Seacoast Banking Corporation of Florida (SBCF) Q3 2017 Earnings Report, Transcript and Summary

Welcome to the Seacoast Banking Corporation Third Quarter 2017 Earnings Conference Call. My name is Paula and I will be your operator for today’s call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session. [Operator Instructions] Please note that this conference is being recorded. I will now turn the call over to Dennis Hudson, CEO. You may begin.

Thank you, Paula. And before we begin, I want to direct everyone’s attention to the statement contained at the end of our company’s press release regarding forward-looking statements. Seacoast will be discussing issues that constitute forward-looking statements within the meaning of the Securities and Exchange Act. And our comments today are intended to be covered within the meaning of that act. Thanks again everybody for joining us today for Seacoast third quarter 2017 conference call. Our press release, which we released yesterday, I think after the market close and our investor presentation can be found on the investor portion of our website under the title Presentation. With us today is Chuck Shaffer, our Chief Financial Officer and Head of Strategy, who will discuss our financial and operating results. Also with us today Julie Kleffel, our Community Banking Executive; Chuck Cross, our Commercial Banking Executive; David Houdeshell, our Chief Risk and Credit Officer; and Jeff Lee, our Chief Marketing and Analytics Officer. Our third quarter results show that the investments we’ve made over the past two years continue to produce results for shareholders. Building on our 90-year-old history the strength of our brand and our transformed customer service platform, we generated record commercial loan growth and solid organic growth overall. We possess one of the top performing banking franchises in Florida, which is one of the nation’s most economically robust states with solid positions in four of our states most attractive markets. We continue to strengthen that franchise through our balanced growth strategy of organic growth, prudent risk management and selective value creating acquisitions. Turning to our financial results. Third quarter net revenue increased 5% over the prior quarter and 21% over the second quarter last year. Adjusted net income rose 20% sequentially and 37% compared with last year’s third quarter. We reported adjusted net income per share of $0.35 up 21% sequentially and year-over-year. We’re clearly on pace to achieve our ambitious vision 2020 goals. And I’d like to remind you what those goals are. In the medium-term to produce 1.30% return on assets, to produce 14% to 16% return on tangible common equity and to push our overhead ratio down into the low 50%. We believe by 2020 and beyond, we’ll exceed some of those numbers and we’ll push our overhead ratio below 50%. Well this quarter we – as I said, we’re on pace to achieve our ambitious goals and we recorded an adjusted average return on tangible assets of 1.16%. Adjusted return on average tangible shareholders equity of 12.8% and adjusted efficiency ratio of 57.7%. We achieved these results without compromising the granularity of our loan portfolio and while maintaining a risk profile that is below the industry average. We have built an integrated loan production and credit underwriting platform that is performing effectively and that is built to add high quality assets over the long haul. Turning to our operations. Third quarter loan production continued strong with record high commercial loan origination. Our loan pipelines are near record levels entering the fourth quarter despite the impact of Hurricane Irma about which I will say more in a moment. But we saw that normalize after the storm. In the past we’ve mentioned Seacoast digital transformation, we continue – I mean our focus on that not because – our focus on that not because we value digital and analytical innovation for its own sake but because that has enabled us and will continue to enable us in the future to stay on top of consumers massively and rapidly changing expectations for what they want from their financial services partner. We continue to benefit from the rapid migration of transactions outside of the branch. Total transactions completed outside of the branch rose in September to 52% compared with 43% in September just two years ago. 40% of checks were deposited outside branches in September compared to 35% in September of last year. Mobile penetration during the quarter increased to more than 32% of eligible primary consumer checking customers up from 29% in September just last year. And the proportion of new deposit accounts open outside of our branches rose to 13.3% of all deposit accounts this quarter. We continue to invest in modernizing our retail and small business sales strategy as we focus on enhancing customer lifetime value a proprietary metric that we unveiled at last February’s Investor Day. We are also developing a commercial analytics portal that will connect our commercial bankers with the analytics and the insights that we are currently providing our retail and small business teams. Overall we focus relentlessly on leveraging our position as Florida’s leading community bank by addressing a larger share of our customers banking need. Shifting briefly to the M&A part of our strategy, last week we closed on the acquisition of NorthStar Bank in Tampa. Combined with our acquisition of GulfShore Bank we now have a strong and growing presence in Tampa, Florida’s second largest MSA. And next month we’ll close on the acquisition of Palm Beach Community Bank, which strengthens our position in Palm Beach County and extends our network further south in the Palm Beach County. We continue to look for opportunities to complete prudent acquisitions to strengthen our existing franchise in Florida’s top four markets and expand our position across the state. I’d like to say a few words about Hurricane Irma. Late August and early September as everyone knows, a difficult time for Floridians the entire state prepared for this category five hurricane, which caused two full weeks of business interruption with one week of preparation and another week of recovery. I think part of the communities in which we operate is not just something we say, it is vital to all of us. Seacoast has been part of Florida for 90% and it is our mission to help our local communities bounce back. To assist our borrowers we rolled out a number of programs to provide them with assistance. In the days following the storm, we conducted site visits and inquiries with commercial customers in our most significantly impacted areas to help assess potential recovery needs. I’m proud to say that our dedicated and committed staff spoke to around 70% of our commercial base – customer base. The financial impact of Hurricane Irma on the quarter was approximately $0.01 a share and Chuck is going to provide some detail in his remarks. But while the financial impact was minimal I think the emotional impact was far greater and I suspect longer lasting. Gratified and relieved by the resilience of the Seacoast family and that our disaster planning and backup site, which we created for eventualities like this perform so well. Finally, given our momentum exiting Q3 and strong pipelines despite the impact of Hurricane Irma, we’re affirming our full year adjusted EPS guidance of $1.28 to $1.32. So in summary, Seacoast [indiscernible] a carefully balance strategy the built loan granularity, strong organic customer acquisition and digital customer engagement in combination with smart accretive acquisitions. As seen from this and previous quarters results the strategy is working, creating real and long lasting value for shareholders. With that, I’ll like to turn the call over to Chuck, who is going to review this quarter’s financials after which we’d be happy to take a few questions. Chuck?

Thank you, Denny and thank you all for joining us this morning. As I provide my comments, I’ll reference the slide deck which can be found at www.seacoastbanking.com. I’ll start this morning on Slide 5 discussing some of the highlights for the quarter. Net revenue increase 21% year-over-year to $57.2 million and adjusted net income was up 37% to $15.1 million. Sequentially, net revenue increased 5% or $2.5 million and adjusted net income was up 20% or $2.5 million. Adjusted return on tangible common equity ended the quarter at 12.8%. Adjusted return on tangible assets was 1.16% for the quarter and the adjusted efficiency ratio declined to 57.7%. All three ratios have improved meaningfully from one year ago and this improvement evidences our continued progress towards our vision 2020 objectives and commitment to creating value for shareholders. Unlike prior quarters the impact of acquisitions of branch reductions were more modest in Q3 highlighting the underlying earnings momentum and the outlook to continue to build tangible book value per share. In early 2017 we engaged in a $200 million equity transaction that included the issuance of $50 million in new equity to support growth. Over the course of the year this capitalism has been employed in a productive manner already offsetting most of the initial EPS dilution from the share issuance. Additionally, we’ve increased tangible book value per share from $9.37 at start of the year to $10.95 at the current quarter. That’s a 17% increase in nine months. By year end we’ll close on three accretive acquisitions exiting the Seacoast franchise into Tampa with the GulfShore and NorthStar purchases and strengthening our presence in South Florida with the Palm Beach Community Bank acquisition. Moving forward one slide, Slide 6. Denny mentioned that third quarter was impacted by Hurricane Irma. The storm cost two full weeks of business interruption as one week was spent on preparation and one week spent on recovery. The impact of Irma on the quarter was approximately $0.01 per share. Revenue was impacted in the form of waived service charges, slower activity in wealth management, and delayed closings on loans. We incurred direct expenses of $0.4 million primarily compensation for staff working throughout the storm to ensure our customers had digital and web access at all times. Remote support from our backup site Nashville, Tennessee and recovery expenses to bring our branch network back online. We remove these directing incremental expenses from the presentation of adjusted results. No adjustment has been made for the revenue impacts. Looking more deeply as the quarter, let’s move to Slide 7 net interest income. Net interest income was up $1.6 million sequentially and as anticipated the net interest margin was 10 basis points sequentially. The result of the lower accretion on both securities and loans when compared to the prior quarter as well as higher interest expense on deposits and borrowings. This is in line with the guidance we provided the last quarter, the net interest margin in the low-to-mid 370’s. And as a reminder the prior quarter benefited from accretion that was above our normal run rate for both loans and securities. Looking forward and inclusive of NorthStar and Palm Beach Community Bank, we expect the net interest margin to be in the mid 370’s in the fourth quarter. An increase to the high 370’s by the second quarter of 2018, assuming no change in short or long term interest rates. This includes the 11 basis points of accretion, which will remain volatile as we move forward. Both NorthStar and Palm Beach Community Bank will be modestly accretive to NIM, primarily the result to higher yielding loan portfolios. And looking forward to changing mix from securities the loan outstandings over the coming quarters should offset modest to increases in deposit rates based on our loan production targets. We remain asset sensitive with a 100 basis points to 200 basis points parallel increase in rates would equate to approximately 4% to 7% improvement net interest income over the next 12 months. And a 7% to 13% improvement net interest income on a 12 month to 24 month period. We’ll continue to manage to an asset sensitive balance sheet should bolstered by very valuable low cost deposit portfolio. A 25 basis point increase in the Fed funds rate was results in approximately $0.02 per share increase and earnings on an annualized basis. We do not expect to two acquisitions to meaningfully impact our asset sensitive interest rate risk position. Moving to Slide 8, adjusted non-interest income increased $1 million over the prior quarter and is up $1.7 million from the prior year’s third quarter. Of the $1 million increased over the prior quarter mortgage banking fees represented $866,000 in large part due to the $57.7 million sale of conforming residential mortgages they were originated in prior periods. The sales transacted to managed on balance sheet liquidity and monetize gains given the fall in long term rates during the quarter. Looking forward we’ll continue to take advantage of these tax opportunities if they arise. The increase in bank owned life insurance was the result of $30 million investment made late in the third quarter with the first year expected return of approximately 6.2% on a tax equivalent basis. Of note, service charges on deposits, interchange income, and wealth management fees were impacted by Hurricane Irma due to the two weeks business disruption I mentioned previously. We continue higher results in other income, as a result to pricing changes we implemented in the second quarter, increased demand for interest rate swaps by our commercial borrowers and more modestly gains on sale from SVA related production. Looking forward, we expect those swap related income and the gain on sale from SVA related productions to continue to improve into 2018. Moving one slide forward to Slide 9, adjusted non-interest expense was down $1 million from the prior quarter and up $2.7 million from the prior year’s third quarter. The quarter-over-quarter decrease was a result of the full impact of consolidation of five branches in 2017 improved expenses discipline and the benefit of the net gain on other real estate owned and REIT to those assets. The adjusted non-interest expense to average tangible asset ratio declined to 2.50% for the quarter from 2.6% in the third quarter of 2016. This quarter highlights the underlying adjusted expense run rate for Seacoast’s exclusive of the two acquisition spending. In aggregate, the two acquisitions will add approximately $1.6 million of non-interest expense to the fourth quarter and approximately $2 million for quarter to 2018. We continue to carefully balance investments with current earnings and anticipate making investments of approximately $4.5 million in 2018 to improve our processes and tools for commercial banking invest in talent tools for enterprise risk management and technology functions and further upgrade our analytics and digital marketing capabilities. These investments will help to scale organization appropriately and set the stage for sustainable high quality earnings growth in 2019 and beyond. These investments are not expected to impact our objective of exiting 2018with a tangible efficiency ratio in the low 50’s. Our continued growth in top line revenue in combination with continued expense discipline throughout the franchise creates opportunities to make investments necessary to achieve our vision 2020 targets. We’re well on our way through our previously announced goal of closing 20% of our locations – retail locations in the next 24 months to 36 months. We have consolidated five branches year-to-date will recurring another two to three branches in 2018 and two to three in 2019. In addition, we’ll consolidate three locations as part of our acquisitions of NorthStar and Palm Beach Community Bank. Branches are still valuable to customers for more complex transactions and keep our brand visible to customers and prospects. But simple task such as depositing funds are rapidly migrating to digital world. We’re clearly building an integrated approach to meeting our customers’ needs. We now provide a full suite a mobile products, online technology, remote ATM locations, call center convenience, and rebranded retail locations for our customers. We believe this integrated approach aligns with today’s customers expectations. As we move forward, we’ll continue to monitor the ever increasing rotation of customer preference to digital and react accordingly. We’ve benefited – we recorded at $7.9 million income tax provision in the third quarter 2017. The quarter tax provision benefited from the adoption of ASU 2016-9, improvements in employee share based payment accounting. As a result, we recorded a benefit of $137,000 for the quarter and looking ahead we expect our effective tax rate to be approximately 35.5% in the fourth quarter and 35% in 2018. Moving the Slide 10, our adjusted efficiency ratio decreased to 57.7%, in line with our internal objective. Our target is to exit 2017 with an adjusted efficiency ratio near the mid 50’s. As we continue to build a streamline organization and generate strong growth and top line revenue. We expect this ratio to continue to improve into 2018 excluding seasonal impacts of the first quarter. Our 2018 target is to exit the year with an efficiency ratio in the low 50’s. Turning to Slide 11, loan outstandings continue to grow during the third quarter increasing $55 million. Excluding the impact of the conforming mortgage sale, loans for organically $112 million or 3.4% sequentially or 14% annualized. Excluding acquisitions organic loans grew 13% over the prior year. Record production from our commercial team in this quarter was offset somewhat by elevated pay downs. Looking forward, we expect loan production to continue to reflect the underpinnings of a strong Florida economy and continue customer receptivity to our relationship based and community based approach to helping meet client needs. Our pipelines remain very strong at quarter end and near record levels despite Hurricane Irma. The commercial pipeline ended the quarter to $155 million, residential at $64 million and consumer small business at aggregate of $47 million. During 2017, we will have additive teams at GulfShore Bank, lending teams at GulfShore Bank, Palm Beach community Bank, Northstar Bank and the commercial equipment team in Tampa. We continue to focus on building a well diversified loan book. Our commercial loan size – our average commercial loan size is $369,000. Our top 10 relationships as a percentage of total capital or 31% at the end of the third quarter, down from 39% at the end of the third quarter of 2016. Those who attended our Investor Day who were remember that our credit underwriting functions are able to process the volumes that small loan granularity requires. The upside of course is a less risky portfolio. Looking forward, we expect organic loan growth to continue in the mid-teens and the loan yield should remain stable. In the high 460’s low 470’s. This includes the impact of the two acquisitions and excludes any outside non-cash accretion effects from loans included in purchased credit impaired or acquired loan pools. Turning to Slide 12, deposit outstandings grew by $138 million quarter-over-quarter were up $603 million from the third quarter in the prior year. Excluding the impact of acquired deposits total deposits increased 1% from one year prior. Deposit growth across all markets was partially offset by outflow associated with public fund money market accounts. Without this outflow organic deposit growth was 3% year-over-year. Rates paid on deposits increased five basis points to 22 basis points quarter-over-quarter reflecting the lag effect in short term rates – increase in short term rates. Looking ahead we expect grow deposit outstandings in the 6% range with modest increase in deposit rates phase the customers is we compete more aggressively for funding. Turning to Slide 13. Credit quality continues to be strong benefiting from rigorous credit selection that emphasizes through the cycle orientation and builds on customer relationships and well understood known markets and sectors as well as maintaining diversity in loan mix and granularity. The allowance for total loans was 77 basis points at quarter end, down one basis point from the prior quarter. In the non-acquired loan portfolio the A000 ended the quarter at 91 basis points of loans outstanding down four basis from the prior quarter. The declining coverage in the non-acquired loan A000 was a result to improved credit quality and loan mix as well the another quarter a nominal losses in the portfolio. Additionally commercial and commercial real estate concentration risk continues to decline as we continue to maintain a well diversified and granular portfolio. Through our loss for loan losses the non-performing, non-acquire loans during the quarter was 237% compared to 245% in the prior quarter and 210% in the same period one year prior. Non-performing loans continue to be nominal, totaling only $14.4 million. Net charge-offs for $279,000 for the quarter compared to net recoveries of $101,000 in the prior quarter, and net recoveries of $1.5 million in the third quarter of the prior year. Looking forward the provision for credit losses will continue to be influenced by loan growth. And lastly, turning to Slide 14, capital position remains strong. Our common equity Tier 1 capital ratio was 12.4%, total risk based capital ratio was $14.8 and our Tier 1 leverage ratio was 10.2% at September 30. The tangible common equity to tangible asset ratio was 9.1% at quarter end. We expect to achieve our adjusted earnings per share guidance for 2017 or $1.28 to a $1.32 per share and our goal to exit the year was an efficiency ratio in the mid 50’s. We continue to expand our analytic and digital capabilities, generate organic and acquisition related loan growth and capitalize – continue to capitalize on the strong position or strong position in the robust Florida economy. We look forward to your questions. I’ll now turn the call back over then Deny.

Thanks, Chuck. And we’d be happy to take a few questions, operator.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And our first question comes from Michael Young from SunTrust. Please go ahead.

Hey, good morning.

Good morning, Michael.

I wanted to started off on the NIM commentary Chuck, to the mid 3.75% I think you said by 2Q next year, correct me I mishear that. Embedded within that you expect some continued positive balance sheet remix towards loans from deposits and the loan deposit ratio moving higher? Or do you expect to get a little more aggressive on deposit pricing to kind of push deposit growth higher? Maybe just help me understand some of the puts and takes there.

Sure. The way I think about it is the guidance really is for fourth quarter is mid 3.70% and then that should climb to the high 3.70% by Q2 of next year. Part of what’s coming on there is the new accretive that’s inclusive of the two acquisitions in Q4. And I think when you look forward there will be a positive mix shift from declining securities portfolio and a growing loan book. And we will compete a little more aggressively for deposits moving forward. We put our guidance – the guidance that we provided as a 6% deposit growth. So assuming we achieve our objective there. Growing deposits we should see NIM remain stable to slightly growing over the next couple of quarters.

Okay, great. And maybe just sticking with the deposits. In terms of maybe where you’re seeing pressure at this point if any other than sort of the public funds piece. Could you maybe characterize it geographically at all that more in kind of the major MSAs, Orlando, Tampa versus the legacy deposit base. Just curious any color there.

Yes. Definitely the more urban market is more competitive. And the pricing pressure is in the public funds arena in the larger commercial client type customers wholesale funding is where the pricing pressure is. If you look at over our last 12 months, our public fund money market balances are down about $102 million – the year. So when you take that out our deposit growth was about 3% and it’s one of our key focuses moving forward. But the competitive pressure is primarily in the urban markets.

Okay. And maybe just last one for Denny. It seems like we’re kind of passed a lot of the restructuring charges related with – just kind of improving the efficiency ratio and expense base going forward so tangible book value growth is increasing. Do you think you need to retain all of that capital to support growth? Or do you think there’s opportunities to maybe be reinstitute dividend or other capital management actions that maybe we’re not thinking off?

And I think we’ll be looking at that. I mean you asked the right question. We still see some opportunities for growth from an M&A perspective. So I think it’s important to maintain a continued strength to those capital ratios. But I would say that is an evolving conversation and something probably have more to talk about next year.

Okay, great. Thanks guys.

Thanks Mike.

[Operator Instructions] Our next question comes from Steve Moss from FBR. Steve, please go ahead.

Good morning.

Good morning, Steve.

On the margin I was wondering does your guidance include Fed hike in those numbers.

Yes. Thanks, Steve. No, rates remain where they are today no change in short-term or long-term rates.

Okay. And in terms of asset sensitivity, it’s fair to think about 3 to 4 basis points in terms of margin expansion for a hike.

Correct. That’s exactly the right number.

Okay. On the deposit side a little bit of increase here in broker deposits wondering if your deposit growth includes some component of that as well.

I think at this point there maybe very minor increases now looking forward but the deposit growth guidance we’re given and what we want to get accomplished would come from our retail small business and commercial teams. And probably much less though on broker deposits, we’ve got about what we want in that bucket.

Okay that’s helpful. Then in terms of – and just one another clarification on the margin, on loan yields the 460 to 470 numbers that was inclusive or exclusive of purchase accounting?

Yes. That includes the accretion.

Okay that’s helpful. And just on the M&A front, Denny you said, you still see opportunities to do deals. Wondering if there’s been any increase in discussions or activity or is that a little further out.

Increase in what activity?

In M&A discussions.

Okay. I really don’t like talking about all of that. I’d suffice it to say that we are continuously alert to opportunities. We continuously talk with folks across the state. And when we see an opportunity that makes sense for us that we think can add real value to what we’ve created here, we engage. So I think those opportunities still exist, they’re still out there. And over the next year you’ll continue to see more of that develop as we go through time. But I don’t have anything specific to talk about in terms – but they continue to be there.

All right. Well thank you very much.

Great. Thanks, Steve.

Thanks, Steve.

And our next question comes from David Feaster from Raymond James. Please go ahead.

Hey, good morning guys.

Hi, David.

Loan growth was a bit lighter than expected as expect as you talk about there is business interruption from the storm. Could you just try and quantify that and maybe what you’re seeing thus far early in the fourth quarter that gives you confidence that you get back to that mid teens run rate?

Yes, I think, when you look at that the storm specifically delayed closings towards the end of the months and our mortgage pipeline as well was certainly impacted by it. Early right out to shoot here coming into Q4 we seen good strong production, teams are back online. Things they got pushed or getting closed. And so we feel confident we’re sort of back on track with our run rate.

And I just to add, we saw record commercial originations this quarter. We hit a record in the residential production this quarter. And a little bit of elevated pay offs in the commercial book, which was a little bit of a surprise. And as we ended the quarter, our pipelines are pretty much very close to a record number. So when we look into Q4, we see continued really solid growth, solid organic growth and loan. So I think the just a reminder, we had a mortgage sale that occurred this quarter that impacted the growth rate. When you take that out, I think our growth rate was closer to maybe expectation. And frankly we see a very, very positive market out there, in terms of continued loan growth. On the deposit side we’ve seen tremendously positive organic growth. Again as we pointed out earlier on the call, we saw a little bit of a cutback in that growth to the loss of some higher yielding asset liabilities, primarily out of the municipal portfolio that we have. But when you axe that out 3% growth which wasn’t bad this is one of our seasonal – this is the seasonally weakest quarter that we typically have. And we’re expecting those rates – growth rates come back as we stated earlier to look forward. So actually we couldn’t be happier with our loan growth this quarter.

Terrific. Could you just talk about your hiring plans going forward, last quarter you’ve hired a team in Tampa. How your conversations going, is it – are you still having good conversations to pick off new teams and maybe what markets you’re most focused on, any detail you have there?

Hey David, this is Chuck Cross. The only comment there is, we continually talk to people around the state, and both individuals and teams. And we’re opportunistic when they’re ready to move or see this is an opportunity.

As Chuck said earlier, we’ve added substantially to the team this quarter with the acquisitions it will close both in Tampa and in Palm Beach County. And the number count there is actually pretty impressive and very impressed with the people that are joining us on that team, in particular it helps us build out our much stronger team, I think are deeper team in the Tampa market, which is just now starting to produce some growth for us. And when you add the impact of that incredible market in Tampa, Tampa, St. Pete, it gives us much greater capacity to continue to grow. David when you look back over the last several years, we have dramatically shifted our loan production into deeper metro areas across the state. And that is what we’ll continue to drive positive results for us both in terms of the loan growth and in terms of in particular commercial deposit growth out of those markets.

Great. On your expense guidance is got you’ve talked about adding $2 million of expenses, I believe in the first quarter, is that off the 3Q run rate would that imply that kind of that $35.5 million to $36 million, I’m assuming is an inclusive of cost savings, it’s kind of a good base for quarterly expenses next year?

Yes.

Got it. Thank you.

Our next question comes from Jeff Cantwell from Guggenheim. Please go ahead.

Hi, good morning.

Morning.

Thanks to taking my question. I just wanted to talk about your improvement in the efficiency ratio, and the extent to which such tied to the increase in mobile penetration. I guess clearly the argument will be some of the improvement in your efficiency ratio, subscribe your digital strategy. So just trying to get a better feel for the extent by which mobile penetration should increase further, as we start to think about 2018 and how much of a driver albeit with respect to the efficiency ratio? Thanks.

Yes, I think the way to think about it is, there’s certainly interlink between the third party providers and the expense associated with digital penetration. That being said, the cost to service a relationship be a mobile or digital is far, far lower than it is on a traditional basis. So it’s up to us to make sure its customers migrate to a more digital platform and as customer preference has changed, that we take action across our network and rotating expenses out of the network, which is what we’ve done over the last two to three years, and as we’ve seen customers migrate to digital. And is that continues, we’ll continue to allow that to happen. So I think net-net it’s actually a positive, the more customers migrate to digital, and it’s something we encourage and are driving towards and it’s up to us to execute against that opportunity.

Really important really little more complicated, of course and in terms of really trying that was well said Chuck, and as we just to want to trying to say, as we begun to make those connections and connect them into actual dollar reductions in overhead the profit as we use to understand, how we – how fast we can move become increasingly critical and that’s been a big part of our success, I think in bringing that ratio down is being able to have that build those connections between the behavioral change and reducing what was our fixed infrastructure cost. And so that’s really the key to the whole thing. And when we rolled out to the 2020 vision in February of this year that was one big piece of it, but there are many other pieces of that 2020 vision that rest on top of those same concepts as we can continue to improve the efficiency of being able to deliver and fulfill, for example, our lending products across the line. So it’s an interesting time, but there’s tremendous opportunity as you point out to bring those expense ratios down in the world which you have.

Great. Appreciate the color. Thanks very much.

Thanks Jeff, thanks.

And we’re showing no further questions. I’ll turn the call back to Dennis Hudson for closing remarks.

Thank you operator and thank you everybody for attending today. We look forward to talking with you again after the first of the year. Thank you.

Thank you ladies and gentlemen. This concludes today’s conference. Thank you for participating. And you may now disconnect.