Q4 2019 Earnings Call

People's fourth quarter and full-year 2019 earnings release was issued this morning and it's available at peoplesbancorp.com under investor relations.

A Reconciliation of the non-GAAP financial measures discussed during this call to the most directly comparable gaap. Financial measures is included at the end of the earnings release.

This call will include about 30 minutes of prepared commentary followed by a question-and-answer period which I will facilitate an archived webcast of this call will be available on peoplesbancorp.com in the investor relations office for one year.

Participants on today's call will be Chuck still Rossi president and chief executive officer and John Rogers Chief Financial Officer and Treasurer and this will be available for questions following the opening statements Mister Solberg. You may begin your conference.

Good morning, and Welcome to our call. We are please share are we recently sold with you today? We continue to produce solid and consistent results for our shareholders. It is Our intention to continue to provide a quality return on their investment. Although the recent interest rate environment became a headwind in the later half of the year and payoffs have needed our loan growth. We actually guided our way through the end of 2019 our growth in non-interest income excluding net gains and losses was highlighted by increases in coffee income categories such as Electronic Banking Trust and Investments and Mortgage Banking income which were all high compared to the linked quarter as expected net interest income per line compared to the linked quarter on the positive side. We were able to begin to actively drop a deposit cost which were down nine basis points from the linked quarter while our loan no,

Thank you.

Bill's only declined

6 basis points with the market expectations for additional rate decreases in 2020 now lowered. We have become more bullish on. Margin. We are anticipating a stable nation of our net interest margin in the for part of the year with Improvement occurring as the year progresses as far as our 2019 results. We saw many improvements in our business office paired to the full year of 2018 including a 16% increase in net income and a 9% increase in diluted earnings per share which results in record EPS in net income for the fiscal year and eight basis point increase in our reported return on average assets to 1.27% and a 10 basis-point increase in our adjusted basis to 1.42% growth in our non-interest income excluding net gains and losses was 13% Which comprise

32% of total

Have you compared to 31% in 2018?

A 59 basis-point decline in our reported efficiency ratio and a 23 basis-point decline in our adjusted efficiency ratio. We also had positive operating leverage on an adjusted basis for the fourth consecutive Year. All of this was despite our lower than expected loan growth in an unexpected rate environment while continuing to make adjustments in technology for our business. We also had an increase of 10% in our tangible book value per share compared to December 31st, 2018 and a reduction in our loan-to-deposit ratio to 87% at December 31st, 2019 compared to 92% at December 31st, June 2018.

As we turn back to our reported results are diluted earnings per share with $0.72 for the fourth quarter, which was flat compared to the linked quarter and a penny higher than the prior-year quarter for the full-year diluted EPS grew 9% to $2.63. We had minimal acquisition costs during the quarter tonne $65,000 during the quarter. We also received a lift in non-interest income due to the settlement of death benefits under our bank owned life insurance policies this settlement provided $482,000 of additional income and the other three cents to diluted EPS. We continue to see reduced fdac expense month. We do FDIC Insurance expense as the deposit Insurance Fund grew in the credits were issued to smaller institutions, which benefited diluted EPS by $0.02 a month.

We also recognize.

Reference costs as a result of organizational changes during the fourth quarter of 2019 which totaled $270,000 and reduced diluted EPS by one penny for a full year of 2019. Our acquisition cost was 7.5 million, which reduced diluted EPS by $0.28.

During 2019. We continue to analyze our Branch footprint and close three locations two of which were closed in the fourth quarter. Some of these locations have leases expiring during the year. We monitor our profitability inactive inactivity within our branches to determine the most effective structure within our markets. We are happy to announce that at the beginning of January . We completed the acquisition of a small insurance agency near Portsmouth, Ohio. We are excited to expand our franchise and be able to offer additional services to our clients within the Portsmouth area while cultivating banking relationships with our new insurance clients as I stated before we Place High importance on our non-interest income and we are fortunate to have a diverse Revenue stream. We have invested heavily in our technology during 2019. We now offer cell which allows our customers to send fast person-to-person page.

tends to friends and family with a

Bank account in the United States. We also introduced a new mobile app for insurance in 401K clients made our website mobile-friendly and work to refresh our own network in addition. Our clients are now able to apply for a mortgage loan using that smartphone. One of our go-to-market propositions is to offer to our clients the same capabilities as larger institutions for the fourth quarter. We were able to generate 4% organic loan growth compared to the end of the third quarter. This excludes the impact of Life required from Prestonsburg. Most of the growth was within our commercial and Industrial loans while declines in our construction and indirect Consumer loans offset part of the increased wage.

Organic commercial and Industrial loans blue $55 million compared to the linked quarter end. However the growth during the quarter continue to be impacted by payoffs a.m. We do not anticipate the payoff Trend to continue at the heightened level of experience in 2019. It is hard to predict customer Behavior. Most of this loan growth was late in the corner store average loan balances have little impact from the increase for the quarter for the full year of 2019. The majority of our loan growth was related to the first Prestonsburg acquisition are organic lawn goes compared to a year and 2018 was 1% which was heavily impacted by payoffs. Most of the growth was in our commercial and Industrial loans, which had organic growth of $84 million or 15% while payoffs and our commercial real estate and construction loan offset practically all of the growth.

Compared to $2,000.

18 or production for 2019 grew by 37% but our payoffs doubled most of the payoffs were driven by sales of real estate companies being sold our customers refinancing their loans into the permanent Market just as important as our loan growth is the quality of our portfolio. We will not sacrifice loan quality to generate loan growth. We play close attention to our loans and work continuously to identify issues and quickly Rectify them.

I delinquency Trends were stable with loans considered current comprising 98.6% of our loan portfolio at December 31st, 2019 compared with 9% at the linked quarter and which was an improvement of 98.5% at December 31st, 2018.

A quarterly annualized net charge-off rate for the fourth quarter of 2019 was higher than the linked quarter in prior-year quarter as we experienced higher but not concerning in direct-to-consumer and Commercial and Industrial loan charge-offs at the same time our net charge-off rate for the full year was 11 basis points lower than 2018. This reduction was mainly due to the recovery during the first quarter of 2019 of a 1.8 million recorded on a commercial loan charge-off and probably a year a non-performing assets wage increase 4% compared to the link quarter-end increases in non-accrual loans were partially offset by declines and Loans past due 90 days and accruing coupled with the lines and Oreo previously acquired loans comprised 3.1 million of the total 3.9 million of loans past due 90 plus days and accruing at December 31st, Thursday.

2019

The increase in our non-performing assets compared to December 31st 2018 was mostly due to the first prestonburg acquired loans are criticized loans declined 3.6 million from the balance is reported at the linked quarter and mostly due to the pay off of one large commercial real estate relationship compared to the same period classified loan screw 7.2 million, which was driven hired by the downgrade of one commercial real estate relationship along with a few smaller commercial loan relationships with I will now turn the call over to John to provide additional details around the income statement and the balance sheet.

Thanks Chuck. Although the interest rate environment has not been favorable to our net interest income. We were able to control the deposit cost during the quarter and sustained only a 2% decline in net interesting, interesting, was 3% higher than the prior quarter and 9% higher than the than the full Year's 2018. Both of which were impacted by the FCB acquisition net interest margin was impacted by the lower interest rate environment and declined ten basis points compared to the linked quarter and 21 basis points compared to the prior-year quarter compared to the link order our Investment Portfolio sustained the most impact declining 22 basis points, which was driven by amortization of premiums while our loan portfolios declined six basis points, in addition, we focus during the quarter and reducing our funding cost which declined 9 basis points and was largely due to dikhao.

Says we made in our deposit rate.

We will continue to closely Monitor and adjust our deposit rates and anticipate having additional reductions in future periods, given an adjustment to our interest rate swap transactions. Our net interest margin was impacted by a 3 basis-point reduction during the fourth quarter.

Compared to the prior-year quarter, the reduction in margin was driven by the lower Investment Portfolio yields while overall low Neil improved and our funding costs were relatively flat for the full year. Our margin declined slightly with our improved loan yields being offset by higher funding costs and lower investment yields while a funding wage increase. We have taken measures to control our interest expense by entering into swaps and closely monitoring our overall retail commercial deposit costs are increasing income from home positions, which is negative amortization expense added 1.8 million for the fourth quarter of 2019 or 18 basis points to margin in four point nine million for the full year of 2019 or 12 basis points to margin.

accretion income

During the fourth quarter of 2019 was higher than the linked quarter largely due to a higher than normal pay off of a commercial loan, which resulted in the recognition of additional income. This is income positively impacted net interest margin by 6 basis points.

Compared to the full year of 2018 accretion income more than doubled while the impact to margin was 12 basis points compared to six basis points in 2018. Most of this increase was related to accretion from the first Prestonsburg acquisition, which had a fairly large discount at the date of acquisition coupled with some money off of the previously required loans.

During the fourth quarter and full-year 2019 the accretion income from the choir loan portfolios offset some of the contraction in our loan due to the fact that the client and interest rates during the quarter. We are pleased with our growth in total non-interest income excluding net gains and losses. We increased to 33% of total revenue compared to 31% for the linked quarter and 29% for the prior-year quarter on a year-to-date basis total interest income exclusion net gains and losses group to 32% of total revenue and improvement from 31% for 2018. We continue to place importance on this metric offers volatility interest rates can impact our net interest income and are not interested in coming can help to support and stabilize our income statement.

compared to the link

Quarter total non-interest income excluding net gains and losses grew 6% and was up 22% from a year ago the increase compared to the linked quarter with due to lack of factors including higher Bank own life insurance income which nearly doubled due to death benefits recorded during the fourth quarter of 2019. Also contributing to the increase was higher Electronic Banking income which is driven by customer activity trust and Investments which experience growth which experience growth in both managed wage in retirement plan fees and Mortgage Banking that group do to increase customer demand following the recent declines and interest rates.

Compared to the prior-year we experienced significant growth in many years areas. Some of the key drivers of the increased were Electronic Banking income growth and higher deposit account service charges both of which include the impact of the first Prestonsburg acquisition deposit account service charges also grew due to the new fee schedule implemented in early 2019. We all Health. We also have considerable increases and swap fees Mortgage Banking and Trust Investments income compared to the prior-year and as I mentioned a minute ago, we recorded death benefits related to our bank own life insurance policies, which drove the increased compared to the prior-year quarter for the full year of 2019 not interested in, excluding gains and losses grew 13% compared to 2018 the largest contributors to the increase were Electronic Banking income and deposit account service charges.

Which were driven by the first?

Prestonsburg acquisition and the new deposit account fee schedule implemented during 2019 commercial loan swap fees more than tripled due to the higher customer demand while Mortgage Banking group, mostly from the man following the client interest rates in the latter half of 2019 trust and investment income increased compared to 2018 largely due to higher manage assets wage and retirement plan fees Bank on life insurance income grew compared to the prior-year from the previously mentioned death benefits.

Our total non-interest expense grew 2% compared to the linked quarter and was up 8% compared to the prior-year. We recorded Severance cost of $270,000 during the fourth quarter of 2019 are professional fees grew substantially during the quarter and was largely due to higher legal expenses and professional fees related to the implementation of the new season a standard compared to the linked quarter. We also saw reductions in Electronic Banking and FDIC Insurance expense to decline an FDIC Insurance expenses related to the level of Insurance Fund that continue to be above the Target threshold for smaller Banks to recognize credits. We cannot reasonably anticipate any future recognition of credits as this is German by the FTC. I see on a quarterly basis our growth in non-interest income expense compared to the prior-year was driven by higher salaries and employee benefit costs, which have been impacted. Yep.

The movement toward the $15.

Minimum wage throughout the organization coupled with the first Prestonsburg acquisition annual Merit increases as well as higher medical insurance costs.

That occupancy expense compared to the prior-year quarter mostly due to higher depreciation associated with the first Prestonsburg acquisition as well as additional technology Capital Investments made during 2019. Also increasing compared to the prior quarter rear quarter or data processing and software costs professional fees and Electronic Banking expense, which were partially offset by the lower FDIC Insurance expense for the full year of 2019 compared to 2018 total non-interest was impacted by acquisition expenses, which totaled 7.3 million for each. Salaries and employee benefits group due to higher salaries as well as a medical costs and stock-based compensation expense for the full year of 2019 base salaries were impacted by higher corporate minimum wage both the first Prestonsburg and American Savings Bank.

Acquisitions and

Annual Merit increases our income tax expense was lowered during the fourth quarter 2019 as we recognize a benefit from a decrease in the reserve for our uncertainty wage positions. We also receive the death benefits related to bank told Insurance Fund during the fourth quarter of 2019, which were tax free.

Moving on to the balance sheet our Investment Portfolio decline compared to link order as we utilize the monthly cash flows for liquidity purposes it your end our Investment Portfolio comprise 23% of total assets compared to 24% the link quarter-end and 22% of the end of 2018 core deposits, which exclude CDs declined 1% from the link order end and increased 13% compared to December 31st, 2018, the majority of the decrease in the linked quarter and with seasonal due to declines in governmental deposits off some of the season seasonality was offset by higher money market balances at December 31st, 2019 compared to the two December 31st, 2018 core deposits through Thursday. Only do two deposits associated with the first Prestonsburg acquisition are demand deposits is a percent of total deposits grew 40% a quarter in compared to 39% of the loan. No.

Order and was flat compared to a year.

Average quarterly deposits increased slightly compared to the link order and we're up 11% compared to the prior-year quarter compared to the link order increases in average non-interest-bearing money market and interest-bearing deposit accounts were offset partially by season of the clients and decreases in brokered CDs.

On here today basis every total deposits grew 11% most of the growth compared to the prior periods was related to the acquired first Prestonsburg deposits wage continue to regard our Capital position as a source of strength and we believe in The Prudent management of our Access Capital. We have purchased shares during 2019, including over 3,000 purchased during the fourth quarter.

We also increased our quarterly dividend to shareholders by $0.04 compared to the end of 2018. A risk-based capital ratios are higher than regulatory minimums and continue to improve as our earnings exceed our dividends.

To Cecil. I wanted to provide an update on our status and projections for implementation of the new standard while we are still in the process of finalizing our implementation. Our team mates difficult progress during the fourth quarter. Our current estimates now include the potential impact of unfunded commitments individual evaluate a loans purchase credited Chariot assets with pulmonary qualitative factors and investment Securities as a result of our updated analysis, which is still preliminary and being validated. We estimate that at this point in time and based on current economic and conditions and projections the January 2020 the January 1st, 2020 implementation of this guidance could result in an increased from our current allowance for loan losses to between $27 and $29 for allowance for credit losses, which includes outstanding loans individual evaluated log.

Is it released?

qualitative factors

Investment Securities a gross-up of our loan balances for the transition for purchase credit. Loans, which is estimated to increase our overall allowance for credit losses incurred additional four to six million dollars.

But increase our between 1.8 and 2.1 million for the establishment of the unfunded commitment liability given these ranges, we would anticipate and after taxes affect adjustment which would be a reduction to retained earnings of between 5.5 and 8.5 million. This amount excludes. The purchase credited. Rated transition wage results in a gross-up of our loan balances to establish the allowance for credit losses just to reiterate we are still refining processes and are in other assumptions. We are working on finalizing our process of determining our implementation impact and validations. These estimates are subject to change upon finalization of our procedures and execution of our internal control framework wage.

As far as cost.

We have incurred approximately $300,000 of incremental expenses related to Cecil for 2019. Approximately two-thirds of these costs were one time and the remaining third will be recurring I will now turn the call back to Chuck for his final comments. Thank you. John looking back at the year. The shift in the market has been remarkable at the beginning of the year. We anticipate need three rate increases during 2019 and ended up receiving three rate Cuts since late July . We have managed through the Steve change and improved at the same time the teams within our organization are top-notch and work cohesively to exceed our client's expectations are referrals between line of businesses continues to get stronger as we look 20/20. We will continue to put our clients need first and we'll invest in advanced technology. I am pleased that we were able to acquire an insurance business this acquisition will khong

cement our Portsmouth team

And position us for even more potential growth within the market area. As far as twenty-twenty. We provided preliminary guidance during our call last quarter in just to give you an update. We expect point-to-point loan growth of 5 to 7% We expect an increase in credit cost in 2020. We believe that historically low charge off levels being experienced throughout the industry and by us are not sustainable. We will also have implemented the new accounting guidance related to the allowance for credit losses beginning January 1st, 2012, which will impact our future credit cost.

We believe the net interest margin will be between $355 and $365 for the full-year anticipating the will be in essence. No interest rate Cuts in 2026. Be based Revenue growth is expected to be in the mid single-digits. We expect non-interest expense growth to be in the low single-digits adjusted for an encore items are continuous review has allowed us to control expenses to this level for the first quarter of 2020. We will have higher expenses than the fourth quarter of 2019 for life savings account employer contributions, stock-based compensation expense for certain employees higher payroll taxes and annual Merit increases. These hiring practices are consistent with prior years. We also anticipate that our Target efficiency ratio for 2020 is expected to be between 60 and 62% off.

for Acquisitions, we still

Will actively seek opportunities within our institutions and fee-based Revenue businesses. We will still search for the quality deals that will complement and grow up business. We will not put up business at risk just to close and acquisition. We always strive to drive shareholder value with our Acquisitions and will not waver from this perspective. This concludes a commentary, and we would open the call for questions. Once again, this is Chuck Solaris key in joining me for the Q&A session is John Rogers our Chief Financial Officer. I will now turn the call back into life and about call facilitator. Thank you. Thank you. We will now begin the question-and-answer session to ask a question. You may press * then 1 on your touchtone phone. If you're using the speaker phone now, can you please pick up the handset before pressing the keys to enjoy your question, please press * then two.

Today's first question comes from Michael Prieto. Okay, BW, please go ahead. Good afternoon. Good afternoon, Mike. How're you doing morning Melissa? Yeah. Happy New Years. Thanks for taking the time. I wanted to start on the some of the guidance. Maybe the margin first to 3:55 to 365 for the full year, you know my assumption behind the scenes that assumes up pick pick back up in in the core margin and then kind of a normalisation and do you increase your aspect? I was wondering if you could maybe expand on those Dynamics a little bit and then just also give us a little color on wage where you expect the security yields to go in the near-term here that seemed to weigh on the core march on the most of the fourth quarter.

I'd be happy to Mike on the Securities portfolio. Yes, that definitely wait on us during the quarter. I would say that wait occurred more in the for part of the quarter than they were part of the quarter. So I think based on what we saw is the quarter played out that those are premium memorization slow down is we're approaching near the end of the year. So we're expecting that the hopefully settle down and uh, hopefully have a pickup in our yields in the first quarter compared to where we were in the fourth quarter. We're actually pretty confident of that box to kind of go through the margin a little bit more detail there. I mean a big part of it is what we can control is deposit products and we've continued to be focused on that working with our teams took a lot of work. We had a number of promotions that we ran starting in 2018 through through nineteen those will start to reprice they have already have started to reprice, but we will see you Thursday.

that will re-price in the

The 2020 time frame that includes both retail as well as commercial commercial also has a number of commitments that were made on public funds A lot of those contracts that we have will expire in 2020. So we'll continue to see the cost of those items Kendama as well. We as we as we mentioned a loan growth will log, you know expect that to grow five to seven percent given the change in mix and the greater percentage of our assets earning assets and Loans versus investment Securities. We would expect that to also be incremental to emerging as well. And you know, we we kind of hope for a live War increase that would definitely help us as well. And you know, as long as the yield curve faith in their we're pretty comfortable with that 355-2365 number if I could piggyback on that, I wouldn't I would compliment John in the line of business.

as for working

To manage the rate situation. I think the fact that we were able to bring deposit costs down 9 basis points and Loans down six basis points off is a compliment to our the quality of our deposit franchise.

That makes sense and then she'll just John maybe just a number follow-up question a number related question. You mentioned that the security issue is more in the early part of the quarter. Are you able to maybe give us kind of wears off the exit margin or security yields were you know in the in December month maybe relative to kind of the full year the full quarter average that that we saw in the balance average balance sheet.

Unfortunately, I don't have that information with me Mike. Okay, but it was it was probably it actually did probably about maybe eight to ten basis points higher then it kind of started out with got it that's helpful. And then on on on loan growth, you know, obviously you have the the five to seven thousand point-to-point loan growth Target, you know payoffs kind of wait on you guys a bit this year. I wonder if you can maybe just give us remind us some of the numbers around that in terms of kind of applications for 2019 and and payoffs. Maybe you know what they were above normal and and my guess is as you lay those numbers out that will kind of give us a roadmap as to how you know, you guys are hopeful to achieve that that loan growth next year should pay off activity kind of subsides a bit. That would be helpful.

our production

In in commercial lending in 2019 was 411 million and that compared to 301 million in 2018. So you can see production was up a handsome 37% That was the good news. The bad news that is that the payoffs went from $127 million in 2018 to 250 million and 2019. We do not expect the payoff numbers to continue as that rates and we do believe we can get that 5.7% Even if we had less production and we're not aiming for Less production, but we think the payoff number was the anomaly.

Okay, that's helpful. And then just as we think about the marketplace, I mean has there been any change in the competitive environment or anything else? You guys move into twenty-twenty here. I mean, it's it's the goal is still to really steal share from the larger banks that that that's been successful for you guys to storage. It has a has there been any shifts in the competitive environment worth noting Chuck. No, I think it's pretty much the same. I think there is an increased hunger out there because you know many in the market are showing low loan growth. I think people are willing to be a little bit more aggressive with pricing which is unfortunate, but I think we see people hanging in in terms of structure for the most part.

Okay, and just one last one.

I mean I'll step back which is on the expenses. I appreciated some of the like, uh qualitative color you guys provided on some of the products you're rolling out with the technology investment. You're making, you know, obviously you guys have been able to do that while remaining fairly efficient here on generating positive operating leverage as you look out. Can you talk about some of the Dynamics there as to what other items you guys have that you could possibly use to offset, you know continue to investment on the technology side and maybe wage what priorities you have on the technology investment side as we move into twenty-twenty terms of the technology investments in 2020 will continue to suck things that enhance the web site the mobile capabilities that we have. We're replacing our ATM network and we'll finish that this year will also doing some investments in kind of systems related to processing Consumer loans and Commercial loans. So those are two big initiatives that we have dead.

Uh or 20/20 all of that is contemplated.

Within the guidance that we have given you in terms of expenses and during the cost of the year, you know, we've continued to look at ways that we can become more efficient to fund some of that you saw a little uptick in Severance in the quarter and that should provide us some coverage for some of those Investments going forward.

I'm like, I would say it's it's real quick much. I think you know we kind of continue we look at expenses like Chuck kind of mentioned, you know, so we had to Branch closer to Chuck mentioned. We did a couple of those in a quarter or one actually just closed recently this year a vendor contracts, you know, those types of things that we look at continually and then just you know, it's Chuck mention some of those systems. We're implementing will provide us with some efficiencies as we Implement those and go forward. So and we always continue to look at our Acquisitions and we did in the past and you know, there's always sometimes we can get a little more cost out as well received on the path of those as well. So those types of it just give you a flavor for a week. We kind of look at it. Thank you know, I appreciate that and thank you guys for the update and taking my questions talk more soon. Thank you. You're welcome. Thank you. And our next question today comes from Scott siefers Piper Sandler, please go ahead morning guys. How are you?

Doing good, Scott. Happy New Year God. How are you? You too. Good. Thank you. I guess the first question maybe a little additional commentary on the loan growth appreciate what you said about not near as much production, but was hoping you could drill down a little into um,

The the payoffs and expectations for them to either, you know, stabilized or maybe just or any numbers you could put around, you know, what is sort of the size or of kind of the pool that would even be, you know, kind of eligible for a payoff. So to speak views of what it would have been a year ago at this time.

Okay, give you a couple of comments be able to address some of what you're asking but not all of what you're asking completely, you know, in terms of the same nature of the payoffs that we had of the roughly 250 million dollars, you know, fifty million of that was related to structures that we were not willing to match in in the market and thirty million of it was you know credits that were various forms of criticized that left us. So eighty million roughly a third of it was suspect credits. You should see that are criticized numbers remain very low in the pool. You know while I would love to match that portion of the exits next year or in 2012.

I doubt that.

We will have $80 worth of credit related, you know the departures. So I think we'll do a little bit better there. We had, you know, real estate sold and put you know to the permanent Market which was another eighty million dollars and I expect them a portion of it along with companies sold will be a little bit less because of the interest rate in environments month. We also had a few anomalies that were related to clients specific issues in an insurance situation that I did not expect to to repeat in terms of how much is do obviously you can see the size of our portfolios in the different page.

direct Line's the

If that's a bit lumpy is our commercial real estate, you know, which is generally 3-year projects. Last year was a particularly large year in terms of the amount that was coming available this year. We would be would be slightly less. So I hope that helps

Yes, it does. Definitely guess I I was just sort of looking for you know, sort of substantiation behind the notion that that that payoff Dynamics, we lose. You know, I'm still here. Are you sure to hear me? Did we lose the call know? Hello. This is the operator we can still hear you and we still have Mr. Seafort's on the line. I'm turning your volume up mr. C first thank Rocco am stuck. Hello everyone. This is the operator. Can you hear me Chuck? Are you able to hear me? Hello. I hope I can repeat it.

Chuck everyone. This is the operator. Please stand by while I attempt to get the connection with the speakers here. It looks like they have disconnected from the call. You'll hear hold music briefly. Thank you.

And pardon me everyone. We do have the speaker's reconnected Mr. Seafort's you may proceed with your question. Thank you. Perfect. Thank you. Talk to you. Yeah, I can hear you now Scott. Sorry about that. I don't know if you able to hear me. No worries. I was maybe I'll just repeat the or go back to the second part. So I I appreciate it. It's the second second question was just on the margin Outlook. So I guess John number one. What's what kind of purchase accounting benefits do you have in there may be the kind of thing that sort of averages about you know million a quarter or so or about 10 basis points benefit to the margin and then just given the the change in total. Margin Outlook wage a little higher than what you had said 90 days ago. You know, I think you start now with a lower fourth-quarter base. I think the core is now about 3:38 from the 4th.

You know, when does it?

Is specifically begin to expand. Well, should we see the core margin beginning to expand as as quickly as in the the first quarter of 2020?

Yes, I would think the core margin would continue start to expand in the first quarter. You know, I think as I mentioned the call earlier the previous question on the Securities book and I was actually able to get some information, you know, the security book ended the quarter about 15 days is higher than it did it points during a quarter. So I think the Security's books should give us a decent lift quarter-over-quarter as I mentioned the deposit rates and we did a number of actions during the fourth quarter. We'll get some carry-over of that into the first quarter and as well as some of the items that are going forward so and in the purchase accounting accretion, I would say definitely it's in the wage. Um,

that low double-digit

Change is where we would expect a purchase counting to be for the year. Okay, perfect. And I mean our module be that's your question was more margin based. But of course we have less days in the quarter. So yeah, we would expect net interest income to be down slightly compared to the fourth quarter, but we are lucky enough to get delete here. So one more day than last year. Good point, Okay, perfect. Thank you guys.

You've got nice talking to you ladies and gentlemen, just as a brief reminder. If you'd like to ask a question, please press start on the one today's next question comes from Russell gone through with the a Davidson, please go ahead. Good morning guys.

Hi, good morning around some dialogue. We've already had but as it relates to the margin, you know hear you loud and clear you feel better about it. You're raised a guy dead. But what gets you towards the higher end of that what Dynamics need to play out to see the 365?

Well, I definitely think.

You know, I mean give them the kind of the pain we felt for their for a while and security book have them keeping the out some steepness to the curve would help us a little bit more steeper on the curve would definitely help some increase in 1 and 3 month Libor would definitely help us and you know, I think we have good loan growth, you know, that'll definitely help us as well get there so we can get the grade of our percentage of earning assets in loans and less in deposits. That would be very beneficial as well.

Okay, thank you for that and then similar question kind of tying out the loan growth discussion. We've already had with the five to seven percent Target. If you could kind of tied together, you know again what needs to happen for that 7% to materialize. Is it the Bay Downs easing is that enough to just get you from the 5 to the 7 or is there something else that we're know that would get us there the Bay Downs he's dead, you know East up um, and uh, I and that's what we expect to have happen, you know pipelines remain strong and so we're off. Yeah, we feel good.

Very good. All right, that's it for me guys. Thanks for taking my questions. Thank you.

At this time, there are no further questions, sir. Do you have any closing remarks? Yes. I just want to thank everybody for participating. Please remember that our earnings release and a webcast of this call will bring the car that peoplesbancorp.com under the investor relations section. Thanks for your time and have a great day.

Thank you, sir. This concludes today's conference call. We thank you all for attending today's presentation. You may not have met your lines and have a wonderful day.