Q4 2019 Earnings Call

for a full year

We believe we delivered a strong year of value creation despite the impact of two Acquisitions. We increased our tangible book value per share approximately 14% while returning 79.2 million in capital to our shareholders through our normal quarterly dividend.

Looking at our friends in the fourth quarter. We are particularly pleased with the success in protecting our net interest margin against the impact of fifty basis point reduction in the FED funds rate that occurred in a September in October .

Excluding the impact of Interest recovery and and Loan accretion income and our operating that interest. Margin. We saw a decrease of about 3 basis points as quarter a relative stability was attributed to the discipline. We have maintained in new loan pricing as well as our ability to offset pressures on earning asset yields by continuing to pass through the reductions on our deposit rates.

During the fourth quarter. We reduce our overall cost of funds by 14 basis points as we've indicated a number of times while interest rates were Rising. We passed along rate increases to our the page, even though we were not under any competitive pressure to do so.

We felt.

It was the right thing to do for our customers, even though our deposit base is not particularly price sensitive as a result of this approach. We were in a good position to pass through rate cuts to our deposit rates decline, which has helped defend our net interest. Margin. We've actually seen a higher beta a passing through the rate Cuts then we we saw when rates were rising and Thursday our deposit beta over the last three rate Cuts. It's been about 47% compared to debate about 19% During the period of rising rates.

Looking at the particular categories or average rate on savings deposits decline 31 basis points for the fourth quarter while average rate on demand deposits declined 12 basis points off and in other in both categories, we were able to to lower rates while seeing increases in average balances which speaks to the quality of our clients service and the stickiness of our life. We were able to keep our margin relatively stable despite continuing to hold excess liquidity as we saw saw a lower lower levels of Loan Production during the fourth quarter back in you to believe that we are best served by maintaining our credit discipline and not chasing loans that don't meet the requirements for risk-adjusted returns.

as a result

We saw a slight decline in Lone bounces during the quarter most notably in our commercial portfolio, which in large part was due to pay offs and pay Downs of criticized assets. We also offer the clients and indirect tag and helped herself portfolios why we did have growth in commercial real estate and our construction portfolios or organic loan growth wasn't enough to offset declines in our other portfolios. We saw 45 million dollar increase in commercial construction portfolio during the quarter some of our clients have become more confident in the economic Outlook and it started moving forward with their projects. We are optimistic that the increased confidence will lead to increase in line utilization and stronger Logan production.

Another key to our strong results. This quarter was our success in controlling our expenses.

Excluding merger-related expenses are total non-interest expense declined by three million dollars from the prior quarter entering the year. We put greater emphasis on maintaining expense discipline across the company long as we have added scale and controlled expenses. We've been very pleased with the Improvement been proved operating leverage. We have been able to realize in the business as a result our efficiency ratio up to 54.3% in the fourth quarter down from 57.9% in the prior quarter, and if you take out the gains record under this position of other real estate, our quarterly loss ratio would have been 55.32%

for 2020 we

We can bring our annual efficiency ratio in and around 57% So with those comments, I'd like to turn the call over to Marcy for a little more detail behind the numbers go ahead and receive them. Thanks Kevin a good morning everyone as I walk through our financial results unless otherwise noted all of the prior. Comparisons will be with the third quarter of 2019 and I'll begin with our income statement with our net interest income increased two point seven million dollars from the prior quarter partially due to a 1.2 million dollar increase in accretion income on a reported basis our net interest margin increased one basis point to 3.94% in the fourth quarter, excluding the impact of Interest recoveries and Loan accretion our operating net interest margin decreased three basis points this quarter to 3.77%

The decline in operating that interest margin was primarily due to a reduction in operating loan yields, which exclude the impact of Interest recoveries and accretion of 9 basis points. This negatively impacted our margin by 2 basis points. The remaining one basis point margin decline was due to continued high levels of excess liquidity which we held in overnight funding and was a lingering result of our deposit growth late in the third quarter. These factors were partially offset by a 14 basis-point reduction in our cost of funds to 37 basis points, as we pass them fed rate cuts to our depositors. We saw steady decline in our cost of interest bearing liabilities throughout the fourth quarter.

This point we do not plan to make any meaningful additional changes to our deposit rates with the lower starting point for our cost of deposits. As we enter the Year. We're focused on the opportunities. We have to reinvest excess liquidity in higher-yielding assets. We believe we can offset the continued pressure on our earning asset yields and keep our net interest margin relatively stable for the foreseeable future.

Moving to non-interest income we saw a decrease of 3.1 million dollars quarter-over-quarter to thirty seven point two million dollars. The decrease was almost entirely due to lower Mortgage Banking Revenue perfecting the seasonal decline. We see in the fourth quarter all of our other major fee generating areas were relatively consistent with the prior quarter.

Mortgage Banking Revenue decreased 1.9 million dollars from the prior quarter, but was at 45% from the fourth quarter of last year this reflects, the increased production were getting from our newer markets in the Box as well as increased refinance activity as a result of lower interest rate in the fourth quarter of 2019 loans originated for home purchases accounted for 55% of total production month or refinancing activity accounted for 45% Our new digital emerge mortgage application portal continues to gain traction, and we close $16 of loans originating through this channel in 2019.

Moving to not total non-interest expense. We incurred approximately $700,000 and acquisition-related expenses this quarter excluding acquisition-related expense. Our non-interest expense came in a million dollars are with three million dollars lower than the prior quarter. The primary driver of the decline was lower professional fees as we completed and number of the technology initiatives. We executed on earlier in 2019. We also recognize the one point three million dollar credit from the FDIC that reduced our assessment expenses. Once again this quarter and that wraps up the benefit we expect to see

We were able to keep our other major expense areas relatively consistent with the prior quarter as we continue to focus on closely monitoring our expense levels.

In total looking at our queue for operating expenses of ninety two point seven million dollars. If you back out the acquisition expenses and adjust for the Oreo gains the FDIC credit and a dog noise. We had related to deferred costs on mortgages our normal. Our normalized run rate would have been about ninety five point seven million dollars achieving the guidance. We've previously provided of $96 post integration of our recent acquisitions.

going forward

We expect our run rate for operating expenses in 2020 to be in the range of $97 to $98 on average. This is about a 1.6% increase and as we've got back in the past we were able to keep our total operating expense growth in 2020 between the 1 and 1/2 to 2% level.

At this point I'd like to give my annual reminder of the Season impact. We expect to see various income statement items in the fourth quarter are not interested. Excuse me, in the first quarter of an interesting typically trans lower do to lower transaction volumes, which impacts our payment services and mortgage revenues and at the same time our non-interest expense trans higher due to the restart of payroll taxes.

Okay, I'll move on to the balance sheet. Our total loans decrease $70 from the end of the prior quarter. This was driven by payoffs and pay Downs in the commercial and consumer portfolios along with seasonal decline in the indirect and add portfolios within the commercial portfolio 6.8 million dollars of shared National credits also paid off in the quarter the snake portfolio is now down to less than $15. The declines in these portfolios were partially offset by a 45 million dollar increase in commercial construction loans.

our total

Decreased $136 from the end of the prior quarter. Most of the decline came in our non-interest bearing deposits, which was largely due to seasonal outflow from commercial depositors off items like bonuses and tax payments over all we are pleased with our organic growth for the year of 2.6% looking at asset quality. We saw positive thoughts in most of our key metrics. We had an $18 decline in non-performing assets. This was due to the disposition of four other real estate properties, which represented about half of our orange for the quarter. We recognize one point seven million dollars in oreo related income resulting from the sale of these four properties the other contributor to the decrease in not performing assets was decline in non-accrual laws of 7.2 million dollars.

As a percentage of total assets our non-performing assets declined to 39 basis points from 51 basis points at the end of the prior quarter outside of the non-performing asset category long. We saw a nice Improvement in the rest of the portfolio are criticized loans decreased $29 million as we had higher levels of pay down to pay off this quarter as we worked hard to resolve a number of issues before year-end month. We had 5.8 million dollars of net charge-offs during the quarter or 25 basis points of average loans on an annualized basis our net charge-offs. It's quarter were impacted by a two point three million dollar charge related to a commercial loan which had a specific reserve of one point four million dollars established against it. We also saw higher levels of consumer loan charge-offs, which is typical in the fourth quarter of consumer loan charge-offs is quarter were twelve basis points, which is in line with our historical fourth quarter trends

Recorded 3.8 million dollars in provision expense a portion of our provision expense continues to be related to the acquired portfolios that refinance in migrate over to our originated portfolio Thursday. Excuse me. These reserves required against these loans accounted for approximately 1.5 million dollars of the provision expenses this quarter.

Our allowance for loan losses declined by one basis point from the end of the quarter to 81 basis points of total loans while our coverage of non-performing loans increased to 150% as a you know, the allowance does not take acquired loans into consideration, but the combination of the allowance with remaining loan discount on the acquire portfolios represents 1.2% of total loans.

That said the new accounting standard related to current expected credit losses are Cecil with effective January first. We expect the implementation of Cecil to result in a thirty-five to forty 5% increase to our allowance for loan losses.

in terms

For the impact to our quarterly provision expense. There are obviously many variables that will ultimately determine our twenty-twenty provision requirements at this point for 2020. We believe that the implementation Cecil along with lower levels of expected recoveries will likely result in an increase to our normalized provision of approximately 4.25 million dollars per quarter. And with that. I'll turn it back over to Kevin genest. Thanks Marcy. I'm going to wrap up a few comments about our Outlook.

You mean 2019 we executed well on our strategy for strengthening in our franchise.

We completed two Acquisitions and increased our presence and faster-growing markets. And then 2019. We have muted organic loan growth approximately 1.3% for the year wage faster-growing West Division Market comprising a larger percentage of overall footprint and a higher levels of business and consumer confidence. We believe we can generate quality loan growth in the low-to-mid single-digit just this year as well as continue to generate increases in our fee Revenue. We also completed major technology initiatives that expanded our products and services improve digital banking capabilities and streamlined our work process flows.

as a result

These Investments we enter 2020 with improved digital mortgage application ports portal a new digital consumer and business credit card application portal all of which should enhance our business development capabilities this year.

One of our key initiatives this year wish to focus on is is the focus on training of our employees on these new products so that we can effectively leverage the investment. We have made to improve our client engagement off the 20/20. We're also investing in a new teller system that will enhance efficiency in our Branch Network and improve experience for our customers over the past few years. We have talked a lot about First Interstate how person who has evolved from a a Community Bank to a Regional Bank capable of serving a broader array of clients with a diverse range of products and services took you to evolve and we have made adjustments to our executive ranks to strengthen our commitment to remaining at the Forefront of innovation in the in the banking industry.

We recently created a new position called.

Chief strategy officer and appointed Renee Newman. Our former former Chief banking lot of students in a position as Chief strategy officer Renee is focused on ensuring that we're well-positioned to meet with changing needs of our clients and deliver a satisfying experience across a growing number of banking channels that we offer roughly. Who is the president of England North Bank North West Bank, which we acquired back in 2018 is now a chief banking officer with the responsibility for overseeing our retail commercial and wealth management teams why we're Navy focus on the future of banking Rush ensures that we maintain the rigor across our traditional Branch Network that led to our Decades of success by separating these two functions We Believe will be a position to continue innovating without losing focus on the basic blocking and tackling needed to maintain our strong and consistent performance as we grow the first interstate franchise dead.

we will continue to be a leader in our communities and

Our mission to be a responsible corporate citizen with this in mind. We are raising our minimum wage for employees to Fifteen dollars an hour. This will impact impact this Thursday an after-tax basis of about $250,000 per quarter and it's included in a run rate of expenses that Marcy has already articulated. We believe this move will well position us could possibly impact us Sorry by possibly impact our Employee Engagement and retention leading to higher client satisfaction, which ultimately results in higher returns for our chef.

As we look for Las Vegas on raising deposit rates, when we didn't have to we believe this is the right thing to do for employees our clients and our shareholders to wrap up. We feel good about how we're positioned to start 2020. We believe we have good opportunities to generate Revenue growth and will continue to focus on expense management. We should realize more operation leverage and deliver a solid year of earnings growth for our shareholders and from a long-term perspective. We will continue to lever the foundation. We have built to add scale enhance efficiency capitalize on our growing footprint and faster growing markets and to continue increase the value of our franchise in the coming years. So with that I'd like to open the call up for questions wrong.

Ladies and gentlemen at this time will begin the question-and-answer.

Recession to ask a question. You may press star in that one and your telephone keypads. If you are using a speakerphone, we do ask that you please pick up your handset before pressing the keys to withdraw your question. You may press star and two again that is star and then one to ask a question. Our first question today comes from Jared Shaw from Wells Fargo, please go ahead with your question.

I thanks good morning. Everybody. Orange Eric, maybe just starting with with your comment at the beginning of the call. Just talking about a challenging environment for loan growth. You know, the the the net loan growth you saw for the whole year and then tying that to your expectation for you know, low-to-mid single-digit loan growth and 20 trying I guess what what was most challenging as you look at 29th? And then how do you see that changing? It was more, you know pressure on pay Downs or was it more sort of self-imposed as you were trying to, you know, change the the credit Dynamics and and you know move those weaker loans, I would I guess what sort of dynamic there and what's changed and we kind of hit a lot of the points nice job. The thing is is that you know, as this year was a strange year. I think that would interest rate Cuts inverted yield curve the whole trade War. I think confidence in the in the with the the business Community Job.

You know.

Kind of wait on the actual growth in you know our markets also, you know in in Wyoming coal has not you know as it continues to fall out of favor, so that puts pressure on Wyoming. So I think the thing is is that that's kind of behind us. The trade war is kind of behind us. The inventory deal cars behind us are asset-quality. We have I think we've clean up effectively wage and that's kind of behind us are sticking portfolio runoff that's behind us. We're down under 15 million. So that won't have any more headwind with us. So I think that a lot of the headwinds that we had back in nineteen years in a way, I think that we were seeing a little bit more confidence. We are business partners out there because some of these things are behind them and they're starting to move forward on project. If you go back to earnings call last quarter I talked about how some of that we had funded a lot of projects, but the people were moving forward because they they lack confidence and where the economy was going. I think some of that has has improved and I think we're moving forward nicely. Yep.

Just feel that the the environment is better if we can continue to move forward and we don't have any kind of this pandemic virus doesn't.

To explode I think 2020 will be a good year for our market. So I think all the the head was there kind of behind us and that the the future looks a lot brighter bulb.

Good. Thanks a lot that color and I guess on the expense side, you know more see here your your guidance for first through the efficiency ratio is most of that going to talk about the the professional fees down this quarter. Should we expect to see that go back up as some of those Tech initiatives that you'd mentioned on the teller system and some of the others role in or where will that growth sort of come from Beyond just the the raising of the minimum wage?

You know, I think you know, we have increases in technology costs just kind of General contractual increases what which is driving some of the increase but we've really managed to our salary expenses to bring them over that increases their back down. We expect professional fees to stay kind of flat to this year. So again, I don't think we're going to see any real increases there. So just kind of salary increases but managing the ftes and then, you know a little bit of increase on the technology costs. Yeah. The thing is is that you know, overall technology culture come up a bit like they normally do but not but I on the do you know the professional fees? We we spent a lot in 2019. So we believe the spend in 2020 will be less than the the 2009 through about flat. It's not going to we don't see increasing over the 2019 level since we did invest a lot this year. So again, I I think overall being able to hold our table.

expenses to 1.6% increase

In light of you know, having to give your employees raises and just normal Merit raises is pretty good.

Okay, thanks. And then just finally for me I guess, you know looking at Mortgage Banking and with the seasonality going into the holidays and everything at the end of the year. How's the pipeline looking going into first quarter? It's a little slow down is always a little slow it you know, it's there. I would say it it's it's not going to be as robust that we see in the summertime but it's you know with rates the way they are. We're still seeing some activity with refinancing and and some you know, people move Port but it's not going to be above the fourth quarter production in first quarter now and we are seeing some nice weather if this keeps up it could help a little bit. So, you know again we think overall The Mortgage Banking Revenue should be fairly flat next year compared to where it is this year sixty degrees in Montana in January is pretty pretty nice. All right. Great. Thanks a lot for the color.

Our next question comes from Jeff Lewis from d a Davidson, please go ahead with your question.

Morning, good morning, Jeff. We're Jeff Kevin. He mentioned appreciate the color on kind of the Dynamics with loan growth challenges, but dig in a little deeper. If you could kind of characterize the the demand and pricing Dynamics in in giving your large Footprints kind of the western versus the Montana Marcus just interested. In fact, I'm assuming you know, you're seeing more growth out west but but in terms of demand is competition pricing if you could just sort of touch on what you're seeing in that footprint, it'd be helpful. Yeah, you know.

Loan pricing is kind of interesting as you as you go to larger credits and better credits. The pricing gets extremely, you know tight I think people are looking for jobs, you know big hits and and with nice credits and they're willing to take lower pricing. You know, we we find where we get the best spread as when we keep on doing what we normally do. Is that small business. It's more mental Mark Thursday against it but I would say the West I'm bigger deal. It's it's it's really tight. But you know, if we continue to look at just our our Core Business wage is more or less small business more middle-market, we can maintain those threats, but we're looking at you know larger deals by we just don't want to go in and and do deals with spreads that that don't make any sense but people are trying to put put on loan volume. I think some of these people wonder why their margins are eroding when you're putting out spreads at 1:30 the cost of funds. There's no way Jose.

There's no.

You know, you know they use a lot of brainpower to figure out why your margins eroding.

Okay. Thanks. Shouldn't Marcy on the I can't remember maybe I missed the dynamic of on the margin if you if you look at 394 Southport it in 377 core. I guess that's a 17 basis-point number if possible. Could you break out the make up of that 17 basis points in what was it off? And what was the interest recovery you bet. So we had one basis point due to charge it off interest. We had eight basis points related to early payoff and eight basis. Due to regular accretion.

Got it. And then any I guess, Terry on that 377 core as we get into twenty-twenty. Is it more of a let's try to maintain kind of The Office Outlook on margin from your perspective. You know, that's what we're working hard to maintain. We believe that that core margin should be, you know stable it might you know Bounce Down a base wage or two, but it we think it's going to be relatively stable going into 2020. Yeah. Maybe you have some pressure on the outside a little bit maybe but we also have some relief on a CD book which is repricing at a great Pace in the first quarter. So we we we believe that the margin might be impacted by a basis point maybe but it should be pretty much stable.

Our next question comes from Matthew Clark from Piper Sandler, please go ahead with your question.

You mentioned deposit costs, you know, the decline may start to slow here. Can you just give us the spot rate at the end of the year on interest-bearing deposit money? Yeah, an interest-bearing deposit is 48 basis points.

Okay, and then excess liquidity has you know continue to be more of a drag and I haven't run the math yet. I think it costs you three basis points last quarter. I assumed it was a little more time this quarter.

So I you know, we're smoking that on on pushing that number down, you know lower because we're not seeing the loan and so we are very focused on on pushing that down, you know, the hard part is going to be today. We're adding Securities on it 2% you know Thirty days ago, it was bought at 2:30. So, you know, we'll we'll see what pickup we can get there. But we will get some list. There is Kevin just talked about with the CDs, you know about 31% of our time deposits are running off in the first quarter. So, you know, the average rate on those is 137 if we maintain those deposits our current offering rates 55 basis points. So again, we should be able to see some pick up there as well.

Okay, and then I guess what's your estimate for a creation this year?

So the Christian should be about two point four million dollars per quarter.

Okay, and then the efficiency guide of 57% That's that's all in that's not excluding CDI amortization.

It is excluding CDI amortization it is okay. Okay that helps. Okay. Thank U are nice girl comes from Gordon Maguire Farm Stevens. Please hang with your question. Good morning regarding I talked about this years of Finnish efficiency, maybe being on the lower end of 56 to 57. But after Kevin's prepared remarks sounds like it's closer to 57% this year. I'm just wondering given a pretty similar expense guidance to what you've been talking about what's changed on the revenue side? And I know it's a it's a small change, but any color you can give their

you know, I think we're going to have

Another quarter of of revenues from there are two Acquisitions. We are expecting some loan growth this year. We're expecting to do, you know around mid single-digit growth in our life. So I think we just get that operating leverage and that should help us on the efficiency ratio side.

Just a little higher, you know from that but you know the point we gave Diana 56.57. We hadn't completed our kind of a budgeting where we have now dog and deeply in in Iraq and we feel that we have, you know better I guess land of sight exactly what that number is going to be. So it's going to be right around here. You know, I think the thing is is that I continue to try to reduce our expense to asset ratio and and we're looking at to bring that down closer to our goal of of 265. We're starting to head toward that goal. So Thursday, we we're feeling good about our expense levels, you know, and revenue had words are going to be there. We're going to you know, do everything we possibly can to get to the revenue in size but and and introduce operating leverage, but it's not really the expenses are increasing higher just really, you know, they had ones might be ahead of us. And if you look at just the fourth quarter and back out the acquisition expenses, we we got to our

57% efficiency ratio 1256. Yeah.

Okay, great Marcy, the the Cecil discussion and the provisioning. Could you?

A little bit again. I think I may have misheard.

So we expect an increase in our allowance to be someplace between 35 and 45% to land in there.

And then in terms of our provision expense for this year, we expect lower levels of recoveries credit recovery's and so we expect it to come round four and a quarter million each quarter. Okay. Sorry. I thought you said an increase of four and a quarter. So it's absolutely and off no, no no in total 4.25 million per quarter. Okay. Thank you. And then Kevin just lastly give him the Stock's performance the last couple of months. So any thoughts on how the current valuation impacts your prospects for m&a this year and and whether it changes your thinking around repurchases since last quarter Joey, well, we have all the levels of of levers to pull regards to capitalization. You know, we there's there's a lot of talk going on, you know with regard to age.

urgent Acquisitions and

So and you know, I think the interesting thing is is that first of all, we're turning down a lot of them because it just don't fit what we want to be as when we grow up but there's a lot of conversations going on Thursday. And I think the conversations are actually I think healthy the conversations are are less about premiums the more about office announced a deal that makes sense for both shareholders group going forward with the combined institution. So it's I think they're healthy discussions that are being had and they're they're they're not focused about trying to have a big premium and along tangible Book value pay back. So I think they're very productive and we'll see what happens Thursday. It's it's it's an interesting world, but I would tell you that there's a lot more conversations happening than had was happening, you know, four months ago.

And then updated. So on repurchases repurchases, you know, I don't, you know, the price of our stock right now is it gives us what we see as more than a five-year TJ Book value returned. So repurchases we don't believe is the most effective use of our Capital at this point for our shareholders. We try to limit repurchases until Thursday. We have a payback less than five year book value dilution, so we at this juncture, and we really hope our stock doesn't drop down to the levels that we we need to buy it back. There's other Alternatives that we can use to to return Capital to our shareholders, and and we're, you know looking at all our all of our options great. Thank you.

our next question comes from

Ki Bolen from KBW please go ahead with your question.

Hi, good morning. I wanted I wanted to drill down into income just a little bit. I know we talked about Mortgage Banking and the you know, we're going to see the expected seasonal slow down just turn volume in 1 q but just looking at some of those other line items. I wondered if you could go into your expectations from the for the year. And then also that other income line item was just a little off the Lower Side. I know that can be bumpy. But just what the impact was there in the quarter that and so, you know, let's start with the other income line. So that other income line does feel a little bit bumpy because it includes, you know, if we have games on a sale of a building or swop fee income varies from quarter-to-quarter fully life insurance benefits things like that. That's all kind of embedded in that line and it can be a little bit bumpy quarter-to-quarter. So that's what kind of drives that going up and down in terms of the rest of our fee-based revenues. We really do believe that overall next year Thursday.

Up about 5%

Yes, okay. Thank you and everything else I had is already been discussed. Thank you. Thanks Jackie.

And our next question comes from Garrett Holman from Baird, please go ahead with your question.

Thanks and good morning. Good morning. I just had a follow-up on spreading would you expect the trend in line with loan growth or do you think the security portfolio stabilizes here? Just trying to gauge your appetite for deployment quiddity insecurities at this current rates?

I think all the time ya know depend on local we're hoping that we get to put lessons of Securities and more and Loans, but you know, we're being diligent to make sure they were putting this excess liquidity to work. So we're we're first first order of business is loan growth second quality of life quality loan growth and then our second order to put it Investment Portfolio.

I'm just hoping this virus disappear soon. Cuz that will help us all yeah me neither but I was hoping you could maybe elaborate through a bit more on the growth opportunity. You see in the Idaho it it's clearly been a bright spot in the Northwest and a bigger driver of your growth recently. I guess. What are your expectations for for growth in that market in 2020?

Okay, and that's inclusive of the roughly flat Mortgage Banking that you

That here you you know the growth in those markets have been very strong. They are strong in nineteen and and look to be strong going in at the 2020. I would say that it's high single-digit or you know could could you know get to double-digit but it's going to be the high single-digits goes double digits. Idaho's doing great. Oregon's doing great faith in the Washington markets doing great and being in Spokane, which is a a growth city, which Coeur d'Alene is right on the outskirts of that everything. We we feel really good with our life West expansion, you know, don't forget some of our Legacy portfolios to I mean Legacy markets, we have Rapid City in South Dakota that continues to grow probably in mid signal bulb. That's nice growth area. Also Bozeman is doing doing well zula's doing well. You know Billy's were hoping is a comeback, you know, we have a little bit of a drawback.

We would look at it, Wyoming.

Wyoming's you know kind of going to be flat, you know, my pin would be probably low single-digits Montana, you know, I mean South Dakota mid and now we're looking for higher growth in the west. So it's really dead continue to to really grow in the west and not have a drag with regards to Wyoming and Montana. Our growth rate should be good. Cuz the West Palm they grew in the upper single-digits all the last year. It was just had to drag of Wyoming and and not the real growth in in Montana that that pulled that down so we can we feel strongly that God will continue to grow and if we can just get our our Legacy footprints in the come up a little bit that will have good loan growth.

Thanks for asking you to click one on the tax rate is a bit higher than expected here in key for what are your expectations for four twenty $20, you know, we think that the tax rate for life will be right around that 23 percent level. You know, it's always kind of a little bit lower at the beginning of the year as people exercise options and we have some benefits from investing their but overall for the year about 23%

Thanks for taking the question.

And our next question is a follow-up from Matthew Clark from Piper Sandler. Please go with your follow-up. Hey, just two quick ones. One is the weighted average rate on new business relative to what paid off quarter.

483 was the weighted average rate on the new business.

Okay, and then nice Improvement in credit quality this quarter, I guess when you look at the the decline and criticized I guess how much of that was given by upgrades how much of that was just you guys working out of stuff or potentially selling or resolving situations and just trying to get a sense per rate the rate at the rate of change here. I picked up most of those they they they saw the door they were worked out and they weren't upgrades. They are no longer with us, which is the way we like it.

Trend or is that kind of that pace expected it continue or is that just more kind of your end you get lucky that I mean that I don't know if we continue that pays cuz you don't have that much left, but we're going to continue working at that down. The good news is that the inflows are are not there. So we'll continue to have Alto so they should continue to do to be at where they're at or or or less because the influence inflows are not there.

Ladies and gentlemen that does conclude today's conference call with you. Thank you for joining today's presentation. You may now disconnect your lines.

Great. Thank you.

Ladies and gentlemen with that we'll end today's question-and-answer session this point. I'd like to turn the conference call back over for any closing remarks.

Thank you for your questions guys and gals. As always we welcome calls from our investors and analysts during or between investor calls. Please reach out to us if you have any questions, and thanks for tuning in today. Goodbye.

Did you sell any non-performers this quarter? I'm looking at my chief risk on I don't know. Would you be selling these non-performers? No, we did not sell any non-performers. It was all work out strategies for successful.

is that