Q4 2019 Earnings Call
Good morning, and welcome to the U.M.B. Financial Corporation fourth quarter 2019 financial results Conference call.
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Please note this event is being recorded.
I'd now like to turn the conference over to Kay Gregory Director of Investor Relations. Please go ahead.
Good morning, and welcome to our fourth quarter and here in call Mariner, Kemper, President and CEO and Roms soccer CFO will share a few comments about our result.
Yeah, Brian CEO of you'll be bank will also be available for the question and answer session.
Before we begin let me remind you that today's presentation contains forward looking statements all of which are subject to assumptions risks and uncertainties.
Actual results and other future circumstances or aspirations may differ from those set forth in any forward looking statement.
Details about factors that may cause them to defer are contained in our SEC filings.
Forward looking statements speak only as of today and we undertake no obligation to update them, except to the extent required by securities laws.
Our earnings materials are available online at Investor Relations got you wouldn't be dot com.
Oh earnings per share metrics discussed on this call or on a diluted share basis.
Now I'll turn the call over to Mariner Kemper.
Thank you Kate and thanks, everyone for joining us today, as we recap our fourth quarter and full year 2019 performance as I look back on the last 12 months I'm proud of our team's ability to produce solid results, which includes strong loan and deposit growth and continued fee income momentum.
We earned 66.5 million or $1.35 per share in the fourth quarter, and 243.6 million or $4. A 96 cents per share for the full year 2019 on total revenue of 1.1 billion.
Average loan balances grew 10.6% on a linked quarter annualized basis for comparison purposes publicly traded banks that have reported to date have shown a median late quarter annualized increase of 4.1% an average loan balances.
For the total portfolio fourth quarter topline loan production was a record 1 billion.
Total payoffs and Paydowns were slightly more elevated unusual at 656 million this quarter or 4.9% of loans.
Net average loan growth of 341 million for the quarter was led by Cnine CRB and the recent growth in residential real estate loans originated both in private banking and consumer continued in the fourth quarter.
In 2019, we added 111 million of mortgage balances on a year over year basis for an increase of 16.4% compared to an increase of 13.4% in 2018.
We continue to see growth through both market share gains and in our Underpenetrated markets as line utilization trends have remained fairly study the top three loan growth regions for the fourth quarter were Saint Louis, Colorado, and Texas. These are the areas with less than 2% market share for us.
Full year 2019 production of 3.6 billion represented 39% increase over 2018 levels and led to 1.2 billion of net growth on average.
We experienced both growth and payoffs as a result of robust M&A activity amongst our clients.
And in several markets have been able to take advantage of disruption caused by bank mergers, we continue to see opportunity in our markets and the production pipeline remains strong as we look forward into the first quarter.
Net charge off for the fourth quarter were point to 3% of average loans and on a full year basis net charge offs were 0.27% of average loans inline with our historic averages.
And consistent with our comments last quarter nonperforming loan balances did indeed declined by 22% from the third quarter.
Our loan book remains well diversified and I'm proud of our long term track record of quality underwriting.
These results in the quality of our portfolio drove the lower provision in the fourth quarter.
Now looking to the income statement net interest income increased 2.4% compared to the third quarter, driven by strong asset growth and lower funding costs.
As we mentioned last quarter, our strong loan pipeline should help us continue to grow net interest income even in the current rate environment.
On the fee income side, we saw continued momentum.
With an increase of 6.5% compare to the third quarter Corporate Trust and fund services, both posted strong results and our investment banking teams saw increased underwriting activity and customer demand, which along with positive fixed income markets drove solid increases in agency municipal and MBS trading revenue.
Again this quarter there were some noise in our other income line related to market adjustments that often have expense offsets, including positive impacts from coli and equity earnings income.
Our expenses for the quarter increased 12.1 million compared to the third quarter, driven largely by incentives tied to business and revenue growth hiring and several growth businesses and overall company performance.
The momentum in our fee income related businesses and the correlation with commission payments can add variability to our expense levels.
We estimate that approximately three fourths of the quarter over quarter increase in expense was tied the business growth.
We continue to invest in our business, including the reinvigoration of our retail business. We've discussed before rolling out the new teller platform online banking upgrades and online account opening capabilities, which are nearing completion.
In the fourth quarter, we launched a retail credit card a campaign, which drove some of the increases in advertising and postage expense. This campaign will build on the growth we've seen over the past year with 2018 retail card account originations up 63% compared to 2018 levels.
Additionally, we have been opportunistically, adding to our teams and to our revenue producing capabilities. For example, we've hired an experienced team middle market commercial bankers in the desirable twin cities area and a successful group of business banking professionals in Salt Lake City. Several of these new hires are onboard now.
And the rest are in process, we'll share more details on these teams in the coming quarters.
In closing our success in 2019 has set the bar high for us in 2020 with the current rate backdrop year over year revenue growth is likely to moderate from the 8.5% levels. We experienced in 2018, however, we aren't slowing our focus and we remain very diligent about can do.
Trolling expenses as tightly as we can without mortgaging our future.
As I shared earlier, we will continue to invest prudently in our business to enhance our revenue generating capabilities and improve customer acquisition trends and experience, but we'll also have an eye on efficiencies.
While we typically do not give guidance I believe we can do better than the current 2020 and consensus earnings estimates barring any material unexpected deterioration in the operating environment.
Now I'll turn the call over to ROM for a more detailed discussion of our results wrong.
Thanks, Mariner benefits from our strong loan and securities growth balanced and lower funding costs that drove the increase in net interest income were partially offset by declining asset yields and the pay off of some higher yielding balances that shifted the mix of our loan portfolio.
Total, earning asset yields fell 23 basis points to 3.76% from the linked quarter driven largely by a 30 basis point decline in loan yields.
Approximately 61% of our loans are variable tied to short term interest rates one month, LIBOR fell 26 basis points in the fourth quarter impacting 56% of our loans that reprice during that period.
Interest bearing deposit costs declined 22 basis points contributing to the 24 basis point reduction in the cost of interest bearing liabilities and the 18 basis point decline in total cost of funds.
Net interest margin for the quarter was 3.02% down seven basis points from the prior quarter, while our net interest spread a 2.66% was virtually unchanged from the prior quarter the benefit from free funds declined by seven basis points sequentially at their value decline in a lower interest rate.
Environment.
Overall margin was positively impacted by approximately 16 basis points from lower funding costs and balance sheet and mixed changes and four basis points from higher loan fees negative offsets included approximately 17 basis points related to loan pricing seven basis points from the decrease benefit of free funds.
And three basis points from excess liquidity, primarily driven by excess deposit flows in our institutional businesses.
Repricing in the first book provided about a basis point of net interest margin improvement as cash flow rolling off a 2.43% during the quarter was reinvested a 2.69%.
Considering recent market dynamics and our expectation that the fed will hold rates for now we would expect approximately four to five basis points of net interest margin compression for the first quarter.
As always the actual outcome for our net interest margin will depend on a variety of factors such as the pace at which LIBOR moves loan growth the potential variability in our aviation Trust and public fund businesses and our overall balance sheet mix and need for funding.
Average total deposits increased 5.6% on a linked quarter basis, largely in institutional and commercial money market balances along with the beginning of annual buildup of public funds.
Da balances rose by 5.2% to 6.4 billion driven largely by corporate trust, including our aviation business and the typical year end buildup of cash for municipal payments.
Our overall deposit composition by source as shown on slide 14.
Moving back to the income statement Mariner discuss some of the opportunities we're seeing in fee income and the detail on specific drivers are shown on slide 21 and 22.
Total reported noninterest income was 110.4 million for the quarter, an increase of 6.7 million compared to the third quarter.
Positive in include Trust and Securities processing income, which improved 1.6 million or 3.6% over the third quarter, driven largely by fund services and corporate Trust revenue.
Additionally, trading and investment banking income increased by 1 million due to higher trading volumes.
Also included an increase where some market and volume related items reported in the other line $2.6 billion. The coli income or a 3 million dollar increase from the third quarter, which has a proportional offset in deferred compensation expense a $2.5 million increase in equity earnings on alternative investments, which was one contributor to the.
Bonus and commission expense and a 1.4 million linked quarter increase in derivative income.
$2.3 million of lower gains on sale of securities partially offset these increases.
Non interest expense for the fourth quarter was 203.5 million an increase of 12.1 million from the third quarter.
More than 50% of the quarter over quarter increase in expenses were driven by higher bonus and commissions expense within the salaries line item tied to business and revenue growth and overall company performance.
Deferred compensation expense, the offset for the increase coli income increased two and a half million dollars on a linked quarter basis.
More detail on quarterly expenses can be found on slide 25.
Our effective tax rate was 13.9% for the fourth quarter and 14.8% for the full year 2019 benefiting from greater levels of income from tax exempt sources, such as municipal bonds for 2020, we expect our tax rate to be between 15 and 16%.
Finally going back to slide 17, and the asset quality section, we provided some high level preliminary detail about the implementation of Cecil.
We expect the day, one impact on our reserves will be an increase of approximately 10%, but very minimal impact on our common equity tier one ratio at adoption.
These estimates were calculated using current economic outlook on the current characteristics of our portfolio.
We plan to review make any necessary modeling updates and present, our final day, one impact when we file our 10-K.
Day to provisioning will depend on the mix of portfolio growth as well as expectations for the macroeconomic variables highlighted on this slide.
That concludes our prepared remarks, and I'll now turn it back over to the operator to begin the Q and a portion of the call.
We will now begin the question and answer session.
To ask a question you May Press Star then one on your Touchtone phone.
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At this time, we will pause momentarily to assemble our roster.
The first question is from Chris Mcgratty with KBW. Please go ahead.
Hey, good morning, everybody.
Right.
Mariner around just just wanted to start on the any investments you're making.
How should we be thinking about.
The level of expense growth in 2020 versus 29 tenant in light of this sit in light of.
Kind of the more challenging revenue outlook that weve been presented by lower rates.
Well.
You know, we don't obviously give guidance on that but what I would say is that the.
And we talked about some of the level of.
Business investment expense for related revenue and investing in teams and things like that in some of the marketing dollars that hit.
That is a hit the fourth Corp, first quarter fourth quarter numbers, making them look a little higher than they had then.
Some of the answer to that will be dependent on what the revenue.
Picture looks like in 2020.
And we certainly expect we talked about in our comments as we always do that the loan growth and pipeline numbers look pretty good as we look into the first quarter. So.
And we are as as we mentioned in the comments investing in a couple teams in salt Lake and in Minneapolis, So those things will kind of way right on the expenses.
And our Rami want to add anything you know, we don't give any guidance on that.
You shouldn't expect our.
A big reduction in our expense.
Load right. So I don't know say from.
We will definitely be cautious on expenses, obviously internally, we focus a lot on operating leverage so to your point the operate and Mariners comments.
The revenue environment is the right environmental will be a tough one going into 2020 and those manner said, we set the bar pretty high for us in 2019, but that doesn't mean, we will not focus on the expense out of the equation.
Definitely focused on making sure that we.
Operating as efficiently as we can and 2020 without mortgaging the bright future that we see.
By continuing to invest in our company.
Yes, I've never been as pumps as I am about investments, we've made and the team that we have.
As I look into the next three and five years I mean 2020, some years because tough operating environment, but the investments we've made in the team I've got on the field.
If we could go to the Super Bowl like our teams are going to the Super Bowl I would say, we have a super Bowl contention team [laughter]. That's good color thanks for that.
Just trying to get a sense of where you R&D investment sorry, the two teams how much of the impact with was felt in 2019 versus.
Continuation of what you see is some revenue opportunities to invest.
Yeah, I'm, sorry, but that another way to give you too much more color on that without becoming a company that gives guidance all right. That's that's fine.
In terms of the quarter there was a comment in the release of out of derivatives offset could you just.
I'm just trying to make sure that's kind of what seems like a onetime onetime item, but just can you give some color on that.
Yeah sure Chris This is wrong. So just to give you some context for the full year 2019, our total derivative expenses were less than 200000. So what you saw in this particular quarter was an adjustment or a benefit of three and a half million that reduced our expenses. It basically what it did was reversed out all the higher derivative expenses in the second and third quarters, we've been talking about so if you go to our.
Press releases in second and third our derivative expense flight because of some activity. So our notional book on the back to back swaps as increased about 50%.
2019, so as part of that we visited our valuation adjustments or valuation.
Functions and made it more in line with where the industry is so thats why you see that quarter over quarter spike of $5.1 million swing, but I would look that the total expense line item on a full year basis. That's that's great. Thanks, and then last one on the kind of seasonality in the deposits.
How do we think about I mean, it seems like this quarter's seasonality was was even more meaningful than prior fourth quarters. How do we think about kind of first quarter for second quarter of just the balance sheet as it accordions up and down thanks.
As I said in the prepared remarks, some of the seasonality is typical with public funds those come in the second half of December really so there wasn't a big impacts in the fourth quarter because of public funds necessarily.
Deposit inflows in excess liquidity, how to deal with our institutional businesses, particularly asset servicing because funds were.
Readily deploying some of the cash balances into the market and then the aviation Trust business, which is fairly new to us and so there's a little bit of volatility to it public finance public funds typically peaks in the first quarter and then stop step down.
It's really hard to say, what's going to happen to some of these deposit balances given that are very nature. They tend to be very transient in nature short term.
They get deployed pretty easily in the markets. So a lot of things can change on us which is why it's really hard to give a clear hands on what will happen deposits and margin for that matter I would add though the aviation Trust business. It is new to us. So we don't have a lot of experience with it.
But as the business continues to expand.
One second here much subs going by on the road here.
Snowblower Snow truck just went but.
Huh.
Anyway, our expectations for the aviation Trust business, our that as it expands than we have more business coming along that the growth in that deposit basis stays behind should grow because the number of clients is growing so there is an expectation that the.
That deposit base continues to grow even though we don't have a lot of history with it.
Got it thank you.
Thanks, Chris. The next question is from Nathan race with Piper Sandler. Please go ahead.
Thank you good morning, and morning mix going back to last question on deposit growth expectations, just perhaps more broadly just thinking about 2020 in aggregate.
Deposits exceeded loan growth in 2019, so just curious just given kind of where your pricing and given some of the expansion the corporate trust side of things if you still expect.
Deposit growth 60 loan growth in 2020.
No.
This is Jim Nate.
We don't anticipate that however on the increased expenses that you saw on fourth quarter. The increased marketing expense for the consumer division was to continue to.
Track consumer deposits the the increase in the consumer card spend that we're currently doing that we've seen success is to continue to build our consumer franchise. So we are looking to balance some of that growth in our consumer division, we have been able to successfully attract obviously.
Commercial deposits the yield but.
With the new markets that we're going into those teams are laser focused on deposit collection as well not just loan costs.
Building balances so we do anticipate those to be successful.
Taming balances in Salt Lake as well as Minneapolis, but to exceed our loan balance expectations I don't I don't anticipate.
Got it that's helpful color, Jim and then just changing gears and thinking about the institutional segment. The pre tax margin ticked up nicely in the quarter I think it's the highest level that we've seen last seven or eight quarters or so so just curious just given some of the investments that you've made in a number those units and just given the scale that you guys are seeing there.
We can kind of see us as a sustainable pre tax margin level going forward or if you think theres more investments there may begin to limit that expansionary this level going forward.
I would think recruited anticipate this level going forward, we continue to make investments, whereas you know we've closed on the last corporate trust acquisition, while smaller revenue.
We have made considerable investments we've discussed what we're dealing with various fintech partnerships.
We established as far as the.
Yes, we relationships, but the corporate trust business as well as the traditional broker dealer business, but we've seen increases in the bond trading month after month quarter after quarter, which had been reflected in the.
Yearend results and we're very excited with what we're seeing with institutional I think.
I am confident you'll see continued results from that division. That's all its very leverageable at this point the investments that have been made.
Okay, Great I appreciate the color. Thank you. Thanks.
Your next question is from Gordon Maguire with Stephens. Please go ahead good morning.
Lawn and garden.
I wanted to follow up on the discussion around the bonus in commissions do you have what that how much of the call. It $40 million increase in compensation. This year was related to that and tied to the revenue side in volumes.
So.
We didn't break it out exactly.
For you, what we're probably going to stick with the answer we gave than in our prepared remarks, which is that three fourths of of the expense increase came from business generation activities.
Of which.
Included in bonus income or you see a bonus and commission is tied to new business we had.
Some marketing dollars related to the increased activities for our credit card and deposit gathering activities.
Theres some expenses related to the hiring the original hirings of the folks that weve added in Minneapolis in Salt Lake and.
And Ron you might have couple of did I am just Gordon if you go to page 25 of our slide that we kind of elaborate where the drivers of the salaries and benefits are so I'd go back to what matters at about 70% of the quarter over quarter increase was because of volume and revenue growth and then my comments also a 50% of the expense growth is related to bonus and commission.
Once again so.
Of the 10.7 million increase in salary and beneath 6.8 was tied to the bonus and commission again overall company performance widget gross.
Revenue growth all of that.
Yes, I guess I was just trying to get at given the really strong balance sheet growth the strong fee growth, how how you gauge.
Whether you're kind of at a high level watermark for bonus and commission specifically.
For this year.
Well I mean, it was a hell of a good quarter I guess.
Let love to repeated.
I mean again, we don't give give guidance on on that but it was a pretty damn good quarter.
And then just switching to fees, specifically cards purchase volumes were up double digits. This year, but interchange fees or kind of low single digit growth can you talk about the headwinds you're seeing on interchange rates and whether you see that continuing.
Well I'll just high level and then Jim Sullivan reports some can go deeper, but you know as we've talked in the past.
60, some odd percent of our interchange income.
Comes from.
The healthcare business and we've talked about.
So our business in the sense, but we don't necessarily control, what we get paid there because of partners and we have a sharing arrangements so that holes down what would be the.
The numbers otherwise.
So we carry better better interchange in the commercial and in the consumer, but but the the the volume.
See on in our slide deck on page 37, entice you to break down of the percentages and that's really what pulls it down I mean will add anything to have it is that sharing relationships with our health care business pulls it down now the beauty. If it's working right is is it should be volume driven rights all those partners.
And all those relationships.
So from adjusted earnings growth perspective, it's a lower margin, but but have decent decent growth so $3.2 billion in the quarter of interchange spend right. So that we expect that number to any to grow on a quarterly basis.
In that model in that model. It's it's obviously tied together with the deposit growth coupled with the account fees. So the the cards is a piece of it certainly the lower margin, which learn and just described.
That's helpful and.
Then mariner just any update on M&A prospects, where the focus would be and just readiness for any kind of M&A given the internal investments this year.
Sure.
So I mean, thats hard readiness coasts all those things you talked about the investments we've made et cetera, We're we're ready.
We're very much would like to no no new comments really from quarter to quarter as far as where we are aware that we've got an active effort active team active calling effort a very much would like to do.
Do a deal that we can.
See all the right things from whether its synergies or cultural overlap.
You know to us ultimately spread our expenses over a larger organization within our footprint or contiguous.
So we're ready to go and what would you know have an active effort and continue to look further ideal.
On the banking side, and then again no new real comments, we continue to look for corporate Trust opportunities Aviation Trust, South Korea anything related to our corporate Trust and trust activities.
And our.
Our.
And our investment.
Services business, where we're providing banking services to broker dealers and send tech companies and we're looking across that whole spectrum for either product additions, where we can add more products on the truck to the customer or bolt on type acquisitions or or consolidation opportunities. We we believe that on the corporate trust side, we can.
Continue to be consolidator there as.
As we've been successful with that and are.
Having already having a lot of success, we continue to see opportunities there and we'd like to see opportunities there.
Alright, thank you.
Thanks, Greg.
The next question is from Ebrahim Poonawala with Bank of America Securities. Please go ahead.
Good morning, guys.
Good morning, Andrew So most of my questions have been asked and answered a couple of off just a follow ups and sorry, if I missed this $2.2 billion and beat it then deposit growth now I understand some seasonal outflows, we should expect into first quarter, but any sense of how much of that do you expect to retain.
On one kill over that 2.2 billion, okay, but it's really tough to say, bringing this is wrong, it's really tough to say what some of these businesses as the traditional seasonality that we've talked about historically about public funds, but as I said earlier and men are added to it some of these businesses.
We're fairly new especially the corporate trust aviation business and Thats growing really nicely on a steady basis and then this volatility, especially at the ended the quarter. Sometimes so it's really hard to say long answer to sit lump that it's really hard to say what.
The outflows going to look like.
And then we've talked about the success really across the across the board on fee income, which coupled and a lot of ways with deposit growth. So fund services is having success and with every account. We ran off on services. There is up a bit of institutional deposit business comes with each and every one of those.
Relationships, so hard to tell at this point certainly there'll be some.
Some contraction just because the public funds business.
I talked about three basis point impact margin from excess liquidity any little bit on a quarter over quarter basis, we're probably about 500 to 600 million.
Richer in liquidity, so that's probably a guide for you to consider and answering your question too.
What was public fund at the end of the year benefit.
I don't have that handy regime with its.
The second half as of December is Atlanta, it starts picking up so first quarters the seasonal before it can get back to you later.
All right I'll circle back and just I guess separately I think you being database from quarter on loan growth.
Instead fast I think to back half of last year, even when things were macro wise not looking great in terms of high single digit loan growth expectations. Just talk talk in terms of anything into markets that seems concerning on what are the market. So you're seeing the best growth in industry verticals, where you're seeing the best opportunities.
It's really come in from everywhere and I My remarks have been the same for quite some time about why we continue to see sort of better than industry loan growth, which is a lot of it is you know I'll hit them high level again, but under penetration and a lot of our large markets. So just being able to X.
He is execute the right people on the ground plenty opportunity for us to just get a decent market share and several large markets.
And we continue to be.
Under penetrated vertically also right as it relates to stronger efforts over time to put specific specialty individuals and marketing and all that and hiring against particular verticals and and market into them specifically more than we.
We were we used to be generalists, so those two things, which we've talked about for some time continue to drive.
A lot opportunity for us and we think there's a long runway for that we a you know we were also just had a really good team on there's a lot of tenure.
Putting people in particularly in the commercial lending side is I think a lot of you know when you're able to put the same people in front of your prospects and clients for a long period of time.
As well for you in.
Long sales cycle in this business so.
We were uninterrupted from the crisis. So we don't have to retrain, our prospects and customers and yeah again as kind of same remarks have had about that for quite some time I don't know Jim if you want to know we've seen we saw a loan growth in every market, but one and it was more of rural market for us and.
History wise, there hasn't been I mean, there are pockets, we are seeking some slowdown in transportation I believe I mentioned that last quarter as well nothing in our portfolio that were concerned with both just.
Macro indicators that.
Raise concerns, but our production last quarter.
Almost 50% was from see an eye so without Cnine business, we just the treasury business and ancillary accounts and so it's been exactly what we would the addition of the real estate, which is that over the last five to six years over to see our E book, but it's what we've always done in our market penetration is merger.
Addressed earlier in the markets that have historically been underpenetrated, but.
We have a compelling story and we're continuing to tell in the markets, but we've expanded into over the years, we've had great growth in Texas, and Colorado Saint Louis and.
It continues to.
To move forward.
On to say on the Salt Lake in Minneapolis.
Understood. Thanks for taking my questions.
Yes.
The next question is from David long with Raymond James. Please go ahead.
Good morning, everyone. Good morning Gordon.
Oh, Rob I think you indicated for the first quarter.
Here are you were looking at said that the NIM, maybe down four to five basis points and just curious if you could provide a little color on how you see asset yields and the funding side of the balance sheet, both working in the first quarter to get to that point.
Yes, It does look good.
One month LIBOR rights as year end, it's come down about 15 basis points. It's right now at 165, So as I said in my prepared comments about 40% of both is tied to one month LIBOR. So assuming that the said doesn't do a whole lot just because of the movement in line what are you should see some.
Some pressure on the asset yields or I should say loan yields.
But that should be offset by the growth prospects that both Jim and Mariner talked about and then on the portfolio side. If you look at our disclosures.
So about $1.1 billion of roll off so cash flows coming due in the next 12 months and approximately quarter of them are in the first quarter and the roll on rollout differences about positive 30, 35 basis points, so that should offset some of that asset yield pressure just from.
What's happening with the LIBOR rates and then on the funding side, we're being very diligent on the funding side, obviously, we will be very cautious and react to the environment.
So we should see some.
Alleviation of pressure on on deposit costs and overall as if the interest rate stays the weighted same thing on net interest margin as well.
Okay got it. Thank you and then as it relates to the Commerce Trust acquisition I believe that close at the end of November did that contribute to any of the deposit growth they had in the quarter.
No not not materially now.
Okay, and then smile at the small acquisition.
Right, Okay, Yep, and lastly, as it relates to see so you know as you guys are getting closer to actually having to report results under C. So.
Have you thought up or does it change your appetite for any particular.
Type of loan does it change how you hear your either your willingness to make that loan or the pricing that you have historically done versus what you may do in the future.
No not really because I think whatever we would do you know it's going to come on the margin and it's going to come in over time.
You know as you probably learned theres different asset classes that carry different waiting in the mortgage business. For example is one of those and currently for US that's not a big you know.
A big part of our balance sheet. So doesn't have a big impact we do plan on and we've talked about that expanding.
Our mortgage business, but it should happen.
Over time and have a and impacts that you would imagine come with something that happens a measured and overtime. So so it's not really no nothing we expect to change the way we do business.
Actually the ways the way, we bring in business today and the type of as we bring in today is actually more beneficial to us and then a lot of our peers as it relates to seasonal and it all comes down to competition right. So what would the big banks do they react to Cecil which is unlikely then we'll have to change our terms to but otherwise it's strictly.
Three foot yeah.
Got it thanks, guys appreciate it.
Again, if you have a question. Please press Star then one.
The next question is a follow up from Chris Chris Mcgratty with KBW. Please go ahead.
Great. Thanks, a follow up just two quick ones first.
Any thoughts on any updated thoughts on the buyback.
Obviously haven't been using it because of the organic growth, but any kind of change and so.
Well soft philosophy on on levels of where you might consider Ryan sorry.
No.
And so those who haven't heard of before I mean, we will obviously want to put our capital work to build the business first so we're going to prioritize our capital against acquisition lift outs and things like that.
And then to the extent that those aren't coming as quickly as we like we can have obviously always do buybacks and or increase our dividend.
And and do smaller acquisitions that can be a mix of all of it.
We keep an eye on it you've seen us do it before so we have a willingness that our first hsas are not long ago. So.
Certainly willing to do it when the time is right and appropriately priced and we feel good about it but other than that.
We're going to be focused on putting our capital work building the business.
Great and Mariner on the M&A front I.
I think your last year was more cat was 1 billion half of that is what's the can you remind us the range of what you might be considering obviously 2019, and 22000 seems to be the market moving towards more transactional transformational deals, but maybe your appetite for first for size.
You know there is no hard and fast rule there the smaller than deal you doing all the same amount of work to do that and you don't get the lift out of it. So you know that certainly.
Mark had deal would be a nice.
Bottom into the range you know and.
The bigger the MISO and then the only thing I would say, though because we have we take risk very seriously the bigger the opportunity.
The less risk, we're going to want to take doing the deal. So those are going out to be banks look a lot like us if their behavior that makes sense, but.
We're prepared to do deals market or larger.
Thank you.
This concludes our question and answer session I would like to now let's turn the conference back over to Kay Gregory for any closing remarks.
Thank you and thanks for joining us today today. This call can be accessed via replay at our website and as always you can contact in the Investor Relations at eight 1.8607 lines the resting with any follow up question.
Again, we appreciate your interest in time, So you go chiefs.
[laughter] everyone.
Conference has now concluded. Thank you for attending today's presentation you may now disconnect.