Jason Weber - Senior Vice President, Director of Corporate Development Philip Wenger - Chairman of the Board, President, Chief Executive Officer Philmer Rohrbaugh - Interim Chief Financial Officer, Chief Operating Officer.

Travis Potts - Jeffries & Co Chris McGratty - Keefe Bruyette & Woods Inc. Joseph Gladue - Merion Capital Group Frank Schiraldi - Sandler O'Neill & Partners LP Austin Nicholas - Stephens Inc. Brian Zabora - Hovde Group, LLC Matthew Schultheis - Boenning & Scattergood Inc. Brody Preston - Piper Jaffray & Co.

Good morning, ladies and gentlemen, and welcome to the Fulton Financial Third Quarter Results Conference Call. This call is being recorded. I will now turn the call over to Jason Weber. Please go ahead, sir..

Thank you, Payton. Good morning. Thanks for joining us for Fulton Financial's conference call and webcast to discuss our earnings for the third quarter of 2017. Your host for today's conference call is Phil Wenger, Chairman, President and Chief Executive Officer of Fulton Financial Corporation.

Joining Phil Wenger is Phil Rohrbaugh, Senior Executive Vice President, Chief Operating Officer and Interim Chief Financial Officer. Our comments today will refer to the financial information and related slide presentation included with our earnings announcement, which we released at 4:30 PM yesterday afternoon.

These documents can be found on our website at fult.com by clicking on Investor Relations, then on News. The slides can also be found on the Presentations page under Investor Relations on our website.

On this call, representatives of Fulton may make forward-looking statements with respect to Fulton's financial condition, results of operations and business. These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, and actual results could differ materially.

Please refer to the Safe Harbor statement on forward-looking statements in our earnings release and on the Slide 2 of today's presentation for additional information regarding these risks, uncertainties and other factors. Fulton undertakes no obligation, other than as required by law, to update or revise any forward-looking statements.

In discussing Fulton's performance, representatives of Fulton may refer to certain non-GAAP financial measures.

Please refer to the supplemental financial information included with Fulton's earnings announcement released yesterday in Slides 12 and 13 of today's presentation for a reconciliation of those non-GAAP financial measures to the most comparable GAAP measures. Now, I would like to turn the call over to your host, Phil Wenger..

Thanks, Jason, and good morning, everyone, and thank you for joining us. I have a few prepared remarks before our Interim CFO, Phil Rohrbaugh, shares detailed information on our third quarter results and discusses our 2017 outlook. When he concludes we will open the phone lines for questions.

We reported diluted per share earnings of $0.28, an increase of 7.7% linked quarter and 16.7% year-over-year. Pre-provision net revenue increased approximately $2.6 million or 4.1% linked quarter and $6.7 million or 11.3% year-over-year. Our return on average assets was 0.98% and our return on average tangible equity was 11.52% for the quarter.

Overall, we were pleased with our financial performance for the third quarter, although there were certain areas we expected to do better. We continue to focus on growth, efficiency and profitability to drive shareholder value. During the quarter, we grew total revenue to a record level while reducing our overall noninterest expenses.

The diluted per share earnings of $0.28 equals our all-time high that we set in the third quarter of 2006. Average loans increased 1.8% or $265 million linked quarter and 8.3% or $1.2 billion year-over-year. Loan growth and ending balances moderated during the quarter.

C&I loan demand is typically softer in the third quarter and our line borrowings and total originations declined reflecting this seasonality. In addition, we had some criticized and classified credits payoff that created downward pressure on loan growth.

Our average commercial mortgage portfolio increased 0.7% or $45 million linked quarter and 9.5% or $538 million year-over-year. Growth year-over-year was throughout our footprint, but primarily in our Pennsylvania market.

As we have mentioned in prior quarters, our owner occupied commercial mortgages represent close to half all the overall commercial mortgage portfolio - of the overall commercial mortgage portfolio. And we remain within the regulatory guidance on concentrations in commercial real estate lending.

We will continue to take advantage of the market opportunities to prudently grow our commercial mortgage portfolio. Consistent with Fulton's underwriting standards we generally lend to experienced borrowers that have stable cash flow and sizeable equity positions.

Our average residential mortgage portfolio increased 7.8% linked quarter and 22.5% year-over-year. Growth was throughout our footprint, but primarily in our Maryland and Virginia markets. Our average C&I loan portfolio increased 0.9% or $36 million linked quarter and 4.7% or $191 million year-over-year.

After hitting a new record level in the first quarter of 2017 our period-end commercial pipeline decreased for second consecutive quarter. Our commercial pipeline decreased 11.7% linked quarter and 5% year-over-year, driven in part by what we believe is a more cautious business spending environment and stronger competition within our footprint.

Despite the decline, our pipeline remains at a level that we believe will allow us to stay in mid-to-high single-digit average yearly loan growth. Credit conditions remain consistent with prior quarters, despite an uptick in delinquencies. We believe this uptick is not suggestive of a broader portfolio or macro trends.

Noninterest income declined linked quarter and year-over-year, driven primarily by a decline in our commercial loan interest rate swap fees. This business tends to track with commercial originations, which were down linked quarter and year over year. Also, SBA loan sale fees were down linked quarter and year over year.

Given the current pipelines, we believe fees in these two businesses will improve in the fourth quarter. Excluding the reversal of $1.3 million valuation allowance for mortgage servicing rights during the second quarter, mortgage-banking income was flat linked quarter, mortgage production was down, but gain on sales spreads improved.

Turning to expenses in the third quarter, we saw a linked quarter decline in our noninterest expenses. Efficiency ratio was 64.3%, inside our stated goal of 60% to 65%. This compares to 65.3% for the second quarter of 2017.

We continue to look for ways to make our organization more efficient to drive the efficiency ratio lower, while not sacrificing the customer experience. On the capital front, we paid a quarterly common dividend of $0.11 per share. We did not repurchase any common stock during the quarter.

We have approximately $31 million left in our current share repurchase program, which is authorized through December 31, 2017. Turning to regulatory matters, emerging from the BSA/AML consent orders remains a top priority for us.

We believe that we are continuing to make progress towards that objective, and that we are approaching the point where we could see some of the orders being lifted. With respect to the Department of Justice's ongoing fair lending investigation, we have continued to cooperate with that investigation and have nothing new to report.

At this point, I'd like to turn the call over to Phil Rohrbaugh to discuss our financial results in more detail. Phil..

Thank you, Phil, and good morning to everyone on the call. Unless I note otherwise, quarterly comparisons are with the second quarter of 2017. Starting on Slide 4, as Phil noted, earnings per diluted share this quarter were $0.28, on net income of $48.9 million.

Third quarter earnings reflected an increase in net interest income, a decrease in the provision for credit losses, an increase in security gains and a decrease to noninterest income. Total noninterest expenses were down slightly.

Moving to Slide 6, our net interest income improved by $5.2 million or 4%, driven by a $560 million or 3% increase in average interest earning assets. Average loans increased $260 million with the remainder of the growth primarily in short-term other interest earning assets.

The net interest margin decreased 2 basis points, partially offsetting the impact of the balance sheet growth. There is also one additional day of interest accruals in the quarter. Even though loan yields were up 7 basis points linked quarter, there was a decrease in the net interest margin that was driven largely by the interest earning assets' mix.

As a result of deposit growth outpacing loan growth, excess funds were invested in shorter-term lower yielding other interest earning assets.

This resulted in our overall yield in interest earning assets increasing only 2 basis points, while our cost of funds increased 4 basis points due to seasonal increases in municipal deposits and promotional pricing around certain deposit raising efforts.

Our net interest margin for the quarter was lower than the range we provided in our outlook for the third quarter of 2017 mainly due to the lower loan growth than expected. Both non-interest-bearing deposits and total interest bearing liabilities were up linked quarter by $107 million or 2%, and $415 million or 3% respectively.

The increase in average interest bearing liabilities was due largely to a $679 million increase in interest-bearing deposits driven primarily by seasonal deposit increases and promotional deposit raising efforts, partially offset by $231 million decrease in short-term borrowings.

For the first 9 months of 2017, net interest income increased $37.4 million or 9.6%, driven by a 7% increase in average interest earning assets and an 8 basis point increase in net interest margin. Yields on earning assets increased 10 basis points, while cost of funds increased only 2 basis points.

This was the net result of the 6 basis point increase in the cost of deposits being offset by a lower long-term borrowing cost due to the prior FHLB advance and other long-term debt refinancing.

Turning to credit on Slide 7, based on our evaluation of all relevant credit quality factors, we recorded a $5.1 million provision for credit losses in the third quarter, $1.6 million lower than the provision in the second quarter. The slower provision level resulted mainly from a slowdown in loan growth.

Credit metrics remained fairly consistent with the second quarter of 2017, except for a slight uptick in delinquencies and net charge-offs. Both the allowance for loan and lease losses as a percentage of loans and the coverage ratio of non-performing loans remained consistent with the second quarter.

Annualized net charge-offs to average loans were 14 basis points for the quarter as compared to a 11 basis points for both the second quarter of 2017 and the third quarter of 2016. The total dollar amount of gross charge-offs actually decreased by $900,000 from the second quarter, but this was more than offset by a larger decrease in recoveries.

For the first nine months of 2017, net charge-offs were 12 basis points. Ending non-performing loans increased slightly to $136.5 million. Non-performing loans as a percentage of total loans were unchanged from the second quarter of 2017 at 0.88% and improved from 0.96% a year ago.

Delinquencies as a percentage of loans increased to 1.28% as of September 30, 2017 compared to 1.2% at the end of the second quarter. This increase was seen mainly in the 30- and 50-day delinquency category. Moving on to Slide 8, noninterest income excluding security gains decreased $3.6 million or 7%.

This net decrease was primarily driven by a $1.8 million decline in commercial loan interest rate swap fees, resulting from lower origination volumes, a $1.3 million decline in mortgage banking income due to the reversal of MSR valuation allowance in the second quarter and a $620,000 decrease in gains on sales of SBA loans.

For the nine months of 2017, noninterest income excluding security gains increased 5.5% and was driven mainly by higher mortgage banking income, investment management and trust services income and SBA loan sale gains. Moving to Slide 9, noninterest expenses showed a slight decrease of $540,000 or 0.4%.

Salary and employee benefits decreased $1.6 million, mainly - due mainly to revised estimates of incentive compensation we earned in 2017 and a seasonal decrease in payroll taxes. Other outside services decreased $1.1 million related to the timing of services provided for certain technology initiatives and the risk management and compliance efforts.

A decrease in also realized in ORE and repossession expenses mainly due to higher net gains on property sales. These decreases were partially offset by $1.2 million increase in data processing and software expenses, reflecting higher transaction volumes and new processing platforms.

In addition, FDIC insurance expense increased $640,000 reflecting our lead bank becoming subject to a large bank premium assessments and the strong balance sheet growth we have experienced.

For the first nine months of 2017, noninterest expenses increased 7%, driven mainly by a higher salaries expense, state taxes, other outside services, and tax credit investment amortization. Excluding the tax credit investment amortization, the year-over-year increase to noninterest expenses would have been 4.9%.

Income tax expense increased $3.6 million or 39% resulting in an effective tax rate of 20.5% as compared to 17% in the second quarter of 2017.

The higher rate reflects excess tax benefits associated with vesting stock awards recognized in the second quarter as well as an increase in income before income taxes, generally taxed at a 35% marginal federal tax rate. Slide 10 displays our profitability and the capital levels over the past five quarters.

We continue to see increases in both returns on average assets and returns on tangible equity over the periods presented. And in conclusion, we have included on Slide 11 a summary of our outlook for the year, which remains unchanged except for noninterest income and net interest margin.

We have lowered our noninterest income outlook from mid- to high-single-digit growth to mid-single-digit growth, reflecting our results for the first nine months of the year. We have lowered our margin outlook for the fourth quarter of 2017 to a 2 to 6 basis point increase, as compared to a 3 to 9 basis point increase we provided last quarter.

This margin outlook reflects how the mix of earning assets are expected to change with continued loan growth, seasonal decreases in municipal deposits in the latter part of the year and continued promotional deposit pricing impacts. And now, we'll turn the call over to the operator for questions..

Thank you. [Operator Instructions] Our first question comes from Casey Haire of Jeffries. Your line is now open..

Hey, good morning, guys. This is Travis Potts on for Casey..

Hey, Travis..

Good morning, Travis..

Just starting on the expense guide, you kept that unchanged at low to mid-single digits.

Year to date, you're up 7% and guess kind of like where do you see that leverage into 4Q to kind of hit that, even the high end of that range?.

So let me walk you back a little bit to how we formulated the outlook for the full year. In 2016, we reported noninterest expenses for the year of approximately $490 million, and indicated that in the 2017 expense outlook, we expect to increase in a low to mid single digit growth rate from that level.

Through the nine months, we incurred noninterest expense as $387 million, which is, as you indicated, 7% above last year for the nine month period. But that does include approximately $8 million of tax credit investment amortization.

As we did explain before, there is an equal amount of tax credit for this type of investment that is going through the tax expense line as a reduction that nets out that expense item to zero. So there is a little bit of geography issue here. And if exclude the tax credit amortization from 2017, that puts the increase to nine months at 4.9%.

We currently project our expense range to be at $128 million to $132 million for the fourth quarter, which includes tax credit amortization and the high-end of that range is consistent with the last few quarters.

If you use the high-end of the range in the fourth quarter, the full year 2017 projection would be in the $519 million area or a 6% increase from 2016.

But again, if you remove the tax credit amortization in 2017 and use the midpoint of that range as an estimate to exclude the tax credit amortization, you obviously will be at a lower percentage increase with about 4%.

So hopefully, I think it gives you a good understanding of the interplay between the tax credit amortization and the outlook we provided..

Now, that's great color. Thank you. And just moving - and I know it's small, but you added some brokered deposits this quarter. I guess, just kind of like what's the strategy there going forward.

It didn't really seem like you needed any hole to fill there, given deposit growth outpacing loan growth on the quarter? I guess, just how should we be thinking about that and kind of what's your appetite to put on more of those brokered deposits?.

Just by way of background, since the financial crisis, we have observed it's a bit more difficult to put Fed fund lines in place with other banks. So we've been looking for Fed fund alternative facilities and a strategy around that.

And we've now begun to explore, putting them in place, starting with one recent arrangement, which is essentially sweeping cash from, in this case, a broker into either NOW or money market accounts at our bank. And that facility is looked at as the Fed funds alternative in terms of the pricing that we do negotiate around that.

And as we look forward, we are going to continue to plan to look at these facilities as part of our overall funds management and liquidity management process. And we did act on that early in the second quarter before we saw some other things happening in terms of putting that facility in place..

All right, thank you, guys..

[Indiscernible]..

Thank you. And our next question comes from Chris McGratty from KBW. Your line is now open..

Hi, good morning, guys..

Hi, Chris..

Hey, good morning, Phil. In your prepared remarks, you talked about the BSA update and kind of resolution could come in stages if you will. I'm interested in maybe when that might start and how long that may take to get kind of soup to nuts on that.

And then can you talk about your priorities, once you're fully behind it, whether it's capital deployment, some expense synergies, charter collapse? That would be great. Thanks..

So you know as we've stated in most of these calls, it's - at the end of the day, it's the regulators who decide when the orders get lifted. We're confident that we continue to make progress. We continue to have exams by all the regulators. And we believe that we're getting closer.

So outside of that, I can't really say when it - when they might start and what timetable it will be. But we continue to do everything that we need to do to move forward. Now, once the orders are lifted, our first priority is to consolidate the banks. And we would begin that as quickly as we can. And there will be some expense reductions there.

We haven't outlined those yet. So as we get closer to that happening, we would do that for you. And then, so we'd also be looking at strategic acquisitions that would make sense for the company..

Great. Maybe if I could circle to loan growth. Your mortgage, your mortgage book continues to grow at a pretty decent pace. I'm interested in maybe your appetite for how much further you're going to let this grow, especially since your comments on the C&I environment kind of suggested a little bit of tepidness by borrowers..

So that growth has happened for a couple of reasons, Chris. One is for a period of time we did not have outlets for a number of our jumbo mortgages and we did not have outlets for our low to moderate income mortgages. We were anticipating that we would have those outlets in place early in the third quarter.

But it actually didn't happen until late in the third quarter. So as we move into the fourth quarter, we do see more jumbos and more of our low to moderate income mortgages being sold and not going on the balance sheet.

So there has been - although at the same time there has been a little bit more demand for our ARMs and we do keep those ARMs on balance sheet..

Okay, so if I'm hearing you right, it's - the portfolio will grow but at a slower pace.

And is that perhaps how you get to the, I guess, implied like around 50 million bucks in the fee income in the fourth quarter? Is that just geography in terms of selling and gaining on sale?.

We believe the two areas that will grow again in the fourth quarter are the swap income and the SBA sales. I think that will drive that number more than mortgage banking, just because while we won't - we'll be selling more the percent that we do.

From a seasonality standpoint, we would expect that mortgage volume won't be as strong in the fourth quarter as it is in the third quarter..

Great. Thank you very much..

Thank you. And our next question comes from Joe Gladue from Merion Capital Group. Your line is now open..

Thank you. Good morning..

Good morning, Joe..

Good morning, Joe..

Let me just, I guess, follow up on that a little bit with that last question. Yeah, you did have deposits exceeding loan growth in the third quarter and that led to, I guess, a buildup in some low-yielding short-term assets.

Given that you expect to be selling some more loans, the jumbos and low-income housing, how soon do you think you can I guess absorb or redeploy those low yielding assets into higher yielding [indiscernible]..

So a couple of things that will happen, Joe. A big part of the deposit increase was the large inflow of municipal deposits. And they will start flowing out in the fourth quarter. So we don't expect to see the same kind of deposit growth.

And the promos that we were running on deposits I think and very shortly, so our focus in fourth quarter on deposit growth will be again in non-interest-bearing deposits. So I think that will also impact our deposit number.

And we do feel that both CRE and C&I growth will be stronger in the fourth quarter again, so we see that all kind of flipping during the quarter..

All right, okay. And while you gave good color on the expense growth and outlook, just little more detail on the compensation side. I guess, there was some lower - you said there were lower estimated incentive compensation.

And just wondering how that that plays into your fourth quarter - the third quarter, I guess, a lower run rate than we've seen in the fourth quarter, assuming the lower estimates would affect what you did in the first couple of quarters as well..

Yeah, we have - first off, we have a high number of different incentive compensation plans that are driven by a multitude of factors. And we're looking at them every quarter, trying to project where we think they're going to come out for the year.

And that's an ongoing process that we then take a look at and then adjust our accrual and estimation process based upon where we see those planning for the year. We will continue to do that going into the fourth quarter. And you know, again, look at them based upon actual performance in the fourth quarter to decide if they need to be adjusted.

It's those costs are reflected in the salaries and benefits line. And so that's influenced by a number of things including benefit trends as well. And obviously, the fourth quarter can have a lot of variability in that as well.

But in thinking about that area, we would expect somewhere before salaries and benefits to be in the $72 million to $74 million range in the fourth quarter..

All right, and lastly, I'll just ask about deposit pricing, I guess, just wondering what - there is continuing upward pressure from the last Fed rate increase or what you're seeing deposit pricing-wise?.

So this is Phil Rohrbaugh on that. We have not seen a pressure today to adjust our deposit pricing, which is a conclusion that you may draw if you have looked at the change in origin between periods.

Really what occurred there was, as Phil outlined a combination of three things, with one of the biggest we already talked about, which was the change in the earning asset mix because of how deposit growth outstrip the loan growth in the quarter.

But importantly the growth we had in the higher cost municipal deposits in the quarter did bring our margin down. And that's much more of the influx seasonally than we have experienced in the past and that is expected to run out in the fourth quarter.

And then with respect to promotional deposits that was the other factor largely driving our cost of deposits in the quarter and I think Phil mentioned that. But from the point of view of adjusting deposit pricing, we continue to monitor that every week.

And as we continue to see additional rate increases, should we see those we constantly evaluate the need to react competitively. But to-date, we have not had to adjust our pricing..

All right, thank you..

Thank you. And our next question comes from Frank Schiraldi from Sandler O'Neill. Your line is now open..

Good morning, Frank..

Hi, Frank.

How are you doing?.

Good. Thanks. Just a couple of questions, first on - I want to make sure I understand the expense guidance.

So the low to mid single digit growth, that is excluding tax credit amortization?.

Yes, we - it does exclude that. And as I indicated, if you include it more in the 6% range, in my earlier commentary based on - using a range of 128 million to 132 million a year. But excluding it, it's about 4% [ph] in terms of what we expect..

And, Frank, to be clear, that expense is 100% offset by lower tax rate..

Right, understood. And then, I just wanted to ask on the permanent CFO search, just wondering if there is any more detail you can provide in terms of if you have a candidate at this point, if you're still whittling it down to an individual and just maybe some any thoughts you can provide on timing..

I think we're getting close and we would hope to make an announcement in the not too distant future on that, Frank..

Okay, okay. That's all I had. Thank you..

Thank you..

Thank you. And our next question comes from Austin Nicholas from Stephens Inc.. Your line is now open..

Hey, guys, good morning..

Hi, Austin..

Hi, Austin..

So you're seeing some nice year-over-year increases in your wealth management business fees. You can maybe talk about any opportunities to continue to grow that both on an organic basis and then any inorganic opportunities to acquire RIAs, and then, if there is any regulatory order impact to that any inorganic strategy? Thanks..

So we have been growing organically. I would note though that overall - the overall growth, 50% of that growth is organic, and the balance comes as a result of higher values from higher market prices. But we have been successful growing organically. We expect that to continue.

We would be restricted right now because of the orders of buying any type of businesses that would - excuse me - enhance that. But as we emerge from the orders, we would consider looking at investment management companies that could help us increase at a faster pace..

Understood, I think rest of my questions has been answered. So, thanks for your time..

Well, thank you..

Thank you. And our next question comes from Brian Zabora from Hovde Group. Your line is now open..

Thanks, good morning..

Hey, Brian..

Good morning..

Just a question on some of your prepared remarks, you mentioned stronger competition in your footprint impacting loan growth. I wanted to see if there's any details if - the comparison is being more active on pricing or structure and terms, just any thoughts around that..

It's primarily I would say in the Central Pennsylvania. The BB&T acquisitions of Susquehanna and that - provided us with a really good opportunity, to take advantage of market disruption.

And what's happened in the last three or four or really six months is the number of smaller banks that we compete against have been pushing or making Central Pennsylvania a priority. So we are seeing more competition from those. And that, as a result we are seeing less growth from market disruption right now than we had been in the past..

It's helpful. Then the second question, the securities portfolio, you sold some and took some gains.

So how much did you sell and did you reposition the portfolio at all?.

The securities we have been selling are largely have been equity securities around bank stocks in particular. And certainly the market has - afford an opportunity for us to look at it and we reacted based upon that and it's been principally in that area where we have taken actions to-date and that reflects what we've done for the first nine months..

Okay. That's all I had. Thanks for taking my questions..

Yeah, thank you..

Thank you. And our next question comes from Matt Schultheis from Boenning. Your line is now open..

Hi, good morning..

Hey, Matt..

Hi, really quickly, can you add any color surrounding what impact, if any, that the budget process in Harrisburg may be having on your outlook for the business or your clients' outlooks for their businesses?.

So that's a great question. And I do think it is having an impact in Pennsylvania. And, yeah, there's just so much uncertainty right now. I think it's causing a lot of folks to pause..

Does that include you or is that your competitor?.

I would say, it's primarily our competitor or - I'm talking about customers, I'm talking about our clients..

Right, yes, excuse me, so was I. Okay, excuse me.

And can you add any color as far as your Ag loan portfolio as far as how much is coming from, say, dairy versus hogs versus boilers and layers?.

Sure, so if you look at that portfolio, just first off, about half of it is Ag business and half of it is family farm. And then if you - so if you break out the family farm portion, about half of that is in dairy, about $250 million. And then, the balance of the $250 million is pretty much evenly broken out.

From all those other categories you mentioned..

Okay.

And really quickly on the tax credit and the expense, the low-income housing tax credits, I guess, is there a defined life to this arrangement? In other words, do we start to see your expenses in your tax line item go back to what it was prior to this year, in the future, and if so, when?.

So currently, is if you invest in affordable housing projects and the tax credit related to them and goes through the tax expense line.

But as you look at other economic development projects that might not be affordable housing then you're required to take the amortization from those types of credits or referred to as new markets tax credits above the line in terms of the amortization, which is over a period of time.

Our focus is on LIHTC, the low-income housing tax credit primarily, but we respond as transactions present themselves and as we're looking to support communities in what we do. And we would expect the level of amortization and - that we had this year in terms of tax credit amortization for new markets tax credit to be well below in the future.

So - but again, this is very transaction based and it depends on the opportunities presented to us..

Okay. Thank you..

Thank you. [Operator Instructions] Your next question comes from Brody Preston from Piper Jaffray. Your line is now open..

Good morning, guys..

Hi, Brody..

With regards to the NIM guide, I know you lowered it to 2 to 6, is that inclusive of a Fed hike in 4Q?.

We have some thinking around that. And - but if we do get a rate hike, we're thinking it's late in December and there would be minimal impact to the quarter. But we did consider that in framing of that outlook..

Okay.

And could you remind me sort of what the positive impact to the NIM is from each 25 basis point increase from the Fed?.

I think that in the past as we looked at the 25-point basis impact, it has been into the $5 million to $6 million range in terms of that impact on an annual basis..

Okay. And then, I guess, with regards to loan growth, I guess, squaring away some of the commentary from prepared remarks and from some of your questions, you noted that you expect commercial - C&I and CRE growth to maybe help drive loan growth in the fourth quarter.

But given what you said about sort of, I guess, maybe the tepid business environment and commercial pipelines being down 11% quarter-over-quarter, how do you expect to, I guess, grow commercial loans?.

So the pipeline includes a lot of things. And we also look at what we are expecting with a lot of confidence to be settling in the next three months. And given that number, we feel also growth will pick up again..

Okay, and I'm assuming then that's what's driving some of your confidence regarding the swap fee income line-item as well..

Yeah, that swap fee income line tends to track very closely with settlements. I'll just add, on the SBA side, which we expect to bounce back, the fourth quarter is always our strongest quarter in SBA fees..

Okay. Great. And then, last question for me, I mean, with regard to the BSA, I know you can't give specifics, we're about I think 40 months into this from the first order that you guys received.

And given some of the uncertainty around the timing of resolving these issues and getting out from under the order, just wondering at this point, the order is sort of enough of an inhibiting factor that it puts any other strategic options on the table for you guys like potentially partnering with another institution?.

I don't think they have any impact in that, so..

Okay, great. Thank you very much, guys..

Okay..

Thank you. And I'm showing no further questions in the queue at this time. I like to return the call back over to Phil Wenger for any closing remarks..

So thank you all for joining us today. We hope you would be able to be with us when we discuss fourth quarter results in January..

Ladies and gentlemen, this does conclude your program for today. You may all disconnect. Everyone, have a great day..