Q3 2019 Earnings Call
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Bank Dot com.
I'll now turn the call over to Georgia, Texas.
Thank you David welcome to our third quarter earnings Conference call.
Our press release issued earlier today, we reported net income of $81.8 million third quarter 29 thing.
The increase of $26.6 million, 48.3% compared the same quarter last year.
Diluted earnings per share were 84 cents for the core.
Included in third quarter earnings were $2.1 million net after tax non core items, we had merger related costs of $1.9 million early retirement program expenses of $131000 and branch right sizing calls.
$118000.
Excluding the impact these items the company's core earnings were $84 million for the third quarter and core diluted earnings per share were 87 cents increases of 27, and a half million dollars and 26 cents respectively over the same quarter last year.
I would like to mentioned, we've been consistent with our inclusion of among other things securities gains and losses long maturity will contributions and provision expense in our core results, while excluding items such as merger related costs and branch right sizing.
Expenses from the core results.
We've done so again this quarter.
However, this quarter, we experienced several notable events that further impacted our results that are worth additional discussion.
First as is public record Simmons bike as a result of its merger with like SMB was a participant in a shared national credit Flagstar petroleum at LLC.
Quite star became subject to bankruptcy proceedings earlier this year.
On September Thirtyth 2019 bankruptcy court authorize a sale quite star assets through a section 363 proceed.
Our portion of the shared national credit was $19.1 million.
Based on the anticipated net proceeds from pending bankruptcy stale our loss recognized in the third quarter was $14.7 million.
As a result of the wall. So we might especial provision $15 billion to increase the allowance to an appropriate level consistent with our historical ratios.
Second during the quarter, we recorded the sale of our visa class B common stock.
The gain on sale the shares was $42.9 million pretax it's been our intention to fund our Simmons first foundation with part of the proceeds from the sale of visa stock.
We have previously contributed over $6 million to the foundation as an advance on that commitment.
This quarter, we contributed another $4 million to the foundation to bring our total contribution over $10 million since its inception in 2014.
Third we have previously mentioned our efforts to reduce our CRM portfolio by selling some non relationship loans.
During the quarter was so $114 million of loans and recognize a 5.1 billion dollar loss, including sales fleets.
Included in the loan balance was $82 million reliance bank portfolio and classified loans to $32 million, primarily from the acquired portfolios of bank SNB Hartland My.
In southwest Bye.
In summary, the net after tax effect of these notable items is an increase the net income of $13.8 million for the core.
I'll speak more worldwide star alone light.
Our total assets from $17.8 billion at September Thirtyth.
Our return on average assets for the third quarter was 1.83% file core return on average assets was 1.88%.
Our efficiency ratio was 43.8%.
Our loan balances the ended the quarter was $13 billion, a decrease of $124.1 billion from last quarter.
We were successful in reducing our real estate portfolio by $165 million.
Our loan pipeline, which we find is loans approved and ready to close was $639 million at the end of the core compared to 419 million at the end of the second quarter of 29 team.
The projected weighted average rate of loans in the pipeline is 5.43%.
On a consolidated basis, our concentration of construction loans was 108% and our concentration of CRT loans was 321% at the end of the core.
Total deposits at September Thirtyth were $13.5 billion.
Which was flat compared to last quarter, and an increase of $1.1 billion from year end 28 team.
Our non time deposits were up $200 million, while our time deposits were down the same amount.
Our net interest income for the quarter.
Was $150.2 million.
Included in interest income was yield accretion recognized on loans acquired $9.3 million, which is down from $10.2 million last quarter.
Of this amount $4.4 million a 48%.
Was accretable credit Mark related and $4.9 million for 52% was interest more correlated.
Our net interest margin for the quarter was 3.81% compared 3.92% at June Thirtyth.
The company's core net interest margin, which excludes all accretion.
It was 3.58% from the third quarter 2019, compared to 3.66% previous score.
The 23 basis point difference between GAAP and core net interest margin included 11 basis points credit Mark accretion.
12 basis points of interest more accretion.
Right decrease in the variable rate loan portfolio preceded our ability to manage deposit repricing, which contributed to the decrease in our net interest margin.
Our non interest income for the quarter was $83.8 million, an increase of approximately $50 million compared to the same period last year.
This increase was mainly result of the gain on the sale of visa stock previously discussed.
In addition, we recorded a gain on the sales securities $7.3 million related to the sale to approximately $89 billion of bonds. This part of a plan to reduce wholesale funding and rebalanced portfolio.
We also had an increase in mortgage lending income of $3 million compared to the same period in prior years.
Non interest expense for the third quarter was $106.9 billion, an increase of $6.6 million over the same quarter last year.
Core non interest expense for the quarter was $104 million, which represented an increase of $5.5 million when compared to third quarter 28 team.
$4 million. This increase was related to the Simmons first foundation donation mentioned earlier.
We also had incremental increases in several operating areas related to our recent acquisition over the last month.
Software and technology costs increased approximately $2.2 million over the same period in the prior year related to our next generation banking technology initiative, we have previously discussed.
Our incremental I'd say expenditures during the third quarter were primarily related to this initiative.
I'm pleased to report that we're beginning to see real change associated with our in GB investment.
Major milestone was accomplished during the third quarter. When we successfully completed the migration of our core banking platform to our vendor hosted environment.
This was the single largest conversion we have ever noted.
The seamless transition was very successful and has increased security and the reliability of our systems.
In addition on October 16th we had an extremely successful launch of our new mobile mobile Viking out.
I knew that makes us a formidable competitor in mobile banking customer response has been phenomenal as evidenced by the 4.9 star rating from our user.
We will continue to expand customer offerings through our digital channel.
At September Thirtyth, the allowance for loan losses legacy loans was $66 million.
With an additional $600000 allowance for acquired loans.
Loan discount Mark was $60.4 million for total coverage of $127 million.
At the ended the third quarter nonperforming assets from the $93 million, an increase of $5.4 million from the second for.
This balance primarily made up of $72.9 billion nonperforming loans and $20.1 billion in other non performing assets, which include $5.9 million enclosed bank branches held for sale.
Our annualized year to date net charge off to total loans were 38 basis points in the provision for loan loss for the third quarter was $22 million.
The flagstar losses embarrassing.
Contrary to the credit culture here Simmons.
Recalls we were only a participant in the credit we were limited both in our ability to act unilaterally.
And in our access timely information.
We learned some valuable lessons from this experience.
We've changed the approval authority of any energy loan to a bank wide committed.
All the loan participations must also be approved by the bank wide Committee.
We are evaluating our whole limits on any single loan and own total borrower death.
We will work to exit all purchase syndicated energy credits.
Currently we have $187 million in syndicated energy loans, which Simmons is not really bye.
We expect exit leased $120 million. These credits by the second quarter of 2020.
Our energy portfolio. Currently includes two credits totaling $17.3 million, which are all non accrual.
Both loans acquired loans from the bank SNB portfolio.
We've recently done a deep dive in our energy book and while things can obviously change we're confident we've accounted for all classified credits as of September Thirtyth 29 team and have reserved for them accordingly.
In summary, we have balances of $426 million energy credits or 3.33% of our total loan portfolio.
During 2019, we have booked $87 million in new commitments, all of which are Simmons bank control.
We have book no additional energy loans since the second quarter.
72% of energy portfolio is upstream and only 7% the service related.
In the future, we will emphasize energy loans, we make should be to customers with deep banking relationships with Simmons.
And also mentioned is losses like this impact not only the bank itself, but also and appropriately it's managed.
And I expect quite star laws have a substantial impact on the compensation payable under the incentive plans for over 80 company executives.
Our capital position remains very strong.
As of September Thirtyth common stockholders equity was $2.5 billion.
Our book value per share was $26 in 36 cents, an increase of 11.4% from last year.
While our tangible book value per share was $15 from 73 cents an increase of 16.7%.
From the same period.
Ratio tangible common equity tangible assets was 9.1% at September Thirtyth.
Our total risk based capital ratio was 13.2%, while our tier one leverage ratio was 9.1%.
In our press release earlier today, we shared our initial projection for the expected increase in the allowance for credit losses that will occur and adoption of new accounting Stan.
Based on current work completed to date.
We estimate that they see ill will increase by approximately 130% to 170% over the allowance based on June Thirtyth 2019 loan levels.
However would purchase discounts are considered.
Horacio will increase by 10% to 30% over the June Thirtyth 29 team total credit coverage ratio.
Yes, maybe the increase is driven by changes within the new standard.
And approaches used in modeling.
Not due to perceived increase in risk within the portfolio.
This projection is simply an estimate as a point in time modeled under fairly stable economic conditions and does not include the impact of our pending merger with Landal company.
We will continue to refine our methodology and assumptions in any adjustment to future reserve levels will be based upon forecast of economic conditions at that time and the composition of our portfolio among other factors that mostly subject to change.
While we expect significant changes related to season, we do look forward to a single line item representing the entire allowance for the total loan portfolio.
The double counting will still require some exploiting.
Current shift from acquired to legacy loan pools, and the lighted provision expense will go away.
We're excited to announce and we're still target to complete our previously announced acquisition with Landrum company on October 31st.
With an expected system conversion during the first quarter 2020.
We're really excited about the expanded market presence in several states as a result this merger.
Last week, our board approved a new stock buyback program up to $60 million.
We look forward to using this mechanism as market conditions warrant as a method to increase shareholder value.
Over the past five plus years, we've acquired 10, new biking part.
During that period, we have adopted new associates products services processes, and certainly new markets.
Over the next few months, we will evaluate our new organization make adjustments consistent with our longer term strategy.
We will continue to build the Simmons brand throughout the states. We served by investing in those communities.
We will examine our lineup of products and services.
We will review the makeup of our loan and deposit portfolios.
We will plan for the optimization of our physical locations.
We will increase our efforts behind digital offerings to our current and future customers.
And we work to make sure we achieved the efficiencies we expect from our investment in technology.
Future M&A activity will be strategic.
And we'll be prioritized provide additional scale and market share in our current footprint.
Similar to our expectations regarding our newest partnership with landmark bye.
This concludes our prepared comments, we'll now take questions from our research analysts and institutional investors I'll ask the operator, please come back online and we view the instructions and open the call for questions.
Thank you.
As a reminder, you wanted to press star one on your telephone.
Well the giant question press the pound <unk>, please standby wildly compiled the Kenny roster.
Our first question comes from David Feaster of Raymond James Your line is now open.
Hey, good morning, guys.
Hi, David Moore day.
I just like to start on the core margin and kind of whats your expectations are looking forward and you know the impact of.
Incremental 25 basis point rate cuts given you know the market implications of potentially two in the fourth quarter.
Well I guess I'll start that I.
I think we've said this before that.
A nice own our loan portfolio, which is 50% variable pricing.
Our pricing on loans is good.
Accelerate versus the repricing of our deposits and.
It's happened in them.
Rising interest rate environment, it's also happening in a lower.
Interest rate environment, and certainly one or two additional cuts will make that problem even worse.
Now I'll say this while we certainly pay attention our net interest margin. We also trying to manage.
Our net interest income, which I think we did very effectively through other means in the third quarter.
So we will expect to continue to have downward pressure on our net interest margin as long as the federal reserve.
Continues to lower rates, especially 25 basis points as time own consecutive meetings.
It's just not very good position for banking industry today.
It's certainly not driven by.
Readily.
Available economic data.
He is really hard to plan around and our work we cut out for US just like every other month.
David This Bob I'd also point out that in Q4 Landrum will merge into the company and their margin is lower so to get a comparable it it will definitely be down a few basis points just symbol Andrew.
Okay.
And then switching gears to loan growth you know it sounds like a you know demand there.
Given where your pipeline is could you maybe quantify the payoffs and paydowns in the quarter and expectations for growth going forward given a the caught your commentary about cautious optimism in the market and then just on the competitive side I mean, we're hearing anecdotes about you know less equity.
Deals in more non recourse and challenging pricing dynamics are you seeing this is well on its is that's causing you to pass on more deals even though demand is good.
And that is Matt al I'll take the first added that our pay offs Rd Palace was 500 million.
Third quarter, but do your point on loan opportunities loan growth I mean, it with AARP our pipeline at 639 million I will tell you why that's above.
Bed bug last quarter, we are seeing what's your what others are seeing in the market on commercial real estate you, while we're managing our concentrations prudently and there is a realistic possibility that some of that.
Approval and ready to close will fall out because of more competitive.
Banks that are out there both on rate and on structure that you know won't be old will price. It in structured the way to our credit standards that falls out at Bald Mountain.
I expect we expect to see some of that with that retire pipeline that the demand is there but.
We're cautious on our our commercial real estate opportunities that come across our desk, but I will tell you in the third quarter.
We grouped senile ending $400 million, which I was very encouraging in of that see an AG.
Production was true core.
See not customers that we've been pursuing for 12 months on a calling plant and now we're getting resolved to that so that was very encouraging to us in the third quarter.
Okay. So let me I guess looking out to next year I mean, do you kind of expected to stay in a low single digit realm or.
How do you think about loan growth next year.
Well, we do expect low single digit loan growth.
We'll continue to have to manage RCR he concentration.
So while we may originate loans.
Our correspondent banking unit may help us in so part of those.
Just patients to downstream bank so.
I think our pipeline is very strong we're going to be very disciplined in our underwriting standards. We are starting to see some.
Less desirable structures come into the marketplace today, we're going to do our debt level best stay away from those you know it's lecture near.
Coming up.
False economy again for at least another 12 months.
We're just going to try to stay as neutral as we possibly can.
And not bad on either side of the equation.
Okay.
And then last one from me could you talk about your capital priorities. It sounds like you anticipate being more active in repurchases going forward, but how do you look at buybacks versus M&A and you know with Atlanta from deal and given that you're kind of already in the capital ranges that you laid out do you see opportunities to optimize the capital stack the foundry.
Purchases.
Or do you think you could go to the lower end of your targeted ranges.
Well I think this time of uncertainty, we we would prefer to me at the upper end of our range from a capital.
Standpoint.
You know, we're sort of been an adjustment period, David right now I think I mentioned in the comments that you.
You know over the last five or six years, we've put a lot of things together, we brought a lot of new people a whole lot of new products new markets together.
Some of that we will build into our long term strategy. Some of it will evaluate we may decide that we don't like this quite as much as we felt we did it will make an adjustment.
The Landrum acquisition as you know is our largest today.
Let's see on three very distinct markets.
So we need some time to be able to integrate.
Excellent associates of will pick up is land landmark.
End of the Simmons organization, So I would expect that from an M&A perspective, we're not going to be really aggressive early on in 2020.
The.
The valuation marketplace today makes it much tougher.
To get a deal done under our disciplined metrics, particularly from private bank standpoint, who really doesn't understand.
Valuation in the aggregate.
So we've got plenty on our plate to keep us busy.
From a stock buyback standpoint, you probably saw we sold our visa shares.
And quite honestly.
We do but what most of our investors do that is we take look really good opportunities in the marketplace, you probably know that vesa went from $121 share.
In December two today 175 plus change.
That's pretty good increase for one year I'm sure what stock it is and you know than our stock along with other bank stocks have been depressed. So from an investment standpoint, we just believe it's better to.
Monetize and off balance sheet investment.
And take that money and invested in something we believe has long term value.
So that's how we sold looked at the stock buyback.
And the and the timing of of diseases side.
So you know we're committed to a strong capital levels and of course with Cecil coming in and the impact that it's going to have on capital to begin with Oh, we're more conscious today maintain those levels and we have made by us.
Okay. Thanks, guys appreciate it.
But.
Thank you and our next question comes from Stephen Nolan of Sandler O'neill. Your line is now open.
Hi, guys good morning.
Good morning, good morning.
Curious I'm going back to the core NIM I think last quarter.
Maybe the number was about 366 guidance for the rest of year, obviously were down at 358 here today with the prospect of more cuts or are you guys willing to give an actual number there on the guidance for you think that core NIM will shake out is that.
More of a below three fiftyth kind of number.
You know same this Bob I would say you know right now given the volatility and.
We're not willing to give a rate out there.
What I'd tell you is we look at the futures just like everybody else.
Couple of weeks ago, we looked at the rate increases.
Expected for this next meeting it was down as the 20% well right now it's up to almost 90% and just changes in just a couple of weeks. So trying to project, where that's going to be weaken bakes in general can manage the NIM when you have moderate increases or decreases in pricing, but when it move.
Moving on a regular basis like it has an is projected it's hard to get take volatility out of those numbers. So as George said earlier, our goal is to manage the net interest income at this point when they come under.
The net income on the income statement not necessarily to the NIM rate.
Okay Fair enough and I think you said on that pipeline. The average projected long it looks like 543 on that 600 million plus verses. Thanks, I'm calculating it correctly. Your current core loan yields around 519. So can you talk about how you're getting.
Higher average yield on new production today are kind of what the composition of that that's driving the higher yields.
Steven Great Great question, you know where.
We're might remain disciplined our pricing standards, while still in to bobs comment the onto the market and way.
The rate environment looks like but.
We're holding our bankers accountable to our pricing standards and so far.
Our skin and now which is what you don't see in.
Our comments is month over month, we track that number and ask is coming down it's coming down in secret six to eight basis points month over month, So we're still above.
We're pleased with where we're at but it is coming down.
With the overall.
Hi yields in the market.
Okay and it is is there any mix shift change from what you guys have done in the past or is it still about the same from variable rate fixed rate perspective.
We have we are trying to be very Georges point in time to be very neutral will probably be balanced.
With fixed and variable in Ad and.
Volatile environment right now with interest rates when as Bob said between on Santa any after set so we're trying to say 50 50 on fixed unbearable.
Okay, Great and then one last one for me on the theory concentration you guys.
Talking about continuing to manage that down maybe windier on.
With future sales is there I mean is that need to go below 300% or is there a target where where you're working towards and if so why specifically.
Well obviously.
For us in the 300% level is regulatory guidelines. So we would prefer to be within regulatory guidelines now I'll remind you that we roll.
Landmark bank into our flow portfolio because of their significantly lower see already concentration that's going to help it quite a bit we're also continuing to pursue.
Selling or letting non relationship see already loans run off the books. So we think it's going to be a natural process over the next six eight months.
You know what.
Well, we really big focus on here is not necessarily RC already overall concentration, but our construction.
Concentration.
As we get into.
You know less certain times, we want to make sure that construction projects that we are finding its.
Our good solid regardless of economic conditions and.
Tell you that were.
You're much more focused on making sure that construction lending his appropriate as opposed to our board Mercy Ari fulfilling.
Okay. That's really helpful. Thanks, George Thank you guys.
But.
Thank you and our next question comes from Matt Olney Stephens Your line open.
Hey, Thanks, good morning, guys.
Good morning.
Hi, George I think you mentioned the amount of the energy loans outstanding at this point can you. Just go ahead and repeat what that number is then is there any kind of specific allowance.
On the energy book or since some of those loans were acquired do you have the remaining amount that discount on those loans I'm just trying to appreciate what the losses could look like as you exit the $120 million of loans that your that you're not be agent. Thanks.
So Matt.
To to.
No. This one more time, we have $197 million in syndicated energy loans.
Which we are not the Lee buying so situation hopefully not like quite star, but where we don't control our own discipline that's not.
Typical of Simmons.
And it's something we're uncomfortable with us so we off we have already given notice to believe buys that we want out of those credits. So as the next Redetermination date comes up Aurs are able to find someone to take our place we expect to get out we don't expect any loss to get out of those loans.
We have $17.3 million nonaccrual energy credits.
That only use two credits of both of those required from the bank SNB portfolio. We think that we have appropriately reserved for any potential loss in those loans. So we don't expect.
Anymore.
The rest Murray energy portfolio is performing fine.
Now I'll mention again on that.
This year.
Every energy loan that we put all the books is controlled by Simmons Bank and it has a pretty deep deposit relationship with the bank.
We put no new energy loans on the books since the second quarter. So in the third quarter noticing energy levels.
So where we're really taken a good hard look at our energy portfolio.
Fits into the rest of our blending appetite.
We've stepped out little too far with regard to syndicated credits, where we have no other banking relationship and really don't have control their credit.
We've been bitten pretty hard by quite store.
Loss and we certainly don't want to go from that again.
So you know were fairly comfortable with where we are today Matt.
We've got the total energy credits, a $426 million, which is only 3% of our total portfolio that number is going to work down as we exit some of the syndicated credits.
Okay. Thanks for that color, George and I guess that those two specific loans that are on non accrual the $17 million, what's the reserve allocated to those two credit.
Matt were and I have to get back with you on that because we'll have an information royalty.
Okay, that's fine.
Okay, and then going back to the discussion around the core margin.
Yes, the core margin was down call. It nine that's in the third quarter and it looks like that that wants to cut again next week.
So can you just got talk around that nine compression in the third quarter as anything about the fourth quarter is that a good place to start.
Assuming that that data cut next week and that's before we assume any impact on the Laino deal, it's going to close here.
<unk>.
You know Matt.
[laughter].
I wish my Crystal ball very many that answer you know just just backing up little bit this time last year.
We were in the mode of raising some traditionally low deposit.
Pricing.
To be fair to our customers because we have lagged behind rate increases we took the benefit of.
Our loan rates, but we didn't pass loan.
Anything or our customers. So we got the mode of moving up all our deposit pricing then all sun the.
The factored in all of sudden we're going back now.
So.
We're in that period of time of try and make that shift ourselves our loans Reprice me I mean their own some index the changes in.
Here, we go a we just have to make sure we're fair to our deposit customers as we adjust deposit pricing.
The fed goes down 25 basis points are loads are going to go down.
We're going to continue to move deposit pricing down, but at a fair right. If they do it again it just exacerbates the problem. So.
They need to make up in mind.
Which way the economy is going to give us some indication. So we can manage that in the field.
And I'll tell you the real in results of that is our customers are scratching their head going you know we don't really see these problems that are justifying rate cuts in the economy today, but they must be out there otherwise we wouldn't have rig goods. So that's the cautious optimism that I was talking.
Well, our customers don't necessarily see it.
But I believe it must exist because of actions related to interest rates. So it's a very frustrating.
Situation not only for us, but for the entire banking industry.
Sure, Yeah, and you're certainly not alone, saying that the margin pressure so definitely appreciate that.
Stepping out that you mentioned that was interesting you said that Sim into whats currently in a <unk> called <unk> and adjustment period, and I don't think you you've you've characterized that.
Like that in recent years, but you had acquired several banks. So I just want to understand digest that period, what's on the table when would you consider additional exit that asset classes or geography, either divestitures Swan fully appreciate kind of what this adjustment period means for a percent tenants Hurst.
Well I think everything's on the table announced I'll start by saying that.
Because of the landmark acquisition, we're restructure our geographic managed so were able now to look at state by state.
Geography, so that's one real benefit.
Adding a bank like landmark to our footprint gives us scale unable to manage in certain geographies better than we could before our budget process is changing completely a we use the budget by business unit now we're budgeting.
Revenue by geography. So every business unit is going to be required to have revenue goals in every geography, and that's consistent with what we've said all along and that is that in our community banking structure.
We want all of our products and services available to all of our customers in every geography, where we do business that has not been the case in the past a lot of its been because we don't have or didn't have at the time scale to support some of those revenue generating business units, we do today so.
So those are the kind of adjustments that were really taken look at today, we have to make sure that we integrate the landmark locations because.
You know, Missouri is going to be a standalone unit part of landmarks locations are in Missouri, Oklahoma, and Kansas is going to be a standalone unit part of landmarks locations are in Oklahoma.
Texas is going to be a standalone unit part of the landmark locations are in Texas. So we've got an adjustment period for all those geography used to make sure that wall overseen by age and understand our long term goals. So while we always take a look at branch right sizing that include.
It's actually from markets, what's more important for us just make sure that we focus on revenue generating opportunities in our new geographic structure.
Okay.
Okay, Great and I guess last question for me a I appreciate on on the visa shares I appreciate the commentary about reallocating capital elsewhere, It's always a safe to assume you don't have any additional b to b shares remaining at this point.
That is Greg is correct okay.
Thank you guys.
Thank you Matt.
Thank you and then next question comes from Brady Gailey of KBW. Your line is now open.
Thanks, Good morning, guys.
Good morning.
So looking at the expense base I know we talked about.
Having expenses around that a 100 million mark per quarter. It was a little higher than that even if you exclude the merger charges little higher than that in the third quarter that maybe just your outlook <unk> absent the landmark deal that maybe that's your outlook for how expenses will trend at seven this going forward.
Yeah first Brady this Bob.
We were the core earnings when you back out the merger related like you said was about 104 million.
4 million of that was specifically related to that foundation, because that would put us right at the 100 million dollar range and that's that's about the guidance. We've been given is close to that hundred million dollars. We're we're below in the second quarter and a lot of things kind of hit just right.
Third quarter.
Was more on a normalized basis, you take that hundred million dollars and as we've been saying, there's probably a couple million dollars in LNG be expense that will be going on the books each quarter.
So there's that baseline goes up from 100 100 $204 million per quarter, and then just given you a little color on Landra.
You just take their numbers today, there, they're about 20, 322 and half $23 million at quarter fully and on noninterest expense.
They will operate are they.
As a standalone bank through Presidents' day is what our expectation is for conversion right. Now so we won't have much in cost saves until after that point, then it'll be a measured period over a couple of months. So.
You can take that 23, and we announced before 35% cost saves if that's our number that would put us on a normalized basis say by Q3 to Q4 additional of about 15. So you then you'd be adding between 23 million per quarter going down to about 15 by the end.
To the here.
All right. That's helpful. And then the FDIC assessment credit it looks like that was that positively impacted expenses by about two and half million is there any of that left or was that fully realized in the third quarter.
But we may have another million in half or so in the fourth quarter. You know, it's all dependent on their final numbers, we get from the assessment, but that obviously for all the banks that's a nice little positive after all these quarters.
Okay, great. Thanks for the color guys.
Yeah.
Thank you and again, ladies and gentleman asked a question at this time. Please press Star then one I touched on telephone and then next question comes from Gary Tenner of David D.A. Davidson. Your line is open.
Hi, guys good morning.
Oh wait so I apologize if you went through this but in terms of credit or looking at that Npis, excluding TD ours and kids were.
Relatively flat this quarter, even with the.
Resolution of the White Star credit So could you talk about kind of inflows into mph status. During the quarter and then also comment on migration of special mention and classified credits during the quarter.
Sure.
During the quarter and I'll tell you one thing that I am looking forward to with regard to Cecil.
Yes that all our critic coverage is going to be in one place.
Currently we have loan mark against the acquired portfolio, we have the allowance against the.
Legacy portfolio during the quarter.
We had alone that a move from the acquired bucket to the.
Legacy buckets and we restructure.
Its own non accrual we don't expect any loss it has about three parts to the total.
Loan balance and that total loan balances little under $20 million. So yes. That's one relationship is primarily responsible for the flat to up a little bit of nonperforming.
Loans, even with white store.
Charge offs.
So you know we continue to manage.
From acquired in the legacy.
And that was primarily the result.
Of the numbers this quarter, one loan that moved over from acquired and legs.
And what type of credit is that one.
Yes.
It's a C ori.
Loan.
Out of the Denver market.
I'm, sorry out of which market.
Denver.
Thank you and then just in terms of kind of.
You know.
Loan loan rating migration otherwise.
Yes.
Oh.
We saw no.
Migrations.
One way or the other as far as we were outside of George's comment we were neutral to that point, we saw the trend we have nothing trends.
On a risk rating matrix that are at or moving towards.
Negative trends are on that converts me, we're proactively looking our portfolio on a quarterly basis and there are now rate and upgrades, but no trend that shows a migration one way.
You know Gary.
Course history is my goes back long time, I'm not sure that we have.
You ever had lost as significant as what we experienced would like stars when that happens.
You don't hit the panic button, but everybody starts taking look at what's next.
And I'll say this I'm pretty confident that are.
Credit team took a good hard look at our portfolio over the last quarter to appeal.
Any other surprises might be out there now.
Knock on wood as we said before things can change but.
No were fairly comfortable with where we are today.
Alright, thank you.
You bet.
Thank you and this does conclude our question answer session I would now like to turn the call back over to George Makris for any closing remarks.
Well, thank you very much.
You know, Bob and I came to each other that this quarter is going to have more noise in it than ever before we have no acquisition that we announced.
During that period of time, so we appreciate your patience with us this morning.
We're also pleased with our results in the third quarter.
We're not looking forward to additional rate declines, but it looks like to come and we'll just make adjustments here. So no. Other questions have great day. We appreciate your attendance this morning.
Ladies and gentlemen, this concludes today's conference call. Thanks for participating you may now disconnect.