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HFWA Heritage Financial

Participants
Jeff Deuel President and Chief Executive Officer
Don Hinson Chief Financial Officer
Bryan McDonald Chief Operating Officer
David Feaster Raymond James
Jeff Rulis D.A. Davidson
Matthew Clark Piper Sandler
Jackie Bohlen KBW
Call transcript
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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Heritage Financial Quarterly Earnings Call. At this time all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, today's call is being recorded. Replay information will be given out at the conclusion of the conference. conference your the CEO, President turn Deuel. Jeff now over host, to and I'll sir. ahead, go Please

Jeff Deuel

Thank to Jeff Kevin. Hinson, our may Heritage. you, Chief Welcome with our listen those in Attending and later. who Chief and Operating Financial This Bryan are: Officer. is me Deuel, Officer; of all CEO Don who McDonald, called

it and had an have earnings went prior the Our to you release out hopefully this call. to morning review pre-market opportunity

the a statements We portion quarter release. third Investor have on refer forward-looking Relations our presentation the posted in Please website. also of investor press to the

We performance pleased the third are quarter. with our in

Despite to operate adapted and challenging operating continue only helped majority by us circumstances, model with the this appointment some us, has for and actually has for of us remotely. increased our areas and well about We identify our has new the Bank lobbies productivity. efficiencies and of worked open the we've branch XX% worked effectively working for workforce

something metro The areas areas. and core Seattle metro the than populated of We have where limited economy reopening operating movement a major states Portland The empty, footprint. the of more rural outside of to there's regard reached pretty a less in operate. our but fashion we still two downtown the generally are areas the with plateau and parts a feel lot more

respond some evolution relief ongoing of efficiency is industry nine vaccine. the move to expect of to our to the a of activity in same from at remain response the our This We the have announced we in locations. current XX% time and and improve the to until We or overall. of branches, closure efforts consolidation level

office digital enhancements to to the improve focus back continue customer We experience. continue the in to on

by to Hinson, color and We'll with metrics serve take operations move on our who quality specific with and some a on few allow operating to will us credit same about cover to automation, systems Don our the now better core our including do Our goal CECL. customers. comments results, more minutes process to which optimize workforce integrating is also with will financial

Don Hinson

you, Thank Jeff.

our ROA QX As X%. release, earnings share an and in earnings of we in of per $X.XX reported recognized

improvement ratio from the margin. showed our of in in a also spite We quarter efficiency prior lower

to in on utilization indirect higher relatively to an lines million XX. in process which balances at Moving conjunction loans, had QX loans. of with compared balances due lending are at $XXX a ceased year. few maintaining increase We and to existing operating in originating balance McDonald minutes. customers will credit consumer and new sheet. a SBA from relationships was a decreasing in commercial decreases loans Deposits the earlier rates and loan increased discuss Consumer of combination loan auto this in balances. production PPP CRE due the we primarily this for Net XX cash deposit loans, Bryan QX June were loan Impacting levels. obtained construction offset C&I in to decline flat XX.X% by C&I continued XX.X% being to September

At Reserve Federal balance banks Bank Loan lines over at Bank continue and have Federal fund the quarter sheet other strong billion. very at maintain Home liquidity. $X We facilities credit and we to fed combined end, of

broker overnight X In total deposits. balances basis $X deposits than investment make of cash totaling and points securities addition, less over have and up we currently unpledged billion

Our XX%. loan deposit ratio is

us we economic strategy our with our of We will leverage, low situation. current serve in sheet well believe continue balance a longstanding operating which

two C&I COVID-XX. borrowers our these quality, credit due net charge-offs QX of by were for were charge-offs $XXX,XXX. Regarding The bulk impacted to

$XX.X to and non-accrual million three increase was impacts due in relationships non-accrual the COVID-XX. The of experienced increase problem primarily loans totaling to an loans in also due We potential commercial continued lending showed high-risk COVID potential loans CARES credit loans have provisions The due under to was that in impact the of related been Act industries. modified to in that signs problem mostly weakness. increase

in in two the for or risk of The of high to XX% Of and rates related interest these the impacted for XX% or $X.X increase deferral the the second received most deferral had provision unfunded of a of C&I loss to a are forecasted status and were QX. XX% the approximately were of their payment Provision COVID at X.X% At in loans for we end the end on end approximately deferrals. second to increased Moving on were loans. million commitments full industry, are QX, allowance loans round for modifications. for included utilization portfolio QX of mentioned. of which loan losses that expiring and of by to loans the at provision our significantly QX due an XX% loans of modifications was compared the losses total previously of credit and September $XX.X QX. XXX either first current modification X.XX% QX, million, on in XX% represents lower modification loans end are increased amount the the deferrals modification. $XXX,XXX portfolio, industries of combination in only have of the $XXX which loans ex-PPP modifications, At payment loans on hotel totaling restaurant million the payments credit the QX I XX, rates $XXX status X.XX% loan million status of payment approximately At shutdown. to

dependent offset was be on will at in June to and moving forecast. to The allowance due of to at Excluding decrease a marginally guaranteed not an for X.XX% higher quarter, on a individually of evaluated XX, X.XX% for loan collectively loans during evaluated collectively combination PPP partially from including loans status was allowance increase the This charge-off allowance number are growth. The the decrease evaluated. increase in the forecast, future was XX. which loans, provided the improved by the an and for non-accrual experience September loans in a factors, of allowance loans due for, magnitude economic provisions economic losses credit at

with $X.X points the margin was in Our costs. to due PPP QX a in rates, million much yield decreased of deferred incentive QX. new new of having interest costs QX. which associated points the loans rate the yielding reduced expense FTE, repricing the mobile the the and basis resulting compensation platform. have Non-interest of deposits. QX in and cost million than and primarily quarter Compensation online in decreased decreasing implementation partially a deposits decreased Offset accruals Direct, lower total due professional Deposit expense occurred with to Heritage portfolio. the categories services compensation expense and the Partially related compensation percentage COVID a yield to not approximately offset cost and overnight moving investment prior in our decrease mostly lower a reduction in cost by of due have premium decreased a we curve, $X credit commercial lower due capital, finally, banking higher investments for of portfolio a capitalized ratios. decrease in in current combination loan the to and in PPP QX. variable existing of four assessment higher net quarter assessment. remaining small FDIC being Professional a than of on quarters, the remain over all all from any bank loans rates decreased first originations did offsetting regulatory due the past combination increased lower cash it in decrease to low a was yields rest loan balances, loans, PPP higher lower This investments, well a And to loan to in the due of X XX basis where and capital costs services. to we a

loans, with on Although production was Bryan X.X% which PPP. is TCE and impact when quarter. our from the outlook, of have remove XX, Based which of believe $X.XX prior was regular the continuation the SBA now at Yesterday, September an dividend, is the long-term the declared consistent unchanged update you position the ratio prior Board the and the our we ratio loan is X.X, dividend on capital will McDonald appropriate. quarter. PPP

Bryan McDonald

our production with detail I'm third Thanks, Don. group. starting going our quarter on to provide lending commercial results,

commercial XX% loan down commercial third X% closed from $XXX the $XXX $XXX down quarter $XXX ended $XXX million from end The and XXXX. of of at pipeline the from last quarter quarter in million, from new quarter, the XXXX. and last commitments, quarter, down of loan at $XXX quarter, the teams our down third million the million third For closed in million million

discontinuation been the up was with by New impacted projects, transitions $XX quarter, loan on capital negatively plans, for bank demand million expansion quarter putting million from business versus in $XX customers $XX was The many from indirect third our of has hold. XXXX of production Consumer lending consumer of to and XXXX. last due million COVID-XX third quarter down first the XXXX. and the the decline quarter during

on new Moving average increase X.XX%, XX of basis third last PPP quarter loans; quarter. interest rates, from for interest points an commercial rate our to loans was excluding X.XX%

XX forgiveness $XX long-term average We versus third ended million third XXXX. PPP in at is due The compared X.XX% $XX department And activity quarter for applications caused in quarter to late X in closed drop of last quarter spike basis new from SBA September. XXXX, third up the process. the the in million rates. morning waves $XX from some in third quarter the rate all pipeline finally In strong loans of on of stage by of quarter. points moving loans, this closed PPP in the XXX excluding X,XXX as quarter pipeline and addition, XXXX. have mortgage quarter of the mortgage was of in XX% the the our And up Refinances new in in at PPP. to QX made X.XX%, applications million of the refinance in million pipeline taking million second million a customers plus The to and $XX $XX The started quarter loans end.

payments all approval, We call submit We the all the now XXXX to customers received anticipate that way Jeff. and the to to has turn has inviting have forgiveness through back SBA end forgiveness XXXX. proceeds. I'll loan of but yet by for not into one progressed the late any continue of process

Jeff Deuel

Thank you, Bryan.

earlier, As I pleased we with mentioned performance-to-date. our were

a view and better at ex-PPP, is performance a several quarters. now our Our X.XX% in are clearer ACL of healthy position next over we the portfolios with expected a

the our concentration for have system Our of management the impact well positioned conservative risk us profile and discussed pandemic. much

new Our categories hotels risk not primary recreation and concerns the which is news. remain with entertainment, high of restaurants,

status. non-accrual closely majority round approaching are and in three these businesses vast potential We working ratings with the of and requests Generally, owners deferral moving make-up TDR the non-accrual the downgrading we categories. increases problem loans to are business and/or and on by

are the sit for course, are in variables remain comfortable the stimulus and current additional started. when where with we of we we state loan elections, subdued Of originally much maybe now many the and portfolio anticipated to long term, there economy. government the consider how the reopening including to more believe damage our than we near But pandemic in the

current take advantage is of our As earlier, we adequate foundation Don a our liquidity with us of challenges mentioned solid our opportunities. capital That robust and conclusion levels to to address the provides prepared are comments. believe and

call. ready Kevin, and now on questions the the we're to call from welcome open So up anybody any

Operator

Thank Feaster, Instructions] of Please David go the James. line ahead. [Operator go you. to We'll Raymond

David Feaster

morning, Good everybody. Alright.

Jeff Deuel

morning, Good David.

David Feaster

the just on start branch I rationalization. to wanted

can you about I then it just, would branches? technology, attrition. that just, you whatever its just, the just out, the salaries? have of but done the closing some bit just maybe maybe great given these ones cost And decision expect on to a mean, close occupancy you talk You the a lower? guys then and of and where attrition the the How you front, the identified for or are be job timing finally saves to expectations of comes expense use

Jeff Deuel

to in. of a Yes. I'm analysis ones each in branches months through and XX to the over in and till may started pretty start, and We've Don our them of and XX happy this overall last closed; experience with done it. want twos seven have now, ago footprint. the went to some we've think locations years. rigorous Up we several chime We've I process

form of we So get between on your of In all how talking – another is and XX% the depending attrition, when what branches. go to XX%, estimated to of in I branch. most ones about about back we when the historically we're are the one back distance from extreme relatively have comment close expect I cases, our

to XX% relatively in that So we would a runoff expect XX% maybe moderate range.

example, same for maybe because typically that access to or the in historically we'll we maybe anything estimated the we to digital the people they have And about us expenses I want and didn't you we past. think results even get branches when the XX%, timing? when I more better see XX%. were think probably past did closing add maybe than Don,

Don Hinson

Sure.

I the on severance leased our think the depending if lessors quarters, and some of the depends and timing so there was it are next spread settlement with two the packages. the of facilities on also then over

to – just that'll it'll spread should we the XX% average done hoping so run-off, And keep it the on historically about within quarters. So to next with over have be technology, by Jeff's XX%. around and next XX% going again be run-off, out It of all back QX are two on year. we been

David Feaster

occupancy what and you million between $X.X do versus And the think then salaries of that how breakdown you, benefits? much do

Don Hinson

now. I tragic think right a it's

I out. run we didn't it's branches – they opposed see benefits. our think as to occupancy was, it's per practices as as Again, XXX,XXX mostly you didn't we expensive salary branches. and it's branch, run spread were so about it But expensive

David Feaster

And your appetite clients? Where you are helpful. seeing loan opportunities on I guess loans? the your just production of how's – That's demand? new And loan production, What's just Yes. pulse trended? what for what's for new then

Jeff Deuel

Bryan, take want to one? you that

Bryan McDonald

have our bankers quality We're you to a portfolio Yes. management know, obviously for asked Sure. of to additional emphasis the attention appetite credit there. on still reasons. and pay is obvious It's, we've our heightened

that with us at bankers the remain new PPP. and refinances we're as through that both we've still actively new as, our So to kind highlighting group same of a for looking active as that, opportunities, really And encouraged came clients looking at opportunities. well time been as to well the separate

pipeline last if but So a at the down about XX%. by was about the you the look down numbers, were year closings versus third,

on we're seeing and would kind and being quiet. pretty is communities metro a what's opportunities markets, consider although the working of that basis. new are in I good businesses and So remotely, that on active business they're regular The going Jeff conducted. the still about pretty still talked are still people the so

there still So being but cautious, there. and thinks a we reasonable, our little is more appreciate is – demand which are customers loan still bit there

Jeff Deuel

And see activity we and It's were the out David, we when deal a we've see seen Bryan exposure pretty involved much certain level to and flow I and in there. same directly. before. get nice it there's of that approval hits that seeing

David Feaster

some the you do a and maybe near-term steepen liquidity about we going where excess – think the curve where Okay. and and a wrong trough? you then, guess, been think how just I liquidity, ton, assuming forward, do when we what That's doesn't deploy deposit helpful. should do I mean, excess think but And to has expectations to good but deploying growth way tremendous a be would – think how maybe yield mid should maybe you about this you way that, do and attrition and some is think

Jeff Deuel

coming can and those see side. they're the XX% is the as of continue we customers deposit we've in easily Well David, those two the and with It But new the customers because were it's evidence to can't deposits, business new remote because taking – we're we to benefits slow as – for across, and growth normal. and the we PPP with of for to and that move, time deals about now we talked did everyone's on quarters are work that. remote new get embedded closing loans together seeing perspective still the partly that regard of customers. and

sit. let seen who got up of it the that until phenomenon businesses operating, now we're have money, PPP We also

you I NIM PPP pick-up on you expect Don, down. starting be But think of to want would Bryan, money And I some add. now get Bryan, that to that probably after have used. start the some trending maybe or see comment, to you flat want comments deposits And on we're deposits we to question. you think

Bryan McDonald

Yes.

Jeff a highest seen existing And we've new tends As historically. top accounts build generally to adding of on third that, lot growth our just and continue we to quarter still customers are month liquidity. of then be said,

on turn to the I'll you Don, So NIM. it

Don Hinson

is as usually. QX And a Okay. our just reminder, quarter growth largest

our deposits total to of have costs. to here. we kind on The continue bottom the first of up many cost basis NIM cost the again cost we'll NIM, of expect down, to – deposits, points XX So talk pieces drop into break may end we around to hitting

now. We points are at basis XX

to go we a it's whole lot work down But are not it looking further. there. So to

core last X.XX%. putting the NIM, X.XX% is On that yield still loans the the overall are of rate and we quarter kind on

So some down. come there's still room to

to factor you doesn't in going I it NIM, that, the when not both Although up, But always go next fees start yield much quarter because extent have loan and you again equate. start stuff to would think NIM. on cycles, like impact will necessarily how quarter we put you see little a non-accruals drop non-accruals and bit loan, in the that in and past these when getting this are of we does less our

David Feaster

Okay. everybody. That's Thanks helpful.

Jeff Deuel

David. Thanks,

Operator

Okay.

Next, to D.A. line of we'll ahead. Jeff Please the go Rulis, go Davidson.

Jeff Rulis

morning. Good Thanks.

Jeff Deuel

Good morning, ahead. Jeff. Go

Jeff Rulis

branch guess not take had it does kind base? a to if traditionally thoughts sought rationalization, if it I M&A, little your you there. – from but alter we're of well, of the do know if probably how is at of just that the appetite think we'll you efficient or future and about more what I after this we're sort pivoted – guess yet, the alter you that doorstep I

M&A think Just, the approach? adjusts you it do

Jeff Deuel

play the or it, done have way to about a I is contributed M&A into maybe undertaking. say taking I and look probably it's us because closures we XX enter the areas of arrangement not either its that past. in to we financial of a before. at We've where would new the those result They as the an both consolidate we branches talked additive,

it have go the on necessarily So, no, forward. impact an don't I think would

Jeff Rulis

Okay. utilization demand And rate decline, a and thought Got impacted is maybe the is stunned this demand the of, taking it. but that be be that's COVID Bryan, is everything far as think by factor? that that better. pieces – is know mentioned certainly usage question you but somewhat impacted that that you think specifically by you COVID, by for I a by is I something overall as PPP that could COVID, may related,

Bryan McDonald

Definitely a million QX, lines. XXX on the in drop the around big Jeff. liquidity, utilization in something saw We

So and of of dollars a lot maybe the ended had that that was was excess that PPP portion where having liquidity, normal a came revenues. that relatively company in, up

fell through into liquidity. it higher So

assets. and come also all So much as than in through, decline statements it I watch inventory, to liquidity, of maybe due augmented in a then think the in money the is both those financial PPP cases more receivables its by we investment cash or how

that, reasonably low I are we're So businesses notable, anything say the continue to a but performing watching yet we've well, many of relative to seen nothing it would but years. is really or in lot it's, perform

Jeff Rulis

right. it to think I – pretty areas added? you you there. felt you effort was anything additions have I related, like – kind to there other kind of added are credits, of were that those the looked and ring-fenced a or All that – aggressive non-accruals spread certain one, didn't think Last the that any are guess,

Jeff Deuel

Yes.

modifications but that information quarters, more were case, have a large out support than slightly see where contractual of we'd talked we've We be nonaccrual TDR, relationships these good outside we and our a of past – whether of a that substandard around maybe we that several were we TDR around in the are amount prior the but and that think a the call this some in conservative circumstances receiving it's counterparts, is the it's have enough TDR over And That ones this were view not. more into. status Jeff were might that ones I then about may beyond kind maybe loan. what I occurring when round of are arrangement it's customers, entity. running step we the tend they is, to contractual to comes lot decision can the that a we think is than it as and that else. or third we the see we that typically an TDR anything next understanding That's Whereas substandard of then stream. that that the alongside if a rating, that, months borrower. of and these facing a we support do substandard maybe make payments the necessarily is don't payments, of called the And

So we're this gray time. is – interpretation is little in area. bit in there a all I a point And room there think at for

going We that the the year year. have up we calling through TDRs, vastly but different the the think that now end is don't consider at of it be end to to of

mentioned is it it, see that additional from those will don't approaching goes industries. that area forward. risk the that this activity moving we're any just we deterioration high beyond categories think now widespread and So come calling We we and in

Jeff Rulis

I'll step Thanks. Appreciate it. back.

Jeff Deuel

Thanks, Jeff.

Operator

Thank you.

Next, Matthew go to Clark we'll line Piper ahead. go Please Sandler. the of of

Matthew Clark

morning. good Hey,

Jeff Deuel

Matt. morning, Good

Matthew Clark

Maybe outlook. we you earlier, the on bit the on touched take can a yield we new I start X.XX%. of with know but margin little

do basis of consider about security are basically something got around bottoming It is, going You Question out there X.XX% XX – margin. you but deposit kind how quickly core get points. a toward sense Is want this about or there, last there X.X%.You've for or you're improve is the pricing? suggests costs in kind I on but do mix agree it's or can there whether to know anything production X.XX%? get to you not quarter a the you just that of quarter? disagree competitive, is

Don Hinson

maybe loan. Well, the talk on maybe margin start. you to And can the I'll Bryan,

Bryan McDonald

Okay.

Don Hinson

into Xs. I we're could hit current off headed low do think probably based our It portfolio the X.XX%.

year. next out bottom will it think I

were new then of that investments get yield near them last pricing which we investments did it's and new investments. many put the obviously – this week steepening bit quarter. X.XX% are if actually We and of real loans a range. lot Like buy a both an being lot that we way, a and over in that, didn't curve, they around can the two again on us little think some low I this we But of the the were on for of hit selective that it's pretty because just bottom and also funds. and next use I we'll yes, those year that this the That'll off Again, Xs. we'll have to redeploy be think PPP But then is be challenging in runs that. will we'll I from want they about there. because But those. increasing as it doesn't you said in the other to Bryan, like when we're yields, on on both be things loan you talk just them yield X.XX% mean feasible… X.XX% factor helps putting

Bryan McDonald

Sure.

the But increase. If where from point rate the we you categories last the categories, look X.XX% was there up a relative last caused mix it's at of little with The and basis than ended the dollars. composition the and had overall that that quarter, to change quarter. underlying couple the X.XX% what generally X a we higher

the raising our negotiating top what are time, we're environment. would of wherever and But the We given spreads into we call the I portfolio, – at booking can. the same

our So the highest of portfolio. quality it's higher portions quality,

we potential hard we for for the always And working are But groups. both meet pricing deposit competition just loan the also and the so, to have the need pricing market. in those

Matthew Clark

then within of about and I two your are of another. of think XX% And branch plan, network, your it's on the rationalization XX% Okay. branches branch miles one

the can cost months' last do do not less XX of X% being you more, more or than why saves operating the So expenses.

there? more if is, opportunity to wondering Just there an do again

Jeff Deuel

maintain nine for looking efficiency. – dramatic Doing effort our an improve at as pretty is or in that effort our to organization. an always we're Matt, to

in between looking focused one there our the other. is on it customer and we're it So, some hands. we oftentimes, and But play suffice footprint say and you base over make that I difficult it last on how branch sitting may nine to our right at on think, to close can there XX close years, the improve haven't maintain to branches two now, always can. that add be best our if been I a guess as the we done that that Yes, but several we've still be over the we'll that, are proximity, we

Matthew Clark

Okay. Understood. And then just...

Bryan McDonald

up of I David said the of follow of forward most costs occupancy ongoing it to closures. and was it's are saves. are occupancy the when the and a most of it, XX% salary on I costs, kind When want I that so Matt, saves something about go occupancy on about asked correction, mentioned exit the actually about salary, XX:XX earlier costs,

Just wanted that. clarify to

Matthew Clark

Got much your that on PPP, or in maybe I XQ? And to the you. then you customers have it. guess, Thank how funded forgiveness, XQ of started seek

Jeff Deuel

Yes.

to and SBA So, roughly yet three in through weeks likely one we but and right although we the the now, all got XXX we've gone way been the don't – has paid of process apps forgiveness opened that only those ago SBA haven't we're it has approval, receive we on shortly. have loan

with on groups the is obviously and waves. of to get That's they're individuals that And various working the waves. currently. ready time, forgiveness, this doing at are we're goal our at year. goal curve our by everybody And customers looking learning a our So to bringing internally, having end the invited on apply. up the set teams customers through in are We've got a when the a system

allow that become a slow we've yes, to we're so everybody in XXX got to of little And Matt. had X,XXX the taking just so But, far bit been plus experts. total invited

Matthew Clark

would Okay, think going on forward? XX% just great. it thought going it Is XX%, the around be kind into of up quarter, tax came back put the XX% the or rate, we we should And to XX%. then expectation, I

Don Hinson

remember expectation. of is I expecting for of think but don't XX% quarter. communicating fourth XX%, No, the kind the I'm what kind is XX% therefore I year, and

Matthew Clark

you. thank Okay,

Jeff Deuel

Thank Matt. you,

Operator

of the go Bohlen Jackie KBW. of we'll to All right, Please ahead. line next go

Jackie Bohlen

Hi, everyone.

Jeff Deuel

Hi.

Jackie Bohlen

Good morning.

correctly Am deferrals. three, TDR? on surrounding discussions that there you're moving no quick just real it your the round follow-up that Just one I into a interpreting comments point, at is

Jeff Deuel

more set were most – fact at to you one terms the has And given CARES had in if you regulators Yes, of that of us our could the given and rules way it modifications, the months. then look Jackie. We of that Act six think leeway out move based go prospects we and of forward. it duration second for round them our and get analysis days call at and it is the what round maybe in and what first to are time on going were it's to the time, forward generally third the XX them

Jackie Bohlen

Okay.

So of to environment, of Just are the that out impacted impact non-accruals, and deferrals yet. to the related and where second of into round is factor given to of comments could there? status completely of the what ready the as Don's not understandably some in play industries does unknown way margin, and kind play payment those thinking return

necessarily may you'll result non-accruals that have, but not impact does have the in security the losses downgrades you So be that margin? could given

Jeff Deuel

I and Don definitely that why for understand want have can beyond extenuating seeing borrower quote that's industries, of may we that asking it. to a in. entity high-risk round, possibility and – is the are the time to do the we're them lot we from many itself. in can the you third obviously relationships analyze is, of are the what they itself are support situation, have of take jump many But for is, those requesting the what or think to where so But a they have circumstances,

on they because just will non-accrual, think automatically of to don't and not. TDR, many to I So go them they I have go think

Jackie Bohlen

Okay.

Jeff Deuel

you want to that? add anything Don, on

Don Hinson

just It think obviously struggling that they of go, because to you. I agree had directly – needed I be $XXX three we of that's modification, all on strong they left those this It non-accrual. continued went of them, going of doesn't I But third say there, for they're go of say but to the hit last would to TDR could just we with wouldn't that that we kind because like and to a No, big – I enough payments. we were felt would happen extend just again a mean million credits necessarily didn't modifications non-accrual, where what quarter. have most

Jeff Deuel

at us And – quarter. let's quarter. fourth they surface take take could into came we're Jacky standpoint, just or easily of action to slid just and very They it they from very like the timing a the came just go. let's the But to end have caused

Jackie Bohlen

familiar obviously your am Okay. understood profile. No, with I I and very credit

And on system anything when with new it – then process. some sure than has rate the the there line the quarter, to expense some I that topic it like savings. treasury I'm lower understanding one start least in at was I Was in been optically, last sure XQ properly, moving parts know the for last make to management consolidation expense and quarters. looking in run there me, wanted little a just make bit base I at past unusual got looks the layering I was other just of I want So you've XXXX? the

I'm good sure rate? a make So I want just base starting with to

Don Hinson

I Yeah, I if it's take don't don't if exit you you the think think to significantly out costs, – change quarter-over-quarter. going

offset I I increases be some think increases will these maybe that by with million and of general just exit think $XX some But items. toward costs, rate, don't that. some

lower I think run not we'll are reasonable. FDIC have costs without probably think premium, the exit fairly million I $XX so the rate

Jackie Bohlen

versus normalization ratio? was And Okay. the to Don, much related of increase impact FDIC line the item leverage of in the how quarter the linked that

Don Hinson

that more Say one time?

Jackie Bohlen

press ratio. that in based leverage line release impact item there some said was to It on the that the text,

you've credits that know I the that so expiring getting the benefit been were from. And

And of trend so what couldn't was? tell I items of those the each

Don Hinson

– it's as decrease. look of and think then to the think then, more I of probably X.XX% our of range, in if these QX, as – forward Xs, the the is kind baseline or gradually – I some maybe assets work is Yes, $XXX,XXX something – kind the I in down like we I think that. like think like so high in high And I

leverage the I overall lower next X.XX% think quarter. – ratio help maybe it probably assessment. the And and so be, But will that will we improves the about hope

Jackie Bohlen

Okay.

Okay, thank you.

Jeff Deuel

Jackie. you, Thank

Operator

we this have questions [Operator no further time At queue. in Instructions]

Jeff Deuel

you you, we're talking your there performance, the and Kevin. questions, in and support any time, to over and this our quarter's If is thank forward not and Well, goodbye. call, you ready more coming interest all for up to your of we you with weeks. Thank we thank look ongoing earnings wrap your many

Operator

Ladies replay today, will will Pacific midnight. you. and through will available be this gentlemen, November Time Xth available Thank for p.m. that X:XX and run conference be

the International dial XXXXXXX. You by code replay code access with area may of dialing XXX-XXX-XXXX, X-XXX-XXX-XXXX at AT&T callers code XXXXXXX. dial access system time any may the

do conference. day. for joining. concludes your disconnect. Have may And good thank you a that you Now, does We now