Q3 2019 Earnings Call

Good day.

Welcome to the Byline Bank Corp, third quarter 2019 earnings Conference call. All participants will be in listen only mode should you need assistance. Please secondly conference specialist by pressing the star key followed by zero.

After today's presentation, there will be an opportunity to ask questions to ask your question you make press Star then one on your telephone keypad 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 Tony Rossi, a financial profiles. Please go ahead.

Thank you Andrew Good morning, everyone and thank you for joining us today for the byline Bancorps third quarter 2019 earnings call.

Using a slide presentation as part of our discussion. This morning. Please visit the events and presentations page by lines Investor Relations website for access to the presentation.

Before we begin like remind you that this conference call contains forward looking statements with respect to the future performance and financial condition to byline Bancorp and involve risks and uncertainties various factors could cause actual results to be materially different from any future results expressed or implied by such forward looking statements. These factors are discussed in the company SEC filings, which.

Sure available on the company's website the company disclaims any obligation to update any forward looking statements made during the call.

Management may refer to non-GAAP measures, which are intended to supplement but not substitute for the most directly comparable GAAP measures. The press release available on the website contains the financial another quantitative information to be discussed today as well as the reconciliation of the GAAP to non-GAAP measures.

I'd like to turn the call over 12, Bertaux pair Chaney, President and CEO Alberto.

Thank you Tony Good morning, and welcome everyone to our third quarter earnings call. We appreciate all of you joining us. This morning with me on the call today, our Lindsay Corby, our CFO for his first call one become our chief credit Officer as is our practice I'll start the call with an overview of our performance and give you key highlights for the quarter before passing the.

All over to let's say, who will walk you through the components of our financial results in more detail I will come back with closing remarks, and then open the call Washington as a reminder, you can follow our comments with the help of a deck that you can find in the Investor Relations section of our website.

Starting on slide three of the dock, we delivered another quarter characterized by solid earnings and profitability and a strong margin despite tougher rate environment in the third quarter earnings came in at 15.3 million or 39 cents per diluted share adjusting for merger and conversion related charges earnings came in at 16.

Point 2 million or 41 cents per diluted share.

Profitability continued its positive trend with our away a narrow T C on an adjusted basis of 112 basis points and 12.2%, respectively. Despite our Tc ratio, increasing by 78 basis points on a year over year basis.

Overall revenue increased 5.8% from the second quarter and showed good balance between spread and fee income categories. Our net interest income increased 6.2% from the prior quarter, driven by both growth and earning assets and our margin which increased to 4.62 per site.

The margin benefited from a 16 basis point increase in loan yields offset by marginally higher funding costs, which moderated further the margin excluding accretion income declined by 11 basis points and came in at 4% consistent with our expectations and the guidance we provided in the second quarter non interest.

Income increased by 4.4% from Q2, driven largely by higher gain on sale revenue from government guaranteed loans, partially offset by higher fair value charges on our servicing asset.

From a business standpoint loans were flat for the quarter, an up 11% on a year over year basis. This quarter, we saw a fair amount of pay up activity across our lending businesses and in our acquired portfolio total originations were 97 million led by Cnine and small business the market remains competitive.

And given the rate environment and stage of the cycle. It's important to remain disciplined managed margins and not chase opportunities what poor risk reward characteristics pipelines at the end up a quarter, where solid and we added additional talent to our lending ranks that will contribute to our business development efforts going forward.

Deposits grew 20 million and stood at 4.1 billion as of quarter on what the growth coming primarily from low cost core account deposit costs were flat quarter over quarter and reflective of actions taken in response to the rate environment and outlook.

Our efficiency ratio improved to 59.8% from the second quarter adjusted for merger and conversion expenses. The efficiency ratio increased largely as a result of higher professional fees tied to projects that we anticipate will not recur going forward.

Yes, we have done since our recap in 2013, we continue evaluate our branch network and assess activity levels customer traffic behavior and proximity to other branches to determine if we're better off consolidating or maintaining the location. This quarter. We identified I know there are three branches that can be consolidated and.

One that can be re purposed with minimal customer impact service levels and overall convenience. We expect these activities to occur during the first quarter of 2020. The consolidation is expected to result in a onetime charge were approximately 817000, and we anticipate it to generate 1.2 men.

So in an annual cost savings as we've done in the past, we will look to reinvest a portion of those savings back into a business from an asset quality standpoint, our NPL, excluding guaranteed portions of loans increased by 16 basis points over the second quarter, partially due to the downgrade of one commercial relationship.

Chip and one government guaranteed loan net charge offs increased to 56 basis points for the quarter, primarily due to charge offs taken on loans, what specific reserves nearing resolution, we anticipate charge off level to gradually moderate and the fourth quarter provision expense declined from the second quarter and the allowance increased.

The 82 basis points with that I'd like to pass the call over to let's say thanks, Robert Good morning, everyone. I'll start on slide four with a review of our loan and lease portfolio. Our total loans and leases were 3.8 billion at September Thirtyth, a net decrease of 32 million from the prior corridor. The decrease in total loans and leases lets price.

Marelli due to a higher level of payoffs and pay downs corridor.

<unk> came in at 150 million compared to 136 million in corridor, we continue to see payoffs in the commercial real estate portfolio and saw slight increase from the commercial portfolio during the quarter originated loan portfolio increased approximately 184 million.

Gross spread nicely across our commercial commercial real estate and construction portfolio.

Growth in the originated loan portfolio with off that I had $216 million decrease.

<unk> portfolio.

The only half of the decrease in the acquired portfolio related to the natural movement to originate at and the remainder stems from Paydowns and payoffs on loans and relationships not considered core to our best Huh.

Moving to slide five I've government guaranteed lending, but that we have led us to investors and others. Following our story to include more disclosure is around [laughter].

Our small business capital team dedicated to originating and servicing government guaranteed last.

We continue to be a top 10, Sta lender nationally and we are ranked number one in Illinois, and Wisconsin isn't the higher risk higher return business that produces higher average bond yield gain on sale and servicing fee income. We currently managed 1.9 billion and yea and U.S. da loud, we've retained the unguaranteed portion on balance.

Great and sell the guaranteed portion and to the market for premium.

Moving onto the part that I flight deck, our total deposits increased 20.1 million to 4.1 billion at September Thirtyth. The growth was driven by increases in our interest bearing checking money market and time balance that the growth in our interest bearing checking and money market accounts was primarily attributed to increases from our commercial customer.

Growth in these areas was partially offset by $19 million decline of noninterest bearing demand that get you real estate tax payments during the quarter. We have seen balances rebound in October and are currently out 40 million today.

<unk> costs increased two basis point, which is down from the five basis point increase we had in the previous quarter increase was primarily due to the lower average balance of noninterest bearing deposits in the third quarter, our cost of interest bearing deposits was unchanged at 1.34%, which represents the active management of our funding.

As a result of shortening the duration on our time deposits that we have positioned our teeth to reprice at levels below their current maturity.

Assuming no change in the outlook for rate than market condition as our time deposits were now we expect to see it declined in the cost of east odd that we will begin seeing the impact during Q4 and look the additional benefit in the first half of 2020.

Moving to slide seven.

Net interest income in margin.

Noninterest income increased 3.4 million or 6.2%. This was the result of the full quarter impact of the acquisition higher margin and higher earning asset level. Our net interest margin increased 11 basis points to 462 in the third quarter accretion income contributed 62 basis points to the margin in the third quarter up from 40 basis.

His point last quarter, excluding accretion income our net interest margin was inline with our expectations at 4%.

11 basis point decrease since the previous Carter was primarily due to the average loan and lease yield excluding accretion income declining to 567 from 577.

Approximately 50% of our floating rate loan portfolio is tied to prime and a decrease in the average loan yield excluding accretion income was due to 25 basis point caught that occurred during the quarter.

We implemented certain strategies during the quarter to improve our earning with expectations of lower right.

Do you break and shorten the duration on our promotional Cds, we began replacing time deposits with other flooding right, that's particularly by replacing maturing Cds with money market products and third we unwound, our 250 million pay fixed swaps in September software entered in 2016, and we're used to hedge against rising interest rate.

In addition, we were able to repossession a portion of investment securities portfolio to decrease our variable rate exposure.

Turning to not interest income on slide eight.

And the third quarter, our noninterest income increased.

$623000 or 4.4% from the prior quarter, despite a $1.4 million decline and the fair value of equity securities and gains on securities held.

The increase was primarily due to a 1.9 million dollar increase in our net gain on government guaranteed loan sale, we sold 93.3 million of government guaranteed loans during the third quarter compared with 75.2 million of lots sold in the prior quarter.

Average premiums received during the quarter increased 13 basis points to 11.41 <unk>.

Due to increase prepayment speed assumptions, we reported an additional 1.6 million dollar fair value adjustment on our servicing asset which was up 387000 from the prior quarter.

Moving to slide nine let's look at our noninterest expense.

Our third quarter expenses included 1.1 million of significant items, including merger related expenses core system conversion expenses and impairment charges on assets held for sale.

Adjusting for these items in both periods, our noninterest expense increased 3.9 million from the prior quarter.

In addition to the full quarter impact of the personnel and operations the Bank about Park River for.

The higher expenses, driven by a 1.1 million dollar increase and professional fees.

Higher professional fees included approximately 1.5 million of project related costs that are not expected to reoccur.

The system conversion and branch rebranding complete we expect to realize the remainder of the efficiency. It's projected for of park for fourth by that beginning of 2020 and as Albert I mentioned, the additional branch consolidation should also contribute to improved efficiencies in the second half of the next year.

We remain focused on continuing to improve our efficiency, while reinvesting in our but.

Turning to slide 10, well take a look at asset quality, our nonperforming assets increased to 92 basis points of total assets from 83 basis points at the end of the prior quarter, primarily due to the downgrades of a commercial relationship and the U.S. government guaranteed loans during the third quarter.

As of September Thirtyth, our nonperforming assets included 6.2 million of government guaranteed loans and I worry about that excluding government guaranteed MPL, our nonperforming loans to total loans was 98 basis point up from 82 basis points at the end of the prior quarter.

Our net charge offs were 5.5 million in the corner or 56 basis point of average loans and leases for the quarter year to date charge offs represent 36 basis points of loans and leases versus 40 basis points the Erica.

Virtually all of the net charge off during the quarter were attributed to the Unguaranteed portion of U.S. government guaranteed loan and primarily on loans what specific reserve.

Provision expense was 5.9 million, which cover charge offs and resulted an increase in our allowance for loan losses. The third quarter provision included allocations of 10 million for originated loans and leases, partially offset by the relief of 4.1 million for acquired loan.

The higher level of provision that we have seen this year, reflecting growth in our portfolio, particularly the unguaranteed portion of government guaranteed loans and migration of the acquired portfolio into the originated portfolio as well as increases to our general over there.

Our provision for the third quarter increased our allowance for loan and lease losses to 82 basis points of total wantonly. That's from 81 basis bites at the end of the prior quarter and our coverage of Npls, excluding the government guaranteed portion was 84%.

In addition to the traditional allowance as a percent of loan and lease metric. We also analyze the allowance in conjunction with the acquisition accounting adjustment impacting our acquired portfolio at September Thirtyth be acquisition accounting adjustments slots are allowance for loan and lease losses represented 162 basis points of total loans and leases.

With that I would like to pass the call back Alberta.

Thank you might see in closing we had a very busy quarter with the successful conversion and integration of the Oak Park or forest transaction I'd like to acknowledge and thank all of our employees for their hard work and completing two conversions in less than seven months as I said previously the market environment remains very competitive for both loans on that.

Assets I think it's fair to say that we're seeing late in the cycle behavior with respect to both rate and structure are particularly in the CRT space.

That said, we continue to see good deal flow and opportunities both in terms of customers and talent. This quarter, we continue to selectively add talented bankers both on the commercial and retail sides of the business that we feel will contribute to our growth going forward with that operator, I'd like to open the call for questions.

We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone. If you are using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then to at this time, we will cause.

Early to assemble our roster.

The first question comes from Terry Mcevoy of Stephens. Please go ahead.

Good morning, everyone.

Good morning, Terry monetary Thanks for adding slide five I guess I'll start with a question on that slide within the sector concentration are there any specific industries or sectors that had been behind any increase in charge offs in the non guaranteed portion and I'm, just wondering where restaurants.

Right up within that pie charts that includes that foodservices or any other industries.

Yes.

Terry in terms of the Foodservices, Yeah, that's where the restaurants are and that in terms of the charge off it's been pretty diverse it really hasn't come from any particular, one piece of the pie chart per se.

More so than the other we do tend to see an uptick in terms of business acquisition type.

Unguaranteed portions of the long, but beyond that no. It's not really one particular piece. The point of this chart is really to show you just the diversity in terms of what's being originated.

Thank you and then as a follow up sounds like you've got really good opportunities to lower CD costs I'm. Just wondering overall your interest spread cost of deposits flat quarter over quarter did that trend lower as the third quarter progressed and.

If the fed cuts rates next week or what are your thoughts about a <unk> ongoing ability to just lower funding costs.

Sure So and as I said in my remarks that you're going to see it on the time deposits really in terms of the decrease going forward here. So I I do think that it will help us what the right caught next week and make it does occur and you will see some relief on the time deposit side there yeah, if I could just that.

Jerry just in addition to what lens. He said I think we were were probably proactive very proactive once the outlook change for rate.

So we in anticipation of the Fad coding we took action with respect to.

Taking the foot off the gas as far as promotional pricing was concern anticipating that it would rather it was not going to be a onetime costs, but rather it was going to be several cotton rate. So I think adding to what latency side certainly if the fed work to be more aggressive.

You know in cutting rates next weekend, followed by another potential rate cut in December I think job I think we would see the impact on that for sure.

Okay, great. Thank you both.

Thank you for the next question comes from Michael Perito of KBW. Please go ahead.

Hey, good morning, guys.

Morning might Bernie.

I wanted to follow up on the.

The U.S.P.A. business here, you know I guess, what I'm trying to flush out I mean, obviously you guys have been very transparent in that you expect kind of charge offs and credit losses to be elevated that business relative to kind of the traditional commercial banking lines, but you're trying to flush out as I look at some of your peers across the country charge offs you seem to be.

A little lower and I'm trying I'm trying to get a sense or get your insight as to how is that more. So you think just because the S.P.A. businesses such as a larger role to piece of your overall company and do you have any thoughts about how your loss rates compared to others in that business and just trying to get a better sense.

How the comparative credit performances for you guys versus some of your peers there.

Sure. So I'll take a stab at that might I think.

To your first question in terms of peer comparison beer comparisons.

I think we run a pretty diversified business that's call. It I would view it more as as general in nature, meaning we have business development officers that are focused on originating SBK loans.

Some of our competitors have certain verticals that they focus on where maybe the dynamics and in a particular vertical as it pertains to both risk and reward are different so I think that could explain some of the variance. It is for sure a higher risk business relative to our commercial banks.

In business as it pertains to charge offs and also exhibit.

You know some kind of higher volatility so in certain quarters, you see it both on the gain on sale side and you certainly see it on the credit side I think as it pertains to this quarter with respect to.

Charge off levels I think last quarter I think we commented on resolution activity being.

Relatively moderate in the second quarter.

Relative to two the previous quarters, and we definitely see saw an uptick in resolution activity and as we get closer to final resolution on credits, that's usually when when charge offs.

Do occur and I think thats as I pointed out and Lynsey pointed out a lot of these charge offs what were charge offs taken on loans were fully assigned specific reserves to them. So I do think that you know charge offs.

Going back to your question are certainly higher here I think if you look at the.

At the risk adjusted returns in this business.

And you can look at this relative to our competitors you know we tend to be prime plus you know.

Our and our originations here some of our competitors tend to be a little bit lower there and correspondingly you would expect to see lower charge offs as well.

So, but I think the last point I would make I think we would probably see some gradual moderation in charge off levels in the fourth quarter and going forward.

Very helpful. Thanks, and then just as I think back to the the IPO process, you know what with the rich shown deal and some disclosures you guys provided I think it was it was clear that the profitability on the SBS business was was very high and I'm curious if you can maybe give us an update on how the profitability.

This is trended and where it is today, but then also Conversely, you know kind of work kind of where the bank profitability is X. The SBS business today, and how that's trended over the last couple of years as well.

Hi, Mike We don't we don't break out the two we don't segment report we view.

The bank as one.

So I think when we went through the IPO process I think breaks down as a good way to look at the profitability. It's the most simple way to go back and look at that.

We have obviously invested in the business continue to invest and technology people process.

I would say we continue to look for ways to make it more efficient everyday. So I'd say, that's probably are bought back as we do not break that out and in terms of the remainder of the bank. We continue every day during the same thing. So we look at at the entire bank and we will continue to see the profitability improved.

As we continue on with our strategy I think one thing that I would that I would add Mike. There is if you looked at as as we've said in the past we are today, it's a gain on sale business for us and I don't know given where premium levels are and premium levels have been so.

Since frankly since we acquired the business prior to the IPO I think to US the business makes sense to continue to.

To take advantage of the fact that premiums continue to be strong and continued and we'll continue to sell the guaranteed portion. So I will tell I'll I'll add to what lenses that a couple of things you know average premiums.

On the business have been very very consistent since we've owned it and certainly since the IPO, so that bodes well for the gain on sale model and the profitability of the business. The rice the rise in rates from relative to when we acquired the business also benefits the portfolio given the fact that you're getting a higher costs.

Larry on those loans, which are as you know primarily floating rate tied to prime.

Let's see said we've continued to invest in the business if you look.

I think we don't we don't show it here in the and the slide but I think you can look back historically at what origination levels have been in that business. So I think that should give you a pretty clear picture in terms of how that business has performed certainly since we've owned it and more importantly to your point since the IPO.

Got it and then just just lastly by my quarterly Pesky question about that capital and share repurchases and kind of where you guys are and I guess, just obviously theres still organic opportunities as you mentioned, adding talent still and you know just couple of quarters ago, I think close Oak River. So I mean, there's still lots of op.

Opportunities on that side, but the TC ratio is pretty strong and and your net organic balance sheet growth.

Seems to be a little bit more moderate them. Then you know a couple of years back with some of the payoffs and stuff of that nature. Just curious if he can give me an updated viewer thought on kind of capital and and other potential for that broadening overtime.

Yeah, I think we will.

I think obviously, we first and foremost we want to utilize capital to support the organic growth.

The company second to look for you know and be able to the employee that capital in ways that increase the value of the franchise further by doing acquisitions like we've done in the past.

And thirdly, if we don't see.

Opportunities than you know, it's an ongoing conversation certainly that we have with our board in terms of if the out outlook work to change then we would look too.

You know buyback shares or we would look to potentially establishing a dividend.

At some point that being said at this point, it's it's up we think we have good growth prospects.

We have you know.

Opportunities on the M&A front than I am happy to talk about that you know end the call a little later if somebody has a question on that but we.

We see still a path. We're you know we see opportunities to grow organically and we see opportunities to continue to do what we've done in the past what brings back to acquisitions as well and we want to make sure that we have.

The the level of capital to to be able to support that.

Alright, and then since you brought up just any on the M&A environment, Alberta.

Give an update there as well.

Yeah, I mean, I would say the you know.

The environment remains a remains okay, you know, meaning I think the usual conversations and discussions.

You know activity in that front I think it has remained consistent I wouldn't say that it has increased but I also want and say that it had is that decreased as as you know, particularly when you're talking about.

Smaller institutions that tend to be primarily privately held you know these processes can take time you have ownership groups that have been in place for a long time.

And you know timing is is always a consideration and you have to be patient with that but I would say you know the level of conversations has remained pretty pretty consistent over the course of the year in and really no not that much different than in years past.

Great. Thank you guys for taking my questions. Appreciate it thank you Mike.

The next question comes from Andrew Liesch of Sandler O'neil. Please go ahead.

Morning, everyone.

Good morning, I Wonder.

Thanks for the clarity on the month of loans that reprice based on prime and it certainly looks like going forward. The CD repricing you have coming up this quarter and into next year should help offset some of that.

But if I look at this the strategies it guys have implemented and knowing that the.

Great environments challenging and lending market in Chicago is incredibly tough, especially the pricing.

Is there enough opportunities on the liability side to offset the pressures that you're seeing on the on the earning asset side.

Yes, Andrew you don't think it's the one for one ratio by any means.

Do you think that there will be compression.

Continuing on that on the lung side, if we do have deep cuts that are predicted yeah, you're going to that you're going to feel that we thought this past quarter.

In terms of the core yield without the accretion income in their go down 10 basis point so.

I don't think at the one for one ratio, but we've also made some slight compression here going forward okay.

And it looks like you've you've covered all my other questions I'll step back.

Thank you. Thank you.

Again, if you have a question. Please press Star then one on a touchtone phone.

The next question comes from Nathan race of Piper Jaffray. Please go ahead.

Hi, good morning, everyone.

Hey, good morning I.

Just going back to Andrew's question, the margin compression that you're expecting a core basis for the fourth quarter is expected to be a little less than we saw here in Threeq you just given the swap termination you talked about Lindsay.

I would say that it will depend.

The dynamic competitive environment here with that wasn't deposit front so.

In my opinion that our margin well.

Well well be pretty consistent with what you're seeing however, there could be for flight slight compression.

Okay understood that's helpful and changing gears, a little bit Albert so the low production was down year over year by a seasoned degrees. So just curious can I get your puts and takes in terms of what you're seeing from a production standpoint is perhaps the traction you're seeing with some of the recent hires as you've made more recently and just if you expect maybe for you to maybe be more.

I have an offset to the softer growth that we saw this form craftsmen low double digit range.

Yes, so I'll take that question and two parts first off I think.

As far as net portfolio growth as as we talked about in the and the release and we touched on the on the prepared remarks.

Payoff activity was was certainly higher this quarter, certainly higher than second quarter, and certainly higher than what we've seen and you know and the in over the course of of the year I think what we're seeing is I think I used the term late cycle behavior in some cases.

People are we have loans on the books and we're seeing a payoff request and we look at the terms or are we look at the structure that's being offered to a customer. This is primarily on the on the real estate side and we're just taking a path. We just don't think the risk reward is there we maybe we.

Thank the just the yield is just simply too low and we'd rather frankly said on that liquidity.

And wait for better opportunities.

So I think hopefully that answers a bit of your question as far as bill. The look so you know the looks that we're seeing I'm kind of the deal flow that BB at bats that we get on deal flow.

Deal flow has been good we're getting plenty of at bats.

You know and I think at this stage whats important is just being discipline and.

Thoroughly putting on volume for the sake of putting volume and and trying to.

Operate profitably and protect the margin and so that you can.

You know kind of wait for for better opportunities that show a better risk reward.

You know to take advantage of them.

As far as the new hires we've added.

A number of you know very talented bankers to through the ranks here recently it takes a little bit of time, just because of sometimes there is there is non solicitations and play so they can't call on customers for a period of time that being said, we're seeing we're seeing traction in terms of some of the hires starting to build there.

Pipelines.

And we do probably expect to see some of that I think as early as as this quarter, but more in full we expect to see it in 2020, particularly after.

After Q1 more into into Q2, which is when really the non solicit.

We will start due to come off so hopefully that gives you some clarity in that regard.

Yes no.

Thats great color appreciate that and then just maybe lastly on expenses.

As we look out to 2020, some hires coming on board, but you also have some relief within the professional fees.

Then you also have the branch consolidation. So I guess is it fair to expect operating expenses in the 43 to 44 range heading into next year Lindsay.

Think that bear.

Yes.

Higher as more people, yeah, I mean, and I think Thats a fair number.

I think.

I think lessees lengthy second comment was also fair.

No we.

When we see opportunities to add solid bankers due to the company. We will certainly take advantage of that it's a it's so yes. It has an impact short term on expenses, but they tend to pay for themselves pretty well in a relatively short period of time.

Absolutely.

Got it understood and I guess lastly, along those lines of those opportunities.

Asset quality lenders and commercial bankers as that's slowing at this point just given where we are in the disruption cycle or is that still kind of steady state.

We're we're seeing we're seeing good people still and I think it will it will slow down probably here towards the end of the year and beginning of the year because that's usually as you as you well know when.

Incentives and bonuses are usually paid so we're getting to the time of the year that if people are looking to make a change that they're probably wait until the end of the year until they get their compensation.

But we're still we're still seeing good people, we're still talking to a number of people that that we would be very happy bringing onto a company.

Okay, great to hear I appreciate the color. Thank you.

But.

The next question comes from Brian Martin of Janney Montgomery Scott. Please go ahead.

Hey, good morning.

Ryan Hey, just one follow up on the last question about you've talked about rubber Alberto the M&A versus the talent additions I guess you more confident in hiring people. Today, then transactions given it doesn't feel like Theres, a lot of activity or no different still pickup in activity in the marketplace today is that.

Fair to say when we look over the next couple of quarters or at least Thats kind of 12 months.

Yes, that's always a tough question. The one thing that that I would say to that I mean, it's always a tough question because you know what what sometimes you know seems to be a long term conversation Ken can change.

In all its all then you know something May may come up that you thought would would take a lot longer. So it's hard to its always hard to say on the M&A front.

In terms of talent, you know I would I would probably 10 to two agree with your comment in the sense that you talk to people you have relationships with people and those tend to be less complex conversations you are not you're trying to get them to join your company.

You have a good story you have a good platform and they're looking to.

For for a home.

That's usually a.

An easier conversation as opposed to through the sale of a company. So I would tend to do kind of agree with your with your first comment there Brian .

Okay perfect. Thank you and then just being a couple others for me Lindsay pesky on the accretion, but just has it been reset now so it should just kind of be the normal stair step down or we was there something kind of unusual or non recurring there that resets it even lower just kind of baseline to start with.

That's a great question this was definitely a peak.

And our view there was they a sizeable recovery of about a half million. So I wouldnt stair step it from there Brian .

Okay, Alright, and then just one more on tying back to the margin Lindsay just the I appreciate the comments on the Cds and kind of the steps you guys have taken in.

But I guess, if you throw out a scenario, where we have a couple of more cuts three and three markets. The next couple of meetings and is it does the moderation in the the decline in the margin slows I mean, it wouldn't be let's say 30 basis points lower couldn't maybe not be 30 basis points lower but each cut have less of an impact.

As far as what the margin drops based on kind of what you said that how to is that fair how to think about it under that scenario.

Now I would really think about it as.

We've targeted about for every 25 basis points, it's about three to five basis point of margin. So.

Again, it's going to depend but I wasn't tie it to that at all it will level out it at any given I think at all.

It will comprise.

Okay and do you guys. Just remind me do you guys have floors and the loan portfolio or is that not a lobby we.

We do have a modest amount of floors about 200 million.

Okay.

All right and.

Then I guess just the last thing maybe for Alberto just see kind of year you talked at the start of the call about the improvement you've seen in the the profitability and efficiency as you look too.

2020, with some of the revenue pressures out there can you give some context and how you're thinking about.

There would be in our away or whether it be efficiency next year, just kind of high level, how you see things involving based on kind of your ability to execute as you've outlined.

Brian I think we run the business in the in the long run kind of with with the kind of but the general guidance in terms of efficiencies and profitability that we've talked.

About in the past I don't I don't think that has that has not changed you know it.

Look revenue interest rates and by interest rate environments change that certainly we'll put.

Sure at times that also will help you at times if it turns more favorable so I think for US is we just run the business kind of with the long run in mind.

And we'll adapt accordingly to the rate environment, if I could add one more thing to do what Lindsay was saying you know at some point.

If rates continue word to continue to decline I mean, I think it's it's a challenging environment for all financial institutions. So it's I think.

It what's important is to a degree that we can continue to run the business you know for the long run that we can continue to add good people.

And we can continue to.

Grow both loans and the boss assets you know it with good risk reward balance in play I think will be just fine.

Okay I appreciate the color guys. Thanks.

And we have a follow up from Terry Mcevoy Stevens. Please go ahead.

Thanks, So just wanted to follow up what are your current thoughts on the impact of C., So and I guess, specifically I'm just thinking about the reserve for your acquired loans in how much of the current Mark current credit Mark would come over to the reserve.

Sure that carry in regards to cease all we are in emerging growth company.

So we were thrilled with the news that came out just recently from past. So we will be delaying and we won't be disclosing at that time.

Where we're at yet we are doing a lot of work we're running parallel word we are well on our way. However, we are going to elect to remain emerging growth company.

And delayed the implementation.

Perfect. Thank you.

Thank you Sir and we if you follow from Michael Perito of KBW. Please go ahead.

Thanks doesn't actually also Terry I took the both for me so I appreciate it thanks.

Abroad.

I see no further questions I would like to turn the conference back over to management for any closing remarks.

Thank you and I just wanted to take a moment to thank you for joining US today, we look forward to speaking you again next quarter and actually after the end the year. So we want them. The case that where we don't talk to you again I hope you have a great holiday season, and we look forward to speaking to you in January thank you.

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

Right.

One.