Q3 2019 Earnings Call

Good morning.

So state Corporation.

Earnings Conference call.

Today's call is being recorded all participants will be in listen only mode for the first part of a call.

Where we will open the line for questions, what's the research analyst community.

I will now I'll turn the call over to Jim memory cells State Corporation, Executive Vice President and Georgia Investor Relations.

Thank you for calling in today to the South State Corporation earnings Conference call.

Before beginning I want to remind listeners that the discussion contains forward looking statements regarding our financial condition results.

Please refer to slide number two for cautions regarding forward looking statements and discussion regarding the use of non-GAAP measures I.

I would now like to reduce Robert Hill, our Chief Executive Officer, who will begin the call. Good morning. Thank you for joining us I'll begin the call with summary comments about third quarter and observations on <unk> overall performance, John Pollok will review the quarter more detail and we will then conclude the call with questions from the research analyst community.

The first on most of 2019 have been very solid as we produced record earnings in the third quarter net income for the quarter totaled 51.5 million dollar 50 per diluted share. This represents a 1.31% return on assets and a 16.62%.

Our own tangible equity in the fourth quarter of 2018, we updated you on our areas of focus for the company and also announced our longer term financial targets. Our team has made significant progress and the execution of our strategic objectives and this is clear in the financial performance in the third quarter a year ago. We.

Previewed with you the ability to create operating leverage due to our large increasing or customer base I'm pleased with this progress as we have created efficiencies reduce expenses and made significant investments in people technology and systems, we continue to see opportunities to enhance the customer experience drive operating leverage and.

Create a simplified and more efficient process in many areas.

I'm also pleased with the sound balance sheet and loan portfolio that we have as we move into periods of more uncertainty soundness continues to be a key strength South state bank.

With moderate loan growth an excellent asset quality, we continue using excess capital to invest in the company since embarking on our stock buyback program in the third quarter of 2018, we have repurchased approximately 8% of outstanding shares and still maintain considerable levels of capital.

Vast majority of which is common equity the board of directors has declared a cash dividend of 46 cents per share. This is an increase of three cents from last quarter and a 27.8% increase from the same quarter a year ago.

I'll now turn the call over to John Pollok for more detail on the financial performance for the quarter. Thank you. Robert My comments. This morning, we'll focus on our margin noninterest income and expense capital management and some thoughts on the estimated impact up the adoption of the current expected credit loss model.

For the second consecutive quarter, we showed improvements and adjusted operating leverage with increases in both net interest income and noninterest income and a reduction in expenses. This quarter on slide number five you can see the small improvement and net interest income this quarter up to $127.4 million as interest income.

Was flat and interest expense decreased $200000.

Net interest income excluding acquired loan accretion increased $1.3 million linked quarter as loan accretion continued to become a smaller portion of our earnings stream.

Our net interest margin declined nine basis points as yields on interest, earning assets declined by 10 basis points impacted by two rate cuts during the quarter and lower acquired loan accretion.

Our cost of interest bearing liabilities declined three basis points and our total cost of funds declined two basis points this quarter to 69 basis points.

We were able to bring down the cost of all funding categories during the quarter with the exception of certificates of deposits.

We also had annualized growth of over 6% and noninterest bearing checking accounts with quarter end balances increasing by $52 million.

Slide number six shows the composition of our interest earning assets and the change in mix during the quarter in total our average interest earning assets increased $181 million with an increase in our investment portfolio and growth in our loan portfolio.

One growth was somewhat muted by refinance activity in the residential book, but of course, we had good mortgage banking thing income as a result.

Average loans increased by $67 million are 2.4% with a 291 million dollar increase on the non acquired loans and a $224 million decrease on acquired loans acquired loans now represent 18% of interest, earning assets and accretion income on these loans and now.

That's only 5.4% of interest income as shown on slide number seven you can see those balances and the discount remaining on the portfolio on slide number eight we had very strong improvement in adjusted noninterest income this quarter as shown on slide number nine with a $1 million increase in fees on deposit occur.

Sounds and 800000 dollar increase in mortgage banking income.

Mortgage banking income totaled $6.1 million on record levels of secondary market activity.

Slide number 10 shows are linked quarter expense detail adjusted noninterest expense totaled $96.4 million, which was down $1.4 million linked quarter on good expense management in almost all categories and the benefit of a 1.6 million dollar credit on our FDIC insurance assessment.

The credit, which triggered by the deposit insurance fun exceeding its targeted level and we anticipate receiving approximately $800000 in additional credits in the fourth quarter.

We have now achieved the majority of the previously announced branch closure and cost initiatives on a run rate basis and remain focused on holding expense growth within our zero to 3% long term target on slide number 11, you can see the end result of revenue growth in lower expenses in our efficiency ratio improvement.

Down to 58.4% this quarter.

Tangible book value increased by 35 cents per share to $38.20 as shown on slide number 12.

This is a growth rate up 8% from a year ago, despite being active in the share repurchases. During this period, our cash dividend also increased 7% compared to last quarter and over 27% from a year ago.

On slide number 13, you can see the repurchase activity by quarter, which totals 2.165 million shares for a total of $157 million.

We currently have 835000 shares available for repurchase under our existing plant.

From a capital management standpoint, our tangible common equity to tangible assets ratio was 8.8% and within our long term target and the dividend declared by our board this quarter represents roughly 30% of earnings.

These capital management efforts and operating leverage improvements this quarter resulted in a 16.6% return on tangible common equity within our long term goal of 16% to 18% and finally Cecil will become effective on January the first 2020.

Standard will require estimating projected and lifetime credit losses based on macroeconomic forecast assumptions and certain management judgments over the life of the loans.

Under our baseline scenario, we estimate the our allowance undersea so we'll be in a range of $105 million to $120 million. This increase is roughly $35 million to $50 million and we estimate the initial capital charge required to reach this cecil level reduce our tangible.

Common equity ratio by 20 to 30 basis points.

Well now turn the call over to Robert for some summary comments.

As we near year end, our tension turns toward the years ahead. Our goal is to build upon recent results and continue to create value for our customers shareholders entertain very good progress in 2019, we look forward to the opportunities ahead of US. This concludes our prepared remarks, and I would like to ask the operator to open the call for questions.

Thank you we will now begin to question answer session.

Ask a question press Star then one under Touchtone phone.

If you are using the speaker phone, we ask you placement or per handset before pressing the keys.

But any time your question has been addressed.

Your question. Please press Star then too.

At this time, we'll pause momentarily to assemble a roster.

And today's first question comes from Catherine Mealor KBW. Please go ahead.

Thanks, Good morning.

Catherine.

Let's start with gross.

Are you still have your target as I've got to 5% to 10% and the non acquired gradually was really strong this quarter over 15%, but it feels like the acquired write off continues to keep that the net growth below that 5% range does there can you talk a little bit about your outlook there and is there an inflection point in the near term where are you.

Thank you acquired runoff were flat when we're really going to start to see the benefit.

Of that non acquired Buck growth falling to the bottom line. Thanks.

Catherine This is Robert Yeah. Overall, we continue to feel really good about our 5% to 7% range a math thinking in terms of our team our markets. The way were structured certainly I think have the ability to operate comfortably within our risk parameters inside a inside that range I think it's each quarter spin or something.

A little different this quarter mortgage was down so that certainly hit overall net loan growth, but we had really good growth income and commercial owner occupied 9%.

And some slight growth and see already about about 3%. So the pipeline than strong we've had a strong pipeline all year, but Q2 to Q3, our pipeline grew 19%.

And in Q3, our production was right at a billion dollars, which was a record for us and that was up nicely over over Q2, and most of the most of the pipeline as an owner occupied and see an eye. So.

The components of the gross that we're seeing and and and nice areas of growth, we feel really good because their relationship growth driven.

And then the market saw Charlotte was where we saw the most churn in the acquired book as we kind of reposition park and got Kinda remake some of our team members added some new talent there. The charlatan into Q3 was up 14% Greenville was up 19. So it's there's not a kind of a one size fits all.

The answer we continue to say really healthy volume pipeline production levels and most of our markets, but we also some of that some of the churn. We're seeing I think is a result of some of our customers who have just been de leveraging and we've seen it for about a year and and we continue to see some of that the.

I mentioned, the mortgage and the secondary market. This more going secondary and then we're continuing to see some what we perceive as risk build.

In certain segments of the of the market just terms and conditions on credit being stretched pass levels that we're comfortable with so.

Catherine Theres not a one size fits all answer.

But to summarize we feel very good about our 5% to 7% range that we can operate there that the markets are going to provide us that level of opportunity and the components underneath the net number we continue to feel very good about.

Okay, Yeah, that's really helpful. In it and then on pricing.

As I said that can appreciate it looks like your your legacy loan yield to actually really stable. This quarter, we see that I think fall yet more instantly. Your peers can you can you talk a little bit about anyone's if the dynamics within your core portfolio and how much is variable versus fixed and tied to lie boring how much that's repricing immediately with with pad.

Rates coming down and then also where you're seeing new pricing today on your on your new production Bank.

Catherine This is John so new production pricing I'll start with the last part of your question first year, we're in that kind of for 35 range.

Your pricing never got really up in the high fives. So you know we as you know focus on but a credit so I feel like from a pricing perspective or even as rates have moved back down you know, we've just had we've had more stability.

Yeah, when you Peel apart our $11 billion a portfolio you're right that 6.3 billion is fixed.

About 4.9 billion is variable when you Peel back the variable even further a 22% of that's hybrid arms, 21% as floaters and then we got off a small part that that is adjustable is on the adjustable rate side.

So when you look and you kind of go a little bit deeper.

<unk> inside or the the floaters. So the floaters are roughly.

2.3 billion, a and you want to Peel that back a little bit more we've got prime based loans in that bucket.

There was a little over a billion dollars and then lob bore we have about 1.3 billion Todd the lot more.

Okay.

That's great it and maybe you look at that.

At that Nick, but only a billion three tied to align well I mean, maybe you could you argue that.

While there is down Thats your core linear if it's it's not going to be as maybe check I need it hasn't something your peers, which gives you the opportunity to really bring the funding down.

You know I'd add a more measured pace to well yeah. I think I think that's fair I think you know we had a bigger residential mortgage book and so we had more fixed rates or hybrid arms.

Clearly when you when you go down in the detailing our margin table you you're seeing the decrease on the mortgage side, but the yields and there are holding up so having a little bit more fixed rates helped us, but our view I think on net interest margin really hadn't changed much is we're trying to manage more toward neutral.

We saw some nice opportunities as we've talked about.

Trying to do that as rates came came back down. So we're trying to really get more balance there. It's a great opportunity I'm really really to do that.

It was nice to see kinda flipping over on the funding side, a little bit Kathryn is it last quarter, we mentioned and we started seeing stability and the pricing on funding and now we're seeing decreases in fact, all our categories on the deposit side went down except for Cds, and we think those are going to begin to.

Trend down so really feel good about the position we take a long term look at margin.

Clearly we were sitting here. This time last year in rates were were on their way up and now they're on the way back down so you're gonna have from a quarter to quarter basis, when they join the steering wheel like this all right you're going to have some noise in there, but really feel good. It's it gives us a good opportunity as we build that commercial bank more to maybe get a little bit more balanced on the variables.

Side.

And Oh.

Very helpful color, thanks, great quarter.

Our next question today comes from Jennifer Demba of Suntrust. Please go ahead.

[noise]. Thank you good morning oriented gentry.

Two questions first on expenses he said most of the.

Cost savings.

Cost reductions rather you've made.

Had been taken out can you kind of give us John a good sense of where fourth quarter expenses may land with all the puts and take I.

You know you said, you're going to get another <unk> rebate from the FDIC.

That's correct yeah, when we get another rebate there I think as we said on expenses before we're trying to stay in that.

Let's see wrote a 3% range on expense growth I think when you look at this quarter, you can see salaries and benefits were up.

About a million dollars, we funded some incentive plans I'm clearly when rates go down yeah. We had a few syrups, we took the discount right up on a little bit surprised a little bit a noise in that salary and benefit line. So I'd say first of all feel good that we're going to be in our range, Yeah fourth quarters all.

You know kind of different at yearend, depending on kind of kind of what you do but feel good about really where where we are long term and I think one of the the pieces to look out on the expense side is really when you look at kind of the digital side of our company.

And think about the cost.

Really servicing our customers I, just kind of hard to believe but you look a year over year. Our mobile users are up 15%. Our bill pay users are up another 10% we put in cell. So our person to person payments were up 40%. So.

So I'd say general for what we're saying is where we're really being able to squeeze out the costs longer term.

In the company on the especially on on the amount of volume that we have with our customers. So I feel like it's all headed in the right direction. Yeah, we're continuing to build out our delivery channels and so we've got a little bit more work to do there, but generally I feel really comfortable we can stay within our within our range.

Okay and can you talk about M&A interest today, Robert and John and what kind of targets you might be seeking.

Right now.

Yeah, I don't think is really change from where we've always been Jennifer is I think what has changed is we're really well I mean really well positioned.

You know the the last year, we've taken we kind of laid out our financial targets. We we laid out what we wanted to accomplish in 19 to get those in line into provide more clarity both internally and externally with our numbers and I think we met a lot of progress in that this year and and so now if you look at our team are.

Capital position, our infrastructure, we're just <unk> and a really good place. So M&A is really for US driven mostly by you know the right people are the right company at the right time, and I think we continue to evaluate it that way and as we always have.

When you consider doing a transaction where the company of a similar side [noise].

I would say right now we would keep all options on the table, we've always tried.

Two.

Keep plenty of Optionality and in in terms of strategically the direction of the company and if that was if that type of company met those parameters. Yes that is something we would consider as we do downstream as well.

Okay. Thank you.

<unk>.

Our next question comes from Tyler Stafford of Stephens, Inc. Please go ahead.

Good morning, guys.

Good morning.

Hey, I just wanted to start on on deposits Oh, you know total deposits are up call. It 3% on average year over year, obviously nice.

Be growth this quarter and over the last year, what puts savings down savings in Cds down 7% or so so I was just hoping you could talk about deposit growth expectations as you look out over the next year. So.

<unk> I'll, let me start and now trying to turn it over to John .

I think <unk> well, we feel good about is kinda somewhere I guess back to Catherine's question on the loan credit side is the components of of deposit growth because we can go get deposit growth.

But just like 9% growth and owner occupied is same kind of dynamic on the treasury fraud is we've added 278, new treasury relationships you. This year, which you mentioned that noninterest de da growth about 6% in that category and about 150 million of that growth came from the treasury effort. So.

Feel really good about that and then well we'll hit 500000 checking accounts, probably in the fourth quarter or maybe the first quarter of next year. So the the activity levels overall in terms of just core relationships.

Overall feel pretty good and feel like we're on a really good what the pipeline. So that's a pretty sustainable pace John in the other how only thing I would add up as you know the end up in the park.

Apart a merger that we did you know wasn't a big retail banking, we're really starting to see those branches really do extremely well on the retail side. So were are checking account growth numbers were up there.

So that's clearly beginning to even give us more firepower and and those are in those offices. So I really feel good that you know we can continue though to get nice deposits. You know our focus is always on might noninterest DDIY. We measure we measure checking account growth weekly that's how Robert now were brought up if you.

Want to work you got to be excited about opening a check in account. So we try to get as much of that is as we can okay. Thanks for that and then maybe John appreciate the details around that the Cecil impact can you talk about just how we should think about at the pace of an amount of future buybacks given that a that capital impact you mentioned and then just in any framework to think about.

<unk>.

In addition for 2020 under seasonal.

So on on the capital side I'd say a couple of things I think was we mentioned really a year ago at the Investor Day I'm. You know we didn't really know the impact of Cecil then we got a range out there now.

Thank back then we talk about maybe even bringing up the T.C. range down a tad I'm sure. That's something we'll think about as we get into our capital planning a at the ended the year, but you know we just got within that range up we still loved the value of our company. We're going to continue to look at buybacks, yeah from a dividend perspective.

At the low end up our range at a 30% pay out so I think we'll continue.

The focus on our new payout range, which as you noticed is 30 or 30% to 35%. So I think we're in really good shape a from a from a capital management standpoint.

Yeah, we really haven't tap the sub debt market.

Clearly those prices out there today tower look very attractive that's something we have a and our tool told that if we wanted wanted to do that.

Next year from an accretion standpoint, you know the stories really really hadn't changed a whole lot.

If you kind of go back and looked at our slides.

You all page eight I think we've tried to use this slide a lot and this is kind of how we think about accretion going for it of course. This is based on September authority. If these numbers will change at the year. It at year end, but slide number eight so really good place ought to look at that in fact, I use the slide countless times with investors try to walk through that so.

So when you think about our non credit impaired book, we've got a 24.2 million dollar discount.

That will continue to up to accrete up through the income statement, that's a pretty pretty easy one to see there and then if you go back up on the credit impaired book you can see our non credit discount today's about 32.9 million so assuming that our.

Credit Mark or our reserve is correct on the credit impaired you would continue to see that accrete in the next thing I would mention as you know we today in our acquired loan book, we have everything set up in pools and so we have to measure the weighted average life. So we've talked about before you know I still have loans and pull.

Sales from our C. B T transaction that we did back in 2010, so we have to Remeasure the cash flows and kinda extend the accretion out well, we're gonna bust our pulls up.

Well go more to a Fas 91 approach and so as we do that I think our view today is you're going to see an acceleration of those accretion of that credit impaired accretion bucket kind of come through the income statement. So I think our view at the beginning.

It's all things being equal today kind of where prepayment speeds our tower I won't have to extend those weighted average lives out. So we think more accretion income will kind of flow through the income statement.

Okay very helpful. I appreciate that.

And then do you have what the loan prepayment fees or this quarter.

I'm, sorry, I didn't hear you the loan prepayment fees do you have those handy I do not I can get that for you that don't have that okay. That's fine.

That's it for me thanks, guys.

And our next question today comes from Stephen Scouten of Sandler O'neil. Please go ahead.

Hey, guys good morning important.

Do you all had some nice movement.

Within average, earning assets bounces and yield here and I'm wondering if you could give a little more detail one specifically around the new tax exempt securities yields what your investing in there from a duration standpoint, and so forth and then just kinda if you think theres incremental.

Mix shift to be had there within the balance sheet that would be beneficial moving forward.

Okay. Steven I think is as we talk as we kind of went into the leverage transaction like we've tried to telegraph you assume in loan growth didn't pick up a great deal we would make more purchases you know end the and the investment portfolio.

So your portfolio grew a little over 92 million or for the quarter, We had 234 million in purchases 71 million and pay downs.

We actually sold 42 million a we just didn't like some of the structure of those credits and falling rate environment. So we sold those took some gains.

And reinvested a there and then we had about 29 million in maturities, our blended kinda tax equivalent yield.

Well, what we purchase was right at 271.

And so I felt really good about that I think as you know theres so much volatility out there in the market today little different for us trying to grow the investment portfolio or some but feel good about about what we were able to what we were able to purchase if you.

You know kind of drilling there are a little bit further 39% of the purchases were you kind of normal up stuff that we've done on on mortgage backs.

Yeah, we as we had some SP a up prom floating rate bonds that we got we like those there's zero risk weighted so we kind of took those on and then some miscellaneous others that that we're able to able to yet.

Yeah. If you look at a weighted average life. It kind of stayed roughly the same was about 4.4 0.3 years.

Okay. Okay.

Okay, no. So you've got some better yield maybe with some different product mix, but no real extension of risk or duration. It sounds like that that is correct perfect.

And then maybe just going back to kind of trends in your market loan growth and so forth it sounded like and one of the answers to Catherine's question I believe it was that you're seeing some maybe increased risk taking from some participants in your market and maybe thinking about that may constrain growth are there any specifics you can lender that in terms of where you are.

Seeing people push the envelope, if it's any particular asset classes and if you're seeing any real changes in consumer behavior or if it's just more and customer behavior. If it's more just a level of cautiousness.

As a Steven this is Robert <unk>, you know what I'd say overall is mainland demands pretty good pipelines good volumes good so.

No it's not like read a tipping point, where is all you pull the Orange then overall, we feel our markets are pretty healthy and robust but around the edges. You are seeing it I'd say, mostly isn't CRH and mostly it's around its around the terms and conditions and structure if so.

All right and that's that's what we're seeing more take take risk and where where we're letting more of those deals just walk away.

Perfect. That's helpful. Robert Thanks, guys appreciate it.

Again, if you have a question. Please press Star then one today's next question comes from Christopher Marinac, Oh Fig partners. Please go ahead.

Hey, Thanks, Good morning, I'm wondering just to ask about the Accretable are not excuse me Nonaccretable difference that you outlined I think it's on page eight other release I know is a small number this quarter, John and Robert but are there opportunities for more reclassifications, there or is a lot of those major shifts behind you.

Chris This is John you know, we look at it every quarter.

So you know some quarters or are better than others yeah. Its.

The fourth quarter is a little unusual right, we're kind of the last quarter before Cecil <unk> and implementation of that.

As you can as you can tell the the number just keeps gets smaller and smaller and you look it at page seven and you think about our Accretable yield I think this is a great chart to look at.

The only represents about 5.4% of title interest income today.

And so it just kind of gets smaller and smaller stuff. We do have some releases you know, it's not going to have some major.

Impact on on that accretion number I do like the contractual yields that we're seeing in that acquired book and you look at that page. Those are a those have held up pretty nicely, but Chris really not I wouldn't see some big release coming out of that it's just kind of gotten gotten pretty small.

Okay, Great just wanted to verify that thank you for that and then when you talked about the digital build out and expenses related to that.

How much goes towards a digital on the commercial side versus on the on the retail side is that going to be splits or what is the emphasis on on those two.

I'll start Chris I think you know on the on the digital side you know, let's just think about commercial and you. We rolled out this year you know our relationship with Encino and so when I think about the commercial side I kind of think about that piece first that you were kind of going through that.

What I think about commercial you know from the digital side more I kind of really go back to really Treasury. We spent a lot of time.

Making sure we got on the right system as you all know we took park system, a we did not get arc customers converted on that system till April .

You are starting to see our service charge Lon move in fact, this quarter or some of that increase in the service charge line was due to the due to the treasury due to our treasury area. So really seeing great adoption that we have a 500 million dollar pipeline and treasury today made that isn't it.

North mist pipeline and I think the reason is people like treasury liked that digital side really liked the digital side of that.

Robert not only thing I would add as you know I don't know that is I don't know that its 50 50 from an expense standpoint, but from me I'll address more the prioritization of our digital road map is it was kinda.

Several years ago, we laid out a digital road map and first it was kind of what we call T. Two or technology transformation of basically removing all the technology components that don't really directly impact our revenue streams in customer base or make us more operationally efficient and so that was step one was really it was.

Kind of moving the things that aren't important off the play and then it became the commercial bank. It was a as John said it was treasury is on the LLS system is purchase cards is getting all the products and services in getting that that that delivery channel build out and that is not fully come.

Point, but we're a long way down that path and then the last piece, we have moved towards really is the consumer pace I'm.

Mortgage volume has doubled online in the last year, our consumer volume continues to double our online check in account continues to double and now we're looking at kinda, our our mobile platforms and the technology around that so obviously the technology enhancements and things you need to do never really come too.

And but I think we've come up with taking the roadmap from kind of being conceptual three years ago to clearly driving a driving business today.

That's great. Thank you for that background, just a just a quick final comment on the wealth management business I presume that you're seeing kind of net positive flows there just in general.

It has one we've had some institutional money. That's this kind of rolled out you know kind of turned out but overall I think business. There continues to be strong we've added teams and in Raleigh. We've added themes in the upstate South Carolina, our investment services group had their their best production growth.

So prediction production quarter ever in Q3, so overall I feel continue to be very pleased with our progress in wealth.

Sounds great. Thank you Robert Thank you John .

Our next question comes from Nancy Bush of an A.B. research. Please go ahead good morning, gentlemen.

I'm going to ask you a big hypothetical here you know.

Zero rates or negative rates are still a remote possibility.

But they're not as zero possibility anymore I'm, given what's going on in the world and given what's going on at the fed is that a scenario that you have to look at seriously at this point is it something that the regulators are talking to you about if you could just give me your sort of initial thoughts around that whole subject.

John I'll start I you know it we went down this path a couple of years ago thought they were going to go negative in every body went and looked at their core system to see if they can handle a negative rate right. So I remember all that everybody's panicked about that but.

Yeah, I think in general I don't feel that today yeah.

Lower rates longer to me what it means as you Gotta go get more noninterest DTA Gotta continue the to build.

More in the in the low cost funding side. So I think that's how we're viewing it is keep trying to go out and get those really really good core deposits right now yeah, I think I to me. It all goes back to relationships and and that starts with funding is I think the banks that are core.

Regardless of what the rate environment is and none of US no right. So we thought we'd be going up this time and that you know this time a year ago now no no. We're moving backwards and you kind of a almost a race to zero, which doesn't seem real logical, but that's kind of where we are is the but the funding side that.

I think that's where our balance sheet is just different than a lot is our is the core funding that we have in the company's is gonna be more stable regardless of the rate environment I think less there's just can be less opportunity to drive earnings through financial engineering, and it's going to be more just based on core customer relationships.

Okay.

If I could also just build on Christmas question for a minute and the wealth management business I mean, it's it's not a new business for you certainly but with the additions you've had over the couple of the last couple of years, it's a bigger business and it's somewhat of a different business. How are you trying to position your fiduciary wealth management et cetera relative.

Some of your competitors isn't there a core customer that you're looking for.

Yeah that there really is and this is really different so mean, we do some transactional business, but not a ton. So no. We're not competing really kind of what the slobs or the world for US is mostly people who have has built a level of wealth that we can help them with retirement plan.

Turning for where they are today, but where they're going down the road, but mostly as people who've built some financial wealth, but want to hang on to it and it's not I've got to be in the top quartile of high performance is more about the preservation of that well and the growth of that wealth at a reasonable risk.

<unk>, So that's where we've had good success and it tends to be a from a range standpoint. It's it's on the lower end. This is a million to 20 million and so but as people who have built that well Warner preserve though and grow that wealth, but not necessarily be too far out on the risk.

And we can help them accomplish that.

Okay. Thank you.

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

Thanks, everyone for your time today, we will be participating in the Sandler O'neill East Coast Financial Services Conference in Naples, Florida, beginning on the 13th of November .

We look forward to reporting to you again soon.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.