Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from John Hecht - JMP Securities.
John Hecht - JMP Securities
You guys provided great detail in terms of your stress test, that the legacy assets and the legacy organization. If I remember it, you also conducted a similar stress test at the bank level. I’m wondering if that’s accurate. Can you maybe discuss that in a little bit more detail some of the assumptions you made there and some of the results as well?
John Delaney
No, John. We’ve done a variety of internal work, but we haven’t done a specific stress test for the banks that we’ve disclosed publicly, unless Don or Tad, I’m missing something. I don’t believe we have. I want to make sure I don’t misspeak.
We have run the same kind of stress tests, you have in front of you or you may have in front of you, which is what we’ve laid out in our presentation today. We have done similar work like that for the bank, and it indicates the bank has adequate capital. We haven’t done any test that we’ve disclosed. Again, Don, unless I’m missing something.
Don Cole
John, I don’t recall anything.
John Delaney
I don’t think we’ve put anything out on the bank.
Tad Lowrey
Now, everything you said is accurate.
John Delaney
I just wanted to make sure that there was something that I might have forgotten that we spoke about.
John Hecht - JMP Securities
I’m wondering if maybe you can discuss the expected credit trends at the bank level. At least, it looks like you’re keeping reserves to nonperforming assets, around 100%, so good coverage there. Do you expect to keep that reserve coverage ratio? Do you expect to see continued deterioration in credit at the bank like you would at the holding company? Given that these are newer and higher quality assets we’d expect to see a different kind of linearity there?
John Delaney
Well, the bank’s portfolio, there’s a couple of ways to think about the bank’s portfolio. The entire asset base of the bank, if you will is about a third legacy loans, right and that’s where we will experience stress. About a third of the bank’s loans are non-legacy loans, in other words, loans that have been made since the middle of ?08.
The bank in general is under lent. So, what’s positive for the bank obviously, is its percentage of legacy loans relative to its balance sheet is small, but the legacy loans, we do expect come under pressure and they have. There was a positive selection process that was associated with moving the loans into the bank.
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