Yadkin Financial Corporation (NYSE:YDKN)
Q1 2016 Earnings Conference Call
April 21, 2016 10:00 am ET
Scott Custer - President, CEO
Terry Earley - EVP, CFO
Brady Gailey - KBW
Stephen Scouten - Sandler O'Neill
Kevin Fitzsimmons - Hovde Group
William Wallace - Raymond James
Christopher Marinac - FIG Partners
Tyler Stafford - Stephens Inc.
Ladies and gentlemen, thank you for standing by. Welcome to the Yadkin Financial Corporation First Quarter 2016 Earnings Call. During the presentation all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded Thursday, April 21, 2016.
I will now turn the conference over to Scott Custer, CEO of Yadkin Financial Corporation. Please go ahead, sir.
Thank you, operator and good morning, everybody. Thank you for taking time to join us this morning. And certainly thank you for your interest in Yadkin Bank. I'm pleased to be able to talk about our first quarter, as we usually do on these calls.
I'm going to make some opening comments, which will be centered around the first couple of pages on the short presentation that we've got, that hopefully you have access to. And then turn it over to our CFO, Terry Earley to get into a little bit of detail on the quarter from a financial perspective. But just some highlights from the quarter from my seat here.
Number one, we were extremely pleased to be able to close our merger with NewBridge, a little bit earlier than we had thought and maybe a little earlier than we had signalled, but we were able to get regulatory approval in a very good way and we were able to close early and did so, on March 1.
So that's certainly a highlight of the quarter from a financial perspective. We made $0.39 on a core operating basis and Terry is going to get into more of the detail on that. I would say that as you think about the earnings of $0.39 for the quarter, impacted by the merger as we had NewBridge in for the third month of the quarter.
NewBridge's financial metrics were not where Yadkin's were in terms of, on a pure operating basis. So you had the full share count come in on March, 1 that would begin to impact EPS. But we're just beginning to start the cost save process. So you know the overall earnings, I think still be able to post $0.39 a share, with the new share count and not really hitting our stride quite yet on the cost saves.
I think it speaks to the core earnings power of legacy Yadkin. The ability that we have to begin to realize cost save synergies as we go through our integration process, with NewBridge and also to have as we implement the business model across the entire company now to realize revenue synergies are already being felt.
So, all of those things to say. I think a $0.39 quarter is exceptionally strong. I'm not going to go through all of the items on the 1st Page, but you do see the operating metrics. Particularly pleased with the return on adjusted tangible common equity still north of 13%. We still are, we're managing the business very well from an expense perspective, efficiencies ratio while it's up slightly from Q4 still below our targeted levels.
And again, if you think about NewBridge's efficiency ratio was 71%. So as we bring them in, our efficiency ratio on a core legacy Yadkin basis probably would have been in-line with Q4 and you'll certainly see that efficiency ratio, move down in future quarters as we realize, cost saves that are beginning to come in, even as we speak in the month of April here.
Pleased with loan growth of north of 10%, excluding acquired loans. Often, our first quarter can be a little slower quarter, yet I think it speaks to the robust markets that we're in, 75% of our core deposits were in, what I say the four best MSA's in North Carolina and I think you continue to see the good loan growth coming from those markets.
Importantly, credit quality improved and we see great credit trends in our portfolio. And you see that noted there with a nice decline in the charge-offs. And Terry's going to walk through a bit of reconciliation on tangible book value, but you see that we closed the quarter to 11.94%. But that's after we made a total of $0.60 in dividends, during the first quarter.
We paid our normal $0.10 a share dividend and then we paid a special dividend which you recall. We paid just prior to the NewBridge deal closing at $0.50 a share. So, I think that it speaks to the non-diluted nature of the NewBridge deal, good earnings and still enabling the company to return nicely to its shareholders.
Just a quick word on the NewBridge merger and we can talk more about this, if there are questions. But we're already well down the road on integration. You'll know that we've already talked about our conversion, our core systems conversions not scheduled until mid-September. But I'm pleased to say, that we're already fully converted in our mortgage business and NewBridge mortgage business is fully converted onto the Yadkin system.
The NewBridge SBA builder finance businesses are fully integrated into the Yadkin SBA builder financier business models. And really, the business model and credit delivery model has been fully implemented across the NewBridge footprint. So while we're operating on two core systems today and will be for sometime, our organization is one, the way we're delivering the customers is one, we operate as a one team and that's how we're doing it.
So we're pleased and well down the road on integration efforts. And you'll begin and certainly as you, when we have a chance to talk about Q2, that will be much more reflective as you see the cost saves coming in.
Flipping over to the next page in just a little more detail on our earnings profile, again you see this. I think the key thing here as you see the nice year-over-year improvement across all of our operating metrics that are detailed in the first four bullet points. I would, again call your attention to the one, two, three, four, fifth bullet point again around credit quality. Provision was just under $2 million less than Q4 reflecting, again lower net charge-offs, very much improved credit metrics and we continue to build our allowance.
I think the other thing that you can't see here on this page. As we look at the sequential quarter profile here of earnings. Is what we can see is, the intra quarter earnings trajectory of the company. So as we look at January, February and March really a great trajectory there and as, especially as we think about January to March, which are comparable month? Obviously March has the NewBridge in there, but you can really see the new earnings power of the company as we see, as we have a good length into the intra quarter results.
With that, I'm going to stop and certainly will forward the questions at the end, but I'm going to turn it over to Terry Earley now our CFO, to get into a little more detail on the financials for the quarter.
Good morning, everybody and thank you, Scott. I'm on Page 5 of the presentation. I think this page deserves some comment. I think, the first thing I would say is, you see the metrics, you see the NIM and GAAP NIM 4.05% and the core NIM 3.70%.
What I think is important to remind everybody is to go back and remember Q4 and note that the GAAP NIM was 4.29% and the core NIM 3.87%. And in that Q4, we highlighted two things that made it a bit, higher than expected and that was the interest income from the early call of the debt security, we disclosed that amount in the schedules to our Q4 release and we had exceptionally high, accretion recovery or loan recovery that went into accretion for loans that had been charged off prior to the merger date with legacy Yadkin, our MOE.
So those have been it's obviously, were somewhat unusual and they had the effect of increasing GAAP in core NIM in a pretty significant way. Obviously its back down this time, but what I think I want people to look at 4.29% to 4.05% GAAP NIM and assume that's totally driven by the NewBridge merger because it's really not.
NewBridge's NIM in Q4 was 3.52% and so on a GAAP basis. You know we've been in that middle 3.75% or so. So 3.70% is pretty good for, having a NIM on the core basis. It's going to trend a little lower, but I don't want you to take away from this, the level of decline that you saw, in Q4 is going to replicate it. So, at that pace, as we get into Q2 and Q3.
Also, I just want to make sure and I know there is lot of analyst and whatnot on the call. And our average earning assets and whatnot are, for the end of the quarter as you modeled, think about $6.448 billion as we jump out of Q1 going forward.
Turning to page, on Page 6. A good quarter in non-interest income and I can say that because not only it was, but there's a lot of merger things going on here too. But as Scott mentioned, the SBA front $60 million in production, 58% of it is in multi-funding 7a's and only 11% in portfolio product, which is pretty normal for us, around 10% plus or minus in the portfolio.
Scott said the integration was complete and the pipeline's net business are incredibly strong. Gain on sale margins held around pretty well in the quarter. On the mortgage side, you see the production number. The pipeline's the best we've seen, both in locked pipeline and unlocked pipeline and our mix of government business is certainly having a positive impact on our margins.
I guess the last thing, I would say reflects along the other non-interest income at the bottom. I mean, we not only had good mortgage quarters especially year-over-year, good SBA production that's allowed us to say, relatively steady in the SBA world, but we had a good wealth quarter and obviously BOLI is up with the bringing in NewBridge BOLI, but a really strong wealth quarter as well.
Turning to Page 7, as Scott said we've got about 58% efficiency ratio up slightly but NewBridge is was about 71% efficiency ratio business coming in. And we're certainly making progress on the cost saves. We disclosed that we got 12 branch closures that are planned and underway, customers have been notified, so those things are working their way through the system. And you can expect to see, the efficiency ratio continue to track down, as we take these costs out and we believe we're little ahead of where we thought we would be at the end of Q1. Now and are encouraged by that.
Even though, the savings we did realize at the end of Q1, we can't see it reflected that much in the quarter. On Page 8, on the balance sheet and we're about $7 billion, just a tad over $7.4 billion at the end of the quarter. We had 10% loan growth on originated loan, you see that in the top left bullet.
Obviously, good non-maturity deposits base at 73%, total deposit strong DDA. The TTA, tangible common equity, tangible assets down in the quarter, had just under 8.75% and certainly a better optimized capital structure coming out of the merger. And lastly, very importantly at the bottom right of the slide, is a reconciliation of TBV.
Now we got 51.5 million shares outstanding at the end of the quarter. We started the quarter with $12.51, had $0.10 a share regular dividend, $0.50 a share special dividend, $0.04 a share was the impact of some restricted shares that were issued earlier in the quarter. And then you see the impact of the merger.
The shares issued the price it was issued at mark-to-market on the balance sheet and the merger cost at about $0.50. So about 4% dilutive to TBV at the beginning of the quarter in-line with what we were expecting. We always talked about mid single-digit type dilution and we think, this bodes well for the earn back.
We've been talking about 2.5-year earn back and nothing we're seeing at this, would cause us to, think we can't as well or better.
Scott with that, I'll turn it over to you.
Thanks, Terry. I'm just going to quickly touch on asset quality, then we'll open it up for questions. And you see that on Page 9 and the way we break this down trying to show both the allowance along with the remaining credit mark.
I would say, maybe three key points on this slide. One is, we were very much benefitted by NewBridge and their strong asset quality position and the NewBridge portfolio was additive, accretive to the overall Yadkin's. And so our metrics have improved and you see at the bottom, the classified asset ratio now well below 20% at 18.5%.
Net charge-offs were 15 basis points and that's in-line if you go back for the last four quarters. We've averaged 16 basis points. So very much a good consistent run rate on from a charge-off perspective.
And finally, Terry was doing the reconciliation on book value just a moment ago. We still have 68 with NewBridge. Now, we've $68 million of remaining credit mark on the balance sheet. Certainly now that would - and it's really between $0.75 and a $1 of book value. So as we begin to realize that mark, as we've been able to in the past.
I would offer the book value is somewhat understated with $68 million of credit mark sitting there, that's still giving us nice protection on those loans. So asset quality remains a very strong point for the company.
I'm going to stop because I think we went through that fairly quickly. We spent, maybe right at 15 minutes. So we have plenty of time for questions and operator, I'm going to turn it back over to you, to see if there are any questions from folks on the phone.
[Operator Instructions] and our first question comes from the line of Brady Gailey with KBW. Please go ahead.
So I realized that the effective reserve is 150 basis points. Optically, you look at it and its 20 basis point. As you know, you acquire loans refi, that ratio will go higher. How many years, do you think it takes to build that, reserve of 20 basis points back up to 1%, is that like a two-year thing or a five-year thing?
This is Terry, I'll take that Brady. I think it's much closer to five years than two. I also think 1%, if we were to look at our peer group, I don't know any of them are really running. I think they're all sub 1%. I mean, not all but the median would probably be sub 1%, noticeably below 1% now.
It certainly will be, you know we've been consistently now for, I don't know three or four quarters building ALLL, but you know reflecting not only the covering charge-offs and providing for a loan growth and also being mindful of the credit mark, earn [ph] off. So we'll continue to build, we've done it again as I said, three or four quarters and you know, I don't have an exact number, but I'd say it's closer to five than two.
Okay. All right and then, I'm just curious about your take on future M&A. I mean, you have NewBridge close now. You still have a little bit of wiggle room till you get up to $10 billion. Would you all consider doing another acquisition at this point or is the focus for the next year or so really you know internally driven by integrating NewBridge and getting earnings higher?
Brady, it's Scott. I would say, well first of all. You never say, never in life. So let me preface it by that, but we like where we are today. I think $7.5 billion is a good size. We want to see the NewBridge deal get integrated right. We want to realize the benefits and the synergies from that.
We don't have our conversion and unfortunately until mid-September. So there's a lot of work to do between now and September and I just don't see ourselves throwing another log on the fire between then and now, with all that we have on our plate.
So again, you know so I think we'll be largely internally focused company for the next few months. One that is, going to deliver the results that we committed to deliver it on the NewBridge deal and trying to realize the benefits of really good organic growth because of the markets that we're operating in and so we feel good about that, right now. So I hope that was somewhat of an answer.
Yes, thanks for the color guys. Appreciated.
Our next question comes from the line of Stephen Scouten with Sandler O'Neill. Please go ahead.
A question for you on the loan growth and looking at the kind of the details, you guys give on Slide 8, in the growth between the acquired books and the originated books and that 10.2% number. Can you kind of give me some clarity on what, is there any migration from the acquired over to the originated book in anyway because if I'm assuming about $2.1 billion in loans from NewBridge, but I'm almost seeing about $1.9 billion increase in acquired loans. Can you just kind of help me reconcile that and kind of think about the sustainability of the organic growth rate?
Yes, Steve. This is Terry. I'll take that. For sure, there'll be a little bit of migration from the acquired book to the originated book, especially for non-purchase impaired, as loans refinance.
The 03-3 [ph] the purchase impaired there might be a little every now and then, where loans totally rehab, gets refinanced. It's competitive on the refinance, we might move that over. But this is, in terms of our production numbers remain strong, our pipelines remain strong. Q1, maybe a little bit of elevated pay offs in the NewBridge book, but certainly less than we saw especially in Q3 of last year.
And so, we've talked about overall growth in the mid-to-high single digits. We did that last year, with loan growth of about 7%, net of some pretty heavy chart pay offs and we're expecting that again. Obviously NewBridge was a faster grower than that. And this really, it ties back to the comment on loan pricing on the NIM page.
I mean, we're in the middle of changing our pricing strategy in the NewBridge markets to slow down their growth and to improve their pricing, that takes time, but my partner Steve Jones and Ed Shuford on the credit side are well underway in those effort. So expect, you know again expect that growth to be in that range and originated growth is going to remain very strong for us, especially given the strength of our markets.
Okay, that makes sense and then maybe Terry, if you could give me any sort of incremental guidance on the additional NIM compression, you expect. I mean, obviously what you just said kind of ties into my question of kind of re - adjusting the mindset of the legacy NewBridge and the pricing expectations, having pricing structured loans. How much of a drag, do you think that will be on your NIM moving forward?
Well and Steve, here's the way I would think about it. Legacy Yadkin was about 3.75% core NIM company. NewBridge was at 3.52%. Yadkin's about 60% of the earning asset base in rough numbers. So that's going to give you an idea of where the core NIM is going to migrate to somewhere in that 3.60% range, 3.65%. And then obviously, even though our pricing expectations going forward are going to change, it takes a long time to turn that battleship, if you will.
So, it's - we're saying it, we're feeling it changes. We look at, what's in the pipeline and what new production looks like. But it's going to take a while for it, for the work on the NewBridge side to lift the NIM. But I think it's going to really hold down the compression and again, so I would say somewhere in that 3.60% to 3.65% range based on where we're right now.
Okay, thanks and one little bit of minutia. What do you expect to be your forward tax rate? Obviously, a little elevated in the quarter.
It was well - we signalled Yadkin's was a 35% operating effective tax rate. It picked up about 3.54% NewBridge. We had some things that were tax advantage. So it picked up a little bit, it's just about 3.54% and as far as I can see right now, would expect that good estimate from my chair, going forward.
Okay, great. Thanks so much for the time. I appreciate it guys.
Our next question comes from the line of Kevin Fitzsimmons with Hovde Group. Please go ahead.
Just one quick follow-up on the margin. So Terry, I hear you that looking at the two companies' core margins and so somewhere in 3.60% or 3.65% kind of range, on a full quarter basis. How should we think about the trajectory further out and specifically that, assuming we don't get the help from Fed rate hikes because I would think that, it settles in that full quarter range and as you kind of alluded to, you're going to be kind of de-emphasizing growth and emphasizing pricing in the NewBridge market.
So should we expect to see that kind of over some period of time, that margin start to approach with the core, the legacy Yadkin margin used to be?
Well I think, you mean is the core NIM going to, the new core NIM is going to migrate up to, kind of what the legacy Yadkin core NIM was?
Is that your question?
Kevin, I think that's going to take, we'll be taking baby steps. I mean, when you got a $5.2 billion loan portfolio and you're originating between $1.5 billion and $2 billion a year. I mean, it's got to fund up and whatnot. I mean, I'd say it's going to be in that. I think we'll start to see progress maybe in a couple of quarters and then, I think it's going to take closer probably to like two years, before you see it fully migrate up to there.
The average life of the NewBridge loan is about 3.5 years something like that. So, that gives you an idea about what are our re-pricing ability is going to be there. And you didn't really ask this question. I mean, the NewBridge portfolio is certainly shorter than the legacy Yadkin portfolio. It was probably closer to 4.5.
I think the other thing that's encouraging is that, the mix of fixed and floating business between the Yadkin and NewBridge is exactly the same. 54% fixed, 46% floating, so it's going to have similar re-pricing, floating rate characteristics and I think, that's going to help to. Whereas Yadkin was probably 70% fixed.
So, anyway more detailed than you probably asked for, but it's an encouraging signs, the NewBridge business model, the loan model, the credit model have fit in very, very nicely into the Yadkin business model.
Okay, thanks and one quick follow-up on the subject of now the reported margin. I know this is, tough to forecast with any precision on a quarterly basis. But when we look at the net accretion income of $3.6 million in this quarter. There's a few moving parts because I know you've had accretion kind of migrating down from all the deals that have happened before, but now we have NewBridge coming in as well.
So when we think about the delta or the GAAP between the reported margin and the core margin. How should we think about that GAAP as we look out two or three quarters from now, is it theoretically going to shrink? Are we still early enough in the accretion situation with NewBridge that could stay the same or even expand from here?
Well, I think one thing is that, March we only had NewBridge accretion in for one month in the quarter. So when you think about the absolute number, you got to keep that in mind. It's got, it's likely to go up, some. I think the migration, though is consistent with what we've talked about in prior deals, the GAAP NIM will migrate to the core NIM, of what I think is going to.
Obviously the slope is stepper in the first year or two and then after that, it's going to kind of slope of that move, is going to level out some. I think, but it's probably more in that 3.5 year to four year range to get all the way there. And I think, it was probably a little bit upside and the difference the delta between the two, early on just because we only have one month of accretion from NewBridge.
You know, with [indiscernible] our credit mark on the NewBridge transaction credit and interest rate mark is, given the quality of the loan book and the fact that, their credit metrics were so good. It's certainly significantly smaller than we've seen in prior transactions. So many times, these things really spike and I just don't think we're going to see it and do that, the delta between the GAAP and the core because the books are good and it's very similar to ours, so.
Okay, great. Thanks.
Our next question comes from the line of William Wallace with Raymond James. Please go ahead.
Maybe, I kind of want to ask a question about margin. But, well I'm going to ask it. So Terry, have you got a chance to now look at the interest rate positioning and figure out, how you guys want to position yourself? You'd mentioned may be making some changes on the balance sheet to be a little bit more neutral, now you've had a month of NewBridge, have you had the opportunity to think more about that?
Yes, Wally. We've been pretty busy. We've done a lot, David's here, our Treasury. You know, David we've done a lot on the investment portfolio. We're - from derivative plus space to and as well as we're probably lengthening out some of the funding, they had. So, I would say we're in the middle of modeling all that right now, but we should come out. Less asset-sensitive than legacy Yadkin was pretty natural on an EVE long-term basis, EVE.
Maybe slightly, slightly asset-sensitive on the short-term NIE [ph] basis. So that's what we believe, that's the way the modeled it. Before we did all this work and now we're, you got to run your models and see. So you know certainly the direction of rates is, if you got a crystal ball, I hope you'll share it with us. But, we feel like where we have - if I had a Mulligan to go back two, three, four years.
I've probably been guilty of letting the company be too asset sensitive. We've left current period earnings on the table to do that. And I just think, given the relative uncertainty today, it's more prudent to be pretty neutral especially long-term risk.
Okay, all right. Thanks. And then, I wanted to maybe talk about the cost saves in a little bit more detail. So we know, you've got 10 branch closures late second quarter, two late third quarter and then the conversion also in September. So you kind of got three big events, there I assume. Going to be the driver of the majority of the remaining cost saves.
Is there any way you can maybe just help us think about what percentage of the total cost saves, we'll see out of those, three events or maybe just think about it, as two events, the 12 branches and then the conversion?
Yes, Wally. It's Scott. I think, you've described it because in fact you just described it in the same way I described it to our board yesterday. It was, the cost saves are going to be realized in really three tranches or three buckets. First is just with the, some of the personnel savings that we're getting as we're able to realize those here upfront. So those are being realized some in March, but more in April and May.
And so we will have a nice bucket of cost saves there. I would say, that in the first quarter we will realize and in the neighborhood of 15% of the total. As we move to the second quarter, again our branch closure is in. That's another bucket and that would probably move us along, with ongoing personnel reductions.
We'll realize right at about 50% of our cost saves through the second quarter. And then because the conversion and obviously, a lot of cost saves will come out of conversion and we've got this by-person, by vendor contract and on them. So it's very tight in terms of how we're managing the process.
The conversion won't occur till mid-September. So we'll realize about 70% of the full cost saves by in the Q3, but in some of those - conversion will spill to the early part of Q4 and we'll be fully phased in, you know essentially done by into Q4.
So I hope that helps, I mean you got the three buckets personnel saves, upfront. Branch closures in the middle, conversion mid-September, all cost saves in and done by 12/31.
And Wally, Terry. Let me tag on, is that mainly you're going to NIE move, that's just as we look at the end of the period, NIE. It's going, we're going to have to realize that. But it's not going to mean that Q2, some of those savings will maybe realized later in the quarter and those type of things.
So the timing of how they commenced, just how we're seeing it, from our side there in terms of how we're thinking about the calendar for the rest of the year. I would say, just on the total bucket. We've I think told all of you that we would, that we believe, our realized cost save potential would be in the $28 million range. We remain very confident in that number and if, we had, if we were going to miss it, we miss it on the upside. Meaning, we'll miss it. We'll do better than the $28 million when the dust settles.
Thank you, that's helpful. Scott, I appreciate it. I'm wondering if, on the organic loan growth, you guys cited that 10.5% or something linked quarter. What was the rate of the growth, if you just took out the NewBridge loans and let in all the other acquired loans?
Wallace, Terry. It's around 5%.
Including everything. And normalizing for NewBridge, as bring in their balance. There was good growth in margin in the NewBridge market that's included in that. But their growth in January and February is not.
So 5% linked quarter.
No, 5% annualized, total book including NewBridge markets from March 1 and pay-offs you know that's the acquired and the originated book.
Okay, perfect. That's really helpful. Thank you. I think that's, all my other questions have been answered. So I'll hop out and let somebody else ask. Thanks guys.
Our next question comes from the line of Christopher Marinac with FIG Partners. Please go ahead.
Scott and Terry, I was curious on from an operating standpoint. What do you intend to do, with the South Carolina component of NewBridge? It seems to be opportunities and markets there for you to really expand and take those to a different level. I was just curious on, timing of that and sort of what you see the big picture for growth opportunities. Maybe it's not a 2016 event, more of 2017, but just wanted you to elaborate on that, if you would?
Yes, Chris this is Scott. Really, the bulk of our South Carolina business is and around, is in the greater Charlotte, MSA. NewBridge did have one office in Charleston, had a production office in Greenville in the Upstate. We do a lot of lending in South Carolina through our SBA. We're one of the largest SBA lenders in South Carolina, where our builder finance group is very active in South Carolina.
Our mortgage group has offices throughout South Carolina. So we're well represented in South Carolina. Just not with a lot of bricks and mortars. And that's what you'll see us do. I just don't - I'm not a fan of getting the mile wide and inch deep in places, where you got a one office here and one office there.
We really like our position and what we try to do is become deeper and more penetrated in places like Raleigh and Charlotte. Now Greensboro, Winston-Salem. And I just think, you know South Carolina is a good state and we're having good success, but we're just going to do with more surgically with businesses that we have good subject matter expertise in and can go leverage small niches in the market and we can do that in a really efficient way.
Okay, so as a result really you're spending from infrastructure standpoint, it's just not there, it's limited which gets back to the earning's piece.
Right, we're just going to. We're not going to get it. Yes, we're just not going to get a lot of expense ahead of revenue in new markets, where the payback's a long time and you end up just you know scratching at the surface like. I'd say, one office in Charleston. You really got to, I think you got to ask, can that really sustain itself. There's a lot of expense to build that up and it takes a while before the revenue catches up.
Okay, great. That's helpful and just a follow-up on the system side. Are there any system investments that you need to make, as you integrate and get through September, on this or have those already sort of been in place with prior investments in prior years?
No, those are really already in place. Had not to do anything, there I mean. Our core, one of the great things there we've got is. Our core FIS system is a very scalable system there, much larger banks than we are on that system and we've got a lot of upside there to leverage, if you go along.
Sounds, good. Scott, thanks so much.
[Operator Instructions] our next question comes from the line of Tyler Stafford with Stephens Inc. Please go ahead.
Just two from me, that have not already been asked. You guys have talked about lot of the earnings trajectory that you're going to see, this year and next. And obviously, there's going to be a lot of improvements on the expenses that are going to fall out. I was just curious if, you've got any updated thoughts on how much improvement in the efficiency ratio, we can see this year?
I think it will continue to track down. It was 58, this quarter. We just again scratching the surface on cost saves. I do think that we have, as I look out. Our second and third quarters are historically good quarters from a revenue perspective. So, so often we focus on the expense side of the efficiency ratio, but always is, always a lot more fun to work on the revenue side.
And I'm optimistic about that too. So I think we'll continue to see good progress because we should drive good revenue growth and we'll continue to see the cost saves roll in. I hate to get pin down to a specific number, but I think we'll just see that continue to track down, just as it tracked down last year.
I mean, if you take a look we started 2015 north of 60% and the last two quarters, we were well below 60%. I think, we'll see a very similar type trend as you get through 2016.
Okay, that's fair. Thank you. Do you happen to have the dollar amount of SBA sales that you had in the first quarter?
It was about $26 million.
Okay, all right. Thanks guys.
There are no other questions at this moment. I'll turn the call back over to presenters.
Okay, thank you, operator and thanks to everybody for joining us this morning. We appreciate again, appreciate your interest and look forward to talking to you at the end of the second quarter. Thanks.
Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.
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