Allison O'Rourke - EVP of Finance Mike Daly - CEO Jamie Moses - CFO Sean Gray - COO Richard Marotta - Senior EVP and President, Berkshire Bank.

Mark Fitzgibbon - Sandler O'Neill David Bishop - FIG Partners Laurie Hunsicker - Compass Point Collyn Gilbert - KBW Matt Breese - Piper Jaffray.

Good morning and welcome to the Berkshire Hills Bancorp Third Quarter Earnings Release Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Ally 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 sections 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, Ally. Good morning everyone. Thanks for joining us for our third quarter call. I'm joining this morning by Richard Marotta, Sean Gray and Jamie Moses. I'll provide an overview of the quarter and I'll turn it over to Jamie to walk you through some of the financials and will 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 headquarter space in Downtown, Boston. And we continued building the team with two 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 would 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. Now 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. Based on our closing date, the Durbin Amendment will become effective force in the second half of 2018.

As we've stated in the past, we expect the revenue impact to be about $5 million for a full year, to be about half of 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 a deal you should close the deal.

We are enthusiastic about the opportunities this acquisition presents. The Commerce has the number one deposit share in Worcester that's the second largest city in New England behind Boston.

We will be bringing expanded products set to their customer base and we'll continue to support the community and empower 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 three lending offices and 19 branches in the greater Boston market with four in Boston and our new headquarters. Our total loans in these markets exceed $3 billion and deposits are over $2 billion.

In Boston, we are eager 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 is offering remarkable opportunity for a bank like ours and expect the move will benefit customers across the entire footprint.

We have three 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.

And they all have significant experience in the market and the energy in drive we look for in all our team members. We also added a mortgage team in Boston led by Kevin Gillis; he was previously a senior loan officer and Eastern Massachusetts Regional leader, 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. 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 will 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. 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 1 or 2. With the addition of Commerce that number will drop below a 100%. We expect continued organic deposit growth in the fourth quarter with the 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 336. 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% purchase. 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 expect to see a longer term benefits beginning next year. SBA loan fee income continues to decline in 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 improve profitability and we rank 17th nationally for loans produced this year. And 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 down 2% to 3% in the fourth quarter before Commerce and once the integration of Commerce is complete in 2018 we would expect to see further improvements and efficiency.

The non-core charges in the fourth quarter are expected to be around half of the $32 million pre-tax estimate of Commerce acquisition cost, 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 plays to 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 a corresponding charge to non-interest income of approximately $3.5 million.

These tax credit investments bring about a penny per share to the bottom-line each quarter. The fourth quarter GAAP rate will be lower due to the merger charges coming through.

All together including Commerce, we expect core earnings per share in the fourth quarter to be about $0.57 including seasonality in the impact of issuing additional shares for the acquisition. We estimate that the diluted common share account 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 intangible 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 and our prospects for integrating Commerce building our 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 begun the integration process with Commerce we'd expect to get full 2018 guidance on our next call.

And well our strong relationships and experience merger team did create an opportunity to close this acquisition early, a system conversion and cost sales remain in line with our original timing expectations. We'll also be subject to the Durbin impact earlier than originally anticipated.

With that being said, we see plenty of opportunity for growth, an exclusive of potential rate hikes and tax reform. We would 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 sides for 2018.

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

We're now, we're heads down, concentrating 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 it up to any questions..

[Operator Instructions] First question comes from Mark Fitzgibbon with Sandler O'Neill. Please go ahead..

Hey, guys. Good morning..

Hi, Mark.

How are you?.

Good. Thanks.

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. Thanks..

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

Okay.

And Sean, I got, one of thing I heard from some of the other banks in the market is that, money market rates out there gotten a little crazier, 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 large 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 $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 earning looked in the third quarter, I don't think they have 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. I guess, what I can tell you is from an overall perspective, as I said before we are 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 here into Q3..

And then, lastly, Jamie on Commerce. I guess post the fourth quarter in terms of the margin, I know you are going to give guidance for next year later..

Yes..

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 are -- it's going to -- first that's 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..

Great. Thank you..

Thanks Mark..

Next question comes from David Bishop with FIG Partners. Please go ahead..

Hey, good morning, gentlemen..

Hi, Dave.

How are you doing?.

Good.

How are you doing?.

Great..

I was wondering if you could discuss maybe some of the actions you took to reduce the expenses on the mortgage production side, if you saw volumes were down and there is some flexibility in terms of variable comps.

Maybe some of the actions you took to reduce some of the expense burden given a slowing 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. Mike spoke to it in his script that we also went through a technology conversion this quarter. We are able to take some of the best and breed from the bank, invest some breed from the mortgage division and to combine them essentially. So, really, no more duplication in process or technology, so that was a big positive impact.

And then, the commission base, any time volume is impacted, we are very proud of the leaders over there that they manage that the variable comp piece largely commission base very responsibly..

Got it guys.

And then, chipping back to the deposit pricing side, as you sort of look across the footprints, still continue to grow, is there any meaningful difference in the deposit betas in the various market you guys now touch on?.

I will it kick it to Jamie on the betas. There are definitely, if you look at the whole geography markets like Boston and New Jersey have been more competitive. We talked about this and it benefits us as well on the commercial side, the benefit of a diverse geography, we are 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..

Yes. You saw Dave this quarter, four basis points on -- sorry, yes, four basis points on deposit cost. So, I think that we do see some differences across the regions, obviously, Boston is going to be a place that we are 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 are in right now..

Got it.

And then, I know it's early with the commerce acquisition here but any signs of commercial moments in terms of market share, are there any due relationship you can point to or just maybe give from a holistic kind of the basis any signs of new business movement, market share capture given the -- post acquisition announcement?.

There is no negative movements for sure. The Commerce Group has been terrific, we are 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 is only positives with respect to additional business, losing business, gain business.

And with respect to some big hits, some of that will come from existing customers as well..

The big advantage we have is, we are going to bring our product set, so we will have commercial swap product other types of products that will be able to offer those client. So, we see positive expansion in that area..

Got it. Thanks for taking my question..

Thanks David..

Next question comes from Laurie Hunsicker with Compass Point. Please go ahead..

This is Laurie.

Hello?.

Hi, Laurie.

How are you?.

Hey, good. Thanks.

Just wanted to go back to a question Mark was asking on margin and just help me clarify in terms of the flattish margin, were you talking core margin ex-accretion or including accretion?.

So, we were talking including accretion here in the [Audio Gap] the Q4, but we would expect ex-accretion to be roughly in line as well. So, we are continuing to be flat on both of those [comp query] [ph]..

Okay.

So, I didn't see in your S4 in accretion schedule, but I was estimating accretion, I don't know 1.5 million are so per to your top-line? So help me think about that or maybe asked in another way, how much impact are you expecting accretion income to be on margin?.

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 and First Choice. And then, what we sort of adding back to it a little bit with Commerce, when that comes online..

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

That's right..

And so, what are -- maybe asked in a different way, what is your projection for accretion income for full year 2018? How you are thinking about that?.

Yes. We don't have it that way Laurie. We were $3.1 million here this quarter, next year we are thinking about it, sorry, next quarter we are 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 would expect in 2018..

Got it. Okay. Thanks.

And then, can you just give us an update on both taxi and firestone with respect to total balances, new originations, non-performers and charge offs?.

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 in March until now. There had been no surprises. We feel very strongly that the 65% mark remains prudent, conservative from a credit perspective.

But, also proper from a gap and a purchasing 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, vast majority of it is in the Boston part about $90 million of the $99.3 million in Boston.

Net charge offs on those assets for the last three years are about $4 million. And the NPL balance right now is about 28.9. But, when you look at the NPL balance, you really got a step back and look and consider that about 10.3 of those NPLs are current and paying by their terms another 5.5 or about 30 days attached to. So, if you kind of --.

Go ahead..

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 takeaway 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 its $1.3 million for the quarter or certainly for the year that number, I don't have..

In the quarter. Okay.

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

The only loans we will originate is just in 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..

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

Yes charge-offs for the quarter were about $73,000 versus last quarter of 141, NPLs or non-performing loans are $1.836 million versus the $1.9 so that kind of flat lined. Total outstandings are down from 225 to 211 that's basically seasonal, so they are down about 6%. We anticipate that's 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 for you guys impacted it all by Houston?.

Nothing material..

Okay, great. Thanks, I'll leave it there..

Thanks Laurie..

Next question comes from Collyn Gilbert with KBW. Please go ahead..

Thanks good morning everyone..

Good morning Collyn..

Sean, if I could start with you, 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 are doing?.

Sure. Mike mentioned Doug MacLean comes on and he is really the next piece we needed for overarching pre-leadership from Worcester to Boston. I mentioned last year that we took our lenders and we distinguish 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, where it's kind of business as usual and regards to how we are positioning that book and how we are looking at that book. One other piece was there..

Well, I guess, what was that the comment was made that you repositioned CRE ahead of the Commerce deal, I didn't know did that what that meant, Sean like you said you repositioned your own portfolio?.

Absolutely. There was a chance to sell some non-relationship very small amounts and then there were also was, there were a few pay-offs that didn't fit really our structure and pricing, so with the potential of Commerce coming on we could check a harder line in regards to those line of opportunities..

Okay..

So pay-offs in 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?.

Well let me answer Sean better. We hired some real talent in that Eastern Massachusetts areas, so our expectation is that we're going to see some growth..

Okay, okay.

And Mike while you've been ejected there, just a question for you, so when you indicated maybe the target for 10% EPS growth next year doest that include the impact of Durbin?.

Yes..

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 that's core NIM I mean holding it stable, how you are 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?.

Yes. So Collyn, what we have seen in Q3 is that we saw across the board loan yields ex-accretion were rising. So that came through in the fed funds rate increase obviously that was 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 are getting to that flat number Collyn..

Okay, okay. That's helpful. And then just the - obviously a lot of new hirers coming on and the big investment here in Boston is that, and yet but yet Jamie you had indicated that, core operating expenses were likely to be down in the fourth quarter.

So, how is, how are the cost of these new hirers being observed 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 layout maybe in dollar terms sort of what the mortgage, how you are thinking about just, maybe the annual mortgage revenue generation and then what the related expenses of that, it's just obviously lot of volatility you had indicated third quarter seasonably low, fourth quarter seasonably low.

Just walk us through again kind of some of the dynamics if you could on that mortgage business, because it's little tricky to model?.

I can start Jamie and you can jump in. On an annual basis we expect between 30 and 35 bps of profit from line with as you said Q1 and Q4 being seasonally lower. So as we look at it like that that takes into consideration some of the fluctuations and expense or some of their fluctuations and volume through that period.

And I think it can allow for a pretty targeted model.

Jamie anything else?.

I think that's right Sean, we've said that it's between 30, 35 basis points of production profitability overall annually. And so, I think when you can 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 you are 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..

All right. You did say that, sorry. Okay..

That's 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 the third quarter is seasonably lower quarter for mortgage, but the volume levels are high, sorry go ahead..

Yes. Sorry Collyn, Q4 is going to be the seasonally lower number for mortgage, Q3 is typically kind of an upselling 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 would 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 that originations were there just it didn't drop to the bottom-line?.

That's right..

I think that's right..

Okay, okay. All right I think that's all I had. Thanks guys..

Thank you, Collyn..

Next question comes from Matt Breese with Piper Jaffray. Please go ahead..

Good morning everybody..

Hi Matt..

Just to stick on mortgage for one more, I understand it whether 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 would think?.

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

Yes. This quarter obviously we operate in Houston, we operate in Texas. So there were 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 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've got that.

And then going to Commerce, now is the deal is closed, can you give us the goodwill and intangibles number associated with the deal?.

It's early isn't it Jamie?.

It is still little bit early Matt, we can - we can take that offline and get back to you on that when we have that sort of there..

Okay.

And then you noted preferred dividend and some shares issued there, what should we be figuring on for a preferred equity component now into the balance sheet and as along the same lines, what is the 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 -- one preferred share is convertible into two common shares, and the dividend is exactly the same as the common share.

So, economically one preferred share is same as the converted price of two common shares..

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

Yes. I got it right there..

Okay.

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

So all that kind of Sean answer is that, in the end, but as Mike said we have 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 two sets of books until then. But, I will let Sean kind of comment..

The same thing was two systems until then. So, post the March conversion is where we really start to see the synergies of the deal and expenses..

I mean, I would like to see as be able to say we could get the -- did our cost save by the end of the year next year..

Okay..

Fair. Everybody okay with that and that's what we are going to bill..

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 alternations in the provision.

Do you think 5 million per quarter is something you can maintain in 2018 or will those be some fluctuations due to the Commerce acquisition?.

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

Understood. Okay. That's all I had. Thank you very much..

Thanks Matt. Appreciate it..

This concludes our question-and-answer session. I would 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 will discuss our fourth quarter results..

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