TriState Capital Holdings, Inc.
Q1 2015 Earnings Call Transcript

Published: 23 Apr 2015

[Operator:]

Good morning, everyone and welcome to the TriState Capital Holdings Conference Call to discuss the financial results for the quarter ended March 31, 2015, which were released yesterday afternoon. All participants will be in listen-only mode. [Operator Instructions] Please note, this event is being recorded. 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. Representing TriState Capital today is Jim Getz, Chairman, President and Chief Executive Officer. Jim will be joined by Mark Sullivan, Vice Chairman and Chief Financial Officer for the question-and-answer session. I would now like to turn the conference over to Mr. Getz. Please go ahead.

[Jim Getz:]

Good morning and thank you for joining us this morning. It's always a pleasure to be able to update you on the execution of our profitable growth strategy for TriState Capital Holdings and never more so then when we started years we have in the first quarter of 2015. Earnings per share grew more than 12% from a year ago period to $0.18 in the first quarter supported by total revenue growth of 32% and solid credit metrics. First quarter earnings growth is even more notable when you consider that we had nearly $1 million less in security sales gains in a year ago period. It was achieved entirely through organic growth and core profitability. Loans grew 13% annualized in the first quarter while adverse rated credits decreased by 14.3%. Non-interest income represented more than 35% of revenue, thanks to the growing contributions of Chartwell Investment Management. In all a very balanced and profitable quarter that we believe highlights however focused on consistently executing our growth strategy. Before going into more detail on the quarter, I’d like to spend a few minutes on some very positive capital planning news, we reported in yesterday's press release. As of January 1, Basel III recognized the credit risk mitigation benefits of certain non-purpose loans secured with financial collateral that is priced daily. The new capital rules provide for lower regulatory capital to be allocated on these loans, compared to lending collateralized by less liquid assets such as real estate, equipment, receivables or future cash flows. We determined that these provisions supply to the majority of our private banking channel lending to high-net-worth borrowers which we originate through our referral network of financial intermediaries. Specifically, the provisions applied to TriState Capital, non-purpose margin loans that are collateralized by qualified marketable securities which we price and monitor daily. TriState has uniquely positioned for this favorable Basel III capital treatment to loans collateralized by marketable securities for a few reasons. We have been placed people who have significant knowledge of the capital markets and strong relationships within these securities industry. The liquid nature of our financial collateral our loans are over collateralized by structured advanced rates. The collateral is mark-to-market and monitored on a daily basis. We have made significant investments to develop a robust proprietary system for monitoring this collateral. Since inception, we've had no charge-offs related to these loans and we believe our proprietary system has helped us to more effectively mitigate credit risk. As a result of Basel III, the new regulatory capital rules recognized the credit risk mitigation benefits of TriState Capital's marketable securities collateralized loans and the very unique expertise and technology we've developed to manage it so successfully. We believe the new regulatory capital treatment is now in alignment with a lower credit risk profile with these loans, which also are the fastest growing category of blending we have at our bank today. Importantly, the application of the new capital treatment does not change our uncompromising approach to over collateralizing, actively monitoring and managing risk associated with loans collateralized by marketable securities. Before we find this new capital treatment to qualifying loans, we complete an extensive internal analysis of the rule, taking into account the requirements for the various regulatory authorities. The analysis was undertaken in consultation with expert bank regulatory and legal advisors. About $700 million of our $1.1 billion in private banking channel loans at the end of the first quarter qualified for the application of the new capital treatment. Accordingly, when we complete our regulatory filings for the quarter, you will see our holding company total risk based capital ratio will increase to 14.39% at March 31, 2015 from 11.02% at December 31, 2014. Our banks subsidiary total risk base capital will increase to 13.65% at March 31, 2015 from 10.69% at December 31, 2014. Going forward we anticipate that the majority of loans that TriState Capital Bank originates through its private banking channel will qualify for the new regulatory capital treatment on our non-purpose lending secured by financial collateral. With Basel III implementation had the net effect of increasing regulatory capital by $70 million in the first quarter, we now expect to be able to execute our growth strategy without a need for new external capital for the foreseeable future. Of course, this gives us substantial new flexibility for achieving our long term 15% compound annual loan growth goal. Also as we've said before, in addition to our organic growth goals we are active in the marketplace for investment manager acquisition candidates that complement Chartwell's book of business, investment strategies and distribution capabilities. The capital freed by our implementation of Basel III positions us for the move quickly should we identify the right opportunity. Now I would like to talk about other highlights of the quarter. As I mentioned we are extremely pleased with the first quarter results we reported yesterday. Net income for the quarter totaled $5.1 million, up some 10% for the first quarter of 2014 even with nearly $1 million less in security sales gains than in the year ago period. Recall that our acquisition of Chartwell Investment Partners closed on March 5, 2014 so last year's first quarter included only about a month's contribution from Chartwell. For the first three months of 2015, you can clearly see the revenue contributions of Chartwell with investment management fees of $7.7 million. Equally important to us is that taken together our bank and investment management businesses generated total revenue of $25.5 million in the first quarter, an increase of 32% from the year prior quarter. Non-interest income grew to 35.5% of total revenue this quarter compared to 17.9% in last year's first quarter with just one month of Chartwell. This compares to an average of 27% for $1 billion to $5 billion asset commercial banks. As a percentage of average earning assets, TriState Capital's non-interest income grew to 1.33% in the first quarter up 71 basis points from the year before and up 2 basis points from the linked-quarter. Net interest income totaled some $16.5 million in the first quarter increasing by 4% from last year's first quarter. The increase was primarily driven by 10% growth in total loan interest income from the increase in private banking and commercial real estate lending over the past year. Compared to the first quarter of this year, fourth quarter 2014 net interest income was $1.1 million higher primarily due to the linked-quarter's deferred loan interest recovery of $762,000 and two additional business days that contributed approximately $450,000 in net interest income. Finally, as you may have seen in our release yesterday we saw a significant loan growth in the first quarter, while deposit growth was steady and strong throughout. All those moving parts will reflect in our net interest margins for the last few quarters. NIM was 2.44% for the first quarter compared to 2.61% in the fourth quarter of 2014 or 2.49% adjusted for non-accrual loan that was paid in full. The quarter's NIM continues to reflect the fact that lower risk profile and floating rate loans were the primary driver of current growth and lending and net interest income dollars. I will repeat what Mark and I have said many times, by design NIM has been outpaced by growth in net interest income, non-interest income and total earnings. We are also maintaining what we believe to be one of the more highly asset sensitive balance sheets in banking even as we deliver net interest income growth. Our internal model demonstrates that a 100 basis point interest rate shot result in a 5.6% increase in net interest income. On the expense side, I’ll briefly remind you that when looking at comparable data next year's first quarter of just one month to Chartwell expenses, and the linked fourth quarter included $1.6 million in earn-out expenses related to the Chartwell acquisition. Moving to loans, obviously we’re extremely pleased since the end of the last quarter total loans grew by 13% annualized to $2.48 billion and rep more than 28% over balances at March 31, 2014. Our unique private banking channel continues to be the bank's greatest source of current loan growth. Pricing in marketable securities back loans continues to average between 200 to 225 basis points over 30 day LIBOR reflecting the low risk profile of our private banking channel loans. Private banking loans were up 31% annualized from the end of 2014 surpassing $1 billion for the first time. Compared to a year ago those loans to net high-net-worth individuals have grown by 77%. They are mainly sourced through our growing network of financial intermediaries, which now number 93 firms nationwide. Commercial real estate lending also remains growth driver for us and it continues to exhibit reasonable pricing and credit support. CRE loan balances were up 12% annualized from last quarter and up some 27% from last year's first quarter. In terms of commercial and industrial loans, we're seeing some positive signs in the marketplace, which indicate that good potential for increased utilization of revolving credit lines by businesses like our middle market, commercial customers. Now let's discuss the dynamics of the loan portfolio. The complexion of this loan portfolio has changed over the past 12 months. If you take a look at the year March 31, 2014 and compare it to March 31, 2015. In 2014, 38% of our commercial - of our loan portfolio was made up of commercial and industrial loans, today 27%. On the commercial real estate side, in 2014 some 31%, today 30% of the loan portfolio. In the private banking arena, in March of 2014, 31%, today 43%. Now looking at the activity of the loan portfolio in March 31, 2014, we had a total loan balance of approximately $1.9 billion. During the 12-month period we originated $950 million of loans. We had total loan payoffs of $355 million. We had lines of credit pay down of some $49 million, leaving us with a net loan balance growth of some $547 million or up over that 12-month period of time some - up some 28% with the total of $2.48 billion. It is our highest priority that the exceptional loan growth we're producing comes from high quality credit worthy sources. On that front, we’re extremely pleased with our credit metrics. The quarter so no charge-offs and in fact had a modest recovery of $7,000. Non-performing assets declined by $900,000 from December 31 and represented some 1.05% total assets at March 31, an improvement of six basis points from year end and 15 basis points from a year ago. In addition, total adverse rated credits decreased 14.3% during the quarter. We recorded provision expense totaling 925,000 or 0.15% of average loans annualized largely in supportive growth. This is inline with provision, which measured 0.13% of average loans annualized in the year ago quarter. Recall that in the fourth quarter we saw the full payoffs of our previously non-performing loan, which led to the reversal of the specific reserve for the credit and a negative provisionary expense for the same quarter. Loan growth is typically our headline I want to draw your attention to the success of our deposit gathering efforts during this quarter. Since the end of 2014 our team has grown deposits by more than 18% annualized to more than $2.4 billion. Our ability to secure stable, low, all-in-cost deposits to fund our lower risk loan portfolio is the outcome of consorted efforts to staff our deposit gathering team and incentivise our bankers to meet customers lending and deposit needs in a superior manner. Turning to our investment management business, Chartwell continues to exceed expectations one year after closing the deal last March. Chartwell's investment management and sales team continue to collaborate with our private bankers and commercial lenders on new distribution opportunities and they’re gaining momentum on leveraging TriState Capital's financial intermediary relationships. You may recall that in 2014, we've fully accrued approximately $17 million in post closing contingent consideration. Including the $1.6 million incremental earn-out expensed in the fourth quarter, which is due to former earners of Chartwell this quarter, while we have the option to pay up to 60% in TriState Capital common stock, we intend to pay the full amount in cash since we believe the stock is meaningfully and consequentially under valued. The stock price also led us to continue making opportunistic share repurchases under TriState Capital's buyback authorization which was announced and initiated in the fourth quarter of last year. Of the 10 million, we're up to 1 million shares authorized by our Board with purchase to total of 987,233 shares or approximately 9.7 million at an average cost of $9.87 per share through March 31. Thanks to our financial service distribution capability, investment management, and private banking has emerged as the low risk minimally capital intensive engine of future earnings for this company combined they now represent approximately 50% of total revenues. Investment management fees alone represented 30% of total revenues in the first quarter with Chartwell segment net income accounting for more than $1 million or 21% turnover earnings in the first quarter, that's nearly $0.04 of our consolidated EPS of $0.18. Chartwell's assets under management grew to $8.1 billion from $7.7 billion on December 31, 2014. Assets under management growth during the quarter reflects $272 million in new business, and new flows from existing accounts as well as $256 million in market appreciation, which offsets outflows of $138 million. The weighted average investment fee rate was 37 basis points in the first quarter and we continue to see opportunities for expanding margins as we build out Chartwell’s distribution through our financial intermediary network to the retail clients or the institutional business continues to drive new business and flows. What continues to allow us to attract and retain investment management clients is Chartwell's highly credible performance. Its track record as of March 31, included five of Chartwell’s 12 investment disciplines beating their benchmarks on one year performance. Seven of a 12 beat their benchmarks on three year performance and all 12 of the disciplines beat their benchmarks on five year performance. I began my remarks this morning by outlining the important and significant changes to our capital framework in light of Basel III. The net positive affect of this outcome is substantial. What is unchanged however, is how we treat our available capital whether retain from earnings or raised from the capital markets we’ve always taken and we’ll always take a thoughtful and dynamic approach to allocating capital in our efforts to achieve the highest and best opportunity for our stakeholders. As we continue our strong organic growth in banking and consider potential investment management acquisitions for Chartwell. Our successful execution of our profitable growth strategy stems for the opportunistic use of capital. It's what driven our 28% increase in loans, 32% increase in revenues and 28% increase in pretax, pre-provision earnings over the last year. We are delighted with these results and looking ahead we believe that momentum positions us very well to deliver continued growth for our shareholders. Our culture is growth oriented and our business model is scalable. You can be sure we are pursuing every opportunity to profitably expand our track record of success. That concludes my prepared remarks. So now I will ask Mark Sullivan, our Vice Chairman and Chief Financial Officer to join me for questions and answers. Operator, please open the lines for questions.

[Operator:]

[Operator Instructions] The first question is from Chris Mcgratty with KBW. Please go ahead.

[Chris Mcgratty:]

Mark to want to start with you, can we talk about the margin? Jim, the color on the spreads on private banking loans was helpful, but Mark as you talked about your decision to kind of keep your duration of liability really short but as we kind of approaching some rate decision in the back half of the year, can you talk about potentially terming out some of your liabilities, whether that might be deposits or prudent borrowings because I think in your prepared remarks I heard that you don't see the debt issuance come in the capital benefit in the quarter. You don't see that debt offering necessarily transpiring next year. Thank you.

[Mark Sullivan:]

That's correct. You may recall the January - our call I had indicated that we were lengthening in the CDs and this quarter we added about 50 million in two and three years in CDs – spread equally between two and three year term. So, we are seeing some lengthening on the deposit side. As you look at our NIM, there certainly has been compression, we’re down about five basis points this quarter and with the lengthening and also with private banking continuing to lead the way on long growth, we'll probably see a similar compression. Now, any comment on NIM TriState, [indiscernible] our growth in loans, investment management fees growth continues to outpace any NIM compression as we continue to deliver strong growth and net income and earnings per share. In the context last five years extremely lower rates and five years of continued NIM compression, our net income compound annual growth has been 26%. So that's really the driver for us.

[Chris Mcgratty:]

So higher net interest income - compression margins -

[Mark Sullivan:]

And not-interest income.

[Chris Mcgratty:]

Okay. That's very helpful. Maybe a question Jim on credit, can you remind the size of the shared national credit book I think it was 5.4% at the end of the year, any update on liquidation?

[Jim Getz:]

Yes I will give you a quick update on that. If you go back a year ago to March of 2014, our private equity related shared national credits at that time was $193 million. As of March 31 2015, it's $100 million. And for this quarter they are down $0.26 million. So we've really moved quickly as I have indicted to you to eradicate these shared national credits they are private equity related. We have not taken any single loss on any of these whatsoever. They have been eliminated via attrition and things like refinance and also our sale of these. We are well on target to continue to move forward on this over the next couple of quarters.

[Chris Mcgratty:]

Great. And just one last follow-up. Can you remind us of any energy exposure in that portfolio, given the stress in the energy sector?

[Jim Getz:]

The last quarter we went over the energy portfolio and we had at the last quarter three credits, one about $7.8 million and I indicated to the group that we anticipated that company to be sold and have set it par. The company was sold in the first quarter and we did get out at par. The second one was a drilling company which we had concern about. We already had it rated as a substandard credit. We have it fully secured from our standpoint. At this point we feel very comfortable with the amount of money we have in this specific reserve on that particular credit. And the other one is a Philadelphia based Energy Company. We are the sole bank in that deal. We know the management very well. It’s an excellently performing credit with leverage of less than two times. It's about $8 million in size. And that's the extent of our energy portfolio.

[Operator:]

The next question comes from Matt Olney of Stephens. Please go ahead.

[Matt Olney:]

Hi, thanks. Good morning guys. I want to focus on the capital, the capital move is pretty interesting. Can you give us a dollar amount of what the total risk weighted assets were in the first quarter? I think I may have missed this in the press release. And then I guess – is a follow-up to that, for the loans that do qualify for a lower risk weighting in the private banking channel, can you provide any more details? What were the risk weightings previously and then what are they now in this more favorable year's?

[Jim Getz:]

I'll answer the second part of your question and then I’ll turn the first part over to Mark. The risk weighting was 100%. So it was all the risk weighs on all the private banking loans. We are at the same level as a traditional commercial and industrial loan, a commercial real estate loan. So it was 100% risk weighted. If you look through that portfolio we mentioned that we have a little over $1 billion, at this point actually it's - as of today I think it’s a $1.60 million of outstandings. We feel very comfortable with all the loans that are currently on our system which we refer to as parallels which is about $700 million of loans. We are planning this quarter to move those loans under the rule which will free up $70 million of capital. If you look at the loans that are all secured by marketable securities, today it's about 890 million. So that's another under 90 million, much of that is pending future movement onto the system. What we are planning to do is only take advantage of the rule for those loans that are in fact on the systems. So, I fully expect that there will be a release of some additional capital over the next quarter's as some of those loans do migrate to the system. We spent thousands of hours internally and externally with professionals going over this in some detail. So the answer is pretty straightforward. It releases $70 million of capital this quarter and we anticipate there will be additional release of capital of those loans that have been a 100% risk weighted that's the additional $190 million. And then after that plan is that the overwhelming majority of the private banking loans will be pretty on, we’ll go onto the system and they will have nominal capital requirements. That's the positive going forward. Mark, do you want to answer -

[Mark Sullivan:]

Yes. Matt in the - at the top 12/31/2014 we're 100% risk weighted asset - 2 billion, just over 2.6 billion. [2.6] billion and at 3/31 100% risk weighted 1 million - 1,957,000. So, roughly 700 million decrease.

[Matt Olney:]

Okay. Thanks Mark. And then as far as, you have more capital cushion now, Jim does that change your strategy or your thinking going forward. I mean obviously they need for future capital as much slower but operationally, does it change your thinking whether it's growing loans more or buying more loan portfolios or buying back more stock any commentary on that?

[Jim Getz:]

We have the flexibility now to wave all the things that you indicated. We've been very direct about the fact that we intend to move forward at some point in the future with additional supplements for Chartwell Investment Partners. We've just for the most part completed a stock buyback. We certainly would be entertaining that type of situation. It also gives us a great deal of flexibility now on the private banking side if you recall last year we brought in assets from a very large trust company. And as a result of acquiring that particular company as a client, they asked us to take all the loans that they currently had on the books from other banks and that was approximately $220 million of loans that we had to set aside $0.2 million of capital. Now that business is really a not capital intensive, it's nominal capital that will be necessary to support it going forward and it's been the loan growth engine for the company side. I think actually as we pointed out 50% of our revenue is generated by private banking and Chartwell neither those businesses going forward or capital intensive. So, I think you can see us continuing to attempt to grow both of those businesses pretty handily, while the company has the ability now to self generate capital to support the commercial and industrial loans and the commercial real estate. So it puts us in a different perspective and as we mentioned to you, we would have to go out and more than likely raise $40 million to $50 million at some point in the first quarter. We plan to do that, we plan to put subordinated debt on the books and a 10-year subordinated debts going around 5% now, so it wouldn't had an impact going forward on our earnings. So this is a very positive situation for the company.

[Matt Olney:]

Thanks for that commentary Jim, yes on the credit front - as you look at the commercial loan book as a whole so extra private banking loan just the commercial loan book, any commentary on the overall credit trends? Were there more upgrades or more downgrades I'm showing that you feel for the overall trends and that will be commercial credit book in the first quarter?

[Jim Getz:]

I think the best way to look at that is to look at the adverse rated credits. There were $69 million of adverse rated credits at the end of the year. There's now $59 million of adverse rated credits. So we're seeing some real improvement in that particular portfolio and some of it has to do with their movement to sales, some of these shared national credits that are the private equity nature. So we’re seeing some improvement. I believe you’re going to see some improvement in a near-term in the non-performing assets also in the quarter that we're in.

[Mark Sullivan:]

And just to add on – just to add on credit - on credit metrics, this quarter we had a provision expense of 926,000 that's after we added $2 million in specific reserves incremental specific reserve. So we could, otherwise we would have had our reserve release. And our historic range has been 40 to 53 basis point of average loans. The last three quarters we averaged eight basis points. So clearly we’re trending lower than our historic range consistent with the decreasing risk profile of the loan portfolio. So we’re in a risk business and we’re now going to average eight basis points in the next three quarters but we also expect to see a repeat of the second quarter 2014 either. So I think it's definitely have a trending lower in terms of the expected range in the credit metrics.

[Operator:]

The next question comes from John Moran of Macquarie Capital. Please go ahead.

[John Moran:]

I want to circle back on the capital question that was just asked. So its $700 million of the billion in private bank loans and the difference if I am understanding it correctly is that, is it the other 300 are not on pairs. So what allows the favorable treatment would be that is on the system is that correct.

[Jim Getz:]

Okay, a little clarification on that John. There's $700 million this quarter, okay, that we’re comfortable that's been monitored by price. We made an internal decision that if the assets - the loans are not on Paris, because Paris has the capability and the requirements of the rule is they have to be financial - it has to be financial collateral, it has to be marketable, it has to be monitored daily price to the market on a daily basis that they have to be over collateralized. And they have to meet the interpretation requirement of eligible margin loans secured by financial collateral and we have that legal review of that. So we feel comfortable with those particular loans. Now there is an additional $190 million of loans that are in fact collateralized by marketable securities potentially a large amount of that could potential move onto the system. But we’re evaluating that and we feel comfortable with the 700 and we’re looking for the others to move forward to be put in into the system. Now the remaining amount there is jumbo mortgages, the high-net-worth individuals. If you recall, we stopped making any type of mortgage including these type of mortgages about three years ago, little over three years ago. And these are the legacy mortgages from these high-net-worth individuals and that book of business to begin with you is in the midst of lying off periodically every quarter.

[John Moran:]

Okay. Got it, that's helpful. But the idea then would be that the $190 million that maybe moving that would be just a matter of timing and that could free up another close to $20 million in capital?

[Jim Getz:]

Well some of it won't, because some of the requirements of Basel III if there is any alternatives in that portfolio, they don't qualify. So some of those loans that we have and I think it's probably about $50 million or so are related to alternative investments and that doesn't qualify under Basel III. As part of the diversified portfolio and that particular investment class is not acceptable, because it's hard as you know to price that to the market on a daily basis.

[John Moran:]

Sure. Okay, that’s helpful. Thanks for the clarification there. The other one that I had, I just wanted to make sure that I have the number right, 93 firms it sounds like on the PB kind of platform that you do and posses with. How does that compare linked-quarter and if I’m correct, you guys have been adding that at a pretty good clip. And then sort of related to that, where do we stand on the build-out of the Chartwell distribution into that channel. I think there were some plans for additional hires this quarter and then kind of first half of this year?

[Jim Getz:]

Yes, couple of points on that. It was 90 at the end of the year, its 93 now. And with regard to Chartwell, we now have our full complement of staff which is five wholesalers and a national sales manager in place that is all been put in place as of right now. We hired it in early April, our final wholesaler. So we have a full staff in place now. There's today about $730 million of assets that are related to financial intermediaries that Chartwell is successfully managing.

[John Moran:]

Great. So basically the OpEx run rate and build on that is - it’s kind of in there, I mean there might be a little bit more if the last guy came in April?

[Jim Getz:]

Yeah, the last guy came in April, he wasn't on the payroll for the first quarter.

[John Moran:]

Perfect. Great, thanks very much for taking my questions.

[Jim Getz:]

Okay, John. Take care.

[Operator:]

The next question comes from Bryce Rowe of Robert W Baird. Please go ahead.

[Bryce Rowe:]

Thanks. Good morning Jim and Mark. Just one follow-up on the regulatory capital. It is to be clear when you say nominal capital against the eligible private banking loans is that, is that a zero percent risk weighting or just nominal mean 10%, 20%.

[Mark Sullivan:]

That means zero, there is a formula attached to it. We have dissected, we also brought in an outside party to look at it and they came up with the same number zero.

[Bryce Rowe:]

Okay. And then second question, when we think about not regulatory capital but capital ratios from a common equity perspective, is there a floor intangible common equity to tangible assets ratio that you guys are targeting to not breach?

[Mark Sullivan:]

I mean typically we want to stay in at 8% to 10% range, where we are now, so I don’t see that moving.

[Bryce Rowe:]

Okay, that's helpful. Thank you.

[Mark Sullivan:]

Bryce, the reason this is a zero on this formula, all these loans are over collateralized, okay, over collateralized, the whole portfolio has the loan to value about 60%.

[Bryce Rowe:]

Okay. So and so Jim just to be clear, if we did experience some volatility in the financial markets, is there a loan to value ratio, I would trigger some different risk weighting.

[Jim Getz:]

Before that happens, right we would either have additional collateral or pay down on the loan typically additional collateral we put in.

[Bryce Rowe:]

Okay.

[Mark Sullivan:]

The loans, one of the requirements for this treatment is they have to be over collateralized, okay, so on average we have about 40% margin at this point.

[Bryce Rowe:]

Right, okay. Thanks you. Appreciate it.

[Operator:]

And next we have a follow-up from John Moran of Macquarie Capital. Please go ahead.

[John Moran:]

Hi, sorry guys, I have ticky-tacky one for Mark, just on tax, I know that we expect that it was going higher this year with more income at Chartwell 32.5% for the quarters, is it fair to think that that continues to kind of trend up as Chartwell gets in more.

[Mark Sullivan:]

I think what's you are saying is a pretty much for quarters, is an reflection of our expected annualized expense. If you look at the segment the bank portion is at 30%, somewhat to last year and the Chartwell pieces is about 38% - little over 38% effective rate so combined were about 32.5% that’s pretty much what we expect to be.

[John Moran:]

Great. Thanks guys.

[Jim Getz:]

Any other questions?

[Operator:]

There are no other questions. This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Getz for closing remarks.

[Jim Getz:]

I’d like to thank you for your participation today and your continued commitment to TriState Capital. We look forward to keeping you up-to-date on our progress and to hosting our next quarterly call with you in July. Have a great day. Thank you.

[Operator:]

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