TriState Capital Holdings, Inc.
Q3 2018 Earnings Call Transcript

Published: 18 Oct 2018

[Operator:]

Good morning, everyone, and welcome to the TriState Capital Holdings Conference Call to discuss Financial Results for the Three Months ended September 30, 2018. All participants will be in listen-only mode. [Operator Instructions] Before turning the call over to management, I would like to remind everyone that today's call may contain forward-looking statements related to TriState Capital that may generally be identified as describing the company's future plans, objectives or goals. Such forward-looking statements are subject to risks and uncertainties that could cause actual results or outcomes to differ materially from those currently anticipated. These forward-looking statements are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. For further information about the factors that could affect TriState Capital's future results, please see the company's most recent annual and quarterly reports filed on Forms 10-K and 10-Q. You should keep in mind that any forward-looking statements made by TriState Capital speak only as of the date on which they were made. New risks and uncertainties come up from time to time and management cannot predict these events or how they may affect the company. TriState Capital has no duty to, and does not intend to, update or revise forward-looking statements after the date on which they are made. To the extent non-GAAP financial measures are discussed in this call, comparable GAAP measures and reconciliations can be found in TriState Capital's earnings release, which is available on its website at tristatecapitalbank.com. Please note this event is being recorded. Representing TriState Capital today is Jim Getz, Chairman, President and Chief Executive Officer. He will be joined by David Demas, Chief Financial Officer for the question-and-answer session. At this time, I would like to turn the conference over to Mr. Getz. Please go ahead.

[James Getz:]

Good morning and thank you for joining us. We’ve just completed another robust quarter continuing our trend of consistently producing strong EPS results even as we focus on delivering exceptional long-term growth. We are building a business with meaningful client relationships here at TriState Capital. That mindset has been the cornerstone of our entrepreneurial culture from the start. We've carefully executed this strategy that anticipates growth opportunities and facilitates solutions for our niche commercial private banking and investment management clients in a sustainable, scalable, and sophisticated manner. Since our $70 million initial public offering in 2013, our last common equity raise we acquired three investment managers and took client assets under management to nearly $10 billion. Over this same period we grew on balance sheet assets organically by nearly $3.5 billion or more than 153%. All the while we've invested in talent, products and platforms with equally significant investment in highly scalable distribution, administrative and operational support enhancements. We've culminated [ph] a collection of premier strategies with outstanding financial performance that we believe resonates with clients and prospects and provides us competitive advantage. Beginning in 2016 we initiated strategic investments to begin building a deposit franchise to fund organic loan growth. Today, we have a highly sophisticated improvement treasury management program that rivals regional and superregional competition. And more recently, we've developed a digital lending platform for private banking which will be released in the fourth quarter. We intend to continuously fortify what we see as a dominant national franchise for our private banking business. Each of these investments embodies our commitment to continuous innovation and a superior client experience. We truly do well by doing well for our clients. This is reflected in our financial performance over the recent one and five-year periods through the third quarter of 2018. TriState Capital has grown quarterly net interest income to $28.8 million up 22% from last year and 83% from the third quarter 2013; revenue to $41.6 million, an increase of 18% from last year and 146% from 2013; pretax income to $16.1 million, up 32% from last year and 721% from 2013. Net income available to common shareholders of $13.6 million is up 36% from last year and 925% from 2013 and earnings per share of $0.47 increased 34% year-over-year and 840% from five years ago. We have also generated year-over-year double-digit EPS growth in 18 of the last 22 quarters that we've been public. In fact, our track record was recently recognized by Fortune, which named TriState Capital to its 100 fastest growing companies list for 2018 based on three-year annual growth and EPS, revenue, and total returns. We were pleased to be one of only 46 companies from any industry making this list for the second consecutive year. We have achieved our growth and success with a highly scalable model and team that has expanded from 128 to just 253 employees over the last five years. This is evident in the company's superior revenue per full time employee of $654,000. This scalability is also evident in revenue growth that continues to outpace expense growth and we continue to see opportunities to build incremental operating leverage in our business. In addition, TriState Capital Bank's efficiency ratio remains in line with our goal of low to mid 50s range improving the 52.55% [ph] for the first nine months of 2018. We continue to operate under the viewpoint what this company can achieve in the next five years is sum multiple over the last five years. Our growth strategy is unchanged from the time of IPO and we are even better positioned today given our team, clients, scalable infrastructure, low risk profile, capital distribution and capabilities. Turning back to the third quarter, let me touch on a few noteworthy items. I'd like to draw special attention to our bank deposits which great at an even faster rate than loans on both the year-over-year and linked quarter basis. Our treasury management and liquidity management franchise contributed to average deposits which expanded by nearly 12% from the second quarter and 27% from the third quarter of last year. These represent the highest quarterly deposit growth rates in our history as a public company and compare to our very positive growth in average loans of nearly 5% to the linked quarter and 21% year-over-year. Keep in mind this is all organic. Recent deposit growth places TriState Capital among the top quartile of our peers including those who have added deposits through acquisition. This strategic expansion of our national deposit franchise is designed to continue fueling organic loan growth by expanding and deepening client relationships. Among our depositors are family offices, high net worth individuals, middle-market companies, commercial real estate and other private investment funds, registered investment companies, broker-dealers, and futures and commodities firms, municipalities and credit unions and community banks. The timing our deposit gathering success may vary from quarter-to-quarter. Accordingly, the exceptional deposit growth in the third quarter pushed our loan to deposit ratio to 100%. This deposit volume influx is reflected in interest expense and net interest margin of 2.22% for the third quarter. Although we note that this is only a change of 5 basis points from the year ago quarter, while we view the economic impact to be unique to the quarter, we're very happy with the continued growth in our deposit franchise. Importantly, we're growing valuable direct deposit funding ahead of anticipated demand for both private banking and commercial loans which we expect to be very healthy in the fourth quarter of 2018. As we've said before we do not manage our business to net interest margin and instead focus on net interest income dollars. We look at consistent net interest income dollar growth fueled by our organic expansion of high quality earning assets as an indicator of positive risk adjusted returns. By this measure, the third quarter was outstanding as continued strength in private banking in middle market lending drove increased loan volumes and interest income during the quarter. Even with growth plus deposit growth net interest income grew to a record of nearly $29 million. Total interest income for the third quarter of 2018 grew to $52 million increasing 47% from the same period last year and nearly 10% from the linked quarter. At the same time third quarter 2018 average loan yield expanded by 67 basis points for the same period last year and 10 basis points from the linked quarter. As a general note, we have conservatively managed interest rate risk since our inception. TriState Capital continues to maintain an asset sensitive and LIBOR neutral balance sheet. Well over 90% of our loan portfolio was floating rate and primarily pegged to LIBOR while about a quarter of our deposits are fixed rate CDs. This continues to allow us significant flexibility in managing interest rate risk in changing market conditions. On the lending side, the bank again grew loans organically to a record of $4.8 billion at the end of the third quarter, up 21% from one year prior. We also achieved another significant milestone by originating over $1 billion in new loan fundings over the first nine months of 2018. Low risk private banking loans continue to be our fastest growing category of lending. These loans which are largely backed by marketable securities and other liquid collateral grew by nearly 28% over the last 12 months. Private banking loan applications remained strong in the third quarter of 2018 growing by 39% from the same period last year. This continues our trend in 2018 of growing applications 35% to 40% year-over-year. And TriState Capital's unparalleled national distribution network now numbers 183 financial intermediaries compared to 159 12 months ago. In commercial lending we continue to drive double-digit rates of organic growth through middle market relationships in our four-state footprint. Commercial and industrial balances grew by 19% over the last 12 months. Over this same period total commercial real estate balances grew nearly 11%. Our CRE relationships were again strong contributors to swap fee income in the third quarter which totaled $1.9 million. While borrowers' use of swaps can vary quarter to quarter, we said earlier in the year that we expected to be in line with 2017's $5.4 million. With more than $5 million in swap fees already recognized in the first nine months of this year, we are on pace to exceed last year's level. Moving to Chartwell, our investment management businesses provides most of our noninterest income that in turn presents more than 30% of this company's total revenue. Performance, product mix and distribution capability continue to attract new clients and funds from around the United States to our asset manager. Chartwell has grown client assets under management by nearly $10 billion at the end of the third quarter increasing 20% from one year prior. Third quarter revenue from the investment management business grew 7% to $9.9 million from the year ago period. One of our previously discussed financial goals for Chartwell is to see double-digit investment management growth. While we continue to expect this business to attract net inflows and maintain organic growth we don’t currently expect a double-digit rate for full-year 2018 given the balance of our business between equities and fixed income recent stock market volatility. We're proud of the positive inflows in growth that we have achieved especially relative to the industry. We also continue to evaluate additional acquisition opportunities in the investment management space to support our long term objectives for this business. While the Colombia acquisition is minimally accretive out of the gate as expected it had annual run rate revenues of more than $2 million at close and is expected to become a meaningful contributor to our business, client base and future growth. We continue to win this period of performance Chartwell's investment professionals deliver for their clients. These results by our active managers have been rewarded with very meaningful net deposit of inflows for the third quarter and first nine months of 2018. From a product perspective, inflows were led by our high grade and short duration BB rated fixed income strategies. These and other Chartwell strategies continue to deliver strong investment performance through the end of the third quarter. 86% of our asset manager's products were ahead of their respective benchmarks for the one year period. 64% were ahead for the three-year period and 75% were ahead for the five-year period. This performance which is critical for attracting inflows really positions Chartwell very well for continued growth. As we head into the fourth quarter we remain focused on our 2018 performance goals, all of which are aimed at sustaining our record of delivering double-digit earnings growth to shareholders over the long-term. Also I mentioned earlier, we expect to continue driving Chartwell revenue growth, in addition we remain on pace to grow net income at a double-digit pace, organically grow loans at a double-digit pace, double treasury management deposits, drive operating leverage and maintain a bank efficiency ratio within a low to mid-50s range. Maintain strong credit quality metrics and surpass $15 billion in assets under management at Chartwell during 2019. Based on the new business pipeline for each of these three businesses, we head into the fourth quarter and next year expecting to sustain revenue growth while continuing to build incremental operating leverage. We have consistently delivered substantial annual earnings growth and EPS over the last five years and we believe we've built an engine for growth that is only accelerating. That concludes my prepared remarks. I'll now ask David to join me for Q&A. Operator, please open the lines for questions.

[Operator:]

Thank you. [Operator Instructions] Our first question comes from Michael Perito of KBW. Please go ahead.

[Michael Perito:]

Jim, David, good morning and thanks for taking my questions.

[James Getz:]

Good morning Mike.

[Michael Perito:]

I have two margin related questions, kind of a shorter term one for David and then a bigger picture one for you Jim, but I guess first on the shorter term one, just, obviously you guys continue to grow and I appreciate the focus on NII and that dollar growth should continue, but I guess just help me just out a little with the near term margin, obviously it seems like LIBOR worked against you a little in the quarter, but I'm just curious you have had a few weeks here LIBOR has recovered a bit, can you give us any sense of where you maybe expect the NIM to trend next quarter generally speaking after kind of some of the compression you saw this quarter?

[James Getz:]

Michael, I'll answer that question and David may want to elaborate a little bit more. But let me give you a few observations and thoughts on net interest margin. Let's put net interest margin in perspective for TSC and keep in mind we're building a business here and it must be looked at much more holistically than over a period time not just a quarter. A quarter doesn't really make a trend line. For us it's a very narrow metric. It does not take into account non-interest expense, namely real estate, people, technology or infrastructure. Look at how our non-interest expense relative does since it has declined so significantly over the past few years. Look at how cost effective our deposit gathering methodology has been. It does not take into consideration the risk profile of TSC or that almost a third of our revenue is non-interest income in nature and growing. We - really we have experienced a meaningful uptick in deposits during the third quarter anticipation of the strong fourth quarter and loan demand. The second and fourth quarters have traditionally been best from a loan growth standpoint for TriState Capital. Now let me go over with you a couple financial metrics relative to NIM. Changes to our NIM need to be considered over periods longer than just one quarter. At 09/30/2018 our trailing 12-month funding data including deposit and borrowing cost is consistent with our quarter four 2017, quarter one 2018, and quarter two 2018 betas, but our third quarter 2018 is material, we hire on a single quarterly basis. Our funding betas in general are traditionally higher based on a rate of deposit growth and branch list business model, but they also can be more lumpy in any individual quarter due to first of all basis widening or narrowing between LIBOR, target Fed fund and effective Fed funds including the timing of the LIBOR increases within a given quarter relative to Fed funds increases, timing of the large new deposit client deposits arriving in our balance sheet in an expected rising rate environment, namely we may have to acquire new deposits at higher rates but we then can't control rate increases thereafter. Then thirdly, growth in average deposits exceeding growth in average loan or vice versa, namely average borrowings you'll note were twice as high in the second quarter of 2018 as they were in the third quarter of 2018. Our NIM is gone from 226 at 12/31/2017 to 235 at 03/31/2018 to 238 at 06/30/2018 to 222 at 09/30/2018. While we agreed 16 basis points of compression over a quarter seems substantial, to see 4 basis points of compression over a year is not surprising given the shift in our loan mix that is constantly occurring on our balance sheet as private banks loans secured by marketables continue to make up a large portion of our total loans. Said another way, there is always some downward pressure in our NIM created by the ongoing de-risking of our loan portfolio as we grow. Keep in mind if I take you back to 2013 and our IPO, private banking loans were about 19% of this portfolio. Today there are 55 and we fully expect they'll be 60% within the next 24 months. Additionally marketable securities loans, particularly the large dollar variety, our lower spread contribute to ongoing reductions at our efficiency ratio given the streamline nature of the on boarding of those loans. So what is sacrificed there and spread NIM contribution is picked up in our operating leverage and reduced credit cost. Now, what does all this mean? The NIM will rebound as the excess liquidity is put to work and our treasury management initiatives continue to gain further footing. David, did you have any points?

[David Demas:]

No, you said that well Jim, I have nothing to add.

[Michael Perito:]

Thanks Jim and then, and so I guess my followup question and this is the bigger picture question you have somewhat addressed it, but as I think about TriState and what you guys are trying to accomplish, I guess what is the benefit of having an asset sensitive, or you know obviously it was perceived to be asset sensitive, I guess why not hedge the balance sheet and try to make the margin a less volatile variable going forward as opposed to being so exposed to LIBOR if the real, high level focuses on just growing the balance sheet and leveraging the platform economies of scale, et cetera, et cetera? It would seem like you would remove a variable from your earnings and help you maybe manage the balance sheet a little bit better, is that something that's ever been considered from your perspective yet?

[James Getz:]

We have not considered it. From the very beginning when we started the, started the bank in January of 2007 we've had an asset sensitive portfolio. And keep in mind, most of the period of time that we've managed this company from 2007 through I guess we could conclude 2012, we've been in declining rate environment and we are reducing positive earnings during that period of time. So it's something that we periodically look at, but we have not embraced it at all at this particular period of time. Having this as an asset sensitive portfolio allowed us to be quite candid with you not to take on any type of interest rate risk. And if you look at our earnings, you've probably noticed that we have continued over this period of time, over the past couple quarters releasing some provision. And we look at the release of provision as earned and not opportunistic. Our asset quality is pristine by design. We have a lower provision. It's expected outcome of our business model and we've only had 21 charge-offs in the 11-year history of the bank and that includes a severe recession. So this has really worked for us and produced the EPS numbers in the marketplace, so that's why we haven't looked at it and I'll let David comment here.

[David Demas:]

Michael as we've shared with you and others we have good liability side swaps on the balance sheet from time to time as we anticipated this rate rise. We're asset sensitive now and you can see us move to asset neutral as we move through the cycle and we continue to explore ways to hedge the asset side of the balance sheet, but we’ll continue to do that as we move through the cycle.

[Michael Perito:]

Thank you guys, I appreciate it.

[Operator:]

Our next question comes from Russell Gunther of D.A. Davidson. Please go ahead.

[Russell Gunther:]

Hey, good morning guys.

[James Getz:]

Good morning.

[Russell Gunther:]

I just want to try to tie together a few of the comments you made Jim. So in your prepared remarks you mentioned that the economic impact would be unique to this quarter as it relates to the margin compression and I think I understand that you would expect the margin to rebound as that excess liquidity is put to work. So to triangulate that, the excess deposit growth in this quarter is going to get put to work with the particularly robust loan growth you mentioned for 4Q and we could see that margin in the short term rebound next quarter?

[James Getz:]

Yes, you should look at it exactly that way. Historically, the fourth quarter has been the most robust loan quarter that we've had, both when the commercial and the private banking but particularly on the private banking side. And as I look at just the basic lifecycle of the fourth quarter it usually ends around December 15, and the new quarter doesn't open until January 15, because of the holiday season and things along that particular line. So we fully expect the first few months of this quarter to be in very strong.

[Russell Gunther:]

Okay, great thank you. And then just switching gears a little bit, given the market volatility of late, could you just share with us how that private banking channel, those loans have performed and any color you could provide on what may have needed to be cured or an nurtured up?

[James Getz:]

We really haven’t had any issues that we can report to you. In the past we've talked to you about items that had to be cured and things along that line and this current phase of the market has not impacted that portfolio at all. I think you want to keep in mind that the other phases of the market, the market itself was not quite as high as it was when the turndown occurred at this point, so we have nothing negative to report to you on that.

[David Demas:]

Russell, the average loan to value in that book right now is about 44%, 45%, so there's a fair amount of room between that and any stress events.

[James Getz:]

Well, I want to be clear there were six cures and they've all been straightened out.

[Russell Gunther:]

All right, thanks so much, guys.

[Operator:]

[Operator Instructions] Our next question comes from Matt Olney of Stephens. Please go ahead.

[Matt Olney:]

Hey, thanks. Good morning guys.

[James Getz:]

Good morning.

[David Demas:]

Good morning, Matt.

[Matt Olney:]

Good morning. I want to go back to the loan yields. I think the overall loan yields in the third quarter was about 419, can you give us some more color about what the loan yields are in the private bank versus CRE versus C&I and how those changed in the third quarter? Thanks.

[David Demas:]

Matt, I don’t have the data for the quarter, but for the quarter private banking yielded about 405, CRE yielded about 459, and C&I yielded about 415.

[Matt Olney:]

Okay and then, I guess Jim to your earlier point, the margin is down about five bps over last year, but the NII growth is about 22% over that time, so as you look forward can you talk about the challenges, the opportunities to maintain that NII growth of over 20% how sustainable is that in your view?

[James Getz:]

I think it's meaningfully sustainable and the reason we do just look at what we have reported here of additional intermediaries we're making more market penetration. We have a seasoned group of commercial lenders out there, many of which have been with us now for 10 years. The large, like to give you an example some of the turmoil in the banking world in Philadelphia has helped us out dramatically with BBNC acquiring two large regional firms, National Penn and Susquehanna. We had the same thing going on in the Ohio region with First [indiscernible]. So we had we have a high level of confidence that NII will continue to move up 15% to 20%.

[Matt Olney:]

And then David, I think you said in the past that your operating expense growth expectations for 2018 is somewhere between 11% and 12%, looks like we're kind of headed right towards that. As you look into 2019 what's your view as far as your expense growth levels?

[David Demas:]

Matt, very early indication we're still in the planning process for ’19 but I think 12% is a reasonable expectation at this point. We will certainly update you on our next call.

[Matt Olney:]

Okay, that's helpful. And then last from me as far as capital ratios, talk to us about how you are viewing your capital ratios, which ratio is your constrained?

[James Getz:]

The Tier I is our constrained and you can look and a lot of people when they look at TSC they take a look at peer banks, other $5 billion to $10 billion banks and you'll see that most of their Tier I is in the 9% range. But we're not in the mood of acquiring any banks and so we're pretty comfortable taking that down to 7% before we can consider doing anything from a capital standpoint even though that is still meaningfully above the minimum for well capitalized and obviously our regulatory authorities have been comfortable with it also.

[Matt Olney:]

Okay, great. That’s all from me. Thank you.

[Operator:]

Our next question comes from Daniel Cardenas of Raymond James. Please go ahead.

[Daniel Cardenas:]

Good morning, Jim.

[James Getz:]

Hi Dan.

[Daniel Cardenas:]

Just most of my questions have been asked and answered, just one question maybe as an update on prospects for M&A on the investment advisory side, is that - how's that looking, do you feel optimistic that you can continue to be successful in making acquisitions in that arena?

[David Demas:]

We feel more confident than we did a year ago when we made this public announcement that we would make this happen at some point by the end of 2019. There are lot of macros that have occurred in that industry. More people are prepared to take our call, to visit with us, talk with us and the multiples have come down somewhat. You probably noticed that in the publicly traded arena and you know now they are somewhere between 4.5 times EBITDA and 12 times EBITDA and they used to be meaningfully higher than that at this point. So it's very much moving toward a bit of a buyer's market. So I think we can really connect ourselves with a top quality partner between now and the end of 2019. It will really expand our focus on the asset management arena and take our non-interest income up consequentially higher than where it is now and further of course reduce the risk profile of the company.

[Daniel Cardenas:]

Okay, good and then should we be thinking about provision levels given some pretty dynamic loan grow but provisioning that’s been pedestrian at best?

[David Demas:]

Dan, we continue to run a pretty good quality credit book as I think most people on the call would agree. We had some recoveries in the quarter, don't know what credit events we'll see in the fourth quarter and certainly don't anticipate anything material. So I could see our overall allowance to total loans being 30 basis points or less by the end of the year.

[James Getz:]

Dan, to give you a specific, our total classified loans here is $7.5 million and the criticized loans are $21 million. So this portfolio is in very good shape and much of it, even if you take out the private banking portfolio and just look at the C&I and CRE portfolio, it’s - we have a lot of confidence in it. We've been in a very good cycle for the past couple of years at this point, but if you look at the loan portfolio, our loan portfolio today our commercial real estate is less than 30% of that loan portfolio. And as you are well aware most banks are meaningfully more than that and our C&I portfolio is about 16, so it's really - I think we have some pretty good controls and constraints on it.

[Daniel Cardenas:]

All right, thank you guys.

[Operator:]

Our next question comes from Matt Schultheis of Boenning & Scattergood. Please go ahead.

[David Demas:]

Good morning Matt.

[Matt Schultheis:]

Good morning. Quick question on Chartwell, just for the quarter I think you had an increase in AUM of something in the neighborhood of $300 million and I was wondering how much of that is attributable to performance and how much of that is attributable to net customer inflows?

[James Getz:]

Most of the flows were coming from the BB as I mentioned it in the presentation okay, and also the high quality corporate bond. If you look at their new business and new flows from existing accounts it was some $515 million. Market appreciation was $172 million. Okay?

[Matt Schultheis:]

Okay, all right thank you. And then with regard to the private banking loans, you said in the past that periods of market turmoil could affect demand from the consumer and as the market became a little more volatile did that actually play out as you expected or did that not really over application volumes are unchanged?

[James Getz:]

Well remember when we talk about market turmoil we don't talk about weeks, we talk about quarters and months and a year. So you can see what the numbers were that we had this quarter and it was really pretty meaningful and then recall in the presentation I went over the applications, they were up by 39% for the same period last year. So…

[Matt Schultheis:]

Okay but you didn't just in that two weeks or a short period you didn’t see people get a little more tentative at all?

[James Getz:]

Yes.

[Matt Schultheis:]

Okay, thank you.

[Operator:]

Our next question is a followup from Michael Perito of KBW. Please go ahead.

[Michael Perito:]

Hey guys, thanks for the followup. I just had a few quick specific questions. One, I want to start on attach rate [ph]. I know as the comment in the release that I think you mentioned it should be in the same neighborhood in the fourth quarter, but I wonder if you guys have any preliminary thoughts on what kind of tax charges you're using and where that could settle in for 2019 at this point?

[David Demas:]

Matt, it's a little bit early to give you any specific guidance on ’19. We're actually having those conversations here as we speak, but you can count on us to regularly evaluate opportunities, continue to prudently and responsibly manage tax expense. We’ll continue to do that next year. As I've shared with you in the past the solar credits tend to be pretty episodic and so you can't predict when and how those opportunities will come, but we will continue to look for opportunities to manage the rate. I think you can expect the rate to be somewhere around 13% for overall 2018.

[Michael Perito:]

Okay, thank you. And then the liquidity bill in the quarter, I know Jim you mentioned that the plan is to deploy that, but I guess as we think longer term, I understand it could fluctuate from quarter-to-quarter you guys core deposits which can be lumpy at times, but what do you view kind of as the right liquidity position for TriState given the risk profile and how are you thinking about it, is it a dollar amount, is it kind of percentage of the balance sheet, just any thoughts there would be helpful?

[James Getz:]

We have never really been concerned. If you look at our loan to deposit ratio, it's consistently been over 100%. But what I would tell you with the success that we're having in the marketplace with the pretty multifaceted program that we have been place, I fully anticipate over the next several quarters that it won't be unusual for our deposit growth to exceed our loan growth.

[Michael Perito:]

Okay. And then just last question from me, just hoping for - I just don't want to beat a dead horse here, but there's some demand for a couple metrics on the margin and the positioning of the balance sheet. So I was just curious if you could remind us a couple of things, one primarily the, we know the overall percentage exposure to LIBOR, but in terms of 30-day or 90-day can your remind us where most of the portfolio is positioned and when it reprices? And then conversely on the deposit side, can you remind us what if any deposits you have that are indexed directly to Fed funds? Thanks.

[David Demas:]

Sure Michael. On the asset side about 92%-ish is indexed, loans are indexed predominantly to 30-day LIBOR, 30-day LIBOR I think comprises in excess of 80% of that portfolio. And loan to deposit side will take that 40% of it is truly indexed to Fed funds and the rest is in our discretion.

[Michael Perito:]

Perfect, thanks for the color guys.

[Operator:]

Our next question is a follow up from Matt Olney of Stephens. Please go ahead.

[Matt Olney:]

Yes, thanks for taken the followup. I want to go back to credit quality and as you mentioned the credit trends in 3Q look excellent, but some of the other banks in the market are reporting some problems with more private equity sponsored, highly leveraged borrowers, and some of those loans. And just remind me what is your exposure at this point to TE sponsored borrowers and how much of that is highly leveraged?

[James Getz:]

Right, let me take you back to when we had some issues in that segment of the business back in the second quarter of 2014, you learn more from your mistakes than your successes. We had less than $10 million of private equity related shared national credits in our portfolio now and they're all performing - it's performing as agreed.

[Matt Olney:]

Great, thank you.

[Operator:]

This concludes our question-and-answer session. I would like to turn the conference back over to Jim Getz for any closing remarks.

[James Getz:]

We truly appreciate your continued interest in our company and the commitment and look forward to continuing to update you on our progress on the next quarterly call in January. Thank you very much.

[Operator:]

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.