Q3 2021 Midland States Bancorp Inc Earnings Call
Ladies and gentlemen, thank you for standing by and walk through the Q3 2021 Midland States Bancorp earnings call. At this time all participants are in a listen only mode. After the speaker presentation there'll be a question and answer session.
The question during the session need to press Star one on your telephone if you require any further assistance. Please press star Zero I would now like to turn the call over to your host 20 Rossi of financial profiles you may begin.
Thank you Kevin Good morning, everyone and thank you for joining us today for the Midland States Bancorp third quarter 2021 earnings call joining us from Midlands management team are Jeff Ludwig President and Chief Executive Officer, and Eric Lemke, Chief Financial Officer, we will be using a slide presentation as part of our discussion this morning.
If you've not done so already please visit the Webcasts and presentations page of Midlands Investor Relations website to download a copy of the presentation.
Before we begin I'd like to remind you that this conference call contains forward looking statements with respect to the future performance and financial condition of Midland States Bancorp that involve risks and uncertainties, including those related to the impact of the COVID-19 pandemic.
Various factors could cause actual results to be materially different from any future results expressed or implied by such forward looking statements.
These factors are discussed in the company's SEC filings, which are available on the company's website. The company disclaims any obligation to update any forward looking statements made during the call. Additionally management may refer to non-GAAP measures, which are intended to supplement but not substitute for the most directly comparable GAAP measures.
The press release available on the website contains the financial and other quantitative information to be discussed today as well as the reconciliation of the GAAP to non-GAAP measures and with that I'd like to turn the call over to Jeff Jeff.
Good morning, everyone and welcome to the Midland States earnings call before we begin today I have some sad news to share.
Week, we lost a beloved member of the Midland family when Leon Spark, our former President and CEO passed away after a long battle with a L. S.
Besides being the driving force of an unprecedented period of growth that turned Midland into one of the largest community banks in Illinois, Leon was a great friend and mentor.
So many of us at the company.
Me as energy enthusiasm and hard to help build the Midland culture that serves as our foundation today, we were fortunate to have him as a friend and a colleague.
And he will be deeply missed.
Now moving to our usually prepared remarks, I'm going to start on slide three with the highlights of the third quarter.
We executed well and delivered a strong quarter driven by positive trends across most areas of our operation.
Everything that we have been working on over the past couple of years from added more banking talent to streamlining our cost structure to optimizing our funding sources is generating the desired results. We're.
We are seeing stronger more diversified loan growth a decline in our cost of funds and an increase in our net interest margin.
Higher levels of reoccurring fee income and improving efficiencies all of this combined to produce another strong quarter of earnings we generated net income of $19 5 million or <unk> 86 per diluted share.
And our core earnings power continued to improve as our adjusted pre tax pre provision income was $28 $4 million in the third quarter, an increase of five 2% from the prior quarter.
This year, we have talked about our progress in adding new commercial banking talent, particularly in higher growth markets in northern Illinois and St. Louis combined.
Combined with a steady increase in loan demand as the economy continues to strengthen.
The new additions are helping to drive a higher level of organic loan growth, excluding PPP loans, our total loans increased at an annualized rate of 12, 3% in the third quarter.
The loan growth was well balanced with increases in commercial commercial real estate and consumer portfolios offsetting declines in PPP and residential real estate loans.
When both commercial FHA warehouse lines and PPP loans are excluded our total loans increased at an annualized rate of eight 2%, which is well above the rate we have seen over the past several years largely due to improved growth in commercial lending.
This is attributable to a number of factors we have increased our focus on this area.
Which has resulted in a higher level of productivity among our existing banking teams. We're getting good contributions from the new bankers, we have added over the past year and we are benefiting from our increased presence in higher growth markets.
As a result.
Conventional C&I lending is becoming a stronger complement to our equipment Finance group, which has been the primary driver of commercial loan growth over the past few years, and which continues to generate solid growth.
We are also effectively generating full banking relationships with commercial clients, which is positively impacting our deposit mix.
During the third quarter, our total deposits increased seven 8% from the end of the prior quarter with all the growth coming in noninterest bearing and low cost checking and money market accounts.
Portion of the growth was attributable to higher balances of commercial FHA servicing deposits, while the remainder was largely from new and expanded relationships with our commercial clients.
The improved deposit mix combined with the elimination of higher cost funding sources last quarter helped drive an 11 basis point decline in.
And the cost of our average interest bearing liabilities.
This had a positive impact on our net interest margin increased five basis points from the prior quarter.
With the more productive commercial banking team, we have built and growth in our reoccurring fee income most notably in wealth management as a result of the Atg Trust Company acquisition, we are generating more revenue, while also keeping our expense levels relatively stable.
This is enabling us to realize more operating leverage as we continue to grow the bank and our efficiency ratio improved to 58, 8% in the third quarter from 62% in the prior quarter.
Another area, where we are seeing positive trends as asset quality.
We are continuing to successfully resolve nonperforming loans, while the inflow of new non performers is slowing.
As a result, our total nonperforming loans declined by 11% from the end of the prior quarter, while our net charge offs were down by 26%.
With the improved asset quality, we are able to release a little more of the reserve that we had built up during the height of the pandemic.
Moving to slide four we will provide an update on our PPP efforts and the impact these loans had on various line items in the third quarter.
As the forgiveness process continued our PPP loans declined by about $64 million and brought our total balances to $82 million at the end of the third quarter.
We recognized $2 $2 million in fees during the third quarter up a bit from the $2 million that we recognized in the prior quarter.
As of September 30th.
We had $3 $5 million in fees to be recognized.
Turning to slide five will provide an update on our loan deferrals during the third quarter, we had a steady flow of borrowers being able to return to regular scheduled payments upon the expiration of their deferral period as a result, our total deferrals declined by 68% from the end of the prior quarter.
With just $34 million remaining at September 30th or less of 1% of total loans.
Of the remaining deferrals almost all are now making at least a partial payment at.
At this point I'm going to turn the call over to Eric to provide some additional detail on the third quarter.
Thanks, Jeff I'm, starting on slide six and we will take a look at our loan portfolio.
Our total loans increased approximately $80 million from the end of the prior quarter. This was due to the higher level of commercial loan production that Jeff previously discussed as well as a $51 million increase in period end balances on commercial FHA warehouse lines growth in the equipment finance portfolio and an.
<unk> and consumer loans the growth in these areas offset the continued forgiveness of PPP loans as well as continued runoff in the residential real estate portfolio due to refinance.
Financing activity excuse me while period end balances were higher on commercial FHA warehouse credit lines average balances were lower than in the prior quarter.
September 30th our balances of PPP loans were down to $82 million.
Excluding PPP loans commercial warehouse credit lines and consumer loans added through the Green Sky partnership our total loans increased at an annualized rate of 6%, which reflects our improved ability to generate growth in commercial and commercial real estate loans.
On slide seven we've provided an update on our equipment finance portfolio as of September 30, we had just $9 million of deferrals, which represents a decline of 74% since the end of the last quarter.
We continue to see a steady recovery of our borrowers in the transit and ground transportation industry as the trends and business and recreational travel continued to improve.
We've also seen more borrowers returned to scheduled payments as well as others that remain on deferral, making some form of partial payment.
88% of the borrowers on deferral in this portfolio are now, making a partial payment.
On slide eight we've provided an overview of our hotel motel portfolio at September 30, we had just $7 million of loan deferrals in this portfolio, which is down 82% from the end of the prior quarter and all of the remaining borrowers on deferral are now making interest only or some other.
Their form a partial payment.
Looking at slide nine we provided an update on the consumer loan portfolio that we have through our relationship with Green Sky. This portfolio has performed extremely well during throughout the pandemic at September 30th we only had 700000 of deferred loans in this portfolio, which represents just one.
110th of 1% of the total loans and just 25 basis points. The delinquency rate remains even better than the historical range that we've seen in this portfolio.
In addition to the strong performance. The escrow account is available to cover any deficiency in Midlands principal balances escrow account increased to $34 $6 million at the end of the third quarter.
Jeff will provide an additional update on the green Sky relationship later in the call.
Turning to slide 10, we'll take a look at our deposits.
Total deposits increased $405 million or seven 8% from the prior quarter.
The increase was largely attributable to an increase in commercial FHA servicing deposits as well as higher balances of other commercial deposits, resulting from our business development efforts.
Looking ahead to the fourth quarter, we will have additional opportunities to reprice higher cost time deposits, we have $184 million of Cds maturing at a weighted average rate of 166%.
As these deposits renew at current rates, we should see further reduction in our deposit costs.
On slide 11, we will walk through the trends in our net interest income and margin.
Our net interest income increased two 6% from the prior quarter, primarily due to an increase in net interest margin.
Excluding accretion income our net interest margin increased seven basis points due primarily to the reduction in our cost of funds, resulting from the elimination of higher cost funding sources last quarter.
We were able to generate an increase in our net interest margin. Despite an unfavorable shift in our mix of earning assets as we continued to add to the investment portfolio to help support net interest income.
On an average basis, the investment portfolio increased by $39 million compared to the prior quarter as we added securities with yields in the range of $1 two 5% to 145%.
Our net interest margin for the quarter, excluding the impact of PPP income was $3 two 4%.
Looking ahead to the fourth quarter, we have a little more room to bring down deposit costs with the maturity of the Cds I previously mentioned, however, as Jeff will discuss in a few minutes. We have received a large influx of low cost deposits in October that will that will temporarily increase our excess liquidity and placed pressure.
<unk> on our net interest margin in the fourth quarter.
We've used a portion of this additional excess liquidity to further deleverage our balance sheet by prepaying, another $130 million of <unk> advances.
Including $80 million of longer term advances that matured in 2025.
Prepayment will reduce our interest expense by approximately $2 $2 million annually.
We will record a prepayment penalty of approximately $4 $9 million in the fourth quarter, which will be partially offset by the unwinding of an interest rate swap that will result in a gain of approximately $1 $8 million.
Turning to slide 12, we'll take a look at the trends in our wealth management business our assets under administration declined by $19 million from the end of the prior quarter, primarily due to market performance. However, wealth management revenue increased by nine 9% due to the full quarter contribution of <unk>.
Atg.
Compared to the third quarter of last year, our wealth management revenue has increased nearly 30%, which reflects our strong progress on growing our recurring sources of fee income.
On slide 13, we'll look at noninterest income.
We had $15 $1 million in noninterest income in the third quarter down 13, 1% from the prior quarter.
Klein was primarily due to a higher level of impairment on commercial mortgage servicing rights in the third quarter, resulting from an increase in prepayments.
Excluding these impairments are non interest income decreased two 1% from the prior quarter, primarily due to gains on the sale of other real estate owned that we recorded in the second quarter. This was partially offset by the higher level of wealth management revenue previously mentioned.
Turning to slide 14, we will review our noninterest expense.
On an adjusted basis, primarily excluding the items related to our tax settlement and prepayment of the FHFA advance last quarter, our noninterest expense declined by approximately $200000 from the prior quarter with not much variance in any of the major line items combined with the higher level of revenue that.
We generated our efficiency ratio improved by about 140 basis points.
We continue to expect our near term run rate to be in the $40 million to $42 million range. Although we are continuing to integrate atg and eliminate some costs from that business as well as realize some additional efficiency enhancements from technology, Rollouts, which could result in a slight decline in noninterest expense from third.
<unk>.
Though the timing of when those items will impact our expense levels is uncertain. So we are leaving our guidance at this wider range for now.
Turning to slide 15, we'll look at our asset quality trends.
Our nonperforming loans decreased $6 7 million from the end of the prior quarter as our dispositions and upgrades exceeded the modest amount of new inflow, we saw in the quarter we.
We had $3 million and net charge offs in the quarter or 25 basis points of average loans.
Are these net charge offs related to the charge off of the specific reserve held against one of the three hotel loans in the Chicago area that we placed on non accrual last quarter.
We expect to sell this note during the fourth quarter with no additional loss.
The other two loans remain in nonperforming and then Theres been no additional deterioration of reserve requirements for either credit.
We recorded a negative provision for credit losses of $200000 in terms of the various buckets that make up the provision we recorded zero provision for credit losses on loans due to improved asset quality.
And a negative 200000, a provision for credit losses on available for sale Securities.
At September 30, approximately 96% of our ACL was.
<unk> the general reserves.
On slide 16, we show the components of the change in our ACL from the end of the prior quarter, our ACL decreased by approximately $3 million. The decrease was driven by a combination of charge offs on SEC reserves and favorable changes in the portfolio. This was partially offset by a small addition related to economic forecasts.
On slide 17, we show our ACL broken out by portfolio given the positive trends. We are seeing we brought down our coverage ratios in most areas of the portfolio. One notable area of increase in the quarter was in the lease financing portfolio. The increase was primarily due to an increase in net charge offs in this portfolio compared to prior.
<unk>.
Net charge offs for the equipment finance portfolio as a whole were 50 basis points in the third quarter up from 36 basis points in the prior quarter.
And with that I'll turn the call back over to Jeff, Jeff Alright, Thanks, Eric.
I will wrap up on slide 18, with a few comments on our outlook I want to begin by providing some information about how we expect to be impacted by Goldman Sachs pending acquisition of Green Sky.
<unk> had ongoing discussions with green Sky and at this point, we expect that new loan originations through the Green Sky partnership will continue through the second or third quarter of 2022.
Which will enable us to keep outstanding balances in this portfolio relatively stable over that period.
After the new loan originations and we expect the portfolio to decline by $400 million to $450 million during the following 12 months.
Based on traditional repayment trends, we would expect the remainder of the portfolio to run off over the next few years after that.
Although we werent anticipating an end to the green Sky relationship. The work we have done in other areas over the past couple of years to improve our business development capabilities has put us in a better position to be able to offset the runoff of this portfolio.
This includes the additions we have made and will continue to make to our commercial banking team further expansion of our equipment Finance group the build out of our SBA lending business and the upcoming launch of our consumer loan origination portal on our digital banking platform.
And we will evaluate other fintech partnership opportunities as well, although nothing that would represent the same type of volume as the Green Sky program.
Through the contributions that we think we can get from all of these other areas. We believe will be able to offset the impact of the green sky runoff.
And when that process is complete we will have a more diversified loan portfolio comprised of more full banking relationships that generate both loans and core deposits as well as more fee income as our SBA loan production increases.
We've recently made some enhancements to our business development and underwriting processes in the SBA area.
Which should result in more lead generation and loan production in the coming quarters looking more near term our loan and deposit pipelines remain healthy and are increasing with each quarter within the community Bank group. The loan pipeline is the largest largest it's ever been and was 46% higher at.
The end of the third quarter than it was at the end of the second quarter.
This should lead to further quality balance sheet growth and continuation of the positive trends that we've seen in the business lash.
Last year, we divested our commercial FHA loan origination platform.
And we agreed in the sale that they're servicing deposits would move to Midland earlier. This month, we received $400 million of servicing deposits. These deposits should keep us comfortably over $7 billion in total assets.
And provide another $400 million of liquidity that we can redeploy in earning assets that will drive additional growth in our net interest income.
Initially we will put the majority of this additional liquidity in the investment security portfolio to support our net interest income, although as Eric mentioned this will temporarily depress our net interest margin, which will offset to some extent.
With the repayment of the <unk> advances over time, we will put more money to work and funding our loan growth.
As mentioned earlier, we have seen good results from the additional bankers, we have added in higher growth markets in northern Illinois, and St. Louis as well as higher level of productivity from our existing banking teams.
At the beginning of the year, we mentioned that we had named a new market President in St. Louis and added two lenders one to focus on SBA and the other to focus on agribusiness since that time, we've added two additional loan officers in the St. Louis market with strong experience in commercial real estate and added another.
Remember to the SBA team.
In our northern Illinois markets, we added a lender towards the end of last year and have since added two additional bankers with strong commercial lending experience.
Initiative has given us the opportunity to pursue additional commercial clients and we are winning a good share of these opportunities.
With the larger presence we are building in these higher growth markets and the more productive commercial banking team. We are building. We believe we are fundamentally changing the organic growth profile of the company.
This impact on our growth is going to be muted over the next couple of years as we replace the green Sky portfolio, but after that is done we think we will have the ability to generate a higher level of organic growth than we have historically produced with more areas of the bank contributing to that growth and.
In closing we are very pleased with how we're performing and the results. We're seeing from our strategic initiatives. We are seeing solid high quality balance sheet growth the composition of our deposit base continues to improve our.
Our reoccurring sources of fee income are increasing as our wealth management business scales.
And the growth in our client base positively impacts our service charge and interchange revenue.
And we are generating more revenue, while keeping expenses stable, which is driving more operating leverage.
As a result, we are well positioned to continue delivering a higher level of profitability in the future.
And with that we'll be happy to answer any questions.
Ladies and gentlemen, if you have a question or a comment at this time. Please press. The Star then the one key on your Touchtone telephone. If your question has been answered or you wish to move yourself from the queue. Please press the pound key.
First question comes from Terry Mcevoy with Stephens.
Hi, good morning, guys.
Good morning.
A question on the reserve.
The Green Sky portfolio, given the strong credit.
Profile, there was a 25 basis point reserve and as you think about Jeff all the areas that you mentioned in terms of future growth how is that going to impact the reserve ratio and should we build in maybe some incrementally higher provisions.
In the latter part of next year as part of the balance sheet transformation you ran through.
Yes, I think I think thats right as we sort of green Sky's sort of rolled out and we put.
More commercial commercial real estate loans on the books, we're going to go.
Out of.
Increase.
From 25 basis points.
One or more than 1% so yes.
We would expect.
That will be recording some provision.
As we get into next year.
Okay.
And then the servicing deposits to $400 million.
That came in in the fourth quarter.
As we think about next year, how much volatility do you expect to see within those deposits.
Given the elevated levels that you have today.
As it relates to servicing deposits for the most part they're fair they are fairly stable.
There is a little volatility and it is.
Loans are being.
Great modified and so there's some.
Some movement in deposit, but usually it's a.
We take on more deposits in a short period of time, and then they'll come back so that sort of $400 million is sort of the.
It's probably a baseline number and at times it might be quite.
Quite a bit higher than that.
And sometimes it would be at the end of the quarter and sometimes it will be during the mid.
All of the quarter.
But I think that that's sort of a baseline that we think is going to stay and then from there it will incrementally grow as their business grows and.
And there'll be a little up and down as they are as they are processing business.
Thanks, and then maybe one last question if I could for for Eric.
L B.
Pre prepayment can you just run through that data again in terms of the size of the FHL advance maybe what the interest rate was and then.
The prepayment penalty and what you would expect to save in terms of just interest expense going forward yes.
Yes, sure I'd be happy too so.
We unwound.
Third $30 million of FHA advances.
$80 million of those were longer term advances that carried rates just a tick over two 5%.
The other $50 million was a shorter term.
<unk> that was matched with the interest rate swap that we did.
The wound as well and took a gain on so when you look at the total $1 30, the interest expense going forward to save will be approximately $2 $2 million annually.
And then the prepayment penalty was $4 $9 million, which was offset by the gain on the swap of one $8 million.
Perfect.
Okay, Great I appreciate that thanks for taking my questions.
Ill hop out of the queue.
Our next question comes from Michael Perito with <unk>.
Hey, good morning good.
Good morning, Mike.
Sorry to hear about Leon Jeff I have a lot of good memories from the IPO and coming out definitely have and I'm sure you do as well so sorry for your loss.
Okay.
Mike.
I wanted to spend a minute on the green Sky.
Partnership so it sounds like you guys will have more time to replacement loans than I, originally expected, which is great. Because you guys. Some more flexibility there, but I apologize if I missed it can you maybe just walk through you have carriers specially credit impact can you, maybe just walk through that yield impact where the green sky loan yields generally we're in.
And where you expect at least near term most of the CRE, that's going to replace it to kind of come on.
Yes, so good green sky portfolios sort of between $3 50, and $3 75 ish something like that.
And it depends on the mix of the portfolio at any period of time, but sort of in that range and I would say commercial real estate is coming in.
A little little.
On average a little bit less than that we will see a big differ.
<unk> difference in top line yields.
Okay.
And you mentioned.
Past potentially pursuing other partner fintech partnerships to generate some volume obviously nothing to the magnitude that green Sky was but.
I'm just curious if you could give us some more parameters around what types of.
Products interest you is this largely going to be something more in the consumer arena again to kind of diversify the portfolio or or.
Is there other.
Areas that Youre looking at just would love any more thoughts or color you have they are willing to share.
So more than on the consumer side.
As I sort of reflect back on the last 18 months.
And look at how that Green Sky portfolio performed.
Sure.
And some tough times, it's performed very well and I think having some diversification.
<unk> in consumer and in a good way, where we have some credit enhancements. So these programs that we're looking at also have.
Some level of credit enhancements.
To help set up.
Not have one sort of large partnership with one company, but maybe.
A couple to a few partnerships with some some companies that that will do business with that isn't going to.
There'll be a sort of a quarter to a third of where we're at with Green Sky.
Got it Okay and then.
The margin impact of all of this I mean, so you're right I think the correct me if I'm wrong, but the core NIM was $3 17, I think in the third quarter.
You're bringing on.
Almost almost half a billion of deposits from Dwight that sound like they're going to go into securities at least initially or most of it.
And then over 18 months period, you have call it half a billion dollars.
350 to 375 loans that it sounds like you can actually replace fairly close, but certainly maybe slightly below.
CRE production. So I mean is it fair to think of your NIM.
On a core basis.
Likely being I don't want to say depressed, but I guess for lack of a better word somewhat depressed for the next five quarters here until now that catheter Dwight funds have been.
A little bit more efficiently deployed and you guys have had a year or so to replace some of the lost squeeze skylines.
Yes, Mike I think thats right. So so I kind of think about our NIM ex PPP.
Like that $3 24 number.
And I think over the next couple of quarters with this influx and liquidity, we're going to see some compression on that number.
Somewhere between probably 10 to 15 basis points.
And then and then see some upside maybe a year from now as we put some of that cash to work and continue to grow after a loan portfolio, but yes in the short term.
That $3 24 number ex PPP I think we will see some pressure in that 10 to 15 basis point range.
Got it helpful. Thank you guys for taking my questions I appreciate it.
Yes. Thanks.
Yes.
Again, ladies and gentlemen, if you have a question or a comment at this time. Please press Star then the one key on your Touchtone telephone.
Our next question comes from Nathan race with Piper Sandler.
Hi, guys good morning.
Good morning.
Question, just on kind of loan growth outlook, maybe a little further out once the green Standalone start running off in the back half of next year and with the pieces that you've put in place on the commercial side of things and some other segments as well.
Last several quarters, how are you guys kind of thinking about just net growth in the back half of next year and again I don't mean to get too far in front of us, but maybe as you think about in Q1 2023 reasonable should we expect.
Some growth.
Green Sky runoff headwind going to be.
A challenge in that those may be flat to down.
A couple of years out from today.
Yes.
We think we have a lot of good things going that runoff isn't going to start until the back part of next year. So the good thing is we've got yes.
We've got almost a year.
To work.
We've laid a lot of good groundwork to sort of hopefully offset.
That runoff so I think in the short term, we're going to be able to see some loan growth.
Because we've got good commercial pipelines in the Green Sky portfolio is going to be sort of get held at about the same level. So I think we will see loan growth.
Into next year and as we get to the back part of the year as the Green Sky portfolio runs off.
I'm not sure we're going to we're going to be able to.
Matched the run off.
So.
I think the loan balances are going to go up and then theyre going to start to migrate down a little bit as we move into early 'twenty three because the green Sky Runoffs is going to be.
Pretty quick pay $400 million in a year is a $450 million.
Out of money to get to work.
So I do think there'll be some some loan balance pressure in that first sort of first year.
Sometime in late 'twenty three to late 'twenty. Four then the actually the Green Sky portfolio begins to sort of slow the slowdown begins it will sort of go out for another.
Q3 years before it wall run run away.
So that's the period of time that we're going to begin to build today.
Then.
Hopefully.
<unk> pulled out of studies, we can for that period of time, it will be challenging because it's a pretty big number.
Alright.
Got it.
Really helpful. I appreciate that Jeff.
Perhaps just turning to capital.
Capital, we'd love to just get some updated commentary just in terms of the priorities.
Obviously, you guys were active on the buyback.
In the quarter, which makes sense just given the decline in valuations during the quarter.
But as you kind of sit here today based on what Youre seeing in terms of.
Acquisition opportunities.
On the whole bank side of things there.
An additional kind of platforms to supplement what you guys that perhaps on the wealth side of things.
Would just love to get some updated commentary in terms of how you guys are thinking about excess capital, which I imagine should continue to build.
Over the next few quarters here at least in.
And kind of where the priorities.
Shake out today.
Yes.
Priority is to build our capital ratios.
With the caveat that.
If <unk>.
If our stock trades at evaluation, where we can get a one or less than a one year earn back we're going to use some of our current quarter earnings to buy some stock back sort of what we did in the third quarter make roughly $20 million with dividend out six we bought feedback we retained 10.
If our stock.
Starts to trade at a better valuation, we will not be buying our stock back we will retain all and then.
We continue to look for I'll say smaller sort of.
Easy integration opportunities such as Atg, right and maybe it's not in the wealth space.
And another business of ours, but really sort of small.
Sort of add ons that are nice little add ons at all.
A lot of disruption in the company I'll say.
Over the last two years not having M&A on the table is really helped us focus on.
Running I think a better business building pipelines.
And building a company that can grow organically not just through M&A and so if we can.
Get that done which I think.
Through we're through all the building now at sort of what.
<unk> new.
Continue building and watched some of the fruits of the labor.
And a company that has a lot of expertise on the buying side I think is a great combination as we get into late 'twenty three.
Definitely and I apologize if you guys touched.
Touched on this but in terms of the outlook, we're having to provide for some growth as the green book runs off.
Starting in the middle part of next year.
I guess, what's kind of the outlook for charge offs within that context in terms of.
Reserve trajectory going forward.
Okay.
I mean.
I think we would expect charge offs to be anywhere from 10 to 20 basis points is sort of.
Where I would.
Project charge offs right.
To do.
Understood.
And where we're trending in that number is trending in the right direction.
Okay, Great I appreciate all the color. Thank you guys.
Thanks.
And I'm showing no further questions at this time I'd like to turn the call back to management for any closing remarks.
Thanks for joining everyone.
Really really solid quarter and look forward to speaking with everybody next quarter. Thanks.
Yes.
Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.
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