Q2 2023 Stellar Bancorp Inc Earnings Call
Good day, and thank you for standing by walking through the stellar Bank Corp acreage sports second quarter 2020, the results conference call.
At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question during the special need to press Star one on your telephone you will then hear an automated message a bias in your hand as race to withdraw your question.
Please press Star one again, please be advised today's conference is being recorded I would now.
And the comps will be your speakers today correlates aerial cheaper Chief Accounting Officer. Please go ahead.
Good morning, all seem to like to walking through our earnings call for the second quarter of 2020.
This morning's earnings call will be led by our CEO Bob Franklin.
Alright.
They are <unk> executive chairman of the company.
Great.
Evident at the company as CEO of the bank.
And Joe what senior Executive Vice President and Chief Credit Officer of the bank.
Before we begin I need to remind everyone that some of the room.
<unk> made today constitute forward.
As defined in the private Securities Litigation Reform Act.
We intend all such statements to be covered by the safe Harbor provisions for forward looking statements contained in the <unk>.
Also note that if we give guidance about pizza result that guidance is only a reflection of management's beliefs at the time those statements.
And as such are subject to change we disclaim any obligation to publicly update any forward looking statements, except as may be required by law.
Please see the last page of the text in this morning's earnings release, which is available on our website at IR stellar Bancorp Dot Com partners all information about the risk factors associated with forward looking statements.
At the conclusion of our remarks, we will open the line and allow time for questions I will now turn the call immaturity of Bob Franklin.
Thank you Courtney.
And good morning, welcome to the scholar Bancorp second quarter earnings call.
Begin by thanking the great team at stellar banks for their continued and tireless efforts to build scale or back into the premier local bank in our markets.
Our team has been busy refining processes.
Conversion and we will continue in their work as we move through the year.
We will be concentrating on efficiencies through technology and expense control as we better define our needs as a combined organization.
This year has had its challenges with rapidly rising interest rates bank failures and uncertainty in the economy. There continues to be pressure on industry margins as we see inflation in people costs funding deposit costs.
And competition for the dollars, we held in our institutions at low cost per years.
However, we are seeing a slowdown in deposit run off while also seeing the beginning of a stabilization of deposit costs.
Though we are not able to call a bottom for NIM compression because of uncertainty with the fed actions, we certainly feel that downward pressure is easing.
We continue to concentrate our efforts on capital liquidity and credit.
Something we began almost a year ago, we have tightened our credit underwriting while still seeing modest loan growth. We have managed our deposit rate increases that we saw some out migration earlier in the year, we have seen moderation of those outflows and we have begun attracting new deposits.
We have been able to maintain our target of a low ninety's loan to deposit ratio all in an effort to manage through the current economic uncertainties.
As we move through the balance of the year. We will continue. These efforts. Our goal is is to ready our institution for the opportunities that will be caused by the stresses of the last year.
We believe that our industry will continue to consolidate and we intend to be positioned to benefit from that consolidation.
Our shareholders will benefit from our efforts and the great markets that we serve I'll now turn the call over to Paul.
<unk> our CFO .
Thanks, Bob and good morning, everybody. We are very pleased to report strong operating performance in the second quarter. Our net income was $35 $2 million representing diluted earnings per share of <unk> 66.
And annualized ROE of 131%.
Churn on tangible common equity of 17, 5%.
This was incrementally lower than the $37 $1 million.
Our diluted EPS of <unk> 70, <unk> earned in the first quarter due mostly to increasing increases in funding costs more than offsetting increased interest income.
Also notable for the quarter with noninterest income normalizing to a lower level of noninterest expense decreasing thanks, largely to lower merger expenses.
During the second quarter, we experienced a meaningful amount of catch up in our cost of funds, which was higher than our expectations and reflective of an intensely competitive deposit market post SDB, resulting in shifts in our funding mix and more generally reflective of where we sit in the interest rate cycle.
To put this in perspective, we went from accumulative cycle to date beta of approximately 15% on cost of deposits at the end of the first quarter to accumulative beta north of 24% through the end of the second quarter, which brings it closer to broader industry trends.
Since we started out with a pretty low cost of deposits and we maintain a strong base of noninterest bearing deposits at around 43% of deposits, we're pretty pleased with how our cost of funds compared to many of our peers, particularly those in attractive metro markets.
In the interest of keeping our core funding core we've maintained relative discipline on deposit pricing with a willingness to backfill with wholesale sources, such as <unk> advances, which increased from $239 million to $370 million in the second quarter.
$538 million in the second quarter all of this contributed to higher funding costs.
Due to increased funding costs, we saw net interest margin contracts from four 8% to 449% in the second quarter and from 438% to 397% when you exclude purchase accounting accretion.
Accordingly, our pre tax pre provision earnings.
While we do not like to see a downward trend in our NIM or pre tax pre provision profitability, we still feel pretty good about how we look relative to the industry and our ability to protect our relative profitability profitability profile in a challenging environment.
Before turning the call back over to Bob I'd like to make a couple of comments on our progress in positioning relative to our focus on capital credit and liquidity.
On capital strong year to date profitability fueled in part by interest based purchase accounting accretion more than offsetting significant noncash accelerated intangible amortization expense from the merger has helped us build regulatory capital at a very rapid clip.
Total risk based capital had gone from 12, 39% at year end 2022 to 13, 3% at June 30, and we feel very good about our prospects to continue to build capital in the near term.
I should note that at the end of the quarter, we had about $131 million in loan discount remaining and a core deposit intangible assets left to amortize a $129 $8 million.
With respect to credit we remain very pleased with performance so far in 2023.
Although nonperforming assets have ticked down and net charge offs have been minimal we took a provision of $1 $9 million relative to modest loan growth of just over $182 million.
Putting our allowance for credit losses to total loans at 124%.
We feel appropriately reserved given current economic unknowns, but we otherwise take comfort in our credit discipline and from lending and some of the strongest markets in the country.
On liquidity, our focus at the outset of 2023 on maintaining flexibility on the liquidity front continues to prove strategic for US we have been able to strategically access wholesale funding without over alliance and we feel good about our ability to manage our balance sheet to maintain favorable margins and earnings power.
In summary, we believe stellar is well positioned to manage through the current operating environment and to thrive.
The year to date has been quite eventful for the industry and even more eventful for stellar due to our rebranding and systems conversion in the first quarter and brought our integration efforts. We are super proud of the entire stellar team and appreciative of everyone's efforts.
The future of stellar is indeed bright.
Thank you and I'll now turn the call back over to Bob.
Thank you Paul and operator, we are ready for questions.
Thank you ladies and gentlemen, if you have a question or a comment at this time. Please press star one on your telephone. If your question has been answered reducing move yourself from the queue. Please press star one again, we will pause for them, while we compile the Q&A roster.
Okay.
Our first question comes from David Feaster with Raymond James Your line is open.
Hey, good morning, everybody.
Martin.
Maybe let's just start on the deposit front.
The commentary about some of the trends that youre seeing.
And stabilization.
Sounds like.
Most of the migration that you saw happened earlier in the quarter I'm. Just curious could you help us understand maybe some of the trends that you saw how much is true like was it outflows out of the bank. It doesn't sound like that's the case, but it sounds like truly more migration.
Two higher rate accounts.
And it sounds like that Thats slowed this quarter, but not.
Not not stopping I am just curious maybe if you could help us think of the trends on deposit balances.
The early read on on the third quarter.
Hey, David This is ray yes, so exactly the second quarter that we saw.
Improvement in pretty much every category of the what we call the deposit waterfall so.
Whether thats.
<unk> opened accounts exceeding in terms of dollar amount closed accounts are then looking at our carried deposits, which is kind of that but really the bulk of everything and what happened in carried ware.
We saw some.
Significant decreases in the first quarter and that substantially improved still.
A decrease in the carried but nothing like we saw in the first quarter, which was encouraging.
And if you look year to date both the.
But what I would call the net new in dollars, we picked up a really nice amount in net new.
I'm talking about core not including any brokered money. So that's encouraging I think it really speaks to the fact that we've we've gotten through the conversion we have a process now as far as onboarding and kind of energy around the stellar brand.
I'd like to.
Maybe dig dig into that a bit just could you could you elaborate on the growth that youre seeing.
It sounds like you think you might be able to drive core deposit growth going forward.
I guess, where where are you where are you having success driving this new account growth.
Is it with the existing clients is it new clients that you're attracting to the bank and I guess in terms of where are you seeing new add on rates I guess for for average deposits.
Deposit costs, while the new on the new what's coming into in the quarter as a combination.
Spanning relationships and taking a few market share gains.
Posit side, the one thing Thats nice is the.
The amount of nib of the if you look at the number of accounts.
<unk>.
Really nice number of nib accounts that are coming in as a percentage of it of the two.
Total so.
I think there is.
There is opportunity there and.
We've got our bankers are out with a little bit pause on the loan side were out.
Sure.
Trying to win customers on the deposit side.
On the interest bearing.
On the interest bearing that came in cost of those deposits. David those came in at about $3 45, and pretty stable compared to the first quarter of not including the nib. So just the interest bearing of new deposits that were opened in the quarter at $3 45, and Thats very similar to the first quarter.
Alright.
That's encouraging and then maybe touching on the loan side.
Could you help us understand maybe how demand is trending across your footprint, where you're seeing good opportunities and then just talking about the repricing dynamic.
In the next maybe six to 12 months, where were add on rates are coming where roll off rates are and then just trying to think about kind of how this all plays into the NIM and may be where our core NIM could shake out.
Once things do start stabilizing.
But we'll probably I'll touch on that let me give you a little bit on the color on the new.
On the quarter so.
Our new loans came on at $7 62 for the quarter.
Our renewed loans came on at 806 and those amounts are around the same about a half a billion or so each in each category and that came off of seven on the renewed that came on at 806. It came off of 724.
So.
Really like that where we were.
Where we put on those renewed loans and of course, we're working on those new loans as we continue to calibrate our models around new loan pricing.
Maybe talk about the what we're seeing yes. This is Joe on the demand side.
We've taken a something of a pause on.
Commercial real estate, where you've raised the bar on our underwriting and looking for more equity.
Shorter amortization.
Better compensating balances for more or so.
The CRE side, we've seen a slowdown because of the year.
Our increased underwriting requirements.
We're seeing some activity on the C&I side.
And visiting with our customers, we're talking to some people that there was some other banks are willing to talk to us so for sort of cautiously optimistic of a little bit of growth in the C&I side, but.
For new business on the commercial real estate side is it's got a bit slow.
Okay. That's helpful and I guess, maybe Paul I don't want to put words in your mouth kind of here in those numbers. It feels like maybe we're getting closer to a trough in the margin or at least the pace of compression should slow materially is that a fair characterization.
Yes.
Fair characterization, but I would lean towards the pace.
A contraction of compression flowing.
Really what we're what we are.
Facing and I think a lot of our peers are facing similar dynamics as a timing issue.
The assets are repricing at the same pace of.
The funding base and there is an aspect of our funding base now more so than in the past that is wholesale in nature whereabout around eight or so percent of our balance sheet funded by wholesale funds.
Rather be zero, but we're cognizant of the current realities, we have great core deposit base and ultimately we consider ourselves very fortunate to have a very large base of purchase accounting accretion all interest based purchase accounting accretion, which really amounts to.
A repricing of our assets a lot of our asset base and our balance sheet as of October one.
And when you think about how that is going to be really meaning there were I think that we're fortunate to have that be as meaningful for us because really that brings forward. The repricing thats happening every day, albeit it's where pricing thats happening.
As that the pace as wed like it to.
But it's really supporting what we think is more core margin, bringing more core margin forward.
To support us while this.
Kind of timing differential really exists in the near term.
Yes, I think.
One of the things we're watching happening in the marketplace, we're seeing assets start to reprice. So that people can actually get deals done again for for a number of months you've seen it's very difficult at the cost of capital today for people to pencil. Some of these deals to make them work. So.
That's starting to change a bit we're still in a great market in Houston, Texas and still one of the best markets if not the best in the country.
And that that really bodes well for us in our organization.
But the math still of the math and so people are getting used to higher interest rates.
So in the interim I think we see a little bit slower loan growth, but.
At the end of the day.
We will start to see things pick up again as we start to move through the cycle and people get used to what the borrowing costs are.
Okay. That's helpful. Thanks, everybody.
Thank you.
Again, ladies and gentlemen, this do you have a question or a comment at this time. Please press star one on your telephone. If your question has been answered or you wish to move yourself from the queue. Please press star one again and one moment for our next question.
Our next question comes from Matt Olney with Stephens. Your line is open.
Hey, Thanks, good morning, everybody.
Matt.
I will start with Paul I think you said that.
8% of the balance sheet is funded by <unk>.
Wholesale sources and.
Obviously, it's moved up a little bit but still.
That 8% for the back half of the year.
Especially with your comments about.
Maybe some optimism getting some core deposit growth the back half of the year.
Third.
While we are optimistic.
We are.
Pretty practical about the fact that the AD.
A more meaningful amount of wholesale funding is likely to remain on our balance sheet for longer.
Mistakes, we've had in new account openings and whatnot.
And the way that we're kind of.
Successfully bending the curve as it relates to.
Loan growth.
So theres a lot of factors that it will ultimately drive this wholesale funding piece, which amounts to a plug.
But the more success we.
We're able to have the further we get from.
The safer the distance we get from the first quarter. The more we can get back to business as usual in our business as usual strong.
The biggest locally focused bank and one of the best markets in the U S and we just have we've just rebrand it and the results of the fresh rebranding.
Output as it relates to new new account openings have been strong so.
We are optimistic but realistic at the same time that theres a lot of meaningful.
Forces market forces, having their way on the deposit market for ultimately where.
It'll be something that is hard to predict but we're feeling good about where we stand.
Matt I think we're also in our season typically both banks have seen deposit growth began sort of May June timeframe and start to build through the end of the year.
Sort of at a little bit of an unprecedented time, just based on what's happened with the fab, but.
It looks like we're starting to have that deposit build or at least the front end of that is starting to happen.
Which we feel encouraged by we think we've got.
Pricing right now.
And I think we are.
And it appears that we're able to attract new deposits and of that so.
With our focus on our and our belief is that we will continue to build deposits through the end of the year.
Okay great.
Great I appreciate the comments and then switching over to the fees I think Paul made a comment in the prepared remarks talking about kind of <unk>.
Normalization of the fee run rate.
Should we expect this to be kind of the normal run rate on fees, what we saw in <unk> or any other puts and takes to think about kind of the forecast.
Well.
July one.
It put us into.
The interchange.
Count I guess you can say.
Byproduct about crossing $10 billion. So all of that is true.
With the caveat that interchange income is something that we'll expect to see bean.
<unk>, 40% lower from the base, but of course, we're going to seek.
To grow.
So as to offset.
Some of that but that'll be a slower.
Right.
Perfect.
Okay.
I think that last I heard that interchange estimate the impact was about was.
Was it $2 $5 million annually that will start to see that in the third quarter is that right.
We've grown a little bit and I would I would.
Good.
Handicap I would take our debit card and ATM card income and put about.
40% I would handicap that that 40%.
Okay got it.
Okay.
Okay. Thanks for that and then I guess on the.
Expense side.
Would love to hear kind of a.
The outlook is with all the kind of puts and takes you you mentioned in prepared remarks, bringing the brand together, bringing the teams together.
Gration I appreciate kind of where you expect to be in the near term.
We're always analyzing the expense dynamics, but up to this point when you pull out the M&A piece, we're kind of right on track with our with respect to our guidance Matt.
Naturally with revenue being software as a byproduct of the current interest rate environment and return it over more rocks and we're trying to be very thoughtful about.
Where we allocate incremental spend or to the extent reallocate incremental spend where that comes from.
So we're trying to be very practical as it relates to that dynamic but.
We are on pace.
On a core expense run rate, we're feeling good about where that fits for the year.
Consistent with guidance.
Yes.
As you think about this we brought two banks together.
Over the $10 billion Mark we.
We did a lot of things around people.
Without totally knowing everything about each other and as we as we brought the banks together now we have a lot more feel about people and process.
The inefficiencies that we may or may not happen so.
I think the expectation for US is we will get more efficient and we do have the ability to get more efficient. Unlike maybe an acquisition where you.
Just following something into the end of the Tam I think we have the opportunity to gain efficiencies as we move through the year.
And that's not just with people processes and technology.
To lower those costs.
Okay I appreciate the comments and then I guess on the M&A front.
And the industry have you seen a handful of deals announced this week and I know stellar has been heavily involved in M&A.
In the past would love to get some updated thoughts on M&A chatter in Texas as far as what Youre hearing and then thoughts on M&A with respect to the stellar bank from here. Thanks.
Well youre right stellar bags.
Encouraged by what might be out there I think we've got a lot of discussions with folks around.
Different opportunities.
People are still trying to understand kind of where they are I think.
Mark's remarks on portfolios are becoming a big thing and trying to understand what that looks like what the capital destruction looks like.
And the ability to get a deal done and so.
I think you've seen some deals happen where people are starting to understand what that looks like on the other side.
What the combined organizations can do and what the benefit to the shareholders are.
And I think as we move through this a bit.
I think people will get a better understanding.
Where.
If they are trying to take a slight discount to what they thought they were going to get.
And a sale to understand what the benefits are on the other side of that to gain more efficiencies.
And just have a better franchise and scale has become so much more important.
Margins start to.
Get squeezed a bit again so.
We're encouraged by the possibilities out there.
I wouldn't say, it's going to happen in the next quarter or so but.
You can't you never can tell we're opportunistic depending on where people are we continue to have those conversations and we are interested in doing something.
Okay, guys. Thanks for taking my questions.
Thanks Pat.
One moment for our next question.
Okay.
Our next question comes from will Jones with <unk>. Your line is open.
Hey, great good morning, guys.
Alright.
So we've talked a lot about funding thus far already but we really haven't been on the fact that you guys are still seeing really really solid loan growth.
I know you guys.
Seems to be a little more conservative on the outlook at the start of the year, although understandably.
Now that the dust has kind of settled in the demand is still there for you guys.
Is it more of a mid to high single digit growth rate.
Way to think about loan growth as we move into the back half of the year or or is it really appropriate to think that growth.
Slows from here.
I think youre going to see moderate loan growth.
I think that.
Where we are in the cycle.
Whether we're thinking about what credit issues might come in the future.
Where interest rates are going.
And the ability to add loan growth at a decent spread.
Kind of I think the focus.
For us to go out and buy dollars today.
<unk> have that spread erode our margins.
At this point it doesn't seem like the right the right mix.
We want to be.
Adding loan growth at good margins.
And safe.
Type of loans so.
I think loan growth will be moderate.
But we continue to have some.
A big function of that is the fact that we are in the market that we're in.
It continues to push us to make good loans.
<unk>.
With strength in and guarantor strength and liquidity is still out there and available.
Well when you.
The originations that we've had over the past two quarters have been really around half of what they were kind of our peak.
It was the third quarter of 2002 so.
It all kind of starts with with what we originate and thats in that $500 million plus range.
And then when you look at what happens after that.
A couple of drivers for the last two quarters have been that are payoffs haven't been at the level that we've experienced in the past and then we are still getting a lift in the carry study advances.
Exceeding the payments so.
That's kind of driving the growth it's not so much of the.
Of of that.
Loan origination.
On that on that level of originations that probably would've been a little bit less growth, but these dynamics of advances exceeding payments and lower payoffs is driving drove a lot of the growth in the last two quarters.
Yes.
That's helpful and then.
As the loan to deposit ratio is that really kind of your governor on loan growth.
Sure.
Or you could ultimately lever.
Lever up the loan side of the balance sheet.
Or is it really just to the extent you can grow deposits or just how do you think about where.
What are your ability to grow loans as ultimately catch up.
I wouldn't tell you it's a governor on what we do but.
We don't have a great comfort in outstripping our ability to.
We really focus on core funding.
And for Us to go out and try to get to.
105, or 10 or 15% loan to deposit, but just by.
Doing with excess or Texas sponsored our wholesale funds does not really are or where we want to build the bank.
For us we think the true value in these organizations to.
Bill core funding.
So it's not a governor.
Well, that's right around it but it is kind of where we like to set when we move ourselves back to optimization.
About 90%.
Great. That's helpful. And then lastly for me Paul I know accounting can be.
Really hard to predict almost like.
Finger in the air but.
We saw a little bit high level of accretion this quarter.
Could you just remind us what were scheduled accretion is for the remainder of the year and then how you kind of think about full year accretion number.
So we have appreciated a lot of what I'll call windfall accretion up to this point.
So.
Estimate that about.
35% to 40% of the purchase accounting accretion that we <unk>.
<unk> year to date has been.
Ahead of schedule. So we put out guidance that our purchase accounting accretion for the year somewhere like $26 million to $28 million back in January .
And it has been.
Year to date really strong.
Right.
Our initial conservatism on the expectations with respect to purchase accounting adjustments.
Was.
Based on the concept that we thought met loans would prepay.
And we've had more than expected.
Still not banking on there being as much prepayment, we'd like to kind of think about it more as scheduled purchase accounting and then.
Got it.
We'll call windfall purchase accounting comes about that will.
We'll take it so but.
35% to 40% of what we've had year to date is it.
Higher than our expectations.
Okay.
Got it understood. Thanks, guys.
One moment for our next question.
Our next question comes from Graham <expletive> with Piper Sandler Your line is open.
Hey, good morning, guys Garner.
Fair enough.
So I heard some of the conversations around around new deposit openings and how youre starting to see a better percentage of of those be noninterest bearing or at least have a noninterest bearing piece to it.
And I know, it's very difficult to predict and Theres a lot of.
Remix going on in the industry right now.
And it's obviously a good problem to have with you all's noninterest bearing deposits being.
Considerably above 40%, but I was just trying to get a sense of.
What you guys are seeing near term on remix out of noninterest bearing deposits and if you think youre close to where.
You might be able to start holding the line on those balances quarter over quarter.
Just any help there would be appreciated.
Youre right its really hard to handicap.
But were buoyed by the fact that we continue to open non interest bearing deposits and then.
We've seen a higher level of relative stability.
When you compare to the front half of the year.
Since we've never been Super forward on our interest bearing accounts we've already.
None that sweeping has been a reality for our clients.
And maybe.
That optimization increased year to date, but at the same time. These are operating accounts people need these balances to manage.
Although payables, including.
Payroll things along those lines and some organizations get to be pretty decent in size, where it makes sense for them to maintain meaningful balances.
Diffused amongst a lot of customers so.
There's a there's a lot of macro things that are shrinking.
That allocation to noninterest bearing deposits and thats kind of hard to see where the bottom of that remix is going to be.
But we're really pleased with the fact that we're able to continue to open and build these accounts. We think we have the platform to be the category killer community banking one of the best markets in the U S. So it's about executing.
In the near term it maybe.
Slower road, and maybe more of a function of.
Kind of swimming against the stream of what's going on.
Macro pressure wise.
But we're really pleased about where we sit and how our prospects lie.
Back to the hard to predict.
That is difficult, but if you look at the.
The onboarding of the new accounts that ratio of noninterest bearing to total accounts is in excess of our what our non interest bearing is today. So.
<unk> got to see what happens after those accounts get opened but at least on the front end we're opening.
Healthy amount of noninterest bearing accounts as a percentage of the total.
Great that's really helpful.
And then I guess I just wanted to circle up to capital I know you said you wanted to continue building it in <unk> well over 11% now.
Any any near term capital targets, you guys would point to you.
And then I guess, how do you think about capital priorities now that now with maybe buyback versus M&A organic growth any way you could frame that up would be it would be helpful. Thanks.
Sure I'd say, our principal capital priority is more.
With respect to the merger debt.
Net.
The size of our purchase accounting adjustments brought the capital down as we all know to levels that are lower than.
The way, we like to typically operate and.
Focusing on total capital ratio as we did in the <unk>.
Our remarks, we're really pleased with the growth and ultimately to position ourselves to be opportunistic on the M&A front and otherwise.
Our efforts will be supported by a really strong capital base. So we're focused on drilling that and.
We think about the priorities the other priorities are.
Dividends and share repurchases, but we think.
It's hard to prioritize those in the near term, while we're focused on building and positioning our base for what might come next opportunistically.
I think as you think about the rest of the year.
We're approaching sort of are.
Optimization of the capital.
But we also want to make sure that we're.
Putting ourselves in a position to do what we want to do in the future.
We do think M&A is out there for us.
We want to be able to capitalize.
To capitalize on that.
Today.
Given where things are that takes some capital to do it.
That's why we may be sort of accumulating a little more than than we may have otherwise.
Okay I appreciate it and then on that M&A Bryan.
It sounds like.
Talks are picking up and obviously you guys are interested.
What does the what does the target look like the ideal target look like for you guys in terms of size business lines, I guess deposit mix et cetera.
Well.
Rather than be too specific about that people aren't just guessing.
While we are doing.
Yes.
What we look for our partners.
That help our franchise.
Whether it be deposit base marketplace.
Don't do any damage. So we're not looking for things that would actually hurt the momentum that we have in the franchise that we have as long as it's additive to what we're doing in the markets that we're in.
That's kind of what we're looking for and there is plenty of opportunities there.
For us to do that.
That would be sort of.
I think we'd be looking for.
We'd like to get bigger, but the focus is on being better.
Okay.
Good way to put it I appreciate it guys. Thank you.
One moment for our next question.
Our next question comes from John Rogers with Janney. Your line is open.
Okay.
Good morning, guys.
Good morning.
Paul just a quick question on the tax rate it dipped down during the second quarter I think last quarter, you talked about sort of 21% give or take what's the right number we should use going forward.
I would take the weighted average of our year to date.
More reflective of where we're sitting.
Looking at that forward.
Okay sounds good thank you guys.
Okay. Thanks, John Thank you.
And I'm not showing any further questions at this time I'd like to turn the call back over to Bob for any closing remarks.
Right.
Thank you everyone for their interest today.
That will conclude our call. Thank you.
Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.
Okay.
[music].