Q3 2024 BankUnited Inc Earnings Call
Good day and thank you for sending by. Welcome to Bankingitis Ink 3rd, 4204 earnings conference call at this time of participants on on this anonymous anonym mode. After this big presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automatic message advising your hand is raised.
Speaker Change: Please note that today's conference is being recorded. I will now hand the conference of a Tia House Jackie Bravo. Please go ahead.
Speaker Change: Good morning, and thank you for joining us today for Bank United Inks, third quarter, 2024 results conference call. On the call this morning, our Raj Singh, Chairman, President and CEO, Leslie Lunak, Chief Financial Officer, and Tom Cornish, Chief Operating Officer.
Speaker Change: Before we start, I'd like to remind everyone that this call may contain forward-looking statements within the meaning of the Private Security's litigation reform act of 1995 that reflect the company's current views with respect to, among other things, future events and financial performance
Speaker Change: Any forward looking statements made during this call are based on the historical performance of the company and its subsidiaries, or on the company's current plans, estimates and expectations.
Speaker Change: The inclusion of this forward-looking information should not be regarded as a representation by the company that the future plans, estimates or expectations contemplated by the company will be achieved.
Speaker Change: Such forward-looking statements are subject to various risks and uncertainties and assumptions including those related to the company's operations, financial results, financial condition, business prospects, growth strategy and liquidity, including as impacted by external circumstances outside of the company's direct control such as adverse events impacting the financial services industry.
Speaker Change: The company does not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.
Speaker Change: A number of important factors could cause actual results to differ materially from those indicated by before looking statements. These factors should not be considered as exhaustive.
Speaker Change: Information on these factors can be found in the company's annual report on form 10K for the year ended December 31, 2023 and any subsequent quarterly report on form 10K or current report on 8K which are available at the SEC's website. With that, I'd like to turn the call over to Mr. Raj Singh.
Raj Singh: Thank you, Jackie. Thank you for joining us for this call. Let me start by just quickly going through the numbers. This is a good quarter. That income came in at 61.5 million or 81 cents a share. I think last quarter we were 72 cents and the quarter this time last year we were at 63 cents. I checked last week what the consensus estimates were. I think you were 74 cents. So always happy when we do a little better than consensus.
Speaker Change: You know, this was officially the quarter in which the monetary policy inflection happened, happened pretty late in the quarter but we started acting on bringing down cost of funds even slightly before that.
Speaker Change: The cost of deposits, this quarter declined to 306 from 309, last quarter. Costs of interspitting deposits came down from 426 to 420.
Speaker Change: Remember, the Fed move happened pretty late in the quarter, so, you know, if you want to see the better impact of all of that, you should look at our spot rates.
Speaker Change: and the portfolio API on deposits on September 30, it was 293 on June 30, it was 309.
Speaker Change: and if you look at the spot, APY for introspearing, it came down from 429 in June to 401. Even this doesn't actually fully include the actions that we're taking on deposits.
Speaker Change: because some of our deposit products get only priced monthly, so the stuff that happened in October 1st is outside of that. So long when it was saying we're being proactive on staying ahead of all changes in the interest rate environment.
Speaker Change: Low to Deposit Ratio has now come down to 87.6, which is fairly low compared, I don't know, lastly, if we look back on, you know, what is our low point, but you know, feeling very good about where low to deposit ratio is from a liquidity perspective.
Speaker Change: and IEDA as we had set to you last quarter, the last couple of quarters we have had very, very strong growth.
Speaker Change: But.
Speaker Change: We very much expect that to start growing again.
Speaker Change: When the seasonal trends favor us in the first quarter and second quarter. So the pipeline of new business that is coming in is still very robust, but we're very happy with the business that we've closed this quarter and looking to close into the fourth quarter. So.
Speaker Change: Loans were down $230 million this quarter, mostly in the.
Speaker Change: The residential and the franchise in our leasing business as we've been driving goes down for quite some time, Tom will get into the details of that in a little bit.
Speaker Change: In terms of credit charge offs were again very very low single digits I think it was $6 5 million Leslie correct.
$5 million for the quarter.
Speaker Change: We did build reserve again this quarter from 92, I guess not reserve at the ACL.
Speaker Change: It is up to 94 basis points and be able to pick up a little bit Npls were 54 basis points. Excluding the guaranteed portion of SBA loans are at 39.
Speaker Change: There were 31 basis points in June excluding the SBA guaranteed portion.
Speaker Change: The two notable.
Speaker Change: Loans that moved into NPL. This quarter what are the C&I book. This is episodic it does happen from time to time.
Speaker Change: We are adequately reserved for both these loans they happen to be two very different industries is just very unique to the situation that these borrowers.
Speaker Change: Borrowers are in one is in the media space. The other was in the logistics space, but there is no trends anywhere in the portfolio that would suggest that this is something.
Uh huh.
Speaker Change: Repeat itself.
Capital TCE.
Speaker Change: Went up to seven 6% tangible book value continue to accrete up to $36 52.
Speaker Change: So pretty much.
Speaker Change: Yeah.
Speaker Change: Good news on that front.
Speaker Change: We did have as you.
Speaker Change: You will remember earlier in the year.
Speaker Change: We hired <unk> <unk>, who now runs our.
Speaker Change: Small business commercial and retail franchise, we made another significant higher this quarter pretty late in the quarter in September.
Speaker Change: <unk> joined us as head.
Speaker Change: At a historic career at JP Morgan.
Speaker Change: For three decades, plus and a little bit of time at Wells Fargo as well. So she joined the team we're very happy to have her here.
Speaker Change: I'm sure she will make a big impact over the coming 345 years.
Speaker Change: Quickly looking through my notes so yes, the hurricane.
Speaker Change: The quarter, we unfortunately give you a hurricane updates as well.
Speaker Change: We had two hurricanes blow through one and September one and October one in September missed us for the most part no damage to either a physical premises order loan portfolio.
Speaker Change: <unk>, which came by just last week.
Speaker Change: It was closer to our footprint on the West coast, but I'm happy to report that really did not do much damage all our branches or in.
Speaker Change: <unk> business at all.
Speaker Change: The locations are reopened.
Speaker Change: We're coming to the loan portfolio to make sure that there is no impact so far we have not found anything but the work is not complete so over the course of next few days, we will according to the entire portfolio and if there's anything we will give you an update but as of right now nothing to report back.
Speaker Change: This weekend.
Speaker Change: It was.
Speaker Change: I got an email from from our regulators are asking for a bunch of detailed questions as they often do and one question kind of stuck out and it was about fourth quarter of last year. It was about a smaller charge in our P&L and they asked me could.
Could you walk us through what that was and I just didn't remember what it was so I call Leslie on Sunday as I do remember this and shijiazhuang memory untreated and remember it either so I took it upon myself I started pulling my files are to just go back and remind myself, so where we were fourth quarter, if I could find something to answer long story short.
Speaker Change: Still don't know what the answer to that $1 million charges unless people kind of take it from here, but it gave me an opportunity to I started reading our press release rub four quarters ago.
Speaker Change: And.
Speaker Change: As you can imagine preparing for earnings for this call.
Speaker Change: Deep in the numbers for what happened last three months, but this kind of broke that rhythm of little bit. Unfortunately to look at where we were.
Speaker Change: A year ago, and then I started looking taking a bigger picture.
Speaker Change: The more I looked at this the better I felt and I wrote down some just.
Speaker Change: A few numbers over the last few quarters for myself and I don't want to share that on this call.
Speaker Change: But you can correct me if I'm wrong anywhere.
The key indicators of success really our EPS margin ROA ROE and of course, you have to keep an eye on credit and so on right. So after March madness, we embark on this strategy.
Speaker Change: Improving profitability through balance sheet transformation I mean, if there's one sentence that describes what we've been trying to do over the last.
Speaker Change: Six quarters, it's basically this so if I just go back and look at the last four quarters. Our EPS has gone starting in fourth quarter of last year 62000.
Speaker Change: <unk> 69, and 72 cents and now 81.
Not on the back of buybacks or anything like that this is just core performance.
Speaker Change: Our NIM has gone against starting from fourth quarter of last year, $2 60 to $2 57 to $2 72 to $2 78.
Speaker Change: Our ROA.
Speaker Change: Was <unk> 50 to <unk> fourth quarter of last year that 59 to $61 69, we're still not there where does not mission accomplished kind of thing. This is.
Speaker Change: But it's a trajectory that that made me feel good and I just wanted to share a row. Similarly, it was seven three went to $7 nine went to eight now it's eight eight again, we're not there yet, but we're moving in the right direction.
Speaker Change: And just to make a point this is not off the back of cost cutting this is not off the back of bleeding reserved if anything our ACL run from 82 to 90 to 92 to 94, we're building ECL charge offs are low almost too low for a commercial bank.
Speaker Change: <unk>.
Speaker Change: <unk> EPS is going up margin is going up are always going up ROE is going up.
Speaker Change: Just I wanted to share that because it happened on Sunday when I was for very different reasons forced to go back and look at fourth quarter last year, which I was not paying attention to and I thought I'd share that with you. The other thing I would say is we give you guidance every January.
Speaker Change: That's our best guess of where the year will be sometimes we're accurate sometimes were not last year. For example, we saw March madness coming so whatever guidance. We gave you in January got shredded in March Thanks for Silicon Valley in a couple of other banks, but this year the guidance we gave you.
Speaker Change: It's coming in just.
Our results are coming in just in line with the guidance. We gave you. We told you that we will have double digit ni DDA growth, while as of right now we're at about 11, 7%.
Speaker Change: We told you that non broker deposits will grow.
Speaker Change: High single digits I think we're at just over 8% right now.
Speaker Change: We said margin would grow and would get into the high twos as well with $2 78 right now.
Speaker Change: Loans, we said will be high single digits, I think we're a little behind over there.
Speaker Change: But we have another quarter to go but we'll probably end up in the mid single digits. So.
Speaker Change: It's.
Speaker Change: It's kind of the opposite of last year.
Speaker Change: <unk> was going haywire. This year everything is falling into plan and everything is steadily increase and by the way I also want to make a point. These improvements are not artificially theres not by some big restructure the balance sheet and magically your numbers look better than next quarter. We didn't do any of that we just took a.
Speaker Change: Sustained long term approach to this improve the balance sheet left side improved the balance sheet right side keeping expenses in check.
Speaker Change: Let's see.
Speaker Change: Keep credit and check and the profitability will take care of itself not immediately but over time and I'm very happy to see where everything is coming out.
Speaker Change: But I just wanted to share that we often get loss in just one quarter, but it's important to kind of pull back and look at 234 quarters.
Speaker Change: So, but with that grant I'll turn it over to Mr. Cornish. Thank you Raj just for the record I didn't remember the $1 two either so all three I start out alright, and Couldnt find it. So I don't know what they are talking I'm sure I'm sure we'll find it so.
Speaker Change: A little more color on different parts of the business first we'll start with loans.
Speaker Change: As Raj mentioned in total loans were down $230 million. This quarter Cree grew by $34 million, while C&I declined by $112 million.
Speaker Change: Mortgage warehouse was up $33 million for resi franchise equipment and municipal finance were down a combined $185 million.
Were generally in line with those businesses were strategically looking at and have been doing for the last several quarters year to date, the C&I and CRE portfolios are up a combined $286 million mortgage warehouses up $139 million.
Speaker Change: Residential was down $422 million in franchise equipment and municipal finance.
Speaker Change: Declined by a combined $238 million, so all pretty much consistent with our repositioning strategy on the left side of the balance sheet.
A little bit more color on the commercial loan piece, which as Raj noted is a little bit.
Speaker Change: Lighter so far this year than we originally thought.
Speaker Change: Workhouse, although we're still I think expecting an overall solid mid single digit.
<unk> growth if you look at in a few components.
Speaker Change: I think our kind of baseline.
Speaker Change: Business is pretty much.
Speaker Change: Performed consistent with our early conviction.
Speaker Change: In the year I think if you look for example in this quarter, our commitments and things like manufacturing and wholesale trade in construction and some other areas that I would kind of call.
Speaker Change: Core daily.
Speaker Change: C&I business was up for the quarter nicely and continued to perform well.
Speaker Change: Spend a little bit.
Speaker Change: Less than our original predictions this year, where some of what I would call the more market sensitive areas things like capital call lending and issues like that and it has not been so much demand.
Speaker Change: It has not been there overall from a market perspective, but.
Speaker Change: We have a fairly disciplined view on risk ratings rate adequacy and things of that nature and when that business is there and we take advantage of it and when it's not there.
Speaker Change: Typically passed so and some of those business categories. We're just not seeing the right blend of.
Speaker Change: Rate structure credit quality and whatnot. So our performance there has been a bit lighter than we originally planned but in our core business area.
Speaker Change: I think it's been pretty good production has been pretty good all year long, particularly in the corporate banking area.
Speaker Change: For the year.
Speaker Change: The second piece of it.
Speaker Change: As the crude pipeline started out originally at the beginning of the year.
Speaker Change: A bit slower it's been interesting to watch this year each quarter, our production has improved.
Speaker Change: And we're expecting a pretty good fourth quarter, we're starting to see.
Speaker Change: As rates ticked down as capital is available and decreased segment were starting to see kind of much better production and pipeline as we get to the end of the year I think for both of those businesses.
Speaker Change: And all of our C&I related businesses, whether it's corporate commercial.
Speaker Change: Small business I think we will see the strongest production numbers in the fourth quarter that we've seen all year fourth quarter is typically our strongest quarter and I think the pipelines in all the areas are looking good we did see in Q3, a higher level of payoffs than we normally see.
Speaker Change: That kind of comes with the game I mean, some quarters are lower than we think some quarters of what we think and some quarters are above what we think most of that had to do.
Speaker Change: With either company sales, which is pretty hard to predict.
Speaker Change: Or credits that we took a proactive position at renewals are at upsizing and elected to step out of <unk>.
Speaker Change: For various reasons either relationship reasons or pricing reasons or the fact that we had a slightly different view of the structure of the credit with the economic outlook would be for those but overall I think as we head into.
Speaker Change: Q4.
Speaker Change: We're very optimistic about what we're seeing the markets. We're in continue to be strong.
Speaker Change: We've continued to add talent in virtually all of the geographies and verticals that we're in the ones that Raj mentioned from a talent acquisition perspective earlier, a little bit more of the headline ones, but a couple of levels below that at their relationship manager level practice leader areas. We've.
Speaker Change: At all of our groups and all of our geographies.
Speaker Change: Higher in Q3 was good hiring quarter for us.
Speaker Change: Little bit more specifically on Cree.
Speaker Change: Given the interest in this topic I will spend a few minutes going into this a little bit more I would also refer you to slides 11 through 14 of the supplemental deck, where we've provided some additional detail disclosure.
Speaker Change: Overall, the Cree portfolio continues to perform well.
Speaker Change: Our credit exposure remains modest compared to other peers that 25% of total loans creative risk based capital was 164%.
Speaker Change: Comparatively based upon the June 32024 call reports the median level of Cree.
Speaker Change: For total loans for banks in the $10 billion to $100 billion space was 35% compared to our 25% in the medium pre ratio.
Speaker Change: To risk based capital was 220% compared to our 164%. So it's a good business line for US it's important that overall, it's more modest.
Speaker Change: Our balance sheet than it is for some other banks on a big picture basis.
Speaker Change: At September 30, the weighted average LTV of the Cree portfolio was 55% and a weighted average debt service coverage ratio was 170 750.
Speaker Change: <unk>, 56% of the portfolio was in Florida, 25% in the New York Tri State area and 19% in other geographies there were active in.
Speaker Change: Office continues to be the sector, we're watching.
Speaker Change: Most closely as I say it every call I have every office loan in front of me right now.
Speaker Change: And we're watching it.
Very carefully we are seeing some improvements in the sector, but overall the demographics of office and how it will play out and return to office.
Speaker Change: Hello, developing story at this point.
Speaker Change: For our portfolio, we have a total office portfolio of $1 8 billion.
Speaker Change: With 57% in Florida, which is predominantly suburban 23% in the New York Tri State area.
Speaker Change: Of that $1 $8.352 billion of total Cree is in the medical office space, which is a very high performing segment right now so our traditional.
Speaker Change: Office portfolio.
Speaker Change: Just just south of a $1 five for.
Speaker Change: For the total portfolio the weighted average LTV of our stabilized office portfolio was 65%.
<unk> average debt service coverage ratio was 156 at September 30, so well performance.
Speaker Change: $449 million of office loans mature in the next 12 months $234 million of that is fixed rate.
Speaker Change: At rollover in the next 12 months is only 11% of the office portfolio. So I think from a maturity.
Speaker Change: And rollover perspective, we're in good shape.
Speaker Change: With respect to the New York Tri State portfolio of 41% is in Manhattan.
Speaker Change: <unk> was approximately $169 million.
Speaker Change: 95% occupancy and our lease rollover in the next 12 months was 10%, so I think they're well positioned as well.
Speaker Change: It's still early and there is a lot remaining to play out in the office sector broadly in our portfolio. So I would caution against over generalizing, but we are starting to see particularly in Florida. Some good consistent trends as it relates to.
Speaker Change: Quarterly upticks gradually and debt service coverage ratio.
Speaker Change: <unk>, we are starting to see a gradual narrowing of the gap between.
Speaker Change: Physical occupancy and economic occupancy as abatements and concessions start to roll up and as you look at whether it's Miami Fort Lauderdale, Orlando or Tampa, Jacksonville, particularly in Florida, we are starting to see some kind of quarterly.
Speaker Change: Gradual few basis points uptick in debt service coverage ratio is kind of across.
Speaker Change: The board.
Speaker Change: Overall, the office portfolio continues to perform comparatively well and is generally characterized by strong sponsors who continue to support the underlying properties today.
Speaker Change: To date any asset concerns are very specific.
Speaker Change: To a small handful of loans and very manageable since the start of the pandemic in 2020, we've had total office charge offs of $8 3 million related to four loans. Most of that was two loans that we took partial charge offs on last quarter and these are still in work out.
Speaker Change: Overall nonperforming Cree loans consisted of five loans totaling $61 million against almost $6 billion portfolio.
Speaker Change: As of September 30%, excluding the guaranteed portion of SBA loans.
Speaker Change: Of the 61 million and $52 million were in the office segment. So as you can see the remainder of the.
Speaker Change: Segments were in has virtually no.
Speaker Change: Nonperforming loans. So overall, we feel pretty good about where we are from a credit perspective, that's a lot of detail, but Leslie will now get into more detail around the quarter. Thanks, Tom as Ross said net income for the quarter were $61 $5 million or <unk> 81 per share.
Leslie Lunak: Net interest income was up $8 1 million or 4% this quarter and the NIM increased six basis points.
Leslie Lunak: 278 from $2 72 last quarter right in line with our expectations.
Leslie Lunak: The yield on loans was up from $5 85 to $5 87, as new production continues to come on at higher rates and lower yielding loans pay down.
Leslie Lunak: Hold on Securities was up two basis points quarter over quarter as well.
Leslie Lunak: At September 30, the commercial portfolio was 68% floating in the security portfolio with 70% floating.
Obviously, those assets will re price down as rates come down, but that impact will be partially offset by the remixing that continues in the portfolio.
Leslie Lunak: And the fact that fixed rate assets that mature paydown are still being replaced by higher yielding asset.
Leslie Lunak: Rates on our commercial production for Q3 averaged a little over 8% for C&I and around seven and a half for Cree.
Leslie Lunak: We're very happy to see the average cost of total deposits actually declined this quarter as our asphalt from 309 to 306.
Leslie Lunak: And on a spot basis down to 293 from 309 in that downtrend is continuing.
Leslie Lunak: We've been very proactive in bringing deposit trade down deposit rates down from September <unk> through October 11th No magic to that date is just when we.
Leslie Lunak: I get the math.
Leslie Lunak: Data on the non maturity interest bearing book was 78%. So that's a really really good start on bringing deposit rates down and we will continue to bring rates down over Q4. For example, we've got about $1 $7 billion in Cds maturing in Q4 at a weighted average rate in the low fives that will reprice down on average we believe.
Speaker Change: Thanks, a lot for us.
Speaker Change: So that's just an example of the progress that we're making there.
Speaker Change: In terms of guidance around the NIM.
Speaker Change: I expect the NIM for Q4 to be to be roughly flat to Q3 reasons.
Speaker Change: Reason for temporary that previous guidance, a little bit a couple of things going on.
Speaker Change: Little bit lower starting point than we thought we would be with ni DDA and commercial loans, so theres, a little bit of catch up that needs to happen there, but that's really a timing thing.
Speaker Change: And.
Speaker Change: Yes, the rates are coming down our forecasted currently to come down a little bit faster than we originally thought they would sell back to Theyre, just being a little time needed for catch up there looking forward on the NIM as we've been saying all along that trajectory in the future will be more dependent on our ability to continue the balance sheet transformation story into <unk>.
Speaker Change: <unk> the remixing on both sides than it will be on what the fed does and the static balance sheet as it has been for some time remains modestly asset sensitive.
Speaker Change: Comment just a little bit briefly on wholesale funding, we did see an uptick this quarter that the increase you saw in <unk> advances was just really related to intraday cash management activities going on on the last day of the quarter. It's also reflected an elevated cash balances and that will normalize.
Speaker Change: We leaned into brokered deposits a little more this quarter frankly, because of some dislocation in market pricing and they were priced well inside of retail Cds. So that I'm sure that's temporary and it will resolve itself over time, but we took advantage of it.
Speaker Change: <unk>.
Speaker Change: Look back the funding profile of the company has improved considerably over the course of the year for the nine months ended September 30, as wholesale funding is down by $1 $9 billion non brokered deposits have grown by $1 7 billion and ni DDA has grown by $800 million. So the story.
Speaker Change: If you look if you take a little bit longer than a one quarter view as a very good one.
Speaker Change: With respect to the provision and reserve the provision this quarter was $9 million the ACL to loans ratio up from 92 to 94 basis points.
Speaker Change: And the commercial ACL ratio, including C&I Creed franchise and equipment Finance was $1 41 at September 30.
Speaker Change: This quarter the provision a few different moving parts in there.
Speaker Change: Some changes in portfolio characteristics and some assumption changes as well as additional qualitative reserves served to increase the reserve and that was partially offset by an improving economic forecast slide 16 of the supplemental deck into some more detail around that.
Speaker Change: The reserve on Cree office with $2 20 at September 30th that's down from $2 47 at June this really related primarily to a reduction in specific reserve for one loan where we had an updated valuation come in much more favorably than we expected. So that was very good news in the in the office portfolio and that's also what led to the overall <unk>.
Speaker Change: That's when we see an increase in reserve.
Speaker Change: Yes.
Speaker Change: With respect to reserving around Hurricane Milton as Raj said assessment is still ongoing we currently don't expect anything material, but there could be some provisioning next quarter not expected currently to be material.
Speaker Change: Noninterest income and expense nothing particular to note with respect to noninterest income nothing material going on in there. This quarter you saw the increase in noninterest expense and that was mainly on the comp line and we can all celebrate the fact that the biggest driver of that was an increase in the company's stock price, which led to an increase in some of.
Speaker Change: Our share based compensation accruals, we hope that happens every quarter.
Speaker Change: And I'm sure you do as well.
Speaker Change: We previously guided to noninterest expense being up mid single digits for the year, ignoring the FDIC special assessment that guidance hasn't changed one thing. We do expect next quarter is about $8 million in railcar retrofit costs.
And that will push that guidance, maybe to the high towards the higher end of what you might define as mid single digits.
Speaker Change: I think the other thing in terms of guidance I'll throw out there is ni DDA. We're currently expecting maybe slightly down in the fourth quarter DDA perspective, I'll ask a slightly but then growing again in the first half of next year.
Speaker Change: And continue to expect the ETR to be around 26, 5% going forward.
Speaker Change: Well in my remarks, there and turn it back over to Raj for closing remarks, and then we'll take your questions, Yes, I just realized.
Speaker Change: I forgot to mention the numbers I rattled off on EPS ROA ROE over the last four quarters exclude.
Speaker Change: The FDIC special assessment I don't want to be in trouble with my CFO after the meeting.
Suppose dimension that in my remarks, but I forgot I apologize, but it's adjusted for the special assessments in the fourth quarter and first quarter, but now we will open it up for questions.
Speaker Change: Thank you, ladies and gentlemen to ask a question you will need to press star one on your telephone and wait for your name to be announced.
Speaker Change: To withdraw your question simply press Star one again, please standby, while we compile the Q&A roster.
Speaker Change: No first question coming from the line of Benjamin <unk> with Citi. Your line is open.
Speaker Change: Hey, good morning, everyone.
Speaker Change: Got it.
Speaker Change: You always give guidance at the very end of the scramble.
Speaker Change: Writing it I just want to make sure I had it all she said margin roughly flat next quarter noninterest bearing weigh a little bit softer due to some seasonality trends and then you also said there were.
Speaker Change: <unk> guidance.
Speaker Change: Our railcar im assuming our expenses onetime in nature.
Speaker Change: Yeah.
Speaker Change: Sporadic or periodic in nature is what I would call it yes.
Speaker Change: Okay, That's fair and I know you don't want to give 25 guidance. So when you think about just kind of the quarterly.
Speaker Change: Our kind of seasonality cadence of the noninterest bearing deposits as.
Speaker Change: As you kind of around the calendar into 2025.
Speaker Change: Do you think it kind of follows the normal mortgage where it's like the first half of the first quarter is still pretty weak as well or do you think there is a little bit more idiosyncratic points, Steve made and I get that lower interest rates. If we do get a couple of cuts here and then early once you kind of throw seasonality until loop, but I'm just trying to figure out.
Speaker Change: How you guys are thinking about the non interest bearing deposits you've had tremendous success, but you're also facing the tougher part of a calendar. So I'm just kind of curious your thoughts or <unk>.
Speaker Change: And I think you're accurate for our title business, but then there is a lot of business outside of the title space and each one of those business lines has their own cadence may not be as choppy as the title business, but whether it's a corporate business whether it's.
Speaker Change: The HOA or.
Speaker Change: Small business they all follow up slightly different pattern MTS. Our title business certainly has the most has the biggest swings from month to month or quarter to quarter and you are correct for that business. It starts picking up mid first quarter and it peaks in the summer because it's very driven by purchase money.
Speaker Change: So overall I think expecting first quarter second quarter to be our strong quarters for ni DDA growth in third and fourth quarter not so strong.
Speaker Change: Is probably accurate.
Speaker Change: So kind of the pattern that we are seeing this year should be the pattern going forward unless there is some kind of a big.
Speaker Change: Mortgage sort of market turn.
Speaker Change: It can only turned to our favor because it's.
Speaker Change: Pretty historic low so if it <unk> then that that will.
Speaker Change: Would be sort of gravy on top but we're not sort of sitting here and counting on that.
Speaker Change: But I did want to add one comment on your railcar question.
Speaker Change: Recertification and retrofit expense his.
Speaker Change: As generally one time for all of the railcars or we're looking at we hit identified the expenses required to do that some of that happened last year. Most of it is this year theres a small amount of it next year and then we're pretty much done.
Speaker Change: At that point with all the federally mandated re certifications and retrofits that we need to do it doesn't it's one time per car, but it does.
Speaker Change: <unk> Court right Sarah.
Speaker Change: But it is identified and we know when we have to do it it's not like it's just sort of pops up.
Speaker Change: Got it okay.
Speaker Change: <unk>.
About as clear as mud, but I appreciate the color.
Speaker Change: Good job.
Speaker Change: Well I tried.
Speaker Change: And then my other question I know Raj you talked through like earnings have improved reserve has improved interest bearing <unk>.
Speaker Change: Deposits have improved capital has also improved and it seems like loan growth is going to be.
Speaker Change: Similar to the rest of the industry, a little bit softer, but should improve with lower rates and help your all sides of the balance sheet.
Speaker Change: Kind of just curious your thoughts on just capital deployment year, considering capital CET, one has gone up pretty healthy and it doesn't seem like you have a tremendous amount of growth on the near term, but the outlook looks pretty healthy constraint, Florida, the great economic states.
Speaker Change: Thoughts on a buyback or capital deployment going forward.
Speaker Change: So actively in discussion right now on that topic.
Speaker Change: We're in capital planning budgeting mode as we speak over the course of next two months, it's going to be intensive dialogue on that front.
We did talk to the board about this as recently as our last board meeting which was.
Speaker Change: August.
Speaker Change: And at that time, they decided to.
Not.
Speaker Change: The authorized buyback, but to reconsider it again at the end of the year.
Speaker Change: Capital is building up, but it's building up slower than than usual because the balance sheet is changing.
Speaker Change: <unk> set one.
Speaker Change: Given that we're leaning on commercial growth and running of residential that does eat up some capital, yes, we have some cushion, but I'd rather deploy for growth I know right now this quarter, certainly there wasn't growth, but I'm a little more optimistic about growth next year.
Speaker Change: But if we're not able to then yes, we will look at share buybacks as a way to return capital.
Speaker Change: Also in terms of pre pandemic or pre the prices last year, what used to be acceptable levels of capital like a 10% set what I think that has been reset.
Speaker Change: Industry wide too.
Speaker Change: Slightly higher expectation, maybe more like 11%. So if you think about that yes, we do have excess capital, but its not like oodles of noodles of excess capital.
Speaker Change: If we can deploy it in growth that would be my my top choice if not we will look to doing a buyback next year.
Got it that's helpful. Thank you.
Speaker Change: Thank you.
Speaker Change: And our next question coming from the line of.
Speaker Change: Woody lay with <unk> Your line is open.
Speaker Change: Hey, good morning, guys.
Good morning.
Speaker Change: Had a quick follow up on the noninterest bearing deposit guidance is that referring to.
Speaker Change: End of period deposits or or is it referring to the average basis.
Speaker Change: Really probably volatility.
Speaker Change: Say flat to slightly down on both counts.
Speaker Change: Okay. Okay.
Speaker Change: And then I wanted to shift over to credit looking at.
Speaker Change: Slide 22, it looks like there was a.
Speaker Change: A pickup in some of the CRE past bucket.
Speaker Change: Is there anything to note there or is that mostly just the administrative issues.
Speaker Change: The past noon honestly, that's a loan that's been in non accrual for some time now that finally, just actually went past here.
Speaker Change: No.
Speaker Change: Got it.
Speaker Change: Okay.
Speaker Change: And then maybe shifting over to the.
Speaker Change: The office segment ethane criticize right now I know there was a movement back in the first quarter and I believe we talked about how those lines removed because of.
Some of the 12 month lease concessions.
Speaker Change: The expectation still that those loans will be upgraded.
Speaker Change: <unk> expires.
Speaker Change: Yes, once it expires and Ram has been collected for three months.
Speaker Change: Got it alright, that's all from me thanks.
Speaker Change: Thank you and our.
Speaker Change: Next question coming from the line of Jared Shaw with Barclays. Your line is open.
Speaker Change: Hey, good morning.
Speaker Change: Just looking at the deposit cost trends.
Speaker Change: Maybe just a broader funding cost trends, how should we be thinking about the duration of the <unk> borrowings that you added in the duration of the broker deposits.
Speaker Change: For one part of that and then the other is when Youre looking at the.
Speaker Change: Ability to reprice deposits slower from this first rate move as that moves.
Speaker Change: In line with your expectations or has pricing been a little stickier than maybe you initially thought.
Speaker Change: I'll take the first part of that and then I'll turn it over to Raj for the second part.
Raj: The increase in <unk> advances, what we put on is all very short because we expect that to be temporary.
Raj Singh: The duration of the brokerage includes mostly six months.
Raj: Yes.
Raj: They all see these are fairly short.
Raj Singh: Our brokered.
Raj Singh: In terms of deposit pricing hasnt been sticky or not it actually has been.
Raj Singh: For this first cut that happened.
Raj Singh: We came out exactly where we modeled right. So Leslie mentioned, the beta was 78% or so I think that we're modeling 75. So it was pretty close to two to what our expectation was.
Raj Singh: We'll see where this is not the last cut this is the first cut and we'll see.
Raj Singh: How the market evolves, so as the fed moves on but so far I'm actually.
Raj Singh: Optimistic that we will be able to bring down and the market will accept that level of price decrease so or the rate decrease we haven't really seen outflows.
Raj Singh: Nothing to be prompted by the rate decrease and haven't heard a lot of pushback, yes, yes.
Raj Singh: So when we look at the.
Raj Singh: The discussion around margin being relatively flat versus the prior guide for ending the year closer to the high twos.
Speaker Change: What's what's driving I guess that incremental pressure is that is that more just the DDA balances being lower than expected or is that.
Raj Singh: Rates on yields.
Speaker Change: Yields.
Speaker Change: The primary driver there is a lot of moving parts, obviously in the margin, but the primary driver is just the lower starting point than we expected with ni DDA. So like I said, we just got some catch up to do.
Speaker Change: Our margin obviously.
Speaker Change: Directly related to our ni DDA and IBD.
If you grow that margin will grow.
Speaker Change: And NID.
Speaker Change: Thus followed that pattern so.
Speaker Change: Margin growth will not be in a straight line, but it will grow over time as it has over the last 12 months.
Speaker Change: So.
Speaker Change: $100 billion of Ni DDA produces $5 million of earnings it's very powerful.
Speaker Change: Which is why we are.
Speaker Change: Focus.
Speaker Change: So much on ni DDA growth.
Speaker Change: But.
Speaker Change: The fact that margin is expected to be flattish is directly linked to the fact that ni DDA is expected to be flattish for the next three months.
Speaker Change: Okay. Thanks, and then just finally for me I think Tom was mentioning.
The pay down the level of pay down activity versus the strength of the pipeline in the fourth quarter.
Speaker Change: Could you just revisit that in terms of.
Speaker Change: Do you expect still high levels of Paydown activity for them for the foreseeable future or are you, saying that that the pipelines are starting to build stronger levels than expected pay downs on this I guess, that's on the CRE side.
Speaker Change: I would say the latter would be true we would expect that production will out distance.
Speaker Change: Pay offs payoffs when people sell businesses is always very difficult to predict.
Speaker Change: We don't tell you.
Speaker Change: Until a few days before because theres a lot of sponsor activity and sponsors don't tend to release that information, but I would say if you looked at the payoff level for Q3.
Speaker Change: It was higher than its been in past quarters, and we would not expect that to be a normalized level. There are some.
Speaker Change: Normal levels, we will see from time to time, but we would expect that to be a higher level than we would see going forward, but we would expect the production in Q4 will certainly be the highest we've seen this year.
Speaker Change: To reiterate I think for the full year, we should still land at mid single digit growth for the core commercial and credit portfolios combined.
Speaker Change: Okay, great. Thanks.
Speaker Change: Thank you and our next question coming from the line of Jimmy <unk> with Wells Fargo. Your line is now open.
Speaker Change: Yes.
Jimmy: Hi, Good morning, again, just circling back to the margin commentary I am just wondering how that translates to over to NII should we extrapolate that flattish margin means flattish NII or do we get maybe some uptick on the volume side given some of the strength in the lending pipeline.
<unk>.
Jimmy: I mean.
Jimmy: I think.
Jimmy: We should probably see.
Speaker Change: For the full year mid single digit growth in NII as well, so I think there'll be some some benefit in the fourth quarter from.
Speaker Change: The loan growth that we're anticipating but I still think for the full year, probably mid single digits.
Speaker Change: Okay and then.
Speaker Change: I'm, sorry, what was that.
Speaker Change: So go ahead.
Speaker Change: Raj just going back to your comments on on where the bank has come over the last four quarters or so I guess, maybe taking a step back into the transformation on both sides of the balance sheet. What inning are we in there and then as you look at the end game in terms of either an ROA or Roe.
Speaker Change: Where do you see bank United.
Raj Singh: Eventually emerging on those fronts I think were somewhere in the middle of the game. We're not in the very early innings I think that was probably at the beginning of this year or late last year and we're not clearly not.
Raj Singh: And towards the end of the game, there's a lot of work to be done I think this transformation.
Raj Singh: We need to get our ni DDA up tobacco over 30%.
Raj Singh: And maybe even <unk>.
Raj Singh: To shoot for a much higher than that.
Raj Singh: The 69 basis points ROA or the eight 8% ROE is nowhere near where I think the franchises is capable of I think these numbers need to get over 1% and over certainly over 10 11, 12% range for ROE.
Raj Singh: That.
Raj Singh: Again, we will not get done in the next one or two quarters. It is I think.
Raj Singh: Just if you just see what the trajectory has been and if we just draw the line from there it is going to take a better part of next year.
Raj Singh: You get up there we will give you more guidance in January when we have kind of gone pencils down on our budgeting and everything but.
Raj Singh: To your original question I think we're kind of in the middle of the game.
Raj Singh: Not at the beginning of the first and ignited the eighth and ninth inning. So.
Raj Singh: There is still work to be done here.
Speaker Change: Great and then just last from me.
Speaker Change: The bond book can you just remind us what majority of that is index too.
Speaker Change: It's a mix yes, there is a lot of there's a lot of variety in terms of what the benchmark rates and timing of upgrades.
Speaker Change: Changes are in the bond book.
Speaker Change: The loan book is mostly one month sales are.
Speaker Change: So theres quite a bit more variety in terms of the benchmark frequency.
Speaker Change: Okay, alright, thanks for the color.
Speaker Change: Thank you. Our next question coming from the line of David Rochester, with Compass Point Research. Your line is now open.
David Rochester: Hey, good morning, guys.
David Rochester: On the title business, how much do those deposits decline this quarter and where do those sit at quarter end or for the average balance wherever you guys have would be great.
Speaker Change: I think a part of that $430 million decline was from the title business roughly.
Speaker Change: Okay, and about where those deposits sit now.
Speaker Change: I guess I've got somebody looking at up Dave I'll get right.
Speaker Change: How is the customer growth this quarter in that business I know you talked about like 40 to 45 customers per quarter.
Speaker Change: Having to look.
Speaker Change: I think.
Speaker Change: If I recall I think it was 38 customers or relationships that are brought in I could be off by one or two but.
Speaker Change: We actually just this.
Speaker Change: Saturday to entire team out.
Speaker Change: To celebrate getting to 1000.
Speaker Change: We're actually just a couple of.
A couple of shy from 1000, but we're about to get to 1000 relationships sometime this month or maybe over the next month. So yes last quarter was very much in line with the previous quarters I think it was about 38 relationships generally.
Speaker Change: 38% to 45 area.
Speaker Change: Okay, how about that the large customer you guys.
Speaker Change: I got back in Q2, I know those deposits.
Speaker Change: At the bank and <unk> are they there now.
Speaker Change: Not yet the implementation is much more complex. So that is actually a pretty we know we run the business, but it's going to take time and that's going to be.
Speaker Change: Going to be doing the conversion over the course of next year.
How large of an AD can that be on the deposit front.
It's fairly.
Speaker Change: Fairly big.
Speaker Change: It is.
Speaker Change: It can easily bring in a couple of hundred million Bucks.
Speaker Change: Is there once you guys onboard them and show that you are successful in and integrating everything that Theyre doing is there a way you could potentially win more larger clients like this.
Speaker Change: Lee.
Speaker Change: But I like the smaller client nature of this business.
Speaker Change: Big clients complex clients are fine, but the magic of this business is that the average client size is only 3 million Bucks and I want to keep it like that because that's where you have.
You are getting paid for service rather than it being a price game.
Speaker Change: So I've asked the team to stay focused on the small end rather than go for the easy sort of big.
Speaker Change: Big clients that can move the needle very quickly.
Speaker Change: That was all the big learnings from yes.
Speaker Change: March of 2023.
Speaker Change: Yes in this particular relationship that we're talking about part of the complexity is it's really not per se one relationship. It's a large entity that owns hundreds of underlying entities beneath it.
Speaker Change: So each one is its actually.
Speaker Change: Separate business, which leads to the complexity of trying to onboard.
Speaker Change: Why it will take.
Speaker Change: A long time to bring every one of those entities on it's like.
Speaker Change: It's not one big conversion Thats multiple conversion yes.
Speaker Change: Okay.
Speaker Change: Just switching to expenses.
Speaker Change: What was the comp component from the stock price move this quarter do you have a sense for the dollar amount of the railcar expense you can see in <unk>.
Speaker Change: And the dollar amount of the railcar expense is probably going to be about $8 million in <unk> and it was a little over two and three.
Speaker Change: So increase there.
Speaker Change: <unk> million dollars.
Speaker Change: A little increase in comp was $6 2 million and I don't have the exact amount, but the vast majority of that $6 to stock price as well as some.
Speaker Change: We also increased our incentive compensation accruals.
Speaker Change: Okay.
Speaker Change: Compensation accruals, so those T cells.
Speaker Change: So I'm just curious for the <unk> trend excluding that railcar.
Speaker Change: <unk> bump ups are you thinking that expenses could be potentially flattish, maybe even down because you may have that roll off of the.
Speaker Change: The higher comps from the stock price move.
Speaker Change: What I will say to that is we haven't changed our full year guidance, we haven't moved off of that mid single digit or so.
Speaker Change: Okay, Great maybe just one last one on the buyback I was just curious whats holding the board back I know you've been asked this question every quarter and a lot of times you talked about the board meeting Thats upcoming and then the board doesn't go for it.
Speaker Change: Is there is there anything any signpost there they're looking at.
Speaker Change: In this period, where you are remixing and not necessarily aimed at growing the balance sheet and I know you've talked about how.
CET, one at 11% 11, as like the new 10% and we're getting close to well now's as 12 like the new 11%. How are you guys thinking about that.
Speaker Change: It's not the second level and it's not any one thing. It's a discussion is around just to give you a context for example.
Speaker Change: The August Board meeting was I think three days after VIX hit that 65 intra day.
Speaker Change: So when you go into a board meeting and the market is going completely haywire remember back in August.
Speaker Change: When when we had that little.
Speaker Change: Temper tantrum in the market.
The board.
Speaker Change: Literally three days after that so the mood of the boardroom was like what is going on.
Speaker Change: What does this all beam and and so so theyre taking into account.
Speaker Change: The market we're looking at.
Speaker Change: The uncertainty from the.
Speaker Change: <unk>.
Speaker Change: The geopolitical situation that we're in we're looking at also.
Speaker Change: What kind of growth might be at our doorsteps. So theyre looking at the pluses and minuses and they're also saying, okay. If we do a buyback how big is it going to be and how material will it be and we show them the numbers.
Speaker Change: Like we can go out two three 400 million buyback, it's going to be small and when you run through it and say okay. So what is the bottom line EPS impact and it's not much.
Speaker Change: So.
Speaker Change: So in light of all of that.
Speaker Change: Let's wait let's do.
Speaker Change: Do you have capital planning come back to US and then we'll see if we want to do something.
Speaker Change: Okay. So it's not any one thing that they are solving for a number of things.
Including the environment, including.
Speaker Change: What do you think gross prospects might be.
Speaker Change: Fed is about to do what will happen with the elections with all of that stuff goes into there that they have.
Speaker Change: <unk> that against how much could we do and what impact will it have and it's not really.
Speaker Change: The bottom line on that sheet the show them at the bottom is the EPS impact.
Speaker Change: Honestly, it's not that much.
Speaker Change: Alright, great appreciate all the color thanks, guys.
Speaker Change: Yes.
Speaker Change: Thank you and our next question coming from the line of David Bishop with Telsey Group. Your line is open.
David Bishop: Hey, good morning.
David Bishop: Hey quick question Roger Roger Tom.
David Bishop: Yeah.
David Bishop: Dec plenty capacity to grow on the commercial real estate side I think you are at 164 or so.
David Bishop: Saw a little bit of uptick in multifamily lending. This quarter. Just curious do you have any sort of guide largely targeting specific ratio. There just maybe curious what the comfort level is to grow grow that ratio.
Speaker Change: I don't think there is.
Speaker Change: There's plenty of room to grow it's not about kind of 165 number go up to 185 or 200 or whatever we're not solving for that there is plenty of room to grow where there is a restriction as there are asset classes that we are not countries. So.
Speaker Change: The obvious one being office.
Speaker Change: Nobody is touching office, so we're not going to grow that hospitality also were very careful.
Im doing very few deals here and there, but not a whole lot.
Speaker Change: So you look at.
Speaker Change: The avenues of growth, we have limited ourselves from a concentration perspective, that's where the restriction comes in not at the total CRE level Theres lots of room at the dump total CRE level. There is no room in the office space, There's little to no room in hospitality Theres, some room and warehouse.
Speaker Change: We're looking at some new asset classes like data centers, where we haven't done a whole lot in the past, we might do a little bit in that space, but.
Speaker Change: There are sub segments of CRE that are much more restricted rather than the total CRE.
Speaker Change: I would also add to that Raj is 100% accurate.
Speaker Change: As you look at even what people think are the most favored asset classes right now which would either gen.
Speaker Change: Generally be looked at as multifamily and industrial.
Speaker Change: The last 12 to 18 months was pretty robust construction.
Speaker Change: And both of those asset classes, we have seen upticks in vacancy rates in both of those areas. So while we like them.
Speaker Change: A good deal.
Speaker Change: We are cautious.
Speaker Change: When it comes to building these concentrations and ensuring that we're within.
Speaker Change: The overall asset class segmentation strategy that we have and that's really that's really the limiting factor rather than the sort of a big picture up number.
Speaker Change: Got it and then Raj I think you noted in the preamble.
Speaker Change: Pretty good line of sight into the noninterest bearing.
Speaker Change: Our pipeline here.
Speaker Change: If you are flat you are probably still looking at that.
Speaker Change: 11%, 12% growth rate this year or do you feel confident you can maintain that level of growth into 2025, and perhaps even improve on that.
Raj Singh: Yes, we.
Raj Singh: We will give you exact guidance in January but looking at just the way the pipeline stand right now I feel pretty optimistic.
Speaker Change: Great. Thank you.
Raj Singh: Thank you.
Speaker Change: And our next question coming from the line of Stephens <unk> with Piper Sandler Your line is open.
Speaker Change: Hey, good morning, everyone and thanks for the time.
Speaker Change: One question on the expense growth in the quarter it looked like.
Speaker Change: Occupancy and equipment, it's all a little bit of a jump here was there any sort of.
Speaker Change: Branch expansion or is there anything within that Thats worth, noting or is that.
Speaker Change: Minimal puts prediction.
Speaker Change: Repair and maintenance expenses in there.
Speaker Change: Got you.
Speaker Change: Something that should kind of normalize back down as a result or is that a decent run rate.
Speaker Change: I mean, I would look at maybe four trailing quarters as a decent run rate I think it's dangerous whenever you can look at any quarter and say that's the run rate yes.
Speaker Change: Perfect very helpful.
Speaker Change: And then as Youre thinking about maybe.
Speaker Change: The long term potential for the NIM as you work through continue to process through this balance sheet transformation and buildup non experience et cetera. How do you. How do you think about that long term potential for where you could or would like to get the NIM over the next couple of years in a perfect growth.
Speaker Change: We have to get it over 3%.
Without changing the business model.
Speaker Change: <unk> decided to change the business model and take on a little more risk than you can get much higher but based on the mix of business. This should be.
Speaker Change: We're shooting for over 3%.
Speaker Change: Okay, Great and then maybe the last thing for me is just Raj you talked a lot about the progress that's been made over the last four quarters last year directional trends look really good I guess, the one probably missing piece. There is <unk> income is still down from this time last year, so what needs to happen to actually grow PNR.
Speaker Change: Kind of maybe.
Speaker Change: That last piece of the puzzle do we need a <unk> three point out is that something that's on the table or how do we get that last piece there.
Speaker Change #100: I think I think its growth the balance sheet balance sheet is actually going to shrink this year, a little bit maybe 1% or so.
Speaker Change #100: And that is deliberate because we were busy kind of transforming it but eventually we have to get to growing it.
Speaker Change #101: I mean, its revenue Steven its spread revenue and also incremental improvement.
Speaker Change #100: Sure.
Speaker Change #100: Yes.
Speaker Change #100: Okay.
Speaker Change #102: That makes sense alright, great. Thanks for the time guys appreciate it.
Speaker Change #103: Thank you. Our next question coming from the line of Christopher <unk> with Janney Montgomery Scott Your line is open.
Speaker Change #104: Hey, Thanks. Good morning, Thanks for all the information. This morning, I was just curious either from Raj or Tom about the potential for upgrades.
Speaker Change #104: On credits.
Speaker Change #104: Whether it's from lower interest rates or a new tax information you have on borrowers whats the potential to see upgrades and some of the commercial lines that you've disclosed.
Speaker Change #106: Oh, Yes, I think.
Speaker Change #107: I'd split it into two I mean, one the cream portfolio.
Speaker Change #106: We can kind of clearly get line of sight.
Speaker Change #106: Upgrade potential, which we think is good because a good portion of it is tied to there is a rent abatement issue that we have.
Speaker Change #106: And new leases that have been signed and office building so.
Speaker Change #106: I think it's either less later Rodger mentioned earlier, we do not count.
Speaker Change #106: Signed leases when theres physical occupancy until the 90 days after the rent.
Speaker Change #106: As being paid so we can kind of chart out.
Speaker Change #106: Property by property and look at it of those properties that have been downgraded.
Speaker Change #106: We can almost say this particular date.
Speaker Change #106: This is why we will start to count that rent being paid so we have pretty good sideline.
Speaker Change #106: Good about.
Speaker Change #106: Grades.
Speaker Change #106: Within the overall <unk> portfolio, because it's more systemic.
Speaker Change #106: Kind of the nature of what we're looking at in the C&I portfolio.
Speaker Change #106: That's a little harder to say because every individual loan is in kind of a different industry segment a different issue.
Speaker Change #106: It's a little harder to look at it at a very generalized manner I would say, we see some where we think theres good upgrade potential.
Speaker Change #106: Somewhere management.
Speaker Change #106: Changes in business model changes are ongoing.
Speaker Change #106: It may take a longer period of time and some of them may be more stock where they are I would say in general lower rates will help everything.
Speaker Change #106: It'll help the C&I portfolio as well.
Speaker Change #106: It's harder to pick that I would be optimistic about that but in the <unk> portfolio.
Speaker Change #106: Much easier to have very direct line of sight and I would be more optimistic about that.
Speaker Change #108: Great. Thanks for that background. That's helpful. Raj just curious on your comments on the call about the regulatory inquiry over a weekend it seems odd compared to what we've seen in the past I guess thats just normal workflow.
Speaker Change #109: On vacation last week, so I was catching up.
Okay.
Raj Singh: That's all it was.
Speaker Change #110: Perfect. Thanks for quantifying that.
Raj Singh: Again.
Raj Singh: Thank you.
Speaker Change #111: Thank you and our last question coming from the line of John Armstrong with RBC Capital. Your line is open.
John Armstrong: Raj on vacation before earnings is clearly comfortable.
Speaker Change #111: Yes.
Jason.
Speaker Change #111: Yes.
Speaker Change #113: The hurricane hit the road.
Speaker Change #114: So it was interesting from being the other side of the world dialing in.
Speaker Change #114: And finding out what what's going on at the hurricane not that I can do much about it.
Speaker Change #114: Okay.
Speaker Change #114: Obviously most of the questions have been asked and answered, but I did have a question on.
Speaker Change #114: If you have any preferences for what the fed does it feels like the margin March is higher.
Speaker Change #114: Just based on what Youre doing from a business point of view and I understand the pause in the margin this quarter I get that but.
Speaker Change #114: Is there anything that you.
Speaker Change #114: You would prefer.
Speaker Change #114: Does from a rate perspective.
Speaker Change #115: Not really we built our balance sheet in a way that it doesn't really impact us that much of course.
Speaker Change #115: Move a 100 basis points 200 basis points surprise, everyone thats not going to be good but.
Speaker Change #115: Gradual reduction in rates is what we're expecting and it will be fine.
Speaker Change #115: Have a very long laundry list of what I would like the physical side of the house to do but.
Speaker Change #115: The monetary side I really I think they've done a good job I think.
Speaker Change #115: They have a very difficult task ahead of them I still remain afraid of that inflation might spark again next year.
Speaker Change #115: Just on all of the spending in all of the deficits were talking about in all of the giveaways that come about during election time, hopefully cooler heads will prevail next year and we will have more sort of responsible fiscal policy, but on the monetary side I think they've done a good job and I think if they just continue on a steady pace and.
Speaker Change #115: Not surprised of markets I think it will be fine.
Speaker Change #115: Okay.
Speaker Change #116: Okay I'll leave it there was as I'll send you a couple of questions, but nice job. Thank you.
Speaker Change #116: Thank you and I'll now.
Speaker Change #117: Now turn the call back over to Mr. Raj Singh for closing comments.
Raj Singh: Alright, thank you.
Raj Singh: Listen, we're happy with where the quarter came out we're happy that like I said earlier in my remarks that everything has.
Raj Singh: Gone According to plan this year.
Raj Singh: It's rare that happens, but it has happened.
And I'm very optimistic.
Raj Singh: Excited about what I see what the next two to three quarters will be.
Raj Singh: And where we can take this franchise. So thank you for indulging us and listening to our story and we will talk to you again in 90 days.
Speaker Change #118: Ladies and gentlemen that does conclude our conference for today. Thank you for your participation and you may now disconnect.
Speaker Change #118: Okay.
Speaker Change #118: [music].
Speaker Change #118: Okay.