Origin Bancorp, Inc. (NASDAQ:OBNK) Q2 2020 Earnings Conference Call - Final Transcript
Jul 23, 2020 • 09:00 am ET
We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Matt Olney with Stephens. Please go ahead.
Good morning, guys.
Good morning, Matt.
I wanted to start on Slide 8, the selected sectors that you guys provided. I think the overall balance was around $547 million in the second quarter, I think the same slide, a quarter ago was around a $1 billion. So just walk us through how you further refine your focus list on the selected sectors and does this imply you're feeling better about credit today than three months ago or is it just a statement that you've had more time to work through this over the last three months?
Yes, Matt, when the pandemic started through the first quarter, we got very aggressive and transparent on areas that we believe could have -- could be impacted through the downturn this health crisis, let's say. And we included transportation. We include all health care and a few other areas. And through the second quarter, we became because the deep dives and a lot of work with individual credits talking to these clients actually going out and visit them during this time. We recognize the strength in the transportation portfolio. And the overall strength in the health portfolio, less assisted living.
So as we continue to work through the second quarter, we saw those trends and our comfort in those areas that they surely weren't, what we would call COVID impacted asset class. So we remove those and feel very comfortable and confident in that.
Okay, got it. And then in the assisted living book, I believe there were some charge-offs in the second quarter. The remaining book is, I think around $140 million. What color can you give on the existing credit profile of the remaining book with the risk of further downgrades. Just trying to understand, if those credits that were charged off in 2Q have any similarities to the remaining book.
Thanks.Yes, Matt. We got -- this is a point I want to make very clear here. We talked about even in the fourth quarter of '19 and first quarter of '20, our concern is about assisted living, especially those assisted living credits we have that were developer-run. Now assisted delivering credits that are supported by nursing home operators appear to do better, the ramp-up periods or more quicker. So what we did was, and I want to make this point these charge-offs that we took in the second quarter 93% of that was reserved in the first quarter. So these are legacy credits primarily four legacy credits that we decided and use the term cleaning the slate.
We decided that we are going to get aggressive, because two of these credits one assisted credit and one retail credit were deals that we had on basically ready to close that would have got us out at par in COVID basically impacted both of those deals where they walked off. So we decided