Q3 2019 Earnings Call
Good day and welcome to the Bancorpsouth Q3, 2019 earnings conference call in webcast.
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I would now like to turn the conference over to will says accurately.
The V P and director corporate Finance. Please go ahead.
Good morning, Thank you for being with us.
Yeah by introducing the members of the senior management team participating today, we have chairman and Chief Executive Officer, Dan Rollins, President and Chief Operating Officer, Chris Bagley, and senior Executive Vice President and Chief Financial Officer, John Cope.
Before the discussion began to I'll remind you of certain forward looking statements that may be made regarding the company's future results or future financial performance.
Actual results could differ materially from those indicators in these forward looking statements due to a variety of factors and or risk.
Information concerning certain of these factors can be found in Bancorp South 2018 annual report on Form 10-K .
Also during the call certain non-GAAP financial measures might be discussed regarding the company's performance.
If so you can find the reconciliation of these measures in the company's third quarter 2019 earnings release.
Our speakers will be referring to prepared slides during the discussion you can find these slides by going to Bancorpsouth dot com and clicking on our Investor Relations page, where you'll find them on the link to our web cast or you can view them at the exhibit to the 8-K that we filed yesterday afternoon.
Now I'll turn to Dan Rollins for his comments on our financial results.
Thank you well good morning, Thank you for joining us today to discuss Bancorpsouth third quarter 2019 financial performance.
I'll begin by making a few brief comments regarding the highlights for the quarter John will discuss the financial results and Chris will provide more color on our business development activities. After we conclude our prepared comments, our executive management team will be happy to answer questions.
Let's turn to slide presentation slide two contains the normal legal reminders that will has already discussed and on slide three we talk about our performance. We're pleased to report yet another quarter of record financial performance. We reported GAAP net income for the third quarter of 63.8 million or 63 cents per diluted share.
Sure.
Reported GAAP earnings were negatively impacted in the quarter by two non operating items, including merger related expenses of 4.1 million, which was primarily associated with the closing of the summit Bank and Texas Star Bank mergers as well as a negative MSR valuation adjustment of four point $4.0 million.
Accordingly, our net operating income excluding MSR was 69.7 million or 69 cents per diluted share, which is another record for our company on a per share basis. This represents an increase of over 13% compared with the second quarter of this year and an increase of over 23% compared.
The third quarter of 2018.
We have several successes to report in terms of our business development efforts, our mortgage team had a tremendous quarter generating total production volume of 536 million as well as production in servicing revenue of 11.3 million for the quarter.
Well the interest rate environment contributed to the increased refinance activity. Our team also had a strong quarter and purchase money production, Chris will provide more color on these dynamics in a moment.
Within the community Bank, we recorded nice deposit growth and customer customer repo growth for the quarter on an organic basis, which totaled approximately 160 million or just over 4% annualized through the first nine months of 2019, we have grown deposits by approximately 6% on annualized basis.
[noise] loans were down just over $100 million on organic basis for the quarter, we saw elevated pay offs earlier in the quarter and several large credits on several large credits primarily as result of placement of these credits into the non bank non recourse market.
While we are disappointed to lose these loans is earning assets. We were also able to improve our fee revenue by helping our customers place. These credits into the non bank market.
We continue to be pleased with the stability of our fundamentals, including our net interest margin and credit our core margin, which excludes accretable yield was relatively stable at 3.63, 0.76% for the quarter compared to 3.79% for the second quarter, John will provide more details in a moment, but the nominal decline was.
Driven primarily by shift and earning asset mix driven by the deposit growth I just mentioned combined with the slight loan run off.
On the credit side, we reported net recoveries of $700000 for the quarter, while our provision for credit losses was 500000.
Excluding the impact of acquired loans are other credit quality indicators, including classified in nonperforming levels were very stable.
Finally, we continued to improve operating efficiency as we grow our company, while holding legacy expenses within a tight range, our operating efficiency ratio, excluding MSR was 63% for the third quarter, which represents meaningful improvement over both the second quarter of 2019 in the third quarter of 2018.
The last two bullets related to capital deployment.
We're excited to about Rodney CRO and his first Texas first state Bank team, becoming a part of our company. This transaction will provide an entry point for us into the Waco, Texas market and also enhance our presence in several other surrounding central Texas markets.
We also continue to be opportunistic and our share repurchase program. We were repurchased just over 561000 shares during the quarter at a weighted average price of $27.04.
Year to date, we have repurchased 2.2 million shares, which leaves approximately 800000 shares available for repurchase and our current authorization that expires at the end of the year.
I'll now turn to John and allow him to discuss our financial results in more detail John .
Thanks.
Thank you then if you'll turn to slide four you'll see our summary income statement.
In reviewing the summary income statement net income was 63.8 million or 63 cents per diluted share.
The third quarter as Dan mentioned earlier, we did have to non operating items in our third quarter results. We had a negative pre tax MSR valuation adjustment, a 4 million and merger related expenses that also just over 4 million. Accordingly, we reported net operating income excluding MSR up 60.
9.7 million for the quarter or 69 cents per diluted share compared to 62 million or 61 cents per diluted share for the second quarter of 2019, and 55 million or 56.
Thats per diluted share for the third quarter of 2018.
Our net interest revenue increased 4.1% compared to the second quarter of 219, and 17.2% compared to third quarter 2018, the transaction closings in the fourth quarter 2018, and both the second and third quarters of 2019.
Obviously would impact these comparisons.
As Dan mentioned earlier, we've continued to be pleased with our ability to manage the net interest margin in this challenging rate environment.
Reported net interest margin for third quarter was 3.88%, while our net interest margin, excluding accretable yield was 3.76% comparable metrics for the second quarter of 19 were 3.87 and 3.79% respectively.
We reported a net interest margin of 3.67% for the third quarter of 2018, while our core margin for that period was 3.62%.
As we look at the quarter over quarter change in our core margin.
The shift in earning asset mix that data also alluded to is the primary driver for that three basis point decline.
As Dan mentioned earlier also we had 4% annualize deposit growth combined with some run off in our legacy loan portfolio.
This dynamic resulted in high levels of overnight and short term investments during the quarter.
And looking more specifically at the components with the margin loan yields were flat as the impact of the recent fed rate cut on floating rate loans offset pretty much offset the positive impact although other lows that repricing the portfolio.
As expected security yields to increase not only for the quarter. Finally, we saw three basis point increase in our total cost of deposits, which was primarily driven by the repricing of time deposits, Chris will discuss our strategy around deposit pricing more in a moment to.
Before we move on to non interest revenue expense. We can briefly talk about credit quality. We added provision of 500000 for the quarter compared to a provision that also 500000 for the second quarter of 2019 and no recorded provision for the third quarter of 2018.
Excluding acquired loans, our credit quality metrics, including nonperforming and classified assets remained pretty stable during the third quarter. We also reported net recoveries of 700000 for the quarter.
If you're tariff turning to slide five you'll see a detail of our noninterest revenue streams total honest interest revenue was 75.4 million for the quarter compared to 66.3 million for the second quarter of 19, and 71.6 million for the third quarter of 2018.
The MSR valuation adjustment that that I did I mentioned already is obviously the primary contributor to the volatility in these totals.
Outside of that negative MSR adjustment mortgage had a great quarter reporting production in servicing revenue of 11.3 million.
Chris will discuss our mortgage business more in a moment, but we continue to benefit from the low rate environment, both in the purchase money market and in refinance activity.
The final item I would mention is a is the other noninterest revenue, which increased to 8.3 million for the quarter. This did this increase is driven by a number of items, none of which were individually significant which did add up to a sizable increase quarter over quarter.
All the other items shown on the slide were within our range of expectations.
Slide six presents a detail of Nondistressed noninterest expense total non interest expense for the second quarter was 159.6 million compared with $157.7 billion for the second second quarter, 2019, and 142.4 million for the third quarter of 2018.
Total operating expense, which excludes merger related expense and other onetime items was 155.6 million for the quarter compared to 154.5 million for the second quarter of 19, and 141.5 million for the third quarter of 2018.
The closing of the summit in Texas Star emerges on September one were responsible for the norm nominal quarter over quarter increase.
Beyond that that I don't believe there any large variances are onetime items that need to be mentioned.
Core expense base remains in a relatively tight range. We're pleased to see continued improvement in our operating efficiency ratio, excluding MSR, which declined to 63% for the third quarter, representing an improvement over 200 basis points compared to both the second quarter of 2019, and the third quarter 2018. This.
Again marks the lowest quarterly level that we reported in a number of years.
That concludes my comments on the financial Chris financials, Chris will not provide some color on our business development.
Thank you John Slide seven or flex our funding mix as of September thirtyth compared to both for second quarter.
Thousand 19 in the third quarter 2018, total deposits and repos grew almost 1 billion for the quarter.
The addition of summit Bank in Texas Star Bank added just over 800 million in funding to our balance sheet.
Our deposit growth on an organic basis totaled approximately 160 million or just over 4% on an annualized basis.
Over the course of this past year deposits have increased by 2.8 billion 2 billion of which associated with the five transactions closed during this timeframe organic funding growth has totaled 780 million or 5.7%.
We're pleased with our deposit growth efforts, both for the quarter and over the course of the past year.
As we look at pricing our total cost of deposits increased.
[noise], 2.71% for the third quarter from 0.68 for the second quarter this year.
This increase is driven primarily by the tail on the pricing of time deposits.
Given the recent fed action of lowering rates in our internal monitoring of competitive sets across our footprint. We have adjusted our posted rates downward across virtually all of our interest bearing products. Accordingly, we expect the upward pressure on the deposit cost experienced over the SAP last several quarters to abate.
As we look at geographical performance relating to deposits, we had several divisions across our footprint standout this quarter Austin, Texas, The heart of Texas, Our Texas Hill country East Central Mississippian, Missouri divisions, all reported strong deposit growth for the quarter.
Moving to slide eight.
You will see our loan portfolio as of September thirtyth compared to the second quarter of 2019 in the third quarter 2018 loans increased just over 460 million during the quarter acquired loans totaled 570 million, while we had run off of approximately 105 million on organic basis.
Over the course of the last year, we have added 1.7 billion to our loan portfolio through acquisitions, while organic growth has an essentially flat.
As Dan mentioned earlier, we continue to experience pay downs for larger credits as a result of the movement to the non bank lenders, which offer nonrecourse financing these pressures, which can be identified across the footprint, but notably notably there were some larger Texas credits created headwinds to growth for the quarter organic growth for the quarter additions.
To nonrecourse financing pressures, we also continue to see longer term credits out there at very low rates, so while our pipeline of opportunities still healthy.
We simply been unwilling to give on structure in pricing and some of these longer term opportunities that we see is very aggressive rates as we attempt to protect our margin and manage our interest rate risk.
Despite the overall organic loan growth pressures, we continue to have successes in our lending efforts from a geographical perspective, we had several divisions produced meaningful loan growth Austin, Texas, Central Arkansas, Northeast, Arkansas, and North Central Alabama divisions, all had great quarters from a loan growth perspective.
Slide nine contains credit quality highlights.
We continue to be pleased with our credit quality as John mentioned, we had a provision for credit losses of 500000 for the third quarter compared with the present provision of 500000 for the second quarter of 2019 and no recorded provision for the third quarter of 2018.
We had net recoveries of 700000 for the quarter.
Finally, despite the Lumpiness created primarily by acquired loans, our nonperforming and classified assets remained stable in PA days as a result of net loan and leases with 0.82 at the end of the third quarter compared to 0.7, though.
At present at the June 32019 quarter.
The the 0.82% for the third quarter is actually flat compared to the end of 2018.
As we mentioned in the past our view is that we will experience some lumpiness in conjunction with the closing of the transactions as we work to remediate those credits.
Moving onto the mortgage and insurance the tables on slide 10 provide a five quarter look at our results for each product offering our mortgage banking operation produced origination volume for the quarter totaling 536.1 million home purchase money volume was 353.9 million or 66% of our total volume for the quarter.
This is consistent with our commentary in the last quarters conference call at our pipeline it shifted to the 730 purchase refi mix.
[noise] deliveries in the quarter were 374 million compared to 304 million in the second quarter 2019, and 309 million in the third quarter 2018 production in servicing revenue, which excludes the MSR adjustment.
Totaled 11.3 million for the quarter compared to 9.2 million for the second quarter 2019, and 5 million for the third quarter of 2018, our margin was 2.38% for the quarter, representing an increase from 2.31 for the second quarter of 2019.
The margin increase is attributable to the 65 million increase in the mortgage pipeline quarter over quarter. This interest rate dynamics in September resulted.
In the elevated pipeline as compared to the normal seasonal third quarter trends.
The 370 million pipeline at September 30 was comprised of approximately 50% rifai and 50% purchase money.
Finally, as Dan mentioned earlier.
Saar valuation adjustment during the quarter was a negative 4 million.
Moving to insurance total commission revenue for the quarter was 31.5 million compared to $34 million for the second quarter of 2019, and 31.7 million for the third quarter of 2018, as we mentioned each quarter, we typically benchmark to the same quarter in the prior year given the seasonality in our renewal cycles, while total insurance.
Admission revenue was flat compared to the third quarter of last year as a result of the decline in contingent Commission estimates are for PNC commissions and life and health commissions increased by 2.5% collectively this is in line with our loan growth and comments on pricing in the last several quarters.
Finally, I'd like to briefly mentioned our wealth management team, we reported wealth management revenue of 6.7 million for the quarter, which represents an increase of over 10% compared to both the second quarter of 2019, and the first quarter of 2018 Terry modeling. This team has worked hard to attract quality producers enhance our wealth management product offerings there.
Good work is paying off quarter after quarter now I'll turn it back over to Dan for his concluding remarks. Thank.
Thank you, Chris we continue to look for opportunities to grow our company by continuing to recruit revenue producers for all of our products. This is certainly easier when we were recognized as be access insurance was by business insurance magazine as one of the best places to work and insurance.
Specifically within the bank, we ended the quarter up 17 relationship managers compared to the beginning of the quarter on a year to date basis. We are up 36 relationship managers net.
From the end of 2018 with over 50% of those revenue producers located in the high growth markets within Texas.
Our team is pleased with our ability to continue to report improve profitability and a very challenging environment from both a rate and growth perspective, we've worked very hard to protect our net interest margin maintained strong credit quality and improve our operating efficiency each quarter different team stand out or business development standpoint this call.
Order, we were particularly pleased with the deposit growth achieved by our bankers and relationship managers, our mortgage team had an outstanding quarter, both from purchase money production and refinance activity and finally as Chris just alluded to our wealth management team had a great quarter.
With that operator, we'd now be happy to answer any questions.
We will now begin the question answer session to ask a question you May Press Star then one on your Touchtone phone.
Using his speakerphone, please pick up your handset before pressing the keys.
Withdraw your question. Please press Star then too.
Please limit yourself to one question and one follow up if you have any further questions you may enter the question Q.
At this time, we will pause momentarily to assemble a roster.
My first question comes from Kathryn Miller with KBW. Please go ahead.
Thanks, Good morning.
Are you.
Well I'm going to start with the margin.
Had a really nice stability in the core margin, particularly compared to many of the margins. The theme this quarter and if we look at the loan yield.
It seems like a fed rate cut is being offset by the repricing that you're seeing in the portfolio. It is there way to think about when you think we're going to see that inflection point to where we will actually start to either run you'll start to come down.
Do you still think theres, a little bit of room left in the repricing up with lots on the portfolio. Thanks.
Hi, Catherine this is John good morning.
Morning.
Good morning, we do think that.
For the next couple quarter, maybe the next two quarters.
We can we can resist some some of that squeezing the margin that you're alluding to but after that then certainly we're going to I think we're going to see a little less optimism on being able to hold the large enough we do have.
2.2 billion in loans repricing over the next 12 months.
That are going to roll off at a 5% or the last 90 days, we've we've reprice new loans at about a 530. So there's some opportunity there, which you alluded to that is going to be offset somewhat by.
Our.
Our floating rate loans that take hit every time prime is changing.
But those those are kind of sort of offset I think over the next couple of quarters to some extent, although we wouldn't be surprised to see some minor some small.
Degradation in the margin going forward, but still have some hopes that.
That we can have hold up the margin pretty well over the next couple of quarters.
We do have I think 200 million and secure.
Investment portfolio Securities.
Going to be maturing between now and the ended the year that are going to reprice may being course, it depends on what the fed does as maybe 30, bips reprising opportunity upward in those as well.
It depends on whats fed does.
Okay, Yes.
So at current market from a margin this quarter you're more Catherine.
It was really mixed shift that moved it. So so deposit deposit growth is what moved the margin this quarter more than anything else.
Yeah, Yeah, we gave up we gave up about a 2.5 bips just from the mix. That's that's most of that three bip decline in them and the core margin for the quarter was asset mix.
Okay.
Hi, This is driven as we look if you can resist.
And your words, John resistance squeeze over the next couple of quarters could you could you argue that then that gives you time to catch up on the deposit side as we get into next year.
And so.
Arguably kind of over the.
The next to kind of fed cutting period your margin should kind of stay fairly stable well that's that's the wildcard in it.
What we can do what we can do on them, but on the deposit rate. The funding re bid, but you can say that's a that's a fair comment that we do have some opportunity.
To protect the margin by adjusting deposit rates down a little bit yeah.
Have you seen any decline in deposit costs a month over month.
Well the last the last three or four quarters, we've seen a.
Oh gosh.
Nine basis points increase 11 basis point increase.
And then in the second quarter only a five basis point increase and then in this quarter only a three basis point increase in total deposits. So.
The trends going the way we want them to go certainly in the it's true for most banks I would think less pressure less upward pressure on deposits and for the quarter. Our deposit increased as I think I commented on earlier was mostly driven by repricing our CD portfolio.
Most of what we're saying out in the market would be the high rate specials are pretty much gone away.
So we're not saying that high rate competition, many banks for advertising the 13 month or the 17, a month or whatever they want to advertise from a CD perspective, most of that's gone, which is helping helping take some of that pressure off.
Hi.
Great.
Paul.
Good day, and then maybe just on your thoughts on organic growth, meaning you know it's been fairly fairly flat. This quarter is is there any.
Okay outlook into looking at next year that makes you believe that you organic our three improve from here.
Yes, I think that was what I commented on towards the end of the conversation just a few minutes ago. I think we continue to find what we think are quality relationship managers, we continued to add.
Folks on the our team many of them or not and traction at this point, yet, but they'll start gaining some traction.
As I said half over half of our new producers are in Texas, and some part of Texas, which helps us I.
I think we expect to be able to grow.
The wildcard obviously would be the overall economy, if the economy stops growing them, obviously about changes the game a little bit, but I think we're putting people on the right places.
I think we have the ability to play when you look at pipeline, Chris was talking about about a few minutes ago. I think our pipeline is full we're we're holding our own on on that level. So the the impact that we've seen its been more of the non bank irrational pricing, we've seen to 88 for Tim We've seen 315 for 15 years.
We're not willing to play at those rate levels and so we will let a customer will let a customer move a transaction for that.
Thanks, Dan.
He said much great quarter. Thank you Catherine.
Our next question comes from Jennifer Demba with Suntrust. Please go ahead.
Hey, guys, it's actually Steve on for Jennifer.
Hi, Steve.
Question on out when did you adjust the posted rates this quarter.
Throughout the quarter. Okay. So it was kind of through the quarter and do you think you guys will move kind of get out it maybe an October cod or or do you guys react to those are or is it kind of just as you see the competition move.
We track competition on a weekly basis, and we're making moves in real time clearly the fed moves have impact on all of that but we're making moves in real time.
Okay.
Mortgage pipeline looks pretty strong and top four Q you guys you'd be able to outgrow that seasonality in that business are you still seeing right re fi pretty strong.
We are saying Oh, everything strawberry brief I and purchase the mix is up on the revised side as you would expect and we commented on in that because of I guess, where the rate break lines, but I think it's a bunch of the rate environment plus we've added producers there as we grow in different new markets were seeing some opportunities.
To keep keep volume up there.
Okay.
Final question I guess on the M&A side are you guys seeing any kind of different activity from competition other people stepping into deals.
Gross just seems to be slowing and it seems like maybe people move more to M&A anything there.
I'm not sure I, followed all of that conversation, but you know from an M&A perspective, Theres still lot of people talking I don't know that I've seen.
More people talking or less people talking there's there's a there's activity out there on the M&A front.
Okay. Thanks, Thank you.
Our next question comes from.
With Stephens. Please go ahead mark them up.
Hey, good morning, and how are you good.
I just want to ask you about the the stock repurchase plan and expectations for how aggressive are going to be on that going forward.
We've been opportunistic so you know when you look at what we were able to purchase in the last quarter. We've got an automatic program that executes on its own.
It is price sensitive and so in today's environment, we haven't seen that but you know if you remember last year. It was in December that the market through up all over all of us.
So you know, we what we want to make sure that were prepared and ready for that we think we've done well in that to get my Crystal ball out I would hope that the market doesn't backup like it did last year, but but if it did we've got protection in place for that.
Okay.
And then going back to the M&A discussion I guess the data points were hearing are.
There's more and more smaller banks they continue to raise their hand and look for M&A partners I'm, just curious what you're seeing on the ground as far as the M&A pipeline and and how your combinations are coming right now.
Well you I think we've been pretty active and what you would call. The smaller banks World. You know I think we see we see opportunities you know that when we look at the transactions that we've completed this year or announced this year I think all of those transactions have been beneficial to us. They are a claim core banks they are relatively simple and.
Our business model, which means there are relatively low risk for us they've expanded us into some geographies.
Overlapping geographies that benefit us from an efficiency standpoint, and the two that we're working on today Summit Bank that closed on September the first and Texas Star also on September the first we expect to integrate those onto our operating system here within the next couple of weeks.
So being able to integrate those banks quickly as a big benefit to us the Florida Panhandle is a great market. We're excited about what the team down there is doing for US we're already in the Dallas market in Texas starts that stuff and the Dallas I must say in the north of that I think that market can be a big plus for us. So we're excited to get those folks.
In line.
The announcement in the quarter was Rodney Crolles bank and in Waco, Texas.
Next is first state bank great.
Franchise, there and the Waco market a college town undefeated town right now I guess, we can all say.
The.
We have overlap within our markets in the temple and clean area that will benefit us I think there's more and more of that type of opportunity out there what kind of continue to play and talk with the folks that are and our neighborhoods.
Okay sounds great. Thank you. Thank you Matt.
Our next question comes from Jon Arfstrom with RBC capital markets. Please go ahead.
Thanks, Good morning, everyone Hi, John .
Few questions here.
Early in the call you guys talked about the elevated pay offs and go into the non bank market, but then you talked about the ability to pick up some fee revenues.
By helping clients place those credits can you talk about that a little bit then maybe if you can share the magnitude or the size of these credits and then what the offsetting fee opportunity wants.
Yeah. There were several in there the biggest one was a 40 plus million dollar well. The credit was an 80 plus million dollar credit we were carrying 40 plus million of it on our balance sheet.
And our team our capital markets team assisted that borrower and moving that out that happened literally in the first week or two of the quarter.
And then there were several other smaller ones on top of that the capital markets team John was talking about some of the perfect storm of multiple items that generated some revenue for us in his conversation.
<unk> capital markets team is one of them and I don't remember exactly what that was a little less than the million dollar $750000 on on that transaction. So while we hate to lose the the earning asset when when the borrower can take it out into a non recourse what we consider to be exceptionally low rate fixed for a long term.
It's hard to argue with that.
Right, Okay, and you're saying, it's pretty broad, but if you had to aggregate maybe the top you know three or four credits that left is that.
You know $100 million in credit, it's just lumped in a few credits.
I don't know that I'd get to a 100 million in that we're probably in the 50 60 $70 million range that we can identify that went out Chris you want to jump in on that any anyway, yeah. I mean after that it gets smaller and smaller but that you start to get done in 10, and 5 million dollar credits, but I would say did the bigger size Dan suggests maybe six.
You are 70, we also exited some credits in the quarter that would be acquired credits that were.
Not not listed as nonperforming to US but were acquired credits that we had intended to and wanted to exit. So you had some about happening also.
Okay, Okay that helps.
I guess another question I had a was around.
The relationship manager hires that you talked about at the end of your comments Dan.
You talked about insurance, but then you went to talking about the bank in the relationship managers.
Alright, well for insurance in the bank and I'm just curious if the profile of you know who you're hiring help us understand that yeah.
We're trying to hire and all of our categories. You know in insurance was recognized in their industry as a one of the better places to work we like that.
We've got good revenue producers and our insurance team they continue to do well.
They're continuing to recruit on on their side also on the mortgage side, we continue to recruit mortgage producers and we've done well picking up folks on some pretty high growth markets that is helping the production on on that side and then I was specifically talking about the bulk of the ads have been it had been within the bank.
With that my exact number now is it 36 year to date and again half of those are little more than half of those are in Texas, they're coming from lots of different places there's no real one or two places that those are coming from we've hired from some much bigger banks than us in some markets we've hired from some.
Much smaller banks.
On us and other markets much of this is coming through referrals from our own folks.
I like it when our own folks are out talking to their appears in the market and saying you need to come join us and we've had some success with that but it takes them sometime to get down and you know get organized and learn their way around before they can start seeing some real traction, but but if we keep adding people will continue to grain that traction from those folks joining the team.
Okay I appreciate that and then one one small one I know this number jumps around a little bit but for John Copeland miscellaneous income was there anything to call out there in terms of the Andrew.
Well, Dan has already mentioned the placement fee to 750000 capital markets placement fee. We saw our swap fee income go up quarter over quarter, six or 700000.
We had about a 600000 dollar gain on sale of some other real estate.
And then a whole slew of other smaller individual items, but those that's a flavor of the kind of things we're talking about.
Bode very well income a debt Boeing death benefit was up six or 700000. So that's those are the kinds of things we're talking about the perfect storm of everything hitting a little bit I'm not sure that all of that happens again, but but it was a it was a nice quarter for you can say some of those are recurring the boating might be consider.
To be recurring but it did it in the quarter.
Okay.
Alright, Thanks, a lot guys. Thank you John .
Your next question comes from David Feaster with Raymond James. Please go ahead.
Good morning, everybody.
Thank you very well I just wanted to follow up on the buyback question could you remind us where you manage your capital ratios to and what's your limiting ratio is and I guess as the current point expires do you have any expectations for the potential size of a new authorization and how Cecil might play into that if at all.
Well, let's see as folks unpack that a little bit [laughter].
You know I don't know that we have targeted ratios that we've ever disclosed that we're managing to we don't manage that to a target like that.
I think we want to be opportunistic with what's out there when we look forward into what may happen in 2020.
Our board of directors, we'll certainly look at that opportunity at the end of the year that would be a December board meeting <unk> Act activity for us.
So I would hesitate to kind of forced them into a.
What if or how much on a look forward basis, I think we want to make sure that we've got all the tools in our tool kit for capital management and the stock buyback is one of those.
Okay.
And then.
Back to the mortgage do you have any thoughts on the gain on sale margin I mean, I guess given the pipeline do you think it should hold up and has there been any.
Additional conversation or thoughts about hedging the MSR.
Okay. There's two parts their margin would be first MSR with second we are hedging a little bit of MSR.
We've been hedging a little bit of it and you know when rates move around you know, but you could argue that it may or may not be the time to do that when rates are really low you know you're giving up future income. So we certainly have taken the hips. We're now hedging 20% you every part of the value of that's in there. So we're playing in the hedge but we haven't turned on.
A full size hedge with the thought process that if rates do come back up to a more normal level in the future sometime we would want to take advantage of that Chris you want to talk about gain on sale and a gain on sale margin.
See it a lot of that's volume driven and you know in timing to the quarter. So you know we we continue to say that what we think our average margin be flat into we would be 175 of you're looking at across the full year. So.
No I don't know even.
We expect to see some lumpiness like we always had where it bounces up and down quarter to quarter, depending on volume woman's.
Okay.
And then last one from me just just any thoughts on expenses I mean, how much of the summit and Vanalstyne synergies are already in the run rate.
And what's the timing going forward, maybe just what's a good rate run rate as we enter 2020 [noise].
Yeah, So remember.
There's nothing in the run rate there when you look at the quarter, we only had one month of their expense base in the three Q. So we'll have three months about expense base and for Q and as I said, a few minutes ago, our intention in our plans ours to integrate them into our operating systems in the next couple of weeks, which will allow us to start pulling back.
On some of those expenses, but what you're really looking at the large majority of them carrying through the fourth quarter.
Okay.
Is there any timing do you have any projections for the timing of those synergies or is I mean, primarily a one Q2 0 event.
Again, I'm not sure exactly how to answer your question I mean, we're we are.
Actively managing expenses and all of the mergers that we bring through when we bring them on board.
We immediately began working on the operational integration wants their integrated into our system that allows us to knock some of those expenses off 30 to 60 to 90 days post that integration, we anticipate integrating.
The Texas Star in summit here in the next couple of weeks, which would lead to the beginning of that that cost cutting.
I appreciate it thanks. Thank you.
Our next question comes from John wrote US with Janney. Please go ahead.
Hey, guys, John you all talked about the Cardinals.
Baseball's overdone, Oh, Okay, [laughter], It's college football I know you'd like that.
How you doing deals.
Good thanks.
I guess basically all my questions have been asked and answered, but Dan maybe just big picture you're in a lot of markets and I know you know like Texas is better than probably most of the other markets you're in but just big picture. How do you feel about the economy right now just where you guys stands.
You know, we see mixed signals on that front, you're right. When you look at the economy within the states that we serve some of them are not growing very fast.
However on the other side of that.
It's a tight tight labor market across our entire footprint everybody. We talk to is having you know the streaming to find and retain and attract.
People. So I think when you talk about the full employment that would tell you the economy's humming along pretty well when you look at some of the footprints that were in you know, we're not saying the same level of growth that we're seeing in the Texas market. So my answer is it's kind of mixed I think there's still folks that are trying to figure out what all of the tariff to talk means if anything some people in our market are impacted by.
That more than others.
I think we're I'm going along pretty well right now.
Okay, Okay makes sense thanks, Dan.
Thank you and by the wage on baseball is still going on you know there is a world series games in Houston Tonight, Oh, Yeah, Houston, that's right good [laughter].
Good luck.
Our next question comes from Kevin Fitzsimmons.
Davidson. Please go ahead.
Hey, good morning, everyone, Hey, Kevin good to hear from you.
Good good SBQ, Dan just real quick question.
I've been covered but.
Giving you this president and Oh, the Pan handle and you had mentioned a few times that that team is doing very well.
Do you have the infrastructure that you want and need longer term, there or do you aspire for something bigger there in other words to do you do you need to go.
Specifically looking for acquisitions are at a higher teams and the pan handle or do you have just where you need right now.
Oh, I think we've got a great team down there. So you know I think we can play with what we've got for a long time if opportunities come.
Come up that give us the opportunity to add good revenue producers are find another partner down there I think we would be happy to talk about way too.
Andy Stein and the team that came over from from summit to cut some really good bankers down there. Our office. We have we were in the Florida Panhandle prior to summit.
Our location was smack in the center of the of their footprint they run from Panama City over to Pensacola, and we were right in the middle of that already. So this gives US you know a much bigger presents along that corridor and when you look at what's happening in the economy down there that that's an area within our footprint that the economy appears to be humming along.
Quite well.
Are there are there particular markets that if you found revenue producers you really want to add too in the Panhandle.
Oh, you know I don't think we have a blonder on from a revenue producers standpoint in any market when when we've got opportunities to bring people on that can produce business and help us grow our bank.
We're blind to what market that may be if it happens to be on a higher growth market and I'm, Panama City, who was hit by the the Hurricane last year, that's that's going to be some growth in that market for the next several years as they recover from the hurricane damage.
But the entire Florida Panhandle has that opportunity as does mobile, Alabama, or Huntsville, Alabama, or Nashville, Tennessee, or I could I could go on an all in all markets that we're actively looking for and would be happy to bring on revenue producers.
Okay, Alright, great. Thanks, Dan.
Thank you Kevin.
This concludes our question and answer session I would like to turn the conference back over to Dan Rollins for any closing remarks.
Thank you all for joining us today, if you need any additional information or have further questions. Please don't hesitate to reach out to us otherwise, we'll look forward to speaking with you. All again soon thank you very much for participating.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.