Phil Wenger - CEO Phil Rohrbaugh - SVP, COO & Interim CFO Jason Weber - SVP.

Bob Ramsey - FBR Casey Haire - Jefferies Frank Schiraldi - Sandler O’Neill & Partners Joe Gladue - Merion Capital Group Chris McGratty - Keefe, Bruyette & Woods Matt Schultheis - Boenning & Scattergood Matthew Breese - Piper Jaffray Matthew Keating - Barclays Capital.

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

Thanks, Tracy. Good morning. Thanks for joining us for Fulton Financial’s conference call and webcast to discuss our earnings for 2016. Your host for today’s conference call is Phil Wenger, Chairman, President, and Chief Executive Officer of Fulton Financial Corporation.

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

These documents can be found on our website at fult.com by clicking on investor relations and then on news. The slides can also be found on the presentations page under investor relations on our website.

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

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

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

Please refer to the supplemental financial information included with Fulton’s earnings announcement released yesterday on slides 13 and 14 in today’s presentation for a reconciliation of those non-GAAP financial measures to the most comparable GAAP measures. Now I would like to turn the call over to your host, Phil Wenger..

Well thanks, Jason, good morning, everyone. Thank you for joining us. I have a few prepared remarks before our Interim CFO, Phil Rohrbaugh, shares the details of our 2016 and fourth quarter performance. When he concludes, I will review our 2017 outlook and then we will open up the phone line for questions.

We reported diluted per share earnings of $0.93 for 2016, an increase of 9.4% year-over-year. Pre-provision net revenue increased approximately $20.7 million or 10.4% year-over-year, and our return on assets was 0.88% and our return on tangible equity was 10.3% for the year.

Our financial results in 2016 reflected the continued progress in executing our growth strategies. And despite a challenging interest rate and operating environment, we were able to grow revenues at greater pace than our expenses. As a result, we generated meaningful positive operating leverage, a goal that we set out at the beginning of 2016.

Our average loan portfolio increased 6% year-over-year which was in line with our 2016 outlook and was driven by growth in most of our loan portfolios. Our average residential mortgage portfolio increased 6.8% year-over-year. In 2016, we made a strategic decision to originate and retain certain purchase-only jumbo and CRA mortgages.

Going forward, growth in the mortgage loan portfolio will be a function of our strategic priorities and market pricing in the secondary market. Our average commercial mortgage portfolio increased 7.4% year-over-year. That growth was spread throughout our footprint, but primarily in our Pennsylvania market.

We were able to take advantage of the market opportunity to grow our commercial mortgage portfolio while maintaining Fulton’s consistent underwriting standards. Our average C&I loan portfolio increased 5.1% year-over-year, even though our line borrowings at December 31, 2016, were $56 million or 4% less than the same time last year.

Our commercial leasing portfolio continues to be a nice growth story. Our average commercial leasing portfolio increased 42.7% year-over-year to $191 million.

While our markets remain highly competitive, our commercial pipeline at December 31, 2016, increased 26.1% year-over-year, reflecting our focused calling and sales efforts, improved business activity, improved customer sentiment, and market disruption.

Over the past year, we have added commercial relationship managers throughout our footprint and recently we hired a regional president and a few commercial relationship managers for our Philadelphia market.

Also, we have made several key additions in our SBA commercial leasing and agricultural specialty lending areas, as well as in our mortgage banking company. We believe these additions, along with the improved business activity, improved customer sentiment, and more favorable economic outlook will drive growth in 2017 and beyond.

Deposit growth continues to be a bright spot. Average deposits increased 6.1% year-over-year, which was in line with our 2016 outlook. And more importantly, average core deposits increased approximately 9.3%, while average time deposits decreased 5.5% year-over-year. The growth in core deposits was split equally between consumer and commercial.

Our loan to deposit ratio ended the year at approximately 98%, comfortably within our historical operating range. And turning to credit, overall asset quality continued to improve. Year-over-year delinquencies and net charge-offs were down by approximately $10 million and $3.5 million, respectively.

Our delinquencies ended the year at approximately $187 million while net charge-offs ended the year at approximately $13 million, both the lowest level since 2007. Our allowance for credit losses to loans did see a slight uptick linked quarter. The increase was due to an isolated credit and not indicative of broader portfolio or macro trends.

We saw broad-based increases in most of our noninterest income business income products. Excluding security gains, noninterest income increased approximately 8.6% year-over-year, which was towards the higher end of our 2016 outlook. Despite retaining more of our production over the year, mortgage banking continued to drive meaningful revenue growth.

Our mortgage banking income increased 6.6% year-over-year as spreads improved. Excluding the impact of the net mortgage servicing rate impairment charges in 2016, mortgage banking income increased 13.8%. We added loan originators across the footprint in 2016 and will continue to actively hire loan originators in 2017.

So despite a projected rising rate environment and a projected decline in industry originations, we believe that we are positioned to grow mortgage banking income in 2017. Also, we saw notable increases in other consumer product categories such as debit and credit card income and a slight increase from service charges on deposits.

In the commercial area, our commercial loan interest rate swap, Treasury Services, and SBA businesses all had strong years.

Our commercial loan interest rate swap business continued to benefit from growth in commercial loans and in more favorable rate environment, our treasury services which include merchant services and cash management benefited from the improved business activity and solid sales production.

In the early part of 2016 we made a substantial investment into our SBA business. As a result, we are able to meaningfully grow our SBA gain on sale income, which totaled $2.3 million for the year.

Excluding the $5.6 million loss related to the trust preferred redemption in 2015, noninterest expenses increased 3.2% year-over-year and were in line with our 2016 outlook. There were a few notable expense items in the fourth quarter that Phil Rohrbaugh will cover in his prepared remarks.

We did make a slight improvement in the efficiency ratio year-over-year. We continually look for ways to make our organization more efficient to drive our efficiency ratio towards our goal of 60% to 65%. Strategically, the deployment of capital for the enhancement of long-term shareholder value remains one of our highest priorities.

In 2016, we increased our quarterly common dividend by $0.01 to $0.10, paid a $0.02 special dividend in the fourth quarter, and repurchased $19 million of common stock. We have approximately $31 million left in our current share repurchase plan authorization that was recently extended through December 31, 2017.

And finally, I wanted to comment on the BSA/AML consent orders. In the third quarter 2016 earnings call, I reported that it was becoming increasingly likely that the orders will remain in place as we move into 2017. While it is difficult to predict the timing, and emerging from the orders this year is a top priority for us.

We continue to believe that meaningful progress towards that goal has been made but the ultimate decision remains with our various regulators.

In the third quarter of 2016 Form 10-Q, we also reported that the Department of Justice was expanding its investigation of potential lending discrimination and that the investigation now included additional geographies in four of our subsidiary banks.

We are continuing to cooperate with the department in all aspects of this investigation and have no additional information to report at this time. At this point, I would like to turn the call over to Phil Rohrbaugh to discuss our financial performance in more detail..

Thank you, Phil, and good morning to everyone on the call. Unless I note otherwise, quarterly comparisons are with the third quarter of 2016 and annual comparisons are with 2015. Turning to fourth quarter results on slide 5, earnings per diluted share this quarter were $0.24 on net income of $42 million.

While net income increased 2% from the third quarter, earnings per diluted share were unchanged linked quarter and were $0.02 higher than the fourth quarter of 2015.

Fourth quarter earnings reflected an increase in net interest income, an increase in the provisions for credit losses, an increase in noninterest income, and an increase in noninterest expenses. Pre-provision net revenue decreased 5.1% in the fourth quarter, largely due to certain expenses that I will highlight later.

For the fourth quarter, returns on average assets and tangible equity were 89 basis points and 10.47%, respectively. Moving to slide 6, our net interest income for the fourth quarter increased $1.7 million or 1.3% driven by growth in earning assets and a one basis point increase in the net interest margin.

Average earning assets were up 1.2% due mainly to a $260 million increase in average loans. Average interest bearing liabilities were up only 6% as a $220 million increase in interest bearing deposits was partially offset by a decrease in short and long term borrowing levels.

Both the yield on average earning assets and the cost of average earning interest bearing liabilities declined by one basis point, but the net interest margin improved due to the growth in average balances of our non-interest bearing deposits funding linked quarter.

The one basis point [decrease] in earning assets yields resulted from a three basis point decrease in loan yields partially offset by the impact of a decrease in the average balance of lower yielding other interest earning assets.

The decline in the cost of interest bearing liabilities reflected stable deposit costs combined with lower short and long term borrowing costs. As a remainder, we entered into forward agreements to refinance $200 million of FHLB advances upon their maturity in December 2016. This refinancing lowered the current average rate of 4.02% to 2.4%.

We have realized a $280,000 benefit from this transaction in the fourth quarter and an additional $520,000 reduction in interest expense will occur in the first quarter of 2017. The annual decrease in interest expense resulting from this transaction is approximately $3.2 million.

Turning to credit on slide 7, in 2016 our provision for credit losses for the year increased $10.9 million from 2015, driven largely by incremental loan growth in consideration of our credit metrics. Also contributing to this increase was the $3.7 million negative provision recorded in the first quarter of 2015.

Net charge-offs for the 2016 full year dropped by 21% to an annualized net charge-off rate of nine basis points compared to 13 basis points in 2015.

Nonperforming loans at December 31, 2016, declined $13.2 million or 9% in comparison to 2015, and nonperforming loans as a percentage of total loans improved to 0.9% as compared to 1.05% at the end of last year. Delinquencies also improved to 1.27% as compared to 1.41% in 2015.

The allowance for credit losses to loans at December 31, 2016, decreased to 1.17% from 1.24% at the end of 2015. For the same period, the allowance for credit losses to nonperforming loans increased to 130% from 118%.

On a linked quarter basis, the allowance ratio increased to 1.17% from 1.15%, with this slight increase reflecting additional allocations for specific commercial credit. Turning to the fourth quarter noninterest income on slide 8, we saw a $3.1 million or 6.4% increase excluding securities gains.

Mortgage banking income increased $2.4 million or 53.7% in the fourth quarter with gains on sales decreasing $1.1 million and net servicing income increasing $3.6 million. The increase in servicing income resulted primarily from net changes in the mortgage servicing rights valuation allowance which are recorded in mortgage banking income.

Other increases linked quarter in noninterest income were realized in SBA loans, sale gains, and debit card income, commercial loan interest rate swap fees and merchant fee income both declined modestly.

Moving to slide 9, total non-interest expenses decreased $7.8 million or 6.5%, driven largely by certain discrete expense items, including $2 million of additional discretionary compensation awarded to our employees who do not participate in an incentive compensation plan, $700,000 of software costs, and $1.8 million of property write-offs primarily related to a branch closure and the reconfiguration of a building as part of our long-term facilities plan.

Turning to slide 10, overall BSA/AML costs have improved modestly from last year. We continue to expect that outside services costs will shrink meaningfully over time, but likely remain at these levels in the near term.

For the quarter, income tax expense decreased $3 million or 23% for an effective tax rate of 19.5%, which was lower than the 24.2% rate realized in the third quarter. The lower rate was largely attributable to tax credits earned on community development investments. These credits can contribute to volatility in the effective tax rate.

For the year our effective tax rate was 22.4% as compared to 25% in 2015. Again, this improvement was largely driven by tax credit. Slide 11 presents our profitability and capital levels over the past four years.

The increases in both return on assets and tangible return on equity in 2016 reflect the percentage growth in net income outpacing the percentage growth in average assets and average tangible equity, respectively. Capital levels remain strong, with tangible common equity ratio down slightly to 8.6%.

At this point I would like to turn the call back to Phil Wenger, who will review our 2017 outlook shown on slide 12..

Thank you, Phil. We expect the annual average growth rate for loans and deposits to be in the mid to high single digits. We expect modest improvement in the net interest margin. We expect the net interest margin to be flat to up five basis points in the first and second quarters.

The margin trends in the third and fourth quarters will be largely dependent upon changes in the Fed funds rate and competitor actions. With respect to asset quality, we expect the provision to increase, driven primarily by loan growth. We expect the growth rate for noninterest income excluding security gains to be in the mid to high single digits.

We expect the growth rate for noninterest expenses to be in the low to mid single digits. And finally, we will manage our capital to support growth and provide appropriate returns to our shareholders. Thank you for your attention, for your continued interest in Fulton Financial Corporation, and now we will be glad to answer your questions..

[Operator Instructions] We will go first to Bob Ramsey with FBR..

Good morning guys.

How are you?.

Hey Bob, morning..

So, quick question for clarification on the guidance.

Is it flat to 5 bps in each of the first and second quarters or cumulatively over the two?.

That is a quarterly number. And we got the increase in December so you can probably, in the first quarter, go more to the higher end of that range. And then maybe in the second quarter more to the lower end of the range without any additional rate increases..

Okay, perfect.

And is that a fair way to think about if we already get another rate increase sometime later this year, that you would get another maybe 5 to 10 or something benefit that would follow from that?.

Yes, the only difference is we will have -- we still have in the first quarter -- actually there’s a couple things I would note. In the first quarter we get the additional benefit of the FHLB refinancing that happened in December, so that’s a little additional benefit. Now, there is also we have $100 million of senior debt that matures in May.

A $100 million. Actually, it’s subordinated debt. It matures in May. I paid a coupon of 5.9..

6..

Or 6..

5.96%..

5.96%. So, we are still analyzing the best route to take there, but there is a possibility we could pick up some margin from that as we move forward or so..

Got it, great.

And if you sort of put the sub-debt on the side and if there are no more increases then in the back half of this year, are we flat? Are we back to modest compression? Just how should we think about no change from where we sit today kind of outlook?.

No. I think flat it is a way to look at it right now. Given where rates are right now, we believe that towards the end of the sometime late third quarter, early fourth quarter, our new loan production will be at a higher yield than the loans that are running off.

And it’s going to be very close, but -- so that should lead more to, without rate increases, flat margins going forward without any additional rate increases and then the other factor is we’re still not seeing pressure on the deposit side, so that kind of will play into margin with or without rate increases in the second half.

We’ll have to wait and see how that plays out..

Okay.

And then what deposit beta are you guys using in terms of how you’re thinking about the December increase that just happened?.

We have at this point not changed any deposit rates. We have some public funds that are on index rates, but it’s not a big, a large amount doesn’t have a big impact. So we expect, or right now we see deposit rates from this increase functioning similarly to the last increase..

Got it. And then shifting gears, I know you highlighted why the tax rate was favorable this quarter.

Just curious -- and it will be volatile, but is 25 still a good rate to use on full-year 2017 expectation outlook? Or is there anything that has maybe shifted that?.

This is Phil Rohrbaugh. I think the best way to think about the effective tax rate is somewhere between 22% and 25%. Because the pacing of that is impacted by the investments we make in low income housing and when that tax credit may be attributed to us.

And when we try to time that there can be some fluctuations in that in terms of the credit that arises, but it should fall somewhere in that range next year..

Okay. Great. Thank you for taking my questions..

Thank you..

We will go next to Casey Haire with Jefferies..

Thanks, good morning guys. Wanted to dig in a little deeper on the outlook for ‘17. Specifically loans and deposits as well as fees. If I’m understanding you correctly, in the mid to high single digit growth on fees, I think you guys are indicating that mortgage banking can drive that.

Is that true? And what is the main driver of the fee growth, which seems a little aggressive versus my model and consensus? And then on the loans and deposits, Phil, I see your point that you guys can sell more of your mortgage production, but that was also a decent driver of the loan growth this quarter -- sorry, the loan growth in 2016.

And if you do decide to sell that, that will hurt your loan growth and yet you have a loan growth steady state at a mid single digit pace. So I’m just wondering what category, other than mortgage would pick up the slack if you decide to sell more mortgage..

So, just let me talk briefly about mortgage. So we have been hiring additional mortgage originators, and we have been successful I think in picking up market share. In fact, our percentage of production, purchase versus refinance, was higher than I think the industry average.

So we don’t see if the refinance goes away, I don’t think it will hurt us as much as it is to some of the other folks. We think we can continue to pick up market share and grow that revenue. We believe investment management and trust will have a better growth year for us. It was pretty flat this past year, so we see some there.

Our treasury services on the corporate side, we continue to pick up market share there. We believe that we will continue. SBA fees, we expect most of that growth really came in the late third and fourth quarters, so we see additional growth on the SBA side..

Okay.

So you are expecting a similar mix of loan growth in ‘17 and then mortgage banking will benefit from increased hires and then the fee growth will benefit from strength across other line items as well?.

Yes..

Okay, understood.

And then the expense guide, low to mid single digits, what is the base in 2016 on which that grows?.

Well, we tried to highlight for you the fact that there were a number of discrete items in the fourth quarter. But if you adjust and we only highlighted the most significant, but if you adjust for those you end up with more a core run rate somewhere in the $121 million to $123 million range coming into the first quarter.

You have to remember in the first quarter you have slightly lower day count, you have some seasonality in payroll taxes, but that is a way to think about it. With then components of noninterest expense increasing at different rates, but in the aggregate, certainly low to mid single digit growth rate..

Okay.

So $121 million, $123 million is the expectation on a quarterly basis for ‘17?.

Starting out there and then increasing throughout the year in terms of various components increasing at higher rates than others..

Okay, understood.

And just lastly, so I understand the enforcement orders are out of your hands, but is there any -- is there another -- when is the next key date in terms of we get -- and when you hear more from the regulators in terms of making progress in getting these lifted?.

So, there are five different regulators involved in this. We have a number of dates really that span across right now the first six months of the year. And they are staged throughout the first six months..

Okay, thank you..

And we will go next to Frank Schiraldi with Sandler O’Neil..

Good morning..

Frank..

Good morning Frank..

Just a couple of follow-ups, I guess. On the mortgage banking front, Phil, I think you mentioned the better mix between purchase and [indiscernible].

What is the breakout there in terms of the business?.

So, overall, 63% purchase in 2016. In 2015 we were 52% purchase. And I think the refinance market was probably better in ‘16. So, we were able to bring on originators that picked up market share specifically on the purchase side..

Okay. And is it fair to say given I mean you highlighted some other drivers of fee income growth in 2017.

Is it fair to say mortgage banking business you expect to grow, but maybe could grow somewhere below that mid to high single digit rate that you expect fee income to grow in total, given some of the other drivers?.

I do think that would be a fair statement, yes..

Okay. And just on the expense front, just want to make sure in terms of guidance I’m thinking about it correctly. So your guidance, what is it? Low to mid-single-digit growth year-over-year.

That is off of a reported 2016, including some of the discrete items you talked about in this quarter and maybe past quarters?.

Yes, we’re talking off a base, as I indicated, coming into the first quarter of 121 to 123. And various components of noninterest expense increasing at various rates from certainly low to mid single digits over the course of the year. So that will run up over the course of the year from that starting point, Frank.

And hopefully I answer your question here..

Sure, yes.

So Phil, so then low to mid, you start at that 121 to 123, and then you will see low to mid single digit growth from there through the year?.

Right, that’s correct..

Okay. And then just finally a follow-up on the tax rate.

As we think about the lower tax rate in the quarter, is there an offsetting higher expense in the quarter? Because you had higher benefit from these tax credits in the quarter? Or is that not the case?.

I think all the expenses are reflected within that line item, so you have no geography here relative to understanding the impact. So it is in your effective tax rate..

Okay. It’s all in the effective tax rate.

And if the tax rate goes from 19.5 to 22 to 25, that there is no offset anywhere else?.

That’s correct. That’s correct..

All right, thank you..

We will go next to Joe Gladue with Merion Capital Group..

Morning..

Good morning Joe..

I guess most of my questions have been asked, but was wondering if you could give us a little more I guess color on the Philadelphia area.

You’ve said you have hired some more lenders there, just how quickly do you expect those -- that area to ramp up?.

Well, we continue to look for a couple of additional lenders and I think by late second quarter we should be full steam ahead..

All right. I guess that’s it from me..

And we will take next question from Chris McGratty with KBW..

Good morning. Thanks for taking the question.

Phil, the premium amortization, I was wondering if you could disclose what it was not only this quarter but maybe last quarter in the bond portfolio?.

Sure. Just give me a minute here to grab some information on that question. The premium amortization was about $2.7 million in the quarter, and that compares to $2.7 million..

Last quarter, okay. Now, everyone recognizes that a little bit different based on their assumptions.

Is the expectation given what has happened to rates since the election, could that number is -- I guess is there any reduction of that number factored into the guide for the first quarter margin support?.

Yes, slightly, but obviously with the rising rates you would expect that to be reduced and actually you’ll see improve slightly. So that is being considered in the guidance we’re providing..

Okay, great. And on the investment portfolio, you guys have kept it relatively flat over the past couple quarters.

Is that the expectation for the next few quarters that the 2.5 or so bond size is about, right? Or is -- do you have expectations to either reduce it or grow it?.

Well, I think that is a good number assuming our loans continue to grow at the rate that they’ve been growing. So if loan growth would slow down, that would probably pick up a little..

Okay, that’s great. Maybe the last one and if I may have missed it so I apologize. Given the disruption that you have seen in your market from BB&T, I’m a little bit surprised to see the flat year-over-year C&I balances. And again, you may have explain this, so maybe you can just repeat it.

But were there any losses of lenders or key teams during the year that may have explained the kind of stagnation in the C&I book?.

I think ending year number was driven mostly by line of credit borrowings, which were down year-over-year close to $50 million..

Okay.

And the expectation for this year is that, to get to the loan growth guidance, that this would have to be a positive contributor? Is that a fair assessment?.

I think it is. Yes, Chris..

Okay, all right, great. Thanks for taking my questions..

And we will go next to Matt Schultheis with Boenning..

Good morning..

Hi Matt..

A quick question on your mortgage servicing rights. You booked a $1.7 million again this quarter and was trying to figure out how much of that is from new rights being created through the sales loans and the retention of the mortgage servicing rights and how much of that is a mark on the existing book..

Yes, that would all be a mark. And if you recall in the second and third quarter, those rights were marked down $3 million. Then with the increase in rates, we have essentially [indiscernible] 1.7 of that..

Okay. And then --.

So the net impact for the year of those adjustments was negative..

And so then related question.

For the fourth quarter, what was the change in the expectation for the weighted average life of the underlying portfolio to drive the increase in valuation?.

I don’t think the person they can answer that question is in this room, I’m sorry. But we can get back to you on that..

Thank you..

[Operator Instructions] And we will go next to the Matthew Breese with Piper Jaffray..

Good morning everybody..

Hi Matt..

I just wanted to touch on the C&I business again and line utilization, especially in light of your commentary that we might see some better expansion there. And I wanted to know if since the election, you have felt that in terms of optimism from your borrower base..

I think there is a sentiment of optimism. But I wouldn’t classify it as crazy and everyone’s -- but people are starting to talk much more positively..

Maybe in that guidance, what are your expectations for change in line utilization?.

I don’t know that we’ve got or getting that granular on our guidance. I think our guidance is more about market opportunities, about picking up market share, moving into some new markets like Philadelphia..

Okay. And then switching gears maybe to the commercial real estate portfolio, obviously the yield curve has picked up a little bit.

Has that translated into higher commercial real estate loan yields? And could you give us some examples of how things are changed from 3Q to year-end when the yield curve ran up?.

So, I would just first say that in general we see a little less competition on the commercial real estate side. There are some folks that are pulling back for whatever reason, but our pricing is beginning to improve slightly. But again, it’s not something that is dramatically improving..

Okay.

And would you characterize that as less than one-for-one in terms of the 50 basis point move we’ve seen in the five-year C&T?.

I would say yes, less than that..

Okay.

Any color on as to why you haven’t been able to more dramatically increase pricing?.

I think it would be one word, and it’s competition..

Okay. That’s all I had, thank you..

And we will go next to Matthew Keating with Barclays..

Thank you, good morning..

Good morning..

My question would be on I guess the geography of some of the fee income performance. So obviously in 2016, other service charges and fees increased pretty materially, so is that the area where you see some of the treasury services and interest rate swaps flow through into your performance? Thanks..

I look at different reports than you do, so --.

It’s Phil Rohrbaugh. See, in other service charges and fees you would find commercial swap fees in that category and which year-over-year we indicated were up..

Okay. That’s helpful. And then on the small SBA loan sales, is that in there as well or is that within other? As we think about --.

That’s in the other category..

Okay. No, that is helpful to clarify that. And then, Phil also if you could quantify the typical seasonal impact.

You mentioned higher FICA and payroll taxes in the first quarter usually; what’s the dollar level of that increase traditionally?.

It has an impact historically of around $2 million..

About $2 million? Okay. But then as you mentioned, the day count is a bit less, so that -- does that mean that you can have a flattish performance? I guess you mentioned you think quarterly expenses stay around Q4’s core adjusted run rate, and then grow from there, is the right way to think about it..

That’s right..

Okay. And then finally we have heard a lot from some bank executives about the impact of potential tax reform and whether or not, in a competitive industry that will be sort of competed away as banks I guess re-price products, loan products, etc.

What is your perspective as an almost $20 billion asset bank that operates in a pretty competitive market, about whether potential tax reform will fall to the bottom line? Thanks..

Well, that is a really tough question to answer at this point for a couple of reasons. Number one, it is really just talk right now and nobody has any idea if it will happen or what the timing will be.

But I do think if it happens some, I would say at least half of it, in my personal opinion will end up dropping to the bottom line, but probably not all of it..

Got you. Well, thanks that’s helpful. That’s all I had..

It appears there are no further questions at this time. Mr. Wenger, I would like to turn the conference back to you for any additional or closing remarks..

Well, thank you all for joining us today. We hope you will be able to be with us when we discuss first quarter results in April..

This does conclude today’s conference. We thank you for your participation. You may now disconnect..