Good day everyone, and welcome to the MidWestOne Financial Group, Incorporated Fourth Quarter 2018 Earnings Conference Call. [Operator Instructions] Please note, that today’s event is being recorded. And with that, I like to turn the conference over to Mr. Charlie Funk, President and CEO. Please go ahead..

Thank you very much, Brian, and welcome to everyone this morning from chilly Iowa City where as we speak the temperature is 1% below zero, we’re hoping to make it into positive territories day.

Let me begin with the forward-looking statement that simply says, this presentation contains forward-looking statements relating to the financial condition, results of operations, and business of MidWestOne Financial Group Inc. Forward-looking statements generally include words such as believes, expects, anticipates and other similar expressions.

Actual results could differ materially from those indicated.

Among the important factors that could cause actual results to differ materially are interest rates, the change in the mix of the company's business, competitive pressures, general economic conditions, and the risk factors detailed in the company's periodic reports and registration statements filed with the SEC.

MOFG undertakes no obligation to publicly revise or update these forward-looking statements to reflect events or circumstances after the date of this presentation. And with that, thank you again for joining us on the call this morning. We have a lot to discuss. I’ll move through this relatively quickly to get to the Q&A.

The first thing I think that should be noted is that 2018 was the highest earnings per share and net income in the history of MidWestOne Financial Group and we think a lot more went right than wrong in 2018. Ex merger-related charges, we calculate $2.54 a share and a return on tangible equity of 12.1%.

But that said, we’re not satisfied and we expect and plan for improvement in 2019 and I think we’ll be able to do that.

To the quarter, just talking about the balance sheet for a minute, loan growth slowed slightly and especially the last 10 days of the year, we spent most of December over 2.4 billion in loans, had a few paydowns late in the month and that took us just under 2.4 billion for the year on a point-to-point basis. We had a good start in January.

Our pipeline looks decent for the first quarter. We would look at maybe 1% to 2% growth – non-annualized growth in the first quarter, paydowns of course always being the wildcard. For the year, we guided last year 4% to 6% and we were right in the middle of that. We calculate point-to-point was 4.9% loan growth.

Interestingly enough, if you look at average balance 2017 versus average balance 2018 and our loan portfolio was up just short of 7%. So, we think we did a good job on loan growth for 2018 and I would have the same guidance for you for 2019 of 4% to 6%, and maybe towards the high-end of that, but 4% to 6% is a good range.

On deposits, a little bit of a story. I think we made a lot of progress in our deposit raising culture in our company and our average balances were up for the year between 2017 and 2018, 4.4%, which we consider to be a success.

However, at the end of 2017, we had a lot of large temporary deposits in the bank that left shortly after the calendar turned to 2018. We had the reverse happen in 2018 and we had money leave the bank at the end of the year, so the point-to-point is relatively flat. Much of that was in public funds.

Our public funds balances were just over $25 million lower at the end of 2018, compared with the third quarter, end of the third quarter. So, we do have work to do as most banks do in terms of deposits. Deposit competition is keen.

It’s interesting we have what - we see a lot of our bank competitors now above the FHLB rate in terms of some of the CD offerings that they are putting out there. So, it’s clearly expensive to generate deposits in this environment. So, as I said, we’re guiding 4% to 6% on loans. Our guidance on deposits would be 4% to 5% for the year.

I think deposits based on what we see now will be a much bigger challenge than loans. That said, I think we do have plans to continue to increase our deposits to fund our loans. In terms of net interest margin, I think there is a success story there. Just for information, we still face headwinds from reduced accretion.

Accretion added 17 basis points to our margin in 2017. It added 9 basis points to our margin in 2018. We calculate that our core margin, absent accretion was 3.53 for the fourth quarter 2018.

And it’s interesting, if you look at our core margin and compare the end of 2017 with what happened in 2018, if you adjust for accretion and tax reform, we calculate our margin was relatively flat.

Our core margin was relatively flat during 2018 and we think that’s a very good performance in this environment, especially with the flat yield curve in the deposit competition. In terms of non-interest income, I think a descent year, wealth management was hampered of course by the decline in the financial markets and that hurt fourth quarter fees.

I would highlight that our Trust Department, especially showed higher revenues during the year and the prospects in Trust especially for 2019 are very, very good. Much progress in our mortgage unit; was masked a little bit by the weaker mortgage markets that we saw in 2018.

If you compare our mortgage unit to two years ago, it’s night and day difference. We’ve significantly reduced the time to close and we have better pricing and more competitive pricing and profitability and we’re building a nice servicing portfolio that adds to our income.

Our servicing portfolio at the end of 2018 was $477 million, which is up significantly from a year or two ago. Interestingly enough, when we bring American Trust on which I’ll take about in a few minutes, we will more than double that servicing portfolio, again which we think will provide a nice annuity so to speak for fee income.

Swap income from our commercial banking unit was a little disappointing in the fourth quarter. We do think that 2019 with a flat curve yield curve, especially that there is potential and we do plan for more swap income in 2019, a little bit of a shout out to our SBA unit. They had a very good quarter in the fourth quarter.

We think they have more to come in 2019 as a contributor, and I will also say that hiring an SBA banker in Denver has really been beneficial to our company and to the SBA unit. The gentleman we have in Denver is doing an outstanding job.

So, overall for noninterest income, it’s hard to predict what the mortgage market will be and the financial markets will be in 2019. All other things being equal, 2019 should be a better year than 2018 and we thought 2018 was pretty good. In terms of noninterest expense, there is progress, reducing our run rate on noninterest expense.

We did make some progress during the fourth quarter.

We plan for more progress in 2019 and we would just say that if you look at the legacy MidWestOne, MidWestOne as it exists right now, our goal is for $21 million run rate for noninterest expense in the fourth quarter of 2019, and that’s a goal that's front and center with our management team and many of our senior officers.

In terms of asset quality, the large commercial loan that we charged off in the fourth quarter of 2017 had been moving toward resolution and bankruptcy court and there was an auction that took place in the middle part of December.

We had always planned for it to have a charge-off of up to $3.5 million in the fourth quarter of 2018, and we will reserve for that. And throughout 2018, we continue to test that $3.5 million amount as to adequacy and our internal and external analysis was that this was a sufficient amount.

Unfortunately, when the auction occurred the reserve amount had to increase by what we prove to be $1.5 million short. So, it was a complete surprise to everyone involved and we had very little inclination that we would be short of this amount.

So, $1.5 million of the provision was due to the shortfall and fortunately we have that behind us and we’ll settle on this transaction on February 1. We don't expect any further negative impact from this transaction of this loan.

We also had one commercial loan in the Waterloo-Cedar Falls market that required roughly $1 million provision and that was simply a loan that had significantly deteriorating business conditions and we thought compelled to move in that direction.

As we’ve said on past calls, there’s been a significant amount of time spent analyzing our loan portfolios throughout the company. I will say that during the fourth quarter, we had two external loan-reviews done in addition to our internal loan reviews and really found good news in terms of there were no ratings disagreements.

So, the external and internal analysis in terms of loan reviews agree with our analysis done by our bankers. So, we think we are headed in the right direction and continued significant resources will be applied to this area. In terms of guidance for provision in 2019, the guidance is 4 million to 6 million.

And I also want to give an ag update because ag always comes up when we’re talking about MidWestOne. The 20,000-foot view on ag would be slight deterioration, no cost for panic, in-line with the ag economy. By the numbers about 7.7% of our portfolio – of our loan portfolio was ag related, direct ag exposure that’s a $185.6 million.

If you compare the end of 2017 to the end of 2018, at the end of 2017 we had 18.8% of the portfolio rated watch or substandard. That was the end of 2017. At the end of 2018 it was 20.9%. So slight increase in terms of watch and substandard ratings in the ag portfolio. The biggest change however was more loans were deemed to be substandard and watch.

And that’s due to two factors which we’ve talked about before. Number one, there’s a deterioration in some of our borrower’s balance sheets in the ag sector. That’s obvious, but I also think it’s fair to say that we’re doing a better job of accurately rating our loans internally perhaps than we were a year ago.

A breakdown of the 20.9% loan that are rated watch or substandard in the ag portfolio, 9.6% is watch, 11.3% is substandard. We continue to forecast very low charge-offs in the ag sector. We had one charge-off and that was in the third quarter of 2018 that you could call large in terms of ag. And we expect some recovery on that loan in 2019.

Not assured, but we do think that there is a high likelihood that we will have some recovery on that loan. In terms of land prices, we get asked about that a lot and let me be very specific to the MidWestOne footprint in Iowa.

In our footprint, we estimate that land prices were down 3% to 6% during 2018, and I can report that our collateral margins are still good on most of the credits that we have in our ag loan portfolio. It’s interesting we have and this is always a hard thing to do.

We have declined to renew a few operating loans to some of our more troubled borrowers during this renewal season. Again, that’s a tough thing for both the customer and for our employees when that happens. I also think it’s very important to say on this call that many of our ag customers that had decent crop yields in 2018 reported a profit not loss.

They reported a profit. If they had reasonable debt loads, and they had good crop yields, these borrowers may not have made as much money as in past years, but they did show net operating income. So, despite the elevated provision during the fourth quarter. We do see light at the end of the tunnel on credit.

We have Gary Sims, our Chief Credit Officer in the room and we’ll be happy to discuss that during the Q&A. In terms of American Trust, ATBancorp, we have all regulatory approvals. As many of you know that merger, the closing of that merger is contingent on the sale of their retirement business.

That’s taking a little bit longer than we had anticipated, but ATBancorp does have a bona fide buyer, and we still hope to close late in the first quarter. That’s not assured, but our expectation is sometime in March that we can get that transaction closed.

In terms of modelling, what that means for our company in 2019 it’s hard to do simply because we don't know the exact date of the close, but we still feel very, very good about the cost saves that we had projected.

As I indicated on the last earnings call that we had, we’ll probably have to move a few of those cost saves for 2020, but we still believe the earnings per share accretion numbers that we laid out in August whenever we announced the transaction are relevant and good.

The culture fit as we continue to get to know the folks in the Dubuque and Wisconsin and other places and their footprint, the culture fit we think is very good. The asset quality at ATBancorp continues to be excellent by any measure.

Their NPAs have been relatively low and their past dues a little higher than our past dues in the 30-day to 89-day bucket, but still very, very good by any historical measure.

When we do know that the definite close of the transaction, we’ll be able to be a little bit more transparent in terms of 2019 projections, as well as breaking out the cost saves between 2019 and 2020. Finally, I talk for a minute or two about our capital position. We feel fine. We feel comfortable with the capital position where it is the right now.

It’s hard to know what the purchase accounting adjustment will be on AT, but we still project between 7.5 TCE and 7.8 TCE, whenever that transaction closes. We did increase the dividend of a few weeks ago.

That dividend was less than we might have anticipated 90 days ago, but we felt that our stock price represented probably a more attractive use of our capital in terms of share repurchases than a bigger dividend increase, and you will see from the earnings release we did buy back our stock, some of our stock in the fourth quarter and we will continue to analyze that as we go forward.

We think, at this point in time that’s the best way to reward our shareholders. So, in summary, the increased provision put a little bit of a damper on the fourth quarter, but we're very excited and we're very optimistic about 2019. We see a lot of ways that we can improve our financial performance.

We think that the AT transaction will be very, very good for our shareholders. In general, we’re happy with the progress we’ve made, but we expect to make more in 2019. And Brian, with that I will send it back to you for Q&A.

Before I do that, we have, as I said Gary Sims, our Chief Credit Officer in the room; Barry Ray our Chief Financial Officer; Jim Cantrell, Chief Investment Officer and Treasurer; and Kevin Kramer, our Chief Operating Officer. And with that, back to you Brian..

Thank you. [Operator Instructions] And today’s first question will be from Jeff Rulis with D.A. Davidson. Please go ahead..

Thanks, good morning..

Good morning..

Charlie, I wanted to follow-up on that expense comment about a goal of 21 million by quarter-end, clearly a MidWestOne only run rate is that excluding ATB?.

Yes..

Okay.

And, you know I guess with just south of 20 million in Q4, so just some modest growth is kind of the expectation throughout the year on the legacy platform?.

Jeff, this is Barry. Yes, that is correct. Modest growth from what you thought in 2018. Some additional investment in technology driving some of that as well..

Okay.

And then Charlie, you also touched on your SBA Group, interested in a good quarter from your standpoint and given the government shutdown is that group seeing any headwinds on impact to the business?.

Well, there will be headwinds every week that goes by. I give the leader of our SBA a lot of credit because he was very proactive during December and even before December and anticipating this.

So, I think we did a lot of things to – we sped up a lot of processes in late November and December before the shutdown and so I think to date I can’t say the things have slowed down much, but every week that goes by, I’ll be less confident in making that statement. I think it would be the best way to answer that Jeff..

Okay.

And then lastly, just on the margin, kind of an outlook there or you walked through a little bit of the puts and takes, but where do you think margins settles in over the next year?.

This is Jim and I guess I will take that. We do focus on the core margins. So, I’m going to talk to core margin and by that, I mean we are backing out simply the purchase accounting adjustments. And as Charlie referred, we were flat year-over-year fourth quarter of 2017 to fourth quarter 2018 when we adjusted for taxes and for the purchase accounting.

On a go-forward basis, it will be interesting to see if the Fed makes – and that was a period where we got four rate hikes in four quarters. So, we were able to essentially track our loan yields moving higher with what our deposits costs were moving higher.

And it will be a function of whether or not we get another Fed increase, my guess is, we’re going to be in short for some more, a pretty flat margin, I think last year we indicated we thought we would see some compression, I think we were pleasantly surprised by the margin maintenance, the core margin maintenance that we were able to achieve, but I do think there are funding pressures and to give you – it gives me a chance to talk a little bit about the competition we are seeing, but for larger deposits, public fund deposits the market has changed pretty dramatically in the last 18 months.

So, that’s where we are going to see some pressure. And I do think they will see some increases on the loan side. So, my long-winded answer to say, I think we are going to be pretty flat on the margin going forward, that would be my best guess..

I would add to that Jeff that we’ve probably given up a little bit of growth to maintain the margin and we were happy with our loan growth.

We could have had more loan growth, but we’re willing to cut prices and I think the same increasingly could be said on the deposit side and when I talked about in my opening comments being above the home loan bank curve in some of our markets now we won’t hesitate to go to the home loan bank, we have a lot of capacity there should that be a better deal than deposit dollars, but I concur with what Jim said, but I think it is fair to say that when we maintain our margin, we’re probably giving up a little bit of growth as well..

Right.

Jim, you mentioned the core margin, I think it was 3.53 for the quarter, what was that sequentially and I guess the relative accretion benefit?.

Yes, I showed a 3.48 in the third quarter, but I’m going to put a big caveat the 3.48 in the third quarter compared to 3.53 in the fourth would indicate 5 basis points of expansion. In the third quarter, you should know we had a fairly significant reversal of loan interest.

When you back that out, you are basically flat core margin third quarter to fourth quarter. So, therein lies my expectation going forward would be flat. So that’s an important piece of information to have if you are just looking at core margin third quarter to fourth quarter..

And sequential accretion benefit was similar?.

Jeff, this is Barry. We articulated in the earnings release that benefit from discount accretion was 6 basis points to the NIM in the current quarter and 8 basis points in the linked quarter..

Right. Sorry, I missed that. Thanks, that was it..

No worries. Just pointing out..

Today’s next question will be from Nathan Race with Piper Jaffray. Please go ahead..

Hi, good morning..

Good morning, Nathan..

Just wanted to start of deposits, get your kind of thoughts on, you know we’ve seen deposit cost increase 8 basis points to 9 basis points last couple of quarters and I imagine we will probably a similar increase in the first quarter of this year, but assuming the Fed’s on hold for the rest of 2019, how do you guys think deposit cost will behave in 2Q and in the back half of 2019 as well?.

This is Jim. I will take my best shot at that one, and I would divide it up a couple of ways. First, let us look at the CD book, which is relatively short, little over $700 million. That has been for the last year repricing up at the rate of roughly 4 basis points maybe a little more for the month.

Somewhere in the neighborhood of 12 basis points or 13 basis points a quarter. That’s not going to stop increasing if the Fed stops. So that’s for the first half of the year, I think we will still see 4 plus basis points per month. And then if rates do stay here in the second half of the year, that will taper off some.

I will say on the core deposits part of the question, I expect we’re going to see continued increase in that book as well, and again we have some money market specials that we have run this year that are coming on at rates that are on average about our current book markets.

So, that’s going to add some cost and we are pursuing just a larger deposits or depositors tend to be high beta, and so we're playing a little defense in some of our markets. We’re having to move rates up simply to maintain and I don't expect that is going to change either.

So, the higher balance depositors are pretty savvy depositors at this point has been our experience. And so, we’ll see continued increases on both sides. The core and the CD book, both increases..

And then kind of along those lines, we have seen non-interest-bearing deposit balances come down here over the last few quarters on average basis. And I know you guys are working hard on raising core deposits across some of the markets that you are in and so forth with some of the hires as well off late.

So, just curious if we should expect that dynamic with non-interest-bearing deposits to continue to come down in 2019 as well..

I would say that’s anybody's guess. On the other hand, if you just look at what’s just happening around the United States, I don't know why we would be any different. I think probably we will continue to see contraction there..

Okay, got it. And then if I could just lastly. The credit that you guys took the greater charge-off on in the fourth quarter here, if I remember correctly, it sounds like there was a possibility that you guys could, on the gains as that credit moved through the process over the course of the back half of last year.

So, just curious if there was something that changed over the course of the last couple of quarters that may be caused that assets not be as worth as much as perhaps you thought a couple of quarters ago?.

This is Gary Sims. I don't think anything on an external basis changed about the asset. We did get to the point in the fourth quarter and December as Charlie alluded to, where we got to the auction and the results of the auction just did not meet our expectations relative to what we believed we would be able to get for that asset.

Not a lot of color beyond that, the auction just did not turn out the way we had expected it to..

Understood? I appreciate all the color guys. Thank you..

Thank you..

Next question will be from Damon Delmonte with KBW. Please go ahead..

Hi, good morning guys.

How is it going today?.

Good morning, Damon..

So, just first question, just to kind of circle back on the impact of the government, have you noticed any change in sum from your ag borrowers because of the tariffs now that we’ve had them in place for whatever might be six months, five months?.

So, this is Gary Sims. I’ll take a start at answering that. We’ve heard from, I mean really the vast majority of our ag borrowers on the government assistance that was put in place in the fourth quarter, we've been able to quantify that and for the most part they've gotten that money in.

I will tell you that Charlie alluded to earlier that most of our borrowers had good yields in 2018, and when they had good balance sheets going into the harvest, they were able to either breakeven or make money for the 2018 crafty year, and I will tell you that the government assistance probably was marginally helpful for most of those farmers in achieving those results..

Got you.

And then is there any concern going forward that their credit worthiness may be compromised because of the ongoing issue with the tariffs?.

We’re in the middle of our renewal season as most ag banks are at this point in time and what we’re seeing for the 2019 crop year is that essentially what farmers are having to do is adjust their expense basis to a new reality around prices and we don't see just a sharp drop-off in terms of performance for 2019 crop year relative to the tariffs.

Now, don't get me wrong, I think everybody has pointed towards getting this resolved and we’ll be in a better place when it does get resolved, but for the most part our borrowers are positioned to be able to live with the tariff as they exist right now on a go forward basis..

Got it. That’s great color. Thank you.

And then I guess with respect to the outlook for noninterest income, if you take out the impact from the ATBancorp, I think Charlie said you expected it to be better in 2019 than it was in 2018, I was talking kind of like mid-single-digit growth you think or can you kind of put some parameters around that?.

Well I’m looking at our CFO on that when we talk about percentage of growth..

Damon this is Barry with respect to growth in fee income, did you say mid- single-digit, is that what you said?.

Yes..

I think that’s a good marker, Damon yes..

I think that’s, I would just add to that, I think critical to that will be the ability of our SBA banker is to continue to improve, as well as book some commercial swap transactions because as I said in my opening comments, Damon the thing that’s really hard to predict as you don't know where the mortgage market is and you don't know where the financial markets is, which affects our wealth management.

So, all other things being equal that would seem to be a reasonable estimate for noninterest income..

Okay, great.

And then my last question, just given where the shares trade today, and I saw you guys bought back a little bit of stock during the quarter, what are your thoughts on maybe become a little bit more aggressive or does maintaining some sort of activity going into 2019 with the buyback?.

Well I think it’s fair to say that we think the price or our stock is very attractive right now. And we will continue to analyze that and we do have a repurchase program that we have ways to go on should we choose to do so. So, that’s probably the best guidance I could give you..

Fair enough. Thank you very much for the color..

Thank you..

[Operator Instructions] Today’s next question will be from Brian Martin with FIG Partners. Please go ahead..

Hi good morning..

Good morning, Brian..

Say may be, I’ve got a handful of questions maybe just start with Gary and credit and just maybe, it sounds like from Charlie's comments you feel as good as you can about credit as good as you have been in a while and credit just kind of want to confirm that and kind of just get your perspective on doing a couple of reviews externally, one internally, you just kind of confirm that if you can or just any thoughts on just credit and general with all the works you guys have done..

Thanks Brian. I will start the conversation with I believe that we really hit a pretty material milestone in the auction.

The results of the auction on that one particular large credit taking that into account and actually write that asset down to the actual auction results and as Charlie alluded to, we should be able to get the proceeds, collect the proceeds in the first quarter and that’s going to be a pretty material development that we can put behind us and so what I see on a go forward basis, you know 2018 I think was a transformative year in getting ourselves pointed in the right direction and recognizing problems on a timely basis and starting a process around working those assets out and that’s what I see in 2019.

Charlie alluded to a prohibition in the $46 million range, I feel comfortable that we can work within that parameter and make steady progress towards recovering our credit quality in 2019..

Okay. That is very helpful and just a couple of other things from me, it was just, maybe one for Jim. Just on the core margin I think you talked about kind of relative stability here.

Maybe just as you layer in AT, just kind of any more, now that you have a little bit more time to kind of look at things, just kind of the impact of AT as you, maybe look at second quarter, I mean if it closed late this quarter, just kind of that drag or that the impact from AT how that plays out in Q2?.

Brian, we have spent some time, it is – I am reluctant to give you a whole lot of detail because the numbers are pretty squishy at this point. I guess what I would say is, as we have evaluated AT in the transaction we have currently noted and I think it is publicly – it is available information that their margin is narrower than our margin.

And so, I think it’s safe to say that when we bring those two banks together the margin of the combined entity is going to be narrower than our current margin is today. And that’s about as much as I feel comfortable giving you right now..

I would add to that. Brian, it’s a good question. And I think what Jim says is exactly right and what I would add to that would be the efficiency that we again bring in AT into the company are significant.

I think that will more than make up for the narrower margin that we’ll have, but I don't think there was any question we’ll have a narrower margin because they’ve been operating on a margin for a while now on the low threes and you put that with our 350 plus or minus core margin and you're going to get a little narrower margin..

Okay. Alright.

And just as far as the closing of the transaction, I mean, when are you guys intending to, if it does close later in the quarter, do the conversion? I mean just trying to [indiscernible] fourth quarter will be from an expense standpoint?.

Well they have – we don't know. We hope to close it sometime in March. In terms of converting, their core systems to ours, the smaller of the two banks is scheduled for May 15 and the larger I believe for July, the middle part of July. So, that’s what will actually get conversion..

Alright.

That’s helpful and just on the, I guess the expense guide Charlie, I mean, I guess if you kind of get things closed and it sounds like you could be running at a clean expense run rate with AT in the fourth quarter of this year of 2019, I mean does that – can you give any kind of thought as far as if you had a clean run rate from AT where that expense number that $21 million number where do those two numbers kind of connect and is it kind of in the $28 million range with the cost savings taken out of AT or is that kind of in the range of [20 - 29 million]?.

Brian, this is Barry. Yes, that would be a fair estimate of what the range would be, obviously excluding the merger-related cost, but to your point the clean run rate that would be a good estimate..

Yes. Okay. Alright. And then last two.

Just kind of the operating leverage, I mean as you guys get AT in and get the operating – start to get some operating leverage, I guess when you get to fourth quarter of 2019 that’s what we expect to, I mean Charlie you talked about kind of your efficiency goals and what not, if you kind of take a look at fourth quarter of 2019 being a clean quarter with the acquisition kind of talk about where you would expect to be with some noise in between, but just kind of when you get to that fourth quarter of 2019, at least kind of how you're thinking about it from an ROA and a efficiency standpoint?.

That’s a good question and it’s an appropriate question and I think as we look at 2019 as a company, we realize that there was a lot of work to be done and then you throw the merger in and the fourth quarter does seem to be an appropriate time where we could analyze just what our earnings power is, and I think it’s fair to say that our goal would be the fourth quarter absent merger-related expenses, you know is somewhere in the neighborhood of 120 ROA and we clearly need to be below 60% in our efficiency ratio.

As we look at our peers, 60% does not seem to be a high hurdle to climb and we need to get back down. We’ve been there before and we need to get back down to below 60%. So, below 60% efficiency and 120 ROA, fourth quarter, absent noise would be our – where we hope to be..

Okay.

I appreciate that and you did mention Charlie, but just on the government shutdown on SBA, I know you’re expecting SBA to be a bigger contributor, any impact with the slowdown here, maybe I missed if you said that earlier, someone answered that question, but just any impact on – is it just more of a timing issue, you still expect same amount of revenue maybe in 2019 or just how does that play out?.

I think, any impact is anecdotal right now, and I don't know if you could prove it in the numbers.

I think the SBA would be one place that you would look that we’re still in the situation a month from today, it’s going to start to impact our ability to generate revenues in that area, but nobody likes to shut down, but I would say that most of what we’ve seen now would be anecdotal and I don't know what to shown up in our numbers..

Okay. Alright, I appreciate all the color guys. Thank you..

Thank you, Brian..

At this time, this will conclude today's question-and-answer session. Like to turn the conference back over to Charlie Funk for any closing remarks..

Well thank you everyone for joining us on the call this morning and our guidance to everyone would be to stay warm over the next week to 10 days and we wish you a good rest of this month. Thank you again..

The conference is now concluded. We want to thank everyone for attending today's presentation. At this time, you may now disconnect..