Q3 2019 Earnings Call
Good morning, and welcome to the fund over third quarter 2019 earnings call. All participants will be in listen only mode should you need assistance. Please <unk> corporate specialists by pressing the star key followed by zero.
For today's presentation, there will be an opportunity to ask questions to ask a question that you May Press Star then one on your Touchtone phone to withdraw your question. Please press Star then too. Please note. This event is being recorded I would now like to turn the conference over to Kevin Brown Senior director of Investor Relations.
Please go ahead.
Thank you and good morning during the call today will be referencing spot in the press releases are available within the Investor Relations section of our website. So that was dot com.
Selling chairman and Chief Executive Officer will be a primary presenter today, our executive management team is available to answer your questions.
Well, we get started I'll remind you that our comments make forward looking statements. These statements are subject to risk uncertainties. The actual results could vary materially we must these factors that might cause results to differ materially in our press release and RCC filings, which are available on our website.
We do not assume any obligation to update forward looking statements as a result, no information early developments or otherwise except as may be required by law. During the call. We were reference non-GAAP financial measures <unk>. The company's performance you may see the reconciliation of these measures in the appendix store presentation. During the number of course, we ask that you initially limit yourselves to two questions. If we.
Got more time available after an initial questions we will reopen the queue for follow up.
You an alternate every kessel stelling.
Thank you, Kevin and good morning, everyone and welcome to the third quarter 2019 earnings call.
Many of you have.
Third that.
Kevin will be replacing Steve Adams as he transitions out of the Investor Relations.
I want to thank Steve for his aperture and know that Steve will be working.
With Kevin in the coming much to ensure a smooth transition they'll both wouldn't they be able to take.
Any of your follow up calls later today.
As usual I'm joined by.
Oh senior leadership team and I'll walk us through the earnings presentation, and then provide a brief comments about our 2020 seasonal impact before opening a lot of questions.
Our team again deliver good corporate launch this past quarter, while managing through another period of heightened economic uncertainty, but before I cover this quarter's financial results in detail I'd like to summarize the progress we made in 2019 toward.
Give me a number of our key strategic objectives.
With almost all year realignment of our major lines of business under our belt, we believe similar right.
Indicators this quarter directly reflect more efficient and effective go to market approach, especially in key areas like middle market commercial real estate lending, especially after leaving lending areas, including premium perhaps asset based lending senior housing public finance and our new structured lending division.
We're building renewed momentum in our treasury and payment services business and will further expand repeat opener in basketball new Treasury platform.
One of our commercial customers in 2020.
We've also focused on the successful integration of FCB, not only executing on operating fundamentals, but even more importantly, adding what was already solid franchise in Florida, we deepened our bench strength.
Reach by adding 35, private wealth mortgage brokerage insurance and investment professionals, and our expanded central and South Florida region, and Weve focused on building brand awareness through marketing efforts as well as investing in the strategic placement of new branch locations and areas like Lake Mary outside a window and.
In Fort Lauderdale.
And then the digital space, we launched our new online and mobile banking platform earlier, this year and launched a new online more mortgage application tool that has significantly impacted the volume.
Most importantly, we're seeing these investments pay off.
Level and diversification of fee income sources across core banking capital markets wealth management and mortgage was stronger each quarter.
And our collective banking team generated $2.6 billion in total funded loan production to score.
On the other side of the balance sheet our.
Our relationship centric approach contributed to nearly 400 million and non interest bearing deposit growth, which helped us manage our net interest margin and achieved positive revenue growth this quarter.
Turning to slide three.
Diluted EPS was 83 sets for the quarter.
<unk> adjusted basis diluted EPS was 97 cents.
Down three cents for 2.7% the previous quarter and up three cents for 2.9% from the same period a year ago.
There were number of items impacting adjusted EPS this quarter and I'll cover those want to subsequent slot.
Loan growth was studied this war with average loan growth of 424 million <unk>.
4.7% sequentially.
Period end deposits declined 534 million during the quarter as we continued to follow a disciplined approach in regard to higher cost Cds and public bonds, which experienced additional what all this quarter as expected.
Total revenue of 192 million increased 3.8 million or 3.1% sequentially.
Revenue growth supported by strong non interest income of $91 million on an adjusted basis up 1.1 million or 1.2% from last quarter.
And by many factors, including increased production within our mortgage team.
Banking income this quarter was up nearly 31% sequentially and up 96%.
Year over year.
Well much within our portfolio from a quite a perspective also remains very favorable.
Provision expense was 27.6 million in the quarter, increasing 15.4 million dollar relative to a very low $12.1 million <unk> core.
Net charge offs were 22 basis points for the quarter, an 18 basis points year to date.
And are expected.
Remained within our previously guided range of 15 to 20 basis points for the full year.
Our properly profitability metrics have declined slightly however, our efforts to grow sources of non interest income and remix the deposit base will help to mitigate near term headwinds. The adjusted our away was 1.33 for sat down six basis point from last quarter down 14 basis points year over year.
While our adjusted Aro HTC he was 15.46%.
62 basis points for the same quarter a year ago.
The adjusted tangible efficiency ratio improved this quarter to 51.7, a 1% compared to 52.08% and the second core and 55.5% a year ago.
We continued our share repurchase program buying back at <unk> 9.6 million shares this quarter.
As of September Thirtyth, we completed a total of $688.5 billion in share repurchases under our $725 million authorization and as of this week. We can now say the authorization has been substantially.
Bill.
Turning to slide four slide four provides a summary of the adjustments made to this quarter's reported EPS results.
Which collectively impacted EPS by 14 cents.
I will reference appealed the more material items.
First item.
One out relates to a 10.5 million dollar increase and the earn out liability associated with our global one acquisition.
He referenced before the 2016 acquisition of global one included the opportunity.
For performance based earn out payments due to the continued outstanding warrants that business do you want to earnings reached thresholds that triggered to additional years earn out payments.
And we've now recognize it increases the earn out liability accordingly.
Any additional earn out liability adjustments associated with Lumwana are not expected to be material to our financial results.
Also during the quarter, we elected to reposition certain assets and liabilities as a result, we incurred an early extinguishment loss of $3.4 million on acquired FHLB obligations and investment Securities losses of 2.8 billion net of tax. These actions will be a quick hit the net interest.
Income on a go for basis and have a very short estimated earn back period.
Additionally, during the third quarter of 2019, the company incurred a $4.4 million discrete tax item associated with state tax reform.
This was driven by the write down of a DTA benefit due to a reduction in the state of Florida income tax rate what is expected to improve our effective tax rate.
On a go forward basis.
Moving to slide five in lounge, total lounge increased $279 million worth 3.1% sequentially on an average basis, one rather it was 424 million or 4.7%.
We were very pleased with both the level and quality of loan production during the quarter.
Total funded production at 2.6 billion up nearly 30% over the prior prior <unk> and weighted average loan spreads comprising 70 basis points production growth was evident across all of our commercial business lines and was aided by the expanded specialty James within our wholesale bank.
Hi, all four significant this quarter, especially with our CRM portfolio, where we continuously customers sell properties do elevated valuations.
Back the level of payoff activity within our CRM portfolio was about 50% higher than the prior quarter and were spread across various markets.
Commercial and industrial loans increased $198 million sequentially several areas contributed to growth and she United score, including our middle market banking, James Senior housing healthcare premium finance and maybe ill.
We continue to see positive trends of the consumer segment, which increased to $143 million in the quarter across multiple categories.
Lending portfolio mortgage HELOC.
Lending partnerships and credit card.
Although pressure in the market is out of that we continue to emphasize quality over growth and evaluating new lending opportunities. We consistently pass what opportunities that involve aggressive use of non recourse financing concessions on tenor and covenants.
Fixed rate structures that do not meet our rate of return.
Hurdles.
Turning to slide six the seemed like an appropriate time, it's like a deeper dive into the composition and quality of our loan book by category.
Chart shows a key components of each of our brief portfolio categories with the table on the bottom right showing that credit performance of each portfolio.
See I bought $16.5 billion and is primarily comprised of general middle market in commercial banking clients across a diverse set of industries.
Well, then she and I specialty divisions, such a senior housing and premium finance comprise about 16% total loans and I've been a significant contributor to our growth story the last several years.
It's important to note at while syndicated credits are part of the wholesale banking strategy. They only represent approximately 6% upto lunch.
I'd also highlight we have very low exposure related to either energy or leverage loans combined exposure in those two areas at less than 3%.
Total loans.
Let's see or a portfolio was just over 10 billion and almost 90% of that book is comprised of income producing properties with multifamily office shopping center out of jail being the largest property types within the portfolio.
We adhere to a discipline concentration management philosophy, that's our largest CRH alone is less than $70 million <unk> average loan size about $11 million. This portfolio is diverse for about the geographic and property type standpoint, with strong loan to value debt service coverage levels.
This is evidenced by the strong CRT credit quality metrics shown in the chart on the bottom right of the page.
The consumer book is $9.7 billion, almost three quarters of the consumer portfolio.
Isn't a mortgage and he lot categories with the remainder in lending partnerships credit cards and other consumer.
You can see about credit score and loan to values statistics as well as a credit quality metrics on slide.
This portfolio remains very healthy.
Growth both for the quarter end the year has been broad based across all categories. We've included a few additional slides in the appendix.
We'll provide more visibility into each of these portfolios, but in some way we're pleased with quality.
On the diversity of our portfolio and we're also pleased to be positioned in a part of the country that benefits from significant growth in population jobs in wages as well as strong overall economic performance.
Turning to slide seven in deposits core transaction deposit growth was very strong risk were up $526 million sequentially.
As we indicated last quarter, we continue to see the opportunity to remix the deposit base.
By allowing higher cost Cds and public bunch run off while taking advantage of other short term funding vehicles, including broker deposits and FHLB advances, which carried variable rates and reduce our overall asset sensitivity entered into a period of declining rates.
As a result of this approach public bonds and she days both declawed.
By 556 million and 695 million respectively during the quarter.
The growth in core transaction deposits, partially offsetting these declines leading to an overall decline in total period end deposits.
534 million or 5.6% annualized compared to second quarter on an average basis. The decline in total deposits was 185.5 million or 1.9% from the prior quarter.
Within the core transaction deposit category noninterest bearing deposits increased 390.6 million or 18.2% sequentially, while money market accounts.
Increased 259 point, threemillion or 11.5% sequentially.
While total deposit cost excluding P.A. did increased one basis point for the third quarter to 1.11% from 1.10%.
You can see from our monthly trends that rights clearly picked back in July .
1.14% and it's definitely decline since that time.
Given the positive trend weve experienced a non interest bearing deposits total core deposit cost excluding broker deposits declined from 1% in Q2, 2.99%.
In Q3.
Despite a market for city pricing that remains competitive we're now seeing originations at levels that are approximately 30 basis points below maturing Cds on average.
Overall, we remain well positioned liquidity standpoint, and our loan to deposit ratio of 97% remains within our targeted range.
Moving to slide eight net interest income was 402 million up 4.8 million in the second quarter, and up 110.5 million or 38% year over year.
Due largely to the FCB merger.
The net interest margin was flat compared to the second quarter at 3.69% and was favorably impacted by additional purchase accounting accretion this quarter.
Net interest income in margin were favorably impacted by 16.1 million loan accretion 1.7 million of investment securities accretion and 11 million of deposit premium amortization.
Excluding the impact to purchase accounting adjustments the core net interest margin was 3.42% down six basis points from the second quarter.
The net interest margin declined for the quarter, excluding the impact of P.A. was driven by eight basis point decrease in total earning asset yields in a two basis point decrease in the affected cost a bunch.
The decrease in funding costs was driven by one basis point increase in cost of interest bearing core deposits offset by growth in non interest bearing deposits.
As we stated last quarter, we fully expect that additional rate cuts and the second half the year, we put pressure on already asset yields.
We're beginning to see downward movement deposit cost and we're pleased with both the continued growth in noninterest bearing deposits as well as moderation and our overall level of asset sensitivity.
However, given the significant changes the board curve relative to last quarter, we do anticipate burden of impression in the margin between now and year end, Jamie Gregory will provide additional color on the margin outlook.
During Q.
Turning to slide nine in fee income.
Total non interest income was 88.8 million down 1 million compared to the prior quarter and up 17.1 million versus the same period a year ago.
Noninterest income the third quarter included both again and a favorable fair value Mark to private equity investments at 1.2 million compared to 1.5 million last quarter as well as a break point 7 million dollar securities laws.
Adjusted non interest income up 91 point, Threemillion increased 1.1 billion or 1.2% sequentially.
20.1 billion or 28.2% year over year.
For banking visa 40.8 million increased 2.6 million or 6.6% sequentially. The increase resulted from higher service charges card based and SBK during the quarter.
Fiduciary asset management brokerage in insurance revenues of 26.6 million increased 743000, or 2.9% sequentially at 2.9 million or 12.3%.
The same period last year.
Assets under management of 16.2 billion were up 8% year over year.
We continue to see strong momentum and capital markets activity with the younger come this quarter of 7.4 million up 6.2 billion from the same quarter last year.
This momentum stems from a very healthy partnership between our capital markets chain and wholesale banking, James including our newly added South Florida team members.
Success has been evident as the second and third quarter combined with the two highest grossing capital markets being some quarters for a company today moving board, we look for sustained capital markets be income success with income.
At current levels.
Discipline talent acquisition, a favorable interest rate environment created another solid quarter performance from our mortgage company.
Mortgage revenues of 10 point, Fourmillion were up 2.4 million or 31% sequentially, and 5.1 billion or 96% year over year.
Wait revenue during the quarter was driven by higher overall production, including an increase in refinance volume, which accounted for approximately 35%.
Total production compared to 21% last quarter.
Turning to slide 10.
Total non interest expense for the quarter was 276.3 million.
These expenses included a number of extraordinary items, we covered earlier on the call, including the 10.5 million dollar earn out liability adjustment and a 4.6 million dollar loss on early extinguishment of debt.
Merger related expenses were relatively minor this quarter at $353000.
On an adjusted basis non interest expense of 258.5 million increased 1.8 million or 0.7% versus the prior quarter.
Excluding amortization of intangibles adjusted tangible expenses were $255.6 million.
Adjusted expenses in Q3 were higher than expected and were impacted by number of factors, including production base commissions that were higher by 2.4 billion compared to last quarter and other expenses, which increased 1.1 million.
Due mainly to professional fees.
Turning to slide 11, you'll see that our credit quality metrics remain solid.
NPL ratio improved this quarter.
34 basis points to 32 basis points.
Net charge offs of 22 basis points were higher this quarter.
And down two basis points versus the same quarter, a year ago, not isolated to any particular asset class, but spread across our consumer small business and commercial portfolios.
If you look at the chart in the upper right of Slide 11, you'll see the 22 basis points is largely consistent with the last five quarters with the exception of the second quarter, which was impacted by timing and recoveries.
Year to date net charge offs of 18 basis points remain in line with our stated guidance of 15 to 20 basis points for the year and again, we feel confident that we'll end the year within that range.
Provision expense for the quarter was 27.6 million compared to 12.1 million in the second quarter and 23.6 million in the first quarter, resulting in year to date provision expense of 63.2 million.
The increase in provision expense from the previous quarter is primarily related to the timing of charge offs and the impact of gross loan production help won't keep in mind that as we experienced payoffs on acquired loans, we don't benefit from any reserve releases that would typically offset growth related provision.
The allowance for loan losses increased $7.6 million from the previous quarter, ending at $265 million with the ratio increasing two basis points to 0.73%.
The coverage ratios reserved NPL remains strong at 244%.
Or 364%, excluding FCB, npls and impaired loans for which the expected loss has been charged off.
We remain pleased with the quality of our credit book.
Based on many factors, including the stability of board looking credit indicators, such as past dues and non accrual inflows, we feel confident that our strong credit profile positioned us well for the future as we continue to grow our portfolio with the same commitment to quality that as evidenced by the metrics on this page.
Moving to capital on Slide 12, we continue to have confidence our overall capital position.
As a reminder, on July 1st we close a new $350 million series D preferred equity offering.
Which raised new tier one qualifying capital.
We largely utilize this incremental capital to buy back common shares in the third quarter, which had the effect of a increasing our total risk based capital ratio and decreasing our C.G. one ratio consistent with the low end of our target range of 910%.
She T. One at quarter end was 8.96%.
The total risk based capital ratio increased 19 basis points during the quarter 12.30 perception.
Since family the first of 2019 and through the end of the third quarter, we decreased our total share count by 10.7% with repurchases totaling $688.5 million.
We continually evaluate our capital position in the context of our overall capital priorities, which include funding organic growth.
Paying a competitive dividend.
And capital deployment through either share repurchase.
Our other investments we also remain committed to sustaining a capital could cushion that is sufficient whether a possible future economic downturn and credit cycle under our current stress testing framework, we remain well capitalized under a scenario consistent with the great recession.
Turning to slide 13.
Before we address our updated 2019 outlook I want to share a little more detail regarding the progress.
Of our expanded franchise, the central and South Florida marketplace.
We continue to see the South Florida market stand out as being one of the most economically healthy and productive in our but prep.
The acquired portfolio continues to perform as expected and reflects credit metrics that compare favorably to those of legacy synovus.
As we review the portfolio the routine testing and renewal of assets. We continue to be pleased with fundamental help the book and our own assessments have been validated through market transactions in which acquired Npls have been sold at prices that are consistent with or above the fair value Mark.
From a challenge standpoint, the team that joined US from FCB is integrating well within synovus team and his complementing our existing culture with their own.
Which emphasizes delivery on customer expectations with a sense of urgency and commitment to excellence.
Additionally, we've attracted over 35, new producers and wealth trust and brokerage across our central and South Florida markets. These team members you broadly join should I was within the last six months have already generated new assets under management of over $150 million.
Our central and South Florida branches are also quickly adapting to the broader array.
Synovus retail banking products since conversion in May the legacy FCB branches have seen an uptick in their production and key consumer banking products, including credit card and checking accounts, which are up 57, and 6% respectively against 2018 averages. These early wins support our belief in the long term opportunities afforded.
Such a healthy and vibrant market.
Slide 14 outlines our original 2019 guidance for key financial metrics I'll provide a little color. This morning on where we expect to end the year.
From a balance sheet perspective, we continue to expect solid loan growth in the fourth quarter. However, given a number of factors, including accelerated pay offs and our consistent credit discipline. We now expect loan growth for the full year to fall slightly below our previously guided range.
[noise] deposit growth will be a function of the level of loan growth experienced as well and our continued discipline to focus on generating favorable relationship returns.
In the midst of the current interest rate environment.
That reason.
Product deposit growth could likewise fall below the low end of the range.
Revenue growth of 5.5% to 7.5% remains on track despite pressure on net interest income from declining already asset yields. This is a result of both favorable purchase accounting accretion trends within the acquired portfolio as well as strong fee income growth that has outpaced our initial estimates.
Given the sizable level of production activity driving higher fee income and corresponding commissions expenses could be at the top or slightly outside of our 2% to 4% guidance for the year regarding taxes as we stated last quarter, our ability to achieve a lower effective tax rate is largely tied to comply.
We shouldn't have a number of tax credit related initiatives, which we expected.
To complete before year end, while occurring after the close a third quarter or we can now say that a number of these initiatives have been completed.
And we'll provide additional benefit in the fourth quarter and beyond thus our current guidance of 24% to 25% for 2019.
Remains unchanged.
Turning to slide 15 point wrap up and proceed to Q and a we wanted to provide some brief comments on the impact we expect.
From the upcoming seasonal adoption in 2020.
From a day one perspective, we estimate Cecil to increase the allowance by a range of 40% to 60% with approximately two thirds VAT increase due to acquire lounge said another way excluding the impact of the acquired loans. The overall impact synovus is estimated to be tended to.
20%, given our current loan mix and economic conditions.
It's kind of the FCB acquisition accounting guidance did not allow for day, one credit reserves, but instead required a fair value discount.
On seasonal adoption Synovus will recorded allowance representing lifetime expected credit losses, all originated and acquired loans. However, because of an accounting election made at the time of the FCB acquisition Synovus, we'll be able to avoid the commonly referenced double counting effect of Cecil on a large.
Majority of the acquired loans instead, we'll record a balance sheet gross up to loans and allowance on those loans avoiding a more significant hit to equity in capital ratios as reflected in the table on this slide.
Those PCR biology lounge drive 50% of the estimated increase they want allowance and are expected to have no adverse impact to capital.
Our teams are working very hard to prepare for seasonal adoption and while we feel confident that we're on target and prepare to meet the January birth adoption date, our range of estimates could change based on the composition of the loan portfolio and macroeconomic factors that exist at the date of adopt.
Option.
So as we prepare to close out this year.
And looking into 2020, we remain.
Diligently focused on the areas, we can control, including efficiency expense management and growth and our core business.
And specialty lines, while we're aggressively pursuing the many untapped opportunities in our expanded Florida region. We're also very confident that the combination of strong talent capabilities, our relationship central delivery model well positions us to win in our other vibrant markets across the southeast.
Additionally, our continued investments in technology or building, a better operating environment and improved delivery channels to enhance the customer experience and broaden our reach.
But all our team continues to demonstrate our deep commitment to serving customers the highest levels getting back to our communities and ensuring that we create long term value for our investors.
With that operator, I'll now open the line for questions.
We will now begin the question and answer session ask a question. You May proceed Star then one on your Touchtone phone. If you are using a speakerphone. Please pick up your handset before pressing the key.
So with try to your question. Please press Star then too in the interest of time. Please limit. Your question your questions to a question in a follow up question.
This time, we will pause momentarily to assemble our roster. Thank you.
The first question is from the line of John Pancari with Evercore. Please go ahead.
Good morning.
Morning.
What do you see if you could talk little bit about your expectation for the the Green Sky relationship I know that was a contract that was coming to exploration in August or September . So and you were evaluating a can you just give us your update on if you're still participating in the program and if there's been any changes in terms of the terms are yet.
Expected production that you see coming out of that thanks.
Yeah, John Good morning. This is castle, maybe Kevin I'll Tag team that let me just by the way from a housekeeping standpoint acknowledge that we tried to cover a lot of ground in the opening there and a little longer than we would like to have gone. So we'll be very efficient.
With our answers, but will stay on the line as long as we need to this morning to get all use we apologize.
But that range Sky, we are the relationship we're comfortable with relationship.
It's really a continuous give and take in terms of what what we expect what they expect and so even though there are contract dates.
That yes, we won't get into specific.
Dates and actions associated with that we are comfortable in relationship we're still M.B. I'm relationship and again, it's a constant.
Discussion on appropriate returns for us appropriate.
Structure credit, which pools, we have more interest in.
That others, but again as of today, we are comfortable that relationship get our if you'd have anything to add to that okay. Okay.
Okay. Thanks, and then one of just get a little bit more color around loan growth. I know you had indicated that you expect now 29 peak come in below the five or it could be coming slightly below the five and have to seven to have a range. You can you just talk about.
What you're seeing that's impacting that and how does that impact your outlook for 2020, I mean could we see loan growth moderate incrementally through 2020, and if you can perhaps give us an idea of what type of level. We can expect as we look out. Thanks, Yeah, John I don't know that we're ready to give 22.
Any guidance, let me talk about what we see right now and again others might.
Have color, what we did see I know, we've talked about it before accelerated payoff, but actually in the C. R. E book this quarter or pay off we're about 50% higher than in the past quarter, and we made and we look hard at a lot of loans.
We had the opportunity quite frankly to renew that we were taken out of because we just weren't willing to go to a fixed rate structure or when we weren't willing to concede.
On term and tenor and rate and and again it was a conscious decision I've said.
Often is I've been on the road this year that I would much rather.
Happened revised guidance by the way I didn't want to I'd much rather revised guidance down, but I would compromise on those things. We said we're not compromise. So you know the CRT levels stay at an elevated level in the fourth quarter. If they do that probably could cause us to beat that slightly lower and we haven't given up by the way on on anything but.
Just based on current pipelines current mark and market conditions, where we see.
Some construction loans go out at Seattle or go.
Have opportunities to go non recourse subsea, which one is not going to do.
So it's a little I'm sure we like our pipeline, we're optimistic about production in the fourth quarter, where we like the way our teams have come together, we really feel good about some of the hires we've made the go to market strategy. So the production side.
Has been good I think total production of 2.6 million <unk> billion dollars and funded loan production, but payoffs, they're hard to predict but third quarter was certainly accelerated so haven't given up on the fourth quarter and we say.
Outside of guidance it would be we think you'll be very slight if outside but wanted to make sure. We were clear on that and then we'll continue to work towards our 2020 outlook and give that guidance certainly on the January call.
Okay got it thanks guys.
Thanks, John .
Your next question, it's from the line have cancer with Morgan Stanley . Please go ahead.
Great. Thanks, good morning.
Again, I was hoping you guys can probably just a little more detail on the higher provisions slas charge offs in the quarter, obviously I know one of the concerns around your stock might be that potential credit risk and having a tick up this quarter is probably not the best thing in the world.
Q slate, what's driving that Cenovus is it FCB is it something else.
Thanks.
Yeah, Hey, Ken This is Bob just provide a little bit more clarity on that I have a on the charge off ratio itself again, we work I think last quarter was really the anomaly not this quarter.
So we had.
From a timing standpoint of actual charge offs.
I just happened to kind of cluster in this quarter versus last quarter. So I would call your attention that being really low and as Kessel mentioned in his opening comments, if you kind of smooth that curve out a up they are higher there's no debating that but if you break down the charge offs theirs, we didn't have any charge off a greater than $4 million.
A handful of commercial credits in that $1 million to $4 million range offset by a very limited smaller recovery level. This this quarter. So the net effect of all that is you do get you do get a charge off a little bit higher than last quarter. When it was sort of everything went your way, but again nothing systemic your question about.
GAAP geography, it spread out across the footprint with no isolated geography on provision recall that as Kessel mentioned, we take a little bit heavier.
We take full provision on on gross loan production that we just don't get any offsetting that acquired book that you would normally get on the payoff. So you factor those two together it gives you a little bit elevated provision costs, but.
Overall, if you kind of look at it over a few quarters, we don't feel that did anything out of line or any trend line that were concerned about and Ken. This is a this is Jamie one thing to add to that is when you think about the provision expense as Bob mentioned as Kathy mentioned on the call. Just remember that you know part again, when we get those paydowns in the acquired book that's part of that PA.
Story, so we have enhanced or higher P.A. this quarter.
And that's part of the same story that Bob's talking about actually.
Resulted in more provision expense for the quarter for the growth.
Gotcha understood. Okay, and then maybe my follow up question. Please turn to pay for your capital levels I'm looking to see so slide.
Make a point that there's minimal impact in year, one given the three year phase and but does that imply that there is a more substantial impact in years, two and three and what should we infer from that in terms your ability or willingness to buy back additional shares now that the seven.
25 is done thanks.
Yeah again.
There's not a tremendous capital impact you're right about a three year phase in but the main thing I would point to and we'll give more guidance on the capital impact as we move along into 2020.
But I would point to the fact that the PC I buy analogy loans have no capital impact right as Kathy mentioned on the call. That's that's a that's a gross up and Thats a real benefit to US we think about heading into the seasonal environment that we're not going to get the capital hit from those loans and that half of the C impact.
Okay, sorry, and then just on the your willingness to continue to do buybacks now that 720 fives over with.
Yeah, Yeah, Yeah, we continue to manage to art to the range. We described 9% to 10% we're very comfortable at nine as you can see we're just right below it.
We look at that in many different ways, we live in the full capital stack, we run a bunch of different stress scenarios and I. One thing I would just highlighted when we look at a severe adverse scenario just think like a great recession type scenario, we only see a couple of percent capital degradation over that horizon, and so and 9%.
See T. One we feel very comfortable that are the data, that's a safe and sound quite operate.
Alright, thank you.
Your next question is from the line of Brady Gailey with KBW. Please go ahead.
Hey, good morning, guys.
Right right.
So you can just start with the net interest margin.
I know I'm I know last quarter, we talked about that slip being I think about five to eight basis points in the back half of this year yield accretion was higher this quarter, which helped it but.
Large also say a couple of minutes go you're expecting further NIM pressure, so that maybe just an outlook on the NIM into fourth quarter.
Yeah. This Jamie I'll just jump in on that you're right. Our prior prior guidance last quarter, we've had five day basis points predicated on one of a rate cut in July .
And then another one in the fourth quarter for disclosure, we were modeling up October for that for that second caught.
When you back out P.A. were down six basis points on the quarter after getting both those kind of caught in the same quarter.
You know I would you say that the rate cuts happened faster than we were modeling we were using just the market for us for that.
And deposit rates lagged a little bit at the beginning we had there's a lot of pressure on promotional rates Nvidia and we chose not.
Not to participate at the same story, we sat in the second quarter. We did we kept the capital on a said no and higher cost promotional Cds and you saw runoff. There. We also passed on public funds odds are now 550 million all in the quarter Cds down 695 million, but this theres a story when you kind of.
Well that back a little bit the seeding the average maturity with about 2.1% the average going on yield our cost have not the Cds was 180.
We we let 8000 CD accounts go in the quarter and 84% of those where single service. So so were if these are not core synovus relationships.
And then also CD production and deposit production overall was up over 30% quarter on quarter, and so that led to more households more accounts.
That's it that's how we achieved a $525 million of core transaction deposits increased noninterest bearing up significantly.
We will we just we continued to remain kind of third quarter same its second annual pricing some of that in the fourth onto a liability side of the balance sheet Castle spoke to a on the loan side and how would you say that story is a real positive up 17 basis points quarter on quarter on new and renewed loan spreads.
That's a that's a nice tailwind for deposit I mean for loans, how do we head into the fourth quarter. So.
When you see our monthly deposit costs, you see the decline and August and September were down eight basis points from the high.
We feel good about how that positions us heading into the fourth quarter.
When we think about were what will happen in the fourth quarter. Our models right now I know, there's a little more dovish than then border eight but we we have a cut in October and a cut in December .
We would say that should that happen, we would expect another five to eight basis points of NIM compression a and then I would just say that after that as we head into 2020 and deposit betas increase I think that the marginal impact per rate cut would be less.
All right. That's helpful. And then one last one on credit it Pcls were down, but Oreo was up about $20 million, which is a fairly big swing relative to you also asked what was there any big asset that drove that Oreo increase.
Hey, Brad this is Bob it's Oreo and other asset so there's some other classifications and their.
Tick up that NPK number, albeit not very much. The loan account you know again continued to decline, but the mph would include Oreo plus some other asset.
Okay that was all small ticket stuff there was no big.
Asset coming coming in there.
Hi, Brad This is Bob I mean, there was that there was a receivable in there that's a.
Relatively large dollar amount, but we reclassified in India, Yeah. It was an existing.
Accounting class three I'm into the existing asset that we had that would not have classified as non accrual or nonperforming and we just moved it into that category.
Okay got it thanks guys.
Your next question is from the line of Jennifer then with Suntrust. Please go ahead.
Thank you good morning.
Morning.
So you indicated that expenses might be at the high end to just above the.
The range.
In the previous outlook.
Just curious what the propensity would be to adjust expenses to kind of better reflect this new rate environment.
You know Jennifers Jamie as.
As we look at our expense run rate a couple of things really happened in the third quarter and part of that was commission expenses being higher exactly the direction, you're going to lower rates greater mortgage production.
And so we've seen data in the third quarter when that would highlight though is it that was a shift from the second quarter, where we had capital markets and other fee revenue businesses. They were kind of really hitting their stride.
And so.
You know as we think about that guidance.
Our core expense run rate fields, consistent and looks consistent with what we've said in a path where is having a higher commissions. We did have another million dollars higher and professional fees that were nonrecurring in the third quarter.
And Jennifer let me add on it as Kessel I I think a hard maybe at a comment about propensity to adjust.
So just a couple of points you know, we did and we have.
Ben aggressive in our hiring Britain very pleasing our ability to attract talent.
In some cases sooner than we might have thought so you get some expense.
Gain from that and you saw obviously that revenue associated with that.
But it's a question is where are we willing to make adjustments.
I would say that Jamie.
Canada, though last meeting we had yesterday were last evening was about.
Looking at opportunities not just in the fourth quarter, but really in 20.
And 21, and the out years, where all the opportunities too.
Make significant adjustments in the expense run rate and will be much clearer on that 20, and 21 guidance into January coal, we certainly.
Don't take.
Growing expenses likely and we want to make very sure that we.
Continue to invest both in the talent that we've acquired the technology, we need to customer facing technology, but.
Same time, we've got to save to be able to invest we're looking at that.
Again last night and probably later today, we'll give more clarity on that in January .
Great. Thanks, so much.
Thank you.
Your next question is from the line up I, perhaps you know a with bank of America. Please go ahead.
Good morning, guys.
Good morning. Good morning. So most of my question would have been asked and answered just a couple of quick follow ups and downs of the accretion.
Is it right in terms of how we should expect.
The accounting accretion essentially going to Vito come one Q claim team and to the extent you can can you talk about how some of that mean influence provisioning expenses next year like do we see some.
Lower provisioning.
Accretion flowing through that line item. If you can talk about Greg Yes, sure how this Jamie so.
As we look forward, we would expect P.A.
Be reduced dramatically in 2020.
We would expect that full year P.A. to be somewhere in the ballpark of maybe $8 million Hum and so that's a that's.
That's how we think about that you get that goes through Cecil and so when we came out that ties in with your provision question is we look at provision we would take charge off if you look at our pipeline I'm kind of what we have experienced where at 18 basis points year to date and charge all week. If you look at all forward looking credit metrics, we feel.
Good but for next year. When you think about that you would you say charge offs plus growth and that that fee. So you know clearly see so bringing in a whole new variants about the economic outlook and all that but just kind of setting all that all that to the side. That's how we're thinking about it and Ebrahim. This is Bob use your.
Right, we wouldn't have the P.A. credit accretion.
After January one so you would have as we grow so the mark into the loan loss provision you would have just been normal loan loss release associated with new loans in that category.
Got it and just a quick follow up in terms of.
I guess, they too expensive, but just wanted to get a sense of where you think it'd be in terms of the Florida investments by the end of the error and just trying to get a better sense Castle, let alone.
Our pointed on expense leverage do you think you would have the fat means I'm sure. There's always investments to be made but do you think you'll be in a place where are you would have the franchise. When you don't need to make it didn't know if investments next year in Florida.
Well when you say, maybe Kevin can help me on why did we were pleased with what we've done in Florida, both from the realization of the expense age and quite frankly.
From the ability to attract 35 I think of slide in the decadal can't rubbers paid right now, but 35 producers spread throughout Florida and by the way our existing franchise.
Part of that because I think coverage, we now provide for that state allows us just do attract.
A lot more talent I think I've heard of in addition, the slot I think I've heard of maybe a couple of more this week in the South Florida part because I think our footprint lends itself well to people in that space. So as far as 2020, I don't I don't know will ever stop by investing in revenue producing talent.
We just got to make sure that we know exactly what they'll bring how they'll bring it how quickly they will bring it and if we don't meet the expectation you have to have to deal with that but we really do think right. Now if you look at how we're positioned in the five state footprint.
And again not speaking for against any other bank I'll just speak to Synovus, we think we are at attractive.
Employer.
We have a lot to offer our way of business to customers are things attractive and so.
Again, we've had an inflow of talent based or our operating model based on our size based on our reputation based on the markets. We cover the I don't see that slowing in 2020 now again.
Maybe not maybe not quite at the pace.
But it's a good problem to have when people. They can produce good revenue that great reputation in the market reach out to even want to be part of your team. So we'll we'll get that carefully and just have to make sure that we continue to look for ways to save expense. So that we can invest in the revenue generating people.
Got it thank you.
Thank you.
Your next question is from the line of Jared Shaw with Wells Fargo. Please go ahead.
Hi, good morning.
Good morning, driven.
Just circling back on the and the funding side.
If you look at the cost of funds going into the ended the year should we expect to see an acceleration of the deposit cost decline, especially in the as you continue to exit the higher cost funds.
So where do you think that is the.
Maybe the transactional.
Pricing comes down you would step back in there and then also as you replace it with FHLB inside you extending duration there or is it really more just a short term.
Replacement for so that higher costs funds.
Yeah, you would definitely expect to see.
A greater decline in the fourth quarter than what we saw in the third.
Hey, it's just I think that as we've laid it out to point of in the prior earnings call and think about another couple couple of fed moves.
Those numbers still still hold where if you had two more movies you could see another 10 ish basis points of decline in your cost of funds your effective cost of funds.
With regards to the home loan bank, we we that finding we keep fairly short we're constantly evaluating.
What makes the most out by were also were not.
Standing out where you end up paying more spread for the advances.
Okay. Thanks, and then on the capital siding I appreciate the comments on the buyback I guess, what are you seeing in terms of opportunities for other types of investments, whether it's M&A or.
As a sign type.
Acquisitions are there opportunities out in the market is that something that you're interested in here or is it really more we should be looking at the the buyback is the primary buyback and growth as the primary ways of controlling capital.
Yeah, I would jump in on death, I would just remind our capital priorities right number one is organic growth like that that's what we want to do is the most accretive to shareholders like that's our that's our priority and so we'll continue to look for ways to.
Deploy you know in gross synovus and our footprint.
Second our committed to our dividend and we'll continue with a strong dividend policy and we're in the process of looking at that for 2020 currently.
And our third priority would be either share repurchases or other investments and so when you think about other investments.
It would need they would need to outperform you know given in back of the shareholders and make a lot of sounds given the rest that's involved clearly were onto the far to me bank integrate.
Integration beyond.
Building out those branches turning them into synovus branches, but.
Our priority right now executing that.
Looking you know there there could be there's nothing on the horizon, but there could be nonbank ways to basically add products to serve our customers better.
But truthfully those are the last in the in the line of priorities you know its capital mentioned, we talked about a two hires in the last week you know that that's where we should be deploying our capital that we should be building out and grow in these businesses that we already have.
Good thanks.
Your next question is from the line of Brad Milsaps with Sandler O'neil. Please go ahead.
Hey, good morning, guys.
Want to.
Hey, Jamie I wanted to maybe follow up a little bit on the NIM just curious in terms the bond book, even ex purchase accounting will get to yield there stayed pretty stable just curious kind of what you're doing there if you plan to shrink it Additionally, or.
You know to kind of help offset some NIM compression.
Yeah.
Yes.
Including P.A., there's a little bit of noise in PA and the book this quarter only backed that out you're right.
At a three 3.0 for book yield.
Going to one yields in the securities portfolio about to 65 to 270, So you would see that that yield decline over time.
But you're right I would expect just the securities portfolio decline a little bit in the fourth quarter, probably similar to what what in the third.
And I would also just remind you that we did rebalance the portfolio. This quarter, we took some losses I did a little bit of duration extension and pick a little bit a yield and so that's also in the mix of that.
Great and I appreciate all the color on the run off in Cds, and the public funds, but the big category. They grew at least on average where they were the non non maturity broker deposits.
It looks like the yield actually or the cost on it was actually went up a basis point I would've thought those would have maybe band your most interest rate kind of sensitive.
Deposit bucket in its your highest cost kind of curious you know will those reprice you know more significantly in the fourth quarter are you building those because they are indexed and so you should get more of a pick up maybe that we havent seen yet just any additional color there would be helpful.
Yeah, what you're seeing there is timing related.
Those will definitely resets so would the in within brokered deposits the non maturity. They typically trade based off that effective and so I was a spread the fed effective a little bit less than 20.
Bases points and so yeah, you'll see that reset at the fed moves on the Cds you. We have some brokered Cds in there and the going on yield of those is about 180 today and typically five to six months CD and so we would expect to see all of those out that decline.
Line in costs as we go along.
Got it and then just final question for castle it sounds like you're pushing maybe 40, new hires in Florida, plus what you've hired across the rest of print footprint. This year.
Yes. It was would you expect in 2020, you would exceed the number of new producers that yard in 2019.
I don't know.
I don't know that I can give you a number there and it's not just Florida, we are constantly in market.
Recruiting talent we've got.
Close to some more in Georgia.
Right now so.
Gosh, I really would hate to hate to say more or less I think certainly we had the opportunity to build out Florida that had some really underutilized markets with bill brokerage across so yeah that probably that probably slows the air and so I guess the overall number.
Come down a little bit, but I mean, quite frankly that would be a good problem to have if we felt like we had more opportunity rich out top kalorama footprint, but I guess again without any.
Real forecast I'd say that number certainly in Florida would tend to come down and.
We can be very selective around footprint.
Great. Thank you guys.
Thank you.
Your next question is from the line of Tyler Stafford with Stephens. Please go ahead.
Hi, good morning, guys.
No I don't mind expenses.
A big confused about just the earlier comment that the third quarter expenses filled consistent with what you guys said previously expected I mean, even excluding the 1 million higher professional fees.
Tangible in I.E. came in well ahead of the 250 million that you talked about last quarter for for the third quarter in the fourth quarter and last quarter, you're talking about how that even included 100 revenue producer hires as well the July salary increases. So I guess, how do you feel about the ability to to get back towards that 259 average to.
Tangible Eni you going forward and.
And I get fee income was strong, but even quarter over quarter. It wasn't.
That big of an increased to to in my mind at least kind of warrant the decipherable or increased quarter over quarter. So just curious kind of where you expect that the tangible in I eat to go from here.
Yes, Tyler's Jamie.
Those are Ah.
Good question when you look at tangible and <unk> in the third quarter, we were really a few million higher than what we expected and it really it is the two components at the other professional fees of million dollars and it's the commissions.
Just one or two and a half million and that really is the delta to what we what we had forecasted now the reason that's different than what you're saying is it because we are forecasting step down declines from Q3 Q4, and so we do expect the fourth quarter and I eat has adjusted tangible and I need to be lower.
And the third quarter and so that's a piece of it but you're spot on with the with the commission Empaque being kind of made maybe just a portion of what you'd expect given the growth in fee revenue, but the agreement what change there is mix and so basically some of the businesses they were growing faster and the third quarter also higher commission businesses.
When you're thinking about mortgage first derivative sale things like that.
Okay.
Alright, Thanks, Jamie maybe on the on the fee income side and it was a good twoq and Threeq you core fee income results I guess.
Do you think about the sustainable kind of pace of core fee growth over the near term just given all the hires that you that you've made and we've just got so far on this call what what's the sustainable eating kind of core fee income growth from here.
Yeah Tyler.
I'm going to necessarily update guidance, but I'll tell you that that's one of our core priorities right now is it sustainable growth and fee revenue growing in IR as percent of total revenue.
What I like that they were seeing it and now is the diversity of the growth and so this quarter you had mortgage stepping up last quarter.
It was capital markets and so we're seeing we're seeing growth coming across the board I mean, there this quarter, we had over a million dollars increase and fees associated with card and so we're seeing strength across the board, we will update our our longer term guidance in January but.
But but it is a good story and we also within that story, we have businesses like treasury that are really starting to hit their stride and they're starting from a low base and that's just can be a nice tailwinds that fee revenue growth.
Okay, all right. Thanks, guys.
Thank you.
Your next question is from the line of Stephen I accidentally not let JP Morgan. Please go ahead.
Hey, Good morning, guys. This is Anthony only on for Steve.
I want to reality on what the follow up on the credit questions can you talk more about the increase in 90 days past due loans this quarter and was any of this tied to the STB portfolio.
Hi, Anthony this is Bob.
That you're on the very low base. There. So there is some accounting the mortgages that that we actually do.
There are in the FCB portfolio is relatively small number but the increase in 90 days moving from two to four while that's double was still very low base, but that is one thing I could call out is a small mortgage based in Florida, but.
But again nothing that we didnt know about.
Got it Okay and my last question you note on slide seven that deposit cost peaked in July and that's the decline was this broadly across your whole footprint or are you still seem deposit costs increases in certain markets. Thanks.
Yeah. It is it is across the footprint a interestingly I mean deposit cost when you think about Cds are different and different market by the decline is actually fairly consistent across the geographies.
[noise].
[noise].
Mr. Anthony I have are you done with your question.
Yes. Thank you.
Thank you.
The next question is from the line of Garrett Holland with Baird. Please go ahead.
Good morning, Thanks for taking the questions. We've covered a lot of ground. This morning, So had a couple of follow ups on.
And I related items I appreciate the conservatism, what the outlook, but if we only get one October rate cut in Q4.
Q4, NIM outlook meaningfully change.
You know I'm.
No not significantly.
You know I I guess, how I look at the low end of the range and we do have tailwind heading into the quarter.
But yeah. It's just October move I put into low end of the range.
Thanks, that's helpful and then the amount of maturing Cds pick up in Q4.
It's just curious on that point in your outlook for the loan deposit ratio moving forward.
Yeah, we have we have a material amount of Cds and do mature a in this quarter the fourth quarter.
And not quite as many as the third quarter by but but not far off.
That's helpful. Thanks for taking my question.
Yep.
Your next question is from the line that Stephen do on with RBC. Please go ahead.
Hey, good morning, guys.
Hey, good morning, I can you you guys spoke gave a lot of color on your Siri portfolio can you speak to your seat I portfolio and what the market it's like there.
Hey, Steven this is Bob I'll try to give you a little.
Labor that we feel good about RC and I book, If you as Kessel mentioned, it's fairly diverse from a concentration standpoint.
Health care would probably be the industry category that would.
I'll be the predominant at a number there, but again, that's probably 18% to 20% or so of that book our portfolio goes all the way down to small business all the way up to middle marketing corporate syndications, very very spread out very diversified there's no industry concentration.
Absent my mentioned of health care, and that's a very broad space. So.
Credit metrics as Kessel referenced in his earlier comments were very good we do get some small business charge offs in that book Thats, mainly from our.
Legacy accounts that that would just run but our yield offsets that so we feel very good about CNR book.
Great. Thanks for the color there.
And you guys also mentioned about some of the tax initiatives that you guys have been a undertaken.
As this set you up in a better position as far as your effective tax rate goes for 2020.
Yes, Hey, Doug.
Jamie you know we're working on multiple initiatives, we actually have had a deal close.
This quarter, which which is a positive to that we've discussed in the past that they've been.
Were to come along that than we had hoped but we've had a one deal close and we hope to have another one close this quarter.
So we're moving along well there and feel good about our 2020 DTR.
Great appreciate the color guys.
Thank you.
Your next question is from the line have Christopher Marai, Nick with Janney. Please go ahead.
Hey, good morning, just wanted to circle back on deposit mix.
No that we've seen this improvement from the low Sixtys now to the mid Sixtys and curious if that gap going back to pre FCB should close in the next couple of quarters and to what extent does it easier because the up to the fed is lowering rates to get those core deposits higher.
Hey, Chris This is Kevin Blair, you're right. It's been Jamie said in his remarks res Q at a that we've taken two quarters to remix. The book. Thank you will continue to see a re mix in the fourth quarter back into more core transactional deposits and it may be lost them. They overall Archie message, but when you look at this quarter, Jamie mentioned that gross.
Action of 30%.
Resulted in a little over $500 million, a core transactional growth the run off of 700 million in Cds and a 555 in the public funds were all intentional around the strategic Remixing that will continue in the fourth quarter, which will have the effect of continuing to increase core transactional it won't get the legacy FCB portfolio.
Actually worse Innovus was but it puts us with a strong foundation that as we start to bring on new core deposits and that South, Florida, Central Florida marketplace that we'll be able to grow core transactional deposits faster there than me, but possibly what we've done in legacy synovus. So it's really it's going to continue through 2020.
But it gives us a good baseline as we entered the year.
Great. That's helpful. Kevin and just a quick follow up but as you think about FCB theres still expense savings opportunities there and we simply just don't see those because you've got the commissions and the other expense that data that you outlined earlier.
There's not a tremendous.
Level of additional expense reductions, you'll get the full year benefit in 2020, but in terms of the run rate savings that we have posted by the end of the third quarter were largely complete it with the cost synergies that we talk about now as Kessel mentioned in an earlier question, we're constantly looking for ways to car back our expenses and.
And we look at that franchise has been part of Sonos today. So as we look at branch consolidation vendors span personnel rationalization. There is always an opportunity to continue to refine the cost basis.
Great. Thanks, very much guys.
Thanks crashed growth.
Your next question is from the line has Nancy Bush with Nab Research. Please go ahead.
Good morning, gentlemen Castle, you talked a lot about Florida, they haven't talked about a lot about Atlanta and given everything that's going on there could you just update us on the competitive situation and whether you're hiring there et cetera.
Yeah, we are a lot of Atlanta, I actually said door team yesterday, we you know with all due respect you are right teammates in Florida, we talk too much around Florida.
That is where a lot goes questions. Gen tend to go we we've done very well I'm in Atlanta that great talent in Atlanta personally involved and so the recruiting effort. There we continue to see that again across not not really related to any one particular bank, but just again you know.
You bet sort of going on there were right on it we're bullish on the economy and we're bullish on the nature of the talent that we see in market in Atlanta.
Could you just speak to your loan and deposit growth affair sort of relative to the rest of the franchise.
Yeah, I, maybe Kevin can can help there because I don't have that that market data I can tell you what what we see years really goods getting maybe you can speak to that and Andy Atlanta continues to be one of our fastest growing markets. It's not only the marketplace itself, but as we build out our go to market strategy both through the.
Wholesale bank, where we're adding middle market bankers, but quite frankly across all of our private wealth management and community banking.
Lines of business. It continuously shows a the most growth both from a lending standpoint, but also from a depository standpoint. So it is one of the market that will continue to invest and we've added two branch locations. There in the last year last two years and that also has been a bit of a tailwind for other than at the place where we're continuing to look to expire.
And our physical distribution network.
We continue to take advantage of opportunities in the inside the perimeter and outside of the perimeter of Atlanta, We have again I is as Kevin said, we I don't really get excited talking about building branches, but we are continuing to add branches in Atlanta because of the opportunity and just because of that I think the increased distribution, we think that benefit us.
Greatly with our retail strategy. So we've not just opened two we have other sites under development under construction to add to our franchise there.
Yes, I could just add.
Add something to that to the question given the history of Atlanta, how is your deposit pricing and Atlanta now relative to the rest of franchise as well.
It's like any other metro market that we see it it's no different than a nashville or some of the other markets that we talked about south Florida typically has a higher average rate on promotional deposits, but right Atlanta fits right within the other metro markets. So it's not an outlier.
Okay, Alright, thank you very much.
Okay.
Thank you Nancy.
This concludes our question and answer session I would like to turn the conference back over to Mr. Kessel Stelling for any closing remarks. Thank you.
Well. Thank you. Thanks, all of you for your patience today again, we apologize for the length of of the call. We just had a lot of.
Ground up to cover and certainly was a noise your quarter them.
Sometimes these called might reflects that we did our best to try and walk you through.
Those key items I, just want to close by saying that we were pleased with the quality of our loan growth as we said will remain very disciplined with praise pleased with the quality of our core deposit growth again, as we remix the balance sheet, where we're confident that our credit discipline.
Is paying dividends and if that revises, our loan growth a little bit downward, we'll we'll take that.
Discipline as reflected in the reduction in Npls, a low past dues.
And the charge offs and again, we remain in guidance with the guidance we put out this past January so all credit metrics.
Flag that I think we're making the right.
Decisions were really.
Please with the production both from existing.
Legacy Synovus teams and some of the new ads on the validates our model it validates our decision to invest so were very.
Very pleased there were pleased with the markets in which we operate the economic conditions in the southeast.
In general are better than the rest of or none of the most of the rest luxury and so we like amounts we operate in operating and in most of all.
I'm pleased with the performance of our team and focusing on those things.
They can control and putting some of the other noise out so I'm confident that we finished the year strong we look forward to the January call or we'll update our guidance.
For the year in and the out years in terms of our expectations and look forward to speaking with all of you. Then if there are questions in the meantime, please let us know that we'll be happy to get right back to you. So thanks to everyone and have a good day.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Yes.
Oh.
Oh.
Hmm.