Fulton Financial Corporation's (FULT) CEO Phil Wenger on Q4 2015 Results - Earnings Call Transcript

| About: Fulton Financial (FULT)

Fulton Financial Corporation (NASDAQ:FULT)

Q4 2015 Results Earnings Conference Call

January 20, 201 9:00 AM ET

Executives

Jason Weber - SVP and Director, Corporate Development

Phil Wenger - Chairman, President and CEO

Pat Barrett - Senior Executive Vice President and CFO

Analysts

Chris McGratty - KBW

Casey Haire - Jefferies

Preeti Dixit - JPMorgan

Frank Schiraldi - Sandler O'Neill

Bob Ramsey - FBR

David Darst - Guggenheim Securities

Matthew Breese - Piper Jaffray

Operator

Please standby, we are about to begin. Good morning, ladies and gentlemen. And welcome to the Fulton Financial Fourth Quarter Year End 2015 Earnings Conference Call. This call is being recorded.

I will now like to turn the call over to Jason Weber, Senior Vice President and Director of Corporate Development. Please go ahead, sir.

Jason Weber

Thank you. Good morning. Thanks for joining us for Fulton Financial's conference call and webcast to discuss our earnings for 2015. Your host for today’s conference call is Phil Wenger, Chairman, President and Chief Executive Officer of Fulton Financial Corporation. Joining Phil is Pat Barrett, Senior Executive Vice President and 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 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’s financial condition, results of operations and business. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors some of which are beyond Fulton’s control and difficult to predict and which could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements.

Fulton undertakes no obligation, other than as required by law, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

In our earnings release, we’ve included our Safe Harbor statement and forward-looking statements, we refer you to this section, and we incorporate into today’s presentation. For a more complete discussion of certain risks and uncertainties affecting Fulton, please see the sections entitled Risk Factors and Management’s Discussion and Analysis of Financial Condition, Results of Operations set forth in Fulton’s filings with the SEC.

In discussing Fulton’s performance, representatives of Fulton may refer to certain non-GAAP financial measures. Please refer to the supplemental information included with Fulton's earnings announcement yesterday for a reconciliation of those non-GAAP financial measures to the most comparable GAAP measures.

Now I’d like to turn the call over to your host, Phil Wenger.

Phil Wenger

Thanks, Jason. And good morning, everyone. Thank you for joining us. I have a few prepared remarks before our CFO; Pat Barrett shares the details of our 2015 and fourth quarter financial performance. When he concludes I will review our 2016 outlook and then open the phone line for questions. Turning to Slide 3 of our presentation, I'd discuss our 2015 highlights. And 2015 marked another year of our continued progress to strengthen our banking franchise. Of note we had strong commercial loan and core deposit growth, improved asset quality and solid fee income. We successfully completed two funding initiatives to further optimize our balance sheet. To become more efficient and reduce cost, we consolidated 11 branches while further streamlining our organizational structure and benefit plans.

In addition, we continue to actively manage our capital while maintaining strong capital levels. Turning to Slide 4 of our presentation. We reported diluted per share earnings of $0.85, up 1.2% over the $0.84 we reported for 2014. For the year our return on assets was 0.86% and a return on tangible equity was 10.01%. Average earnings asset increased year-over-year driven by an increase in average loans of 3.5% in line with the lower end of our 2015 outlook. Commercial loan growth was strong in latter half of 2015 due to increased business activity and to a lesser extent efforts to take advantage of market disruption.

These factors helped accelerate the momentum of our balance sheet growth with period and commercial loan expanding in an annualized rate of 14.8% in the second half of the year. This growth occurred across a broad range of industries and was primarily concentrated geographically in our Pennsylvania markets. Our yearend commercial loan pipeline is down seasonally approximately 15% from the third quarter; however, we are pleased to see levels approximately 19% higher than the same time last year.

This positive momentum coupled with continued investments in talent throughout our footprint gives us optimism about the prospects for further growth in 2016. Overall, average deposit growth was approximately 6.8% year-over-year which is in line with our 2015 outlook. More importantly average core deposits increased approximately 8.9% while average timed deposit was essentially flat. The growth in core deposits was split equally between consumer and commercial. As with loan growth, we believe we are seeing evidence of local market disruption. As an example our branches that are located in disrupted markets attracted meaningfully higher rates of new consumer household growth in 2015 than branches in our broader footprint.

Our loan to deposit ratio ended the year at approximately 98% comfortably within our historical operating range. Our net interest margin declined 18 basis points in 2015 slightly outside the range in our original 2015 outlook. However, on a linked quarter basis the net interest margin was up one basis point in the fourth quarter of 2015, marking the first increase since the fourth quarter of 2013.

Turning to credit. Overall asset quality continues to improve. Year-over-year delinquencies and net charge -offs were down by approximately $10 million and $15 million respectively. Delinquencies ended the year at approximately $197 million while net charge-offs ended the year at approximately $70 million, both the lowest level since 2007. Our allowance for credit losses to loan remains healthy at 1.24%.

We saw broad based increases in most of our non-interest income businesses and products excluding security gains non-interest income increased approximately 4.5% year-over-year. In a consumer area, mortgage banking income increased 6.4% as both volumes and spreads improved. Our mortgage pipeline is seasonally down 27% at the end of December, but is up 16% year-over-year. In the second half of 2015, we hired a new regional sales manager who is actively adding loan originators across the footprint. So despite a projected rising rate environment and a decline in industry originations, we believe that we are positioned to grow mortgage banking income in 2016.

Also, we saw increases in our debit card income and other service charges on deposit account with each category increasing over 5% year-over-year. In a commercial area interest rate swap, cash management and merchant services businesses all had a strong year. Interest rate swap income benefited from growth in commercial loans while merchant services and cash management benefited from an improving economy and market share gains. Non-interest expenses increased 3.3% year-over-year excluding the expenses related to the trust preferred redemption and were in line with our 2015 outlook.

Salaries and benefits increased due to continued expenses in risk management including BSA/AML and general merit increases. Data processing software and equipment expenses all increased in 2015 in part to our continued focus on building out our risk compliance and technology infrastructures. Strategically the deployment of capital for the enhancement and long term shareholder value remains one of our highest priorities. In 2015, we increased our quarterly common stock dividend by $0.01, paid a $0.02 special common stock dividend in the fourth quarter and repurchased $50 million of common stock. In all, we distributed nearly 80% of our net income to shareholders. We did not repurchase any common stock in the fourth quarter given our loan growth.

And finally we made significant progress towards building out our risk management infrastructure in 2015 specifically around BSA/AML. We also feel that we've made substantial progress towards satisfying regulatory expectations relative to this important area. And we are hopeful that the BSA/AML enforcement actions will be lifted in 2016.

At this point, I'd like to turn the call over to Pat to discuss our financial performance in more detail. Pat?

Pat Barrett

Thank you, Phil. And good morning to everyone on the call. Unless I note otherwise, quarterly comparisons are with the third quarter of 2015 and annual comparisons are with 2014. Turning to fourth quarter results on Slide 5, earnings per diluted share this quarter were $0.22 on net income of $39 million, an increase of $4.3 million or 12.5%. Earnings per diluted share were $0.02 higher than the quarter and $0.01 higher than the prior year. Fourth quarter's earnings reflected an increase in net interest income and an increase in provision for credit losses and increase in non-interest income and lower non-interest expenses. Returns on average assets and tangible equity were 86 basis points and 10.16% respectively and our efficiency ratio improved to 66.6%.

Moving to Slide 6, our net interest income for the fourth quarter increased $2.1 million or 1.7%, driven by growth in earning assets and one basis point in net interest margin. The yield on average earning assets declined by one basis point while the cost of average interest-bearing liabilities decreased three basis points.

Average earning assets were up 1.5% due mainly to $289 million increase in average loans. Average interest-bearing liabilities were up 1.2% as a $225 million increase in interest- bearing deposits was partially offset by a decrease in borrowings.

One basis point decrease in earning asset yield resulted from a six basis points decrease in loan yields partially offset by a seven basis points improvement in yields on the investment portfolio. The decline in the cost of interest-bearing liabilities reflected stable deposit costs combined with lower long-term borrowing cost. As a reminder, in September 2015, we refinanced approximately $200 million of Federal Home Loan Bank advances with an average rate of 4.45% to new borrowings carrying average rate of 2.95%. This transaction accounted for the 21 basis points linked quarter decrease in our cost of long-term borrowing and the three basis point decrease in our cost of interest-bearing liabilities.

At that same time, we also entered into forward agreements to refinance an additional $200 million of FHLB advances upon their maturity in December 2016. That refinancing will lower the current average rate of 4.03% to 2.40%. And we will begin to realize the benefits from that transaction in the first quarter of 2017.

Turning to credit on Slide 7, for the year our provision for credit losses was down significantly from 2014 reflecting improvements in net charge-offs and delinquencies. For the fourth quarter, we recorded a $2.8 million provision for credit losses, $1.8 million higher than the third quarter while asset quality continue to improve the higher provision reflected recent loan growth in the loan portfolio.

Net charge-offs for the year dropped by nearly 50% to an annualized net charge-off rate of 13 basis points compared to 24 basis points in 2014. Although ending non-performing loans increased slightly compared to 2014, non- performing loan as a percentage of total loan decreased one basis point to 1.05%. And allowance for credit losses to loan decreased from 1.42% to 1.24%, while the allowance for credit losses to non-performing loans decreased from 134% to 118%.

Turning to fourth quarter non-interest income on Slide 8, we saw $2 million or 4.7% increase excluding securities gains. Interest rate swap fee income grew by $1.2 million largely attributable to strong commercial loan origination volumes. Debit card income saw a seasonal $600,000 increase and mortgage banking income grew by $450,000 or 12% mainly due to higher servicing income.

Moving to Slide 9. Total non-interest expenses decreased $800,000 or 0.7% excluding the $5.6 million loss incurred in the third quarter of new redemption of trust preferred securities. Expenses were lower in a number of categories including outside services down $840,000 and marketing down $350,000.

For the quarter, income tax expense increased $3.6 million, or 35% mainly due to higher pretax earnings and an increase in state income tax liabilities. Our effective tax rate was 26.5% for the quarter compared to 23.2% in the third quarter. For the year, our effected tax rate was 25% unchanged from 2014. We believe this is a reasonable estimate for our expected rate in 2016.

Turning to Slide 10. While we made significant progress towards building out our regulatory compliance infrastructure, overall BSA/AML costs remain elevated. Total BSA/AML related staffing and outside services costs haven't declined as rapidly as anticipated and we've incurred higher temporary staffing costs.

Slide 11 presents our profitability and capital levels over the past four years. The decreases in ROA and tangible ROE reflect lower net income and the decrease in the tangible common equity ratio reflects share repurchases and asset growth.

At this point, I'd like to turn the call back to Phil who will review our 2016 outlook shown on Slide 12.

Phil Wenger

Thank you, Pat. We expect the growth rate for average loans and deposits to be in the mid to high single digit. And we expect net interest margin to be stable on an annual basis with modest volatility, plus to minus 0 to 3 basis points on quarterly basis. With respect to asset quality, we expect the provision to increase driven primarily by loan growth. We expect the growth rate for non-interest income to be in the mid to high single digit and we expect the growth rate for non-interest expenses to be in the low to mid single digit. And finally, we will manage our capital to support growth and to provide appropriate return to our shareholders.

In closing, as we've discussed, we are making investments in our talent and our infrastructure. We believe these investments position us to drive meaningful growth and generate positive operating leverage in 2016 especially in light of expectations for a generally improving business environment and changes in the competitive landscape in a number of our markets. So thank you for your attention and for your continued interest in Fulton Financial Corporation. And now we will be glad to answer your questions.

Question-and-Answer Session

Operator

[Operator Instructions]

And our first question we will hear from Chris McGratty with KBW.

Chris McGratty

Hi, good morning, everybody. Pat, I want to talk about the BSA, it seems and correct if I am wrong the timeline keeps getting pushed out little bit and in your comments about the expense is not dropping as quick would support that number one is that kind of has something materially changed I think from-- I think it was mid year to sometime in 2016 and then if that is the case and given the volatility we have seen in the market and kind of where your stock has come over the last month or so, doesn't the buyback make a lot more sense over the next near quarter or so?

Phil Wenger

So Chris let me try to address that. So regarding our BSA progress, we think we've made significant progress. The timing of everything really is a difficult for us to judge and I know we were hoping for the first half of 2016 but I think a much more conservative estimate would be sometime in 2016 and we just don't have a lot of control over a lot of that timing right now. As far as the buybacks are concerned, our priority use of capital is first to fund organic growth so that is what will do going forward. So to the extent that I think the extent that we repurchase stock will be depended on our growth rates.

Chris McGratty

Okay. And just a follow up, Pat. I miss the borrowing changes that were put on the quarter and the impact in Q1. Could you just review that I think the FHLB?

Pat Barrett

Sure. Excuse me this is end of third quarter transaction where we had about a little over $400 million of long-term FHLB advances. We took $200 million of that and took a prepayment penalty rolled into new borrowings and lowered our rate on that $200 million by about I think it was 160 basis points at the same time the other half of that bucket which is schedule to mature late or at the end of 2016, we locked in forward rate agreements so that will continue to roll at the existing about 4% coupon until the end of 2016, at such point we will start new borrowings also about 150 basis points reduction. So in the fourth quarter you saw the full impact, positive impact of all our balance sheet optimization, so that's a good run rate that you see which I called out which is a drop in third quarter to four, and I just reminded folks that you will see a similar drop, it's about $3 million a year savings on our interest expense line item for 2017 that should begin right at the beginning of the year.

Chris McGratty

Great. If I could come back just on the buyback real quickly just to make sure I'm on the same page. So you guide to mid upper single digit loan growth. Obviously there is some seasonality in your business but if I guess my question is if you hit the guidance would we anticipate no buybacks in 2016? I am just trying to wrestle with the fact that your capital levels are still pretty healthy and your stock offer 50%.

Phil Wenger

Yes. So we have $50 million program in place. And I think we will try to strategically use that at this point in time. So our stock is off and I think our goal is still to utilize what we have in place.

Operator

And we will move on next to Casey Haire with Jefferies.

Casey Haire

Thanks. Good morning, guys. Apologies if I miss this but on the NIM guide can you just let us know what kind of Fed policy you are baking in for 2016 in terms of and how many more incremental hikes?

Pat Barrett

Sure. We've already one a little earlier than we anticipated originally back in December. We got another one at mid year and then a third right at the end of the year which really doesn’t have an impact.

Casey Haire

Okay. And I mean so if we don't get any help from the Fed is it I mean is it still good? Is that range still comfortable or is there a further downside?

Pat Barrett

Yes. I think that -- that's why we do the plus and minus and the zero to three basis points. If we don't get another increase -- yes, we'll see probably some positive momentum in the first quarter just because the loan growth will continue to roll into the quarter but the second quarter we wouldn't necessarily see an increase and could see a contraction in the third quarter if we don't get another increase in margin, I think we'll still see positive revenue growth regardless.

Casey Haire

Got you, okay. Switching to fees. Can you just talk to what do you see is the drivers I mean it sounds like you guys maybe a little bit over earned this quarter on swap fees and debit card income. If I take the mid point of your guide that's an average of about $46 million in quarter which is decent uptick from this fourth quarter level. If you just give us some color on what the drivers are for some -- what appears to be pretty aggressive growth on the fee side?

Phil Wenger

So in general we believe with the talent that we're bringing on the mortgage side that we can drive growth in mortgage fee income. We really were flat in our investment management and trust this past year and that is an area of emphasis for us that we can drive growth. Our overdraft income in the fourth quarter appears though it stabilized which will take away that pressure that we had in the past of that decreasing. And really all the other categories are being driven by growth of accounts especially on the commercial side. And we believe that will continue.

Casey Haire

Okay, great. And just finishing up on the asset quality front. Your guide -- provision driven primarily by loan growth. Is that safe to say that in terms of a net charge-off outlook that you expect to remain relatively benign near term at this 13 bps level that we saw in 2015? And then secondarily on the loan loss reserve ratio at 124, is that a good bottom?

Phil Wenger

So let me -- I'll start with loan loss ratio first. No, we in this past we went from 142 to 124 so dropped 18 basis points. I won't say that 124 is necessarily the bottom but I don't think we have another 18 basis points drop. But the peer average is somewhere around one, we don't want to get there but we could go a little lower than we current are. As far as charge-offs concerned I think right now they look pretty benign but for the year I think we are looking at flat charge-offs right now based on what we know. Is that cover all your questions, Casey?

Operator

And next we move on to Preeti Dixit with JPMorgan.

Preeti Dixit

Hi, good morning, everyone. To start with the strong C&I growth in the quarter? Can you give us some color on the drivers of the growth both by type and geography and then how much of this is prior to higher may be line utilization versus new relationship that you are seeing come on?

Phil Wenger

First off the line utilization did not change. So it was the growth really -- it's still being split most of 50:50 new relationships and from expansion from existing customers. And it was primarily in the Pennsylvania market although we did have some growth in all our markets but the largest growth area was Pennsylvania. And it was highly diversified across a number of industries and not one in particular.

Preeti Dixit

Okay, that's helpful color. And then as we think about funding the mid to high single digit loan growth with deposit growth. How should we think about deposit cost here based on what you are seeing in the market place? It seems like most things aren't really passing on the rate hike, but given your loan to deposit ratio? How are you thinking about you're need to be more competitive here?

Phil Wenger

So yes we manage that loan and deposit ratio and a range between 95 and 105 and we think we are well within that, we still have really no wholesale deposits whatsoever. So we do have outlets we can go to if we need to although our deposit growth continues to be pretty strong and we are going to continue to push that. We have not really had any pressure on deposit pricing so far.

Preeti Dixit

Okay, got it. And so I know you alluded to this in your prepared remarks but could you give us some metrics around household growth that you saw this past year given the disruption in the marketplace and maybe how is that compared to recent years?

Phil Wenger

So we've never really given guidance on household growth. I can -- I would say in the last six months in disrupted areas our new account openings are running about 29% higher at branches that are in disrupted markets than in branches that aren't in disrupted markets.

Preeti Dixit

Got it, good color. Thank you so much.

Operator

And next we move on to Frank Schiraldi with Sandler O'Neill.

Frank Schiraldi

Good morning. Hey just first to follow up on the regulatory order. So what is the estimate if you have at this point on how long it's going to take from here to reach compliance, and do everything you needs do under those orders? And then is the uncertainty on timing more because of that point, you have wait basically on regulators to review or are there schedule exams that you have to -- you are trying to reach a completion by.

Phil Wenger

You know there are schedule exams and you know the timing is difficult because we do have to go through a period where we show that we have sustained the BSA and that period of time has not been clearly defined quite frankly. So it's really hard to say.

Frank Schiraldi

I guess I would assume that period has not started yet because you are still working on compliance or on --

Phil Wenger

Yes. So it's started for something and but not for everything.

Frank Schiraldi

Okay. So what is the main I guess piece of this to be completed, is it going around to all the low risk customers and then collecting one or two pieces about of data from them? What's really the time consuming portion that's left to complete to get you out of deficiency in your mind?

Phil Wenger

You know I think the biggest piece for us is to consistently show that our investigative unit is doing a really, really good job.

Frank Schiraldi

Okay. So it's a more of just okay so more of the sustaining I guess or is that more of look back then?

Phil Wenger

Look backs are all complete.

Frank Schiraldi

Okay. Then sorry if I miss any commentary on this but the charter consolidation going forward is that still something that will take place most likely after the orders come off?

Phil Wenger

And again it's possible that we could begin that before the orders, come off completely, but again that really has not been completed defined for us either.

Frank Schiraldi

Okay. And then just on fee income. Could just give us a sense for your investment management and trust line item just a percentage of revenues that are tied to fees calculated of AUM or AUA levels?

Phil Wenger

I think it's about -- well our investment management and trust revenues are broken out almost 50% through brokerage and 50% in our trust and investment areas.

Frank Schiraldi

Okay. So I guess I mean what -- would it be a small percentage overall of that 50% or would be a larger portion that you would just look at you could sort of as a modeling this from the outside you could look at the market and say, well, market is down 5%, 10% whatever it is and then could affect fees by this amount regardless of new business you are able to add over the period.

Phil Wenger

Yes. Well, I'd say as far as the fees tied to the market I would guess that of the 50% that's not brokerage most of that is probably -- those fees are tied to the value of the investment accounts that would be driven by changes in the market.

Pat Barrett

As well as floats in and out.

Operator

And next we move on to Bob Ramsey with FBR.

Bob Ramsey

Hey, good morning, guys. Just a couple of points of clarity. I know you said you have not seen any pressure on the deposit pricing so far. Is it fair to say that you all have not increased deposit pricing on any of your products since the Fed moved rates?

Phil Wenger

I would say that's a generally true. We do have some deposits that are tied to indexes that have increased but --

Pat Barrett

Less 10% on total

Phil Wenger

Yes. And $800 million

Bob Ramsey

Okay. So what is the index out of curiosity?

Phil Wenger

Hedge funds and primarily debit fund

Bob Ramsey

And the credit commentary shifting gear sounds very positive and everything you are saying. I am just curious if anywhere across your book or across your markets if you've seen any signs of softness anywhere or anything that sort of is peaking any concern or not.

Phil Wenger

I would say in generally answer to tha would be no. There might have been just a very slight uptick in some of the consumer area but nothing that causes us any concern right now.

Bob Ramsey

Okay, great. Last question. I know you've talked about the BSA/AML compliance cost maybe not coming down quite as quick as had been hoped. Could you give an estimate of what that expense will be in 2016?

Phil Wenger

We did not. We do expected to -- we expect outside services to go down. But overall we expect expenses will go up by the numbers in our outlook because we are investing in technology and we are investing in revenue generating talent. I think that biggest difference right now than the past. We are investing in people in the past they were not necessarily revenue generating and now going forward we are focused on bringing in revenue generating people.

Bob Ramsey

I know you highlighted that the growth in new account and so forth and some of the disruptive markets has been better than other market. Have you or had opportunity to hire some of these revenue generating talent away from disrupted companies yet or is there some of that in a pipeline out of curiosity?

Phil Wenger

We've hired some and there are some in the pipeline.

Bob Ramsey

Okay, great, thank you.

Phil Wenger

And you know I fail to mention that on the fee income side we do anticipate increase in fees from our SBA lending group and that is an area that we are adding a talent, and I think we've added four folks to date and probably will be adding some more.

Operator

And next move on to David Darst with Guggenheim Securities.

David Darst

Hi, good morning. So just following up on the competitive dynamics. Are you bringing up a relationships where your investment, your commercial officers have maintained long standing relationships haven't been able to get the business or you are expecting your new hires to bring the business?

Phil Wenger

So I would say to date most of it has been from a relationships that we've -- even though if we didn't have the business that we had developed relationships so that anything happen we would be where they would turn. But we are actively looking for a revenue generating people and we generally would expect some additional business coming from them.

David Darst

Okay. And then do you have any thoughts on your ability to continue to penetrate kind of the urban Philadelphia market from a commercial perspective and then maybe just a multifamily dynamics there?

Phil Wenger

So you know Philadelphia is an area that we would like to move into. And when the BSA orders are lifted that will be a top priority for us. But I am not sure how much of that would happen in 2016 and our multifamily exposure in the city of Philadelphia right now is probably very, very close to zero.

David Darst

Okay. Would you like to enter the market through an acquisition or de nova or from adding commercial teams?

Phil Wenger

Well, if possible all three.

Operator

[Operator Instructions] Next we move to Matthew Breese with Piper Jaffray.

Matthew Breese

Good morning, everybody. Going back to the BSA/AML compliance issues. I know you said you expect relief in 2016. Just a clarity do you expect that it will --given your -- all of your regulatory you will begin to see progress towards full resolution or do you expect them still act in unison and lift all at the same time?

Phil Wenger

So we said that we are hopeful for 2016. We did not say we would expect, we said were hopeful. And I am not positive about that second question. I think it is possible that they could not be unison but I really don't know the answer to that.

Matthew Breese

Okay. And just going back to the provision real quick. If growth comes in line with your expectations, with the fourth quarter provision be a good starting point throughout the year?

Phil Wenger

Yes, I think it probably would. A charge-offs in fourth quarter were incredibly low so depending on charge-offs it could be a little higher but having said that the first quarter is also our toughest quarter for growth, so it's going to be a factor of growth and charge-offs.

Matthew Breese

Okay. And then my last question I was just curious if you looked at the recent FDIC proposal to get the DIF up to1.35% and if so what impact could that have on your insurance premium for 2018 and is that baked into your overall expense expectations for 2016?

Phil Wenger

So on an FDIC; we still don't have any banks that are over $10 billion. So I think the increase is only for banks over $10 billion. So we do not anticipate that it will have an impact on us in 2015 or 2016 excuse me.

Operator

And at this time there are no further questions. I'd like to turn the call back over to Phil Wenger for any additional or closing remarks.

Phil Wenger

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

Operator

And that will conclude today's call. We thank you for your participation.

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