Q4 2019 Earnings Call
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Ladies and gentlemen, thank you for standing by welcome to the W. Asked as financial Corporation fourth quarter 2019 earnings Conference call.
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I'd now like turn the call over to host for today, it's a dominant couldn't yourself Chief Financial Officer, Sir you may begin.
Thank you Valerie and thanks to all of you for taking the time to participate on our call today.
With me on this call our Rodger Levenson, Chairman, President and CEO part BACE Chief wealth Officer.
Steve Clark Chief commercial banking officer.
Rick Wright, Chief retail banking officer, and Lisa Brewbaker, Chief Technology Officer.
Before Roger begins with his remarks, I would like to read our safe Harbor statement.
Our discussion today will include information about our management's view of our future expectations plans and prospects that constitute forward looking statements.
Actual results may differ materially from historical results were those indicated by these forward looking statements due to risks and uncertainties.
Meeting, but not limited to the risk factors included in our annual report on Form 10-K , and our most recent quarterly reports on Form 10-Q .
As well other documents, we periodically filed with the Securities and Exchange Commission.
All comments made during today's call are subject to the safe Harbor statement.
With that read all return I'll turn the discussion over to Rodger Levenson.
Thanks, Dominic and thank you to everyone for joining us on the call.
System with our historical practice, our comments today will be a little longer than usual as they include our outlook for 2020.
For your reference we've also provided additional information on the fourth quarter full year 2019, and 2020 outlook in the earnings supplement posted on our website.
I will briefly touch on Q4 and full year 2019 results and then turn the call over to Dominic to walk through the details of the 2020 outlook.
As always upon the conclusion of our prepared remarks, our team will be happy to answer any questions that you may have.
We're very pleased to report that Q4 2019 was another strong quarter for with Smith with core earnings per share of 96 cents and core or away of 1.63%.
Our results in the quarter were driven by solid revenue generation in both our spread and fee businesses combined with disciplined noninterest expense management.
Hi, like also included a 40% reduction in our nonperforming loans, resulting from the positive resolution of our largest NPL.
This performance in the fourth quarter contributed to full year 2019 results of a core earnings per share of $3.74 kind of core or away of 1.61%.
As outlined in pages 10, and 11 of the earning supplement our results for the year exceeded our original expectations and reflected strong operating performance combined with the successful integration of beneficial.
One of our key strategic objectives related to beneficial is the repositioning of the loan portfolio.
Specifically, we identified approximately $1.6 billion of non relationship lower yielding portfolios, including approximately $1.1 billion of residential mortgages that we plan to run off and replacement higher yielding and relationship driven see an island.
The declining interest rate environment in the second half of the year accelerated this plan run off and was reflected in our 2019 loan growth.
It also contributed to our full year net interest margin of 4.44%, which included 45 basis points, a beneficial related purchase loan accretion.
While the timing of the loan attrition and accretion was different than anticipated. It is consistent with our strategic plan.
Total deposits grew 2% for the year when excluding the impact of the sale of five New Jersey branches to the bank. The Princeton. This included a 4% increasing core deposits and minimal post conversion deposit attrition.
Organic core fee income growth, 5% for the year was led by strong mortgage banking and wealth management revenue offset by a modest decline in our traditional banking fees.
Our core efficiency ratio of 56.2% reflected achieving higher than modeled cost savings from beneficial ongoing expense management and higher revenue.
Credit costs were modestly over our original expectations at $29.2 million worth 35 basis points of loans. This was directly attributable to two specific episodic loan impairment in the second quarter, which accounted for over 75% all four of our net charge offs of the year.
Finally, Evans as a result of our strong capital position and current share price, we were able to repurchase just over 2.1 million shares a with the stock at an average price of $42 in 83 cents during the course of the year.
Having completed the integration of beneficial and achieving or exceeding our plans for 2019, we move into 2020 uniquely position as the only locally headquartered bank in the greater Philadelphia, and Delaware region with the size scale and product offerings combined with with this though are served.
To compete with our Big Bank competitors in this market.
We look forward to executing the second year of our strategic plan.
I will now handed over to Dominic through provides additional information on our 2020 outlook.
Thanks Roger.
Good afternoon, everyone and happy new year.
We're excited to turn the page to the second year of our three year strategic plan, which is focused on transformation and delivering on the opportunities in the greater Philadelphia in Delaware marketplace, resulting from the successful flows conversion and integration of beneficial.
Our 2020 outlook that we will walk through today and outlined in the supplemental materials posted on our website.
Based on performance expectations, consistent with our original beneficial acquisition pro forma and our three year strategic plan.
As we continue to see opportunities consistent with or better than original expectations.
These performance expectations built on our strong 2019 financial and operating results and incorporate the opportunities we see in our pipelines existing relationship opportunity and revenue synergy business cases.
Highlights for our outlook include the following.
Loan growth is expected in the low to mid single digits percentage points.
Driven by mid to high single digit organic growth offset by purposeful run off of non strategic non relationship portfolio.
The positives are expected to grow in the mid single digit including mid to high single digit core deposit growth.
[laughter] somewhat with modest post conversion and branch consolidation attrition.
And purposeful run off of higher cost PD.
Net interest margin in the range of 4.10% to 4.15%.
This includes 125 basis points fed rate decrease mid year.
30 basis points of modeled beneficial accretion.
And five to 10 basis points incremental beneficial accretion based on the pace of attrition in the runoff portfolios given the current rate environment.
Core fee income is assumed to grow in the low single digits.
This lower than historical growth rate is impacted by three key factors.
One.
Urbans effect on debit interchange rates beginning in July 2020, which alone reduces the fee growth by four percentage points.
To full year impact of conversion related product mapping that occurred late in the third quarter of 2019.
And three the interest rate environments impact on cash connect spillman fees, which is fully offset by lower funding costs.
Excluding these near term headwinds fee income would have grown in the high single digits.
Driven by double digit growth, both wealth and mortgage businesses.
Core efficiency ratio is expected to be approximately 59%.
This includes fully achieving 90% of integration cost savings consistent with the original your two projection in the beneficial deal model.
It also includes the first full year over delivery transformation investment.
When normalizing for the interest rate environment versus our original strategic plan.
The efficiency ratio would be approximately 55%.
Credit costs are forecasted to be approximately 26 basis points of loans worked $20 million to $24 million on a full year basis after the adoption of diesel.
Got a mouse zoom out that runs through the piano in 2020. After the day want increase in a steel which has taken directly through the balance sheet.
Our current estimate of the day, one impact from our seasonal adoption is approximately 30 to 40 million dollar increase in reserves from our 2019 year end position, resulting in an H.C.L. coverage ratio ratio between 90, and 100 basis points of loans.
Addressed in the supplemental materials on flighty. This increase is primarily driven by the mix of our organic and acquired portfolios.
Well, our asset class mix, driven by his historical loss experiences and weighted weighted average life of each portfolio.
We continue to fall finalize and validate our assumptions and model outputs and will provide additional information in our upcoming 10-K filings.
The outlook includes pick for effective tax rate of approximately 24% consistent with our strategic plan.
Which is a slight increase from 2019 due to lower expected stock based compensation activity.
Consistent with our strategic plan theme of transformation, we're excited to enter our first full year of delivery transformation and to meaningfully progressed, our efforts in building, our physical and digital delivery channels consistent with our brand in Michigan.
It's wanting 19 working with our strategic partner, we focused on refining the delivery transformation program.
Resulting in our commitment to increase our initial incremental investments and to accelerate our timeline from five years to three years.
This increase an acceleration is based on the continued rapid evolution of technology in our banking industry, along with the opportunity to more quickly enhance our customer experience and accelerate operational efficiencies and ROI.
We have provided additional context in the supplemental materials on slide six and seven.
Including a list of specific initiatives across three major areas of customer acquisition customer experience.
And I T infrastructure.
Finally, some comments on capital management.
It is our longstanding practice return it at least 25% of annual net income to shareholders through a combination of a purposely low dividend and routine share buybacks regardless of price.
When we are in a position of excess capital and our share price is such that buying it from incremental shares has an IR are over 18%, we won't gauge in incremental buyback.
Given our strong excess capital position and our current share price.
Consistent with both the third and fourth quarter of 2019, we intend to be aggressive buyers of our stock in the foreseeable future even at levels moderately above the current market price.
Overall, we expect to achieve a full year core or away of approximately 1.44%.
And achieve our strategic plan a job objective in 2020.
When excluding the significantly lower interest rate environment versus expectations 18 months ago.
Specifically base rates that are 150 basis points lower.
Our outlook performance is slightly favorable to our original strategic plan estimate.
As always we are focused on and expect to deliver sustainable high performing defined as top quintile faraway hit our peer group.
Thank you for joining us on this call today, we will now open up the line and our team is happy to answer any questions. You may have thanks.
Thank you.
As a reminder to ask a question we need to press star one of your telephone to withdraw your question. Please press the pound key.
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One moment please.
Our first question comes from Frank Schiraldi or Piper Sandler Your line is open.
Hi, guys good afternoon.
Right.
Just to start with Dominic I might've missed I'm not sure. If you gave you talked about accelerating the tech spend two to three years versus the five but did you give me a a total dollar amount I'm over those three years.
Oh, I did not and good question. So historically in our previous conversations we've discussed an incremental investment of 32 and a half million dollars as we've talked about increasing in this investment as you'll see in our material. We lay out the gross investment in 2020 of just over $15 million, we would it.
Back to invest at that pace over the next few years, but as with anything over a three year plan, we will continue to evaluate.
Gotcha, and I mean, I guess is it reasonable to think about.
Net expenses are being the same level as well.
Per year.
On the net those would actually increased as part port portions of each you each year spend is in capex and as they begin to amortize the net cost would increase but then that.
Cost would be offset by cumulative gains in revenues associated with the benefits of the investment along with operational efficiencies and other back office expenses.
Okay, and then the 144 our away that you cite for 2020.
Does that include buyback activity.
It does.
You're welcome food buyback activity consistent with recent share repurchases.
Okay, but correct me if I'm wrong. The original guidance didn't have a significantly higher I mean, I think it had your standard return of whatever it is 25% in terms of buyback activity baked and if I think about the 161 you guys had given originally.
Correct, it would've been closer to our minimum level of capital returns okay.
Now and then as we think about buybacks you certainly you know you talked about the IR being attractive and you guys hi, even after Cecil have plenty of excess capital.
You know should we think about incremental buyback as being up to a returns of 100% of earnings or should we think of you know capital return in the near time in the near term.
Could be a could exceed or in the earnings.
So Frank this is Roger I think the way I would looked at it is certainly we intend to continue around the page that you've seen in the second excuse me the third and fourth quarter. This year, and we're clearly generating enough capital to support that but as always we will have value.
Wait that with Oh other uses of the capital the current economic environment credit environment et cetera. So I think it's a fair statement to say that we've certainly generating enough capital to support the current pace and then depending upon those factors on where our share price in his and other things you know we could incur.
We set amount.
Okay.
And so you have I guess a million dollars.
Million shares left I would imagine now the feds changes rules is theres no issue to reauthorizing, that's at some point this year.
So our normal our normal cycle Frank is we do our capital planning with our board in the first quarter. When we were address all capital issues as part of that process, we'll evaluate a new share repurchase authorization and would expect to move forward on that yet we go through that cycle.
Okay, and then just finally I'm on the purchase accounting accretion if you could just remind us I think it's a small number but if there's any purchase accounting accretion in the margin excluding the beneficial deal and then just the timing of.
That purchase accounting accretion is it you talk about the the.
Numbers for 2020, you lay out in your slide deck is that pretty.
Spread pretty evenly throughout the year or does that start to ramp down.
At some point.
Sure. So to your first question there is about two to three basis point of legacy acquisitions purchasing a crack accounting accretion before beneficial.
And then to your question regarding the 30.
40 basis point of purchase loan accretion from beneficial in 2020, it would likely pace down throughout the year, an average that amount.
But how is that contingent upon I'm going to pay off from a quarter to quarter basis.
Right I mean, a yeah I guess the incremental accretion is gonna be more volatile, but if we think about the the model is it a pretty.
Shallow slope in terms of quarter over quarter, how much would roll off.
It is the shelves love in 2000 square.
Okay, great. Thank you.
That's correct.
Thank you. Our next question comes from Michael Perito of KBW. Your line is open.
Hey, good afternoon happy new year Guy.
Michael.
I wanted just.
Clarify so RB <unk> did I hear you guys right just on the.
Sure purpose topic. So your expectation at least for the next couple of quarters, obviously, if any anything beyond that it's a little bit common problem for the next couple of quarters to kind of.
They accept the pace that you were added in the fourth quarter, and then to kind of just constantly evaluate it moving forward what the fact afterwards.
Yes, that's correct.
Uh huh.
And I was wondering if you guys could expand a little bit more.
She had all the information on both the outlook and kinds of the delivery transformation that you've got put in the earning supplement but I was wondering if you could maybe expand.
A little bit more on the decision making process around accelerating.
<unk> some of those expenses not face value. It seems the timing he blue interesting just given the rate environments mortality to kind of I'll wrap up the expenses, but I'm sure you characterize reason for I was wondering if you could just kind of expand on that dynamic a little bit for us.
Yeah sure first I would say and leased to will cover most of question but.
As is.
Our historical practice, when we make incremental investments, we look for the longer term opportunity and so along with this and deliver transformation, we see the opportunity to accelerate not only the investment, but the delivery of the opportunities and benefits from that investment I'll pass over to leases to talk about the framework of decision.
Thanks.
Hi, Thanks, Dominic and Hello, Michael So I live [laughter], Hi, I'm, just kind of underscore what Tom and I get that as we look across the landscape and I. Thank you know everybody thing that the pace of technology is moving very quickly and you know we want to be in a position. Obviously that we can continue to respond in innovate and provide what our customers are looking.
Foreign so as we were looking at the timeline for delivering across all of the projects in our road map. It makes sense to us to be able to tackle that now that we can pull the benefits forward and be able to deliver on those three areas that we talked about in the supplemental materials, particularly around customer acquisition and experience the thought processes.
Really organizationally, we felt the timeless right. We have our expanded market now we've got customers to serve and others to attract and we're ready to we're ready to execute and that was really behind the decision.
Hey, Michael This is Roger I do want to make up point clear, though I our decision to accelerate the investment was exactly as Weve been Dominic described it was not influence at all about the current interest rate environment or 2020 outlook I think when we originally came up with that assessment in the summer of 18 as you know the world.
As a very different place and we did not have anywhere near the amount of knowledge about the beneficial customer base, where the border markets that we operate in now and working with our partner we made the decision to accelerate it along the lines of what Lisa just referred to as opposed to an assessment of.
The more macro financial environment.
Got it and I think I remember when you guys for laid out for plan.
The comment was that you know this wasn't a catch up this was to keep you kind of at the forefront from a technology perspective relative to your competitor is it fair to say.
That that is.
Yes, that's true pace, but has maybe some of your competitor accelerated more rapidly than you saw what kind of making you portfolios that dynamic change at all or any other thoughts on that aspect of it.
No I don't have the dynamic hasn't changed at all I just would refer back to what I. Just said the world has changed dramatically in the last 18 months and this acceleration is required to make sure that we're keeping up with the changes that we're seeing from competition in the external environment.
Got it okay. Thank you for giving me some thoughts on that and then just lastly.
I wanted just ask on loan growth I mean, it sounds like you guys are a little bit more optimistic about turning positive growth in 2020, I guess is that a fair takeaway from your prepared remarks, and if so I mean.
Does the growth that you've laid out your 2020 outlook is that balanced or do you think out of the gates here in the early part of your that the run off could still be more material to kind of the net growth with the stronger back half. Your just any initial thoughts that you see the pipeline in the run off and then how that could play out.
Michael This is Steve Clark, we do think for the full year.
Low to mid single digit loan growth.
That is including the identified rental portfolio, but absent those we are looking at mid to single digit growth. Excluding those portfolios mid to high single digit growth and we think that will be that will be driven in our plan to buy so you know I.
And leasing from our new leasing a company that we acquired with beneficial and a little bit of consumer almost 22 and student lending from.
All right, maybe maybe I'm just asking the question a little differently as you look at the run off which you guys have planned is there any material difference between kind of run off per quarter next year, not looking for growth number per quarter, but just to try and get a sense of and the first half your net growth might be a little slower than.
The back half because the run off slows down and for your progress is there anything of that nature.
Yeah. So we did not model the year that way, we kind of model that consistently consistent run off through the year, but when I started to put the lumpy quarter to quarter, depending on what happened.
Got it right.
Thank you guys for clarification I appreciate the time.
Excellent.
Thank you our next question cousins, Erik Zwick I've been in your line is open.
Good afternoon.
Eric.
Maybe if I can start with the other net interest margin and looking at slide 11 for 2020.
The.
Net interest margin, excluding the I've been official accretion that target of 375 can you just maybe give me a little color in terms of where that kind of starts the year and how you expect it to trend throughout the year to kind of reach that 375 average.
Sure and just for Everybodys referenced we're speaking to page 11 in the supplemental materials.
So in a bullet point below you'll see that the fourth quarter or net net interest margin was a 388 that included some outsized kind of pay off.
Now and some.
Income from purchase from the NPL when you normalize that it would be in the so low three eightys and then as the your flows plays out as it takes some time for the deposit.
Betas to catch up and then playing out the rate environment with a assumed cuts in the middle of the year It would face down throughout the year.
Thanks is there kind of trends down throughout the year end do you see stabilization at some point and that or does it continued to trend down towards even through the fourth quarter.
No we would see stabilization after the rate cut and then stabilization to upside as a portfolio remixes towards the cnine relationship higher yielding loans.
Great and then switching to a the noninterest income.
In terms of the impact from Durbin once it's effective in July can you remind me of the dollar impact of your interchange revenue that'll that'll be impact.
Yes so.
Historically, when we communicated the impact we had said on a full year basis going over 10 billion would be about $11 million net impact to the bottom line, including about a half a million dollars of cost at about 10.5 million of lover interchange.
We're seeing a number about 25% higher than that as we see the mix of our debit interchange coming more from signature, which will take a larger.
Kind of negative hit when Durbin takes effect.
Okay. Thanks, So it's just kind of some quick numbers somewhere around that maybe four and a half million dollar no impact per quarter starting in threeq.
That's why that kind of 25% to the original 11 million estimates.
Yeah. So it would be a little lower than that I would say around three to three to 4 million.
Okay great.
Thank you and then in terms of that the credit cost outlook for 2020 that $20 million to $24 million or whatever the break that down in terms of what you expect in terms of provisioned versus loan workout costs than any other expenses.
Yeah. So this is this is roger the almost the entire amount is sees provision I think the numbers breakout I mean, just to the page.
Sorry.
Well I think its provision is he is right around.
17, or so 17 to 20 with the Delta being based on total credit.
Great I appreciate that and then just one last one for me in terms of the the branch in whole catching that experienced the fire do you have an estimate for when that branch location might open again.
We we don't that's something that we're currently analyzing or probable probably we'll have more information later in the month.
Great. Thank you for Joe you're watching how it at is here is significant structural damage and it if we decide to go further without it we're talking about at least nine months.
Got you know thanks, I live in taught us a mile away. So I try to see it almost every day.
Thanks for taking my questions.
Thank you.
Thank you. Our next question comes from Russell Gunther F.D.A. Davidson Your line is open.
Hey, good afternoon guys.
Yeah.
So a question regarding Roger your comments about evaluating other uses of capital once we get through the next couple of quarters with buybacks I believe the.
Current three year plan was.
Internally focused in that M&A was not something that you would consider is that correct and if that's still the case.
Yes. So we we believe strongly that we have a very unique organic growth opportunity with our positioning in this much bigger market and that's really the focus and how the three year strategic plan was contemplated a as it relates to traditional bank M&A. We have said that we would consider.
Some smaller M&A and our fee based businesses, particularly the wealth management space, but I think from an overall capital management perspective, and that's the way you should be thinking about us.
Got it Okay, and then along those lines, Roger just remind us of sort of the the capital threshold.
It'll be a P.C. in terms of what you would consider your internal targets, so helping us get a sense for.
What is also excess.
So our optimal Tc ratio over you know cycle would be somewhere between seven and 8% and as we've talked about you know that's been stress tested multiple times, including our own experience going through the deep recession were clearly significantly.
The higher than that more than we thought we would be because we landed with better capital. After the closing of a beneficial. So I think that provides us a lot of flexibility or whether it's to use it in buybacks or other deployment of capital as we see fit or if there are things were to change in the economy.
With that we would have a buffer there as well. So we just look at at this point as it gives us.
Significant optionality.
Right, Yeah, no very clear there until I guess, then in terms of timing to work that capital ratio back down to your optimal levels with a depository deal you know kind of off the table near term.
You know getting back to that original question to paying out over 100% of earnings why wouldn't do not see that.
Plus.
For this year.
Yeah, well, obviously I think it's dependent upon share price.
And it's dependent upon other factors as we see you know either opportunities to invest in the business.
Honestly, we're the best in unison fee based acquisitions or other things I you know my comment on the page of the buybacks is I would expect the current pace you thought that we certainly will evaluate based upon all those factors and increase.
In that buyback activity and that would all be factored into our regular capital planning, which as I said, we go through in the first quarter of each year.
Okay, great. Thanks for that and then switching gears to the margin the four tend to for 15.
For this year that contemplates a June could you quantify what that cut would mean within that.
Within that range from a basis point perspective.
Sure so given the timing of it and the presumed data that we've seen more in the more recent rising rate environment about of about 25%. We would expect that and act to be relatively small about $2 million or couple of basis points.
Okay got it.
Next topic, and then just circling back to the expense conversation, particularly the.
Discussion around the accelerated expenses could you quantify what if anything that impacted or impacts your 2020 efficiency guide to the decision to do that.
Sure. It does somewhat by <unk> percentage 0.4, so but it is included in the outlook that we provided and we would expect when you normalize our fourth quarter cost that you see some modest growth throughout the year, primarily driven from growth in investment in the business and Dillon.
Very trends.
Okay and then.
To follow that I made it.
Well, we with that 59% Guy.
Could you help us with what you would consider to be kind of a core growth rate for the company from there from a percentage basis or.
Even potentially simplified further given all of the moving pieces for the absolute dollar expense base for 2020 and 21.
Yeah. So we typically don't provide that level detail.
What I would say is if you think about kind of the assumptions underlying the 2020 outlook.
Around underlying loan and deposit growth the expectation that our fee income would outpace that growth and our ability to scale. The business I think it would be fair to expect you know, 10% plus growth thereafter on the bottom line basis, but again, that's just you know swags of the those performance.
Metrics drawn out we typically don't provide detail at that level.
Okay. Thank you guys that's it for me.
Hi, Thank you again, if you like to ask a question. Please press Star then one on your Touchtone telephone.
One moment please.
Little question from Brody Preston of Stephens, Inc. Your line is open.
Good afternoon, everyone how are you.
Okay Brody.
Hey, So I just wanted to just real quick just sticking with the delivery transformation just reading the headline on that slide so its 15 million of Capex. This year, I, Dominic and its 9.7 million.
Expenses being added to the run rate. This year and then it's 8.2 million of revenue synergies as that is that correct.
So let me clarify it it's a gross investment or 15.2 million, which includes about $6 million of cap at and then when you begin to amortize that you would have a net.
Expense of 9.7 million that is offset by 1.5 million of revenue lift to the 8.2 million is the net expense.
Offset by the revenue.
Okay. Okay. So its just.
Just in terms like for our model it but the one and a half gets added some revenue.
Other income and that 9.7 units added two.
<unk> expenses for the run rate for 2020, and then 6 million as depreciated are amortized over like a five year basis or something like that.
That's correct. So a couple of finer points on that the depreciation would be between three and five years, depending on the fraud project and the 1.5 million as spreads between our fee income and our margin as we.
Leverage increased pipelines generating a more deposit and loan growth as well.
Okay. All right. Thank you very much like clarification I appreciate that.
[laughter].
One ticky tack one on the margin for me so its two to three Deps accretion next beneficial and it looks like it was 47 basis points all in some beneficial. So it's about 49 to 50 basis points of accretion. All then is that correct.
I'm, sorry, which period are you speaking to.
For Fourq, you sorry about that.
So and if you could repeat the numbers that [laughter] yeah. So its Ah you said it was two to three Bips X beneficial of accretion in the fourth quarter and then it looked like it was about 47 basis points of accretion from beneficial in the quarter.
So all of them like 49 to 50.
That is correct. Thank you.
Okay, great. Thank you.
And then the ROI guidance. Other 144 that does that include any other fee income or revenue synergies beyond what you outlined on that delivery transformation slot.
Oh, yes. It does in fact it incorporates the beneficial business cases that we've been speaking to for the last year and a half which is you know the investment in the fee income opportunities that we saw that we have in our legacy footprint that we can leverage across our larger customer.
Basin larger geographic footprint specifically.
Mortgage fee income.
Credit card SP and wealth.
Okay, and if I remember correctly that was about six basis points out of them to the our away and the original plan is that correct.
That is correct.
Okay, Alright, great. Thank you see an eye recovery that you had a this part of the 1.3 million was that tied at all to the health care alone another refinery long charged off into Q.
No Brody that was a much older legacy different unrelated credit.
Okay, I guess I'm you know there was a headline.
You know that.
Refinery sold for the top bed. So I guess I'm, just trying to drill down in terms of potential recovery moving forward tied to that refinery loan.
So if you have any color there are there would be appreciated.
So obviously were part of that bankruptcy process we're closely.
Watching that process in evaluating our options, but beyond that there's really nothing to report at this point.
Okay. All right. Thank you I mean, the NPL that moved a that moved off the books. This quarter was that that was the 20 million sort of local health care facility that you guys also spoke about on the two to call.
That's correct.
Okay great.
And then just ignore the so no new land you know I know, it's a small portion of the book right now, but it continues to grow at a pretty healthy clip. So I'm just wondering to what I was just wondering if you could give us a sense. So what the average ticket side is there and what the typical customer looks like and you know the duration and yield on those loans.
So I'll just give you the the broad overview okay.
A national small ticket to think kind of 10 to 20000 dollar vendor driven leasing.
Business and that is sourced primarily through direct channels and broker relationships. So it's all across the country small ticket.
And are driven you know leasing and it's performing you know very very well.
And according to plan, we're very very pleased with that we see lots of opportunity. There. This is a little bit behind their original plan, but what's really starting to hit an inflection point and take off and we see I'm really nice synergy with our with our commercial business and our and our CFO .
And small business teams I'm as well Dominic can give you a little bit of color you know when the yields in that business, because obviously it significantly higher than.
Normal commercial book, Yeah, So just the supplement.
While the loans are generally typically average what Roger had mentioned they they can range from anything on the 5000, a level and the low side to significantly higher depending on the customer the quality and the product et cetera, we are generating yields in the high single digits to the mid teens, depending on the credit risk.
On product in general terms, but these are typically three to five year duration contracts.
Okay, Great I appreciate that color and then one last one the.
The amount the the CD book, the higher costs CD book that you have pegged for run off you know just across customer time deposits and broker time deposits grew by 2% and then two to two and half percent. This quarter. So I just wanted to get a sense for what the amount or is that you pegged for run off for that higher costs CD book.
You know sort of what the average cost is there and whether or not it would be even they run off or if it would be frontloaded in the beginning in 2020.
Yeah, I would say, it's relatively even from quarter to quarter.
But if you think about.
A year year and a half ago, we're generating 18 month duration.
So longer terms higher yielding and that some of those rates churn will be reducing those back to more rack rate and that will create some attrition.
We don't typically Dick's disclose that level detail, but nonetheless, it would run off.
In an amount that would reduce our growth rate by a percentage or too.
Alright, great. Thank you everyone sort of time I appreciate it.
Thank you.
And with no further questions in queue I'd like to turn the call back over to Mr. Rodger Levenson Sir.
Thank you and thanks again for everybody.
On the call today, Dominic and I look forward to seeing many of you. When we go back out on the road in coming weeks. We're all also happy to address any other questions that you may have prior to then thanks again and have a good day.
Thank you.
Ladies and gentlemen, this does conclude today's conference. Thank you participating you may now disconnect.