Q4 2019 Earnings Call
for the Year, this is
The one point three r o a 13.6 return on tangible common equity and a 49% efficiency ratio, which is an improvement from 50% last year with many banks would consider these to be pretty good numbers, but I do not we do not I would say however that posting these numbers in a year marked by elevated credit cost is a noteworthy achievement. And that's a testament to the underlying earnings power of the franchise a key earnings Street in learning strength indicator. We look at and the board looks at is pretax pre-provision earnings TTP this increase from 242 million and 18 to 400 million up 66% linked year PTP to average assets went from 2.1% and 18 to 2.26% in nineteen. This progress is due to the successful State Bank merger continued Business Development efforts good expense control wage.
now I'm out performance with the
Normal provision run rate this level of TTP will generate attractive returns for investors 2019. Our Capital ratio is strengthened across the board compared to Prior year off. This is a nice accomplishment, especially considering the sheer buyback of seventy nine million dollars ninety million in dividends to shareholders. And will you reduce debt by fifty million tangible book bag you off of the year at $14.65 per share of 8% from the prior-year now improved significantly due to the merger at affected balance sheet management, especially including the Hedge. I'd like to call to your attention to keep part of the four numbers office for the fourth quarter, which is that our loan yields were down nine basis points linked order while deposit costs were down 18 Valerie's off to review are now solid performance in more detail in her presentation.
Max let's talk about the 2019 was great year we've been able to transform and improve the mix and quality of the deposit base for the year quarter positive screw 780 million month 8% excluding state or broker deposit portfolio has been dramatically reduced from a peak of over a billion dollars or 10% 2 today less than two hundred million 1.5% in fiscal year end. I note the deposit costs are down twenty basis points over the fourth quarter of 1818 basis points linked order. This is largely driven by the growth non-interest-bearing core deposits, which are now 26% of the mix versus 23% prior-year. Our liquidity also improved are allowed to deposit ratio now stands at 88% versus 94% a year ago are dedicated Bankers have been very focused on growing core deposit relationships and the State Bank merger contributed significantly to these nice Reserve.
in terms of expense
Management or pleased with the year as our adjusted efficiency ratio dropped nearly a hundred points to 48.6% We have a cost-effective model today. However, we're never satisfied cost management makes you focus of the team we have been and will be making some offensive hires in Georgia Dallas. In other parts of the company. We expect to see nice returns and future gears from the Investments. We will May 2020, a bit further on State Bank merger. First. I have to say again how proud I am of the State Bank bankers and the leadership that they have shown over what is now almost two years working together clearly. We're very pleased with the earnings accretion and our ability to realize the expense stage of the merger importantly. We're very optimistic about the Strategic benefits of adding key Revenue officers in Georgia.
Another point that might make might interest investors is that our board merger has gone rather well in my opinion State Bank directors and new directors are fully engaged. We can feel the chemistry and the diversity of the board is very healthy at this time our management team Ford or committed at a line with our shareholders over 2019 are combined management team mate open market purchases of over seven million dollars worth of shares and we collectively on 4.2 million shares or 3.25% of the company shifting credit Cadence occurred 86 million and net charge-offs or 63 basis points for 2019. Obviously. I'm very disappointed with these results and I I take full responsibility.
Did I ask?
We're taking the appropriate action to remediate risk in our portfolio. And that credit costs will not be a long-term detractor to the value of the franchise recognizing credit downgrades promptly. We're addressing the issues and we're moving forward the frame up the credit discussion a bit further. I think will be helpful to disaggregate these charge off by key loan categories and then describe a few things and characteristics across first. Let's look at our full-year charge off by loan type c and I credits forty-four million or 51% of the total were six General cni loans that included wage outlier of a 20 million dollar charge off a very high-severity lost credit on on snake credit the forty-four million to the relative to the four billion. General portfolio is a charge-off rate of 1.1% for the year.
Restaurant was next with 21 million in charge off. This is about 24% of the total is 5 credits. It's a 2% charge off rate on the 1 billion dollar restoration portfolio. And the last three energy borrowers accounted for 15% of the charge is for the year is $13 and charge in dollars and it's so 1% off the energy book. These energy charge-offs were from credits originated prior to and in 2014. And as we previously reported we changed our EMP underwriting guidelines and our engineering Approach at that time. So our post-2014 e&p portfolio has performed rather well,
so I believe
Restaurant portfolio Remains the highest risk portfolio in the bank the key issues there or margin and labor pressure some over development and third-party delivery several of our bar hours are on a viable path to be upgraded as a result of positive Improvement and operating results and some are going to be able to refinance and reduce exposure others are more challenging to pass an upgrade is is less clear that I can promise you are front-line bankers and management team is highly engaged with this portfolio. And we're actively working with clients Shore up their operation 6:31 in the portfolio balance with $993 million down from a peak of 1.25 billion during the fourth quarter of the restaurant portfolio declined by $57 a month.
The next size area of rest would be leveraged one else without a moderator and similarly with the restaurant we're diligently working through this portfolio to improve the risk profile or exit Loan now, we're not comfortable as a result of this work in the last six months. We've reduced the size of the portfolio by 183 million from a peak of $875 Million down to $692 a year off.
Said no, let me turn to a number of business units that are reporting very good credit results these portfolios and aggregate make up the majority of our total loan portfolio. Let's review the history of Life over the past three years since going public. So Energy Services and Healthcare combined or about $655 million of total loans that experience zero charge all over the last three years. But let's see Cadence one point five billion dollar commercial real estate portfolio is has had a great charge-offs of $16,000 over the last three years. So that would call that outstanding results. You can probably call that zero charge off the two point eight billion commercial real estate portfolio from state that charge off for 2019 or below four million dollars fourteen basis points. This would make their three-year charge-off average around five basis points.
Two point 1 billion dollar residential real estate portfolio and Cadence is is pristine and has recorded charge-offs of less than five hundred thousand since 2017 month and last touching base on the technology portfolio. $388 billion had one charge off a little less than a half a million dollars for 12 basis points in two thousand and nineteen thousand year average would be closer to four basis points. So to summarize 2019 that charge also 63 basis points brings our three year average from are originating a sport folio. It's a 31 basis points, which we would say is in an acceptable range for our model.
expect to see
Twenty-twenty being improved here for credit restaurant and leverage without moderators have elevated risk. That's for sure that I believe the rest of the portfolio will continue to post good credit results month and I did not push the another year 63 basis points in charge off. So, okay Paul specifically, why do you think 2020 will be better? Well, the portfolio has been D risk in several months our exposure to leverage loans without moderators has declined 283 million down 21% the restaurant portfolios down two hundred and fifty million or 20% from the peak off. Our energy portfolio is predominately Midstream and given the recent recovery of oil prices. We believe the risk in this portfolio are reduced and as I mentioned our e&p portfolio page post 2014 has to perform well energy non-performers today or less than ten million that we have one Energy Credit of a little less than twenty million that's on our exit game.
So
Clearly energy Capital markets challenge I get that but we feel pretty good about where we stand today. So as I look back and analyze our recent credit migration, we see the ramp up and criticize about assets have slowed brought it to the optic that we have in third-quarter. It's our expectation to criticize and classified loans will begin to decline over the first half of 2028 as we see some relationships. Do we see some upgrades through the operating performance and some pay downs from refinancing?
Hopefully this information is useful, and we're making every effort to be as transparent as possible with how I see the credit situation. So again, our model generates attractive returns at twenty-five Thirty basis points in charge of sales at 63 basis points. I'm not happy. It's not acceptable, but $63 is manageable the loan portfolio took 5% in the quarter driven primarily by pay downs and energy restaurant and leverage. So for 2020 we now but expect our loan growth learning from 12:31. 2 a.m. To 5% range for the year. Our new business pipelines were down from prior years, but are healthy and they support the mid single-digit growth targets that I just mentioned wage reminder. I'm really pleased and proud of a highly motivated team of Bankers that are not working hard every day to do a great job for clients and grow the business. So with that let me turn the call over to ballot.
Thanks, Paul.
Adjusted net income for the fourth quarter of nineteen was 51.9 million with an adjusted EPS of $0.40 7.8 million and 6 cents per share respectively from the prior quarter for the full year adjusted net income was $223 Million up from $175 million in 2018 adjusted EPS for the full year 2019 with 1.72 down from $50.07 from the prior-year adjusted our 08 for the fourth quarter was 1.16% And the full year was 1.26% as Paul mentioned previously. We continued to experience strong growth in core deposits increasing 270 million or 1.9% from the prior quarter to 14.5 billion and we further reduced broker deposits by 316 million to 1.3% of total deposits for the full year, excluding the impact of deposits acquired from State Bank for deposits increased $780 million or 8.1% and brokerages.
It's declined.
4 and 42 million at the same time our loan balances in the fourth quarter declined by $653 billion or 4.8% to 13.1 billion due primarily to Greater net pay down pay off as we work to reduce portfolio risk as well as $96 billion in loans sold or moved to help for sale for the full year, excluding the impact of Lowes acquired from state bank loan increased $387 million or 3.9% including $124 billion in loans sold or moved to loans held for sale as a result of this added liquidity throughout the year. We increased our investment Securities makes the 2.4 billion or 13% of total assets adding $663 million in the fourth quarter an increasing 514 million for the full year.
This makeshift led to total revenue in the quarter being flat $195 with net interest income increasing 711000 non-interest revenues declining $744,000 for the full year. Total revenue was $782 Million focusing on net interest. Margin. We are very pleased with our net interest margin Dynamics this year and into the fourth quarter of for the full year are Nim increased to 4.0% from 3.61% is our yield on originated in a and c I loan excluding a creation increased 34 basis points during the year to 5.38% and our cost of funds increased only fourteen basis points during the year. The addition of the state bank balance sheets the implementation of our former dollar Libor caller in the first quarter of 2019 and are targeted focus on finding cost all contributed to this margin Improvement.
additionally
And the fourth quarter of nineteen we were able to completely offset the impact of declining interest rates on our variable rate loans through our hedging activity and aggressive management of our cost of deposits wage in the fourth quarter. We saw an eighteen basis point improvement in our deposit cost and only a nine basis-point decline in originated in AMCI Coral O'Neill explain your creation deposit data was 39% in our originated low on data with 15% as a result men in the fourth quarter was essentially unaffected as a result of changes in yields and costs with the impact of lower Libor rates are loans fully offset by one materially improved funding costs to Greater revenues are hedging activities as Libor declined and three increased loan fees Associated largely with the loan payoff activity.
The five basis points decline in the fourth quarter them to 3.89% was actually attributable to two basis points decline as a result of the balance sheet mix with the lower-yielding security just replacing higher-yielding loans partially offset by lower-cost core deposits replacing higher-cost broker deposits a 2 basis-point declined was due to the increased impact of non-accrual life in the marching and one basis point declined due to the total accretion being lowered during the quarter going to 20/20. We continue to feel very good about our ability to maintain wage stability in our core margin in the forecast rate environment.
Just expenses. We're also well-managed for the year as we integrated State Bank and fully realize the efficiencies we modeled for the combined companies are full year efficiency ratio for 2019 was 58.6% further improved from 49.6% in 2018 for the fourth quarter the combination of the flat Revenue increase non-interest expenses resulted in our adjusted affect ratio up slightly to 50.9% for the fourth quarter from 49% in the prior course our 2020 expectation for the adjusted efficiency ratio remains in the low 50s.
I just did not interest expenses for the full 2019 year worth $379 million. And for the fourth quarter were ninety-eight point four million or at Five Point 1 million from the prior quarter of approximately 3.3 million of the quarterly increase was the result of third-quarter credits that lowered third-quarter expenses it FDIC costs instead of a cruel cost and 1.8 million due largely to increases in routine compensation professional fees and advertising and public relations expenses in the fourth quarter dead.
Well in 2009.
Teen we achieved the saves that we initially planned for the state make integration. We do expect to realize additional economies of scale in our operating platform as we go forward with the same time. We are also continuing to invest in our technology infrastructure and talent to support ongoing growth of the company. So as a result on a net basis, we currently anticipate m2020 adjusted expenses to increase very modestly in the low single-digit range over the fourth quarter nineteen run rate.
At 12 3119 or allow us for credit losses was 120 million or 92 basis points of total loans and the Cecil update based on the 4th, 19 data are estimated reserves would increase to between 1.45% and 1.50% or an increase of 55% to 65% from the year-end level. But he originated portfolio only you would expect a 40% to 45% increase in our reserved levels with the greatest percent increase from our consumer and Sierra portfolios life of loan under Cecil is much longer than the current Los emergence.
we continue to
Back the day one phase in Capitol impacted less than ten basis points of total capital.
In the fourth quarter. We also continue to execute on our share repurchase program repurchasing 9.8 million of common stock and an average price of $16.21 and we further enhance our cash position through net earnings and lower risk-weighted assets.
So while we did experience elevated credit cost in 2019. It is important to note that we also enhanced our balance sheet mix on both the asset and the liability side. We strengthen our Capital position while we also increase dividends and bought that stock at favorable prices. We maintain stability in our coordinate interest margin as rates increased and then decline we continued our efficient operating platform while effectively integrating a large and complex acquisition. We expanded our footprint to include a key New Market and we further added to the talented and driven employee base that that gets it done in summary. We have a lot to be pleased with a Cadence Bank and look forward to 2020 operator will go ahead and open it up for questions now.
Thank you.
Begin, the question-and-answer session to ask a question. You may press * then one on your telephone keypad. If you are using the speaker phone, we ask that you please pick up your handset before pressing the keys to attract question, please press * then two at this time. We will pause momentarily to assemble our roster.
And today's first question comes from Brady gaily. Okay, BW, please go ahead. Hey, good morning guys.
Brady but I wanted to start with the buyback, you know, you're not you're not buying back a ton of stock here about half of 1% this quarter the same as last wage order and you have tce of almost 11% of the stocks at 1:20. Tangible. Why not get more aggressive on the buy back in 2020?
Yeah Brady at something that we just have an ongoing conversation with our board on and we're looking at a number of different variables when we make those decisions. I mean capitalist strategic home and um, but but it's definitely something that will continue to look at we've been opportunistic with those purchases and 2019. You can see that by the average price that we bought that back at and I think that's going to be the approach as we go forward at least for the near term. Right and then the expense guide for 2020 of low single-digit creep. I just wanted to clarify that's not your over a year, but that's based on the four Q1 9 expenses. Annualized that did I hear that right?
Yeah, that's right. That's
Right and effectively, you know, that's really kind of a net number from making some investment for the the future growth of the company and then continuing to to really be able to Thursday is some efficiencies from from being a larger organization. There's there's more of that to come and and we're working on that.
All right, and then finally for me, I mean a credible yield levels have been fairly consistent. If you look over 2019 at around $18 million a quarter Thursday, we looked at twenty twenty and you know, I know that bucket is a declining bucket. How how should we think about a credible yield levels at 2020?
Yeah, so in our table three in the press release we we have a table that breaks it down in the ANC. I accretion we'll we'll just gradually decline quarter-over-quarter as that portfolio continues to to work to to wind down on the on the AC IPS most you know, that will transition to PCD under Cecil and that's what you can expect is for that population of loans to have revenue of about half of what it's had really seen over the last couple of quarters as we go forward on a quarterly basis and that's because part of that discount is is, you know, effectively added to those balances as we enter into to the Cecil world.
All right. Got it. Thanks guys.
No, next question today comes from Jennifer number of SunTrust, please go ahead. Thank you. Good morning. Good morning. How much do you anticipate the loan portfolio will be the risks further in 2020 Paul? And what does that imply for net loan growth this year?
Yes, that's thanks Jennifer, you know as we mentioned in the comments the restaurant and leverage without moderators or the things that I think the most about and we've seen a 250 million Dakshin in restaurant 183 in leverage without moderators. Um, I mean the the basic, you know day-to-day work the loan Committee just every time we look at a credit that has higher leverage. We are scrubbing it extra Hardware either working in a way to strengthen the structure and be comfortable or we're asking them to refinance and and find a different lender. So, you know, how do I put a pencil to what the answer your question? I mean specifically I wish I could I can just tell you that, you know, we're off we're looking anything that we think Falls at the higher end of the spectrum or either improving it or we're asking them to refinance.
Okay.
And you said you think it'll be a better net charge-off year and twenty than than 19 with with guidance over a cycle of twenty-five to Thirty basis points. Are you anticipating that it's the net charge-offs this year? Probably somewhere in between last year's result and and that long-term goal.
I think that's fair, you know, hopefully at the lower end of the range. I mean a lot of it depends on on what happens with the restaurant portfolio in particular. So, you know like to be realistic with expectations. We have a good portfolio and as we called out there's a number of categories that are doing fantastic. You know, what I worry about is something comes along that has a high severity of loss that I can't see today, you know everything where you know today has been racked up so to speak but you know that potential exists.
Okay, last question. I think it was announced this week that Crystal file for chapter 11. Do you guys have any exposure there?
We are in the credit. Yes, and we think that our what we know that we've kind of appropriately marked our books with with the bankruptcy in mind that was taken into consideration. Okay. Well, what's the amount on that credit? Our portion is around ten million. Thank you.
And our next question today comes from Michael rose with Raymond James, please go ahead. Hey, thanks for taking my questions. So Valerie just saw that the the Securities portfolio through a little bit as we as we move forward obviously some of the broker deposits are getting near a a trough level. Um, it should we expect the Securities book to remain relatively stable here or are you guys finding good opportunities out there to prove it?
Yeah, so it's it's really a dynamic of power loan growth to be quite candid and our deposit growth significantly, you know this year we had such great deposit growth and honestly wage, you know, we see we see good growth in our core deposits continuing and so to the extent that that exceeds our loan growth then then yeah, I do believe that will continue to grow, you know, I think I think modestly over the near future anyway, but continue to grow that security book, you know, we we did bring down the broker deposits will probably always have just a little bit of those two years, you know, keep that channel open for volatility and in funding levels in different quarters, but the core loan or the core deposit being able to bring those in with the lower cost is something that's very positive and we'll continue to work on that.
okay, that's that's helpful may be delving back to
Loans, so all I think at the outset you said expectations for kind of three to 5% net growth this year. Can you just walk through where where that's going to come from country? Think about it looks like energy still going to be under some pressure obviously restaurant as well General see and I there's some general softness in the market that you and others have mentioned and you just talk about the puts and takes so that of that Outlook. Thanks Michael. I will and I'll ask Hank to comment also. So yeah, we expect restaurant to continue come down. I think energy will be pretty flat. I mean we're we're open for energy. It's a it's a high bar, but we're you know feeling pretty good about where we are there the C and I leverage thing. I mean this is what makes it hard to predict with accuracy as what additional reductions will we have from anything that we feel is higher leverage, but we have a hundred 90 lenders. We're in some great markets. We're talented hard-working.
Bankers they have attracted new business pipelines that are our health either getting not as high as some prior years, but we definitely have some good new business coming in the door and we're going to be able to to home growth for sure when I don't know with certainty is what will the payoffs be that kind of offset that so I don't know. How how would you sure I'll just add to that, you know, obviously, you know, Michael Sam is not really good job of building at his out his team and Atlanta, which is seen some nice pipeline development there. We also had year-end pretty much probably eighty ninety percent of our billed out in Dallas and so seeing some nice loan growth and deposit growth from both of those areas and then in our real estate and Technology health care and business banking, you know, those folks are out throughout the foot of bed and we are seeing both asset and liability growth from those areas as well. You know, one thing it is we did have a high level of payoffs last year. However, we were still bringing in new club.
We are seeing early on in the first quarter that we
May not have as many payoffs this year. It's a little hard to predict because with the non-bank lenders out there and what they do, but I'm optimistic about the first half of the year.
Okay, that's helpful. And then maybe just following up last one for me on that expense Outlook. Can you give a little more color on the plans for for hiring you've seen several of your competitors talk about elevated costs related to hiring efforts, um from Market disruptions and mergers and things like that, you know coupled with annual Merit increases inflation stuff like that. So I guess what are the puts and takes of, you know, those Investments and and where you can expect to save some money on a go-forward basis. Thanks.
So I just kick <expletive> off and just say we we we've made a lot of The Hires in the Atlanta area in the Dallas area that that we've kind of in that are in our budget and run rate Thursday. We are certainly going to be opportunistic where that exists with the teams we have in place are the ones that we feel good about where they are and their business development efforts Sam. I might throw it over you and yeah, I'll just lay off that's very accurate. I mean we pretty much have a lot of the The Hires in the Georgia Market or already in our run rate and if we have a strategic opportunity here and there we may take it but largely the teams built out. It might add that we still do we still are adding treasury management support to really continue that growth on the liability of the balance sheet as well. We had our about ten production people in the Georgia Market in a second half of the year. And so that's in the in the fourth quarter run, right?
And just kind of the other side of your question on where we anticipate having increased or efficiency. Excuse me is you know really as we look across the the technology.
G on the operations areas, those are the the areas where we're putting in some things looking at additional Technologies, um targeted Outsourcing efforts that will certainly would allow us to to realize some efficiencies. They're also looking at kind of some of our our Branch Network modeling and some of the other Staffing levels that we have throughout really off of the the operations areas that that we believe there's opportunity.
Takes a little time to get there by will, you know have some offset during the year, but I understood. Thanks for the call. Appreciate it.
Hey, ladies and gentlemen, as a reminder. If you would like to ask a question, please press * then 1 today's next question comes from Brad Millsaps from Piper Sandler, please go ahead. Hey, good morning. More Brad. I just wanted to follow up on your comments run the margin obviously a lot of a lot of moving Parts. It sounded like you thought could keep the corn instead of just curious in the context, you know, you'll be starting the beginning of the year with you know, about four hundred million or so lower an average loans than four hundred million higher insecurities, even with that as you feel feel still feel good about, you know, being able to hold the margin, you know steady as you kind of move through the first part of the year, you know, assuming rates remain stable.
Yeah, we really do.
And part of that is, you know due to our deposit costs and we've got about a billion and half of CDs that are going to reprice over the first month of the year there at about you know, probably 2 and 1/4 right now and so, you know, the replacement of those is coming in significantly lower when you combine that with some loan growth as we go forward and obviously the the impact of the Hedge we're pretty bullish on the stability of our margin.
In the seven hundred million or so of Securities you bought in the quarter. Can you give us a sense to kind of average rate of kind of where you're buying? Yeah, you know, they're you know, they're they're both directions about five five and half years and they're coming in probably about the 250 level. So they are they are lower than the loan yields. Absolutely and and that's part of what you saw in the balance mixed shift, you know, a couple of basis points decline in the margin there.
Great.
Thank you very much. I appreciate the call and someone wants more. If you would like to ask a question, please press * then 1 today's next question comes from Matt only of Stevens, please go ahead. Hey great. Thanks for taking my question. I want to go back to the loan balance contraction during the fourth quarter. We heard some commentary from you on the the risking of the portfolio. And then we also have commentary about pay Downs being elevated in the fourth quarter. Can you try to parse this down and and give us some commentary about how much of the contraction for she was from D risking versus the pay Downs?
Sure, I need for first off. I made its restaurant energy and leveraged or the three categories that came down the most I mean the worse else we had some technology great credit. So we didn't want to lose it got paid off and you know refinance it on bank bank bank lenders. So what's the breakdown exactly is your question? Well, I think it's actually I mean there's kind of metal together. It was going to say I mean some of the pay offs occurred because we we we weren't willing to to change something and therefore they paid off and that was risky move. Yeah mad blood times. What happens is we have an acquisition or companies merged and they can get a higher leverage Point than we're willing to to kind of chin that bar. A lot of times. We keep the job done but maybe a term debt or piece gets one's up getting paid off. The non-bank lenders are pretty active in the second half of the year. So we saw that impact.
Okay, I guess I give that but I'm trying to tie it back to the 2020 loan growth guidance.
To 4% if the risking is still going on. I guess it's just hard for me understand why the the loan portfolio is going to grow three or four percent in 2020.
Cuz we got good pipelines. We got a hundred 90 lenders. We're out knocking on doors and the economy is good and throughout our footprint and if there's a there's a healthy view towards new business coming in the door off. I agree with that and I I think also think that industry is looking at leverage from a cash flow perspective a little differently than it has historically and so I think those numbers will be coming down.
And and just to add to that, you know the and we mentioned it before but the new market, you know, it takes time to really build the momentum there and and we feel like we've got some momentum behind our backs man. I wouldn't want to try to get you that it's in the can I mean it's it's definitely that's what we think that's our estimate three to 5% based on the pipelines and looking at what we think are likely reductions and de-risking so that that's our estimate Jeanette number but you know, it could be lower. Hopefully it'll be higher and then on on the restaurant and The Leverage book. Is there a dollar amount or a game or any kind of number you can point is towards as far as your expectations of how big those portfolio is our or the next year?
yeah, we're
We're looking at that carefully and we're we're re-evaluating. Let's do restaurant first. So I would say that I know the team is doing a review of what's happening in the industry. We're going to have a discussion about where we want it to be. I think our will probably settle somewhere in the $758 range or going to let the team do their work and bring a recommendation forward and something that wage will consider and decide at that time obviously consult with our board about it. So probably a couple hundred million dollar reduction over the next two years. I would say in in restaurant would be a reasonable expectation wage to be determined and then leveraged, you know, it's that portfolio is a bit more dynamic in other words leverage without moderators. If the credit has a covenant violation and they start off as long as leverage it's not leverage but it goes into that bucket and so it you know, sort of, you know can can go a bit of a life of its own. It's not like you start with a finite number and it sucks.
Comes down, but I do expect to see.
overall leverage farmers at our company produced
Okay, that's helpful. Thank you guys.
And ladies and gentlemen, this concludes our question-and-answer session. I'd like to turn the conference back over to Palmer for any closing remarks.
Okay, so in summary, you know, obviously our goal is to have a strong Regional Bank that generates attractive returns for investors and and to do that. We we focus on core growth really just we've been talking about and and over the last, you know many years. We've been able to generate a attractive loan growth and and really nice deposit growth, especially especially last year. So, you know, we have the team in place now that knows how to do that and I would just remind our investors that were confident in our team and we know that they are extremely committed and determined and like Valerie. I'm looking forward to 20 20 with that we stand adjourned. Thank you, sir. The conference has now concluded and we thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.