was a bit higher this quarter than last quarter, with mortgage flat. Does that mean that C&I yields in general, increased in the quarter? Or was there something else going on there?

I think what we're seeing is the opportunity to take advantage of a little bit on the yield curve. So I think we're seeing a little bit more pricing power as the yield curve has started to rise. We're still not at the point where the yields on the -- on new assets coming in exceed the portfolio yield, but we clearly are seeing the opportunity to price some loans. I don't know if you want to add anything to that, Frank.

Some of it has to do with a little bit of duration. We've gone, in cases, a little bit beyond 5 years, take a little bit of advantage of the back end of the loan curve. The -- I'm not sure of the swap loans that we did in the fourth quarter. I don't recall that, but…

Yes. So I think that that's probably another factor is that the swap loans that we put on are clearly lower yields as well. So I think the expectation there between PPP and swap loans is that we can continue to see some growth on the asset yields.

Okay. Very good. And then last one for me. Very strong deposit growth in the quarter. Maybe just talk about customer liquidity preferences and how that's changing and just how you'd expect these deposit balances to trend going forward?

So we've seen improvement across the board. Our business deposits are up very nicely. We've got some nice growth in our new Suffolk County branches as part of the Empire transaction. And we are seeing that our business customers in general are just are managing their liquidity going forward.

So certainly, we'll see some of that start to ease up as time goes on. But with the new infusion of liquidity coming into the market as a result of the newer regulatory changes that are taking place, the new changes with respect to aide during the pandemic, we expect to see that that liquidity continue to grow; and as a result, the deposits to continue to grow with it.

The only other thing that we're seeing is we're not seeing take down on our floating rate loans being as significant as they have been in the past. Usually, we run about 50%. We're running about 10% less on those.

Next, we have Christopher Keith of D.A. Davidson.

So it looks like C&I was really a bright spot for the core loan portfolio this quarter. And so how much of that strength is a reflection of the growth opportunity in Suffolk County?

It's early. So a lot of it is in the pipeline at this point in time, but we certainly are seeing business coming out of Suffolk County, and we expect to see more. The majority, obviously, of the C&I growth was on the PPP side, but we are definitely seeing a positive -- positive growth, particularly in the owner-occupied C&I.

Got it. Perfect. And then can you give us just a little color around some of where the different loan products are originating at from a yield perspective today?

Sure. Do you want to talk about yield, Frank?

Yes. So we're probably in the [$350 million] range is what we're seeing. More recently, things have heated up. The commercial real estate itself is probably a little bit higher depending on the asset class, could price as high as 4%. But overall, probably about $350 million.

Great. That's helpful. And then just a follow-up on the previous M&A question. As you look down the line, how far outside of your current operating footprint would you be willing to extend for the right deal?

So I think there's a couple of factors there. Obviously, the -- we do already have linkages to the lower upstate market where we've done some lending. We've done some lending as far South as Philadelphia in this immediate market. And certainly, in the New England space as well, we've done some lending. So we're very, very familiar with those markets. So those would be priorities for us.

However, there are ethnic linkages that we have. And I think we would take a serious look at following some of those ethnic linkages as well.

And next, we have Chris O'Connell with KBW.

Just want to circle back a couple of questions and make sure I was getting this correct. The loan closings ex-PPP this quarter were down fairly substantially, right?

Quarter-to-quarter? Yes.

Okay. Got it. And just -- I was hoping to get a little color. It looks like the C&I, core C&I closings were down, but had pretty good net growth. What was the difference in those 2 there?

PPP loans are included in there.

Yes, PPP loans.

So the PPP loans aren't included in the SBA line?

No, those SBA lines are…

I'm talking about ex-PPP on the C&I.

I'm just trying to look real quick. Well, can we speak real quick, Chris. Ex-PPP, they're up $20 million, which is just kind of normal business quarter-over-quarter.

Okay. Got it. And then as far as the PPP fees during the quarter, it looks like you guys had a good amount of forgiveness. So I guess, what were the exact PPP fees during the quarter? Or why were they kind of de minimis, as you guys said?

So the fees we recognized during the quarter due to the forgives was less than $500,000. And as we said in the call, we have approximately $5 million left if all of our loans -- all the PPP loans got -- received forgiveness.

Okay. Got it. And then as far as the swap fees a little bit outsized this quarter, what are you guys like expecting? I know it's a pretty volatile line item, but kind of like a baseline level for that to bounce around going forward?

We're seeing customers are interested in the swap program until they get to the closing table and then they're backing off a little bit because of the interest rate environment. So we're not seeing so much demand for that product right now. Given changes in market rates, we obviously would expect to see that pick back up a little bit.

Okay. Got it. And then for operating expenses, I know the $3.3 million seasonal should fall out next quarter. It seems like that kind of gets you guys to just drive a $34 million baseline level there. Is there -- there's no remaining or not very much remaining cost savings from the Empire deal coming through for the rest of the year, correct?

There -- totally, but I want to point out that we're expecting our run rate to be around $35 million. Given the volume of the PPP loans and the way the accounting works, that reduced the salary expense. So our run rate is about $35 million.

Okay. Great. And that usually holds fairly stable throughout the year after the first quarter seasonality rate?

Yes.

Great. And then if you could just talk a little bit, I guess, about the loan segments and you guys have -- the pipeline is up kind of year-over-year and quarter-over-quarter a little bit. And ex-PPP, kind of, what the -- what you guys are seeing as the biggest demand or growth drivers near term?

So the ex-PPP on the C&I loan, as Mr. Buran pointed out earlier, the owner-occupied C&I space has been a very strong opportunity for us on the business banking side. On the shorter end of the curve, rates have come back in quite a bit. The owners are now taking advantage of this particular point in the yield curve to refinance a good number of loans that are coming mature -- are coming up to maturity, excuse me.

On the real estate side, we continue to see the normal blend of multifamily and commercial real estate, that we have seen traditionally. That space has gotten much better in the last 2 or 3 months or so. Volume was very strong in the fourth quarter as a result of a loosening of a lot of restrictions here in New York state, tended to slow down in November, mid- to late November as a result of some tightening up of the economy or local restrictions. I know we had in New York City some orange zones come into effect that really put a big impact in our Brooklyn and Queens and southern Nassau County marketplaces. That seemed to have gotten much better as the restrictions are now being lifted in various capacities are in restaurants and theaters and whatnot are increasing.

We're seeing a very good pickup in the local retail activity, the local shopping. We're starting to see new commercial spaces being built out for tenants that are either signing new leases or renewing existing leases.

So it's pretty much a combination of an improvement in asset classes across the board.

Got it. Great. And then as far as the forbearances go, I appreciate the detail that you guys have given surrounding the schedule of those set maturity dates coming forward. How are you guys planning to deal with those as they come set to mature over the coming quarters, if they're coming back and asking for additional forbearance?

Why don't you cover that Frank?

Sure. So we've been very diligent in working with customers that are asking for additional relief. We do ask them to provide us with current financial data, at times includes bank statements, if we don't hold the operating accounts here at Flushing, to see what level of banking activity is occurring in the business or at the real estate project that we've financed.

We have seen a very strong improvement in rent collections across all assets. We will grant additional relief for customers who are continuing to experience significant disruptions in their cash flow. Some of those could be properties that had significant portions of their income coming from some sort of entertainment type tenancy or restaurant. For the most part, we reach out to the customers generally 60 days prior to their expiration of their relief, have conversations, ask some questions about the operations of the property. In many cases, we'll send a loan officer out to visit with the customer to actually confirm what the customer is describing as the current situation, either at the business or at the property.

I'm happy to report that, as you can see, an overwhelming majority of the customers that we provided assistance to, starting last spring, have returned to normal. We -- the largest portion of that portfolio, we have left deals with small balance loans, the largest portions in terms of number of loans. And those properties are beginning to show signs of strength as we head out of the winter months and into the warmer season.

So also in terms of that forbearance, I think it's important to point out that really only about $120 million of the total is really full P&I forbearance.

Yes. I saw the [61] in interest paying. That's great.

And just wanted to confirm the structure. Those that are granted additional forbearance from this point going forward, that's going to be under kind of like the CARES Act modifications versus the traditional TDR, right?

As long as we believe that any holdup in payment or forbearance will be granted due to COVID-19. If for some reason we believed that the forbearance was not related to that, then we would have regular TDR accounting. So that we need to make sure that it would be a COVID relief item.

I'm showing no further questions at this time. We will go ahead and conclude our question-and-answer session.

I would now like to turn the conference call back over to Mr. John Buran, President and Chief Executive Officer, for any closing remarks. Sir?

This is Susan. I just wanted to add one other comment.

We got a couple of questions last night on the PPP loan portfolio. And I think we addressed most of the issues or questions that were raised last night.

The one that was not asked, but I did want to get out in public was that the yield for the first quarter on the PPP loans was approximately 2%.

So with that, I'll turn it over to John.

Thank you, Susan. I just wanted to be sure we had that update for -- in the event anybody else had that question in the background.

I want to thank you all for joining us. We're obviously very pleased with the quarter, and we look forward to continuing growth of the franchise. Thank you very much for your attention.

Thank you.

And we thank you to the management team also for your time today. Again, the conference call is now concluded. At this time, you may disconnect your lines. Thank you. And everyone, take care, and have wonderful day.