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TriState Capital Holdings Inc (NASDAQ:TSC)
Q2 2020 Earnings Call
Jul 23, 2020, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning everyone, and welcome to TriState Capital Holdings Conference Call to discuss financial results for the three months ended June 30, 2020. [Operator Instructions] Please note this event is being recorded.

Before turning the call over to management, I would like to remind everyone that today's call may contain forward-looking statements related to the TriState Capital that may generally be identified as describing the Company's future plans, objectives, or goals. Such forward-looking statements are subject to risks and uncertainties that could cause actual results or outcomes to differ materially from those currently anticipated. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. For further information about the factors that could affect TriState Capital's future results, please see the Company's most recent annual and quarterly reports filed on Forms 10-K and 10-Q. You should keep in mind that any forward-looking statements made by TriState Capital speak only as of the date on which they were made. New risks and uncertainties come up from time to time, and management cannot predict these events or how they may affect the Company. TriState Capital has no duty to and does not intend to update or revise forward-looking statements after the date on which they are made.

To the extent non-GAAP financial measures are discussed in this call, comparable GAAP measures and reconciliations can be found in TriState Capital's earnings release, which is available on its website at tristatecapitalbank.com.

Representing TriState Capital today is Jim Getz, Chairman, President and Chief Executive Officer. He will be joined by David Demas, Chief Financial Officer for the question-and-answer session. At this time, I would like to turn the conference over to Mr. Getz.

James F. Getz -- Chairman & Chief Executive Officer

Thank you for joining us this morning. In the nearly five months since fiscal policy makers and the government initiated extraordinary efforts to respond to the pandemic and its impact on the economy, TriState Capital's differentiated business model continues to empower us to meet the needs of our clients and deliver responsible growth in any environment. Together with credit quality and balance sheet strength, scalable and capital efficient operations, and a responsive funding capability, this model has enabled TriState Capital Bank and Chartwell Investment Partners to provide an exceptional experience to our sophisticated clients.

We also continued to expand our advisor network and client base during the second quarter, with each of our private banking, middle-market commercial banking, and investment management businesses growing meaningfully during the quarter. The balance sheet surpassed the $9 billion milestone, with loans growing year-to-date by more than 18% annualized, supporting our goal of 15% to 25% loan growth for full year 2020. This is all organic loan growth, and does not include PPP lending or other one-time programs.

At the same time, we maintain what we believe are best-in-class asset quality metrics for the second quarter of 2020. We fully expect TriState Capital's business model will continue to build -- provide us with very low annual credit costs relative to peers, even as we prudently build loan loss reserves for adverse scenarios. Our objective has always been to outperform in times of credit volatility, while capturing risk-adjusted profitability in all environments. Our highly scalable branchless model and operating leverage also continue to distinguish this Company. The Bank's efficiency ratio declined to an all-time low, 50.39% in the second quarter, down some 477 basis points from the year ago period.

Total revenue grew to more than $46 million in the second quarter, up 7.6% from the year ago period, outpacing a 1.9% increase in non-interest expense. In addition, second quarter non-interest expense of $28 million is 34% lower than the average bank with $5 billion to $10 billion in assets. And our annualized expense to average assets ratio was just 1.22% in the second quarter or more than 120 basis points below average for similar-sized banks. The top line was also supported by non-interest income, which represented nearly 28% of revenue in the quarter. In addition to the Chartwell fees, we had very strong swap fee income of $3.8 million from both private banking and commercial banking clients.

All this was accomplished with our high performing workforce, largely operating remotely, while simultaneously maintaining hallmark levels of personalized and responsive service. Frankly, I believe this Company's relationships with our clients and financial intermediaries had never been stronger, and we are inspired by the trust and confidence they placed in TriState Capital Bank and Chartwell Investment Partners.

Our investment management team is creating significant momentum that is in turn driving Chartwell's new institutional and retail business, positive net inflows, and AUM growth. Chartwell assets under management ended the quarter at $9.3 billion, that's $1 billion higher than at the end of the first quarter and $1.6 billion ahead of AUM on March 23, which was the market's trough for Chartwell.

Market appreciation of $856 million contributed to Chartwell's growth in the second quarter, demonstrating the positive impact of having diversified active management strategies, with nearly 40% of AUM in equities and just over 60% in fixed income. Chartwell generated fees of $7.7 million, comprising 60% of non-interest income during the second quarter. With an average fee rate of 35 basis points, Chartwell's annual run rate revenue grew nearly 12% during the second quarter of 2020 to $32 million on June 30.

The highly credible performance of Chartwell's strategies supported by our sophisticated sales and financial services distribution capability continues to attract institutional and retail accounts. In the first half of the year, Chartwell attracted positive net inflows of $132 million, with $75 million of that production coming during the second quarter of 2020. Chartwell's momentum is evident in the breadth of its relationships. Today, it has more than 325 institutional clients, more than 2,500 retail clients, and nearly 40,000 mutual fund shareholders. Financial advisors can also access Chartwell products for their clients in some 50 retail platforms.

Looking ahead, Chartwell currently has in excess of $140 million in commitments in its new business pipeline to be funded in the third quarter from institutional investors alone. In addition, Chartwell has meaningful activity in institutional searches and finals and its performance continues to be very strong as we go into the second half of the year. We could not be prouder of the Chartwell team and the momentum they're engineering, particularly given the broader economic environment.

Turning to our banking business and liquidity, you recall that in mid-March, we accelerated deposit gathering in anticipation of clients' potential credit needs at the outset of the pandemic in the U.S. Accordingly, deposits grew by 69% annualized during the first quarter. In the second quarter, our branchless and responsive funding mechanism enabled us to manage deposit growth to 2.5% annualized as actual client needs for this foreseeable future became clear and more stable. We continue to actively manage deposits and excess liquidity to match what we expect to be continued organic loan growth.

Funding costs declined significantly to 0.87% in the second quarter, down by 155 basis points from 2.42% in the same period last year. For loans, the average yield declined to 2.69% in the second quarter, and we maintain interest rate floors on 55% of our total loan portfolio. Net interest margin was 1.52% in the second quarter, inclusive of the effect of the enhanced liquidity position we carried in the quarter. We expect NIM to stabilize in that range in the second half of the year.

In terms of commercial banking, we're very pleased with this business execution in the second quarter. The 8% annualized commercial loan growth you saw was entirely from our core business focused on serving middle-market businesses, with revenue up 10% to $300 million. We continue to add meaningful new relationships and expand engagements with existing clients. In the first quarter, less than a third of our C&I loan growth was from net increases in credit line utilization. In the second quarter, the $38 million decline in the C&I balances was fully attributed to net paydowns and credit lines, offsetting $155 million in new C&I loans originated in the quarter. Our $1.2 billion commercial and industrial portfolio also remains well diversified. Our single largest borrower category remains financial services and insurance, representing some 30% of C&I loans.

Our $2 billion commercial real estate portfolio is also well diversified by industry, property type, geography, and sponsor for the majority in multifamily and other income producing real estate projects. We continue to have limited exposure to some of the businesses that may be most directly impacted by COVID-19 social distancing and quarantines, totaling about 6% of TriState Capital's more than $7 billion loan portfolio. These credits are underwritten with our traditional focus on strong sponsor support and recourse. For example, $45 million to hotels, $18 million related to restaurant operations, $47 million to senior housing, $23 million to non-renewable energy distribution and production, and $314 million in commercial real estate lending to projects with a retail component. Our exposure to retail-related CRE loans is very modest at about 4% of loans, and we're confident in our borrowers and the composition to that sleeve of the CRE book.

These are full banking relationships with corresponding deposits and treasury management services. Over 70% of our retail-related project sponsors did not request COVID-19 deferrals. The average rent collection rate has been about 68% on these projects over the quarter. We have no indoor mall-related exposures. Our five largest tenant exposures represent about 25% of retail-related commercial real estate tenancy, encompassing government as well as major brokerage, pharmacy, convenience store, and supercenter chain tenants. Our average loan size for retail-related commercial real estate is about $3 million.

On our first quarter call, we reported that we developed customized deferral arrangements, with fewer than 100 loans as of April 15, totaling some $378 million and representing less than 6% of all loans. As we shared then in April, we were prepared for another $100 million or so of additional deferrals. And we're pleased to report that modifications remain below that level. As of July 15, we have just over 100 loans, with deferrals totaling approximately $437 million, and continuing to represent about 6% of total loans. Importantly, 48% of these borrowers are scheduled to resume normal debt service payments in the third quarter. We believe many clients are gaining confidence in our ability to operate during international health crisis, which is reducing the need for deferrals. The pace and shape of any broader economic recovery will influence how these numbers play out. But based on what we see today, deferrals are moving in the right direction.

As loans grew by $213 million in the second quarter, adverse rated credits actually declined by nearly $2 million to $33 million or 46 basis points of total loans on June 30. Non-performing loans were less than $7 million or 9 basis points of our more than $7 billion loan portfolio on June 30. The increase in non-performance during the second quarter is primarily due to a single commercial real estate loan that Company believes is well capitalized, well collateralized, and adequately reserved for. The sponsors' challenges are not primarily a result of the pandemic. In addition, not a single loan in the remainder of our portfolio is over 30 days past due. This is obviously a very powerful metric and very typical for our Company, given our differentiated loan portfolio. We increased our allowance by 35% in the second quarter and 65% in the first half of the year, primarily reflecting our general reserve build. Standing at more than $23 million, the allowance represents 75 basis points of commercial loans with 32 basis points of total loans, including those collateralized by marketable securities.

As we shared with you in April, we currently expect to implement CECL on December 31. Based on what we know today, we estimate allowance to range from $30 million to $35 million on December 31, representing 85 basis points to 105 basis points of commercial loans or 40 basis points to 50 basis points of total loans.

Asset quality continues to be a differentiator for TriState Capital. Our middle-market commercial lending approach and our disciplined process for these credits is a key factor in our success. First and foremost, we are fortunate to be able to work with some of the highest quality middle-market sponsors in our markets; banking-proven and established operators. Our risk profile reflects the intentional selection of commercial clients, markets, and products as well as industry and geographic diversity. Just as important are the considerable investments we've made to build our top notch credit analytical staff. In addition to our Bank President and Commercial President, our regional presidents and seven commercial relationship managers, average 30 years experience managing these loans, our Chief Credit Officer leads a team of two dozen credit analysts. Our commercial real estate specifically eight analysts manage our CRE credits with an average of 16 years experience, at least a decade in that business. We believe this level of credit analyst experience is a major differentiator for us. We've long made these career positions, where analysts can advance professionally and see a path to six-figure income. Consequently, we're able to recruit and retain top talent. Our analysts scrutinize individual credits and create positive friction with relationship managers in the field to ensure we are properly managing and pricing risk.

Another key factor to our commercial credit quality is the continual oversight we maintain. For example, every criticized risk rating is reviewed monthly by a special assets committee, including executive management. Every loan that is pass rated is reviewed regularly by a component of our credit committee. We also engage an outside, independent party to perform a quarterly portfolio review and have done so since 2008. For new commercial loan opportunities, each requires approval from our credit committee, which includes but is not limited to me, the President of the Bank, our CFO, and our Chief Credit Officer. And no single person at the Company, including me, has any individual commercial lending authority. All decisions are made by this committee.

In response to the current economic environment, we have also been in contact with every single project sponsor, regardless of rating, monitory, occupancy, rent collection, and sponsor liquidity. The underwriting and credit management discipline is married with a commitment to providing accountability, responsiveness, and an exceptional client experience to those we serve. Our relationships with these clients and the strength of our sponsors really are the foundation of our commercial real estate business.

For our private banking business, TriState Capital's unmatched distribution capability, processes, teams, and advisor relationships are operating as designed. This was clear in the second quarter of 2020 when we delivered 15% annualized growth in private banking loans, with record period-end balances for this product, surpassing $4 billion for the first time. TriState Capital also processed the new record number of private bank applications for high net worth borrowers through independent investment advisors and trust officers and our referral network of now 225 financial intermediary firms.

These applications were up 6% for the first quarter and 49% from the second quarter of last year. Our digital lending platform also continues to help our team to provide an exceptional client experience during historic financial market volatility, while maintaining this business eminently scalable. TriState Capital's private banking loans are primarily over-collateralized by high-net-worth borrowers' liquid marketable securities portfolios, monitored daily through our proprietary technology that is subject to favorable treatment under bank regulatory capital requirements and require no reserve. These loans remain our largest and fastest growing category of lending, representing 57% of our $7 billion in total loans. Private bank loans taken together with cash and securities represent 61% of the Company's $9 billion in assets.

Overall, we remain focused on responsible growth for all stakeholders, while building an incredible franchise of valuable and meaningful relationships with our clients and financial intermediaries. As some of you may have heard me say, this is a Company for all seasons. TriState Capital is designed to not only weather challenging environments, but profitably grow and adapt during them as well. Our business model has been tested and has proven its resilience and effectiveness, and we believe it will actually grow even stronger. TriState Capital's robust and innovative suite of products, services, and technology are designed specifically for the sophisticated and unique clients we serve. The support, momentum, and confidence the each of our businesses provides to the others creates premium value to our Company as a whole. With a strong and liquid balance sheet and ever-growing distribution network and a team that excels at servicing clients regionally and nationwide, we remain focused on delivering responsible and sustainable growth over the long term.

That concludes my prepared remarks this morning. I'll now ask David to join me for Q&A. Operator, please open the line for questions.

Questions and Answers:

Operator

[Operator Instructions] The first question is from Michael Perito with KBW. Please go ahead.

Michael Perito -- Keefe Bruyette & Woods Inc. -- Analyst

Jim, David, good morning.

David J. Demas -- Chief Financial Officer

Good morning, Mike.

James F. Getz -- Chairman & Chief Executive Officer

Good morning, Mike.

Michael Perito -- Keefe Bruyette & Woods Inc. -- Analyst

Thanks for taking the questions. Wanted to start maybe with David just on the liquidity side. I mean, it seems like maybe there was a bit more build early in the quarter and that that you guys saw some drawdown on based on the kind of the disparity between the average and period-end balances. I was wondering if you could comment on that and maybe just give us a little insight as to how you kind of see the cash and investment book size tracking over the near term here, given all the kind of activity related to pandemic.

David J. Demas -- Chief Financial Officer

Sure, I'd be happy to, Mike. So, in the quarter, first and foremost, we were focused on helping our clients navigate COVID-19 events as they're unfolding. And so, we were building liquidity as we talked to you about in March, but we also built liquidity in April and May to make sure that we understood and were ready to address our clients' needs. As those needs became more clear to us in the second half of the quarter, we started to move down liquidity in a steady and very client-focused fashion.

As deposits continued to reprice during the quarter, we continued to deploy that liquidity. And so, what you'll see, Mike, is NIM starting to stabilize, as Jim mentioned this quarter and NII growth will start to return in the second half of the year. I might mention that this is all occurring against the backdrop of LIBOR compressing significantly from about 90 basis points [Phonetic] to about 80 basis points of spread between LIBOR and Effective Fed Funds. And so, you'll see us deploy that liquidity in the second half of the year, and you'll continue to see us reprice our deposit book. For instance, we're repricing our CDs now. We're extending duration on the CDs, and we're putting new money on at about 25 basis points to 30 basis points, which is about half of where our deposit pricing is right now.

We're also going to gradually reduce the amount of the deposit book linked to EFF, Effective Fed Funds. That's declining from about 40% of the book a few quarters ago to about mid-30s now, and you'll see that continue to decline. And so, a little bit of compression in NIM caused by a couple of events. Liquidity will come down over the next couple of quarters, but we continue to remain focused, first and foremost, on client needs this quarter and every quarter, and we believe with that focus, they'll continue to reward us with new business and appreciate that we take a long-term view.

Michael Perito -- Keefe Bruyette & Woods Inc. -- Analyst

Helpful, David. Thank you. And then, Jim, maybe a question on capital. You guys raised some debt. The TCE ratio nudged to 5% in the quarter, up a little bit sequentially. I guess, kind of a two-part question. I guess, one, do you think some of those -- the capital building trends could continue moving forward? And then two, can you just maybe give us a little insight about how you kind of balance? And obviously, you have the lower-risk balance sheet which needs less capital than traditional peers, but you're growing, and presumably I imagine there will be some opportunities to grow as we come out of the pandemic here and having capital on hand to kind of take advantage of some of those opportunities. Some insights there would be great. Thank you.

James F. Getz -- Chairman & Chief Executive Officer

Thanks, Mike. I'm going to give you sort of an overview on this, and what is foremost should be kept in mind is we're building a business here. And as we all are aware that the second quarter created challenges for our clients in our industry, we're proud of the results of this quarter, considering the circumstances that we function under. The effectiveness of our business model was certainly proven in the first two quarters of the year.

But from a capital standpoint, we produced what I consider to be meaningful capital organic growth of $16 million, and that was driven really by our net income of $8.4 million and the improvement of our fair value of our investments of some $7.5 million. So, essentially, earnings were utilized to strengthen capital, and as you pointed out, we were in the marketplace and actively raised about another $95 million of additional capital.

If you look at the increase in our net interest income, it actually increased some 7% over the second quarter of 2019. And what you saw -- that's looking at it from somewhat of a longer-term perspective but it's only a year, but if you want to look at the deposit cost, they dropped [Phonetic] 41.4% compared to the first quarter of 2020. And non-interest income -- and we have to look at other aspects of our revenue growth, our non-interest income was up 8.3% over the second quarter of '19 during what all of us would consider somewhat of a volatile market in the stock, bond market and interest rates.

Our revenue -- total revenue was up 7.6% over the second quarter in '19, and we had a bank efficiency ratio of some 50.39%. So, non-interest expense increased some 1.9% from the second quarter of '19, but, and this is important because I consider this statistic to be really the core of this Company, pre-tax, pre-provision net revenue was up 18% over the second quarter of 2019. That's pretty consequential.

Chartwell rebounded quickly and is well-positioned from a performance and financial metrics standpoint for the remainder of the year. The asset quality continued through this whole period of time to be best of class. We increased our allowance by some 65% in the first half of the year. Our commitment to responsible growth continues to be strong and meet our expectations, and this commitment is clearly reflected in the results that we've gotten. If you take a longer-term perspective, over the past 10 years, which we've charged off net charge-offs of $37 million over 10 years, and over the past five years, it's $5 million.

In our $7 billion loan portfolio, today, we only have one loan, one loan that's passed due 30 days or more. The provision level has been earned by this Company. The loan portfolio has been designed to perform in the environment that we find ourselves today. We have no dividend expense, no interest rate risks, variable expenses, obviously by looking at the income statement that we produced, meaningfully lower risk profile, and a consequential focus on non-interest income.

On the net interest margin, we believe the NIM, as David was alluding to, has bottomed in the second quarter. The liquidity was put on the books by design, and we clearly mentioned in the first quarter discussion that it was a risk management tool in a time of stress and as stress has eased and it's been put to work. And what I would suggest we note the growth in the investment portfolio, the meaningful growth that has occurred over this quarter.

And a reminder on net interest margin, it really has a very limited focus. It doesn't take into account expenses, credit profile, non-interest income, duration. And the other thing that's worth pointing out is these floors that we put in place are on, as I mentioned earlier, 55% of our loan portfolio. Over $3.9 billion of this $7 billion portfolio has floors, and they were still being put in place in April and May. And they average -- looking at the full portfolio, they average 60 basis points to 90 basis points across the full portfolio. And David was recently alluding to where LIBOR has been and we've seen it. It's 16 basis points, 17 basis points, 18 basis points. We have given clear guidance in the first and second quarter that the provision will continue to grow over the next few quarters, and we fully anticipate that our provision will be in line with the CECL requirement in the first quarter of 2021.

The loan yield dropped. It was clearly offset by the decrease in the deposit costs. Excess liquidity is still on the balance sheet in the second quarter, and created approximately a 5-basis point drag on the net interest margin.

So, the reason I'm taking this time is so everyone on the call here can clearly understand how we look at it. So, we continue to invest in our clients, in our people, our technology, and infrastructure for the future. And if one would merely look at our income statement, you can see that we spent some $2.4 million in the quarter on technology, yet beat consensus by 50% from an earnings standpoint.

So the first half of the year, we look at it as it's laid a strong foundation for the remainder of the year. So, we look at this as a critical quarter that we got through very successfully due to the people working at this Company and the commitment that they made.

So, I hope I answered your question.

Operator

The next question is from Matt Olney with Stephens. Please to ahead.

Matt Olney -- Stephens Inc. -- Analyst

Thanks. Good morning and good day.

David J. Demas -- Chief Financial Officer

Hi, Matt.

Matt Olney -- Stephens Inc. -- Analyst

Hey. Good morning, David. Jim, as you noted, the operating expenses increased just 2% year-over-year. Impressive cost control especially considering a few years ago, expenses would be up 10% or 12% per year. As you look forward, what type of expense growth should we be anticipating from here?

James F. Getz -- Chairman & Chief Executive Officer

I'll allow our -- you were talking to me but why don't I allow David Demas to speak? I think I've commented a lot lately.

David J. Demas -- Chief Financial Officer

So, Matt, let me build on from a couple of things that Jim talked about a minute ago. Chartwell has done a great job this year, reexamining the costs that they incurred to run their business operations. And without impacting growth or the experience of -- the client experience, they've been able to meaningfully reduce operating expenses by 8% to 9% this year.

For the entire franchise, operating expenses are up about 5.5%, driven almost entirely by FDIC insurance premiums, which is the cost necessary to carry the excess liquidity, which will deploy as we've talked about. Importantly, the efficiency ratio continues to improve, and as Jim mentioned, is just slightly over 50% for the quarter. We continue to build scale in our businesses by providing clients with a highly differentiated experience, and we're really focused on continuing to drive operating leverage as we talked to you about in the past. We've achieved about 300 basis points of operating leverage so far this year.

I think as you look forward to the remainder of the year, our goal is to keep the efficiency ratio of the bank in that same range. It might bump around a little bit quarter-to-quarter, but we believe we've achieved the scale necessary to continue to run this business. And we don't expect other than compensation costs, which are variable in nature and tied to the performance of loan growth, swap income, and Chartwell performance, expenses should be muted.

Matt Olney -- Stephens Inc. -- Analyst

Okay. That's helpful. And I think going back to the discussion around the net interest income and the margin, you've talked about liquidity levels and why that was elevated in 2Q. I guess, I'm still unclear on the path of the loan yields. I think the floors are being put in, I appreciate that, but where do your loan yields go from here compared to 2Q levels?

David J. Demas -- Chief Financial Officer

So, I think you mentioned that about 55% of our book has floors in place right now, and those floors, Matt, depending on the loan are somewhere between 50 basis points and 75 basis points. And as you know, those floors don't expire, they just go away as rates move up. We're putting new commercial real estate loans on -- at a yield of 3.25% to 3.75%. Commercial and industrial loans are going on the book somewhere between 2.50% and 3.50% and private banking loans are going on at 2.25% to 2.95% total yields. So, that's where we're positioned as we grow the portfolio for the second half of the year.

Operator

[Operator Instructions]

James F. Getz -- Chairman & Chief Executive Officer

Operator, there are two people in line here.

Operator

Yes, sir. The first -- next question is from Daniel Tamayo with Raymond James. Please go ahead.

Daniel Tamayo -- Raymond James -- Analyst

Good morning, guys.

James F. Getz -- Chairman & Chief Executive Officer

Good morning, Daniel.

Daniel Tamayo -- Raymond James -- Analyst

So, first, the $437 million in deferrals, can you talk about where those are coming from in terms of the CRE or C&I and which subsegments, if possible?

David J. Demas -- Chief Financial Officer

Dan, they're mostly CRE. There's a mix, but they're mostly CRE. Let me give you a little bit of data in terms of what we're seeing in that behavior. About 48%, as Jim alluded to, have indicated to us that they're going to resume payment in the third quarter. An additional 17% of those loans have indicated that they're going to resume payments in the fourth quarter. So, about 63% in total of those loans have indicated that they're going to resume payments here in the third and fourth quarter. The remaining loans in that book continue within the deferral period. We underwrote those deferrals in March, and we're reviewing them regularly. We're in touch with the client. And overall, each of those borrowers continues to perform better than what we underwrote in March. But to get back to your original question, about two-thirds of those deferrals are in commercial real estate prorated across the commercial book.

Daniel Tamayo -- Raymond James -- Analyst

Okay. [Technical Issues].

David J. Demas -- Chief Financial Officer

Dan, would you mind repeating that? It's a little garbled. Dan?

James F. Getz -- Chairman & Chief Executive Officer

Operator?

Daniel Tamayo -- Raymond James -- Analyst

Hello.

James F. Getz -- Chairman & Chief Executive Officer

Dan, go ahead.

David J. Demas -- Chief Financial Officer

Sorry, we -- there was some interference.

Daniel Tamayo -- Raymond James -- Analyst

Yeah. No, I was just asking if there was a little bit more information you're able to provide in terms of within the CRE book, if that was more broad based, the deferrals or if there was any particular subsegments that you were seeing the deferrals in?

David J. Demas -- Chief Financial Officer

No, it's fairly broad based. There is not a specific industry or geographic area that is concerning to us. It's pretty broad based.

James F. Getz -- Chairman & Chief Executive Officer

Yeah. I think, Dan, in the script, we mentioned that 70% of the retail-oriented CRE did not apply for any type of relief.

David J. Demas -- Chief Financial Officer

Dan, I guess the one item that -- when Jim talked about $44 million of hotels, obviously, hotels are seeking deferrals. And so that entire $44 million exposure, those loans have -- are on deferrals, but that's about the only [Speech Overlap].

James F. Getz -- Chairman & Chief Executive Officer

Yeah. Maybe I could go over for you. If you're really trying to look at this carefully, the COVID-related end of it, where we have about a 6% exposure, which is pretty limited compared to some of the other institutions. If you look at the hotels, we have an exposure of $45 million. There's seven loans there. One of the loans is financing for a ground lease with an operating Marriott built on the land, and that has $2.3 million outstanding. It is non-recourse, but the LTV is 65%.

The other non-recourse and this is a Double Tree Hotel. It's about $10.9 million outstanding, 65% LTV, but I should point out that the sponsor here currently has on deposit with us and has had on deposit with us money of this size for quite some time. Today, he has some $81 million with us on deposit. And then the rest of the five loans, the $31.6 million are all recourse and there's five loans there.

If you look at the food service industry, we have seven loans that are spread between three companies, the largest loan being $7.5 million and the smallest one $3.7 million. On the senior housing, we have eight loans, little over $39 million of outstandings, and one loan is of an assisted living nature, $8.3 million. And the other is skilled nursing and that's -- that group of seven loans is $30.9 million outstanding.

And on the healthcare side, there's five loans, $24.1 million outstanding, and that's a pretty good outline of this whole portfolio. What I can tell you is all these are paying as agreed.

Daniel Tamayo -- Raymond James -- Analyst

All right. That's great detail. I appreciate all that. And then if I can just kind of shift over to the balance sheet growth here for a second. Can you talk about how the increased uncertainty in the current environment has impacted your lending both in the private banking segment, as well as on the commercial side?

James F. Getz -- Chairman & Chief Executive Officer

I would say on the -- let's start with the commercial side. I would indicate to you that we're -- our anticipated growth this year in that area is going to be in the high-single digits or around 10%, 11% at most. And if you look at the past 24 months, it's been in the mid-to-high-20% range. On the private banking, we feel a high level of confidence in that book of business, and we believe it will be in the 20% to 25% range. And I believe that you're going to see that portfolio being about 60% of the loan portfolio at the end of next year.

Daniel Tamayo -- Raymond James -- Analyst

Terrific. Thanks very much. That's all my questions.

Operator

The next question is from Russell Gunther with D.A. Davidson. Please go ahead.

Russell Gunther -- D.A. Davidson & Co. -- Analyst

Hey. Good morning, guys.

David J. Demas -- Chief Financial Officer

Hi, Russell.

Russell Gunther -- D.A. Davidson & Co. -- Analyst

I wanted to just quickly follow-up on the deferral conversation, please. So, of the roughly 35% of that exposure that is at the time, not expected to resume normal debt service by the end of the year, one, do you guys consider these to be higher-risk exposures given that they're in a forbearance program currently? And if they don't return by the end of the year, how is that going to migrate whether it's in the criticized/classified or TDRs? And what impact would that have on the reserve?

David J. Demas -- Chief Financial Officer

So, Russell, just to be clear, the remaining portion of those loans are within the deferral periods that we originally underwrote in March, and we're in touch with those folks. And so, they still could enter repayment by the end of the year. We just -- we haven't confirmed that with them yet or not. They haven't indicated that to us. But as we continue to evaluate each of those credits, there are none at this point that we're worried about. Jim mentioned that there aren't any delinquencies, defaults, or losses emerging in the portfolio yet. And so, we are not -- we're not concerned about the remaining 30% plus at this point. We'll continue to keep you posted and update you in the third quarter, but nothing that we see emerging or migrating at this point.

Russell Gunther -- D.A. Davidson & Co. -- Analyst

That's great, David. Thank you. And then last question would be I appreciate the update on CECL implementation at the end of the year. Are you able to give us what your estimate of the day one impact would be? And then what, if anything, could change given the macro backdrop that would result in a higher number than that $30 million to $35 million all-in?

David J. Demas -- Chief Financial Officer

So, let me give you some detail in terms of how we set up for CECL in terms of some of the underlying thoughts, as Jim shared with you, that $85 million to $105 million and the $30 million to $35 million. Obviously, the economy has been very mixed, but we do continue to see strength in our clients, who overall are navigating in this environment pretty well. We've not seen delinquencies, defaults, losses emerge as we've talked about. And as you know, CECL can be very pro-cyclical. It's very volatile in the short term. And so, the drivers of CECL, as you know, are very forward-focused in terms of the consensus, and don't really take into account the full aspects of the portfolio quality.

So, as we look forward, unemployment and GDP, potential future stimulus, the path of the virus, and other factors create some uncertainty quarter-to-quarter. So, we're looking past that. We're sort of blocking out the noise that's coming to us quarter-to-quarter, and we're really focused on how does 2021 set up at the beginning of the year. And as we look at the setup for 2021, we're thinking about unemployment somewhere between 8% to 10%, and we're thinking about GDP growth somewhere between 3% to 5%. And those are the assumptions that underlie our $30 million to $35 million total reserves. And so, that -- if those metrics change, that obviously could change our outlook.

As you compare us to other banks, I would remind you that our credit portfolio is different. We don't have the consumer credit that other banks have, the credit cards, the installment loans, the auto loans, the home equity loans. And so, you have to adjust for that as you compare our metrics and the numbers we're sharing from CECL perspective, where other banks are at this point. That's our view sort of CECL and where we're headed into 2021.

Russell Gunther -- D.A. Davidson & Co. -- Analyst

Thanks for sharing that guys. I appreciate it. That's it for me.

James F. Getz -- Chairman & Chief Executive Officer

Thanks.

Operator

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

James F. Getz -- Chairman & Chief Executive Officer

Thank you, operator. We continue to thank you for your continued interest and commitment to TriState Capital, and look forward to talking to you next quarter. Thank you very much.

Operator

[Operator Closing Remarks]

Duration: 49 minutes

Call participants:

James F. Getz -- Chairman & Chief Executive Officer

David J. Demas -- Chief Financial Officer

Michael Perito -- Keefe Bruyette & Woods Inc. -- Analyst

Matt Olney -- Stephens Inc. -- Analyst

Daniel Tamayo -- Raymond James -- Analyst

Russell Gunther -- D.A. Davidson & Co. -- Analyst

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