Q4 2019 Earnings Call
Greetings, ladies and gentlemen, and welcome to the true Financial Corporation fourth quarter 2019 earnings Conference.
Currently all participants are any listen only mode.
Question answer session will follow the formal presentation.
As a reminder, this event is being recorded.
Now my pleasure to introduce your host Mr. Rich Vitaros director of Investor Relations for Truest Financial Corporation.
Thank you Lord and good morning, everyone.
Thanks to all of our listeners for joining us today on today's call. We have Kelly King, our chairman and Chief Executive Officer, and Daryl Bible, Our Chief Financial Officer always we review the results for the fourth quarter and provide some thoughts for the first quarter and for your 2020.
We also have Bill Rogers, our President and Chief operating Officer, Chris Hanson, our head of banking and insurance and Clarke Starnes, our chief risk officer to participate in the today's session.
We will be referencing a slide presentation during the call a copy of the presentation as well as our earnings release and supplemental financial information are available on the truest Investor Relations website.
Please note that truest does not provide public earnings predictions are forecast. However, there may be statements made during the course of this call that express management's intentions beliefs or expectations.
Statements are subject to inherent risks and uncertainties and truest actual results may differ materially from those contemplated by these forward looking statements.
Please refer to the cautionary note regarding forward looking information in our presentation and our FCC filing.
Please also note that our presentations include certain non-GAAP financial measures. Please refer to page three in the appendix about presentation, where the appropriate reconciliations to GAAP and now I'll turn it over to Kevin.
Thanks, Rich good morning, everybody and thank you for joining our first first earnings call. Thank you for your support what's you're Gonna see is overall fantastic progress and one year.
I would say to you generally a few liked our company a year ago, you should love Us now.
Well go through this information, we're going to be completely transparent.
As you would expect it's gonna be messy, we don't know all that you want to know.
But I pledge to you said over the next quarter to will give you more and more as we go along.
Some of the highlights which you probably already in October we did successfully closed the deal on big from a sex I didn't see it's interesting the largest financial transaction institution them on transaction in 15 years.
These two iconic companies have 275, plus combined you as a service which is huge.
Oh, the sixth largest U.S. commercial bag.
The number two weighted average deposit market share not top 20 M.S. age.
Oh, I'm about 400, and starting to $3 billion and assets.
Thank you very very importantly, before legal day, one which is less than 60 days ago. <unk>. We had all managers in place on top organizational structure today is a set and running no confusion about who's doing watch. So that's a really really big deal done a lot of work with regard to our cultural talk about that in them.
But if you're really really good and we've made much progress on all the areas.
Spend just a minute own culture. Because this is the most important consideration for all of US culture drives long term performance. There's no question about that.
And therefore, it is our number one priority.
Why do we think about culture is a culture is a function of our purpose our mission and our values. A there are certain practices you know it would be kind of way, we do things around here.
And as a whole process of embedding that culture into the organization, but the most important thing to think about its our purpose a mission and our volumes.
Purpose obtrusive to inspire and feel better life and communities. We really believe we can make the world better and we think that is exactly what major corporations are called upon to do today.
We execute our purpose through our mission, which is focusing on taking care of our clients through a really good environment for our teammates and of course optimizing their long term value for all of our stakeholders <unk>.
Most importantly, all of our mission efforts are guided by our longstanding deep beliefs, which we called fives.
Who is a true it's all about being trustworthy, we serve with integrity, it's about being Karen we know that everyone. In every moment matters. Its about one team coming together, we can accomplish anything working together as a team. It's about success, we know that when our clients when we all win and for our teammates its about happening so.
So positive energy changes lives and we ultimately want all of our teammates to be happy because when you're happy you don't have a job you have a passion.
And we want everybody to be passionately focused on accomplishing our purpose.
We know that we are very very closely aligned early on in this process [noise], We got really good research from our 59000 teammates we.
For example, early on we gave them 16 words to describe their companies.
We got out of over 10000 responses made side. They all picked exactly the same full words.
Couple of much lighter we had scientific research for we ask again over 20000.
Teammates divided between the companies.
To describe the company in terms of how we operate and they described it almost exactly the same.
Just week before last we started a series of 39 town halls.
Bill Rogers and I went around and started talking to our teammates and ask answering questions.
We pull last we did 11 of 39 by next week, we'll do another 11 as well.
And I would tell you that the responses are fantastic teammates are excited.
I Love our culture, They love our purpose I Love our brand I love our color as they love our logo.
So it is off to a really really good start, but I want you to feel confident as investors that this is not two companies struggling trying to come together. This is two companies. They were already deeply aligned in terms of our purpose on mission than our values everything we've seen over the last year affirms jokes that now.
How does the renewed level of excitement from everybody as we think about coming together, it's true ups and going out and make underworld a better place.
Let's talk about some of the highlights.
If you're following along on.
Hey, thanks.
Our total taxable equivalent revenue was 3.6.
Our adjusted net income available to common shareholders was a very and 46 and that's up 29%, but like all these numbers you're going to them or not there obviously inflated because all the central its impact on the BBGI numbers as we added 25 days towards the end of the fourth quarter, sorry, we won't well.
So much on the specific changes, but are we did make over and over a bargain models.
In terms of diluted earnings per share adjusted its a dollar square up and I will give you some detail in terms of how that adjustment was arrive that return on average assets adjusted 1.4% very strong return on average tangible common equity, 18.6% would run out of the shoot is really really good again on jobs.
Basis.
And adjusted efficiency ratio was 57.5.
[noise] both companies.
To give you a sense of momentum grew loans at a healthy pace.
When you read a exiles from restructuring, which are Daryl will talk about.
But the underlying our growth is very good pipelines are very strong.
And we feel very very good about momentum asset quality is great.
And we've taken some action to optimize our portfolio from a credit perspective, our capital and liquidity levels are excellent Darla gave you detail about that.
Businesses as I've said have good momentum we've talked to bankers all across the footprint pipelines are strong.
People are excited about doing business with a true.
The launching of the true it's a brand colors logo could not have gone better.
But I want you to know that we're primarily focused on serving our clients. We're laser focused on making sure our clients have a distinctive outstanding.
Service quality relationship with truest.
We're going to talk about cost saves and Daryl will give you a lot of detail.
We have available for that but I want you to remote from my perspective, we have made a decision to slow the timing down just a few months.
And we did that to improve flat service quality.
To ensure a strong client retention.
Through improved the long term value proposition discussed about really the digital investments that we're going to be making we want to give some of those made before we.
Actually roll out the conversion.
And so on the branch conversions are delayed some.
Part of that was because of the agreement we reach with regulators.
Part of that we want to delight saw him to make sure again, we have our digital value proposition in place.
Well, we are very very confident on our net $1.6 billion in savings. So this should not be viewed as a negative. This is a positive it's the same number.
Simply taking just a little bit longer to make sure we do it and do it right.
Our nonperforming assets were fantastic at 2.14, net charge offs were right into sweet spot of what we've always.
Indicated 0.40, and a very strong common equity tier one capital of 9.4.
For center, so we feel really good about asset quality.
And capital.
If you look at page seven I'll just mentioned these selected items the religious three that are that are large.
Merger related restructuring charges, our 223 million miles pre tax, which is 19 cents negative impact on diluted deeply yes.
We had security losses.
Our balance sheet restructuring.
That was 116 million, which translates into about 10 cents.
In terms of negative impact impact on me, Yes, and then we have some expenses that are not technically from an accounting point of view designated as a merger related but they are incremental operating.
<unk> expenses I do have future benefit, but did not part of the ongoing run rate. So you can kind of think about them. The same them anything is I don't impact future future run right. So when you add all that together you get a net negative impact on our ongoing run rate of.
37 cents, which is which is substantially while you say the difference in gap and.
Adjusted numbers.
Look at page eight just a few comments with regard to loans.
We did have an end to period balance off about 300.
Oh yeah.
Really good mix the mix of loans held for investment consists of 56%.
Commercial 40% consumer about 2% credit card are pretty pretty balanced.
Over time, you might expect to see the consumer grow a little faster than commercial you get a little closer to 50 50, but we feel really good about where we are starting out.
We did take some actions, which dollar give you more color on with regard to the portfolios, but I would just point out that.
The year end portfolio loans or a little insulated.
By about $4.5 billion because of the.
Loans that have moved into loans held for sale and they're sold but haven't closed it set up quite a very very.
Soon so.
You know as we think about the overall market just in talking through an awful lot of our regional presidents and market presence I would say that overall market is pretty good.
Ceos are confident in their businesses.
But in fairness they are nervous they're worried about the macro issues.
The trade war or on a Corona virus you know, we have 10 plus years long into recovery. So while we do not expect a recession in the near term I would say in fairness week, you're starting to talk ourselves into one so it's a little bit of a nervous period right now things, we need to be honest about that.
But that's one of the reasons that through is always remained strong in terms of capital and.
Equity in the event these exits X a central factors do create a.
Interruption in terms of ongoing business or we don't really predict when that we really think thats will settle down we certainly hope and pray that this.
From a virus does not get out of hand, but we all have to be really concerned about that there are lot of people around the world.
Hurt a lot of people dying.
And we got a really hope to that does not work on a global systemic issue.
And I personally don't think well but.
A lot of close attention to that.
If you're looking at slide on page nine just a couple of comments with regard to deposit.
We did end up with non interest bearing deposits of about 92.
Very young.
And a total deposits of about 335.
Barium.
The if you exclude a purchase accounting non interest deposits declined just a little bit into third quarter, everybody. I believe is seeing a continued shift out of our non interest into a time.
We're staying the same thing it's not in different anybody else is facing.
But our interest deposits did increase the strong man for Sam. So you can see what's going on our total deposit activity is very good. It's just a little shift going on we have strong non interest deposits totaled 30.6% one of the best in the industry. So we feel good about that.
Total cost of average total deposits in average interest bearing deposits, respectively decreased 10 basis points in 17, so actually pretty good there given the relatively flat yield curve.
Weve.
Very happy to report, but with our Telegraphing to our clients.
Virtually all of our clients will not be experience any change in their account numbers haven't been involved in lots and lots of mergers over my career I can tell you that the big issues Federer client is change and the main thing about changes don't change my account number. So we've worked out of weighing on congratulate our people so virtually all of our clients not to have.
And any changes into account numbers. So we predicted it will go extraordinarily smoothly.
For our clients, which is certainly our goal.
So.
Overall, even though it's a little hard to say through the numbers.
Our balance sheet is strong strong earnings tremendous progress and moving through its forward.
We're very excited and we're very confident with that let me turn to down here give you a lot more data a lot more carlo.
Thank you Kelly and good morning, everyone turning to slide 10, net interest income was 2.25 billion net interest margin was 3.41% up four basis points versus the third quarter.
Purchase accounting contributed 27 basis points to reported net interest margin.
At the ended the year our final purchase accounting marks included Florida half billion against a suntrust's loan portfolio and 83 million upward adjustment to Cds, and a 309 million upward adjustment to long term debt.
These marks were close to the recent estimates that we provided based upon septemberthirty data.
We plan to true up these marks in the first quarter as the final valuation numbers come in from our third party provider.
Core net interest margin was 3.14% down 15 basis points on the third quarter.
The yield on loans held for investment decreased six basis points.
As the effect of lower short term rates was partially offset by a 37 basis point benefit from purchase accounting.
The balance sheet restructuring improved our securities yields by five basis points and achieved our goal of a relatively neutral interest rate risk profile.
Continuing on slide 11.
This summarizes our balance sheet restructuring, which is focused on improving credit quality.
What any interest rate sensitivity net interest margin and return on capital.
Through the restructuring we improved the run rate on the investment portfolio felt liquidity to meet our LCR requirements.
Rehash, the balance sheet and manage towards a more neutral interest rate position.
We sold loans.
Manage negative convexity reduced premium amortization and enhanced credit quality by exiting 1.4 billion at high risk credit exposures of which 516 million was funded at year end about 80% of that sale traded in January .
Through the end of January we lower interest rates on about 17 billion of institutional deposits by 20 basis points because of our higher credit ratings, we will continue to be opportunistic and optimizing other funding to take advantage of through us higher credit ratings.
We also estimate that year end loans held for sale were elevated relative to normalized levels by approximately four and a half billion and that the securities were elevated by approximately 1.4 billion.
This means the balance sheet should settle.
Slightly under 470 billion at total assets turning to slide 12.
Non interest income increased 233 million after excluding a 116 million and security losses, and 22 million in losses related to the transfer of residential mortgages held for sale.
Approximately 215 million of the increase was due to the merger.
The rest was due to a 22 million increase and insurance income due to seasonality.
And minor changes and heritage BMT fee income categories.
Of note full year 2019 insurance income had organic growth of 8.8%.
Continuing on slide 13.
Non interest expense was up 497 million.
After excluding a 189 million increase in merger and restructuring charges.
And 49 million increase incremental operating expenses related to the merger approximately 400 million as this was due to core expenses from the merger.
The remaining increase was due to 42 million in heritage BV into incentives.
42 million in amortization due to higher CD and other intangibles.
Turning to slide 14.
Asset quality remained strong.
And P.A. increased 175 million to 684 million increase was due to the merger and included 107 billion of acquired nonperforming loans held for sale.
63 million of loans and leases held for investment.
And 63 million foreclosed real estate, partially offset by the sale of 69 million.
Nonperforming mortgages.
Npls were 15 basis points of total loans held for investment at the ended the year down from 30 basis points at September 30.
The decrease in the ratio was mostly due to the effective county for acquired Mpls pool basis MPCI.
This FX on the ratio will reverse with the adoption of seasonal.
And the transition of pull level county for PCIA.
Net charge offs increased 39 million.
And were 40 basis points of average loans down one basis points from last quarter.
Provision increased 54 million due to higher net charge offs and an increase in the provision for unfunded commitments.
Our allowance was 52 basis points of loans held for investment at year end down from 105 at September 30.
Due to the elimination of the Suntrust allowance.
We would note that the combination of our allowance unamortized fair value Mark is a very robust 2.01% of total loans.
The allowance coverage ratios also remained strong at 2.03 times net charge offs and 3.41 times Mpls.
Continuing on slide 15.
Effective January Onest truest adopted c., so the new accounting standard related to credit losses.
As a result, this did not impact our 2019 financial results. However, the impact at adoption wasn't overall 2.9 billion increase and the allowance for credit losses.
The magnitude of this increase was significantly impacted by purchase accounting related to the merger.
We were not required to carry allowance on the acquired loans from the transaction at year end.
Due to the related purchase accounting marks.
Excluding the impact of purchase accounting the implementation FC So resulted in an approximate 40% increase in the allowance for credit losses.
Yes reflects increases that are related to our consumer and mortgage portfolios, partially offset by the decrease in our commercial loan portfolio.
In terms of capital the increase any allowance due to see so resulted in a 2.1 billion after tax reduction to retained earnings.
Truest has elected to phase and the impact to regulatory capital by 25% annually from 2020 through 2023.
Turning to slide 16.
Our capital ratios decreased due to the merger, but remained strong relative to regulatory capital levels are well capitalized banks.
Our CE tier one ratio was 9.4% down from 10.6% in the third quarter.
The benefits of purchase accounting will be partially offset in the first quarter by a 10 basis point impact.
From the treatment of MSR risk weighted assets under the simplification roll up.
And a 14 basis point impact from the C. so facing.
At December 31, tangible book value per share increased 5.2% from September 30.
Earnings during the quarter contributed 3.4% of the increase.
And the merger with Suntrust contributed 1.8% confirming the close was incredible to tangible common equity.
Compared at December 31, 2018, tangible book per share increased 18.5%.
Continuing to slide 17.
We realized 2020, maybe challenging to analyze and model. So we are providing more guidance than usual.
Our guidance is largely dollar based due to the absence of historical baselines, two which growth rates can be applied.
Some highlights from our first quarter 2020 guidance includes average, earning assets to be plus or minus 406 billion.
We expect reported net interest margin to be in the mid to high three forties and core margin to be just over 3%.
Net charge off should range from 35 to 50 basis points and fee income should be just over 2 billion.
Our expense guidance includes 100 $250 million and merger expenses.
For the full year, we expect the balance sheet to grow based upon our guidance net charge off should remain relatively stable assuming no significant deterioration in the economy.
And expenses will trend down each quarter until we achieve achieve an annual run rate it expense savings of about 480 million in the fourth quarter.
Turning to slide 18.
We're also providing medium term performance target targets for about three years, we are confident true lets can generate peer leading return on tangible common equity in the low twentys and an adjusted efficiency ratio in the low fiftys over the medium term.
In terms of capital we are targeting 10% see EG one ratio for 2020.
We're also confident we'll achieve 1.6 billion and net expense savings through 2022.
But we are updating the expected timing of ARX <unk> expense net savings.
This is primarily due to our commitment to the regulators to not to close overlapping branches for the leased the first year and careful and cautious approach to systems integration to minimize client disruption.
By the end or 2020, we expect to achieve a run rate equal to 30% of our net cost savings target by the end of 2020, 165% and by the end of 2022.
For 1.6 billion.
Oh This will drive positive operating leverage for the next three years.
For reference 2019, combined non interest expense, excluding merger expenses, a onetime charitable contribution and amortization or it's approximately 1.8 billion.
We expect to achieve an annual run rate of investment of approximately 200 million by the fourth quarter of 2020.
These investments will be directed towards personnel branding digital and technology now, let me turn it back to Kelly for an update on the merger and closing thoughts and Q on a thanks, Daryl. So if you will take a look at page nine changes to summarize.
Just a lot of really really good accomplishments, so far closer to close the deal we've integrated the financial reporting system.
We've integrated unconverted derivatives work a number of all those systems, we have successfully retained our talent and our clients really concerned about a new mass exodus on that is not warranted we.
We've restructured the balance sheet, we've launched our visual emergent inventory of colors on logo introduce our culture purpose mission and values and I'm happy to say we've added some key leadership in certain areas, particularly in the digital space, So kind of whats coming up in a big picture.
Perspective is that we're now working hard on completing product mapping, which allows them to go into the development.
We will be continuing to complete another 20, a town halls, we'll be doing about 12 next week.
So that continues own.
We continue to focus on a deepening our relationship with our clients. We will complete the branch divestitures in a few months, we will complete the purchase of undue truth Center headquarters here in Charlotte I, just mentioned that because that's a pretty big deal in this market and for our people are people were really excited about being in a 47 story iconic build.
<unk>.
That shows well in Charlotte, we'll be introducing.
Marketing truest brand.
And we'll continue investments in digital on technology, and then will phase in to the conversion out the primary systems. So overall it was a very strong quarter.
As we said a year ago, we have two great companies coming together to create a very special company.
We are in great markets, we have great economics, we have a very strong culture.
Everyone is excited about our purpose, we have the opportunity to make the world better place you got to look through.
So I'll turn it back over to rich.
Thank you Kelly lowering at this time, if you'd come back on line explain how our listeners can participate in the queue in a session.
Thank you.
Your question. Please signal by pressing star one on your telephone keypad.
And just speakerphone. Please make sure your mute function is turned off.
Reach our equipment.
On the phone line one keenly your line is open please limit yourself to one question and one follow up again and I wanted to ask a question and we'll pause for just a moment Sheila everyone an opportunity to signal.
First question.
Cassidy with RBC.
Good morning, telling your mailing Darryl.
Hi, good ones are a great.
Kelly and bill congratulations on doing a monumental dealing coming out of the gates with some really good numbers congratulations.
Thank you. Thank you appreciate it.
Jeremy can you share with us on the credit side the provision for the guidance for 2020.
Seems pretty robust did Ses will have an impact on what you guys and looking for can cause considering that you mark to market all those loans at the time of closing.
Now see solo maybe expected to provision maybe a little lower.
Yeah, Gerard so we basically adopted.
As these guidance on how Cecil operate our auditors Pwc feels very comfortable with what we booked on one one of 2020 in essence, if you back out the purchase accounting, it's a 40% increase of the two banks combined were both around while five or whatever six allowance for up to about 147, you added in Reais.
Our front line it is about 161.
That's what the guidance basically told us to do and that's that's why we booked that I do agree though there is a double dipping there I mean that is definitely positive because we have purchase accounting marks a four and a half billion dollars on the Centrus loan portfolio and now we have a reserve 147 on their loan book as well.
Very good and then.
Kelly and Bill.
When you guys on Slide 19, you listed your accomplishments so far and now the next steps can.
Can you share with us how challenge.
Is the heaviest live it listening ahead of us or has it already been accomplished can you compare and contrast, what you have already accomplished with what you still need to do in terms of degree of difficulty.
Good question drawn I'll take a startup and bill can add to that.
I would say in all honesty, the heaviest commitment of done because.
Pulling to companies together early on to make sure that you don't have any cultural interruption.
But you don't have any.
Moving to clashes in business strategies.
That you still feel confident in terms of achieving the expense saves.
All of those are we feel better today than we felt a year ago.
That's a side for myself and I think there were a car this.
I would call last when we visited a 11 town halls, we touched about 6000 teammates.
And if you'd had been in that room number. One you have said these people have been working together for 25 years.
And number two you were thought to level off excitement was just extraordinarily.
Hi, and so.
Networks is there ought to be done with regard to programming and I don't take anything away from that there is really really hard work.
But at this point what are the organization is settled strong focused.
And we're just now focusing on doing the connectivity work that is big but is a predictable in terms out where we do feel yeah, I think killing I looked at this to the same levels in terms of what's hard and whats easy.
The hard part of the most important part is getting the cultural alignment and making sure. That's there and I think Kelly has articulated that really well and I feel exact same way.
And if that wasn't there other than that would be some concern and that would make the road ahead harder. So I think I think we set a really good foundation for the road ahead, that's not to diminish. The fact, we have a lot of work. So we've got a lot of systems integration to do and.
Revenue synergies to achieve on an all in all those things but.
What I think we would align on is the highest hurdle as it working at is the company culture aligned and our we're leaning forward and I feel great about that.
Again, thank you and congratulations.
Thank you.
Well take our next question from selling Martinez with CBS .
Hey, good morning, everybody congratulations on on your first quarter is a combined entity.
A couple of questions first on your on your marks in the in the outlook for purchase accounting accretion think you. The Mark is about four and a half billion not too different from in your.
In your and your last filing Kitten, Daryl can you just walk us through whether that calculation. It's changed at all with regards to how much of its credit liquidity and rate marks and you know the purchase accounting accretion trajectory.
It's well if he can talk to that because I think this does your guidance implies about I think 1.6 billion purchase accounting accretion.
This year, how does that go how does that move forward also beyond 2020, how do we think about the glide path of D.A. in how it impacts numbers beyond this year.
Yes. Thank you for any questions out so first.
I would tell you that the four and a half billion that was clubs.
That would or selling from December six that while the mark.
About 60% of it as credit related or 1.8% it came down a little bit, but it's really closely aligned to I mean, our Cecil with reserve for unfunded was in the one sixtys level and succeed. So it's just a little bit more than that obviously due for a little bit different methodologies, but it's very consistent from that impact.
The other part the other 40% is mainly attributable to liquidity and interest rate risk.
We did put in one of the slides that the commercial portfolio, probably has an average life of around three years consumer around six.
No I would say, it's going to ebb and flow of how contractual payments come through as well as prepayments.
You will definitely see itch downward trajectory on the purchase accounting accretion that's coming through but at the same time, what you're going to see is our cost savings our net cost savings really kick in and over that same time period and you are actually still see improvement on a consistent basis on our operating leverage number.
Just because the calculation of how.
Efficiency works with expenses over revenue for every dollar we save it's worth $2 or revenue. That's lost so we still feel very good about the projections that we gave out from that perspective.
Okay got it and I guess, a follow up there you're.
Adjusting for Nick for purchase accounting accretion guidance implies about by my calculation about 12.2 billion to 12.5 billion.
Of net interest income acting out P.A.
If I look at the combined entity historically centrus maybe in T. The run rate has been about 13 billion.
Can you just walk us through what's driving that difference I know you. There's a lot of balance sheets restructuring going on but it does seem to imply that the core and I know, there's some degradation there.
EXINI out the P.A.. It's my understanding this right can you just walk me through like what's driving that.
Yeah, I mean, if you're really looked at the balance sheet restructuring, we didn't shrink that much I mean, the mark was four and a half billion. So the loans Didnt sell we just basically wrote down the loans, we did sell mortgages mortgages. If you look at it over the last couple of quarters is down about 10 billion, but pretty much everything else is consistent the big <unk>.
Reason why Eni is down if you go back a year ago and you looked at like what we're projecting our mottos and all of our peers models had interest rates still rising at the start of 19, and if we actually went back and did a lot of homework. We looked at let's estimates for back then and we comparable to what estimates are right now and across the.
Or you know the peer averages down 20 to 25 basis points and that's just because of the lower rate environment and the flatter curve that you're seeing.
Okay. So it's really just it's really just.
The rate backdrop this is Vince.
Degradation in Iraq.
Correct.
Yeah.
All right I mean.
I guess I kept up at like even if I look the third quarter, Darryl combined and <unk> pro forma was about.
3.25 billion or 13 billion annualized. So you know this quarter I guess, there's some degradation there, but it seems like a pretty big drop off.
You know it do you had margin in the second half a 19 really start to head at the rate cuts yeah Hayman. They started in July and you had three drops they really arent seeing the full impact the last drop was in December .
So you aren't getting a sequel impact until you get to the first quarter. So you have to look at that trajectory that we've seen the last six months.
Okay, Alright fair enough. Thanks, a lot.
Okay.
Well take our next question from Matt O'connor with Deutsche Bank.
Good morning.
Thanks for the update on some of the has planned milestones that we should be focusing on page 19, but I guess I wanted to focus on just the systems conversions and.
What are the big ones that we should be thinking about that'll drive the cost saves and.
It seems like thanks, that's on a pretty good job converting various systems a decent deals.
You can always be federal rate.
What's the timeframe for some of the bigger system conversions and I guess, what's we'd be looking forward initially go well.
So it may not be.
Clearly the biggest [noise] is you know there overall to buy a deposit conversion because that's what drives the.
The interaction with their clients long conversion as a big deal. Obviously I would say does have a two to two larger ones. So there are you know we have.
About 3000 programs that have to be dealt with 100 ecosystem. So there's a lot on them, but it's like any other bank, the primarily as loans and deposits.
Okay, and the timing of those conversions.
Sorry anyway.
Timing of the timing of timing. So so we are we will be primarily shooting for.
About August of 21.
I'm not may seem like a long time, but we're committed to doing it right.
Much work is already underway in terms of.
Eco system dose selection best virtually all done we are moving into programming now the programming takes several months then you have a huge amount of time of testing. The you can do it sooner.
And we could be that a little bit but.
He is to take plenty of time for testing.
Because you only know through testing if you've done it right and you don't want to you don't want to put it out there and then go back enough to changes or if I had to give you a specific day now I'd give you like August 21.
Okay.
And then separately on Daryl you know people get a I guess in slide 17 here the outlook for the first quarter on the full year.
Implies relatively stable, earning assets throughout the year.
And mid sounds like there's some kind of insulated.
Assets at year end in held for sale in the Securities book side.
There will be or run off I would say constantly quick so.
Hi, guys, I'm trying to or thinking about the loan growth that you're assuming for the rest of the year or maybe I'm wrong, but there was translated absence runoff in the first quarter.
Yeah, So Matt what I would say is I mean, it's the trajectory of loans coming off the books, mainly mortgages was down you know third fourth quarter. You know we've bottomed out most of the trades has settled now just a little bit left to go this quarter, but when you look at point to point when we presented to our board earlier this week our operating plan.
On a go forward basis, you know, we're looking to be a little bit better than the growth in GDP I would say in the 2% to 3% range point to point and loans over the next year, you know and favorite a little bit heavier in commercial versus retail, but you know I think we have as Kelly said most.
Let them that we finished with the year fourth quarter and you know the teams are working really well together and feel very positive that we're going to grow and generate revenue as we move forward in 2020.
Okay. Thank you.
Our next question comes from John Pancari with Evercore ISI.
Good morning.
Hi, good morning.
On the slowing of the timing of the cost saves.
The factors that you said.
What was the biggest driver because it just seems a lot of the drivers that you said like serve focusing on service quality the customer retention. The digital that's something you would have already assumed debt that you would have been doing so what was the change what surprised you didn't make that change. Thanks.
So John I was not really a surprise, but it is a difference [noise].
We were very committed to picking the best of the systems.
And so we went system by system to look at the best and.
We pick a number of Suntrust systems, which are really really good.
As a surviving truest system, so it's a little technical but.
If you took all of the BBT systems, you can convert theres much faster you just moved all of the data from Suntrust starting to be even do so.
Programs, but when do you pick the Suntrust system and you put it on the BMT equipment.
You have equipment changes and you have the programming to move that.
Suntrust.
Program over to the BBD systems, that's really what's driving the time a bit longer than we thought.
But it's also a conservative estimate they were drawn to our with regard to.
Testing because we're committed to doing an awful lot of Ah testing, a and then remember when we first talked about our timing we did not anticipate the branch delay.
Which Ah you know you alluded to that but that is that as the year of of I'm delighted savings or your was the right thing to do in conjunction with approval of the other process, we feel good about it.
We will be doing this was achieved during the course of year non overlapping markets. We will be doing a lot of work on throughout retail channel in terms of preparing for closings, but that's that's a pretty material change in terms of the timing of the process.
Okay. That's helpful Kelly things and then.
Separately to that back to your 2020 outlook on slide 17, it looks like the share count outlook.
Showing a change so is that implying that you're not assuming buybacks and 2020 and if so could you give us the rationale for that.
[noise] you know, we basically said when we announced the merger we're going to run at a 10% CE tier one ratio until we got through some of the integrations and took some of the risk off the table. So we are starting off targeting 10%.
You know when we could do RC CCAR ask her she car asked that will be coming up in the next couple of months. Yeah. We will build any capacity such that if we decide to change that and decide to target something less than that after we have some success I will have the ability to do that but right now we're sticking to 10%.
Okay got it alright, thank you.
Yes.
We'll take our next question from Mike Mayo with Wells Fargo Securities.
Hi, I'm well the delay the branch closings not really do I get you just updated the number because you said that almost six months ago. So I'm just trying to understand better the outlook for expenses on so you look to take the efficiency ratio from 57 in Uh Huh.
For sat down to what like 53 or 54% over three years that implies a lot of positive operating leverage. So I guess the real question is do you expect positive operating leverage in 2020 and as part of that.
You are delaying some of the branch closures.
And the deposit marine conversions aren't until August 2021, what are the expense savings that you can get more in the near term such as back office or anything else. Thanks.
So we will we always spectrum positive operating leverage for really for the next three years. So that's a that's who were in a really good story [noise]. There a lot of savings that we will get remember again.
The overlapping branches closings our deferred there are a number of branch closings on it not an overlapping areas that are.
Going to be close in the near term. In addition to that just because we don't close certain branches and over 11 years doesn't mean, we don't produce expenses and those areas. Some of these branches are literally side to side and there are commonalities in terms of staffing that region.
Integrate even though there are two separate branches and so there will be called stays in the branches even before.
The branch was actually a closed.
So there are a lot of areas or be honest there. There's still a lot of backroom areas of that are not related to the branches that we have overlapping.
And staffing.
You know, we Didnt deal with all of that day, one as as time goes on we will.
Have additional overlapping redundancy in staffing that we will be reduced due so it's kind of a hodgepodge to be honest up but it's a it's pretty clear to see what we've laid out we think with this modification in terms of the.
We expect a timeframe with regard to say, they're very very confident we'll be able to accomplish that hey, Mike. If you look on page 13 out of the noninterest expense base that we have.
The first five categories that you have their personnel all the way down the equipment expense I would expect those expense items to decrease over the next three years.
This year, you know personnel will drop we didnt went through our first read more into management level, when we close the transaction.
So our sourcing group is working aggressively with our third party vendors suppliers. So we will get savings in those areas and wild out a lot of branches to date won't close this year, we're working very aggressively and all the major markets in the mid Atlantic in southeast to really focus and consolidate our buildings.
And all the metropolitan areas and that should come online you know middle to end up 2020. So we feel very good that we're going to get the cost savings and 2020 and in the next three years.
Instead of just I'm, maybe don't want to answer the question, you're not giving that guidance. So when we look at the year 2020 shared revenue growth exceed expense growth or is this really just all back ended two years two or three.
We have label, we're going to have operating positive operating leverage every year.
Had a promise it every quarter because of there's seasonality, but every year, we will generate positive operating leverage from 19 to 2020 to 21 and 21 to 22.
Okay, and then just a separate follow up question. It sounds like you really are planning to have a strong long term company set that cake.
Very measured approach I guess just.
Maybe a little bit walk from bill on the.
<unk> Suntrust side.
What are you, saying that.
Not going as well as you expected that you could do better than maybe Kelly you can chime in sale.
Okay.
Oh, you know honestly everything is going really well and I don't have any area that I'd say is not going.
Well the expected there a lot of areas are going much better.
To be honest the integration of our.
People in our teams or whether it is our corporate and institutional group or our community bank.
All of those are integrating extraordinarily well I'm, so sorry, I personally I see some real upside in terms of revenue momentum, particularly because of how well. Our teams are working together I've had the chance to visit bills have chance to visit with a lot of our teams in the last 90 days, especially.
And you know again, you walk around the room, you would not be able to detect that this was to company just haven't come together you think they're all been working together for a long time.
Yeah, Mike I'd say, just you know we entered it and with some good momentum Kelly outlined some good loan momentum.
And legacy Suntrust coming into that there was good loan momentum and be in T. as well so.
That's carrying over into a you know into the early weeks of the year.
On the investment banking side and the.
Relationship and the.
Team work, that's going on with the commercial community Bank as just off the charts me feel really good about that them of course were one month, then but all the things that you want to see in terms of Oh pipelines and teamwork and all that I feel I feel really good about so the I think generally just strong momentum and.
The business is heading into the heading into the merger.
Thank you.
Thanks.
Our next question comes from Kenya, Houston with Jefferies.
Hi, Thanks, good morning.
Wanted to ask a bit about on the credit side and.
How are you mentioned you're going to redo the marks again, we're going through so I assume that's in your provision guidance can you help us understand when we moved to the P.C.D. and non PCD within the 35 to 50 basis points a charge offs.
How much of the legacy Suntrust charge offs are we going to see in that number and is there any room, where just yeah. The math ends up looking better than the guidance just because of how the mechanics of a charge off recognition works with have to bookmarks.
Yeah. So can what I would say is that you know our guidance between 35 and 50. We believe we can be within that range you know until there's a little bit of uncertainty in the marketplace right now so we widened the range out a little bit.
So I trust portfolio is performing very well we have good marks on it we did sell a few credits.
Nothing of substance that we did sell some and we wanted to just.
Dispose up but for the most part you know their credit profile is really strong as well so I wouldn't say there'd be any impact when we do convert from PC I had a P. C. D. There will be about 200 million that will basically come out of the purchase accounting marketing go into the allowance out at a 500 that we have allocated so that's a little bit of a new.
He wants but that's just how the Cecil County plays out but of course, you want to add anything yet.
I don't see any big changes.
Things look very stable right now in our guidance around the range depends on the the economy and also allfast some of our.
We're segments grew we've got a lot of attractive higher margin consumer opportunities now between the two companies. So it's really dependent upon the mix and the economy, but as far as stability of asset quality write down around it looks good.
Okay and my follow up just on provision versus charge offs on this point that you have the wider range of charge offs, but I guess because it is it's fair to say that the provision pretty much matches. If you just look at your full year guidance versus what the charge offs guide implies for losses, just the moving.
It's between provision and charge offs that'd be helpful. Thank you.
So I'll start and car country trip and but in essence, our provision estimate is assuming a charge offs and then all of our assumptions within within T.. So as you heard from all of our peers. The models are more complex now. So you have to look at the market environment quiet behavior. There's a lot more variable is that you have.
There were assuming all that is static were sitting room or go to grow the portfolio and where our assumption is is that mix stays the same obviously all that is not going to be like static like that but that's what's built into the assumption yeah. He and the way I think about it is [noise].
We're going to incrementally provided the charge offs generally at a at a reserve rate assuming no big change in our seasonal assumption, so you'd assume that provisions larger than charge offs.
Okay. Thank you guys.
Yep.
<unk>.
And as a reminder, starwood ask a question.
Next question from Erika Najarian with Bank of America.
Yes.
Hi, good morning.
My first question is on on synergies are once again so.
Very strong statement on positive operating leverage over the next three years I'm wondering if that includes any revenue synergies and how should we think about revenue synergies going forward.
Grows in insurance is particularly impressive given that the company companies combined for only 24 days clearly doesn't have any impact so wanted to understand what the revenue opportunities for the combined company I.
And also the other question on that on the cost side Darryl could you tell us what about the pacing.
During the hearing 20, and 21 of the cost savings reallocation. Please.
So Eric or we feel a and bill alluded to this we feel very very good about the revenue synergies really you got to you know remind yourself of how synergistic combination here is centrus had fantastic corporate institutional group or program.
Fantastic wealth management strategies are fantastic National consumer finance business, all of which are complimentary can be leveraged over baby entity.
Our client base. Likewise, we you alluded to the insurance opportunity from guaranteed job and the BBT community Bank.
Has a broader reach the end of Suntrust Community Bank Ridge Hill, so they'll be able to expand some of the programs that there maybe take community Bank had ended at Suntrust Bank. So all of that which of course not factored into our numbers is net very positive an accretive we can't give you numbers on that today, because it's hard to really give you meaningfully accurate.
Numbers, but intuitively from talking to our people.
We know that all of those businesses are very synergistic have huge opportunity and the early.
Response from our people in terms of executing on that as Outstandings now insurance you talked about is real and very.
Very easy to kinda talk grassroots as Chris talked about a minute.
Yeah, Eric I might just also mentioned to play off of those billing Joe's comments on the.
The community bank in the see I'd be working together just a couple of tangible salts when a bow come as I sit down and actually does on the model, we well actually designed in the community bank embedded in the community Bank about 200.
Ah folks that are capital markets industry specialists corporate finance specialists their sole purpose in life is to integrate with the regional presidents to 24 of those the share the client base of baby and see with those individuals and we have for example, just since.
December nine.
Seven deals that would be you know a sizable enough that we get your attention.
But we have been involved and what their client and we have commitments on three of those now seven deals that make up a future, but seven deals in about 45 days of that nature. I think is pretty is pretty good.
Both teams I can tell you from haven't said in the regional presence meetings are exceptionally excited and Ah. It's a it's a natural gravitation and I'll just I'll leave it at that has been very very effective.
On the because a point on the insurance side.
You know we.
We two years ago really said, we want to transform this business and we we bought a consultant to really to kind of transform start was the white sheet of paper I could not be more proud of what those guys have executed all we set up 32 initiatives.
We're on plan or owned our target to develop the you know improved EBITDA just in two years for example, we've increased our margins 6%.
And we've got industry, leading organic growth year to date.
And I will tell you the the three things you want in place are in place. We've got a industry, leading retention has got pricings coming our way and that's up 5% another half percent this quarter versus third.
And our new lot of the new business production, which is actually feet on the streets generate business is up 13% and not have not in my career have us and 13% so.
All things go.
And the insurance brokerage business.
Then on my colleagues that are thinking.
Yep.
I would just tell you it's hard to call it on a quarter by quarter basis. No. We're trying to give you target estimates of what we would be at the end of each year I'd, probably what I would just stay with right now Raleigh eight weeks into the merger will have more clarity you know, we'll close the first full month books next week.
So you know give us another quarter tools will have more certainly down the road, but I think we gave you good enough estimates and feel very confident where I get the cost phase.
Got it and just as a follow up on I just wanted to make sure I understood. How we should treat that purchase accounting over the three years on so you mentioned that 60% of the floor and a half billion if credit and 40% is liquidity and I guess the way I just understood the quite part of the Mark is the non Accretable difference.
Which would not accrete on over at right now and I just wanted to make sure sitting here right at the right way or does all of the floor now selling accrete that for now.
Yeah. So they know US I mentioned this earlier by backing called this out so out of the Florida half billion now that we've adopted Cecil about 200 out of it is going to go into the reserve.
As part of Cecil So it's in there now so it's in essence, having 4.3 will create in as a principal on cash flows come in from the assets.
And then the liabilities that you have over those terms.
Got it thank you and great logo.
Hi, Thank you [laughter].
Our next question comes from Brian Klock, with Keefe Bruyette <unk> Woods.
Good morning gallon.
Morning.
Yeah, I'm just kind of quick follow ups, you want to make sure that yeah I understand the comment on the CP, one now 10% target and then and buybacks.
Taking all the things he won came in at 9.4%, which was a little bit lower end worsened we get initially thought.
The accretable yield that's coming through is coming in pretty fast.
Does it feel like like your timing would see CCAR submission that.
He has probably be a enable the buyback stock in the second half of the year, that's still sound like that's on target.
So Brian Yeah, we did give it guidance that you know this next quarter because of the MSR change and R.W. away and then the Cecil adoption now our first quarter, ending 81 ratio will probably be relatively flat to what we have right now in the nine four range.
After that I agree with you will start to build pretty quickly.
As we generate and create through the earnings power. There you know, it's really I'd call on Kelly and those part and the board part I'd run when we start by buyback right now, we're just sticking with a 10%.
Got it and so remember that.
Yeah. So remember, we've we've said very clearly that.
Over the term assuming things settle down there as a capital opportunity with regard to true up.
We've also said very clearly that during the first phase of our new truest life, It's really smart to be conservative I mean, you know we have a lot of moving parts that need to settle down.
We have a lot of assistant existential factors out in the world, but we know about that right now with what Sprague medical point of view. So there's just a lot of sound raising in terms of being conservative now as that there's uncertainty settle down.
To your point in terms of the capital level, we have in terms of their capital accretion middle occur predictably over next several quarters.
Certainly could be that opportunity on some capital buybacks I wouldn't be surprised at all if that were to happen.
That's helpful. Thank you appreciate it and Andy I'll, just say one real quick follow up on that I'll get slide 17 on the guidance.
Our merger expenses for the full year, the 600 700.
No. It doesn't include some of the incremental operating expenses related to the merger I guess, how much is in that 600. This 700 related to these incremental operating expenses and can you just remind us what that means a lot of the differentiation between the incremental operating and and the others, yeah restructuring and merger charges.
Yeah, Brian So if you remember it back you know I went through in detail a difference between what an order normal merger restructuring charges versus this incremental operating <unk>.
The main primary differences our definition of merger restructuring basically has no future benefit it's due just to the transaction.
Because of the size of this transaction and the magnitude there are lot of things that we are dealing that up putting things together that we'll have some benefit so like wit, and Scott's area, where we're putting the systems together that he's working on it integration and the ecosystems designed around putting those ecosystems together.
Well it has a future benefit we're doing you know lots of that hundreds of millions of dollars of people working on that architecture that we're putting those in calling those out for the most part you know we have schedules in our tables that breakout where it at pull those numbers out but for the most parts and personnel professional or where most of those charges.
Yes, so far as the breakdown goes you know, it's a high level estimates.
I would say about a third of that might be.
Related to that and Maui and the operating the rest would probably be merck's is a ballpark but.
But it's gonna be fluid, it's going to move back and forth.
Alright perfect. Thank your time appreciate it.
Yep.
Our next question comes from John Mcdonald with Autonomous research.
Hi, guys a couple of quick follow ups.
I guess just on the CVG one down if you don't do buybacks and this year with the share count that you've got to do that gets you back up to the 10 in your modeling by the end of year on you roughly a 10 or does it take you into 21 to get back to that 10%.
You know our estimates right now we are plus or minus 10% towards the end of the year at all it depends on how fast the balance sheet grows and how the accretion comes in so there's a lot of variables there, but we're in the neighborhood of 10%.
Okay, and just to follow up installs plus in the purchase accounting is a nice boost for this year. It seems like the difference between the core non core margin suggest something like a billion and a half or so of course accounting.
This is Dan Ives. This year does that fall off quickly next year that like dropped by 20% or just any idea of the pace that that kind of.
Gals down I know you've got the merger seasonal uptick in all said it but what's the any idea on that piece of that.
Yeah I wait we gave you that that terms that try to how you would amortize it and it does fade away you know over the.
However, we are a process.
So I think you're at the right mindset of how to model that I've just know that as you model that and you factor in the cost saves you will see that you still drive positive operating leverage.
Right right. Okay last question on the page 18 that investment the annualized for Q2 0 investment of 200 million.
What do you guys are including in that and how you're characterizing like what kind of investments and then why you calling that out just give us some color on that.
[noise] I'll give a couple I'm. So you know our executive leadership team approved about more than doubling our digital teams that are out work now and are assigned to all the different business units I'm working to make that are improvements and enhancements for our clients.
Experience, so that would be one in personnel there some key hires that we're putting out into the marketplace and you know more teams that have some skill sets that we don't have that we're trying to get more of you're starting to see some branding and aontais world arc marketing going back and forth. So I don't know if everybody else wants to.
That's a big one of those are the development of our innovation and Technology Center.
That I described a lot of excitement lot of focus on a for a pretty immediate a investment in so that'll be a big developed during this year.
Okay. Thank you and I'll, let on there.
Ill, let on their commercial Onboarding and I mean, it's it's a list of dozens of things that we're seeing that are.
You know we've got the capacity to do they're not opportunistic there really client friendly client focused and we're calling it out because these are strategic investments that we think making now are going to really have an incredibly good long term pay back and deferring them for the point of meeting some quarter just doesn't make a lot.
South so that's the reason to put them in there and called them out.
Okay. All right. Thanks, Bill that's helpful. So when you guys talk about them or disease. The 1.6 billion net you know that's kind of.
The kind of investments that you're netting against that God emergency Inds.
That's right and I wouldn't expect that the investments to stop at 200 million right I mean, our gross saves as well north of 1.6.
Yep.
Okay. Thank you.
Our next question comes from wanted Chan with BMO capital markets.
Hi, good morning.
One quick question on different for dividend in the fourth quarter, we get something unusual Dan can you give me one.
One race or.
The equation that 2020.
Yeah, why do we have a couple of preferred that our semi annual rather than quarterly did that that's the nuance that you have to factor in now when you look at that color trialists dividend payout schedule.
But it was only 19 million, which means much Miller.
Even.
I think it predicts on me.
If you remember, though and the BV and T. Rowe agree retired one preferred and then we reissued another preferred.
I think the timing of that all that basically had a favorable impact in the fourth quarter.
It should level out as we get into 2020 from a schedule, but do I talk about this offline I'm sure myself or rich or Aaron can can handle that question for you. Okay. Great. Thank you and then I just wanted to confirm.
So that you could be slightly.
Core run rate for the expenses really 2020 that can we get Q.
Let's look at what's the cost savings.
We should see decline in.
When we run rate.
Yes.
Yeah. So we gave you.
If you make all the adjustments baseline for 19 is 12.8 billion.
We are saying that our net cost savings for the fourth quarter of 2020 would be down 120 million, which is annualize 480 run rate number which is 30% and then it will continue to bell year after year on that.
Okay. Thank you.
Welcome.
Our next question comes from Steven Stephen Scouten with Piper Sandler.
[noise] make them on a guy.
Not to beat a dead horse here, but kind of thinking about the delayed a expense savings I'm just wondering if I calculate that it.
Seems like [laughter] timings about 20 cents a year in 2020 and 2021 I'm wondering if there's any offsets that you've seen in terms of upside surprises from any sort of revenue realizations or otherwise I'd, you've gotten into the deal so far.
Yes. So you are in there you know we didn't factor in intentionally any the revenue opportunities and this a rigid what you're seeing now is they werent found the worst case in terms of expense to light.
[noise] wouldn't know factor then.
Revenue opportunities, but as you just heard Kris and Dale site.
[noise] they the revenue opportunities.
In commercial banking and private banking and insurance.
Across the board a renewed very very substantial.
And it's not something like two years to to get underway, it's underway as we speak or.
So you know, it's it's a very conservative view to factor in the expense to light without factoring in the revenue enhancements, but you know that's our nature, we try to be conservative to read rather a beep and medicines are.
That's kind of already we've tried to factor that Doug.
Okay, Great and then other question for me, it's just in terms of restructuring business unit.
In run off and things like that nature had everything in your mind been completed here already or in the process of what's remaining in held for sale or are there still other decisions to be made about additional business line exits potentially or other or other loans that you might look to.
To take off the now yeah.
You know I I would say for the most part we're pretty much over with from a balance sheet restructuring perspective, you know everything will settle that we wanted to move off this quarter and and move forward from that perspective, we still have our divestiture. That's planned later in the air probably second quarter, you know so that will come.
Out of run rate when that occurs but thanks for the most part you know we have pretty much everything done.
Great. Thanks, so much.
And we'll take our final question from Christopher Marinac with Janney Montgomery Scott.
[noise]. Thanks, I wanted to ask about compensation for the coupon companies in terms of just retaining employees that you have is there anything unique said youre doing or that you intend to do just to keep competitors at bay and keep your team focused.
Yeah, Chris we've been working on that from a from day one in terms of.
Through a special compensation arrangements for key players.
And you know developing a very aggressive ongoing compensation program for all of our people a weather and staff jobs or in revenue jobs. I mean for example, we did a 1500 dollar bonus for like 48000.
Our teammates that was just paid out in the last few months or just was a thank you for their hard work.
And so yeah, we've done a lot of particular activities to try to focus on on that and so that's one of the reason we feel very confident in terms of you know our low attrition and in fact, what we're saying is low attrition so everybody feels good.
We've done all the riding things.
And we will remain aggressive in terms of I've taken care of our team nice because you know all of them away or [noise].
[noise] apartment REIT emerges.
[noise], we're well on auditors based on that.
On the teammates on again all of our teammates today feel very very good verburg sided I'm very confident that are down I'll say again that attrition very very low so we feel very good.
Right Kelly, Thank you Bill and Dale for all the information. This morning, we appreciate it.
You bet right here.
Okay. Thank you waters.
[noise] and thank everyone for joining US hope everyone has a great day.
Thank you and that does conclude today's conference. We thank you for your participation you may now disconnect.
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