Good morning and welcome to the Ameris Bancorp Fourth Quarter 2018 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, today's event is being recorded.

I would now like to turn the conference over to Nicole Stokes, Chief Financial Officer. Please go ahead ma'am..

Great. Thank you, Rocco. And thank you to all who have joined our call today. During the call, we will be referencing the press release and the financial highlights that are available on the Investor Relations section of our Web Site at amerisbank.com.

I am joined today by Dennis Zember, President and CEO of Ameris Bancorp and Jon Edwards, our Chief Credit Officer. Dennis will begin with some opening general comments, and I will discuss the details of our financial results before we open up for Q&A. Before we begin, I will remind you that our comments may include forward-looking statements.

These statements are subject to risks and uncertainties. The actual results could vary materially. We list some of these factors that might cause results to differ in our press release and in our SEC filings, which are available on our Web Site.

We do not assume any obligation to update any forward-looking statements as a result of new information, early developments or otherwise, except as required by law. Also during the call, we will discuss certain non-GAAP financial measures in reference to the company's performance.

You can see our reconciliation of these measures and GAAP financial measures in our appendix to our presentation. And with that, I will turn it over to Dennis for opening comments..

Thank you, Nicole and thank you to everyone who's taken the time to join us this morning on our fourth quarter and year-to-date 2018 earnings conference call. Like I said in my press release quote, we are delighted with our results in 2018 and we believe we've got a lot of momentum carrying this into this New Year.

For the current quarter, we're reporting adjusted earnings per share of $0.96 which is an increase of 54% over the same quarter in 2017 when we reported $0.63 per share. Our adjusted earnings excludes mostly merger related costs as well as some cost associated with a couple of executive retirements.

Including these calls our actual earnings came in at $0.91 per share compared to $0.24 in the fourth quarter of 2017. 2017 earnings were affected if you remember by the adjustment in deferred tax assets associated with the Tax Act.

For the year-to-date period, we're reporting adjusted earnings of $3.38 per share compared to $2.48 in the same -- excuse me in 2017. I remember being in investor conferences back a few years ago talking about our pathway to $1 per share for a year -- for a whole year.

And so to see $3.38 for a whole year and honestly quarterly earnings approaching $1 per share, we feel pretty accomplished here in Jacksonville. I'm going to hit just some of the highlights in 2018, but I will focus on the ones that are impactful as we consider our 2019 opportunity.

The first item to highlight is where our operating ratio has finished the year. The fourth quarter of the year is normally one of our slower quarters but during the quarter, we posted an impressive return on assets of over 160 and a return on tangible common equity of almost 21%.

Granted some of this move higher compared to last year was due to the Tax Reform Act, but even when that is normalized and you're looking at comparable tax rates we improved our core profitability by over 15%. We focused on two areas of the business to accomplish this.

Going into the year, we knew there was going to be an industry brawl for deposit and we were prepared with good plans to deal with margin pressures. We redoubled our efforts to reinvest only the incremental revenues from the rate high into our deposit costs and we succeeded.

The result is that we're reporting exactly the same margin in 2018 that we reported in 2017. Notable light depressingly says given a 46% increase in the balance sheet and that today we are very competitive with our deposit rate.

In other words, we didn't get this result by holding our deposit cost to such a low level that both the cost and the balances are unsustainable. Boiling this down to just $0.02 on the call it makes it sound so easy, but it has been such a granular effort at the customer level.

It's not just happenstance that we managed to zero sensitivity in both years and I want to commend our bankers and the leaders in our treasury group for seeing us through this rate cycle. We also made the move in operating efficiency that we've been promising for some time.

The announcement of Hamilton and Atlantic Coast along with the growth we experienced over the past two years gave us the opportunity to finally make this improvement. Jim and Nichol found an aggressive level of cost savings in our due diligence on these banks and then we hit that number.

We looked at what we were doing administratively and we managed to bring these new banks own with little to no incremental staff or overhead. The result is that we moved our efficiency ratio down to 54% in the fourth quarter compared to 60% in the same quarter a year ago.

That alone is impressive enough to be the end of the story, but we kept looking and found some additional savings opportunities that should push us closer to 50% -- to the 50% level very soon.

I mentioned briefly about the deals we announced that closed and integrated all of the deals together amounted to about $3 billion of total assets about 40 offices and about 400 employees. Our staff did a great job not only on the systems and customer conversions but more importantly with the new employees.

They started wearing our jersey very quickly. I don't know how you can have a successful acquisition, if you don't win over the new staff with an inspiring message about the company they've joined. And without systems that let them serve their customer efficiently and quickly.

Our staff has mastered this element of M&A and attribute a lot of our success in this area to their hard work. Credit quality has been a thing for the last half of this year and so we've added some slides to our presentation that looks at the portfolio with various segments.

We don't really intend to go over those today, but are available for questions by phone or in upcoming conferences to discuss. We're looking at several things that give us real confidence about one quality.

First is our diversification across loan type and geography that insulates us to a real degree against a recession or slowdown in one area or in one industry. Secondly are the results.

We have very low charge-offs, non-performers and past dues especially on the legacy side where we originated the loan even on the acquired side, we've performed better than our initial models.

For the year, we're reporting 18 basis points of net charge-offs and 55% of that relates to the insurance agency fraud that we dealt with in the middle of the year.

Just looking at our legacy portfolio to gauge the strength of our credit policies and our credit administration, we experienced only 4 basis points of net charge-offs in 2018 compared to 17 basis points in 2017 and we only have about 20 basis points of legacy NPA. Lastly, our organic growth.

For the year we came in a little slower than we wanted mostly due to maybe being too selective on some lower yielding CRE opportunities. As our commercial construction book aged and moved to permanent. We're also seeing some investors CRE pay offs that surprises that neutralized really impressive production numbers out of the bank.

The fourth quarter is seasonal for us more so than in the past given pay offs in premium finance, some municipal credits and ag production so being flat this quarter doesn't shake my confidence and our growth goals for 2019. On page 11 of the investor presentation and Nicole shows that loan production in the bank was $605 million yielding 574.

That production level was 30% higher than the same quarter last year and the yield pickup reflects almost 85% of the move in rates this year.

I'm looking at our pipelines in Atlanta and Orlando and they're growing the pipelines and the rest of our markets in our existing markets are very strong and I'm confident we'll continue to have a growth story that's as impressive as our operating ratios.

We reported double-digit deposit growth this year, which is outstanding given the kind of competition we've all seen. We have 42% growth in checking accounts and we reduced our dependency on non-deposit borrowings at the bank down to only 1.5% of assets.

Our momentum on the deposit side is an additional strength we have going into 2019 and our loan to deposit ratio below 90% finally at the end of the year takes a little bit of pressure off of moving deposit cost higher. Our fidelity, we are busy with Palmer and with his teams working on integration plans and on the feature.

We're both recruiting bankers in Atlanta that can help us redeploy the cash flows we expect from the indirect portfolio and we're looking forward to a merger date that we hope will be in the second quarter of this year. With that, I will turn it over to Nicole for some more details on the numbers..

Thank you, Dennis. As you mentioned today, we're reporting adjusted earnings of $45.9 million or $0.96 per share for the fourth quarter.

These adjusted results primarily exclude $997,000 of merger charges, $2 million of executive early retirement benefit, $754,000 of expenses related to restructuring the branch consolidation, $882,000 of the financial impact from Hurricane Michael and a $250,000 our loss on the sale of clients building.

In addition, we had a prior year tax benefit of $1.7 million that we excluded that benefit from adjusted earnings. Including all of these items we reporting GAAP earnings of $43.5 million or $0.91 cents per share.

For the full year, we're reporting earnings of $2.80 per share and adjusted earnings of $3.38 per share which excludes those same type items. We're reporting GAAP earnings of $121 million compared to $73.5 million for last year and adjusted net income of $146.2 million compared to $92.3 million for last year.

One of the key metrics we focused on in 2018 is the operating efficiency ratio. Our adjusted efficiency ratio for the fourth quarter of 2013 was 54.1% and the ratio for the full year with 56.19%.

This is a significant improvement and something we're really proud of especially when you compare it to our fourth quarter ratio is 60.88 last year and the full year last year of 60.27. We continue to press for consistent efficiency at below 50% level due to our announced cost savings initiatives which go into effect in the first quarter of 2019.

And the fact, that we have fully integrated Hamilton and realize the cost savings we were expecting. I just can't emphasize enough the gratitude I have to our team, reducing inefficiency ratio down to 54% from over 60% while growing assets over 45% in the same timeframe is quite an accomplishment.

And it takes every single American team member to make something like that happen. It truly speaks volume of our dedication and focus on financial results and strategies.

Our adjusted return on assets in the fourth quarter which is normally a slower quarter for us was 161 and an increase from the 153 reported last quarter and the 120 we reported in the fourth quarter of last year. And again, the Tax Reform Act had an impact from that on that 120.

But even on an apples to apples basis, ROA would have moved higher about 15% percent overall adjusted results in '17. We continue to believe in ROI north of 150 is an impressive representation of our core profitability and our business model. We stay focused on key operating results for those acquisitions and organic growth.

Our return on tangible common equity was 20.95 in the fourth quarter compared to 13.91 for the same quarter last year. Our tangible book value per share was $18.83 at the end of the year an increase of $5 dollar per share during the fourth quarter. Moving on to the net interest margin, the yield curve has certainly not been our friend.

The pressure on our margins and the yield curve has made margin expansion difficult if not impossible.

We were able to maintain a stable margin during 2013 despite aggressive deposit pricing pressure as competitive betas on deposits has significantly risen from the Fed rate actions along with economic factors that have limited upward movement for the long into the, curve that typically affect our long term loan pricing.

Our margin excluding accretion was 379 for both 2017 and 18 year to date on a quarter over quarter basis. Our margin decline 2 basis points during the fourth quarter from 377 last quarter to 375 this quarter.

Our normal influx of municipal liquidity in the last couple months of the year always boost our short-term liquidity and this year it cost us about 3 basis points in the margin in the fourth quarter.

For the fourth quarter, our yield on earning assets increased by 3 basis points while our total funding costs increased 4 basis point exploding accretion or yield on total loans increased five basis points from the third quarter to the fourth quarter. Our core bank production yields were 574 for the quarter against 489 last year and 551 last quarter.

On the deposit side, we were aggressive on the deposit pricing in the fourth quarter to protect our core deposits against competitive pricing pressure. Even with our aggressive deposit strategy, our year-to-date deposit data was 40 basis points because of our ability to maintain and grow deposits.

We were able to reduce our average balance in Home Loan Bank advances by 80%, which carried a much higher cost of funds of over 200 basis points compared to our average cost of deposits of 79 basis points. Non-interest income totaled $35.5million in the fourth quarter compared to $30.2 million last quarter.

Mortgage revenue was just cyclical and tends to slow in the fourth quarter increased 10% compared to the fourth quarter last year. The gain on sale premium continues to improve, but still below the premiums that we saw in the fourth quarter of last year.

Our recruitment of strong producers with steady sources of referrals has helped us to maintain those levels of production. In addition, we continue to see new homebuilding and home sales in our market although we're focused on watching credit and economic metrics for any sign of weakness, which we have not yet seen.

Since I'm discussing mortgage, I thought I'd hit some highlights from our other lines of business. Overall, growth in our lines of business have been strong, I already mentioned the quarter guide production and the retail mortgage group that their year-to-date production increased by over 17%.

Production in the warehouse lending division increased almost $1.1 billion or 31% during the year compared to last year. Loan production in our SBA division remains strong as total production was over 19% higher this year than last year and we believe we can continue to sustain strong growth rates in these divisions for the next few years.

It seems like almost every quarter this year I've had to discuss our corporate tax rate mostly because of clarification from the changes in tax law last year. This quarter when we filed our 2017 income tax returns in the fourth quarter, we had a large provision to return benefit related to our state tax expense.

We excluded that $1.7 million benefit from adjusted earnings. As a result of that same calculation, we also made an adjustment to our 2018 state tax liability in the fourth quarter, which lowered the fourth quarter tax rate that brings our year-to-date tax rate in line at 21.5%.

This is slightly below the expected rate we had of 22.5, but we believe its consistent going forward, so our tax rate to be between 21.5% and 23%. On the balance sheet side. I'll touch on that a little bit. Dennis has already touched on some of that. Our total assets increased over $3.5 billion or 45.7% for the year.

Excluding the acquisitions, total assets grew $522 million or 6.7% organically. Organic loan growth was slower this year coming in at $483 million or 8.5%. And as Dennis stated production was strong, but net growth was negatively impacted by early payoff.

On the deposit side, deposit growth has been a challenge and continues to be a focus as we enter 2019. Exclusive of the effect of the acquisitions year-over-year deposit growth was just over $549 million or 8.6%.

I think that this is a really good time to point out that in this competitive environment, we were able to grow core deposits at a faster pace than loans, while we kept a steady margin. To repeat, exclusive of acquisitions, we grew loans $522 million; we grew core deposits $549 million.

And I think that's really some to be proud of as it not only grows the balance sheet, but it grows the balance sheet in a sustainable way that increases the value of our company for our shareholders.

We believe the Fidelity announcement only strengthens our ability to grow core deposits and funds our future growth as we reposition their balance sheet and their operating modeling. In conclusion, we're proud of our 2018 financial results or we are already moving forward into 2019 to make it more successful.

We're confident in our ability to execute our integration plans, while continuing to deliver top quartile results for our shareholders. And with that, I'll turn the call back over to Dennis for closing comments..

As promised, we'll just go into questions..

Okay, Rocco..

We will now being the question-and-answer session. [Operator Instructions] Today's first question comes from Tyler Stafford of Stephens Inc. Please go ahead..

Hey, good morning everyone..

Good morning..

Hey Nicole.

I just -- missed it in your prepared remarks what was the tax rate guidance for this year?.

21.5 to 23. Probably 21.5 to 22.5..

Okay. Got it. Thanks.

So the press release talked about in the first quarter realizing the -- starting to realize that the branch and the $20 million kind of efficiency initiatives just where are you in that process, have you realized any so far and what's the expectation for realizing those this year, and how much do you think might be reinvest of that?.

Great. Thank you, Tyler. We all of those -- we still expect anticipate all of those. There's nothing that's been derailed from that plan. The branch closings have already occurred. They occurred January the 11th. So those have already occurred and the remaining cost savings are full. We have no plans to change any of those announcements..

Got it. Okay. Just looking at this quarter expenses both the intangible amortization and other expense line items were up.

Do you have -- with Fidelity in the fold, do you have what reasonable intangible expense that would be for this year, and then, was there anything more onetime in the other expense line item this quarter?.

Sure. So I'll touch on the intangible really quick. So the fourth quarter there was a catch-up of intangible amortization that was on our core deposit intangible, we finalized the valuation of that until we had -- it came in a little bit higher than we had originally booked in June.

So we had to catch up six months of amortization in that because that run rate for the fourth quarter has about half $0.5 million of etc cetera that will -- it won't -- [can't] [ph] catch up this quarter. With the Fidelity numbers, I don't think that we've disclosed those quite yet..

Okay.

And then, the other expense line item was there anything unusual there other than what you called out in the -- as one time in the press release?.

No. That's really not, I mean everything with kind of one-time item, which includes the executive retirement, the hurricane -- hurricane expenses came in a little bit lighter than we had originally thought which is good. We are thankful that was less than what we had originally anticipated..

Okay. Got it. Switching over to the margin and the deposit growth you saw this quarter obviously very strong and that be growth.

And you touched on a little bit in the commentary, but can you just give us a little bit more sense of your expectation for continued non-interest bearing growth this year just given the strength you saw in the fourth quarter?.

I would tell the -- going into this year, we have much more momentum sales efforts or successful sales efforts and strategy on the deposit side. I think this year; it doesn't feel like there's as much right pressure on the deposit side.

Our name recognition in Atlanta even though we've not closed the Fidelity deal or name recognition in Atlanta has already spurned some deposit opportunities that we probably wouldn't have expected to have had this time last year. So outside of the Fidelity transaction just what we would do organically.

I feel good that we would do better this year than last. And I'm not saying that we probably did 10% or 11% on deposit growth this year. I'm not thinking it's going to go to 13% or 14% or 15%, but holding the line right there at double digit on a larger balance sheet. I feel pretty confident..

Okay. Got it. And then, just last one for me on USPF maybe a little bit more nuanced.

But did those loans reprice each year at renewal; are you able to pick up any higher spreads on those just given the velocity with those loans?.

Yes. Those loans, we have an average maturity of about 10 months and so they reprice every 10 months..

Oh, sorry. I thought you were looking at something.

Do you have anything just what the typically pick-up and spreads are on that?.

I think about 60 basis point..

[$1.63 early] [ph] this year..

Okay, got it. That's it for me nice quarter. Thanks guys..

Thank you, Tyler..

And our next question today comes from Brady Gailey, KBW. Please go ahead..

Hey. Good morning guys..

Good morning, Brady..

Just to start on the net interest margin, when you talked about the pressure that the curves has put out there you've done a decent job holding that flat and do you think that you can continue to hold the core margin flat from here or do you think there's some downside in '19?.

It's interesting because when I said last year internally, you talked about our growth our growth goals and leaving our margins stable. And really you had some shock faces from my team and some pushback inside the fact that we've been able to do that is remarkable.

So I think it would be hard for me to say that that we -- I mean that we would expect any decline.

And I really don't see any expansion knowing that our efforts kind of going back to Tyler's question knowing that our efforts, this past year we really focused on deposit growth and looking into '19, we're already tweaking some of those initiatives that we had for deposit growth and focusing more on the non-interest bearing that we all recognize that that's where we really are going to be able to sustain the margin is by growing those non-interest bearing deposits.

So that's our focus. So I'd like to say that a stable margin is absolutely our expectation..

Brady, I would add that even if you look at loan production in the quarter going back to my comment that loan productions dollars are up, but the yield is well to 574. If we're coming in at 574 we got the loan to deposit ratio below 90%.

So we've probably got a little a couple of basis points to pick up, when the loan to deposit ratio moves a little higher. But if loan yields are coming in at 574, I just -- I see plenty of opportunity to maintain the margin where we were this quarter..

All right. And then, in the back half of the year with LION in the mix and their margin is a little lower than yours.

What's the impact to the core NIM of having LION and is around what 5 or 10 basis points of a negative impact?.

I don't. You may have in front of you. I don't have that in front of me. When we model out Fidelity say sort of 12 to 18 months out after we've reinvested order book sort of a more traditional commercial credit. We're not seeing -- their deposit costs are lower than ours their deposit mix is about is as good as ours maybe better.

So really it's just hinges on how fast we can reinvest the order book and it kind of goes back to our desire to recruit as heavy and as hard as we can in Atlanta..

That's right. What we've modeled and to add to that Brady, what we modeled was about a 5% growth in Fidelity's earning assets at a 350 margin.

And then, if you take $400 million of reinvestment with a 250 basis point pickup on that indirect auto gives us back and so will we feel like we can get their margin back in line with ours as well as with because of the non-interest bearing deposit on the funding side..

Okay. All right. And then, I understand the dynamics of the seasonality at 4Q you mentioned all the loan categories that go down in the fourth quarter. I think in the past we've talked about that 12% to 14% loan growth -- organic loan growth pace.

Is that is that still appropriate for '19 or do you think that that growth will come a little -- at a slightly lower pace?.

I would say I really I won't step out on that. I know if I were to break it down into segments kind of how we look at it over here is what the core bank would do, what mortgage would do, what premium finance municipal equipment. We see an easy pathway or a pathway to $1 billion for maybe a little more and in loan growth. So we're done.

We are for sure in double digits. I think it's the third and fourth quarter were softer really across the industry on loan growth.

And there's been so many questions about credit quality and when you're going to pull back or if you're going to pull back the stuff coming through the pipeline is as quality as what we've seen we're not having to move around in the policy -- credit policy to get things on the balance sheet. So we still feel pretty good about what we're looking at.

It's just been a little softer. It's been a little softer. So I would add I think we're good on $1 billion, I think is what we're saying, $1 billion of growth probably 50% to 60% of that coming out of the core bank right..

All right. And then, last for me is just on the buyback. I know with LION pending that may disallow you from doing it and I know your stock still trades at a higher price to tangible so I know Dennis you're sensitive to any sort of dilution there. But at the same time stock stream like eight times earnings.

So how do you think about, I know you'll have $100 million buyback out there? How do you think about actually by macro stock here..

I mean I'm having a little bit of a back and forth with our corporate attorney about whether or not we can buy back in with Safe Harbor rules and all that. And so we've not been as we've not got a kind of a final statement. When we came out with that we said look we would like anything below 2 times tangible book.

And really what we are trading really cheap on next year's earnings we saw -- we were really always traded at a discount to earnings. We've tried it pretty well to tangible book, but even now we're trading right at -- right at or right below two times book where we finished the quarter the year.

So we would definitely be inclined to buy the stock back if we could get around Safe Harbor rules. And I'd love to do that just to illustrate the company's confidence in 2019. So if we can -- if we can get around that in and get some attorney buying and we would we would probably start participating Brady..

Great. Thanks for the color guys..

Thanks Brady..

And our next question today comes from Jennifer Demba of SunTrust. Please go ahead..

Thanks a lot. Appreciate it. I just wanted to ask a question on credit quality Dennis. We've seen some issues with leverage loans with another bank this quarter. Curious if you guys have any leverage loans in your loan portfolio.

And if so what those outstandings are?.

Yes. You like Shared National Credit..

Or just C&I leverage loans not necessarily shared national credits that could be better..

Yes, I wish. Well, one we don't have any Shared National Credit.

Jon, you?.

No. Jennifer we haven't really participated in C&I to the extent that we've been looking at any kind of leveraged deals..

Okay, all right.

So as you look at your expectations fundamentally in 19, what do you think is the biggest risk right now in your budget?.

The biggest risk in the budget as probably not probably growth and I say the biggest risk isn't anybody on the call to think that it's a mammoth risk again. When I look at the pipelines and the production levels and the referral sources and the wayward source in business all across on the one side I give up.

I have confidence, but I think that is probably the industry is experiencing softer growth than kind of where we were a year ago. That's probably -- that's probably the key place. I think on the margin, I'm not worried about the margin given where low production yields are.

And given that we have a lower loan to deposit ratio really than we've had in two year, so we could squeeze out more margin and profitability by just moving higher on that deposits. We are competitive on deposit rates.

I've looked at what our peers -- where our peers are and all the way up to the super regionals and where we're not sitting here with 25 basis points behind that we've got to make that, I don't see deposit costs or deposit flows being an issue credit quality.

I mean we have 4 basis points of charge offs on the legacy portfolio non-performers keep going down. I don't really see a lot of risks. I probably should've started off like that if there was a risk it would probably be on the growth side..

I think I would add to that one comment that on the growth side, the one thing that we're not going to do is give up quality for quantity and that's been a question that we've had in several of our investor meetings.

When do you know that it's the right time to kind of take your -- take your foot off the accelerator on growth and when do you know and we would answer that that when we're not loans that come through committee no longer fit into our policy or the structure.

And so far we have not seen that and that's not I mean our production is still high, but I think that that's one thing that's in all of our minds is that that going back to your question is the biggest risk and Dennis's answer about the one growth is that we're not willing to jeopardize quality..

Surprised the quality has been so good it allows you to grow with that pace..

I'm not surprised with that given how strong the economy is given. I mean the tax rate. Change definitely made commercial customer stronger. There's no question about it. No, I'm not surprised..

It's just a diverse portfolio in our lines of business. And the market the expansion of our markets through some of these acquisitions, it helped our growth rate..

And I'd like to say and I'm not trying to be too visionary here, but I mean in the third and fourth quarter when growth was slowing down we didn't just sit on our hands. I mean it's important to us to hit some numbers in 2019. So we came up with some other strategies. And even if rate -- even if growth does slow between the things we're working on.

On the expense side, on the non-interest income side, the margin things we can do here or there. Even if rate, even if growth slows, we're going to be able to post a pretty impressive growth in earnings per share that and so I don't have to chase commercial real estate loan LIBOR 200 win, if we don't want to.

We can still hit the numbers without having to do that..

Okay. Last question is on, you said you wanted to hire some people in Atlanta.

Do you have a specific goal in mind there?.

Well, we've got, I mean we want to have $1 billion of growth. We've along with Fidelity we'll have a billion five or billion six of indirect auto that's going to cash flow probably in 24 to 36 months. So number wise I don't have -- I don't have a number. I have a number in my mind.

I don't want to say right now because it seems too big, but we are going to capitalize on the opportunity to be the number one alternative to super regionals in Atlanta. And that means we've got a good bit of recruiting to do..

Okay. Thank you..

Thanks Jennifer..

And our next question today comes from Casey Whitman of Sandler O'Neill. Please go ahead. Casey your line is open please..

Good morning..

Good morning, Casey..

Just circling back to Tyler's questions on expenses. Congrats on getting that efficiency ratio down to 54%. So you referenced 50% efficiency ratio in your prepared remarks.

And just wondering to get there can we assume it takes the full cost saves from LION, so maybe you get there in 2020, or do you think it's possible we can get there even sooner with the efficiency initiative you guys already announced?.

Casey, I'm going to answer before Nicole can say anything. The 50% is, I mean just the $20 million cost saving initiative alone will put us maybe 50.3 or 50.4. And I think Tyler did ask if there's going to be some reinvestment. I mean we are again, we're looking to hire people, we're looking in there -- especially on the production side.

So net-net, we don't expect that to be an impact to the bottom-line. But the growth that we expect this year and the way we expect to grow kind of flat on the administrative side and really with we can grow really with just the existing production resources that in the $20 million cost saving initiative is what should carry us to 50%.

Long-term we're not looking to be a bank with a 40% efficiency ratio. I don't think we have to be there. I don't think we can deliver the kind of customer service. We need to be around 50% to deliver the kind of customer service that we want to have the kind of staffing and systems.

So I'm not thinking that we're a bank that's going to cruise into the mid 40s, but we see a pathway with growth and this initiative to get to 50..

Okay, great.

And then, maybe just thinking about expenses in the very near term with the efficiency program in place and as you make the hires, I'm guessing you go throughout the year, should we at least -- can we at least assume some expense reduction in the first quarter would you think sort of hold flat?.

No. I think from an adjusted core operating expense run rate, we will have some of those costs fixed in the first quarter. And so it will be flat to diminishing in the first quarter..

Okay. And then, last question just the provision this quarter.

Can you walk us through some of the dynamics just how much was related to the hurricane, how much relate to premium finance, and then, maybe give us a sense for what your outlook is for provisioning levels in 2019 pre-LION?.

Okay. Sure. For the provision on the hurricane, we really have talked about it for 90 days, how much of an impact that is and ended up with an additional factor key factor that we put in there that added a couple of hundred thousand dollars to the reserve.

The impact of the changes that were in the earnings release on the lost factors for service finance and USPF the consumer portfolio and USPF amounted to collectively about $1.1 million, $1.2 million.

So of the increase that we had for the fourth quarter $1.2 million of it was related to the changes in the lost factors and the additional for agriculture on the hurricane..

Okay. So how are you thinking about I guess provisioning levels in the first two quarters of the year before LION comes on board..

Well, from a budget perspective, I think we're budgeting a provision expense that will accommodate the growth at the current provision that we have plus 12 to 15 basis points of loss. So it's certainly down from the balance. So it's about what the run rate is..

All right. Thank you..

Thanks..

Thank you, Casey..

And ladies and gentlemen, this concludes the question-and-answer session. I would like to turn the conference back over to the management team for any final remarks..

All right. Thank you again for your time this morning. If you have any questions or comments feel free to call me or Nicole and we'll get back to you as fast as we can. Thanks and have a great weekend..

And thank you, sir. Today's conference has now concluded and we thank you all for attending today's presentation. You may now disconnect your lines. Have a wonderful day..