Beacon Financial Corp (BBT) 2017 Q3 法說會逐字稿

Good morning, and welcome to the Berkshire Hills Bancorp Third Quarter Earnings Release Conference Call. (Operator Instructions) Please note this event is being recorded.

I would now like to turn the conference over to Ali O'Rourke. Please go ahead.

Good morning, and thank you for joining this discussion of third quarter results. Our news release is available on the Investor Relations section of our website, berkshirebank.com, and will be furnished to the SEC.

Our remarks will include forward-looking statements and actual results could differ materially from those statements. For detail on related factors, please see our earnings release and most recent SEC reports on Forms 10-K and 10-Q.

In addition, certain non-GAAP financial measures will be discussed on this conference call. References to non-GAAP measures are only provided to assist you in understanding Berkshire's results and performance trends and should not be relied upon as financial measures of actual results or future projections. A comparison and reconciliation to GAAP measures is included in our news release.

And with that, I'll turn the call over to CEO, Mike Daly. Mike?

Thank you, Ali. Good morning, everyone. Thanks for joining us for our third quarter call. I'm joined this morning by Richard Marotta, Sean Gray and Jamie Moses. I'll provide an overview of the quarter, then I'll turn it over to Jamie, who will walk you through some of the financials and discuss our outlook and guidance. And then I'll wrap it up.

So it's been a busy quarter for us. We completed the acquisition of Commerce Bank last week, a little ahead of schedule. We signed a lease on our new corporate headquarters space in downtown Boston, and we continued building the team with 2 new commercial leaders, a strong private banker and a new mortgage team in that market. We achieved further efficiencies from the First Choice acquisition, and we merged the operations of First Choice Loan Services and Berkshire Home Lending to achieve technology and processing efficiencies. And we'd expect this integration will continue to benefit us down the road. Balance sheet growth was solid. Margins remain steady. Our core ROA came in at 98 basis points, that's a 10-basis-point improvement over last year. So all-in-all, it was a good quarter.

I'm going to start by addressing the Commerce acquisition. We were pleased with the reception we received and the quick approval process, which did allow us to close early. The platform integration of the bank is scheduled for mid-March, and we expect to begin delivering on efficiencies at that time. And based on our closing date, the Durbin amendment will become effective for us in the second half of 2018. As we have stated in the past, we expect the revenue impact to be about $5 million for a full year. It would be about half that for 2018 or about $0.04 in EPS in the second half of the year. And while this isn't ideal, it is an eventuality, and conventional wisdom tells us that when you're teed up to close the deal, you should close the deal.

We are enthusiastic about the opportunities this acquisition presents. Commerce has the #1 deposit share in Worcester, that's the second largest city in New England behind Boston. We'll be bringing an expanded product set to their customer base, and we'll continue to support the community and empower our employees to deliver on our entrepreneurial brand of banking. And the combined institution has about $11.6 billion in assets and a loan-to-deposit ratio below 100%. Including Worcester, we now have 3 lending offices and 19 branches in the greater Boston market, with 4 in Boston and our new headquarters. Our total loans in these markets exceed $3 billion, and deposits are over $2 billion.

In Boston, where we're going to occupy our new space at 60 State Street, we anticipate this will happen before the end of the year. And as we've said in the past, we view this market as offering remarkable opportunity for a bank like ours and expect the move will benefit customers across the entire footprint.

We hired 3 senior producers last month to service this region, including Paul Kelly, our new Regional President; Doug MacLean, our new Commercial Real Estate Leader; and Susan Yahn DiPinto, our new Private Banking Leader. Now Paul comes to us from People's, Doug from KeyBanc and Susan from Boston Private. They all have significant experience in the market and the energy and drive we look for in all of our team members.

We also added a mortgage team in Boston led by Kevin Gillis. He was previously a senior loan officer and Eastern Mass regional leader in one of the largest independent mortgage producers in the country. This team complements our existing platform and provides additional opportunity for customer growth within our footprint. So we're thrilled to have them all on board.

Now Richard, Sean and I have been spending a lot of time in the ground in Boston. We're encouraged by the reception we've received from business and community leaders. The market is embracing our unique culture and customer-driven brand of banking. And Greater Boston continues to expand strongly, and we're working hard to position ourselves to facilitate and to take advantage of that growth. And quite frankly, we're having a good time doing it.

Now at this point, I'm going to turn it over to Jamie, who'll provide a review of the quarter, and then I'll wrap it up. Jamie?

Thanks, Mike, and good morning, everyone. It was another strong quarter for us, demonstrating solid growth, disciplined expense management, improving profitability and a strong credit profile. We delivered $0.59 in core EPS in the third quarter while fully absorbing the impact of the recent share issuance. GAAP EPS came in at $0.57, primarily reflecting acquisition activity. Core ROA was 98 basis points, and GAAP was 95 basis points.

Starting with the balance sheet, we grew loans 5% annualized led by C&I and residential mortgage. Overall, commercial loan originations remained strong, while commercial real estate growth was impacted by timing factors and repositioning our portfolio ahead of the Commerce acquisition. The pipeline remains healthy, and we expect to close out the year with ongoing growth.

Now on the deposit side, we posted double-digit annualized growth in DDAs, while overall deposits grew 4% annualized, keeping our loan-to-deposit ratio flat at 1.02. With the addition of Commerce, that number will drop below 100%. We expect continued organic deposit growth in the fourth quarter, with a focus on demand deposits.

Through the Commerce acquisition, we are bringing on $1.8 billion in assets, which includes approximately $1.3 billion in loans and $1.6 billion in deposits. Commerce's payroll deposits can fluctuate. Depending on the day of the week balances are calculated and averaged about $200 million this quarter.

Margins have held up well, driven by the rate hike in June and low deposit betas. Our NIM in the third quarter was 3.36%. For the fourth quarter, we expect margins to remain relatively stable, including the impact of Commerce.

Purchase loan accretion for the third quarter was $3.1 million, driven by higher recoveries. We anticipate this number will be fairly steady in the fourth quarter. The provision was $4.9 million in the third quarter, exceeding net charge-offs. We don't expect any significant changes to our overall credit or charge-off levels in the fourth quarter, and we anticipate our provision will again be in the area of $5 million.

Overall, fee income was lower this quarter due to mortgage banking results. We originated about $660 million in held-for-sale mortgages, with new production coming on 70% purchased. Mortgage rate locks and margins eased in the third quarter, including business mix changes and weather impacts. Our team is experienced at managing expenses based on market conditions, so variable expenses were reduced mostly in line with the revenue change.

For the fourth quarter, we expect mortgage banking fees to seasonally decline by 25% to 30%, with some corresponding offsets in expense. As Mike mentioned, we added a new team in Boston recently, and we expect to see longer-term benefits beginning next year.

SBA loan fee income continued to climb this quarter, bringing in over $3 million in our strongest quarter to date. This is also a seasonal business until we anticipate a slight decrease in results from this group next quarter. Our SBA operations have been a solid contributor toward our improved profitability, and we ranked 17th nationally for loans produced this year. That's a strong showing and one we expect to continue.

On the expense side, the reduction in operating expense quarter-over-quarter was driven primarily by mortgage operations and the First Choice synergies that Mike mentioned.

Our efficiency ratio for the quarter dropped to 59% and was approximately 55%, excluding the mortgage operations. Our overall organic core expenses are expected to be down 2% to 3% in the fourth quarter before Commerce. And once the integration of Commerce is complete in 2018, we'd expect to see further improvements in efficiency.

The noncore charges in the fourth quarter are expected to be around half of the $32 million pretax estimate of Commerce acquisition costs, with most of the remaining coming through in Q1. Since some of these costs will be on Commerce's books, we can't guide to the specific impact on GAAP EPS from these costs at this time. That also applies to any 2018 guidance for now as well.

Our GAAP tax rate for the third quarter was 24%, and our core tax rate was 25%, including the benefit of tax credit investments. We anticipate a core tax rate around 26% in the fourth quarter, including the corresponding charge to noninterest income of approximately $3.5 million. These tax credit investments bring about $0.01 per share to the bottom line each quarter.

The fourth quarter GAAP rate will be lower due to the merger charges coming through. Altogether, including Commerce, we expect core earnings per share in the fourth quarter to be about $0.57, including seasonality and the impact of issuing additional shares for the acquisition.

We estimate that the diluted common share count will average 45.2 million shares in the fourth quarter. We issued 4.8 million common and 520,000 preferred shares as merger consideration for Commerce, totaling $230 million in deal value. Our quarter end tangible equity was 9.3%, which we expect will drop below 9% in the fourth quarter with the impact of the Commerce acquisition.

We're pleased with our overall performance this quarter end our prospects for integrating Commerce, building out Boston and delivering solid results across the franchise in 2018.

With that, I'll turn it back over to Mike.

Thanks a lot, Jamie. Well done. Look, since we've just began the integration process with Commerce, we'd expect to give full 2018 guidance on our next call. And while our strong relationships and experienced merger team did create an opportunity to close this acquisition early, the system conversion and cost saves remain in line with our original timing expectations. We'll also be subject to the Durbin impact to earlier than originally anticipated.

That being said, we see plenty of opportunity for growth. And exclusive of potential rate hikes and tax reform, we'd expect to deliver at least 10% core EPS growth next year while also continuing progress toward our profitability goals. Core ROA improved to 98 basis points this quarter, putting 1% squarely in our sights for 2018.

It's been a good year. We executed on our financial goals, deepened relationships with our customers and communities, found an ideal partner for crossing the $10 billion threshold and we planted a flag in Boston. And we continue to look for ways to operate smartly and efficiently while serving our customers with energy and compassion.

For now, we're heads down. Concentrating on integrating Commerce, building out our Boston franchise, growing our organic business and improving our profitability. The position we're in now is the one we've been working to get to. It's a strong culture and the right people that have allowed us to come this far, and we believe it will allow us to keep delivering on our promises.

This momentum should produce strong results over the next several years, benefiting all our constituents.

And with that, I'm going to open up it up to any questions.

(Operator Instructions) First question comes from Mark Fitzgibbon with Sandler O'Neill.

Just first, a couple of clarification questions. Did you say the systems integration would take place in March on Commerce?

Correct.

Okay, great. And then, Jamie, I think you mentioned the pipelines were healthy. Could you share with us the size of the commercial pipeline?

Yes. I mean, I think Sean can help you with that, Mark.

Sure, Mike. Pipelines remain north of $150 million. And I think with the strong recent hires, we're bullish that, that can improve.

Okay. And Sean, while I got you, one of the things I've heard from some of the other banks in the market is that money market rates out there have gotten a little crazy. There are some folks with 2%-ish kind of specials. Are you seeing that kind of pressure on funding out there?

We continue to see discipline from the larger banks that are the trendsetters in those markets. From time to time, we see some leading pieces like that, Mark, but nothing that's really negatively impacting our betas.

Okay. And then I noticed in the quarter, you have like a $296,000 gain on the sale of business operations. Is that branches? Or is that something else?

So that was a secured credit card division we acquired from First Choice. It really didn't fit our strategic objectives, and there was an ability to get out of that with a little bit of a gain.

Okay. And then lastly, on -- I'm curious how Commerce's earnings look in the third quarter. I don't think they've put anything out.

Yes, that's right, Mark. This is Jamie. Yes, so Commerce's call report should be out in the next week or so. And I guess what I can to tell you is, from an overall perspective, as I said before, we're going to bring on $1.8 billion in assets, which includes $1.6 billion in deposits and $1.3 billion in loans. And what I would say is that the trends that you saw Q1, Q2 with Commerce are continuing on here into Q3.

And then lastly, Jamie, on Commerce, I guess post the fourth quarter in terms of the margin, I know you're going to give guidance for next year later, but should we think about the margin as being relatively stable next year?

I think that's exactly how you should look at it, Mark. We're -- and of course, that is going to depend a lot on what deposit betas end up doing. But for the moment, we think that NIM guidance for us is Q4, pretty flat and then pretty flat into 2018 as well.

Next question comes from David Bishop with FIG Partners.

I was wondering if you could discuss maybe some of the actions you took to reduce the expenses on the mortgage production side that we saw volumes were down and there was some flexibility in terms of variable comp. Maybe some of the actions you took to reduce some of the expense burden, given the slowing on the mortgage banking environment.

Yes, Sean, if you want to talk to that. And remember, we do have some weather-related issues out in Houston that didn't help that.

Yes, and Mike spoke to it in his script that we also went through a technology conversion this quarter. We're able to take some of the best in breed from the bank and best in breed from the mortgage division and combine them essentially. So really no more duplication in process or technology. So that was a big positive impact. And then the commission base, anytime volume is impacted, we're very proud of the leaders over there that they've managed that, the variable comp is largely commission-based, very responsibly.

Got it, got it. And shifting back to the deposit pricing side. As you sort of look across the footprint, it continues to grow. Is there any meaningful difference in the deposit betas in the various markets you guys now touch on?

I'll kick to it Jamie on the betas. There are definitely -- if you look at the whole geography, markets like Boston and New Jersey have been more competitive. And we talked about this, and it benefits us as well on the commercial side. The benefit of a diverse geography, we're able to draw our growth selectively. And it maintains our ability to, in commercial, keep structure and pricing appropriate, keep deposit pricing appropriate. And maybe Jamie can give a little bit more color in regards to the beta piece.

You saw, Dave, this quarter, 4 basis points on -- sorry, yes, 4 basis points on deposit costs. So I think that we do see some differences across the regions. Obviously, Boston is going to be a place that we're going to have slightly higher betas. But overall, we still see things as relatively muted in terms of betas. And we like the position that we're in right now.

Got it. And then I know it's early with the Commerce acquisition here, but any signs of commercial movement in terms of market share? Are there any new relationship wins you can point to? Or just maybe give, from a holistic high-level basis, any signs of new business movement, market share capture, given the post-acquisition announcement?

There are no negative movements for sure. I mean, the Commerce group has been terrific. We're now a week into the deal being closed. And Sean, you may have some additional color. But everything I'm seeing and the people I'm talking to and the people at Commerce, there's only positives with respect to additional business, losing business, gaining business. And with respect to some big hits, I mean, some of that will come from existing customers as well.

And the big advantage we have is we're going to bring our product set. So we'll have our commercial swap product, other types of products that we'll be able to offer those clients. So we see positive expansion in that area.

Next question comes from Laurie Hunsicker with Compass Point.

This is Laurie. Just wanted to go back to a question Mark was asking on margin. And just help me clarify in terms of the flattish margin, we're you talking core margin x accretion or including accretion?

So we were talking including accretion here in the Q4, but we would expect x accretion to be roughly in line as well. So we'll continue to be flat on both of those comps, Laurie.

Okay. So I didn't see in your S-4 an accretion schedule, but I was estimating, accretion would add, I don't know, $1.5 billion or so per quarter to your top line. So help me think about that. Or maybe asked another way, how much impact are you expecting accretion income to be on margin?

Well, this quarter it was 14 basis points, right? So we had $3.1 million, right? So obviously, that's going to go down a little bit because First Choice is going to be coming off the purchase accounting on First Choice. And then we're sort of adding back to it a little bit with Commerce when that comes online. So I think...

Commerce will be online for this quarter, that should be a heavy add, correct?

That's right.

And so what -- or maybe asked a different way, what is your projection for accretion income for full year '18? How are you thinking about that?

Yes, we don't have it that way, Laurie. We were $3.1 million here this quarter. Next year, we're thinking about it -- or sorry, next quarter, we're thinking about it roughly flat. And so I would say that the numbers that you saw here in 2017, probably pretty similar to what you'd expect in 2018.

Got it. Okay. And then can you get just give us an update on both Taxi and Firestone with respect to total balances, new originations, nonperformers and charge-offs?

Yes, Laurie, this is Richard. Just, I guess, a comment before we get into -- as we look at the medallion portfolio from the time we originally did the due diligence and mark it to now, there had been no surprises. We feel very strongly that the 65% mark remains prudent and conservative from a credit perspective, but also proper from a GAAP and a purchase accounting level. So let me give you a couple of touch points on that portfolio. The legal balance is about $103.3 million. Book balance is $99.3 million. The vast majority of it is in the Boston part, about $90 million of the $99.3 million is in Boston. Net charge-offs on those assets for the last 3 years are about $4 million. And the NPL balance right now is about $28.9 million. But when you look at the NPL balance, you really got to step back and look and consider that about $10.3 million of those NPLs are current and paying by their terms, and another $5.5 million are about 30 days past due. So if you kind of structure all that and kind of wipe it all away, the current position of the portfolio, including the NPLs, is about $75 million. If you take away those NPLs that are running at a current pace, about $64.5 million of the portfolio remains current. And about $48 million, which is almost 50% of the portfolio has never been delinquent.

Okay. And what were the charge-offs in this quarter, just this last quarter, the September quarter?

I think it's $1.3 million for the quarter or -- certainly, for the year, that number I don't have.

For the quarter. Okay. And then you are not originating any new medallion loans, is that correct?

Yes. The only loans we will originate is if and when we move a medallion from a multi-owner to a single owner. We actually have a backlog, a list of drivers who want to own their own taxis.

Okay, okay. And then on Firestone, can you just give us the quick numbers around those?

Yes, charge-offs for the quarter were about $73,000 versus last quarter of $141,000. NPLs, or nonperforming loans, are $1.836 million versus $1.9 million, so that kind of flatlined. Total outstandings are down from $225 million to $211 million. That's basically seasonal, so they're down about 6%. And we anticipate that to probably go back up in the fourth quarter.

Okay, and what about new originations in the quarter?

About $23 million.

$23 million. Okay. And I know some of your Firestone footprint is in Texas. Were you guys impacted at all by Houston?

Nothing material.

Next question comes from Collyn Gilbert with KBW.

Sean, if I could start with you. In -- I don't even know whose comments that were in the opening comments. But repositioning the CRE book ahead of the Commerce deal, can you just talk a little bit about what you did there? And just more broadly, kind of what your outlook is for loan growth as you guys go into next year, given, obviously, all the moving pieces with Boston and all that you're doing?

Sure. Mike mentioned Doug MacLean comes on. And he is really the next piece we needed for overarching CRE leadership from Worcester to Boston. I mentioned last year that we took our lenders and we distinguished them to be either C&I or CRE, so I think that's one of the benefits to some of that C&I growth that you have seen. From a Commerce perspective, we're -- it's kind of business as usual in regards to how we're positioning that book and how we're looking at that book. What other piece was there?

Well, just, I guess, what was it -- the comment was made that you repositioned CRE ahead of the Commerce deal. I didn't know like what that meant. Does that mean that you repositioned your own portfolio?

Absolutely. There was a chance to sell some nonrelationship, very small amounts. And then there also was -- there were a few payoffs that didn't fit really our structure and pricing. So with the potential of Commerce coming on, we could take a harder line in regards to those loan opportunities. So payoffs and a few small sales.

Got it. Okay, that's helpful. So in -- again, broadly, do you think that loan growth can accelerate next year or hold the line? I mean, I know the markets in general are not necessarily working greatly, but...

Let me answer that, Sean. It's better. We hired some real talent in that Eastern Mass area, so our expectation is that we're going to see some growth.

Okay. And Mike, while you've interjected there, just a question for you. So when you indicated maybe the target for 10% EPS growth next year, does that include the impact of Durbin?

Yes.

Okay, okay. Shifting gears to you, Jamie, so putting the accretion discussion aside on the NIM, can you just talk a little bit about what some of your assumptions are going into just kind of the trend of the core NIM, I mean, holding it stable? How are you seeing kind of the loan pricing dynamic change? And then do you assume kind of the deposit pricing hold here? Or just some of the assumptions going into the NIM movement?

So Collyn, what we have seen in Q3 is that we saw, across the board, loan yields x accretion were rising. So that came through in the fed funds rate increase. Obviously, that was a part of it. And so what we're seeing is that those loan yields are slightly higher, I'll call it, than the portfolio yields, so the roll-on is slightly higher. The roll-off continues to be just above those portfolio yields as well. So what we're seeing really here is a little bit of churn. And then from the deposit perspective, that's how we're thinking about a flat NIM as well is we imagine we're going to continue to hold the line here on deposit cost increases. And so that's how we're getting to that flat number, Collyn.

Okay, okay. That's helpful. And then just to be -- obviously, a lot of new hires coming on and the big investment here in Boston. Is that -- but yet, Jamie, you had indicated that core operating expenses will likely be down in the fourth quarter. So how is -- how are the costs of these new hires being absorbed to allow you guys to have expenses drop in the fourth quarter?

Yes. So a lot of those expenses are variable expenses that we see seasonally from the mortgage operations and from some SBA operations as well. So that's -- you'll see a seasonal decline here in Q4.

Okay. All right. That takes me to my final question on mortgage. Okay. Can you lay out, maybe in dollar terms, sort of what the mortgage -- how you're thinking about just maybe the annual mortgage revenue generation and then what the related expenses of that? It's just, obviously, a lot of volatility. You had indicated that third quarter is seasonably low, fourth quarter is seasonably low. Just walk us through again kind of some of the dynamics, if you could, on that mortgage business because it's a little tricky to model.

Yes, I can start. Jamie, you can jump in. On an annual basis, we expect between 30 and 35 bps of profit from the line with, as you said, Q1 and Q4 being seasonally lower. So as we look at it like that, that takes in consideration some of the fluctuations in expense or some of the fluctuations in volume through that period. And I think that can allow for a pretty targeted model. Jamie, anything else?

Yes, no. I think that's right, Sean. We've said -- yes, we've said that it's between 30, 35 basis points of production profitability, overall, annually. And so I think when you take a look at, you can make an estimate of our production, use the 30 to 35, and I think you can get there.

So when you say production, is that the revenues that are hitting on the P&L? Or is that a different number?

So production refers to the amount of loan originations.

Okay. All right. And have you guys disclosed somewhere what your targeted loan originations are going to be in that business next year?

Yes, so we said on the call here, Collyn, we did $660 million here in Q3.

Great. You did say that. Sorry. Okay. And so that was 3Q, but that's a seasonably lower -- I'm sorry, can you remind us what you did in the second quarter in terms of originations?

It was a similar amount in Q2 as well.

Okay, but the gains were a lot less this quarter.

That's right. Yes, we saw some compression on the gain on sale margins.

Okay. So when you say that the third quarter is a seasonably lower quarter from mortgage, but the volume levels are high...

Sorry, Collyn. Q4 is going to be the seasonably lower number for mortgage. Q3 is typically kind of an upswing for us. This quarter, we didn't have that due to some of the weather-related impacts and things like that, that we had. So Q4 will be the seasonally lower number.

Q4, Q1, and then Q2, Q3 should be seasonally higher.

Yes.

Okay, okay. So more weather-related. Got it. And then gain on sale too, because I guess the originations -- sounds like the originations were there, it's just it didn't drop to the bottom line.

That's correct. That's right.

I think that's right.

Next question comes from Matt Breese with Piper Jaffray.

Just to stick on mortgage for one more. I understand that there were weather-related issues. But as I think about when the First Choice deal was done and the projections for just mortgage revenues, I think we're thinking north of $60 million. If we put the weather-related issues aside, can we get back to that run rate for 2018, you think?

I think we could. I mean, I think it's hard to say with definity right now, but I do believe that, that is around the number that we would look at as a potential number for 2018. Wouldn't you guys?

Yes, this quarter, obviously, we operate in Houston, we operate in Texas. So there was some weather-related issues there. And there was a system conversion, which helped us with synergies and overall expense management at the company and the mortgage level. But again, I do believe this can provide us exactly what we expected when we modeled it within the First Choice deal.

I think it's a good number, Matt.

Okay. I'll work off of that then. And then going to Commerce, now that the deal is closed, can you give us the goodwill and intangibles numbers associated with the deal?

It's early. Isn't it, Jamie?

Yes, it is. It's still a little bit early, Matt. We can take that offline and get back to you on that when we have that sorted out.

Okay. And then you noted a preferred dividend and some shares issued there. What should we be figuring on for a preferred equity component now into the balance sheet? And then along the same lines, what does the, in dollar terms, the preferred dividend going to cost you?

Right. So good question, Matt. So along with the deal, we issued a small amount of preferred shares. And those are actually convertible preferred shares. So they are convertible into -- 1 preferred share is convertible into 2 common shares. And so -- and the dividend is exactly the same as the common shares. So the -- economically, 1 preferred share is the same as the converted price of 2 common shares.

Okay, but there still will be below net income of preferred dividend and then we should think about income deliverable to common.

You got it. Yes, you got it right, Matt.

Okay. And then as we think about the cost saves you outlined when the deal was announced, how quickly can we achieve all of the cost saves from here?

So I'll let kind of Sean answer that in the end, but as Mike said, we've got -- the conversion happens in Q1. Typically, we get our cost saves after the conversion happens because we still need people and processes in place in order to run 2 sets of books until then. But I'll let Sean kind of comment --

It's the same thing with the 2 systems until then, so post the March conversion is where we really start to see the synergies of the deal and the expense saves. I mean, I'd like to see us be able to say we could get the -- get our cost saves by the end of the year, next year. Is everybody okay with that? Then that's what we're going to do.

And then my last one is really around the provision. With the deal and the rollover in the book, I know there can be some alterations in the provision. Do you think $5 million per quarter is something you can maintain in 2018? Or will there still be some fluctuations due to the Commerce acquisition?

There'll be some fluctuations due to Commerce. They'll probably go up a little bit from there. But not huge numbers, but it will go up a little bit.

This concludes our question-and-answer session. I'd like to turn the conference back over to Mike Daly for any closing remarks.

Okay, well, I want to thank everybody for joining us. I certainly appreciate all your questions. I hope we answered them appropriately and directly. We look forward to speaking with you again in January. At that point, we'll discuss our fourth quarter results.

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