Simmons First National's (SFNC) CEO George Makris on Q4 2015 Results - Earnings Call Transcript

| About: Simmons First (SFNC)

Simmons First National Corporation (NASDAQ:SFNC)

Q4 2015 Earnings Conference Call

January 21, 2016 04:00 PM ET

Executives

Burt Hicks - IRO

George Makris - Chairman and CEO

Barry Ledbetter - Chief Banking Officer

Bob Fehlman - Senior EVP, CFO and Treasurer

David Garner - Chief Accounting Officer

Analysts

Matt Olney - Stephens

Stephen Scouten - Sandler O’Neill

Michael Ross - Raymond James

Peyton Green - Piper Jaffray

Operator

Good day, ladies and gentlemen, and welcome to the Simmons First National Corporation Fourth Quarter Earnings Call and Webcast. At this time, all participants are in a listen-only mode. Later, there will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, today’s call is being recorded.

I would now like to turn the conference over to Burt Hicks, Investor Relations Officer. Sir, you may begin.

Burt Hicks

Good afternoon. I’m Burt Hicks, Investor Relations Officer of Simmons First National Corporation. We welcome you to our fourth quarter earnings teleconference and webcast. Joining me today are George Makris, Chairman and Chief Executive Officer; Bob Fehlman, Chief Financial Officer; Marty Casteel, President and CEO of Simmons Bank, our wholly owned bank subsidiary; Barry Ledbetter, Chief Banking Officer; and David Garner, Chief Accounting Officer.

The purpose of this call is to discuss the information and data provided by the company in our quarterly earnings release issued this morning and to discuss our company’s outlook for the future. We will begin our discussion with prepared comments, followed by a question-and-answer session. We have invited institutional investors and analysts from the investment firms that provide research on our company to participate in the Q&A session. All other guests in this conference call are in a listen-only mode.

A transcript of today’s call including our prepared remarks and the Q&A session will be posted on our website under the Investor Relations Tab. During today’s call and in other disclosures and presentations made by the company, we may make certain forward-looking statements about our plans, goals, expectations, estimates and outlook. I’ll remind you of the special cautionary notice regarding forward-looking statements and that certain matters discussed during this call may constitute forward-looking statements and may involve certain known and unknown risks, uncertainties and other factors, which may cause actual results to be materially different from our current expectations, performance or estimates. For a list of certain risk associated with our business, please refer to the forward-looking statements caption of our earnings press release and the description of certain risk factors contained in our most recent Annual Report on Form 10-K, all as filed with the SEC.

Lastly, any references to non-GAAP financial measures are intended to provide meaningful inside and are reconciled with GAAP in our earnings press release. These non-GAAP disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.

With that said, I’ll now turn the call over to George Makris.

George Makris

Thanks, Burt, and welcome to our fourth quarter earnings conference call. In our press release issued earlier today, we reported record core earnings of $25.9 million, an increase of $14.5 million compared to the same quarter last year and record diluted core earnings per share of $0.86, an increase of $0.22 compared to the same quarter last year. Year-to-date core earnings were a record $89.6 million, which is an increase of $50.9 million compared to 2014. Year-to-date diluted core earnings per share were record $3.18, representing an increase of $0.89 per share compared to last year.

Our core efficiency ratio for the quarter was 59.4% compared to 64.3% in the same period last year. Our core return on assets for the quarter was 1.36% compared to 0.96% in the same period last and our core return on tangible common equity for the quarter was 15.89% compared to 12.65% in the same period last year.

Core earnings for fourth quarter of 2015 exclude following non-core items, $752,000 in after tax merger related expenses, $36,000 in after tax branch right sizing cost and $1.3 million in after tax charges related to the accelerating investing of compensation agreements of several retiring executives and senior managers.

Including these non-core items, net income was $23.8 million for the fourth quarter, an increase of $11.1 million or 88.2% compared with the same quarter last year. Fourth quarter diluted earnings per share were $0.78, an increase of $0.06. On a year-to-date basis, net income was $74.1 million, an increase of $38.4 million or 108% compared to 2014.

Diluted earnings per share were $2.63, an increase of $0.52 compared to last year. For the quarter we achieved strong loan growth. On a linked quarter basis, total loan growth was $66 million. During the quarter, our credit card portfolio grew by $6 million and our Ag raw portfolio declined by $35 million. Adjusting for this seasonality, loans grew by $95 million or 1.95% for the quarter.

During the quarter our legacy portfolio grew by $407 million, $195 million migrated from the acquired portfolio and $212 million was a result of organic growth. As a result of the substantial increase in our legacy portfolio, we added approximately $1.5 million to our reserve. In the fourth quarter, we achieved a solid core net interest margin of 3.88%, which was up from 3.63% in the same period last year.

On a core basis, we increased non-interest income by $12 million or 70.9% over the same period last year. Core non-interest expense increased by $20.1 million or 45% over the fourth quarter of 2014. During the third quarter of 2015, we entered into an agreement with FDIC to terminate all of remaining law share agreements. As a result all FDIC acquired assets are now classified as non-covered. All acquired loans were recorded at their discounted net present value therefore they were excluded from the computation of asset quality ratios for the legacy loan portfolio except for their inclusion in total assets.

At December 31, 2015 the allowance for loan losses on legacy loans was $31.4 million with an additional $1 million allowance for acquired loans. The loan discount credit mark was $55.7 million for a total of $88.1 million of coverage for a total coverage ratio of 1.8% of gross loans.

Non-performing loans as a percent of total loans were 58 basis points, which is an improvement from 59 basis points in the third quarter of 2015. The 2015 year-to-date net charge-off ratio excluding credit cards was 16 basis points and the year-to-date credit card charge-off ratio was 1.28%. Our capital position continues to remain very strong. At year-end common stockholders’ equity was $1.1 billion and our tangible common equity ratio was 9.3%.

Before opening the line to questions, I’d like to spend a few minutes discussing our outlook for 2016. We know that in 2016 accretion compression is a challenge we must overcome. We expect our net accretion benefit in 2016 be approximately $15 million less than 2015.

In addition, we will continue to add our loan loss provision to account for the migrating loans from the acquired pool to the legacy pool. Several of our newer markets have provided excellent loan growth and we see that same trend continuing in 2016. We still expect 7% to 10% annualized loan growth during the year. Margins will continue to be influenced by competitive pressures. Non-interest income should continue to increase as we will benefit from the full year of the integration Trust Company of the Ozarks and we continue to invest in the expansion of trust, investments and insurance services throughout our footprint. That increase will be offset somewhat by an expected decline in mortgage revenue from the good year in 2015.

We will continue to manage our expenses through a commitment to improve technology and process improvement. However, we will invest in the build out of several lines of business and that expense may have a short-term negative effect on our efficiency. In 2015, we successfully integration Liberty Bank, First State Bank, and Trust Company of the Ozarks. We made excellent progress in implementing best practices learned from each of these institutions.

We feel we’re positioned to continue discussions with potential merger partners not only in our existing footprint, but in new geography as well. We remain optimistic that we will complete multiple acquisitions within 12 months. Of course with $7.6 billion in total assets it won’t take too many acquisitions to push ourselves with the $10 billion asset threshold, which will bring increased regulatory scrutiny in compliance expense as well as decreased interchanged revenue.

We expect much of 2015 preparing our company for this milestone. We’ve hired some great folks and implemented a number of systems and processes that have made us a better company. As such we believe that we are well positioned to eclipse $10 billion asset hurdle at some point in the near future.

During the fourth quarter we had several executives and senior managers retire including David Bartlett, our Chief Banking Officer; James Stobaugh, our Regional Chairman for Northwest Arkansas; John Clark our Tennessee Regional Chairman; David Bush our Bank Card Department Head and Shirley Crow, our Loan Administration Manager. We would be remiss not to thank each of these individuals for their service and dedication to our company and we wish them all well in their future pursuits.

Thankfully our company has a deep bench of experienced and talented financial service professionals and these retirements as well as a continued growth of our organization provide tremendous management opportunities for those individuals and others who want to join our team.

This concludes our prepared comments. We’ll now open the phone line for questions from our Research Analysts and institutional investors. At this time I’ll ask the operator to come back on the line and once again explaining how to queue in for questions.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] Our first question is from Matt Olney from Stephens. You may begin.

George Makris

Hey, Matt.

Operator

Matt Olney your line is open please check your mute button.

Matt Olney

Can you guys hear me?

George Makris

We can, how are you Matt?

Matt Olney

Okay, hey how you guys doing?

George Makris

Good.

Matt Olney

Hey, I want to start on the loan growth. The goal you guys talked about before and again today that 7% to 10% range we didn’t see that this quarter or last quarter anything you can point to that would suggest you guys will be able to get there in 2016?

George Makris

Yeah Matt let me go through that reconciliation again because we’ve started to get into our seasonality seasons and that skews a little bit, so our gross loans grew by $66 million linked quarter basis so third quarter to the end of the fourth quarter. During that time our credit card portfolio went up $6 million, but our Ag raw portfolio started playing off it was actually down $35 million from the third quarter. So if you adjust that that’s basically a 2% increase in gross loans four quarter and annualized, it’s about an 8% increase. So we feel pretty good about that.

We did have a substantial movement from the acquired bucket to the legacy bucket $195 million we also generated $212 million of organic loan growth during the quarter and you probably really understand this but we had to make a fairly substantial provision to account for that $400 million increase to our legacy portfolio. So we’re still optimistic that 7% to 10% annualized loan growth will be achievable.

We did have $82 million pay-off in the fourth quarter, $24 million of that was in our impaired loan bucket, so we were glad to see that money actually come in. the other would spread between our acquisitions for First State, Liberty, Delta, Metropolitan and then $4 million in those attributable to the FDIC loans on our books. The rest of the decrease in the acquired portfolio was just due to the regular paydowns on the amortizing loan. So we’re still pretty optimistic about 7% to 10% loan growth and I’m going to let Barry Ledbetter talk a little bit about some of the markets that are driving that growth.

Barry Ledbetter

Hey, George. In the fourth quarter the Little Rock, Northwest Arkansas, St. Louis, Wichita, Middle Tennessee contributed most of that growth for us, even had growth in Northeast Arkansas but we did have some paydown on Ag raw loans there and looking forward to 2016 in the pipeline report we’re showing about $170 million out in the pipeline right now and again most of those markets are the same, New Orleans [ph] Northeast, Arkansas Northwest, Central Arkansas, St. Louis, Wichita and some in Middle Tennessee, but we do feel optimistic about our loan growth going forward.

Matt Olney

Thanks, Barry that’s helpful. And Barry I will be happy but that loan pipeline of $170 million how does that compare to previous period?

Barry Ledbetter

I would say it’s up significantly over previous periods and over last year as well. We’ve had - we’ve been looking at lot of loans and we feel good about that and we feel that again a lot of these loans you don’t know about as far as closing and stuff but we feel very positive as far as the loans we’re looking at and we have to make those loans.

George Makris

Hey Matt let me make one comment just about where we are with timing of integration with the acquisitions. As you can probably understand our first priority anytime we integrate an acquisition is keeping the current business. So our loan offers are out calling on their customers’ loan some of us to make sure they are comfortable still doing business with Simmons. We’re passed that point now we’ve done an excellent job in maintaining our business so you’re seeing that pipeline starting to grow because those loan officers are now out calling on new customers and even expanding the relationships with existing customers. So we think we’re passed that maintenance point and we’re into the growth point with our new acquisitions.

Matt Olney

Got it, that's helpful. And then shifting over on the expense side lots of moving parts in the fourth quarter and I guess we’ll get the full impact of the Ozark trust deal in the first quarter. What’s the good run rate on the operating expenses for the first quarter?

George Makris

We still think $62 million to $63 million is a good run rate for the first couple of quarters in 2016. We had two to three unusual expenses in the fourth quarter. We did some media buys in the fourth quarter that really won’t happen until the first quarter of this year particularly in some newer markets and I’ll tell you advertising in national just little more expansion than it is in prime world. So that was a pretty good chuck of money.

We have also restructured most of our benefit plans and just to keep it real simple we have combined all our former time off policies into a pay time off policy in an order to bring all the merged companies together. We had an accrual experience of about $0.5 million in the fourth quarter to begin 2016. We also made a $300,000 contribution to our foundation. You probably know that it’s still in its infancy, but they are doing great things and all that accounts were about $1.5 million of our expenses in the fourth quarter. If you take that away we are in that $62 million, $63 million run rate range.

Matt Olney

Got it. Okay, that’s very helpful George. Thank you for that and I’ll hop off and let somebody else hop on. Thanks.

George Makris

Okay, thanks.

Operator

Thank you. Our next question is from Stephen Scouten from Sandler O’Neill. You may begin.

Stephen Scouten

Hey, guys. Good afternoon.

George Makris

Hey, Steve.

Stephen Scouten

Question maybe obligatory at this point, but do you guys have any energy exposure to note that I am maybe not aware of and if so do you know the reserves on any of that?

George Makris

We really don’t enter energy exposure that we would really have would be anything related to the favorable sale and that’s been well passed us two or three years. We had a couple of strip shopping centers that had some tenants that left. So those loans were stressed a little bit. We’re passed that too. We are not making any special provisions for any energy exposure to that.

Stephen Scouten

Okay, great. And maybe you guys talked about M&A that could take across $10 billion, what do you seeing currently in terms of those conversations and have they shifted at all given the kind of market turmoil we’ve had even in the last two weeks? I mean is that going to be a hindrance given people’s expectations for takeout prices and what not?

George Makris

We don’t know exactly how they are going to look at it, but we hope that we’ve been very clear that we value a potential acquisition it’s on a relative basis. So it really moves down to how much of an income stream can their organization provide to the total and I think most everyone understands that the value of the shares fluctuates up or down. I am not going to say that there is not a little angst out there about the total value of the deal. But we are still optimistic that on a relative basis we are in pretty good shape.

We still have several conversations ongoing. Marty Casteel gets mad we'll not tell him we took the year off. But we basically did accept for Trust Company of the Ozarks from an acquisition standpoint. We’ve spend a good amount of time this year making sure that we integrated all our acquisitions into the company and I think we are in a great position today to really take up the acquisition trail again.

Stephen Scouten

Okay, great. And any clarity or maybe color you can give in regards to what sort of size acquisition you would optimally targeting at this point in terms of asset?

George Makris

Yeah and I would tell you that if we go into a new territory that we don’t have a presence in today that numbers of billion dollars. So we are looking at for a substantial size company to start in new territory. We’d have several markets where we would like to increase our share. So those markets we are looking at $300 million to $750 million asset size banks that have a very small geography that will help give us scale in certain markets. So really just depends on whether we have a presence there now or whether it’s a new territory for us.

Stephen Scouten

Okay. And maybe one last one from me is just where would you guys optimally want to have that loan loss reserve. I know like you said, some of that build was related to migrations from the acquired into the kind of legacy bucket there. But how do you see that build working itself out maybe on a dollar basis or on a percentage basis how are you all think about it?

George Makris

Yeah I’ll tell you. We used to think about it on a percentage basis and we really can’t do that anymore in the dynamic of purchase accounting has sort of changed the way we look at our reserve. The unusual thing about the migration from our acquired bucket to the legacy bucket is that no impaired loans will ever migrate. So all the bad stuff stays in the acquired bucket with the loan mark against it. So those loans that we’re transferring are only those loans that require the minimal amount of reserve. So just the math behind that loan makes the percentage go down.

So we have a range that we look at each month to make sure that our loan loss reserve is adequate and it’s just a changing dynamic. I can’t give you necessarily a percentage that would be a target for us. It really just depends on the quality of the portfolio, which today is very, very good. We wouldn’t expect any shift in our provision other than increasing it for those acquired loans migrate.

Stephen Scouten

Okay, make sense. I appreciate that.

George Makris

Sure.

Operator

Thank you. [Operator Instructions]. Our next question comes from Michael Ross with Raymond James. You may begin.

Michael Ross

Hey, good afternoon guys how are you?

George Makris

Hi, how are you Michael?

Michael Ross

Good, hey. I think I heard George I think I heard you say that you might expect some upward pressure on the efficiency ratio in 2016. Is that kind of from the fourth quarter core rate or is it kind of from the full year efficiency rate and kind of what are the drivers of that?

George Makris

Michael I think my comments related to a target that I may have mentioned maybe in our last call of 55% efficiency ratio for 2016. We would expect our efficiency to be between 55% and 60% for the year. And that’s going to be negatively impact a little bit. So we won’t get to 55% probably because we’re hiring teams of investment professionals, trust professionals, insurance professionals, who are coming in with basically no portfolio. So we have some upfront investment that we hope really plays off over the long-term.

So those folks usually don’t come very cheap and we have several markets to build out. So that’s what I’m referring to when I talk about some negative pressure on our efficiency, but we do expect to stay below 60% for the year 2016.

Michael Ross

Okay. So those people are you talking about have you hired them and if not is it included in that kind of core $62 million to $63 million run rate build off?

George Makris

It is included in that core rate we have hired a couple in the fourth quarter. We have several prospects that could come to pass in the first quarter of 2016, yes that is built into our numbers.

Michael Ross

Okay, that’s helpful. And then maybe just switching to the outlook for the margin, I think you had mentioned $15 million less kind of accretion benefit. Do you have a sense for kind of what the core margins expectations are as you kind of move through the year, have you seen any behavior on the deposit side since we have raise rates and is there opportunity to maybe like those costs maybe a little bit longer than you might have anticipated? Thanks.

Bob Fehlman

Yeah, Michael this is Bob first on the cost side and deposit. We really haven’t seen an increase yet just 25 bps as it really made a dent yet. If the Fed moves more next year you might see some at that point. On the NIM for the quarter we are 383 on a core basis. We’d expect you’re going to see in the first quarter it’s going to be lower because of the seasonality. But we’re pretty - we expect that number to be pretty closer to 385 to 390 for the balance of next question. Again first quarter will be lower I would expect in the low 380s possibly dip below that.

The accretion that we said that, we said that was a net amount, keep in mind that takes away the FDIC gain that’s in the non-interest piece of it. So there while it’s $15 million it’s probably $22 million, $23 million decrease in the net interest income component of that. We’ll have again another volatile year on the GAAP NIM as we have accretion coming in and when you have payoff as that number goes up goes down so forth. We’re expecting to see a pretty stable NIM in the core side in the 380 to 390 range.

Michael Ross

Okay, that’s really helpful. And then just one final one from me, the $170 million pipeline that you mentioned and you said it was up substantially where was that up I guess by product or geography. Is there anything that’s kind of specifically driving that?

Bob Fehlman

Probably the biggest driver behind that is our St. Louis and Wichita markets. Probably 50% of that is there 30% in Arkansas and other 20% would be in Tennessee.

Michael Ross

Okay, that’s very helpful. And have you added any lenders there recently that might have driven that strong increase particularly in St. Louis?

Bob Fehlman

We have added lenders there and I would tell you that we are also looking for additional lenders. We think the national and [indiscernible] markets are great markets for us and we’re actively looking to add lenders in those markets as well.

Michael Ross

Okay, well maybe you could take a couple from [indiscernible]. Thanks for taking my questions.

Operator

Thank you. Our next question comes from Peyton Green with Piper Jaffray. You may begin.

Peyton Green

Yes, good afternoon. I was just wondering maybe if you can tell me Bob what the split was between the scheduled and the accelerated accretion of $11.1 million value in the quarter?

Bob Fehlman

Yeah, Peyton about $3.5 million of that was related to just accretion that from payoffs either unimpaired or other loans that come up, the other was the scheduled through the year. So we would expect next year somewhere they would in the $6 million, $7 million a quarter is what our expectation is on the accretion. And again it’s back to normal cash flows.

Peyton Green

Okay. So you don’t see any change in that $6 million to $7 million per quarter. It’s...

Bob Fehlman

There will be a change in that there will be to pay any additional payoffs that come it could it will be volatile again. Those are so hard to project, but we would expect the cash flows to be somewhere in that $6 million range.

Peyton Green

Okay, alright great. And then if the Fed does not move over the course of the year what measures would you all anticipate taking to change the balance sheet?

Bob Fehlman

Right now we start through the balance sheet. We’re not waiting on the Fed to go up or to hold or we’re just running the bank like we think it should be run. If the Fed holds where it is we’re well positioned to reinvest continue to invest in the loan portfolio and in a shorter duration continued in that 2.5 to 3 years on the investment portfolio. So cost of funds are still at their lowest level. We’ve got lower liquidity than we’ve had in the past it’s either invested in the security portfolio or the loan portfolio. We think we’re in neutral point if they continue where they are we’re not going to see ourselves change our balance sheet, but we’re not going to see our net interest income go up or down by them substantially changing. Let’s say obviously something change and they did it in a drastic fashion nobody expects that at this time.

Peyton Green

Okay. And then Bob with regard to the core expense run rate of $62 million to $63 million how much more in cost saves are there from the acquisitions in terms of the integration of those acquisitions? Would you expect to see or will we not really see those because you’ll basically spend all the savings that you might get going forward? And then I guess maybe the timing of that.

George Makris

Peyton this is George I’m going to take a shot at that and then Bob can correct me later. We continue to take a look at our branching network. You probably know that we have almost 160 branch locations and the trend in banking today and with fewer and fewer face-to-face opportunities to transactions we continue to see the transactions all across our branch networks decline. So we are always taking a look at ways to become more efficient in our delivered to our retail customers.

So I would expect us to continue to identify low performing, low potential branch locations and we’ll get some savings out of that. We have spent a significant amount of money over the last 12 to 18 months upgrading our technology and some of our systems. We have not seen the full benefit of that implementation yet. So as it continues to mature we’ll see some efficiencies along the way not necessarily in expense savings but in some revenue opportunities down the road. So we think we’ve got a good foundation on which to build, we think there are some continued opportunities of cost saves and that will be spread out probably over the next 12 to 18 months as we really examine our branch network.

Peyton Green

Okay. And then so with the retirements that you mentioned in the fourth quarter, will any of that drop to the bottom-line or will that be invested in new productive capacity?

George Makris

No, some of that will drop to the bottom-line; a lot of that expense had to do with our vesting of longer term benefits, which would be basically normal for that caliber executives who retired. We obviously have replaced most to those folks. But it becomes most of that was early invested. So we won’t have that recurring expense going forward.

Peyton Green

Okay. Alright, great. Thank you for taking my questions.

George Makris

Thank you.

Operator

Thank you. [Operator Instructions] Our next question is from Matt Olney with Stephens. You may begin.

Matt Olney

Hey, guys. Just a follow up on the tax rate in the fourth quarter, the accrual looks a little bit low what’s behind that and what’s the outlook for the tax rate in 2016?

George Makris

We’ll let our tax expert David Garner answer that question.

David Garner

Hey, Matt. The biggest impact of the tax rate during the fourth quarter was if you remember back to the Metropolitan acquisition, Metropolitan National Bank had a significant net operating loss of about $85 million. Section 382M of the code restricts the use of those net operating losses on a go forward basis. In at acquisition date we were very conservative on how much of that net operating loss we’d be able to recognize.

Now that we are two years in cash flows had been much better from that acquisition than we had at the beginning. So we increased our estimate of how much we are going to be able to use of that net operating loss and that was a little over $2 million benefit to the income tax expense line. On a go forward basis we acquired several subsidiaries through our acquisitions in Tennessee and Missouri, our REITs an investment holding company and a captive insurance company, which we are going to maximize our benefit on a go forward basis.

So we think right now our projections are about 31.5% to 32% for a full year average tax rate for 2016. There still might be a little lumpiness in there depending on what our balances are in those REITs in that investment holding company and if we have any additional revaluations of that net operating loss.

Bob Fehlman

One of the big impacts on it was the losses that we expect it on the early side for the Metropolitan acquisitions were a lot less whether it was OREO, whether it was fixed assets or non-performing loans and as time has matured it’s made it clear that we were able to achieve that deduction. So that’s how we are able to free up the reserve on that piece of it.

Matt Olney

Okay, got it. Thank you, guys.

Bob Fehlman

Okay.

George Makris

Thank you.

Operator

Thank you. Our next question is from John Heath with Foyer [ph]. You may begin.

Unidentified Analyst

Hey, guys good quarter.

George Makris

Hey John.

Unidentified Analyst

Hey sorry. Question on the accretable yield when I’m looking at sort of follow on Peyton’s question he asked most of it, but in the third quarter here it looks like a balance in the accretable yield I think it was like $1.4 million but then in the quarter you noted - in the fourth quarter you recognized $11 million so is that time from non-accretable getting moved into accretable or am I missing something on the Q? Thanks.

David Garner

Hey John, David Garner. Yeah some of that was related to a move from non-accretable to accretable, also after the termination of the loss share agreement there was some reclassification between accretable and non-accretable and that is the biggest impact on that.

Unidentified Analyst

Got it, that make sense. I thought that might have been the case. All right, thank you.

George Makris

Thank you.

Operator

Thank you. [Operator Instructions] And I’m showing no further questions at this time. I’d like to turn the call back over to George Makris for closing remarks.

George Makris

Well thanks to each of you for joining us again for our fourth quarter earnings conference call. So no other questions have a great day and if we don’t talk to you before then we’ll talk to you about three months from today. Have a great day.

Operator

Ladies and gentlemen this concludes today’s conference. Thanks for your participation and have a wonderful day.

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