Ameris Bancorp (ABCB) Q3 2018 Earnings Report, Transcript and Summary

Good morning and welcome to the Ameris Bancorp third quarter 2018 financial results conference call. All participants will be in listen-only mode. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. [Operator Instructions]. Please note, this event is being recorded. I would now like to turn the conference over to Nicole Stokes, Chief Financial Officer. Please go ahead.

Thank you Chad and thank you to all who have joined our call today. During the call, we will be referencing the press release and the financial highlights that are available on the Investor Relations section of our website at amerisbank.com. I am joined today by Dennis Zember, President and CEO of Ameris Bancorp and Jon Edwards, our Chief Credit Officer. Dennis will begin with some opening general comments, I will discuss the details of our financial results and Jon will make a few comments about credit quality to include the expected impact of Hurricane Michael on our portfolio before Dennis provides closing remarks. Before we begin, I will remind you that our comments may include forward-looking statements. These statements are subject to risks and uncertainties. The actual results could vary materially. We list some of the factors that might cause results to differ in our press release and in our SEC filings, which are available on our website. We do not assume any obligation to update any forward-looking statements as a result of new information, early developments or otherwise, except as required by law. Also during the call, we will discuss certain non-GAAP financial measures in reference to the company's performance. You can see our reconciliation of these measures and GAAP financial measures in the appendix to our presentation and in our press release. And with that, I will turn it over to Dennis Zember for opening comments.

Thank you Nicole and good morning everyone. I appreciate you taking the time this morning to join us on our third quarter 2018 earnings call. We are really excited about our results this quarter and the momentum we have with earnings and in our operating ratios. For the third quarter, we are reporting operating earnings of $0.91 a share or $43.3 million, which excludes about $1.5 million of executive retirement, merger and acquisition costs and some branch consolidation cost. Including those charges, we are reporting $41.4 million in net income and $0.87 per share. Besides the move in earnings this quarter, our operating ratios came in very strong, particularly given the momentum I know that we still have in key. Our operating return on assets came in at 1.53% in the current quarter compared to 1.26% in the same quarter in 2017. Talking about the return on assets, I remember earlier in the year at a conference or in some meeting, the question was how was the industry going to invest the tax cut? The fear, I guess, was that margins would come down or that spending would go up and really, the industry would just punch out the same results with a little less going to Washington. That didn't happen here. To test this, I grossed up our third quarter results from last year using this quarter's tax rate. And when I do that, I see that our core apples-to-apples profitability ratios higher now by 11.3%. In other words, we have managed the current rate environment with a stable margin, we have grown our balance sheet by almost 50% through organic and acquisition strategy and we have improved our overall operating performance by double digits. We didn't just rest on the fact that the tax law would make us more profitable. Sitting here today, I know we still have a material amount of cost savings to realize on the Hamilton transaction and none of the cost savings we announced a few weeks ago are in our current numbers. Hopefully you can hear how proud I am of the earnings machine we have built with dedicated bankers that love our strategy and are excited about staying top of class. Most of the improvement in our operating ratios comes from gains in the efficiency ratio which moved this quarter to about 54%, compared to just above 60% in the same quarter in 2017. Nicole was wagging her finger at me to not forecast a ratio for next quarter. So I will leave it alone. But with what we had yet to realize in cost savings. I do feel very confident that 2019's efficiency ratio will keep moving in the direction we have it right now. If I could be a master of the obvious for a second, this move in the efficiency ratio is important for earnings per share, but I see it as critical philosophically to our long-term success in being hypercompetitive on the best customers without having to recalibrate our expectations for return on assets. I believe we can be top of class on quality with the best customers and still be hyper profitable. I don't think that these are mutually exclusive, especially for a company that's willing to focus on efficiency and resources. Our margin in the third quarter, excluding accretion, came in at 3.77% against a linked quarter margin of 3.81%. The entire move in margin this quarter came only from higher levels of short-term assets as a percentage of earning assets which negatively impacted the margin by about four basis points. Our yield and our cost on both sides of the balance sheet were managed exactly how we have been managing it for the past couple of years but we wanted extra cash and liquidity as we closed and integrated. Hamilton. Subsequent to the end of the third quarter, we had used that extra cash and paid off certain Federal Home Loan Bank borrowings. So I expect that the negative influence we saw this quarter will be fully erased in the fourth quarter. And this was a messy quarter when it comes to evaluating cost on the deposit side of the business. I know there is a lot of sensitivity to deposit betas and deposit costs, but our move this quarter related mostly to a full quarter with Atlantic Coast and Hamilton, which pushed our interest-bearing cost higher. The fact is, both of these smaller banks were a little ahead of us on interest-bearing cost, but will moderate those levels over the next couple rate moves, one of which we got this past quarter. On loan growth, we had a slower quarter on loan growth this quarter than what we have experienced in the past. We had the same investor CRE payoffs that the industry is discussing, mostly in commercial construction. We also had, what I call the first quarter affect on the two acquisitions where we target and move out certain marginal customers that don't meet our credit standards, but don't have the pipelines in production to counter that negative move. These two acquisitions, especially together, were large enough that this was a noticeable effect, but going forward I do expect that we will see solid growth with these teams in this really attractive market. Core deposit growth outside of M&A came in at about 17.5% annualized against balances in the second quarter of this year. We had a great quarter on core deposit growth. Across our company right now, nothing is more important or top of mind than deposit growth. This attention has paid off. This has been going on for more than just this year. And this attention has paid off and I feel confident in saying that we will beat last year's core deposit growth rate of 11% as we close out 2018. This is no small feat because the competition for deposits, especially the profitable accounts is fierce. It's as fierce as I can remember. So to be growing core deposit at a double digit clip is one thing that could do it in a manner that doesn't push your margin lower is an entirely different kind of result. As I look forward. I don't see anything changing with respect to our growth rate. We still are looking for loan growth in double digits and for deposit growth rate to continue inching higher towards our expected growth in loans. We finished this quarter with a loan to deposit ratio of about 93%, compared to 101% this time last year. So we have a lot more cushion to manage growth rates than we have had in the past. I will stop there on the results and let Nicole and Jon weigh in with some more facts. But first let me say something about M&A, if I can. This quarter especially we have had a lot of questions about M&A with stock prices moving like they have and whether or not we would still be in the game. A lot of the questions these have come in a pretty worrisome tone, particularly given how the markets reacted to some deals. We all have a lot to worry about. Talking for me, I worry about raising two teenage sons and I worry about our folks that were affected by the hurricane, but nobody on this call now or that listens to it later need to be worried that Ameris will be doing a deal that does not reward our shareholders, period. Our recipe for crafting a deal that the market rewards is not any different than it has ever been. That formula is something that's neutral to tangible book value. It has meaningful EPS accretion. The strategies that we use to deliver the economics are simple and reliable and something we have done in the past. And it needs to be in a market that would boost our long-term growth rate. Our stock price falling obviously impacts how aggressively we can go after a deal but our story is good enough that it resonates with Board and management team and I am not concerned that we can't find a good deal even with today's stock price. Jon's going to give you some more color about the hurricane in his credit comment, but let me say that we were blessed with how well we came through the storm. We do have customers and employees that suffered tremendously and our company and our employees are aggressively showing up to help and rebuild where we can. We had quite a few branches that we closed ahead of the storm but today all but four are open for business and we are being creative in our efforts to deliver services where we have a branch that's closed. Please keep these markets and the affected people in your thoughts and prayers for a few months as they rebuild. So with that, Nicole, I will turn it back to you for some more details.

Great. Thank you Dennis. As you mentioned, today we are reporting operating earnings at $43.3 million or $0.91 per share for the third quarter which was approximately an 83% improvement over the same quarter in 2017. These operating results primarily exclude merger charges, executive early retirement benefits and expenses related to the branch consolidation plan announced in September. Including all of these charges, we are reporting total earnings of $41.1 million or $0.87 per share. You will notice that our effective tax rate increased to over 24% in the third quarter. This was a result of the 162(m) calculation on the executive retirement expense from last quarter that was deemed not deductible this quarter. We correctly presented this impact in the adjusted net income Table 9A as an add-back. With this adjustment, our effective tax rate is 23% and in line with our expectations of an effective tax rate of 22.5% and 23.5% going forward. Our operating return on assets in the third quarter was 1.53%, which was an increase from the 1.26% we reported in the third quarter of 2017 and the 1.38% reported last quarter. We are proud of this ROA and we believe an ROA north of 1.50% is an impressive representation of our core profitability. We have been able to grow the balance sheet, both through acquisitions and organically while keeping focus on key operating results such as margin and efficiency. The yield curve continues to make the margin a challenge. Our margin excluding accretion, as Dennis mentioned, declined four basis points during the quarter from 3.81% last quarter to 3.775 this quarter. As Dennis mentioned, we had excess liquidity on our balance sheet during the third quarter such that our short-term assets to earning assets ratio increased to over 4%. Excluding this approximately $200 million of excess liquidity, our margin would have been 3.84$ and reflects the increase we were expecting from the Hamilton acquisition. Subsequent to quarter end, we paid off certain FHLB advances as they matured and we expect the margin to return north of 3.80% in the fourth quarter. For the third quarter, our yield on earning assets increased by 12 basis points, while our total funding cost increased 15 basis points. On the asset side, we saw increases in both loans and bond yields. Our core bank production yields were 5.51% for the quarter against 4.74% in the same quarter a year ago. On the deposit side, as Dennis mentioned, there were many moving parts with the acquisitions and conversion to our systems and products and pricing, as well as strong organic deposit growth. Our year-to-date deposit beta of 38 basis points is in line with our expectations, but something we continue to monitor. Our incremental funding rate for the third quarter in the core bank was within our expectations considering the growth in noninterest-bearing deposits mixed with CD and money market growth and repricing. With the cyclical deposit influx and organic deposit growth we forecast in the fourth quarter offset by the yield curve pressure and despite the intense level of competition, we believe our funding cost will be stable in the fourth quarter, again, allowing margin to return above 3.80% going forward. Noninterest income totaled $30.2 million in the third quarter. Service charge income was up 20% due to the full quarter of Atlantic and Hamilton acquisitions. Mortgage revenue declined slightly when compared to the second quarter but the pipeline remains strong. In fact, the mortgage pipeline is stronger now than it was the same time last year and production increased over 19% when comparing the third quarter of this year to the third quarter of last year. The gain on sale premium rebounded somewhat this quarter but still remains below the premiums we saw this time last year. We continue to recruit producers that have steady sources of referrals or construction connections. Our markets are still strong with respect to new homebuilding and the pace of home sales and we believe continuing to focus on builders and realtors of our primary customer will continue to drive above-average growth and profitability on our mortgage growth. One of the things I am most proud of this quarter is our operating efficiency ratio. For the quarter, it improved to 54.4% in the third quarter, from 57.5% reported last quarter and 61.1% reported in the third quarter of 2017. We expect additional improvement in the efficiency ratio in the fourth quarter after Hamilton is fully integrated. This leverage combined with the cost saving initiatives announced in September of this year gives us confidence that our efficiency ratio will be in the very low 50s by the end of the year and throughout 2019. Our ability to execute our strategy of improving the operating efficiency ratio as we have while growing the balance sheet over 49% in the past year is a mark of our dedication to execution of our strategy. On the balance sheet side, total assets increased over $238 million or 8.5% annualized, materially all of which was in earning assets. Organic loan growth was slower this quarter and came in at 3.4%, which lowered our year-to-date organic loan growth rate to 11.5%. Production was strong but net growth was negatively impacted by early payoff including deliberate payoffs from the acquisition. In the third quarter, which was the first quarter after acquisition, we had close to $100 million of payoff in those markets, which reduced the net loan growth figure by over 4%. Loan production in the core bank was actually 14% higher this quarter than the same time period last year and more than 6% higher than the second quarter of this year. The strong loan production was offset by those early payoffs and an increased level of unfunded commitment production, which we expect to fund in the next few quarters. Pipelines were strong at the end of the third quarter and we believe our forecast of double-digit loan growth 12% to 14% for the year is still attainable. On the deposit side, our total deposit growth really ticked up this quarter. Exclusive of the effects of the acquisitions, year-over-year deposit growth is over $524 million or almost 9%. Core noninterest-bearing deposits grew faster than total deposits with the year-over-year increase of just over 11%. Because of that growth, our mix of deposit excluding the acquisitions has improved such that the DDA accounts are 30% of total core deposits at the end of the third quarter, up from 29% this time last year. We anticipate the usual cyclical deposits in the fourth quarter that will allow us to pay down some of the higher FHLB advances keeping our funding cost relatively flat in the fourth quarter. We still see opportunities for continued strong deposit growth in newer markets such as Atlanta, Orlando and Tampa. We continue to see really encouraging growth in our lines of business and believe this is important when considering the opportunity we have in the fourth quarter and throughout 2019. Production in our retail mortgage division increased by over 19% when compared to the same quarter last year. Production in the warehouse lending division increased over 27% when compared to the third quarter of 2017. And loan production in the SBA division remained strong as total production was over 180% higher this quarter than the third quarter last year. We continue to believe that we can sustain double-digit annualized growth rates in these divisions for the next years. In conclusion, we are really proud of our third quarter results and we look forward to the fourth quarter and 2019. The two recent acquisitions and our successful integration combined with the cost saving initiatives announced last month continue to give us confidence in the 2019 outlook for top quartile financial results. And with that, I will turn it over to Jon Edwards, our Chief Credit Officer, for a few comments on credit quality and the potential impact of Hurricane Michael. Jon?

Thank you Nicole. Good morning everyone. First let me speak to our third quarter asset quality. Overall, most of our asset quality metrics improved in the third quarter versus second quarter. Nonperforming assets decreased 9% over second quarter and totaled 60 basis points of total assets. That improvement was primarily the result of payments and other collection activities, but also certain loans placed back on accrual after having demonstrated sustained satisfactory performance. Similarly, classified assets decreased during the third quarter and totaled less than 15% of total bank capital. Past due loans remain nominal and concentrations of credit remain manageable and within the regulatory guidance. Our charge-offs were the one thing that was a little higher during the quarter and that was due primarily to certain premium finance loans that were really subject to the second quarter reserve build and were charged off in the third quarter. Overall, our primary markets remain robust. We are not seeing any segment of our portfolio that's currently experiencing any material deterioration. So it was a good quarter overall. Now let me say a few words about the impact of Hurricane Michael. First, as everyone knows, that storm has had a devastating effect on many individuals and businesses. Ameris Bank will do whatever is necessary to aid in their recovery. In reality, it's too early to know with full certainty what the real impact will be to those communities, our customers or our bank. But in response to Hurricane Matthew in 2016 and Irma in 2017, we developed strategies to help our customers and we will likely follow that template for this storm also. Of note, when I speak about the primary impacted areas, I am primarily referencing those coastal communities between Pensacola to the west and St. George Island on the east side. Clearly, other non-coastal communities in Florida and Georgia were impacted, but most not as severely as those along the Florida coast. Our overall exposure is really broken down into three parts, agriculture, real estate secured loans and consumer installment loans, really the latter of which is not material and I am not going to really speak about. The bank's agricultural loan portfolio totals $239 million, including both production related loans, as well as those that are primarily secured by farmland. Of that total, about 75% or $180 million were located in markets that incurred some amount of impact from the storm. The primary crops affected were cotton and pecans, as most of the peanuts had been harvested by the time the storm hit. Depending on where your farm was located within those affected areas, the impact may have been as low as a 10% loss of yield up to a total loss. Remedies available to our partners include crop insurance proceeds which I think all of our farmers carry, low-interest disaster loans through several government programs and potentially direct government payments. Clearly, there will be the need for some type of restructure on many ag loans, most likely ranging from forbearing term loan payments to restructured operating lines. I believe most of our farmers and ag related businesses have the capacity to restructure if needed and actual loan losses should not be material. Additionally, Ameris Bank is a preferred lender for FSA and we will utilize the guarantee program as needed. Now as it relates to real estate secured loans, our exposure to those primary impacted areas total approximately $127 million, including residential, commercial and construction loans. Our customers and our lending staff are still in the process of inspecting properties and assessing damages, so the final impact is still a bit unclear. But to give you a small example specific to residential construction loans, we have approximately $35 million worth of commitments, $20 million outstanding in our Panama City and Tallahassee markets. Subsequent to discussions with our builders and our visual inspections, we have determined less than 5% of the homes sustained any material damage or less than $1 million outstanding. I expect most of that damage will be covered by insurance for that entire segment of loans. In summary, let me say it's still a little early to measure the complete impact, but as our information becomes clear, we will make necessary adjustments to our watchlist and the allowance for loan losses. With that, I will turn the call back over to Dennis for closing comments.

Well, on that note, okay, I would like to thank everyone again for listening to our third quarter earnings results and would like to turn it back to Chad, I guess, to see if there are any questions.

[Operator Instructions]. The first question will come from Brady Gailey with KBW. Please go ahead.

Hi guys. This is actually Woody, on for Brady.

Hi Woody.

Okay. So first, I know you said the rise in deposit costs was largely related to the two acquisitions. So I was wondering if you could give some color on how the legacy bank's deposit cost performed over the quarter?

Sure. Sorry, we were shuffling papers real quick.

It's okay.

So there is quite a bit of noise, for sure, because of everything coming on, but the core bank, we did see increase and 11% of that increase was in non-interest-bearing which helped the overall cost. But we did see our money market was part of that was we felt like we were maybe a little bit behind the curve. And if you think back to second quarter, our deposit beta in the second quarter was pretty low. So we knew that we were going to have catch that up a little bit in the third quarter. So we did raise our money market account rate and then as CD rates. So we did have some increase in the core bank but the majority of it did come from those acquisitions. And we believe that the fourth quarter is going to be consistent. We did have a huge increase at the end of the quarter that's going to have a larger impact next quarter. We feel like that increase was throughout the entire third quarter.

And I will say it too, just sort of adding on top of that, like I said, the deposit cost that we inherited with the Atlantic Coast and Hamilton transactions, I am not thinking of the past when deposit competition was not as fierce. We would have taken those deposits and immediately had some rightsizing where we would have sort of moved them to our levels. But given how fierce deposit competition is in Atlanta and Orlando and Tampa, we didn't want to do that. So we have kind of left those sort of where they are. So I think going forward what you would see on the those deposit, especially as almost the deposit beta of zero, probably for the next couple of moves as, in ours we just continue to keep inching up as asset revenues come in. I mean our strategy for two years has been to take whatever incremental revenues we get from a higher rate move and apply those back in a smart way into the deposit cost so that we can remain competitive, continue to grow core deposits but do it in a manner that doesn't affect the margin. I mean I know the deposit cost and deposit betas are top of everybody's mind, but we are not managing just the deposit beta, we are managing deposit cost so that in conjunction with our asset yields and our production levels, so that we keep the margin right there at 3.80%.

Okay. That's really helpful. And then looking at those asset yields, they also saw a pretty big jump this quarter. Was that also driven from the two acquisitions?

Yes. It was some from the acquisition and then it was also due to some of the rising rates in our loan production. Our loan production yields increased and they have increased over the last year. But yes, it's both.

Got it. Thanks. That's all of my questions. Thank you.

Great.

Great. Thank you.

The next question comes from Tyler Stafford with Stephens Inc. Please go ahead.

Hi. Good morning guys.

Good morning.

Good morning.

Maybe just to start on credit. So last quarter, obviously you had the USPF issues. So it was nice to see no issues this quarter. You have got a peer bank out this morning reporting some pretty sizeable CRE issues. Just bigger picture across Ameris' balance sheet. How do you feel about the credit environment? Anything in particular you are seeing that is worrisome? And then anything within the USPF specifically, just as relates to last quarter as well?

I will take the first part first. I mentioned that our primary markets and you know, we have got about seven or eight markets that probably carry 80% or more of our production are still pretty vibrant. There is new investment going on. Property values are holding pretty good. We haven't seen any real deterioration across any of those markets. And so I am still feeling really good about commercial real estate right now. So we are looking out for new construction projects and thinking about lease-up terms in the next 18 months to two years and so on and so forth. But right now there has not been any change. I am feeling pretty good about it. On the USPS side, we are watching that segment really a little more closely and feel pretty good about the downpayments that they are getting, the terms that they would get. There has got to be some small things that will fall out, I am sure, towards the end of the year, but I feel pretty good about the fact that we really sort of encapsulated the issues very quickly in the second quarter, primarily.

Okay. Very helpful. Thanks. Just on the remaining cost savings with Hamilton. How much is remaining in total? And how much would you expect to realize in the fourth quarter?

So we anticipate the fourth quarter earnings after tax is about $2 million that will be incurred in the third quarter. We did our Hamilton acquisition last weekend actually and so that system integration is complete. So we have a few more expenses for a few weeks, but it's about $2 million. And then the cost savings that we announced in September, those will be fully implemented in the first quarter of next year.

Okay. Got it. On the loan repositioning that you talked about, can you just size up how much of an impact that was to the third quarter loan growth?

Yes. I have got that right here. So our total payoffs were right about --

It was about $100 million.

From the Atlantic and Hamilton acquisitions, it was about $100 million. Half of that was in construction and then the remaining we have multi-family, commercial real estate and some C&I that made up that $100 million.

Nicole and I are calculating that alone impacted the annualized growth rate by about 4%, a little more than 4%, just that repositioning.

Okay. Got it. And then just one more from me on the margins. I just want to make sure I am thinking about this correctly. So fourth quarter total deposit costs will move up modestly I guess as just pricing continues to be there, but overall cost to fund should be relatively flattish as you offset those deposit costs with lower overall FHLB balances and cost there and then you get a lift on the asset side. Is that basically what you are saying? And then so we are at 3.80% margin?

Yes, exactly.

Okay.

We think the asset yields are going to continue to move up with the last rate move we just got. And deposit costs are going to keep inching like they have. We keep benefiting I mean we still have the mortgage portfolio, the purchase mortgage pools, those keep paying off. And so every quarter, there's probably a 300 basis point pickup on all of those renewals. Yes, I think I didn't make a big deal about it, but we have a 93% loan-to-deposit ratio right now and we pretty much have the exact same margin we had a year ago when the loan-to-deposit ratio was about 100%. So even where we have sort of repositioned loans as a percentage of total earning asset, we have still held the margin. I am not sitting here worried that the margin is going to fall apart on us, really, at all. I hope I have sounded pretty confident there.

Yes. I think that's coming across. Thanks Dennis.

All right.

The next question will be from Casey Whitman of Sandler O'Neill.

Good morning.

Good morning.

I appreciate the color on the core margin. Just so we can get a sense of where the reported marginal shake out, I mean how much can we assume you are going to get in accretion income next year? Just the best guess would be helpful.

So we are estimating about $3 million a quarter. So about $12 million for the year.

Okay. Great. And then can you remind us how much of your loan portfolio is variable today? And then how much of that is tied to LIBOR versus prime? If you have it?

Yes, sorry.

We are going through. No, it's found.

I am sorry, it's right here. The fixed rate is about 65% and variable rate is 35%.

The fixed rate includes one year, includes the $500 million, $600 million from premium finance, which are really one year credit. So I mean really it's probably, really we are probably in the high 50s on fixed rate. Probably in the high 50s on fixed rate and then the rest variable. And as prime versus LIBOR?

Yes. As far as that goes, the mix is probably, it's moved up quite a bit. It's probably 80% based of LIBOR and still about 20% based of prime.

Okay. Great. And I apologize if you already kind of walked through this. But maybe just give us a little more help in terms of what's going on with the strategy between using broker deposits and FHLB borrowings this quarter? And then sort of what we might see next quarter?

Sure. So during the second quarter, we entered into broker deposits that have a shorter term maturity. They are a year or less. And so we entered into those broker deposits and then we also have the FHLB advances. But those are on a very, very short term, knowing that we have cyclical deposits. And part of that was in the second quarter in preparing for Atlantic Coast and Hamilton. And like Dennis mentioned, sometimes when we do those acquisitions, we like to have some excess liquidity just in case and we haven't experienced that this time. And so we are paying off, we have already paid off a significant portion of those FHLB advances in October.

And Casey, for broker deposits and home loan bank advances, we don't do long dated term deals. I mean, you may be on the call thinking that it would have been smart couple of years ago to have done some two-year CDs and maybe it would have been. But again, we are not trying to play margin games. We are not even trying to necessarily grow the margin. I think, for banker size, 3.80%, for the kind of customers we are having, 3.80% is a solid margin. So all we are trying to do is use this as short term funding that helps us maintain that margin.

Got it. Okay. So in fourth quarter we should see a normal seasonal inflow of your core deposits? And broker deposits will sort of start to come off, as those matures?

The broker deposits will stay for the fourth quarter, but the FHLB advances will be paid down.

Okay. Got it. All right. Helpful. Just so we are on the same page here, just can you remind us how you get to your calculation for organic loans? I mean just what categories of loans you include in there?

Sure. And It's difficult to calculate because what we do is we take the legacy, what we call legacy loans and then we do have loans that shift from either the covert category into PNC, the purchase non-covered or the purchased loans into legacy, once they are refinanced under our credit standards and so we exclude all of that. So then we are excluding the movement between buckets so that we are really just saying what is our true new loan growth in the bank.

So if you are looking at the balance sheet in Nicole's financial tables, really we are including loans and purchased loans. So if you include, I guess for this quarter we are including, it totals $5.543 billion and $2.711 billion and really the only thing we are excluding is movement in the purchase mortgage pools, which this quarter was $22 million is all.

Got it. Thanks so much.

All right.

Our next question comes from Jennifer Demba with SunTrust Robinson Humphrey.

Thank you. Good morning.

Good morning.

A question on your loan growth outlook. You continue to believe double digit makes sense and is achievable. Dennis, can you just talk about the competitive environment? Are you getting the quality credits you want in this environment and at this point in the economic cycle? And are you able to still produce double digit loan growth with the kind of quality you are going to require?

I think, right now, the answer is yes. Well, the answer is yes. If we were two years ago still sitting here with a 70% efficiency ratio, I would tell you no, because we could not compete for those best customers with the kind of yields they are demanding. But the fact that we have moved efficiency ratio down from kind of low 70% to mid 50s and going lower and the fact that we have still been able to grow core deposits, which are probably 30%, 40%, 50% cheaper than home loan bank or broker, I think we are in a position to compete. I mean, I know we are in a position to compete on them. And what we were doing two years ago was 20% loan growth. I mean, we can't do 20% anymore because we are sitting here with close to $8.5 billion or approaching $8.5 billion of loans and that's just not prudent. But being able to do the same nominal amount of loan growth still gives us loan growth in the low double digits, say 12%, 13% where we used to be talking about 20%. We are not really talking about a different nominal amount of loan growth that just shakes out percentagewise to something less. We are sitting here with really attractive concentration ratios. Jon briefly touched on the fact that we are not concentrated in just one asset class. I am not loaded up on commercial construction. I don't have the investor CRE pushing me over 300%. So I have got room to do CRE if we want to do that. We have got more room on premium finance, on mortgage warehouse if that stays an option and an opportunity. Municipal lending, there's still opportunities there. So even outside of our core bank, I would tell you, the core bank looks good, especially with Atlanta and Tampa and Orlando being new opportunities for us, where really they weren't or weren't as big an opportunity a year ago. I still feel good that we can do some loan growth like that.

Thanks Dennis. I appreciate it.

All right.

[Operator Instructions]. The next question will be from Christopher Marinac with FIG Partners. Please go ahead.

Thanks. Good morning. Dennis, I want to stay on the loan growth issue. As we get further along in the cycle, I mean what's the appropriate balance between growing strong, but not growing too much? I know that changes as we go along. I just kind of want to continue on that thought.

I think we will know. I am going back to Jennifer's question. I think I am sitting here thinking more and more about that. I think we will know. When we start seeing deals come across, when we start feeling like our bankers and I love the way our bankers work. If our bankers start trying to send deals through and we have got to get creative on loan structure, maybe do some things that we wouldn't have wanted to do in the past. If on big, commercial construction loans, we cannot talk a customer into getting it bonded anymore or they just refuse to give us any kind of guarantees or things like that, Chris, I think we will know that we are going to have to start tailing back on what kind of loan growth we are looking for. I would tell you, if that happens and I know the industry definitely believes that we are peaking on credit quality and you really might think that if look at what Jon is talking about where credit is and where net charge-offs are. If that's the case, I would tell you right now, I think we are ahead of the pack when it comes to evaluating cost structure and resources and managing costs and efficiency, so that we can hold our growth rate, our earnings growth rates, our EPS growth rate and our ROA at the same level. Maybe it is a little early to say this, but we will not continue to push loan growth as high as we possibly can for the sake of quality. I mean, I am only 49 years old. So I probably have to live through a couple of economic cycles. And in the next economic cycle, I want to be known for quality. And when we can get the loan growth and hold the quality, we will. When we can't get the quality or we have got to sacrifice, we will start tailing back what we want on loan growth and we will start looking for earnings growth in other places, whether it's fee income, cost structure. Does that makes sense?

No, it does and I appreciate the background. Just a quick follow-up. Can you remind us on how deep into Florida along the central I-4 corridor that you are getting in terms of calling on customers, not as much of a branch question as it is a sort of the customer penetration as you get deeper into Florida?

Yes. I know that I-4 was the end of the world. When Ed was here, I-4 was really the end of the world. We just really did not go south of I-4. I mean, Sarasota, for instance, south of I-4, but kind of really still considered maybe part of Tampa MSA or Tampa market at large. Really even that we didn't go there. So I would tell you, our concentration is very small. I mean there might not be anything. I said guarantee, I am pretty confident there's no construction south of I-4. We may have assisted living deal within eyesight of I-4, but construction wise there would be nothing.

Okay. Great. Thank you for the time this morning. I appreciate it.

All right.

Ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over to Dennis Zember for any closing remarks.

Okay. Thank you again for your participation and your willingness. I think the call might have been a little longer than it has been in the past. Nicole and I are available if you have any questions. Jon, as well. So if we didn't answer a question or you want more detail, feel free to reach out to us, email or phone call. All right. Thank you and have a good weekend.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.