Q3 2019 Earnings Call
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Greetings dividends in 2007 consecutive years, we're proud of this achievement copies business model earnings results is strong capital resources not only support this increase but also allow us to maintain significant flexibility for future growth opportunities.
The third quarter, we received $22.7 million or trust preferred securities for the weighted average rate of 4.43% 20.6 million of these trucks were acquired in connection with the company's 2017 acquisitions merchants Bancshares, Inc. and 2.1 million required to Kinderhawk transaction.
Now I'd like to briefly comment on the operating a deal metrics regarding spent as noted in this mornings press release to bed Trust as a 15 branch.
Franchise operating in a six county region in Western New York Community Bank. Currently serves for these counties, but as soon as current footprint and the other two our contiguous to our markets. The demographics are consistent with much of our currently our state footprint, but also increase our presence in the greater Buffalo Rochester, New York markets.
At the end of the second quarter, two that had total assets of $577 million, including total walls of $347 million and $484 million and total deposits. So events loan portfolio is largely a commercial block with $166 billion at 48% of its loan portfolio in commercial real estate and 60.
The $2 million or 18% in commercial and industrial agriculture on firewalls cement also has approximately $98 million for 28% of its total loan portfolio in one four family residential real estate loans, including approximately $60 million in home equity loans.
Consumer and other wells makeup the balance of the mall portfolio of approximately $20 million or 6% of the total loan portfolio.
Debentures trailing 12 month return on average assets was 1.25% net interest margin over the same period was 3.68%.
As noted in our press release shareholders as to Vent Trust Company Corporation will receive for each share common stock they own a combination of $12, a 60 cents and cash in 0.805 more shares of community banks is to make for total consideration valued at approximately $63 per share.
Purchase multiples for the pending merger, our 15.2 times. The last 12 months earnings at 1.67 Times stated tangible book value.
The operating expense cost savings are estimated at 30%.
The transaction is expected to be eight to nine cents GAAP accretive on the first full year basis, and nine to 10 cents on a cash EPS basis.
Transaction is also expected to be tangible book value accretive the pro forma consolidated balance sheet estimate to increase community banks total assets so over $12 billion.
Before I provide additional color on a quarterly earnings I will provide some commentary the balance sheet.
We closed the third quarter 2019, with total assets of $11.6 billion. This is up $851.9 billion was 7.9% from the end of the second quarter of 2019, due to bulk and Kinderhook transaction and organic balance sheet growth total assets were up $990 million or 9.3%.
Print in the end of 2018 and $937.7 million or 7.9% from one year earlier.
Average, earning assets for the third quarter 2019 of 9.81 billion were up 379.1 million or 4% well compared to the late second quarter and up $473.5 million were 5.1% in compared to the third quarter 2018.
Average loan balances in the third quarter, 2019 were up $441 billion or 7% and compared to linked second quarter, 2019, and up $445.9 million, 7.1% when compared to the third quarter 2018.
Ending loan balances were also up on a linked quarter comparative basis $569.1 million or 9.1% $471.7 million attributable to the walls acquired in the interim transaction and an additional $97.4 billion attributable to organic growth in the company's loan portfolios exclusive.
The loans acquired and the Kendrick transaction.
Outstanding balances and all the company's mall portfolio segments increased during the quarter.
More specifically the business lending portfolio increased $56.4 billion or 2.4% during the quarter, while consumer mortgage balances were up 29.4 billion or 1.3% and the consumer indirect and direct portfolios were up $10.8 million 0.9%.
Loan balances outstanding in the home equity portfolio also increased slightly in the quarter.
Average total deposits were up $506.6 million was 6% from the same quarter last year and up $423.5 million over 5% on a linked quarter basis.
Total deposits at the end of the third quarter were $9.17 billion up $704.5 million were 8.3% from the year prior and up $680.1 billion or 8% in the linked quarter basis, although $571.9 million of growth in the linked quarters attributable to the Kedrab transaction the remaining incur.
He's the $108.2 million is attributable to organic growth and deposit balances.
68% of the company's total deposit balances at the end of the quarter were comprised of checking and savings accounts.
At September Thirtyth accompanies investment portfolio stood at $2.48 billion. This is up $79.5 million or 3.3% from the end of late second quarter. During the third quarter. The company increased its holdings of municipal Securities Agency Securities mortgage backed securities and other investments.
Excuse me at the end of the third quarter, the company's cash equivalents stood at $781.7 million.
The tax equivalent net yield on investments screens and cash equivalent started third quarter was 2.52%. This compares to 2.54% one year prior and 2.58% in the linked second quarter exclusive of the federal reserve they dividend.
The effective duration of the investment Securities portfolio was 2.5 years at September 32019, shareholders' equity was up $172.1 million or 10.3% from one year. Prior due primarily to an $86.9 million increase in retained earnings and $64.6 million.
Related other comprehensive income, which included a $74.2 million increases after tax market value adjustment on the company's available for sale investment portfolio.
The company's tier one leverage ratio was 10.76% at the end of the third quarter over two times, the well capitalized regulatory standard tangible equity and net tangible assets ended the quarter. The solid 9.68%. This is down from 10.56% at the end of the second quarter due largely to the impact of the kinderhook transactions, but up 55.
Basis points from 9.13% one year prior.
The company recorded GAAP net income of $39.2 million and fully diluted earnings per share of 75 cents during the third quarter of 2019.
This compares to net income of $43.1 million.83, and GAAP earnings per share for the third quarter 2018. During the third quarter of 2019, the company incurred nine cents of acquisition related expenses net of tax effect due to the kindred on transaction by comparison during the third quarter. Two so 2000 cubic company quite a too.
Sense of incremental earnings per share associate with the Aquas acquisition related recovery.
Operating diluted earnings per share, which exclude acquisition expenses realized gains on sale of investment securities unrealized losses on equity securities and loss on debt extinguishment were 84 cents in the third quarter of 2019. This compares to operating diluted earnings per share of 81 cents in the third quarter 2018, a three cents.
Or 3.7% increase in operating diluted earnings per share between capital periods was driven by an increase in net interest income and increase in noninterest revenues and a decrease in the provision for loan losses, but was offset in part by higher operating expenses and an increase in fully diluted shares outstanding.
Total revenues for the third quarter of $148.4 billion were up $6.4 billion or 4.5% over the third quarter of 2018. This included a 5.1 billion dollar or 5.9% increase in net interest income and a $1.3 million were 2.3% increase in noninterest.
Revenues.
The increase in net interest income was driven by an increase in earning assets largely due to the Kinderhook acquisition and a two basis point increase in the net interest margin from 3.71% in the third quarter of 2018% to 3.73% in the third quarter 2019.
The increase in noninterest revenues was driven by an increase in all three of the company's non banking fee businesses employee benefit services wealth management insurance exclusive of $4.9 million of realized gains on the sale securities recorded during the second quarter total revenues increased $4.2 million or 2.9% of linked.
After basis $3 million attributable to an increase in net interest income and $1.2 million attributable to an increase in noninterest revenues.
The company's net interest margin was down seven basis points as compared to linked second quarter, which included a zero point $9 million Federal reserve semi annual dividend payment or the equivalent of four basis points of net interest margin all other factors, including the addition of the Kendra, earning assets and liabilities organic loan growth during the quarter.
Changes in the company's funding mix and the 225 basis point decreases in the prime lending rate between encourage resulting in a three basis point decrease in net interest margin on a linked quarter basis.
The company's total cost of funds excuse me total cost of deposits remain well below peer industry averages for the third quarter at 26 basis points reflective of the company's very solid base of core deposits.
Noninterest revenues in our financial services businesses, including employee benefits services insured services and wealth management services were up $1.5 million or 4% between comparable annual quarters banking noninterest revenues were up zero point $2 million or 1.1% over the prior year in zero point $7 million or 4.2 person.
Yeah.
On a linked quarter basis noninterest revenues contributed 38.6% of the company's total operating revenues during the third quarter similar to the first two quarters in 2019 in full year 2018 results total operating expenses, excluding $6.1 billion of acquisition related expenses were up $4.8 million through.
5.6% on an annual quarter comparative basis. This increase includes a 5 million dollar 9.8% increase in salaries employee benefits and the zero point $3 million less than 1%.
Increase net increase in all other expenses, partially offset by is zero point $5 million decrease in the amortization of intangible assets.
On a linked quarter basis total operating expenses, excluding acquisition related expenses rub zero point $9 million or 1% during the third quarter. The FDIC awarded the company is 0.7 million dollar assessment credit towards proportional share of excess deposits groups on reserves. In addition, the company's marketing and business development expenses.
Three zero point $5 million on a linked quarter basis, we recorded $1.8 million into provision for loan losses. During the third quarter of 2019. This compares to $2.2 million recorded provision for loan loss in the third quarter of 2018 in zero point $4 million decreased between comparable periods. The effective income tax rate for the third quarter.
2019 was 21.1% up from 21% in the third quarter 2018, the company reported greater amounts of income tax benefits related to stock based compensation activity in third quarter of 2018 as compared to the third quarter of 2019 exclusive of stock based compensation tax benefit.
The company's effective tax rate was 21.5% in the third quarter 2019.
Our asset quality remains strong at the end of the third quarter 2019, nonperforming loans comprised of legacy and acquired loans totaled $28.7 million or 0.42% of total loans, we reported net charge offs of $1.6 million or 10 basis points annualized loan portfolio during the third quarter 2000.
19. This compares to net charges charge offs of 1.7 million or 11 basis points. During the third quarter 2018 at the end of the quarter. The comparable companies total Oreo properties for less than $2 million in the internal wall risk ratings per 10 stable asset quality.
In summary, we believe the company remains very well positioned for the future the company's strong asset quality capital reserves liquidity core funding base and strong non banking business revenues provide a solid foundation for continued growth in dividend capacity.
The company's current market valuation also provides an excellent currency for potential future mergers and acquisitions, we look forward to moving forward with this event team on integration efforts over the coming months as well as increasing our service capacity in our Western Europe markets. Thank you I will now turn it back to April to open the line for questions.
Yes, if you'd like to ask a question. Please signal by pressing star one on your telephone keypad, if you're using a speaker phone. Please make sure. Your mute function is turned to off to a larger signal to reach our equipment.
Press Star one to ask a question and we will pause for just a moment to allow everyone an opportunity to signal for questions. One moment. Please.
And our first question will come from the line of Alex Twerdahl of Sandler O'neil. Please go ahead.
Hey, good morning, guys.
Good morning, Alex Good morning, Alex.
This first off.
Congrats on landing another acquisition just curious how long does it take you guys to do the due diligence process and a bank decides to van kind of from start to deal announcement.
I would say salix it depends on the institution and how readily vacant gather materials up.
In this case.
They were very efficient and so the due diligence.
Period was fairly nominal.
But they can certainly extend for greater periods of time, depending on the capacity of the.
No the counterparty to provide information.
Okay just.
Kind of figure out the cadence of these deals is going to being in the future years.
Talking about sort of specific.
Organic trends had some loan growth for the first time buyers better loan growth and say.
The best and a number of quarters. This quarter I know, it's helped a little bit by seasonality in the municipal business, but.
It was growth more a function of the lack of payoffs that you've been seeing a few in past quarters, I think the pipeline kind of translate into better growth this quarter than what we've been seeing.
Or is any contribution from kinderhawk or is this something else that we should be thinking about up there.
Yes, I think.
Alex in the third quarter.
We had pretty good performance.
For math.
We had good performance in the capital District Albany.
And also.
The Southern region of New York was very good so Syracuse.
Rochester, Western New York Finger Lakes was also.
Very good.
If you look at it year over year.
PPA base.
It's been very good and.
Wise kind of the southern and western parts of New York and in the capital district to guidance, but very good year over year. So it.
It really depends into can kind of change quarter to quarter with respect to early pay offs. I think we did get fewer this quarter, which was good.
I think just the.
The.
The number in the size was a little bit less this quarter, which which which was good. So I think we if you look over the last several years, we have substantially improved our or organic generation capabilities and some of that as a function of as we've gotten a little bit larger we've got.
And.
Greater expertise in certain.
Elements of credit.
We have the the capacity by virtue of our credit discipline in our ability to kind of understand larger credits to do slightly larger credits and manage effectively larger relationships.
And syndication kind of.
Club.
Deals with others. So I think all those things of that played into that but we clearly have improved our organic loan generation ability over the last last couple of years.
Okay, and the pipeline going into the that into the fourth quarter in early 2020 is still healthy.
It's it's still really good so we would expect to see continued decent.
Performance going into fourth quarter.
And then just switching gears just to touch on the margin here.
The acquisitions in the fed dividend et cetera.
Hi, bounce around a little bit but over the last couple of years your margins in pretty steady kind of 365 to 380.
And with the face of.
And now to fed cuts another one potentially next week and maybe another one this year as.
I mean, you have enough tools.
The way up obviously depository benefit in the way down they're not going to be as much benefit there enough tools in our with.
In the short term natures, new securities portfolio and kind of in stuff comes due and the reinvestment rates et cetera to keep the margin within that range over the foreseeable future.
Yes, so so Alex I think we've kind of given general expectations around 370.
Last quarter, we came a little higher this quarter loan yields held up fairly well the quarter I think were down net basis, one down one basis points net quarter quarter over quarter and that was against the headwinds of the.
Of the decreases that the FOMC put through.
Just to kind of give you some color we have about $1 billion in.
Loans that are subject to repricing.
Theater linked to prime or to a lesser extent LIBOR. So when we get a decrease from the FOMC in prime rate.
The impact the other side of that equation as we have nine.
Billion dollars in deposits and so we have the ability in some instances to to contain those costs and potentially reduce some of that higher costs.
Deposits in that mix.
If you recall prior to the cycle that started in late 2015.
For that matter portion of that cycle. Our cost of funds was 10 10 basis points were sitting at 26 today, So I think theres still some opportunity too.
The decrease.
Some of our costs. We also paid off the Trups this quarter, so thats going to help a little bit. So I think theres a couple of tools, but the other thing I would note is that.
We do have a substantial residential mortgage portfolio and even though we do have some some borrowers.
For putting the money relative to secondary market rates, the nonconforming nature of our.
Our portfolio tends to slow prepayment activity relative to the rest of the market. So that portfolio holds up pretty well.
Either when market rates rates come down and we did book this quarter as we booked new loans, we booked those at about.
Kind of par with our existing book yield so as a new loans going on they went on pretty much closer to our very close to our book yields this quarter. If you recall in prior quarters, it was a little bit higher.
But all in we've kind of maintained new.
New loan yields it.
Levels very similar to our book yields.
Okay. That's very helpful. I'm just.
Second to hone in on the deposit piece of it at 26 basis points.
No.
Obviously, not a ton of room to go down.
Following up on on your thoughts and maybe they will go down I mean do you think that go down in the fourth quarter. After two potentially three cuts as here or is there still going to be a little bit of a lag and maybe some some cost actually moving higher into the end of the year.
Okay. Good question, Alex and my expectation is that the similar in the fourth quarter.
As compared to the third but if rates.
Stayed down on the short end and for that matter kind of in the mid part of the range I would expect that over time, they will start to drift down.
In 2020.
Great. Thanks for taking my questions.
Thank you Alex Thanks, Alex.
And if you find that your question has it been answered you may remove yourself from the Q by pressing star too and we'll now take our next question from Russell Gunther of Davidson. Please go ahead.
Hey, good morning, guys.
Good morning, Russell morning Russell.
I wanted to follow up on on the expense outlook here.
Which I believe you said that you'd expect the cost saves from Kinderhook to meet potentially exceed just curious if you could give us a sense for what sort of in the run rate already from those related cost saves and then how that should trend going forward.
Yes, Russell we realized the.
Majority, okay ill sand the run rate cost saves in the third quarter.
They're they're generally baked in at this point.
We potentially have some other modest.
Cost savings in the fourth quarter, but but it's a little too early to kind of call. It on a full year basis. So we're kind of holding our.
Our general guidance at around 30% any sense a share in earnings per share accretion, but.
In fact, we realized our operating expense.
Savings on Kinderhawk and on an all in basis, we actually came in this quarter I think even slightly above our or better than our expectations around all in operating expenses, obviously the FDIC.
Insurance premium.
Refund or credit actually helped us a little bit we also.
Consciously drove down some other operating expenses, we also had a little less or net results in some of our property related write downs and those types of expenses during the quarter. So our 90.
Less than 90.
Million dollars.
91, and a half including the FDIC.
Expenses is sort of.
Ahead of our expectations I think 93 is a more.
General.
Sense of of the fourth the fourth quarter and beyond that we start to I get connected inflationary trends.
Got it okay very helpful and then.
On the revenue side of things just an update if you could in terms of the outlook.
Within your employee benefit services.
Well I would say we expected to continue to grow.
As it has for.
15 years.
I think.
One of the.
The challenge is just as that business gets bigger growing at the same rate gets more more difficult but.
We've got pretty.
Solid in steady growth in that business now that.
The run rate on revenues almost 100 million.
And so I think that business will continue to grow it might grow at a slightly smaller percentage basis I'm not sure. It's going to grow is smaller dollar volume.
Basis, which is helpful because of certain amount of fixed cost there that's not a considerable so you can you can expand the margin in the March on that business is actually much higher than it was 10 years ago 10 years ago is pretty good. So I think also.
We have some other.
New revenue line opportunities in that business that we will continue to to explore so and in some of them are.
It's reasonably significant potential growth so.
Certain capabilities, we have in that business.
That.
We think we can continue to evolve and in in developed.
In put into the market that will be helpful. So I think those businesses will continue to grow Russell I think probably at a smaller percentage pace, but I would expect that necessarily to smaller dollar base.
Got it I appreciate that might very helpful. I guess, just as a follow up the potential new revenue lines within that vertical is that something that would necessitate.
Additions related acquisitions or can be done kind of organically.
I think it could I think we would probably.
Not look at.
Paying a lot.
For something.
Even though that that space right now the private equity.
Firms are playing in that space today, very meaningful way and.
Have essentially bid up prices.
In that space to a point, where it makes a lot less sense for the strategic buyer, but it doesnt financial buyer, but we have tremendous.
Operational capacity in that business and we have the ability to.
Develop solutions.
Based on our existing.
Platforms to leverage.
Additional.
Service capacity it into into the market. So it could be I mean, we've looked at I'll call them smaller acquisitions that already kind of haven't developed platform that we can leverage better. We've also had conversations about.
Existing opportunities that we can build out our our current platform to service. Some of some of these opportunities are fairly significant I would say so I think we have some.
Pretty good runway still left in that business going forward.
I appreciate your thoughts there mark. Thank you for that last one from you guys are you disclose the impact of C.. So as it relates to the Mark in this deal just curious any preliminary thoughts you could share just an update on timing for.
When we might get a look at the full disclosure as impact the pro forma balance sheet.
Right. So good good question, we are working on additional disclosures.
For this quarters Q.
So we're we're going to expand our disclosure nor model is built.
Kind of running through.
Our.
On a parallel basis for a couple of quarters now we had our validation is completed.
And we'll be making some additional disclosures in the Q as I said.
Very good. Thank you guys for taking my questions.
Thanks Russell Thank you.
Well take our next question from Collyn Gilbert I've K B W. Please go ahead.
Thanks, Good morning, gentlemen.
Good morning.
Just a few housekeeping questions I am sorry, I missed it would you say Joe the impact was at the FDIC savings this quarter.
Order.
About $700000 to the good.
Okay and will that would you start have you absorbed all your credit as it relates to that so that then costs will be start to be incurred in the fourth quarter again or how will that play through.
Yes, there is theres additional credits potentially available depending on how the fund performs.
So if the fund performance above.
It's tough target benchmark for four reserves, we would expect that sort of impact to occur for another two quarters.
And then we would likely exhaust the credit after a couple more quarters.
Okay. Okay.
Okay, Alright, that's helpful. And then just on the deposit growth side.
I know you'd indicated overall with the impact was from Kinderhawk, but you guys saw some really good noninterest bearing deposit growth. This quarter. So just trying to understand the movement within some of those segments.
Yes, I think it was small you get you typically get.
Variations in the public funding and we have give or take a billion dollars or so in public funding that can change quarter to quarter by a couple hundred million dollars or so.
So we like look at kind of public funding separately from the non public public we continue over the course of the past you've had very good growth in kind of the core checking savings money market.
Public funds.
It never moved dramatically, but it's kind of a slow in continual cadence of.
Low single digit growth in that core deposit base.
As Joe said about 68% of our deposits right now are in checking and savings accounts.
That have actually very.
Long lives in our markets so.
No nothing tremendous collyn is that we'd be I don't I don't think our shareholders want us growing our deposits 10% because.
We're not in those markets and that means we paid up due to acquire them. So we tried to do at the old fashioned way in our markets, but we just have a continued cadence of of growth in the.
The core deposit.
Part of the of the deposit base, which obviously is.
You know is is very good.
Okay. Okay. That's helpful and then just another.
Housekeeping item it looks like you guys have folded in the mortgage banking line into deposit services.
Deposit services.
Hi, this there was targets.
Just curious is a break out there and.
If you know why why that that is is it just because you're going to deemphasize that line going forward.
Okay.
Good question I think just in totality, we thought it was just easy to.
To put those two line items together is are we don't have a substantial.
Mortgage banking business in the sense that we don't we don't sell a significant part of our portfolio to the to the secondary market.
It's just not a line of business that we've actively.
I've been in originating in selling mortgages, we portfolio the lions share of our mortgages over the years.
Okay. So not a big variance we should assume the in this quarter's line versus what you've done historically.
Hey, you sold again, it's now yes, it's down it's down a little bit on the mortgage banking side, but not not all that significant to the.
For the total revenues of the company for sure Okay.
Okay. Okay, and then just to sort of a little bit more big picture question, just as it relates to the margin.
As we look out into 2020, and and assume we sort of stay in this low rate environment. What is there a point, where you feel like the margin can kind of bottom or how do you sort of see it broadly playing out as we look into 2020.
With assuming that the last fed cut comes in the first quarter of 2020, sorry.
Yeah, I mean, if we have two more fed cuts.
We'll likely negatively impact the margin in 2020.
Yes, I think was pointed out earlier in the call even in that in the.
Post crisis era, we tended to keep our margin kind of in that in that 360 range.
Low 360, some min 300, sixtys expectations would be that we would probably maintain it in 300 sixtys level at least through through most of 2020.
Obviously, if the yield curve stays.
Flat to inverted and low for very long period of time that will become more difficult to sustain in years beyond 2020.
Okay. Okay. That's helpful. And then just on the an M&A front.
[noise] with Steuben and and further opportunities do you see more deals or the supply of potential deals increasing yeah similar to a profile that steuben has.
How do you sort of see M&A playing out for you guys.
Yeah I think.
We will have.
I think theres a pretty.
Long runway of opportunities for us into the future and.
Yes, we try to be very.
Disciplined about the.
The partners that we participate with.
You doses to Bend is a good example is.
It might not be is big is other things, we could do but if you look at miss it.
Very high performing institution for its size I mean, the our ways over one plenty of the efficiency ratio 60, the asset qualities clean they have a nice trust department. So it's it's in our footprint. We have some branch overlap. It's just it's a very good profile of the kind of partner.
Or that we're we're interested in so I think there's there's a number of those the across our footprint I would just kind of repeat historically our acquisition strategy has been to be disciplined do.
Hi value lower risk kind of things, where the risk return profile is asymmetric.
And Mr., Ben as Didnt, Kinderhook, clearly clearly fit that that profile.
You know if you look at we are now in New York, Pennsylvania.
Vermont, Massachusetts.
Thats a fairly.
Big geographic footprint.
For us to continue to.
Hi, Fi and work with others on opportunities.
Also we would look to kind of contiguous markets as well so.
Oh, you can't go very far North and east of where we are we can move a little bit south and west and so we've had conversations with with institutions in adjacent markets that are south and west Abbas as well and I suspect that will that will continue.
It's important for us the organic execution is important for us I think historically, we rely too much on.
M&A for the earnings growth that we were getting.
We need we needed to improve on that I think we have improved on that.
We continue to see the benefits of that greater capacity around organic execution going forward, but I also think that.
That M&A opportunities these kind of high value lower risk opportunities.
If you look at our history over the last 10 or 15 years, a lot of the balance sheet growth has come from.
Has come from everyday and I think we've been able to be.
Disciplined about it in it and extract the value for shareholders out of out of the execution on those.
This transaction so.
It's I've always said, it's not about being big business got nothing to do is scale I'd, rather be smaller than bigger but.
And regulated capital industry regulated capital if you want to get operating performance improvement you have to get a little bit bigger overtime, but if you look at our return metrics of has also improved over time so.
I think thats says that that will be the the strategy going forward I think we continue to have lots of opportunities.
If it doesn't matter, whether it's a somewhat larger institution or smaller institution. It has to be something that kind of fits our profile.
Well, we won't do it so.
So we don't take those risks I think we we trade at a above average multiple in the market for a reason I don't think we're going to do something thats and disciplined or chase growth for the sake of growth to put our.
Our shareholders at risk in any way so that will continue to be disciplined that will continue I suspect to find high value acquisition opportunities going forward.
Okay. That's great that was all I had thanks guys.
Thanks, Thanks Collyn.
Our next question comes from the line of Erik Zwick, Boenning and Scattergood. Please go ahead Sir.
Good morning, guys.
Good morning, everyone Airport.
Couple of questions on they are just do then transaction first I was just that competitive bid situation or a negotiated transaction.
I'm not going to comment at this juncture era, we just now so.
I will.
I guess, it probably more to be disclose going forward.
Understood that's fine.
And then just wanted to make sure I heard the comments clear with that 30% targeted cost savings that does not currently incorporate any targeted branch closures that you may revisit that it out at a later time than it did I hear that correctly.
That's right.
Okay, and then just looking at their net interest margin looks like it's been pretty stable over that the past year. So given the outlook for.
Potentially a couple of more fed cuts and for the yield curve to stay flat would you expect any major changes to their margin between now and the targeted deal closing and I guess the heart of my question just kind of zero in on.
Pro forma impact yeah, that's on a pro forma marching to the company.
Yes I.
Okay. Thank you would be it's going to want to be similar to two the same headwinds that we're facing in the industry spacing in other words.
My expectations would not be that the margin will head north and go off but it is potentially would drift down a little bit with the FOMC cuts, but nothing.
Really out of alignment with.
The industry in general.
Okay, and then maybe just kind of one detail and follow up on that it looks like they've got about 20% of their deposits and jumbo time and just given your strong loan to deposit ratio is there.
Opportunity to let some of those runoff and hope you are not withstanding the headwinds that we've just discussed.
Yes, I mean, there are some.
Jumbo Cds that are priced at market and I think ethanols come up for renewal will have to evaluate the overall relationship and profitability with each of those situations.
But.
Historically, we have not paid through the market for for deposit funding.
We expect that we're going to maintain our discipline around that going forward. So.
Expectations are that it that jumbo book is probably not going to grow and major is down a little bit over future quarters.
Great. Thanks for taking my questions.
Thanks, Eric.
Hi.
Settlement there no further questions at this time I like the hand, it back over to for closing Cliff.
Very good. Thank you all again for joining our call and we will talk to again in January Thank you.
And this concludes today's call me. Thank you for your participation you may now disconnect your lines and have a wonderful day, everyone take care.
Thank you and.