Q3 2019 Earnings Call
Ladies and gentlemen, thank you for standing by welcome to Columbia Banking systems third quarter 2019 earnings Conference call.
This time all participants are in listen only mode. Later, we will conduct a question answer session through both the telephone and web instructions will be given at that time.
If you are on the telephone and should require assistance during the conference. Please press Star Zero as a reminder, this conference is being recorded I would now like to turn the call over to your host Hadley Robbins, President and Chief Executive Officer of Columbia banking system.
Thank you Mike Good morning, everyone and thank you for joining us on todays call. As you review work third quarter 2019 year to date results were released before the market opens this morning.
The earnings release supplemental slide presentation are available at Columbia Bank Dotcom.
I'm pleased with a third quarter results earnings exceeded 50 million for the second straight quarter, you're going to year to date basis net income was up 16% over 2018, or so the true to 148 million.
During the third quarter or bankers did an excellent job and focusing on those things. It takes directly control loans grew up 109 million on strong production of 383 million.
Credit quality continued to strengthen and deposits expanded by 644 million portion of which is an increase in public forums that Greg seacrest or see our chief Financial Officer, who will discuss got his comments.
Our succession plan as a key component of sustaining our business model and I'm happy to report that the CEO succession process now underway is going very smoothly, our employees and bastards in a broad spectrum of other stakeholders, who have expressed strong support and appreciate the thoughtful continuity of leadership.
'cause a talented banker with 25 years of experience, including four truths about growing Columbia Bank I'm proud to pass with torture on to clean up and I'm confident he will lead Columbia Bank successfully huge.
On the call with me today.
<unk> Chief Financial Officer will provide details about earnings performance, that's fine our chief operating officer at incoming CEO for view, our promotional activity is going to highlight the status in some of our digital investments.
Andy Mcdonald, our Chief Credit Officer, who will review our credit quality information.
And Chris Murray, well earn company Chief operating officer.
Paired comments, we'll be happy to answer your question [laughter]. It's important to remind you that we'll be making forward looking statements today, which are subject to economic and other factors.
The full discussion of the risks and uncertainties associated with the forward looking statements. Please refer to our securities filings.
And in particular are 2018 FCC Form 10-K .
This born I'd like to turn the call over to Greg talk about our financial performance.
Thank you had like.
Third quarter earnings of 50.7, $9 and if you have some 70 cents per diluted share what's the second best quarter. Our history. After the second quarter 29 team as you know we've been working diligently since the latter half of 2017, but protections in place to defend burned down and net interest income should interest rates decline.
As a reminder, the three primary interest rate risk management tools, we've been using have been to increase the duration of our assets.
Selectively growing the balance sheet by borrowing short term debt on the purchase of securities that would respond well in a write down environment and a derivative strategy utilizing a zero cost collar.
Since 2017, VIX freight mounted increased 38% to 47% of the portfolio and our derivative strategy remains in place with a 50 million dollar notional amount.
We entered the third quarter with approximately $59 in our security strategy.
We didn't agree for security strategy in the third quarter by selectively increasing public funds by approximately $300 million as an alternative do you think that's a choppy advances with corresponding increase in the securities portfolio.
The decision to use public bonds. This quarter is in line with our contingency planning plan.
Yeah desired periodically tough some of the alternative funding sources available to us our security strategy now stands at approximately $800 million and along with increased long duration of the permanent strategy will provide protection and he then have a further decline rates.
After considering the $4.9 million alone interest recoveries in the second quarter net interest income did increase $2.2 million quarter on quarter. Thanks in part.
Thanks in large part for an increase in net interest, earning assets and bone growth during 2019.
As you'll recall.
The interest recoveries also added 17 basis points into the second quarter them. When you factor that then the remaining decline and the third quarter operating them of nine basis points, what's driven by the extra insurance, we took out a form of increasing the security strategy.
Cost of deposits did increase modestly get our decision to selectively increased participation public bonds Oh, that's part of our overall interest rate risk management strategy. If you exclude the public bonds, which are also nature, our core deposits was unchanged.
Noninterest income was $28 million for the quarter, which was about $2.4 million on a linked quarter basis and up $7 million compared to the third quarter of 2018.
Each quarter benefited from one time items, we are seeing positive trends in loan card and financial services revenues, because we continue to focus on generating noninterest income.
Third quarter VIX extends the $87.1 billion includes $1.9 million of expense that is directly tied to our digital efforts. We remain focused on closely managing our expense run rate and anticipate noninterest expense excluding digital to continue in the mid Eightys range.
The year to date impact where digital initiatives was $5.9 million, we anticipate a full year impact of $9 million to $10 million.
As you go onto the first year of the digital journey, we have focused on foundational projects that create capacity in the front and back offices and we're on schedule to meet the three year strategic roadmap laid out a year ago.
We expect a similar level of digital investment in 2020, with a full year impact any $8 million to $10 million ish.
Our effective tax rate was 19.6% for the quarter and 19.2% year to date, both within our target range of Nike for 20 years.
We got could we repurchased shares during the third quarter as part of our capital strategy and we will continue to do so provided we feel will benefit our shareholders as mature in prior calls we have a strong capital position and we'll continue to balance buybacks with special dividends and strategic opportunities.
Lastly, the team has been working hard on the implementation of new current expected credit costs more Cecil accounting standard.
Based on our current portfolio and forecasted macroeconomic conditions, we estimated they want impact on because allowance for credit losses for Hcl.
Thank you from a decrease of 10% to an increase of 5%.
This reflects an indicative range from the five five quarter look back we performed the forecasted macroeconomic variables contributing to quarter on quarter variations.
No material impact our capital levels as anticipated.
Work does continue to refine invalidate parties on models and the ultimate impact will depend on characteristics the loan portfolio.
On the macroeconomic environment at the adoption Dave.
At this point I'd like to turn the call over to class.
Thank you Greg good morning, everyone.
We've always focused on driving long term value for our stakeholders. This quarter solid performance embodies the outcomes for a long term thinking.
Our bankers continue to build relationships on both sides of the balance sheet.
Evidenced by the growth in loans and deposits.
We continue to evaluate how we allocate resources.
The gain on sale leaseback transaction during the quarter is an example.
In the coming years, we will reinvest to saw a small portion of the gain into a contemporary replacement facility.
Better suits or needs and those of our clients.
Hi, Andrew can be reallocated to growing other parts of our business.
Without the noise created by the increase in public funds deposit still grew by approximately $344 million were 13% annualized during the quarter.
As a result, the deposit mix shifted slightly from 61% business and 39% consumer.
Third quarter loan production was $383 million exceeding 1.1 billion on a year to date basis.
Even with this record setting production pace, our bankers have been busy generating new leads resulting in a solid loan pipeline.
Term loans comprised 65% of the production, whereas lines were 35% of the total.
The quarterly production mix was 56% fixed.
39%, 45% variable.
The overall portfolio mix is now, 47% fixed 36% floating and 17% variable.
New loan production throughout the quarter was booked in an average tax adjustment coupon rate of 4.77%.
Which is lower than the overall portfolio rate of 4.82%.
The decline as a result of higher yielding repayments in the construction and see our east space, coupled with repricing of variable rate loans.
[noise] prepayments of $146 million in the current quarter were stable and consistent with the prior quarter amount of 153 million.
Well stable on a linked quarter basis current prepayment activity is down about 10% from third quarter 2018.
[laughter] during the quarter you can I production was 44% or hundred $69 million of the total production and commercial multifamily real estate production was 42% hundred 61 billion of the total.
She and I loans were up 63 million driven by seasonal activity in AG book, along with increases in the finance and insurance sectors.
Commercial and multifamily real estate loan totals were up $62 million during the quarter driven by increases in the warehouse land office space and recreational sectors.
As part of our ongoing branch rationalization process, we finalized the consolidation of three branches during the quarter.
Two in our Puget sound market and one in our Portland region.
One additional branch consolidation is underway and scheduled for completion during the quarter.
We continue to advance or digital program in the third quarter, we completed the rollout of aren't new commercial online banking and Treasury management system, and we implemented our new human capital management platform, improving operational and talent management efficiencies across our employee base.
We currently have multiple projects underway will improve our peer to peer money transfer capabilities.
It did ties deposit account opening enhance their small business lending capabilities and drive efficiencies increased automation across the company.
We view, our digital efforts as an ongoing journey rather than a destination.
The primary colors are in place the road map is laid out.
And we are moving well down the path.
I want to take a moment think Hadley for his leadership friendship and contributions to building our franchise over the past seven years, the entire team, which has had been Gail a long and happy retirement now I'll turn the call routing Andy.
Thanks, Glenn in summary credit quality is very good npls to total assets were down to 27 basis points, which is the lowest level in 12 years.
In addition, we continue to enjoy positive migration in both the criticized and classified loan categories.
We are however, carefully watching our clients with respect to macroeconomic condition.
If the tariff war persists it is likely the region will experience negative economic impacts as Washington, Alaska, and Oregon are among the top seven states most affected by these tariffs on a GDP basis.
We actively monitor this sector and are encouraged by recent trade developments with Japan and ongoing discussions with China.
However, we did see an increase in watch rated assets in the quarter by roughly 31 million.
And this was to help us further monitor trait development impacts on our.
Our third quarter provision for loan and lease losses of 299000 was again very modest and essentially unchanged from the prior quarter.
The quarter benefited from a large laborde recoveries in both the originated and PC high portfolio.
Most of the recoveries for the quarter were related to two relationships dating back to the great recession.
The dedication of our special credit team is exemplified by these recoveries.
Absent these recoveries our provision would have been more meaningful.
So for the quarter, we had a provision of 1.75 million for the originated portfolio offset by a 1.2 million release for the first heritage portfolio and indefinitely. So 214000, food Columbia River West Coast and Pacific Continental portfolios.
As of September 2019, our allowance to total loans increased by one basis point to 94 basis points of total loan.
As always we like to remind you that this ratio was impacted by our acquisitions and the associated loans that were recorded at fair value.
Bedded in those valuations is approximately 20 million of net discount for which approximately $15 million associated with the Pacific Continental portfolio.
3 million, what the west coast portfolio, and 2 million with the interface.
With that.
All back to Hadley.
Thanks, Andy.
We're pleased to announce our regular quarterly dividend of 28 cents, which constitutes a payout ratio of 40% for the quarter.
In a dividend yield of 3.95% based on the closing price Silverstar on October 22.
This quarter's dividend will be paid on November 22 shareholders of record as a close of business on November six 2019.
One thing that's been a privilege to be part of this company have been inspired daily by the way our employees care for each other our customers and by was there anything commitment to help build stronger communities. This concludes our prepared comments. This afternoon as a reminder, Greg Clint Andy and Chris or here with me to answer your questions.
Right.
The call for questions.
At this time like the take any questions you might have for us today to ask a question simply click the acuity button on the lower left hand corner of your screen type. Your question in the open area ethics admit.
If he would like to ask a question over the phone press Star then the number one on your telephone keypad to withdraw your question press the pound key.
And we will pause for a moment to compiled acuity roster.
Your first question is from the line of Jefferies. Your line is open.
Thanks, Good morning.
Good morning drugs.
Well I guess first ones for Greg just to kind of get back into those expenses.
Favorite topic I think the mid Eightys range ex the digital is what you said it and have said in the past I.
The nine to 10 million.
Full year digital spend what does that year to date.
There are to date I believe I said in my comments. It was 5.9 billion year to date and that actually did reflect almost a million dollars that we were able to capitalize this quarter, which brought in the year to date range versus what I indicated last quarter.
Okay, I'm, sorry, I didn't hear that year to date number was that you said 5.95, it's 5.9, which is net of approximately $2 million were able to capitalize so absent the capitalization would've been higher.
Got it okay.
I guess for the full year I guess Q4.
We're still looking for a rapid and not spend in addition to the mid eighties guidance.
Incremental to the mid Eightys guidance correct, I mean, we're pretty far along in the year I think is quite a sudden as his comments a lot of the cornerstone projects are pretty far along but generally I think over the balance of the or roughly 30 projects are going to have done there's still a little bit they could flip between fourth quarter, but yeah, there wouldn't be still decent.
Our mental to the mid Eightys right.
Okay, and if we took kind of that mid eightys base into 20.
Talked about it another eight to 10, a added for the additional digital spend what kind of core expense rate could we assume on the Oh, the mid eighties, a number if you're comfortable discussing that.
Give me that number time jeffs, you're talking on the core well. So yeah. If you did you mentioned eight to 10 million in 2025 or additional digital Smith.
Right.
Okay, I mean, I guess you dogs.
Exit digital spend you'd probably expect to see two or 3% growth I mean, something in line with rate of inflation. So I mean, I. If I were trying to model that out I would try to take into the rate and inflation.
Okay. That's helpful. I was just trying to get that number down.
The question I guess for Andy just trying to.
Understood that the.
The these recaptures and recoveries on on past a transactions, it's kind of come and go it seems like we've we've seen a flurry of in the last couple of quarters is there anything, prompting the timing of that or is it just kind of and indeed coming in.
Paul in the last couple of quarters anything to read into that.
Yeah, I mean this quarter, we had two significant ones.
One for about 1.9 million any originated portfolio.
I guess you could classify that one is a bit of a surprise.
<unk>.
We had a strategy in place, where we were able to encumber.
Asset and the.
Principles, finally decided to do something with those assets and that afforded us the opportunity to.
Collect on them, but absent them actually taking action to.
Try to create value with the assets, we would have been still.
Hitting for some kind of recovery.
The 1.2 million in the in the PC I book was actually.
A negotiated settlement where the individual actually came at a year ahead of what we expected.
What we had agreed to and again it was they had an investment opportunities as they want to take advantage of.
So I'm just kind of a combination of a number of things, but that's all I would explain the two large recoveries.
Okay, Thanks, and Hadley Congrats on the retirement I think a commendable commendable job stepped in and it kind of a critical point that banks history. So congrats we'll take it.
Your next question comes from a line of Aaron Deer. Your line is open.
Good morning, everyone.
Good morning, and all extend my congratulations as well have plenty retirement and Clinton on your new role is what Chris to to you as well the I guess.
Following up on on Jeff's inquiry into the to the expenses I'm, just trying to understand a little bit about the D. The year to date versus the full year guidance. It looks like you know you're basically talking about a three to 4 million.
<unk> expense it could hit in the fourth quarter, but I guess I'm expecting some amount of that given the size of it you must be looking to capitalize or what can you give us some breakdown of how that might occur.
Yeah, I mean, I think the capitalization diesel ways.
It's trigger to late in the process once were able to.
The negotiate contracts and it's really isn't fall out of what was on that piece of paper and and I would say we've had better experience negotiating contracts. This year than we probably point haven't stopped by early on here about three to four range I am hopeful that some amount of that we put capitalized so it could bring you down to the lower end to the range Aaron but.
There's also piece of that could flip into action here. So that's why there's a bit of arranged there's no.
Okay and <unk>.
And I'm sorry, what was the amount of that spend to do that you expect for next year and is it a similar kind of situation.
Where some of that will end up being capitalized so one fully be recognized in the year.
Yeah. The range I'd comment on my prepared remarks was the 10 million for next year I looking into next year as projects, there's probably less opportunity.
To capitalize and we've been able to do in some of that what I call the cornerstone projects given size and scope.
But there could be solved that could pull you down to lower and arrange era, but until we really get into that it's really hard to predict sure. Okay and then I'm.
Looking at the at the margin just given some of the the the.
Balance sheet strategies that you employed during the quarter.
As well as just the the change in rate environment, What's your expectation for the net interest margin as we head into.
Here going into the fourth quarter and into next year.
Yeah, well I get a absent any potential action next week from the Federal reserve.
I think you're really looking at a flat to down environment pricings continue to be very competitive we're always going to have some quarter on quarter fluctuation just given our funding mix and as deposits slot in the first quarter.
But it could happen a change next week I am I think where it's going to be flat to down little bit is way I'm thinking about it.
Okay, great. Thanks for taking my question.
You're welcome.
Your next question comes from a line of Gordon Mcguire Your line is open.
Good morning.
Gordon.
Congrats handling Clint.
Greg I just wanted to clarify you said the full nine basis points of operating NIM decline ex the recoveries last quarter that was all from the security strategy.
Yeah, the security strategy that Havent nine basis point impact Gordon I mean never there are other and balanced in the quarter, but when you factor out some of those those ups and downs it really you're left those nine basis points.
So it held pretty flat if you back out the interest recoveries, that's right and the strategy.
And then just clarifying your last couple of your comment on the last question you said absent the the any change or you just saying absent a rate cut NIM is flat to down or absent a change in the projections for rate cut.
Absent a rate cut next week and if you just look at where the curve is now I would expect and I think the curve does factor in.
Caught but if we just hold just take a look at the curve as it stands today roll forward into next quarter I would look at down to flat to slightly down.
Okay.
And then just just.
Yes.
The impact from the rate cut as it is it still what you were talking about last quarter I'm, just like the net basis from the.
The protection strategy to still in the same range and can you just kind of update on.
Yeah. It's a good question I mean, it's fairly consistent it if we have a 25 basis point next week.
Or in the future, let's say.
I have an estimated 3 million dollar impact over the next the following 12 months and that's not up to an ethylene protection from the interest rate risk strategies.
Okay.
Incremental though sorry.
Oh go ahead.
And I understand there's a lot of moving pieces the expense base next year, but it's been a little while since you've talked on this call about the efficiency ratio in the mid 50% target in the the rate outlooks change. Since then so I'm wondering if you could provide an update there.
Yeah sure I mean, as you point out that the interest rate environment does impact the efficiency ratio and we did expect that flowed up a little bit this year as we executed on the digital strategy I think you no longer horizon. So later into next year and then probably into the following year, we do expect that to flow back down.
We are really focused on driving operational efficiencies in part due the digital initiatives doubt that make that happen Oh, but I think you know the range ran its probably the range, we're going to be into the next couple of quarters.
Yeah. If you just also kind of segue to think about the ratio not noninterest expense to average assets.
In the quarter that was I think to 59 and that's really in that range. We've been talking about for a while to which is having that ratio in the 250 range. So that'd be a metric, we're keeping a close eye on as well.
Got it and.
And then just housekeeping what was the weighted average price of the repurchases this quarter.
You asked one question I don't have in front of me I think it was slightly over $35 a share. Okay. Thank you buy them at once you get the 10-Q the numbers will drop out.
Thanks.
You're welcome.
Your next question comes from the line of Matthew Clark.
Line is open.
Hey, good morning.
Well, that's too congrats to you heavily in clean as well.
Well, if I take those comments.
On the expense outlook mid eighties layer on 2% of inflation.
The call at the midpoint of the eight to 10 million of digital that implies an $89 million run rate on average next year.
Does that consider.
Maybe modest but the the recent branch closings.
Closures and the.
And the efficiencies that you might gain from some of these dual systems coming off.
Next year, Yeah, I think it does reflect both of those bought it doesn't reflect that is we're still midstream on our budget cycle for next year, which is where it will really start to make a lot of the decisions.
Good Foundationally can help us calibrate number better Matt.
But I would say at this point. It does include both of those factors.
Okay.
Okay, and then just on the loan growth outlook, Yeah, I think youve conservatively.
Oh guided to low single digits.
In the past looks like you're tracking to do around 5% for this year.
I guess, how do you feel about.
The growth outlook as we look into next year and you consider some of the new producers you brought on board.
[noise], whether or not that might change your outlook.
Yeah, Matt This is Chris, let's say that despite a very competitive environment, we're seeing patient opportunities that match or credit discipline.
The pipeline remains remains full but we're we're continuing to monitor prepayment activity.
Which is difficult to forecast.
And we stay frequently in contact with our clients to try to stay ahead of that.
So yeah, we're going that we're in that range.
Okay, and and did you happen to have the.
The loan payoffs in the quarter.
Thank you spoke to pre pays but not the overall payoffs.
Yeah, Hi, Matt This is client actually had that number.
And.
[noise] in the script I took it out because I just consider payoffs as you know kind of a good thing yeah Alex.
Part of what we expect will make loans and it's the prepayments that create the variance.
Let me come back to Okay got it in a report in here I can I can follow up offline also because it's just a to report that you know we pulled up the prepayments from the same report so we can get given number.
Okay, and then just last one on the interest recoveries at last quarter 4.9 million for some reason have been able to find this quarter what they were.
<unk>.
Matt This is Andy interest recoveries this quarter were not anything out of the norm.
And so we didnt highlight.
Recoveries lasted for reformer and above what we normally enjoy [noise].
Okay. Thanks.
Excellent.
Your next question comes from the line of Jon Arfstrom. Please go ahead.
Thanks, Good morning, everyone.
Good morning warning a few follow ups.
Maybe Greg for you first in terms of Colin asset liability management.
You talked about the colors, you talked a little bit about the securities and public fund strategy. What more do you think you need to do or you just satisfied where things are at today in terms of when you look at the forward curve and the rate environment, you feel like you're you're set or might we see some more changes in the next few quarters.
It's John honestly, it's not something we ever stop looking at I mean, we had a very active dialogue around or asset liability management.
And pricing on both sides of the balance sheet and obviously next comes into play as well.
So we're not resting on where we are at this point, we're absolutely still intending to actively manage.
Hi tech or them as well as actually Manaker net interest income.
Okay and he is the expectation with some of the loan growth that you guys have talked about expectation is even with maybe some incremental margin pressure.
You still feel that interest income growth isn't the cards for 2020.
It's hard to predict at this point I mean, as I mentioned, we're still going to the budgeting process. So I hate to give you any leading indicators on that John but I don't think commented on we feel comfortable with pipeline and.
You know, it's still something that we're going to continue to talk through as we get into next year.
Okay.
Chris for you follow up on loan growth.
This is like a high class problem, but you had your second best quarter in terms of new originations. Its dips below what you have last year, but still a healthy number.
Are you seeing any changes in the pipelines are any part of your commercial or commercial real estate.
Optimism or pipelines might be feeding a bit or do you feel like this is all pretty consistent.
I'm not saying it remains pretty consistent the pipeline is full and again as just mentioned, we're seeking plans of opportunities that meet our disciplined.
Credit philosophy. So at this time I would say it remains consistent.
Huh.
And my last follow up.
The give us a little more detailed in the sale lease back. If you can and then you know what kind of potential branch consolidations there might be on the horizon coming in 2020. Thanks.
John This is quiet.
The the sale leaseback was of facility in the Bellevue market that you know obviously with all the group is happening there and the period of time that Weve owned the location. It's a it's a fairly dated branch facility.
And on a on a very valuable piece of.
And so as we looked at what we want to do not just with branch consolidations, but just the branch footprint in general because in my prepared remarks, I mentioned, we'll reinvest and Oh more contemporary.
Location in the coming years, we've got.
You know up to.
Three years or so that that we can.
Evaluate where we're going to be in that same part of town.
We've talked in the past about or neighborhood concept and I expected that you'll see a facility like that replace this specific location.
But we also have some other.
Places within our footprint, where we feel like that additional branch locations would be beneficial to serving our clients and hoping or bankers generate new relationships.
So that's the reinvestment component of it.
The rationalization part in the deck that we put out on our website. This morning, we have.
What we've done in that regard so over the last 10 years or so.
That's ongoing and.
Don't.
We've never been fans of putting in a target or a number out there because we really look at.
How a branch traffic is changing how.
Different channels that customers are using and that really drives what.
We see as potential additional consolidations or or or closures. So it's a it's a more its more than just.
Simply reducing the.
A number of branches. So you won't see a ton of new branches I don't want you to think that we'll get it a branch expansion strategy by any means.
But it's it's a very very dynamic process as we go through.
Chris and I have worked.
In our current capacity very closely on it for several years and.
I I I'm pretty excited to see what Chris does that as we move forward.
Okay, great and echo the comments heavily congratulations and.
Clinton, Chris a long runway ahead, so best of luck.
Thank you.
And as a reminder to ask a question you can click the Q many buttons on the lower left hand corner of your screen type. Your question in the open area and click submit to ask a question over the phone press star one on your telephone keypad.
Yeah on the next question is from Jackie Bohlen. Your line is open.
Hi, everyone. Good morning.
Good morning, Jackie welcome back.
Thank you.
I just.
I wanted to touch based on <unk> make sure I understood. The comments regarding I'm the security strategy and the positive impact that that has had on the Greg you were saying if we were still have a rate <unk> next week and that would be approximately a 3 million decline in income over 12 months and that's not a that you and a half million benefit from the strong.
Did you used undertaken you like properly understand that.
Yes.
Okay. So is it fair to assume that I think you've kind of alluded to that that if we are too high the environment, but we have continued types. You know you would actively look at the potential benefit for continuing to strategies is that fair.
I would dynamically continued reassess the entirety of the interest rate risk management strategy best practice.
Okay.
Hi, Thank you.
And then Andy question for you I'm you know just given some concerns that you're seeing from your customer base over the possible impact of tariffs and you know what that might be the businesses has this changed anything within how you think about your reserve methodology.
Understanding of course that we're about to enter Cecil.
Yes, and Cecil will save us all I guess, so that'll be a wonderful thing.
Well certainly from a qualitative standpoint.
It does impact our you know our economic outlook as we look forward. So wouldn't we are calculating our reserve.
We are very cognizant of what's occurring, especially with trade wars, Brexit and other economic indicators <unk>.
We look at manufacturing or the last several quarters, it's been on a decelerating basis.
So those kinds of issues are always part of our methodology.
When we're looking at our allowance and then of course as we would see those things if it were to materialize on the quantitative side of the model.
We would ease off on those qualitative assumption.
Okay, and then I would assume that the introduction of Stifel methodology, and given a lot of the political noise that we have that could lead to increased volatility.
Yeah, I mean, they're thinking.
I think that's a very keep observation on your part if you just think about the economic environment in the fourth quarter of 18.
To the first quarter up 19 to where we are now today, you can see quite a bit of volatility and economic data and forecasts.
Right.
And not the guidance you provided and thank you very much for that for a Cecil range of minus 10% to up 5% is that based on where we stand today.
That range really does reflect the entire range and he just talked about so we just wrapped up a five quarter look back.
I would say, though.
The high end of the range absolutely reflects what we are today.
Okay.
Thank you and I would be remiss, if I didnt Echo everyone's comment on congratulations on you know this management shifts that Hadley I I hope you have a lot of fun things planned.
So I do thank you.
Yes.
<unk>.
At this time, we have no further questions on the phone.
Before we conclude the call Matt I'll circle back on your question regarding payoffs during the quarter. They were 62 million. So prepayments of 146 payoffs of 62 million.
Got it toward another 8 million total.
Okay. Thank you Vic crudes are call for the day appreciate it.
Thanks to all our participants for joining US today. We hope you found this webcast presentation informative. This concludes our webcast and you may now disconnect have a good day.