Q3 2019 Earnings Call
Greetings, ladies and gentlemen.
Gee Corporation October 17th first quarter 2019 quarterly earnings conference.
All participants are in listen only mode.
Great question answer session will follow the formal presentation. If you wish to Q4 question the signal by pressing star the board.
As a reminder, this event is being recorded.
It is now my pleasure to introduce your host Mr. Rich, Josh director of Investor Relations for B B G Corporation. Please go ahead.
Thank you Johnny Good morning, everyone. Thanks to all of our listeners for joining us today.
Today's call, we have Kelly King, our chairman and Chief Executive Officer, Chris Henson, Our President and Chief operating Officer, and Daryl Bible, Our Chief Financial Officer, who will review the results for the third quarter and provide some thoughts for the fourth quarter of 29 scene.
We also have Clarke starnes, our chief risk officer participating in the queue at a session.
We will be referencing a slide presentation during the call a copy of the presentation as well as our earnings release and supplemental financial information are available on the baby achieve web site.
Before we begin let me remind your baby and she does not provide public earnings predictions are forecast. However, there may be statements made during the course of this presentation.
Express management's intentions beliefs or expectations.
BB and she's actual results may differ materially from those contemplated by these forward looking statements.
In addition in connection with the proposed merger with Suntrust Baby and she has filed but the FCC a registration statement on form S. Four to register the shares a baby a cheap capital stock to be issued in connection with the merger, which can change the joint proxy statement prospectus that has been sent to the shareholders a baby at Ti and such.
Trust.
Please refer to the cautionary statements on page two regarding forward looking information in our presentation.
<unk> SEC filings and the way that on page three that relate to additional information and participant in the solicitation.
Please also note that our presentation includes certain non-GAAP disclosures. Please refer to page two in the appendix of our presentation for the appropriate reconciliations to GAAP.
And now I'll turn it over to Kelly.
Thank you rich good morning, everybody and thanks for joining our call. A this is really a very strong quarter for baby until you, especially when you look at the amount of work in Africa, and it's going in to prepare and your for MRV with Suntrust, which is going very well and I'll talk about that.
It was our core or that was driven started on non interest income.
Loan growth is very strong actually 4.3 billion dollar mortgage sale, which we'll talk about little bit later, I, we're making excellent progress on my favorite Suntrust and I'll talk more about that.
Just looking at some of the numbers our adjusted net income was $832 million up 3.7, or so of course, it's common core diluted a b S. On an adjusted basis was about seven 3.9% purposes common core and very respectable returns on adjusted basis orally or see our chief.
<unk>, respectively are wanting to have 11.36 and 18.7.
[noise] [noise] good about type of course, <unk> revenue was up three by your models up 3.5% versus third quarter I fee income was very good 1.3 billion of six to 4 million or 5.2%, which is good but other than that our earlier data.
It was driven by mortgage banking was up 42% stress is really outperforming up organically, 8.7% versus third quarter, but I think Chris is going to give you more calling back down a bit and also our investment banking on board brokerage were up 12% on a like order basis.
<unk> loans held for investments were actually down.
<unk> and 8%, but again if you exclude this 4.3 billion dollar mortgage sale were up 6.5%, which was over a data.
I don't think give you more detail with your question, but a 4.3 billion mortgage starwood simply purchase loans that we have purchased.
The premium they were paying off at an accelerated rate it makes sense for us to effectively.
Redeemed ours will pay a sound bars and improved our rate dropped positioning born.
Yes.
Our reported Nam decreased five basis points to 3.37 coordinate I'm decreased also five basis points, but if you said the loan sale reported and core NIM. All a decreased two basis points I think yeah barrels were getting a lot of color with regard to that.
Our adjusted efficiency ratio was 57.1 down slightly from 57.3 on a common quarter.
Expenses reflect higher incentives and commissions first since third quarter 18, due to their improved performance in insurance mortgage banking and investment banking and brokerage credit quality was just really strong.
I'll answer questions about that but across the board credit quality continues to be very very strong.
We did have some strategic.
Activity during the quarter, we redeemed 1.7 bearing a preferred stock and replaced it with a like amount at a lower cost or just a really good economic trends transaction. We did sell to 4.3, Barry and I just talked about we did increase our dividend 11.1% of July meeting, which is a very very healthy three plus percent dividend.
And yield we also did receive shareholder approval, which I know that unanimous even to add Suntrust.
On the merger out on the name a and we've talked about a 'em. We have named 75% of our troops later, it's I'm going to give you a little more detail and just a minute about the overall ret positive progress that we've made with regard to date to the upcoming merger.
If you follow along on page five on the selected items.
Just call. These out as I said, we had first start redemption, where we were covering the expense of the capitalized sure interest cost that was 46 million pre an after tax six cents a share a negative hit incremental operating expenses relating to the merger was 40 million after tax that was five cents negative hit.
Merger related and restructuring charges of 26 million after because three SAS now the positive side, we did have all our gain on the impact on the mortgage sale that was a positive two pennies. So many net that out we had a negative impact on the EPA <expletive> off 12 centers for the though of course.
So if you want to take a look at a the next slide slide six on loan growth I feel really good about loan growth. If you if you look at.
The underlying performance again ex mortgage sale.
We have 6.5% analyzers very strong enough any relative to what's going on or marketplace, what's happening with lot of our competitors very pleased to see alive.
I was up 7.6% third quarter, two rest second quarter annualized.
We did have a very low performance in CRT very much about design because we talk to you last couple of quarters, we've been dialing back.
We see some sluggishness in some of the CRT categories, and so we're being careful about that but if you look on the table I won't go through all over and good luck on the table on page six you'll see that they see an outperformance is really broad based across.
Eight or 10 different categories. So it's not just a one off type of loan.
Allegory for much that's really really broad base and thats very very good.
Mortgage loan by the way did do very well they were up 7.4% versus second quarter. Once you is slow to sell.
So just talking again about what's going on in the marketplace.
As all of you I'm sure no it's difficult to figure out what's going on with all of the conversation.
Much of a rather I agree.
Or what I try to do just talk to our people talked to clients and see what's going on.
In fact is today as I just indicated our class the steel borrowing.
They still feel a basically confident about production on our pipelines are very strong.
But I would tell you that is more conversation going on today about concerns about the trade wars is beginning to create and level of uncertainty.
And even though the comedy is still strong today overtime that will began to enter why.
In terms of negative impact on the economy, we saw some negative rig counts I was just today is that a one off we just don't know.
I personally think as a challenging for all of us to be calm right now not try to draw to draw a huge conclusions are the individual well advertised at pop up everyday are sometimes multiple times during the day.
Better in my view tobacco and take a long view and the truth is a long view us economy today, it's very strong.
We do have these clouds around there around the globe in terms of Brexit all letter was.
Potential positive good news out of that this morning, I personally think we'll have a reasonable I tried to air which roundabout ended the year I personally think we'll have the new NAFTA approved.
And we will head into 2020, which substantially better.
Since the failing or confidence and we have today, but I could be wrong and that's why we're being very cautious in terms of everything we do in terms of capital liquidity into reputation.
Because we simply RM environment, where to place a high bet on any one scenario up or down is not a smart.
So we're being cautious with basically guiding to neutral.
Slide psychological Tim towards the upside.
Which we think will service well if you look at ONTAP page seven on deposits a I was very pleased with deposits. Obviously this has gotten into big story today.
How do we all react to the substantial decline in the long yen.
The or potentially inverted yield curve back and forth kind of everyday it's very challenging for everybody.
We're doing very well our total deposits saw started to second are up 5.2%.
But we are managing.
The categories for example on non interest bearing deposits are down 1.4, that's kind of the normal.
Disintermediation is going on out across the industry today, we weren't going forward is really pretty low.
In that environment, our money market savings are up 9.6. So that's the conversion so we're seeing some movement and the categories.
But when you get through that 5.2%.
Eric are strong we.
We see a little movement in our mix.
Noninterest bearing deposits are holding strong.
Client deposits.
Relative to national market funding actually increased 3.6% annualize versus two second quarter of my team.
Our cost of interest bearing deposits as 0.99 down three basis points versus second quarter and cost apparent deposits was points experiment down one basis, sorry, so really good.
Management of that Daryl and Donna all of our people and treasury several very very good about that ever be problematic as we go forward, we have some substantial a spike down or.
We're not actually expecting that we're planning to be relatively neutral going forward, but with a psychological little debt.
With that let me pass revenue.
Thank you Kelly and good morning, everyone today, I'm going to talk about our excellent asset quality margin dynamics solid fee income expenses and provide guidance for the fourth quarter turning to slide eight.
Asset quality remains excellent net charge offs were 153 million up three basis points as a percentage of average loans. This is largely due to indirect loans seasonality and the resolution of a commercial credit.
Our nonperforming asset ratio was 22 basis points.
And is better than the previous slow seen in 2006, continuing on slide nine.
Our allowance coverage ratios remain strong.
Allowance ratio was primarily impacted by the sale of 4.3 billion of residential mortgage loans.
And the resolution of a commercial credit, which lowered the reserve for unfunded commitments, including these onetime items the allowance to loan ratio remained at 1.05% provision was 117 million below net charge offs of 153 million.
Turning to side Ken.
Reported net interest margin decreased two basis points after adjusting for the sale of residential mortgage loans and related reinvestments.
Might recall that the timing differences between the settlement as a mortgage sale and the securities reinvestment temporarily increased earning assets by about $2 billion and impacted the margin by three basis points. Excluding these items core margin.
I was also decreased two basis points.
Net interest margin was impacted by lower rates, which reduced annualized yields by seven basis points on the loan portfolio two basis points on the securities portfolio. The cost of interest bearing deposits decreased three basis points, which partially offset the drop in asset yields.
We've reinvested $5 billion securities late in the third quarter to build liquidity for the merger.
And that reduced our asset sensitivity has also creates negative pressure on our standalone margins in the fourth quarter. In addition, we are evaluating opportunities to restructure our balance sheet as we wait for the merger close.
Continuing on slide 11.
Non interest income was 1.3 billion up 5.2% versus like quarter, our fee income ratio was 43.4% down seasonally from 44.4%.
Insurance income was down 79 million due to seasonality, but increased 8.7% from a year ago on firming market pricing and organic growth.
Mortgage banking income was stable as higher production and servicing related revenues of $24 million were offset by decline of 25 million in net MSR valuation.
Investment banking and brokerage commissions were relatively flat, but up 12% versus last year.
So is primarily due to higher managed fee accounts.
Service charges on deposits increased 7 million, partly reflecting more days in the quarter.
Other income increased 35 billion, primarily due to $23 million increase in income related to assets.
For certain post employment benefits and 17 billion for clients derivatives, turning to slide 12.
Non interest expense was 1.8 billion, an increase of 89 million.
Increase was largely driven by merck's ammo expenses, which are up a combined 54 million.
Merck's totaled 34 million, which included relocation expenses legal fees project management cost and professional services.
We expenses were 52 million, which included 39 million for personnel and trials for professional services.
You can see the details on page 16, and our quarterly performance summary.
Core expenses were up 35 million, including $9 million increase for professional services 6 million increase and personnel expense, which includes 23 million increase for certain post employment benefit expense that was offset by decrease incentives and equity based comp.
And a 19 million increase in other expense due to higher advertising and marketing costs and other items.
<unk> expenses increased 1.7% of $30 million from last year, excluding merck's ammo expenses.
Year over year increase and adjusted non interest expense was primarily driven by 18 million increase some personnel expense due to higher incentives.
34 million increase and expense, reflecting higher non service related pension expense higher operating charge offs higher advertising and marketing costs, which was partially offset by a $17 million decrease in regulatory charges.
Ftds for essentially flat versus second quarter of down approximately 1500 from year ago.
Turning to slide 13.
Capital and liquidity remains strong.
Ratio was 10.6% up 20 basis points due to strong earnings and the mortgage loan sale, a dividend payout and total payout ratios were 46.9%.
We issued 1.7 billion of preferred stock and redeem a similar amount.
Higher cost issuances, which will say 4 million per quarter and have an earn back of 2.8 years.
Our modified average LCR ratio was 139% to.
To build liquidity for the merger, we pre invest at high quality liquid assets at the end of the third quarter to facilitate compliance.
Our ratio for true.
In addition, we issued debt to Barry to build parent company cash, let's now exceeds $10 billion.
These actions will provide negative pressure to be bmcs net interest margin, but it's prudent for truest starting out with very strong liquidity.
Let's turn to decide 14 to review segments.
Community Bank retail and consumer finance net income increased slightly.
To 446 million fee income decreased 15 million, primarily due to decline and the net MSR valuation, partially offset by increased production revenue.
Average loans and leases decreased two and a half billion, reflecting the mortgage loan sale.
Loan yields increased 12 basis points of interest bearing deposit costs were down four basis points.
Non interest bearing deposits were about flat.
And residential mortgage originations were up 11% from second quarter production mix was 68% purchase at 32% re Fi and excluding the mortgage loan sale gain on sale margins declined 28 basis points due to a mix change to higher correspondent production.
Continuing on slide 15.
Community Bank commercial net income was $19 million increased $19 million to 338 million loan production increased 22% as higher Cnine CRT production offset lower dealer floor plan production.
Loan yields were down 17 basis points versus interest bearing cost down only one basis point noninterest bearing deposits were essentially flat.
Turning to slide 16.
Financial services and commercial finance net income was 185 million an increase of 16 million total revenue increased 26 million, primarily due to higher grandbridge income capital markets in client derivative revenue.
Average loan balances grew 7.6% annualized helped by equipment finance and corporate banking.
Loan yields were down 15 basis points and interest bearing deposit costs were down 13 basis points.
Noninterest bearing deposits for flat from last quarter. Additionally, invested assets increased 2.7 billion versus linked quarter and $5.3 billion versus last year.
Turning to slide 17 insurance holdings that income decreased 50 million to 61 million, primarily due to seasonality now I'll turn it over to Chris to provide more perspective.
Performance this quarter.
Thanks, There also.
Turn to page 18.
Our policies to slides really to reinforce our transformation plan that we call.
The insurance Holdings operating plan continues to gain momentum. This is appointed John Howard shared with you last fall at Investor Day is really built with assistance from BCG, a little more than a year ago about 15 months or so and build around 32 initiatives that we're working to execute over the next three years.
As I said, we're about a year end.
Clues implementation, new operating models, both in retail and wholesale and a myriad of other revenue grows and expense synergy.
Initiatives and if you look at the upper left in chart. There on page 18, you can see revenue for the segment is up 9.3% or 44 million light quarter.
As a pointed out a number of times in the past really three drivers to strong organic growth first is good client retention in retail were up about 91% wholesale about 76%.
New business volume.
Not renewals totally new business line was up 17% like core that's the best number that I ever remember seeing it was more impressive is built each quarter throughout the year.
And then third driver really as pricing and on the heels of the two largest sure bill last years in 17 and 18.
Continuing to see price lift because the tightening capacity in the market. So for example, second quarter was up about three and half percent this quarter of about 4%. So retention new business and pricing is really driving the result, you see in the lower left hand corner of organic growth so organic growth.
As a 200 basis points to 8.7% in the quarter, which is about double what we would expect to see in the industry. We expect probably mid fours and industry. We believe the the backdrop.
Allows for additional tightening of capacity and continued lift in pricing as we go through 19.
Be flip over a page 19.
I would I would say that.
Hi offers really designed to help us drive be laser focused on enhancing the margin in the news.
The dollars of EBITDA production to reinvest in the business. So we have I'd just point out in almost every business new technology implementations, So hill, both revenue and cost.
Future.
Looking at the chart upper left their EBITDA, you can see absolute EBITDA was up $24 million last quarter of 27.6%.
And the strong organic growth that I've shared with you on the prior page combined was good solid cost control.
Has ended the third leg was really.
Remember we acquired regions in July of last year were now 15 months into that and we have exceeded all of our expense in revenue synergies and the combination of those three things have really helped US drive the result in the lower lifts chart.
On page 19 was as EBITDA margin you can see margin line quarters of 310 basis points to 21.4%.
No. This is the lowest quarter of the year for us. So if you look at what our year to date margin would be it would be in the 25% range. So a lot of improvements been made.
In margin enhancement.
And lastly, just leave you with a lot of focus on use of data and analytics.
It really help our underwriters better understand the true risk into client, which.
Helps them long term keep their their.
The rates down and oppose that especially in wholesale. So in summary, just continue to be very pleased with the progress that we have made.
In insurance started about to Darryl. Thank you Chris continuing on Slide 20, you will see our outlook.
The following guidance is based on being T. Standalone. However, we continue to spec the merger of equals a centrus will close in the fourth quarter.
We expect total loans held for investment to be flat versus third quarter, mainly due to seasonality. Excluding this loans would be up 1% to 3% versus linked quarter.
We expect net charge offs to be in a range of 35 to 45 basis points and the provision is expected to match net charge offs plus loan growth.
We also expect GAAP and core net interest margin to be down 79 basis points. As we discussed earlier, we are building liquidity for the merger for LCR, that's what asset buffer and parent company cash.
Negatively impact net interest margin by approximately three to five basis points in the fourth quarter.
Adjusted for the liquidity, though we expect net interest margin to decrease three to five basis points.
We anticipate fee income.
2% to 4% versus five quarter, driven by insurance and mortgage banking, we expect expenses, excluding merger related expenses to be flat versus like quarter. We expect onetime expenses for the m. only to be about $60 million to $80 million in the fourth quarter, mainly driven by personnel professional costs.
And we anticipate an effective tax rate of 20% to 21%.
Finally, BV and Tees full year guidance remains intact and.
In a challenging rate environment, we will continue to grow our revenues faster than expenses driving positive operating leverage will be more pronounced.
Which we more pronounced once we close the Emily.
In summary, the quality of our core earnings this quarter was excellent resulting in strong loan growth solid fee income versus last year and excellent asset quality now let me turn it back to Kelly updates on the merger of equals enclosing QNX. Thanks, Daryl. So as you can say it was it really wells are great quarter.
Not particularly highlighted the there weren't spend on.
And the loan area on the expense area and insurance era.
Very good so let me give you a few comments with regard to the merger update.
Is going extremely well.
Our executive management team.
Which is a 14.17 side continues to meet weekly.
The team is working extremely well together.
Not be more pleased fewer flown the wall Watson has made you're going to fall, we've been working together for years and years and years.
Bill and I are working together extremely well.
The whole team is working together well and I must tell you I really appreciate the focus of the team them in the focus is working together and we're focused on the go on making through its number one best financial institution that we possibly cost or Ken. Thank you great progress in terms of.
Name in the key leadership.
Through recently, we've named 8000 physicians with rebel seven to five centers leadership roles.
We believe about legal day, one of players versus all positions will be named.
And everybody will be ready to guard, we've been very successful in meeting our diversity gold, which is one of our primary focuses.
And we've done a really good job picking.
Benefits programs going forward for truest.
One of the great things about anymore is you really get a chance to look at both companies and pick the best studied side and that's what we've done with regard to benefits. So we're going to have a world standard benefit program and remember for two or if our class premiers and shareholders. It really must work for our teammates on associates.
We feel really really good about.
That so.
We've had some some marks in terms of activity.
In July Thirtyth, Suntrust and BBGI shareholders, both almost unanimously approved the deal and the name.
Eroded a regulatory process has been approved by the North Carolina Commissioner banks, which is very important. The next step is approval of our divestiture plan by the department of Justice.
And then we believe that the remaining regulatory approval approvals will will follow.
We feel good about where things stand with the regulators they are being deliberate.
Even decide the significant solve this deal as they should be and as we are I.
I mean, so everybody has the same goal of making sure that when we move forward with this.
That we've done it all the time and properties.
So given all of that.
We believe that we are still on track for any closing into fourth quarter, we can't guarantee that.
We believe we are based on all of information that we have at this time.
We made really good progress in the last several months with regard to.
Merging the technology of the two companies. So during September we finalized the vast majority of the technology ecosystems and remember what we try to do the areas. We pick the best of breed. So with Suntrust has the best tell our program. We picked our program we have to Miss loan system, we picked up that system. So the end result is you get really really.
The first class systems across the board.
Which is fantastic.
We did recently completed a dress rehearsal for legal day. One flows are about 100 merger related work streams that had to be tested.
And they all past very very wells.
I have read for legal day, one close.
Further our importantly.
We have had to all sites and several daily meetings.
Working on developing the true its culture. This has not been a process off throwing out maybe into thrown out Suntrust isn't a process and taken divestiture of each one.
And I've been extremely excited.
About how this has worked the culture as we define it.
Is our purpose mission that our values.
And then to various activity approaches kind of the way we do things around here, we've already agreed to our purpose I mentioned on our values and I'll tell you the bill on our very passionate about this process. We believe is most important part of the entire journey.
And we could not feel better.
The teams.
Had a complete meeting of minds, good discussion, but no no aggravated interaction note.
No real divergent views just really fine tuning.
Wording in terms of how we present this to the world.
So frankly, it is gone extraordinarily well, we could not feel better.
Teams are 100% aligned.
I will tell you as we roll. This out later that our purpose mission and values are engaging and very very excited so as we go forward.
Once we have legal dajuan there'll be a number of things that will happen kind of the first changes we have to affirm for the board all the various committees and policies and practices all of which are being worked on Nab. Various groups. So we are ready to go day, one to present all of that to the New company Board.
As for to be able to improve all of that.
We will share shortly after that our purpose mission and values with all teammates or we think thats our number one job.
Is to get out we plan kind of a road show if you will to get out and talk to our teams across entire enterprise about our culture.
We are working through our marketing area.
On our branding plan closing in on that making really good.
Progress. So that's very very exciting and is that rolls out it will be a more excitement we remain important made very confident and achieving our $1.6 million a net call sage.
And I was centered went out to you that we have not included in any of the numbers any revenue opportunities, but we do and lot of work on that Bill and Chris are leading that effort with regard to focusing on revenue opportunities and they're up almost 20 different works frames right now.
In terms of pretty low fruit.
And so we wanted to be conservative in our projection, but I'll just tell you there are huge opportunities when you combined these two companies.
Theres virtually no overlap does this opportunity to site was on tranches and bring it over to begin to pay will begin to take it over to Suntrust.
And and we know how to do that so we're very very excited about that I'll tell you that when we announced this deal back in February I was very very excited.
Today, I'm, even more excited I'm more confident than before and here's why such a deal is based on a same this synergies are as good as they've already economic opportunities. Good transformative nature of this in terms of making rural better is.
Is as good but now not much into the process I feel even better because our executive team has deep strongest committed.
Teammates are excited they see that world is names I see opportunities the same.
We truly believe that we can have our class have a brighter financial future being created a place where our teammates will enjoy and have a long and fulfilling career. We believe our communities need help to date, a world is changing and really fast.
We havent are having a dramatic increase in the gap in terms of economic.
Any quality and we don't feel good about that and we want to do our park.
And I can tell you that legal day, one truest, we'll be ready to be a leader in finding solutions to making life.
And of course, we will through all of these efforts optimize the long term return to our shareholders, which we feel very very confident about solving a thank bill under Suntrust team and all of my fellow BBD associates and thanks to all the hard work that has gone into it very soon we will be one team and I will tell you all we already got back to you.
Thank you Kelly John at this time, if you would come back on the line and explain how our listeners can participate in the Q and a session.
Thank you, Sir ladies and gentlemen, you would like to ask the question the signal by pressing star one on your telephone keypad.
Or using the speakerphone. Please make sure your mute function is turned off to another signal to reach our equipment.
Again press Star one last question, we'll pause for just a moment hello, everyone and opportunities singles.
Joe.
We will know take out first question from.
John Mcdonald of Autonomous Research. Please go ahead, Sir your line is open.
Hi, Good morning, I wanted to ask Daryl just a question on the fourth quarter outlook on when we kind of combine the outlook for loans to be relatively flat and NIM to be down.
We had in then I guess average securities are probably up given the liquidity build how does the dollars and when I look how should we think about that for the fourth quarter.
No I would say John that if you look at linked quarter.
Probably be data attach.
Because of that drop that we have in margin.
Flat earnings assets for the most part linked quarter.
Lot of that is just due to seasonality and the loan side like I said in the prepared remarks.
And then that the margin decline.
Core margins really down three to five basis points. The rest of it is just due to building up excess liquidity for the combination with.
Suntrust. So that we can have strong liquidity.
LCR ratios and just strong overall cash on hand out we're going around our company.
Got it Thats, great and then just a bigger picture question in terms of the truest demo.
With the environment changed since February and you've also had a chance to fine tune your assumptions for the third Party review you have any updates on kind of the financial targets that you set out for the 51% cash efficiency in ROTC of 22, obviously is a loss changes further out but any updates on that.
John This Kelly.
With the market is substantially different than it was backend back in February .
The most difficult thing to zero around data is efficiency ratio goes the denominators.
Under a lot of pressure.
We believe with regard to officially Russia, or whether we hit 51 or not we believe we'll be talking class in terms of.
Efficiency ratio.
Sorry, I feel more confident into 202%.
Return on tangible common equity regardless of whether remember exactly what we said nine months ago roll to roll of change, we try and barrel video will be a top performing Daryl and comment on it I would say John as we still have 100% clarity between both companies. So we have high level estimates I, let's say we at once.
We closed this quarter, if you give us a little bit of time, a month or so we'll come out with more clear guidance on a go forward basis on the timing of our cost base and how we're going to get the cost say. So we know you guys need that information we will provide for you, but we've got to get the deal closing the gap to make sure we understand for all the savings.
Others are coming from first.
Totally understand thanks, very much guys.
Yes.
Excellent.
With that move onto our next question from John Kerry of Evercore. Please go ahead. Your line is okay.
John .
Sorry about that yes, so just back to the deal closed discussion I know Kelly you mentioned that you're confident in the fourth quarter close the deal but you also indicated you can't guarantee it is there any anything that lead you to believed that it could be after for Q any change in your thinking as you're going through the process, where you thinking it.
Could be into next year.
Well as I said, John where we're focusing on the fourth quarter.
Obviously are where we are aware that possibly to slip to the first quarter. We're getting some part of that most of our focus is on the fourth quarter. We are not aware of any reason to.
Expected to go into the first quarter.
I always say that.
So today this is beyond our control this is into regulatory framework.
And.
They move at their own pace.
And so all we can do is give you and our best information based on what we know.
And based on what I know I still expect to fourth quarter flows.
Okay. All right guys. Thank you and then separately Daryl I know you mentioned that.
In your remarks that you're evaluating additional opportunities to further restructure the balance sheet I know you've already pre funded the merger as.
As well as sold some of the residential mortgage.
Folio, but just want to get it you can elaborate possibly on what incremental actions you could evaluate for the balance sheet. Thanks.
Yes, so John I mean, both companies are looking at their balance sheets very thoroughly right now Kelly said earlier on other things they want to do when we combine as we want to make sure that our interest rate sensitivity is relatively neutral to slightly biased a little bit so but try to get it to be more neutral. So we don't have a huge impact to end.
Hi, I'm as rates continue to change. They also as I said earlier, what have strong liquidity from a credit perspective, yes, there are certain.
Portfolios are loans that.
Can be so that Clark and Ellen co were Wanna get off their balance sheet, we will take advantage can do that as well.
Lastly, we will look at assets that so much.
Decision on the business, but if there's assets on the books that might be marginally not the best performance from a capital return perspective, we might see us shed some of those as well so all that's coming together.
We will have more color on that later in the quarter as we close.
Okay, great. Thanks Darryl.
Okay.
Through that move onto our next question from Mike Mayo of Wells Fargo Securities. Please go ahead your line is.
Hi, it's another question on the merger.
So you say of 75% the leadership roles name when do you get to 100%.
Yes, most of the tech ecosystems.
Identified what do you have left there and most importantly, I know you've been asked twice already but can you put more meat on the bones on the technology related savings I mean that was number one reason for emerging Internet you can make more tech investments and get more at attack.
So would it be learned over these last nine months. Thanks.
Yes, I would you Roger the staffing.
I fully expect virtually 100% of all the staffing to be.
Great to revolve around the first them I remember, we're very close but it's.
There won't be admitted that we'll be paying out there Bob first in November .
In terms of ecosystems, we've covered all their mindset or was it was $100 are we going through that are late.
And so we feel really really good that's the first step by the way into whole conversion process, you seemed math to decide which ecosystems.
And in all areas.
Systems within those acres systems.
So all of that is going long really really well we're completely on track.
Regarding that.
In terms of technology savings you know it has.
Multiple facets.
First thing is you have redundant or hardware, which of course goes away.
You have all you have redundant.
Programmers start.
With regard to because you're operating two different hardware systems in theater for software systems.
When you pick one system over another system that necessarily.
Frees up expenses with regard to with regard to that and then of course you are you thinking in terms of reinvesting for the technology of the future and you're right.
When we announced that still we said this was really about putting together to companies that are closer to become more.
Economically sound.
It really leaning into the future by investing in technology that will allow us to be a leader with regard to mitigate our clients' needs.
That's a that's a process, it's not like as easy as to be honest as hook into computers existing systems.
Because we're having to look at what's available today out there that we don't Io and to be honest is not a lot out there today that we don't we're in good shape.
Our digital platform.
Constantly rated as number one two or three and entire system, including all the big banks. Despite what some people say that we are extremely well positioned with regard to that but a world change it really fast.
So we have to invest a lot to be sure we stay at the top.
And then we already beginning to do work in terms of thinking about what's the next step was to new frontier.
What is a mixed investment that we can make.
That will.
Substantially improved the lives of our of our clients and so that's what this whole innovation.
Center is all about is creating a group of teams as well how 20 to 40 agile.
Teams that are be focusing on improving existing products and services and approaches but to creating new products and services.
In small business in retail.
Across the board we are canvassing the world in terms of what's out there, where we don't believe in recruiting or will it to something out there around the world that we can bring dart lives, we want to do that but we also recognize it as well as changes of fast.
There is opportunity for us to create any oil and so innovation is a part of this whole process. So.
The mechanics of all that is very complicated.
But it's really a bifurcated process of.
Hook into existing computers up as I say, which I think we're gonna chuckled when I say.
It really is that symbol is hook into computers up next year, we operate efficiently from day one.
And then making sure we're layering on top of that improvements that will make our class lives better.
And then just one follow up say November Onest do you have all the leadership identify that that would be good.
But culturally gave a presentation recently talking about the cultural similarity when you gave some data and I didn't really understand.
That data I mean seem kind of pie in the Sky to me and you look you're close to the situation you're dealing with the employees you are saying hey culture. They were similar.
Many people on the outside of quality for a decade or to say you know what you guys really aren't sandler BB empty and Suntrust I guess where's the disconnect and the perception about the difference in cultures, and what you're finding out and when there are differences how are those resolved.
Well I'm not sure, which made and you were talking about but.
I don't think is the Barclays Conference.
Mark I don't must flavin PON describe as this put that out there I thought of a straightforward non us, but everything I say that we always right I tell you truth.
And.
So what I was referring to is that we've had a number of statistically valid feedback sessions from.
20, plus thousand of Suntrust and begin to your clients.
That have.
As a such as our associates.
That have validated what I, what I said.
So for example, early on when we were doing the.
Name research.
We had 20000 plus responses to go out 10000 made side.
And we gave them a list of 16 words to describe the companies and all all groups on both sides pick the exact same for words, which is pretty incredible.
And then we did on more sophisticated study in terms of kind of how we do business around here time of the behavioral aspects of our culture.
And we were shown by the research Paypal.
Statistically.
Driven graphs that showed up.
Maybe anti.
Associates responses and Suntrust decisive sponsors and they it was a virtual will complete overlap, meaning you guys are the masses of our.
Our employees.
You asked them you know how do you feel about this without any other they give you designs are saying response and I get that undergo immigrant I'm traveling around into failed and talking to our people and when I ran into Suntrust.
Honestly how's it going this is going great. We work together, we are we have lots of other buttons on competitively better front I know he showed their old friends.
And and they talk about each other just very positively affirmatively I'm sorry.
When you put all that together.
I am I'm quite certain.
Our.
Material deficit is there's always understand there's a big companies you could I'm sure you find something different about their companies.
But where there are.
No I thought I'd call monitor Fusses, they will just fade as we come together as truest.
And operate on to our new purpose mission and values.
So they will just fade away.
If we were to encounter in a material.
Which we've not we would deal with a straight up and executive team.
And we were the rich a consensus and move forward.
We've covered a lot of issues at this point has been nine months, we have covered a lot of waterfront and the teams are working great I've said and.
We've not discovered material issues that I could say you was it was a real cultural crack.
Bill Rogers and I have this working you know arrangement together, where we talk about no like between us and so we've committed to each other.
Very deeply that it's either one of the sees any light we get reform immediately talk about.
And we haven't found in July .
I'm, not saying, we won't but I don't think we will have a we have the mechanism and commitment and the trust.
Between Bill and I and all the way through the teams that if we do have issues, we deal with them promptly quickly and decisively.
Alright, thank you.
We will now move onto my next question from Betsy Graseck Morgan Stanley . Please go ahead, Sir your line is now open.
Hey, good morning.
Good morning.
Couple of questions.
First just a clarification Darryl on kind of the LCR and the commentary you gave around each play and retooling the balance sheet a little bit for.
This merger.
On page 10, when we look at the.
Change in.
And now I scenarios and you've got this negative sensitivity, both down a 100 and down and up 200.
I just want to get.
How you're thinking about what that looks like post merger because.
I don't think you would set yourself up like this.
On a standalone basis, so just want to understand where this is going in and whether or not you had to.
Get ready for LCR, even after the tailoring real Didnt go through in other words are you hearing a little bit too much Chile at this stage post tailoring rule or not just if you could speak to that little bit.
So we're still working on our numbers at the 85% number both companies operate at 70, So we will have to have.
One form or another higher.
Hi quality assets on our balance sheet will take some form so we started to build that at the end of this past quarter. So that's it from a interest rate sensitivity nobody asked purchasing those securities. We also did unwound some pay fixed swaps, but on summer see a fixed swaps.
Did create us so that it and we improved our sensitivity on the downside, but hard on the upside.
Ideally what when we close or shortly thereafter, we would want at Debbie I'm somewhat symmetrical and that we would still probably lose a little bit on the downside, but benefit on the upside as we wont work on that.
Data and her team are working together and they are coming up with strategies post legal day, one such that we will try to get into that position.
You're right there were kind of caught in the middle of what we're trying to do right. Now is what you saw at the end of this quarter, but we will work towards that and we'll see how that all comes together by a feel confident we'll get into position, where we need to be.
As close.
And that's in part because that's tied a little more asset sensitive then you I'm guessing says it's part of that answer that's true that is true that will help some exactly and I think there will be some other adjustments, we like bank as well.
And then just separately Darryl could you speak until we can you speak a little bit too how youre thinking about the buybacks.
As you get to close and then beyond close I think last time, we spoke there was an expectation that the C. One might be.
Closer to 10%, but then there was some mid quarter Tom release.
Matt talked that seems like maybe you would be a little bit below 10% at close so can you tell us where the parts are moving there and how it impacts your outlook for the buyback.
So I bet, so just as a general level.
You will recall that where you said youre targeting 10%.
One.
Players.
And we really are not going to consider buybacks until after we hit that level.
Now I recognize that many investors, which I've already asked me or why do you need such a hefty see two when level because that's got a lot of cushion in it which it does.
But the reason is because we're going through a lumpy big merger, which has got a lot of uncertainty that economic environment as uncertainty geopolitical events have uncertainty. So all those reasons, we're conservative and they still start karma, 10%. So.
There are only give you a little color as a second about kind of where we are you know, but not from my point of view is hard to know they're kind of depends on what rates are.
These marks has a huge impact in terms of.
Our capital position, but it's going to close to 10, which may just not gonna be too far past legal day, one that we're going be Bakken about that business, but to specific dates and give you better true.
Yeah.
So where we stand right now right now.
Yes, I will probably touch under and but as Kelly said, we don't really know exact date, we're going to close when interest rates are we're still working with delight. Our third party on that actual mark for Suntrust. All that is coming together nicely.
My guess is will be close to 10, we may not be at 10, right now, but it also depends on depending on what assets, we decided to shed or whatever could have an R.W.A. left potentially.
So you never know about how you get there right now it's we're in the highs.
But there was no guarantee that will be over 10 at close but that this company combine generates a lot of capital a lot of earnings and we will get to 10% I think in a relatively short amount of time.
It's still a wildcard because you don't really know because rates are so volatile right now where you're going to be I. Just know that we have a lot of flexibility and we're working to to try to.
Do what we can.
To maximize and optimize the balance sheet.
Okay got it right and to your point is that tend to find number anyway.
Right and as our.
Thank you.
Thank you.
Yes.
We went out move onto our next question from Ken.
Of Jefferies. Please go ahead your line is.
Thanks, Good morning, everyone.
A follow up on just things that are going to be potentially slipping timewise, depending on the close date, but darling understanding at least on the BB and T. side of what the expected Cecil day, one looks like and then just any considerations.
In terms of any changes with regards to how you think the credit mark looks and the potential breakdown of that credit mark. Thanks.
Yes, so I mean for being team you know our fiscal reserves are going to be higher than where we operate.
The incurred right now, we're probably up in the neighborhood of 30% to 50%.
In that range.
All that could be a moot point when we if we close this quarter in the fourth quarter.
So Clark and Alan cohort and our teams have been working.
On the combined gross number we are at a point now where we can disclose that number reactors still working on that but the teams are working together and just coming up with it as far as purchase accounting marks go you know I would say when we announced this transaction in February we were saying that credit Mark would be.
2%, we believe the marks are coming close to that level, but thats not file yet.
Could be a little give or take plus or minus on that but I think we're in the ballpark of that you know the other marks on the liquidity and interest rate marks right now.
It is at a slight discount, but thats also volatile to what happens in the marketplace.
Hopefully that's helpful.
Yes, Thank you and I'll follow up just on the insurance side, you talked a lot about the good color how that current business trends are going from a growth perspective can you talk about how insurance is expected to grow within the outlook you'd given for total fees just in terms of a ballpark of the type of growth rate that you think can be sustained in the insurance business. Thank you.
Sure.
Well for fourth quarter. We you know this is our lowest quarter the years easily fourth quarter beat our second lower so we would expect from here commissions to step up in the 3% range.
But sort of looking out further fourth and into maybe the first half of 2020.
What what you have really is.
Most of the two years largely as a measure of losses 17, 18, as I've mentioned earlier.
You have tightening of capacity in the market.
Such that they are still upward pressure on pricing is hard to know exactly sort of how long that last.
But certainly fourth quarter, we expected.
How possibly even push up a bit.
Depending on how the reinsurance renewals go in January .
Thank you also can see some a further commitment to that to the pressure so.
You know when we look at the balance of the year, we're expecting sort of full year.
Organic growth to come in at least for us in the 6% to 7% kind of range.
Year to date were at 9.1 right now.
Possibly we could beat those numbers.
We expect to industry probably be in the mid fours.
So.
I think bill and very very strong about.
Backdrop of the market as a result of that but also I would say because of the.
Approach we started.
Over a year ago, we feel really good about our team.
We as I said, our new business growth has built upon itself every quarter of throughout this year.
And we've got technology going in and just about every business, which is helping us be more efficient or effective.
So I think the prospects for us to outperform the market as we look forward are very very solid both in both in margin and overall growth.
Thank you.
Sure.
I'm going to move onto our next question from its Matt O'connor with Deutsche Bank. Please go ahead. Your line is open.
Good morning.
Sorry.
First just wanted to follow up on the capital discussion.
No I appreciate wanting to keep little more capital as the integration is going on.
As you think post integration or what's your confidence.
In the execution of the integration.
We see the 10% Q1.
It's really kind of well above where some of your truck peers are pointing to.
You might have seen yesterday, it's very similar bank to you in size talked about bringing it down to 9% another ones in the eight and a half the 9% range. So I'm just wondering if you could give some thoughts on kind of medium term.
Post some of the deal integration what you think.
Going see two on target might be.
So I think.
You know predicting what your capital level needs to be out into the future is a bit of guessing game, because you really can't.
Determine what's your capital levels were BMT unless you can create a term what the than existing circumstance is going to be so.
It always has to be a hedge and the best way to think about us is.
Relative to the environment.
Based environment is relatively risky because you will see us be relatively more conservative in terms of capital liquidity.
And we will always have strong diversification capital and liquidity vary.
Depending on.
The circumstances that they've received the time into forecast that we made.
As I said earlier today.
From a conservative point of view is set to recognize that doing and large deal.
There are just lots of issues at while we feel extraordinarily confident about their conversion on all of that they're still things that I can't guarantee.
And you know and my prediction is about ended the year, we'll have a trade war reconciliation on an after approval at noon after approval et cetera, but I can't guarantee that.
So when you get through all that anchors you back to the 10 now to your point about you know all those moving to nine or so.
I certainly don't think I mean, when we get through a more try and pool, a predictable environment I don't think nonsense inappropriate at all.
I'd say pushing down eight and a half.
We're still gives you 150 basis points arbiter minimum seven.
But remember seven is a really hard to solve a digital and everyone or close to seven as some pretty bad stuff that happens when you get there. So yes. The debate is really between eight and a half nine on ongoing more stable environment position in my view.
And so as saying stabilize I will be.
Recommending to the border, we consider a lower target capital level.
And based on the word to Daryl and his team does we will come over to whatever that number looks like but we're not going to be rushed and I want to be fair to our shareholders.
There is opportunity here, but we're going to be conservative and I'll market understand that mark or over promise on rather over deliver.
That's helpful. And then just separately any early signs of.
Call either client attrition or clients kind of taking a wait and see approach from doing business with you and I know you can't talk of Suntrust, but is there any kind of wait and see on the flip side are there discussions with clients, saying, hey, now that you're going be a lot bigger or can you do more for us.
Whether it's a taking positions and lending or you've kind of broader product side. So I was more we can do whether you there.
About those kind of puts and takes if you're seeing any so far thank you.
Yeah. So it's a great question and you're right. We have limited insight into that because we've been very very clear to our people. We are outright competitors today as we have since day one.
And we're not going Walt anywhere close to that line of not being competitive.
So therefore, we have very limited information.
We do pick up.
Little bit Savannah, and we'll feedback.
And certainly there are clients out there talking about hey, us would be great. When you guys get together.
You'll have more expanded lending capacity you have more products and services.
If they were BBD all centrus either were both sides the same thing which is true.
And so I think everybody recognizes the opportunity out there.
By us combining.
In terms of any attrition materially, but I've heard with regard to diabetes side, there has not been.
No there's been a lot over compensation out in the market about everybody center, taking all of our business. That's not true you just saw growth numbers were very long 6%.
Deposits grew five star I'm sorry.
I don't know how to be clear than that there's not an immaterial attrition.
Turnover rate is about the same a lower than.
It has been so I would say to you that this is.
Got a extraordinarily successful to this point Theres no indication of energy Kay.
And does no expectation of entity today, rather the expectation is you know a rather positive optimistic opportunity as we come together.
John could you take our next caller please.
Yes, Sir we will now move onto our next question from Michael Rose of Raymond James. Please go ahead. Your line is now well.
Hey, Thanks for taking my questions.
Just going back to the merger.
I think when you guys announced as you've talked about 2 billion in onetime charges just wanted to see if there any adjustments to that and any adjustments to the timeline I think you've talked about a conversion somewhere 12 to 18 months after close and should we expect a majority of the onetime costs to come around a that timeframe. Thanks.
So Michael it's Darryl so we numbers are still coming together.
So year to date between between 10 Suntrust do you look at our.
Charges today, we're about 250 million between marks and movie related expenses.
We got some.
More information on the I.T. conversions, that's getting finalized that's going to be a really large number.
So I don't have all the numbers and yet.
But I'm pretty sure that we're going to probably utilize the bulk of the 2 billion.
We'll give you more color as as we closed because we still don't have all the information that we really need between.
Each of ourselves.
Until we close the transaction.
What I'm seeing right now and there's some very complicated integration as Kelly talks about booking these computers together, that's kind of take some a lot of need for outside assistance to help that all come together. So I would say, it's going to be the bulk of the 2 billion from funnel Horsing and right now, but we'll give you a better information first time.
And goes we're trying to get the majority of all that systems, but together by the end of 21, if that's possible.
Theres a.
The teams are working really hard to work out those plans and.
We're very comfortable that that can be done in that timeframe, but we'll give you more specifics as we get more clarity probably over the next couple of months, but things are coming in as expected.
I think you're going to have a really robust combination of.
It systems, where that's all said and done.
Okay, that's great color and maybe just as a follow up now you've had some time to kind of dig into to their side can you just explain where you think the greatest opportunities could be for revenue synergies and maybe what areas are working on I should prepare for the after the close thanks.
Yeah, Mike This is Chris.
Bill and I've been working together as Kelly alluded to earlier on a number of fronts I would just maybe hit.
The highlights certainly they have a much more built out capital markets business to bring strategic advice sort of down segment. If you will we have a very strong community bank that.
Yes from call it revenue companies down to 25 million that need those type of services.
Which we did not offer prior so we see a great opportunity to bring strategic value to those commercial clients on many fronts from a fee perspective to really build out there there overall needs and planning for further future.
The flip of that would be so that's a big ones to slip of that would be we have a substantial insurance business.
I think of a best in class insurance business, there's really not much we don't offer that we can take to their entire commercial business.
Up and down small business only up to the largest corporate clients. They handle we also have a.
Largest life insurance distributor in the country with Crump live.
We.
We have built a business within our company of offering to to our clients. We will extend that naturally to the Suntrust clients on the boasts the commercial and individual side. If you think about the connectivity with Wilson the broker dealer the strong wealth business they have.
The state planning the to fund Bassil plans busted agreements that kind of thing we have a tremendous opportunity.
To offer.
Life into the wealth business and also into came in insurance on the commercials, so tremendous opportunity there.
Third debt, so kind of common sense as we have a very strong.
Business, we call BBC at work, we provide sort of turnkey deposit programs to our commercial clients for their employees.
Intros has a plan it has not been as effective and is one thing that that we think we didn't turn on day one.
We'll go to deposits in that sector. That's just a handful of three that I think are high potential, but we've got another 15 to 18 behind that that.
Maybe begin to have kind of all sizes and shapes that we're not models.
We're very excited.
That's great color thanks for taking my questions.
Sure.
We will now move onto my final question from Stephens Cosan of Sandler O'neil. Please go ahead your line is.
Yeah, good morning, everyone.
Good morning.
I was curious.
How you guys are thinking about the move to Charlotte and kind of protecting the legacy brands in the standing on that you guys haven't Winston Salem for free for me beauty, and obviously Atlanta for Suntrust, and particularly as it pertains to Atlanta and it continues to grow it looked like kind of capital the southeast and how you think about protecting Matt as you move the headquarters to Charlotte and not.
Let and somebody else kind of take that position over time.
So I would say everywhere, we're very excited about that move for all three markets.
Charlotte Atlanta and.
Chris inside Charlotte is us as a super dynamic market I mean, its score and ensuring the fast.
It's Scott let me are real kind of a major focus for young professionals.
To be attracted a lot of technology people there lot of technology companies their auto companies, moving though technology operations there.
When when this merger is done in Charlotte raise the second largest some natural.
District and the country.
And so Charlotte is going to be a mega place for us to do business.
And Atlanta is fantastic as well and Atlanta as you say is the is clearly the dominant.
City in the into southeast so fantastic place.
We love Atlanta.
We will continue to love Atlanta. This is not we're not moving out of Atlanta.
We will have a superstar.
Later in Atlanta from Suntrust, who is one of the most accomplished bankers in the country today.
She is she is extraordinarily plug Dan.
We won't Miss a beat in Atlanta.
Commitment will be increased in terms of our community support.
Our commitment in terms of marketing and execution will be increase.
We would expect our.
Execution of business attraction in Atlanta to be greater going forward.
Then has been in the past.
And.
Keep in mind that you know our commitment was and is that we will have domiciled our headquarters for capital markets.
Investment banking.
Wealth management.
In Atlanta, Likewise in Winston Salem, our retail community bank will be headquartered in the.
Yes, I would try it area.
And so neither market loses.
It's just that we happen to be blessed by haven't Threed fantastic markets.
That are now they kind of the foundational anchor geographical locations are true. So I don't think about it as truest be anchored to Charlotte thinking about it is true as big anchor to three.
And we'll still have a toehold in markets that we generated from and Wilson North Carolina in Orlando and so we are a community bank.
We don't think in terms of one market driving everything we think of it being a coalition off a group of community banks coming together under the advantages of a holding company. So.
Nobody loses everybody wins.
Perfect helpful. And then maybe we'll just one follow up you spoke to kind of.
In long term strength in the economy, and obviously your growth remain solid ex the mortgage sale, but we've seen some mixed economic numbers manufacturing et cetera can you talk a little bit about what you're seeing from your customer base in terms of incremental investment and overall market demand.
Thanks.
Yeah, I'll make a comment animal Florida murder comment.
The feedback that I get primarily from our regional presidents, but also talking directly to class on I'm traveling around.
If a 10 years magistrate America really kind of suffered as the biggest companies were doing more robust international business and.
Main state was still recovering from the recession Mainstreet has recovered from the recession.
Not to 10 years and not investing mainstream he is now needing to invest wanting to invest into our investing.
So main street is kind of a broad based.
Business activity.
That we shared cost.
Ray of our business activities.
And of course, we don't participate as much and a larger global international businesses. So as they are seeing more the impact of the trade was not it that's not impacting us as much as with some of the Mega banks.
So I'll obviously another was it we are still here, we are beginning to hear some compensation from our local mainstreet compliance.
Around uncertainties around tried awards because after a while at drifts down to 90 trade and everybody talks about it.
If San Francisco long time, it will affect may say, but it's not having a material impact a day part any color on that I would just echo what Kelly is saying that while there is more conversation about the headline news in.
Maybe some more cautious tone is in some conversations are our opportunities continue to be very robust across the board. We have good pipelines really I think one of the benefits as Kelly brought out earlier is just the diversification into various platforms. We have so while there is more conversation I'd say, it's more on.
The higher end.
Then it is at this point on main street, or the retail side, but people or or conscious and thinking about it and we're trying to respond appropriately, but we still think theres plenty of opportunities with all the different.
Levers that we have to pool.
Great. Thank you guys so much.
Okay.
Right.
Hi concludes todays question answer session at this time I'll turn the conference boxes, Mr. rich basis for any additional or closing.
Okay. Thank you John Thank you everyone for joining us I apologize those we have time to get to today. It will call. You later and I hope everyone has a good day. Thank you very much.
Thank you gentlemen, this concludes todays conference calls. Thank you for your participation you may now disconnect.