FCF
#Hey, <UNK>.
I think without the acquisitions we would feel very good about that, but the operating expenses we'll be adding for the 13 branches will be about $6.8 million on an annualized basis, and with Delaware County Bank, it looks like about $9.8 million, and then moving a little higher than that.
Up to $13 million or so.
So that's going to add to our expense base, but our revenue will need to out run that.
And since you mention it, <UNK>, it's a great question.
We've targeted that $160 million figure and we've talked about it for some time.
Obviously, as we do more acquisitions and we grow, we will need to continue to invest in our businesses.
So we're probably going to migrate to really talking about net efficiency ratio, the core efficiency ratio and the stated efficiency ratio, as opposed to just a dollar figure target.
In the near term, though, we do think that, yes, the acquisitions are going to add to the dollar figure of what we have to spend, but the core rest of the bank should be operating right about that $160 million level.
At least for the near-term and probably next year.
Yes, the pipelines look good.
We have been fairly disciplined with a rather large portfolio of our indirect auto business and purposely ran that off just given the spreads.
The downdraft there year over year is over $70 million.
I think that will continue.
We like the prospects of the business long term, particularly if short term rates start to move up a little bit.
So we're kind of hanging with it.
So that's obviously impacting a little bit of our growth.
There is really an ebb and flow to the C&I and the commercial real estate business.
We have pretty good pipelines as we head into the fourth quarter.
We've also really looked closely at our risk appetite.
We've had a little energy exposure and just paring some things from time to time, and so just readjusting that.
We think with a full team in Ohio that will more than offset that and get us back up to ---+ our guidance has been mid single-digits and hopefully we can get to where we are consistently a little bit on the high end of that.
Thank you.
Yes, thanks.
I appreciate the question.
It is not pleasing to us, obviously, that it's coming in at the high end of the range.
There are couple of things that happened in the middle of this year that are going to change as we go into fourth quarter.
Before we had pursued a branch acquisition, we were pursuing deposit growth to keep up with our loan growth and had offered some kind of certain market specials for certain types of deposits.
Some of those will start rolling off in the fourth quarter.
So that should help the margin a little bit.
And then, obviously, the bigger effect is going to be the impact of the branch acquisition, which should close here towards the end of the fourth quarter.
So there won't be a tremendous effect on the branch acquisition in the fourth quarter because it's going to close towards the end, but some effect.
But it's going to start replacing the short term borrowings with the longer term deposits at a cheaper rate.
The effect could be particular pronounced if the Fed raises rates in December, then if we hadn't done the branches, our short term borrowings would've raised up almost immediately, obviously, with the branches placed in short-term borrowing, the rates on those borrowings would not be going up.
So those will come into effect.
All that being said, we had ---+ I think when we announced the branch acquisition, we had said that we expected from that probably about a 5 basis point improvement in the margin.
That wasn't baking in a rate increase in December, that I just mentioned, so I do not mean to confuse that issue.
So that would ---+ just as result from the branch acquisition probably take the margin ---+ our expected range of the margin from 3.20% to 3.30%, up to more likely 3.25% to 3.35%.
This is <UNK>.
I would just add, somewhat encouragingly, as we look at our corporate banking, small business and our mortgage loan portfolios and what we're adding volume on here in the last quarter, those spreads seem to be above our 12 month rolling average, and as <UNK> shared in his comments, our replacement yields for newer loans seem to be now eclipsing the runoff.
The other thing I would share, just anecdotally, as I talk to our lenders, they do feel like credit structures have stabilized a bit and they are not ---+ and I quote ---+ they feel like they are not feeling the pricing pressure that they have had over the last few years.
So for what it's worth.
Lower.
(laughter) I know you and I have talked about this a lot.
We stubbed our toe a little bit with energy, otherwise the core performance over the last four quarters have been clearer sooner.
I think we're little bit more reticent on energy going forward.
And we have to be very thoughtful and discerning regarding some certain segments.
So I will keep you posted as the story unfolds here.
Thanks.
Appreciate your interest in our Company and look forward to seeing a number of you in the next quarter or two, either on the road or at your conferences.
Thank you very much.
