Q4 2019 Earnings Call
Welcome to the old National Bancorp fourth quarter 2019 earnings Conference call. This call is being recorded and has been made accessible to the public in accordance with the Fccs regulation FD.
Corresponding presentation slides can be found on the Investor relations page at old National Dot Com and will be archived there for 12 months.
Before turning the call over management would like to remind everyone that as noted on slide two certain states.
Certain statements on today's call maybe forward looking in nature and are subject to certain risks uncertainties and other factors that could cause actual results to differ from those discussed the company's risk factors are fully disclose and discussed what and at Ccs filings.
In addition starts in slides contain non-GAAP measures, which management believes provide more appropriate comparison. These non-GAAP measures are intended to assist.
Investors' understanding of performance trends reconciliations where these numbers are contained in the appendix of the presentation I'd now like to turn the call over to Jim Ryan for opening remarks Mr. Ryan.
Thank you Dorothy good morning, everyone.
National out several strategic actions today, including a new strategic plan.
Consolidation of 31, or 16% of a branches across our footprint and to capital actions, including raising our dividend and authorizing a new share repurchase program.
I've mentioned on prior calls we spent the last year internally focused and I challenge our executive team to think about ways. We can better serve our clients our team members our communities and importantly, our shareholders. This new strategic plan, it's called the only way I'll share more details later in my remarks, but somebody initial charges related to implementation are included in our.
Fourth quarter earnings.
Starting with slide three or fourth quarter, net income was $49.2 million, including 8.4 million to charges from the only way as well as merger charges. Adjusted net income was higher at $55.2 million.
As you review our results you'll see that our core margin was stable. Despite the fed fund rate cut in September and October and a challenging yield curve.
Credit quality remains strong we recorded 1.3 million to provision on net charge offs were three point sixmillion. The higher net charge offs were primarily result of a single credit that was previously reserved for in prior quarters nonaccrual loans declined nicely in the quarter in year over year as I've said in prior quarters, while our credit quality of strong we're not immune from Wassa.
We're still watching a small number of credits, but I'm not losing sleep over credits today.
We saw record commercial production for the quarter and strong core deposit growth importantly, we also effectively manage our cost a total deposits lower by nine basis points to 43 basis points, and we posted strong year over year operating leverage efficiency ratio improvements.
Next on slide four full year net income was $238 million, including 17.4 million in charges for the only way and merger charges.
Adjusted net income was almost 24% higher year over year.
Like the quarter, we saw record commercial production for the year and our pipeline was a record setting $2.2 billion at yearend we.
We also produced a record $1.4 billion your mortgage loans of which approximately 60% was sold in the secondary market.
We posted strong year over year, adjusted operating leverage improvements of 636 basis points and adjusted efficiency ratio improved to 369 basis points.
Adjusted return on average assets was 1.25% and adjusted return on tangible common equity was 15.7%.
On the capital front, we repurchased 6 million shares during the year at an average price of $16.58.
Moving to slide five despite the repurchases tangible book value per share grew by 15% year over year and tangible common equity to assets stood in a strong 9.09% at yearend.
As I said that in the beginning of the call, we announced two capital actions, including a 7.7% increased our quarterly dividends or 14 cents per share, which represented approximately 3% dividend yield.
We also announced a new share repurchase program of 7 million shares, which we expect to be opportunistic about over the next year.
A quick update at M&A, our strategy hasn't changed we remain active look or in a selective buyer where patient continued wait for the perfect pitch, while remaining focused on execution.
Given the importance of the old be weight, the hurdle will be even higher to work on achieving our milestones of completing our initiatives.
Next right is going to walk through this quarter's details [noise].
Thank you Jim.
Turning to the quarter on slide six our GAAP earnings per share. It was 29 cents an adjusted earnings per share. It was 32 cents adjusted earnings per share excludes $8.2 million and don't be way related charges $250000 and merger related charges as well as $400000 in debt securities gains.
Moving to slide seven our quarterly adjusted pretax pre provision net revenue was 10% higher year over year end up a notable 23% for the full year.
This result was driven by increased scale from a recent Minnesota partnership our strong low cost deposit base and a continued focus on expense management.
We also improved operating leverage by strong 636 basis points year over year.
Slide eight shows the trend in outstanding loans as Jim referenced our commercial loan production of $681 million was the largest in our company's history. We ended the quarter with a record 2.2 billion dollar pipeline and good momentum heading into 2020.
Persistently high levels of prepayments that tell commercial outstandings flat, despite our third consecutive quarter of record production.
As expected September and October rate, that's there was loan portfolio yields excluding accretion down 40 basis points in the fourth quarter.
Production yields in the fourth quarter were 3.76%, which reflects the lower long term rate environment that we will that we would expect will continue to put pressure on asset yields.
Moving to slide nine appeared and average deposits increased during the quarter. Our total cost of deposits declined nine basis points quarter over quarter with very low 43 basis points.
We're pleased with the results of our deposit pricing strategy that has resulted in a meaningful reduction deposit costs, while simultaneously growing our core deposit base.
It's a little over $1 billion in deposit index, the fed funds and proactive management of exception price book, we're confident in our ability to manage deposit cost lower in response to any future fed action.
Slide 10 shows our fourth quarter, earning asset mix for the quarter over quarter change and Luminex, although our efforts have been impacted somewhat by prepayments. We remain focused on re mixing the loan portfolio towards more productive commercial and commercial real estate loans and out of indirect another homes.
The investment portfolio yield was down eight basis points quarter over quarter to 2.74%, which was equal to the fourth quarter yields on new purchases.
Next on slide 11, you'll see the detail changes in our fourth quarter net interest income corresponding margin. We're pleased with the performance of our margin given the challenges of the interest rate environment.
Interest margin, excluding accretion was better than expected at 3.25% compared to 3.26% last quarter. The anticipated decline in earning asset yields which were down 14 basis points was nearly offset by reductions in or funding costs.
Active repricing of our deposit book and strong noninterest bearing deposit growth helped mitigate the negative impact on asset yields the resulted from the recent fed rate cuts.
Our ongoing work to reposition the balance sheet, we more neutral interest rate risk position, along with continued thoughtful and disciplined disciplined approach to deposit pricing should allow us to defend our marketing well against this definitely flat yield curve.
Slide 12 shows trends in adjusted noninterest income our fourth quarter non interest income decreased $6 million. Following a strong third quarter performance that included record capital markets revenue and $1.7 million, an annual vendor incentives the quarter over quarter change was the result of the seasonal decline in mortgage banking revenue and returned to trend line of our capital markets revenue.
Also include on to slide is a summary of our mortgage activity for the quarter, which included a record $468 million in production.
Low interest rates continue to support strong refi activity, which accounted for 54% of our production.
Next slide 13 shows the trend and adjusted non interest expenses, which reflects our ongoing focus on expense management, we did experience an uptick in adjusted expenses in Q4, driven by additional incentive compensation accruals related to record loan production and are full year earnings performance.
Our adjusted efficiency ratio for the full year they record low 57.87%. It represents a 369 basis point improvement over 2018 expense discipline is an important part of our culture and despite the revenue headwinds impacting the industry remain committed to generating positive operating leverage.
Slide 14 has our credit metrics credit conditions remain benign as we experienced positive migration during the quarter and both nonperforming in under performing loans felt the news cycle lows.
Recorded $1.3 million in provision expense during the fourth quarter, well posting net charge offs of $3.6 million. The increase in net charge offs was driven by single credit that didnt fully reserved for in prior quarters are higher level of nonperforming loans relative to peers reflects our practice of identifying credit challenges early we believe early recognition of underperforming credits.
In active engagement with borrowers ultimately leads to lower credit losses as demonstrated by our below average charge offs.
Slide 15 demonstrates our strong reserve coverage and low risk balance sheet with 56 basis points of reserves against organic loans and 322 basis points in loan Mark against the acquired loans. We believed that we have adequate reserve coverage.
Before we turn away from credit you want to provide you with an update on our transition to Cecil our estimated increasing allowance remained unchanged at $35 million to $45 million a large portion of the increases related the establishment of an allowance for $2.3 billion of acquired loans with relatively modest increases in reserves on the remaining legacy book.
Relatively wide range reflects the uncertainty of future macro economic forecasts, but assuming economic conditions remain stable, we would expect to be into bottom half this range.
Slide 16 provide some key takeaways from the fourth quarter performance. We're pleased with our results driven by good execution against our strategic objectives. We successfully defended record margin, which showed only a one basis point decline for prior quarter.
Commercial loan activity remains strong with three consecutive quarters of record production and a record pipeline heading into 2020.
The 636 basis point year over year prudent and adjusted operating leverage and the 369 basis point improvement in our adjusted efficiency ratio demonstrates the benefits of our increased scale and continued focus on expense management.
Slide 17 includes thoughts on fourth quarter, starting point and our outlook for 2020.
We expect commercial loan production to remain strong based on both the size and quality of our pipeline. We expect core net interest margin, we under some pressure from the shape of the yield curve.
As a slide suggest fees and expenses should follow follow normal seasonal patterns and we remain very focused on continuing to drive positive operating leverage our full year 2020 tax rate is expected to be approximately 18.5% on a hefty basis and 14.5% on a GAAP basis. The effective tax rate includes an estimated $15 million and.
Tax credits, primarily related to historic tax credit projects expected to be completed this year. These projects are anticipated to generate an estimated at $13 million in tax credit amortization, which will flow through the operating expenses lease include a $13 million an operating expenses in your model along with the reduce the effective tax rate. The after tax benefit of these pro.
Correct is estimated to be approximately $2 million in 2020 as a reminder of the tax credit amortization has recognized through expenses in the quarter in the quarter. The corresponds with the placed in service date, well the tax benefit is spread over the full year through the tax line.
Well now turn the call back over to Jim Ryan to share some additional details on her own be wed strategic plan.
Thanks Brendan.
Turning to slide 18, I want to share some details on they all the way in May we started when they performance and permit diagnostic to define our go forward strategy and identify revenue and efficiency opportunities across the bank.
In August of 2019, we set up to build a bank will plan was that was a little over three key objectives first transform old national told leading commercially oriented regional bank with a distinctive client centric value proposition delivered through a client segment focused organization.
Secondly, lay the foundation to be a top performing independent bank by streamlining our operating model and strengthening our risk and credit processes to provide a seamless client experience thirdly improve our operating leverage invested our operational infrastructure to meet our clients, where they are and ensure that we're keeping pace with technology and quite distinct.
Asian.
Right balanced portfolio revenue and cost initiatives to help us deliver top quartile performance.
We have now entered the implementation phase to capture the value identified design phase we have over 800 milestones of 60 total initiatives, we anticipate the execution lasting one to two years, we communicated the impacts are the only way changes to our team members last week, including the 31 branch consolidations.
We plan to also hold on Investor day on May 13, Indianapolis to provide more details and share updates on our progress.
Moving to slide 19, let me share our vision for the only way.
I won't be a leading commercially weren't in regional bank with a distinctive client centric value proposition based on strong relationships and streamlined operating model an exceptional work environment that empowers our team members to deliver their best.
Moving to slide 20, let me share some key organizational structure changes for the all the way.
Historically old National has been organized by geography that model served us well for 185 years, but as we've grown through partnerships and our clients have become more diverse we saw the need to move from a generalist or more specialists relationship management approach to better serve our client needs. As a result, we're moving to three main Klein segmentations.
The first is a commercial segment, which includes segments space by clients revenue size and approved Treasury management offering and some dedicated you asked for specialized lending on select industry verticals. This segment is being led by one of our most successful commercial leaders Dennis Heisman, who started our little Kentucky office more than 10 years ago.
Dennis will lead the segment for mobile and key new hire reporting to Dennis as Melinda Anthony who recently joined US from Wells Fargo to lead our Treasury management team. She leads the T M team from Indianapolis.
The second segment is community banking that will provide products and services tailored to each market serving personal small business clients through a full range of distribution channels to meet clients, where they are the second is being led by Todd Clark was the president of United Bank and Trust and most most most recently our CIO Todd will lead the second for Michigan.
We're creating a new wealth group for the third segment that combines our existing wealth management Trust businesses, our investment group and our private banking teams for a simplified private banker led approach with an emphasis on financial planning.
This new wealth segment will be led by shutting alomar, who will join old National later this month from U.S. Bank.
It would be leading this segment from Minneapolis.
I also want to know that Daryl Moore will continue to lead our credit risk functions and continue to partner with our new segment leaders.
Our main support areas, including risk management operations finance and IP functions will lines. These client segments. This approach will why complexity with the amount of risk taking and each of our segments, leading to an overall better client experience improved cycle times and enhanced efficiencies.
We also announced today the hiring of Paul Kilroy to be our new CFO , joining Chris from Huntington Bank and Scott effect on to lead our operations, who most recently worked at Accenture.
Please refer to our press release for more information about these key hires.
On slide 21, we provided some insights into the major initiatives of the all the way.
The expense savings will generate near term benefits, but I'm more excited about the potential for the longer term revenue enhancements.
We'll take most of 2020 to implement the revenue initiatives. So we will not seeing it benefits this year.
We have initiatives in all three client segments, we expect required investments in technology and talent to generate the anticipated revenue enhancements and we'll provide more details it's initiatives more fully materialize.
Moving to slide 22, we outlined the timing of the real estate severance profession, and professional onetime charges related to the expense savings initiatives.
Expense savings are presented net of any ongoing investments required to implement.
We expect total charges, a $53 million, which we've already taken $11 million in 2019, mostly related to professional fees. The remaining $42 million, we expect to take this year, where the bulk coming in the first quarter.
Not including any benefits from the revenue initiatives the charges earn back and approximately one and a half years.
By the end of 2020, we should be on a run rate of $36 million annually, but we expect the 2021 impact to be 40 million plus as we implement additional longer term opportunities in 2021 that are dependent on technology deployments.
Thank you for allowing us extra time this quarter to provide the only way strategy update and the whole team is available take some questions. Thank you.
At this time, if he would like to ask a question. Please press Star then a number one on your Touchtone phone to withdraw your question press the pound key please hold while we compile the culinary roster.
Your first question comes from the line of Scott Siefers with Piper Sandler.
Good morning, Mr. receivers why did you guys have everything going fantastic.
Good just want to make sure I understand the expense opportunities on slide 22, and Jim I think use that as I just want to make time crystal clear all the you know if we look at that they're walking to $579 million throughout 2020, and then the $40 million then we'll your 2021 benefit those are all.
<unk> expenses, which are net of revenue opportunities right. So that's all in other words anticipated to drop to the bottom lines at the right way of looking at it.
Yes, they're all expense savings opportunities, which include any required investment to achieve those expense saving opportunities.
We haven't include any revenue synergies this year I, primarily because they'll be simply de minimis. This year, but we expect the impact to really start achieving that 2021.
Okay, alright, perfect. So.
That's good news.
Then maybe just to separate question I'm sort of run rate stuff. So the margin on a core basis came in better than I would've thought this quarter I know you mentioned in your prepared remarks around it that the shape of the yield curve being the fact that would cause further compression, but I guess I'm I'm, just thinking given that the compression wasn't as bad as a feared and.
The fourth quarter, what the main puts and takes would really be a as you look out going forward.
Maybe to give you a high level re let Brenda comment right, where I don't exactly right.
Given the shape of the old curve loan yields are continuing to be under a little bit of pressure here. We will continue to look for ways to offset that through deposit side, but as our deposit costs have come. So low. It's just it's going to be hard to keep up with the changes in the yield curve and those are really the put and takes is just how much of the yield curve continues to change and evolve and how much pressure that puts on continuing.
Loan yields okay.
The agenda I mean, it's got the only thing I'd might might add to that just a reminder, we still have a number of of Cds that will be maturing over the next year on the 75% IMR cheap or Cds mature in one year about a third of those mature in Q1. So there's some levers there we still have an exception fix exception price book that we can can push on.
So we have some levers on the funding side that will continue to go after but it's really around new production yields relative to our portfolio yields that we'll continue to put pressure.
Alright, perfect. Thank you guys very much.
Scott.
Your next question comes from a line of Chris Mcgratty with KBW <unk>.
Good morning, Chris.
Hey, good morning, everybody.
Thanks for the question.
I want to come back to the the efficiency program I'm just to make sure I understand it I think in your remarks, you multiple times talked about operating leverage.
You talked about the efficiency improvement the banks made over the last couple of years.
If I'm thinking kind of in terms of efficiency ratio even into high 50, 58, and some are 50 to 60.
Assuming the fed doesn't move into kind of rates kind of of the equalizer here. How do we think about this program in the context of efficiency. This is this a program.
To try to maintain efficiency at these levels or drive the efficiency ratio lower.
Yeah, I think it's all about the context, right, which how much revenue pressure, we have from from lower margins from additional fed rate actions right I mean, regardless of what the economic environment or interest rate environment was going to be this year, we run to accomplish this program for so many reasons right. It's the right program to do it's the right evolution of our company. This time.
I was hoping it just happens to be a more challenging interest rate environment for the industry and so for US you know.
I hope ultimately will lead to operating improvements in efficiency ratio improvements, but I really can't predict what's going to happen with interest rates. This year and the shape of New Yorker continues to be frustrating all those things I think will help offset any impacts from a from a challenging rate environment, but long term the whole ideas to drive further operating improvements and efficiency.
The ratio improvements.
Okay.
Total revenue I'm, sorry, that's before the revenue impacts again.
I I am more excited about what those potential revenue impacts looked like for us.
Starting in 2021.
Great.
If I could just add one more Jim.
You guys had historically kept expense growth at or below inflation.
Turning to take it from a different angle.
The $40 million, you're talking about for 2021.
If I'm just trying to help us kind of ballpark for a run rate of dollars because I think that's a big big wildcard.
Is the expectation that your core expenses would be down in 2021 relative to 20 as you kind of hit full full steam or.
Is this a way to come back some of the inflationary technology investments and stuff like that it was trying to get a ballpark of where the expense growth rate.
Yes, I mean like we've done a pretty good job like so keeping expenses below inflation will continue to do that.
Obviously will benefit in 2021 versus 2020 in terms of additional expense savings dollars.
No. We don't think you guys have expenses too far off in the model when you adjust for the all the way you adjust for the tax credit amortization of Brenda talked about you know feel like expenses you guys have the consensus it makes sense to us, but again I would also point out that I will provide further updates in may but these revenue initiatives do require new people.
Additional technology, and so there'll be some expenses related to that but on a net basis. It should all improve you know the bottom line and improve the operating leverage of the company.
Okay, so that expense that you're referring to and consensus. So if I look at consensus 2021 expenses, you're saying.
With this announcement you feel good about that are with this announcement, we should you should do better than the consensus number.
I'm, saying 2020, the expense number seems to be on the right to directory of where we think minus those adjustments, we just talked about.
And our goal is to again further drive improved operating leverage and so we'll continue to watch expenses and year over year from 2021 to 2020, our expenses should be better.
Got it that's helpful. Thanks.
Your next question comes from a line of Terry Mcevoy with Stephen Good morning, Terry Hi, Good morning, I'm, sorry to have to start with a Cecil question, but I'm going to [laughter] ship as as you transition the $2.3 billion of acquired loans from call. It a PCIA world to a piece.
The world there should be an impact to net interest income and I'm just not sure if you've.
Quantified what that impact would be and if so kind of discuss maybe your high level thoughts on Cecil and thanks for the reserve.
Disclosure, but more more so on the Eni impact.
Terry Brendan eight.
We don't have a lot of accretion impact related to that that movement. It's a relatively small bucket. The the marks on those shouldn't have a a huge material impact to our ongoing run rate around it around accretion we've calculated that in its relatively relatively small I think other other institutions my had a slightly larger.
In us around that number.
Okay, and then the reserves on acquired loans that percentage I'm guessing is higher than the core portfolio. So my question is as we move forward in the acquired loans continued to come down should the reserve ratio to total loans should that come down as well.
So if you take the 2.3, which you are right carry does have a higher mix of commercial so the genuine packer Cecil might be a slightly higher reserve, but that is that is embedded in that 35 to 45 million dollar range that we provided should be take that an added to our current reserves that should give you a pretty good ideas of what the reserve levels.
Be going forward and then it all depends provision will depend on sort of the mix of as our production had again theory production will be a little higher mortgage will be a little lower.
And then a question for Jim as if I think about what Bob did it old National moved from a community bank to a Super community Bank. Today, you know, we're talking about moving from that Super community Bank to a regional bank I guess what were some of the risk that you discussed internally as it relates to what this.
Could mean to the commercial banking in the community bank as well given that they're very strong deposit base that comes through the community Bank.
Yeah, Let me first start with you know at our heart, we are community bank.
We continue to be involved in our communities. We think we're better at it than than most banks are in terms of how we continue to support our communities and how we continue to serve our clients so that really doesn't change.
Regardless of the all the way having said that you know is as we get bigger and our clients are more diverse and were spark spread farther apart we recognize the need that our platform maybe wasn't a scalable as it was under that more geography centric structure. It was hard for Jim to tack on another region with another seat.
Joe and some more presents on top of that have become that became more challenging for us and so we think this new structure Oh, we've broken the company up into three primary segments that picks up a clients and then support that you know with our operations and I see and finance functions. All makes a lot of sense to us and we think this is pretty typical of banks our size when they get to this.
Point, where they have to think about the evolution of its structure.
You know I'm also really excited about some of the talent, we're able to bring to the organization when we're out telling our story, whether it's to individually relationship managers in markets or whether it's too you know senior leaders in our company people are pretty excited about the story here at old National and they see this is a place I'm being successful and I think this organizational structure helps us support that.
And then we're also obviously able to generate a savings that we're reinvesting back in ourselves and better technology to make the organization more fiction efficient, but also improve our client offerings. So I think there's just a natural evolution for where old national it's been over 285 years, but I also think that makes a platform more scalable for us going forward.
That's great. Thanks, everyone.
A question Terry.
Yes for follow up question from a line of Scott Siefers with copper Sandler.
Receivers.
Hi, Thanks for taking the follow up I'm, just want to drill down into the expense base in the fourth quarter of 19 for a bit came in a little higher than I had anticipated you guys called out. The you know the incentive comp for example, what you know how much of that ends up indeed being transitory in other words comes.
Kind of immediately back down and how much is just sort of a strike if at all is a higher sort of structural more sure bring to walk you through the changes, yes, yes, Scott it yeah, most of that $4 million would would walk right back down in the first quarter. What you will see though is then we'll be adding in payroll taxes and then merit.
In the second quarter as Jim mentioned earlier, we feel pretty good around that consensus estimates, excluding the only way initiatives that are out there for the full year 2020, if you back off the $22 million, we expect in 2020 related to own be way and then adjust for the $13 million in tax credit amortization.
I guess you'd feel pretty good view of how we how we're looking at expenses going here.
Okay, perfect and then just on the tax credit amortization I couldn't be mistaken right I thought we were sort of.
Stepping back from that business in the next year will be much bigger what are what are sort of the dynamics are around that.
Yeah, we had that we're not stepping back from that business, but there there is a certain type of federal historic tax credit Thats, a one year deal that creates this kind of volatility that we're talking about today, we have a handful of credits they originated sometime ago that we'll be running through a this year. This is the last of these tax credits there are no longer be.
Eligible to.
To be done going forward. So this is this is the last of that I've. Just got these are projects. They were working on for if there's a long runway for these projects. These projects worth Alaskan those projects and quite frankly, the last of the one year never even eligible to be done.
So we hope through this fund structures Weve talked about for will create less volatility that fund continues to get bigger.
But these are the last of those kind of one year deals that unfortunately, we just have to push through this accounting.
Yeah, Okay that makes sense. Thank you and then just in terms of how how the impacts will flow through throughout 2020 is that can be kind of evenly through the year or will there be Nick.
Good call. Good question, a bulk of it actually comes in the first half of the year again, but again. These are historic deal. So you know you have to get certificates of occupancy and things like that and so those things could there could be some timing push from twoq to Threeq you.
I think a bulk of that stuff to happen in the first half of the year, but again those tax the tax rate effect is a full year tax rate effect.
But the bulk of the the expenses actually come through when they get placed into service and we think thats going to be in the first half of the year with a little bit tailing on the third and fourth quarter. Okay. Perfect. Thank you guys very much.
Good question Scott Thanks.
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Next question comes from a line of Kevin Swanson with Hovde group.
Hi, Kevin Good morning.
Good morning, I appreciate the comments on M&A, but just curious any thoughts around some of the larger community banking regionals are teaming up there I know I'm always and and kind of the transactions being generally more accepted.
Yes.
There's a little bit of a mixed track record here on some of those transactions and and we continue to look at all forms of M&A as you would expect us to do and and for US you know plan aims to continue to do the types of deals we've done a which is to continue to expand our footprint build scale and existing footprint try and drive efficiencies out of automatic scale.
Yeah that would be plan, a but as you would imagine our board looks at all types of transactions and we'll continue to look at those opportunities as they evolve, but but as I said earlier I mean, those transact any transaction has a higher hurdle today, given our focus on a needing to achieve the initiatives a milestones embedded within the only way.
Okay.
Most of my other questions answered, but maybe just one more it looked like in the end of period basis indirect increased a little bit. This quarter is that just a timing issue or is there a change in the that's thought on that portfolio. Yes, no changes thought it's just that portfolio ebbs and flows and sometimes you have more run down than others. It just happened to be a little bit higher production.
Okay, great. Thanks, guys.
Thanks.
Yeah, we'll follow up question from a line of Chris Mcgratty with KBW.
Yes, Sir.
Thanks, Im just trying to clear on the expenses.
Slide 22, where you give the ER the onetime charges for 20 and also the benefit on the recurring benefit Brendan was your comment that you're comfortable with 2020 consensus I think you said excluding the M.
And the implementation charges or is it including the what it looks like 20, a little over $20 million of.
Benefit.
We're comfortable with the consensus kind of on a standalone basis, and then you can add in the impact on slide 22, plus the tax credit amortization.
That clear, okay. So comp so comfortable with consensus but then if you hit the you know 157 9 million per quarter.
We would need to reduce expenses by that amount is that what you're saying.
Yeah. So you take you take that expense line and then you can subtract the consensus estimates and then you can September subtract the full year 22 million dollar benefit from anyway, Okay. So you're comfortable with where it was prior to the announcement in the.
It helps us help and said okay. That's great alright. Thank you.
Thanks, Chris.
There are no further questions at this time are there any closing remarks.
Thanks, everybody for the support we appreciate the extra time, you spent with US this morning, as usual Leno, and Brendan and Jim and Daryl everybody's here for follow up questions. Thank you so much.
This concludes old nationals call once again, a replay along with the presentation slides will be available for 12 months on the Investor Relations page, Oh International's website old National Dot Com and replay of the call will also be available by dialing 18558592.
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