State Bank Financial Corporation (NASDAQ:STBZ)
Q1 2016 Earnings Conference Call
April 28, 2016 11:00 AM ET
Joe Evans - Chairman and CEO
Tom Wiley - Vice Chairman and President
Sheila Ray - EVP and CFO
David Black - EVP and CCO
David Brown - Head, Corporate Development
Jennifer Demba - SunTrust
Kevin Fitzsimmons - Hovde Group
Christopher Marinac - FIG Partners
Tyler Stafford - Stephens
Stephen Scouten - Sandler O'Neill
Paul Miller - FBR
Nancy Bush - NAB Research
Ladies and gentlemen, thank you for standing by. Welcome to the State Bank Financial Corporation Results for the First Quarter 2016 Conference Call. During the presentation all participants would be in a listen-only mode. Later we will conduct a question-and-answer session. [Operator Instructions] As a reminder this conference is being recorded Thursday April 28, 2016.
I would now like to turn the conference over to Joe Evans, Chairman and CEO. Please go ahead sir.
Thank you, Tina. Good morning and thank you for joining our call. With me on the call today are our President, Tom Wiley; Chief Financial Officer, Sheila Ray; Chief Credit Officer, David Black; and Head of Corporate Development, David Brown. I am going to talk about our strategic priorities and the progress we made during the quarter, give you some additional detail on the National Bank of Georgia transaction and then Sheila will discuss the first quarter results in more detail. David is then going to give a wrap up with the loan portfolio and asset quality metrics. After they finish with their prepared remarks Tom and David Brown will be available to answer questions in the follow-up.
Our first quarter earnings press release and the slide presentation that we will reference on this call are all available in the Investors section of our Web site statebt.com. And as usual I need to remind you that comments we make on this call are subject to our cautionary note regarding forward-looking statements in the press release and also for Slide 2 of the earnings presentation.
Now turning to Slide 4, I am really pleased with the way this year is starting out we've got positive results on all fronts. I am pleased with the trends in our fee income business which in aggregate were up 16% over the prior quarter. Mortgage SBA and payroll were all up measurably with payroll having yet another record quarter while revenue from the seasonality of tax reporting is a recurring first quarter lift in the payroll business. Our first quarter payroll revenues in 2016 were 15% higher than they were a year ago. Derek Whitworth who heads our Altera Payroll division has recently been given the additional responsibility of leading our insurance program while insurance is not yet meaningful in its contribution revenues I expect that to change over Derek’s leadership.
Our SBA business led by Alan Thomes continues to perform very well. According to reports put out by the SBA for the six month period ending 3/31/2016 State Bank ranked second for the SBA 7(a) production in State of Georgia well ahead of our regional competitors. As announced last year week a Riley based SBA team led by Brad Turner has joined by Alan's State Bank team and we look forward to a meaningful increase in SBA revenue going forward. We've got a very high regard for Brad and his team and think they'll be a great fit with us. This addition expands our geographic reach. It adds significant expertise from some specific lending verticals and accelerates implementation of some technology in the SBA area. I am very pleased to have Brad and his team, join us.
Turning our focus to core deposits and funding mix, we continue to make solid progress in growing non-interest bearing demand deposits and transaction accounts. Average non-interest bearing deposits have increased for 16 straight quarters and have crossed the 30% line as to percentage of total deposits for the first time. I continue to believe that our ability to integrate payroll, treasury services and cash management capabilities for clients is a tremendous competitive advantage for us and is a big driver of our success.
Sheila will discuss efficiency in more detail but expenses declined once again as we continue to see very positive results from the efficiency actions we initiated last year. We posted another strong quarter of loan originations this quarter leading to 98 million of growth in outstandings and I am particularly pleased with the contribution of our Patriot Capital Equipment Finance Division which we added in the fourth quarter of last year. In addition to loan production that's exceeding our forecast the entire company is benefiting from Chris Santy’s energizing leadership and his expertise in growing scalable assets. Every one of our four strategic priorities, fee income, core funding, efficiency and loan growth showed solid progress in the first quarter and overall I couldn't be more pleased with the way our team is executing.
Moving on to Slide 5, on April 5th we announced a very healthy bank acquisition for which we have high expectations. Headquartered in Athens, Georgia National Bank of Georgia is a $407 million asset bank with only two branches, one in Athens and one in Gainesville Georgia. Two dynamic MSA markets immediately adjacent to Atlanta to the Northeast, we really like this bank as was the case with Bank of Atlanta and First Bank of Augusta, we have a long history with the bank and hold its leadership in the highest regard. They run on efficient operation heading a $400 million bank with only two branches and they have a very compatible credit culture that we know well. We participated in loans with them for years and think that Tom Lanier is one of the best community bank credit people that we know.
Bill Hopper and his team at National Bank of Georgia are going to be a great fit for State Bank. Athens and Gainesville are attractive growing communities that will be very positive additions to our footprint. After Atlanta they represent the second and third largest banking markets in North Georgia and have companies that thrive on different economic drivers than our existing markets. This will be healthy bp diversification for us.
On Slide 6, we provided some additional details about the transaction. The transaction consideration is $45.45 a share which is approximately $68 million for the outstanding shares and options. The consideration mix is 50% cash and 50% stock as long as State Bank is between $18 and $21 a share. If the value of our shares falls below $18 then the deal becomes 100% cash, at that price we are not inclined to give our shares away. If we trade above $21 then the exchange ratio becomes fixed on the stock consideration at 2.164 times each share for State Bank. The transaction value is approximately 1.6 times fully diluted tangible book value per share and 14.1 times trailing 12 month earnings with a core deposit premium of roughly 8.8% it is right in line with market and with a high degree of strategic and cultural compatibility we think this is going to be a very great and excellent value for us.
What really matters when you look at the price of a deal with how much of their business sticks and just grow post closing and we feel very positive about both those metrics. Assuming the deal closes with a 50-50 cash stock mix, we anticipate 4% tangible book value dilution with a payback of approximately 4 years and 2017 earnings accretion of 9% should the transaction become all cash would slightly expand the playback to 4.5 years, but the 2017 earnings accretion will rise to 12%. We've assumed and jointly identified 20% cost savings in this analysis. And as usual, we have assumed no revenue synergies in our analysis and our loan growth projections are based on their historical growth rates at NBG. And quite honestly I'll be disappointed if we don't get some lift on both those metrics.
We've consciously taken a slightly lower dilutive approach upfront by using some cash consideration. The tradeoff is greater earnings accretion, improved pro forma leverage, improved ROE and less future dividend payments. This transaction has been unanimously approved by the Boards’ of both companies. And we anticipate the transaction will close in the third quarter of 2016 pending all customary, regulatory and shareholder approvals. Again, we believe this is another positive transaction for both parties.
And with that, I'll turn the presentation over to Sheila.
Thank you, Joe. I am going to pick up on Slide 7 with results from the first quarter which as Joe mentioned was a strong start to the year with net income of $10.8 million or $0.29 per diluted share. Total interest income on loans and invested funds excluding accretion income was up 2% from the fourth quarter of 2015 and 16% or $4 million from the first quarter of 2015 due primarily to strong organic loan growth as we continue to replace the accretion income with traditional interest income. Additionally, we purchased 270,715 shares of stock at a weighted average price of $18.94 into our current buyback authorization. However the majority of those shares are just over 247,000 and were purchased after quarter end so sometime in April.
Turning to Slide 8 accretion income decline $4.5 million to 9.7 million as we didn't have loan goals closing that in the first quarter compared to 4.1 million in gains from loan for closing in the fourth quarter of 2015. Base accretion was $6.1 million and declined $280,000 from the fourth quarter of 2014. Non-interest income increased and is a bright spot is Joe mentioned to $9.4 million in the first quarter that's led by mortgage, SBA and payroll revenue which were all higher compared to the prior quarter and the first quarter of 2015. Mortgage production was $117 million in the quarter which led to $3 million in fee income. The SBA gross production was just over $20 million in the quarter compared to just 8.5 million in the first quarter of 2015. This resulted in a 34% increase year-over-year in SBA revenue when you compare the quarters.
Payroll fee income increased 15% year-over-year to $1.3 million as the number of clients increased nearly 10% over the same time period. If we turn now to Slide 9, you will notice that we have made significant progress with respect to expenses and continue to reap benefits from the efficiency actions that we announced last year. Non-interest expense excluding loan collection and OREO cost which tend to be a little bumpy, declined $1.8 million or over 6% from the previous quarter to 28.4 million with the decline largely due to $1.2 million in lower salaries and benefit costs. Keep in mind that expenses related to growth in revenue producing opportunities will partially offset cost savings and could actually increase expenses going forward.
But given that production revenues are correlated with expenses within our key fee income initiatives, we remain intently focused on our efficiency and burden ratios. The burden ratio is non-interest expense plus non-interest income is a percentage of average assets. This ratio declined to 2.26% in the first quarter from 2.46% in the previous quarter. We are continuing to make solid progress on this front and remain on track to achieve our 12 to 18 month target of a burden ratio at or below 2%. We're focused on this ratio to ensure that during period revenue declines, we also have expense declines.
Before I turn it over to David, I want to briefly talk about private funding on Slide 10. As Joe mentioned, we continue to experience solid growth in transaction deposit accounts including non-interest bearing deposits which comprised over 30% of total deposits at quarter end. Average total deposits grew at 11.7 million from the previous quarter and 138.4 million from the previous year. As we mentioned on our last call, one of our 2016 priorities focuses on growing total deposits throughout our footprint, targeting new client relationships and increasing market share.
During the quarter, we tested some deposits promotional rates and term deposits in the business money market accounts which resulted in some shifting of balances and reversed the declining trends in time deposits. Our preference is to grow funding in lower cost products but we occasionally use a rate driven products to expand our customer base in an otherwise sleepy rate market.
This concludes my remarks and I am going to turn the discussion over David.
Thanks, Sheila, and good morning, everyone. I will begin on Slide 11 covering loan growth, our organic and purchase non-credit impaired loans grew at 104 million or 5% in the first quarter. Including the offset of the $6 million decline in the purchase credit impaired portfolio, total loans were up 98 million or 18% annualized with diverse growth across virtually all lines of business, geographies and call codes. Total loans increased 258 million year-over-year which is net of 51 million of contraction in the purchase credit impaired portfolio. On the bottom of the slide, you will see the originations in the quarter matched the third quarter’s record high at roughly 450 million. We also experienced the second highest quarter in level of paydowns reflecting a healthy churn given the short-term nature of most of our loans.
Slide 12 provides a view of the loam mix change quarter-over-quarter, commercial real estate continuous to comprise the majority of total loans, however, there is significant diversity across asset class, sponsor, source of repayment and geographies. We're accounted to internal subcategories concentration limits as well as create specific stress tests consistent with inter agency guidance. Additionally, we continue to experience growth from non-accretive categories including, C&I and least portfolios which increased 34% and 31% respectively this quarter. This growth was driven by successful quarters of Traditional Commercial Bank as well as some pool purchases by our respective law finance team. Patriot Capital which originates fully amortizing primarily five year maturity of goodwill finance agreements originated over 13 million this quarter at attractive yields putting in all place to handedly exceed our initial projections.
Turning now to Slide 13 and referencing table five in the press release. Credit metrics across the entire portfolio remains flat. Organic non-performing loans were 9.4 million presenting 50 basis points of total loans. While the uptick in NPAs this quarter represents a large percentage increase the nominal movement is relatively modest and we're still well below peer levels. This increase in NPAs is primarily related to a small number of loans that we viewed as prudent to downgrade the substandard nonaccrual and is not indicative of a broader negative migration in the portfolio. We recorded an organic provision of 1.5 million in the quarter influenced by loan growth and an increase in specific reserves for impaired loans. With the allowance as a percent of loans staying essentially flat or down just 1 basis point to 1.19% which covers organic NPAs by 2.4 times.
Purchase non-credit impaired loans which as a reminder came in from Bank of Atlanta and First Bank, continued to perform well with non-performing PNCI loan at just 2.6 million and pass throughs declined to 30 basis points from 39 basis points in the prior quarter. Transitioning through the purchase credit impaired portfolio, PCI loans totaled 150 million at the end of first quarter down from 146 at the end of fourth quarter and down 27% year-over-year as these loans continue to be successfully resolved. The diligent efforts of our team in special assets led to recoveries of our PCI loans exceeding $3 million for the second straight quarter. The earn-back of all charges associated with the early termination of loss share will be achieved prior to the end of this quarter, the second quarter of this year exceeding our initial estimates.
Additionally, we reported the negative provision on PCI loans for the third straight quarter reflecting overall improving cash flow expectations. Our total allowance of 30.3 million is essentially flat from the first quarter of 2015, while separate and distinct calculations optically the reserve release in the PCI portfolio has offset reserve build in the organic portfolio without a material impact to earnings. Wrapping up, we are encouraged by the fundamental economic trends in the markets we reserve and while the competition for quality assets is increasingly intense our teams are well positioned to build upon the momentum shown in the first quarter.
I’ll now turn it over to Joe to go to Q&A.
Thank you, David. And Tina, if you would open the line for questions. We are ready to move to that.
Thank you. [Operator Instruction] Our first question comes from Jennifer Demba of SunTrust. Please go ahead.
David, could you give us a little bit more color on the loans that whether on non-accrual this quarter you said and it sounds like there is no trend in terms of industry or geography?
No Jennifer, I wouldn’t say there is a relatively unique circumstance for each individual loan in the movement, so nothing discernable from a trend or migration standpoint. And we feel like that there is appropriate attention being paid to these loans and if it goes to the further duration we feel like the loss given default is very manageable.
Okay and how many loans were there?
I don’t have the specific numbers in front of me Jennifer, it's nominal amount the one loan in particular is the predominant sort of movement.
Okay and how big was that one approximately?
Thank you. Our next question comes from Kevin Fitzsimmons of Hovde. Please go ahead.
Just wondering if we could get a little more color on the margin so on both maybe the core and the reported basis looked like the core margin ex accretion expanded this quarter. So just curious how you are thinking about that going forward? And then when we look at that quarterly accretion in income amount, I know that’s a very tough thing to gauge especially when it comes down to the loan pools closing right now. But how we should be -- if you were in RC to how would be thinking about that $9.7 million accretion quarterly number? Thanks.
Sure, this is Sheila and I’ll be happy to talk about that. From a margin perspective, a couple of things I think happened this quarter. On the expense side, you didn’t see a lot of movement, but the parts changed a lot with time deposits kind of taken out but offset and expressed by -- and that would be also taken off in some interest bearing going down. I think we will be pretty solid there. On the yield side, we had a nice uptick in investments during the quarter primarily because spreads wind doesn’t see all those. And so we were happy to be able to participate there, we also had a good shift earning assets up into loans obviously out of just cash and our cash we continue to manage down so that’s helped. We have a great pickup this quarter from fee income which we would normally have so we think there is still some upside there.
On an accretion standpoint, we actually spend a lot of time looking at that as you might imagine. And we believe that for this year you are going to continue the bank’s accretion we mentioned were from 6.4 million last quarter to 6.1 million this quarter. So if you look at that trend, what we observe and when you look at it, you compare it to the previous year we noticed that the yield was down a little but the assets declined pretty significantly during that time about 28% in volumes. So as you look and you continue to see some run down there, I think you are going to continue to see that declining, I think it fell, the base accretion fell about $280,000 quarter-up-quarter. Recovery income fell about 110,000 from that same time period.
So what you will see is the recovery periods -- and pools will obviously continue be bumpy. We are probably still going to have some pool close outs this quarter or this year, perhaps next quarter, I don’t know for sure because of the timing of those is hard to predict as we have talked about in the past but you will see a nominal but gradual decline in the base accretion probably similar to the rate that you saw this quarter. However, on the positive side, and what Joe and I were talking about before meeting the accretable discount at 86 million compared to 87 million is kind of just as it gets to keeps on giving, and we are happy about that and what guides that is the re-estimation each quarter on cash flows.
One additional question, Joe this one is for you, just I know you guys outlined the deal and the dynamics behind that, I am just curious what you're seeing more broadly in the stated M&A discussions, whenever this topic comes up on calls in the past, you say that you guys are very careful about looking for the right deal but they just take time, they take time to work with the management and taking the right time. So what do you think made it the right time for NBG to sell and more broadly, how are you guys feeling the potential sellers are thinking out there, is it just down the pricing expectations or are folks waiting until after the election and then deciding whether to pull the trigger?
When you've been talking to somebody for a couple of years, I don't know how long you've dated your wife before you decided to get married and I don't know what motivation pushed you across the threshold, but it's one of these things where you just -- with a good long-term relationship, you just keep talking about it and finally things line up. And it is this role of an entering a side. We've been involved with these folks since before they started the bank. When they organized the bank, I think in 2000s Tom and I were at Central South and had a long relationship with these folks at their prior bank. Their main office which was the Old Bank of America office in Athens became available for sale and they haven’t raised their capital yet, we bought the building for them and basically land banked it for them until they raised their capital. We participated in loans with these folks with Tom Lanier driven credits probably going back 20 years. So this is a relationship, that is just cooked and matured and it finally stars aligned to a point that we all pull the trigger. We got some other deals that have similar characteristics of long-term relationships that we feel pretty optimistic about. We don't do a lot of deals, but the deals that we do, we feel are strategic, are good relationships and if you look at the track record they have performed. And we believe that 2016 is going to be a good year for us in capital performance.
Our next question comes from Christopher Marinac of FIG Partners. Please go ahead.
I guess Joe to stay on the question of NBG and that transaction, is it possible that you have upside on the cost saves, I was just curious if the 20% figure is ultraconservative or if there is a reason that was at that level compared to past transactions you've done?
Now well this is one where we just don’t think we've got push that number any harder. They come in the door with pretty good efficiency and a $400 million bank with two branches walks in the door reasonably efficient. We're much more focused on helping them grow the revenues and the outstandings to the upside by the removal of some of the distractions that are just prevalent. And when you're running a small bank you've got the same regulatory distractions that we do, with field people to pass the burden around to. These folks are good lenders. They are good asset generators. If you look at their deposits mix it is a lot like ours they are lite on CDs they're long on checking accounts and money market accounts. And we think this team with our capital base and the markets that they in have a lot of upside. And the last thing we want to do is to try to crank so much cost savings out of them that we demoralize them and diminish the upside. This is a growth opportunity more than a cost saving opportunity.
And then if look at the ongoing deposit evolution, did you see any sort of natural barrier that you can't get across in terms of the whether TDAs or perhaps just looking at the overall kind of cost to funds?
Well I think that just mathematically we're probably around the bottom from a cost to fund standpoint, but from a growth end front standpoint, I think we're just scratching the surface with commercial deposits at Metro Atlanta. The name recognition that we've gained in the past 7 years, the reputation that we've built and getting in front of more significant companies, the technology that we put together, a balance sheet that is easy to get. The larger deposits are comfortable from a deposit concentration standpoint. We think there is a lot of upside for us in Metro Atlanta to grow the same kind of deposits that we have been posting for the last seven years.
Great, thanks very much everybody.
From a rate standpoint, I think we have pushed the floor of cost of funds as low as we can.
Thank you. Our next question comes from Tyler Stafford of Stephens. Please go ahead.
Hi, I wanted to start on SBA revenue expectations for 2016. Just given the seven or eight guys, you hired this quarter. I know you said meaningful growth this year, I was just curious if you could approximate or size that up for us at all?
I don’t know that I want to stick my neck out any further than just saying it is going to be meaningful. 2016 if there is a little bit of transition time of just get the processes, and people actively into one another by. But these folks have been cookies of SBA team for a long time and I think to say that it is going to be meaningful is about far as we want to stick our neck out this one time.
Okay that’s fair. Sheila, I wanted to follow up on a comment I think you made on the buybacks, did you say you had repurchased 240,000 shares just in April? And if so any commentary on the pace of the buybacks we should be expecting?
Well, you know it's dependent on the price so it can be 501 plans, so we are not actively managing it our representative is. So what we have done, is gave some guidance when we set the plan up. And they purchased a group of shares in April that was the bulk of it. 247,441 shares were actually purchased in total. And it's at varying prices but it blends down to just under $19 a share. The stock price then kind of starts going up I mean you are glad so you are stock price go up but we also like buying our shares. So I think we have got the right metrics in place now where they are probably too conservative when we did this last year and we recognize that. The dividend that we increased made us take a second look at the metrics frankly and we realized that we needed to adjust the pricing when we established the new plan, which we have done. So we have had some success and depending on what happens with the market which is anybody’s guess at this point, I don’t bet on that anymore. We hope we will be able to buy some more.
Okay and then last one from me. The tax rate, any outlook from there it was fairly high in the first quarter? Thanks guys.
Yes I have noticed that too, Tyler, just being honest with you and there is nothing that we are going to look at and start working on, the nuances of the loss share and taxes have started to lessen as a impact on our expected tax rate. So that is something we are going to look at and I can't really answer that right now. But we have got marked into.
Thank you. [Operator Instruction] Our next question comes from Stephen Scouten of Sandler O'Neill. Please go ahead.
Curious with you on the loan growth, what the pipeline is looking like and I think, you might have mentioned there was some loan purchases in the quarter, can you give us an idea of what the scale of those purchases were within the specialty finance I think you mentioned?
Yes Stephen, this is Tom Wiley. A couple of things, first of all, the pipeline does look good. Seasonally, first quarter is a little slow coming up the gauge and we actually had our most robust month in March. And April, looks good and as we look down and as Bob mentioned earlier it's pretty much across all geographies all the final codes and really just, it's not just commercial real estate, which is encouraging but it is coming from markets and I’ll look forward to continuing to do, some our growth for the foreseeable quarters, second question [Multiple Speakers].
Yes, we pretty actively bank, some non-bank financial companies like Patriot Capital was. And like that side of our business, like the relationship we built with some of those companies.
And just to give you a sense of scale Stephen, the note purchases from a net came from our specialty finance group, but that component of the growth was less than 20 million of the total growth and so that is just part of their business, was it the individual note purchases or pools of smaller denomination notes that other institution may want to dispose of from a concentration perspective or from a just structuring a transaction, but while a consistent driver of growth that wasn't the sole determinant of quarter-over-quarter growth.
Okay I mean is that something that's kind of in the ballpark of a normal level for you guys that is 20 million per quarter?
And then just in terms of the pace of the runoff of the acquired book, is this kind of 20 million to 30 million per quarter, would you say that's kind of what you expect to see from the runoff moving forward. I know there is some lumpiness obviously but is that kind of you all are thinking will transpire?
Yes, I think, a component of that is the optic is that runoff but the reality is some of that is fueling organic growth. And so that piece of it as we have a maturity or extending new credit to an existing relationship that from an accounting classification standpoint will move from the purchase credit to organic.
The other thing is that in the First Bank portfolio there was a pretty good portfolio of construction loans that turned quickly, so those things paid off rapidly. So I think if you compare year-over-year it went up quickly, that is going slow somewhat because those construction loans are churned out. So we anticipated on the First Bank, we didn't see it churn down as quickly in Bank of Atlanta because they had a construction loan. And First Bank the construction portfolio churned quickly.
Thank you. Our next question comes from Paul Miller of FBR. Please go ahead.
Most of my questions have been answered but I was just wondering real quick with the buybacks, you're not buying back stock until this deal closes, am I correct?
10b5-1 plan according to our counsel can stay in place until file our S4 and then it will go into a quite period and won't be able to buy back. And then after the deal closes obviously it will pop back up again. But currently [Multiple Speakers] it is possible to continue although at the current price level that's not happening right now.
And at what point do you feel that you stock is, I don't ask like that, where would you buy stock up to at what price?
I don't think we have publically stated that and I don't think we are at a point that we can state that right now.
I mean that's fine. I know I am kind of back in the corner of that question, but outside of this deal I know you want to digest this deal you still relatively are overcapitalized, is there other deals behind this that you guys are looking at or it is just whatever shows itself at this point?
Yes, like I said earlier, I expect 2016 to be a very good year for us in terms of capital deployment. There are things actively in discussion right now that we have got reasonable degree of optimist about.
Thank you. [Operator Instructions] Our next question comes from Nancy Bush of NAB Research. Please go ahead.
I have a question about the payroll business I mean you referenced I think a 10% client growth in that business, you said there also are sort of normal seasonal elements and so if you kind of split out? And secondly on the 10% client growth, what do you see is your competitive advantage right now that's enabling not that kind of pretty robust growth?
Well let me start with the backend of the question about, what's propelling the growth. Being able to offer payroll in conjunction with a broader treasury payment services that we do and allowing a treasury client to pay all a part of their payroll processing cost with analysis charge and having treasury and payroll sales people that are conversant across that whole spectrum is really an interesting conversation to initiate with a lot of that clients both existing bank clients and also as a point of the entry to new bank clients. That synergy between having a well built out treasury cash management platform that we believe competes -- we can go head to head with any regional bank in Atlanta with our treasury capabilities and to be able to integrate payroll processing with that it is just a really nice competitive package while you run it every time -- if you're out there just selling traditional bank services there are a lot fewer payroll competitors of significance than there are banks of significance. And I have yet to run in to any perspective client that had a brother on role on the Board AGP.
Okay, I get that.
And one other thing we would be remised not to mention is the impact of the Affordable Care Act. The tax filings required by the Affordable Care Act have been provided an increasing revenue opportunity for us and we expect that to continue going forward. We provide a level of expertise and support to our client that has created some run backs from those that have left us. Because they found that they didn’t get that same support elsewhere. So I think, a part of our competitive advantage is the level of service that we provide to our clients, we make their lives simpler, we help them run their business and we take care of their tax filings under the Affordable Care Act and provide some consulted type service there that with our admin or adding that insurance component to the payroll pay. We are just going to get better at that and that’s a continuing opportunity for us.
Okay, and can you just separate -- I mean how -- what would your normal lift has been in the normal seasonal lift have been in the first quarter and how much can we attribute to client growth, if you can -- I understand you can't split it out but just a rough idea?
I think as Sheila said our first quarter this year versus first quarter of last year. We had a 10% growth in clients and a 15% growth in revenues.
Okay. Secondly Joe, I would just ask you on a larger but related subject, I attended a conference in Atlanta last week on the whole, issue of Fintech in the community banking sector and I mean given that you already have some technologically sophisticated businesses under the umbrella there, I mean how do you look at the whole subject of Fintech do you see it as transformative to your company in anyway? And how are you evaluating it?
Well I think there will probably winners and losers in Fintech I see lots of them building efficient distribution models. I think it will take a business cycle to tell how good they are at credit. They also -- it's interesting -- most of these Fintech companies don’t have any money. And while they can generate assets, most of them have an issue of how they are going to fund those assets and we have seen a number of interesting opportunities of putting together structured pools of purchases of assets from Fintech companies where a private equity group files, approval of loans and takes a meaningful subordinated position in the pool. They are similar to the way we structured asset purchases from an RTC bank in the last war. But anyway we think that yes, it's -- most of these Fintech companies are doing tonnes of loans that aren’t stock and trade, the smaller denomination credits. And one way or another there is probably -- we are finding some opportunity for us in there either in bank in the companies helping them fund the loans, particularly long term acquired in some of these companies. I think, it's going to take a positive time to see if the credit metrics that they think they have mastered in their models holds up in the next downturn.
Do you see any particular regulatory or have you seen any particular regulatory response yet to Fintech on the community banking scene I mean that’s seems to me to be the choke point. How the regulators are going to look at this and how the regulators are particularly going to look at community banks that are using Fintech to maybe source outside their communities, have you got any thoughts about that?
Nancy this is Tom Wiley. And we have consciously stayed away from the consumer Fintech business for that same reason.
And it does gets our attention on our business-to-business transactions actions and while we haven’t done a lot of it. We certainly think the environment is safer in that type of one time services consumer.
Thank you Mr. Evans we have no further questions at this time. So I'll turn the call back to you for any closing remarks.
Great, thank you Tina. And thanks to all of you for taking the time to join us on the call. Look forward to speaking with some of you at the interim being here same time next quarter. Thank you very much.
Thank you. Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect all lines. Thank you and have a good day.
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