WesBanco, Inc. (WSBC) Q4 2016 Earnings Report, Transcript and Summary

Good morning, and welcome to the WesBanco Fourth Quarter 2016 Earnings 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 John Iannone, Vice President of Investor Relations. Please go ahead.

Thank you, Anita, and good morning. Welcome to WesBanco's fourth quarter and full year 2016 earnings conference call. Our fourth quarter and full year 2016 earnings release, which contains consolidated financial highlights and reconciliations of non-GAAP financial measures was issued yesterday afternoon and is available on our Web site, www.wesbanco.com. Leading the call today are Todd Clossin, President and Chief Executive Officer; and Bob Young, Executive Vice President and Chief Financial Officer. Following the opening remarks, we will begin a question-and-answer session. An archive of this call will be available on our Web site for one year. Forward-looking statements in this report relating to WesBanco's plans, strategies, objectives, expectations, intentions and adequacy of resources are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. The information contained in this report should be read in conjunction with WesBanco's Form 10-K for the year ended December 31, 2015, and Forms 10-Q for the quarter ended March 31, June 30, and September 30, 2016, as well as documents subsequently filed by WesBanco with the Securities and Exchange Commission which are available on the SEC and WesBanco Web site. Investors are cautioned that forward-looking statements, which are not historical facts involve risks and uncertainties, including those detailed in WesBanco's most recent Annual Report on Form 10-K filed with the SEC under Risk Factors in Part I, Item 1A. Such statements are subject to important factors that could cause actual results to differ materially from those contemplated by such statements. WesBanco does not assume any duty to update forward-looking statements. Todd?

Thank you, John. Good morning everyone. On today's call, we will be reviewing our operational and financial results for the fourth quarter and the full year of 2016. Key takeaways from our comments are: 2016 was another successful year for WesBanco as we made steady progress on our business and balance sheet strategies and we manage for the long-term success of our key stakeholders. We have maintained our strong culture of credit and risk management as evidenced by the continued improvement in our credit metrics. We are driving positive operating leverage while controlling operating expenses. And we continue to generate loan growth across our markets, and are pleased with our loan pipelines as we enter 2017. We are pleased about our results for the quarter as well for the year, as well as several milestones achieved this past year. Excluding merger-related expenses, we earned fully diluted earnings per share of $0.59 on net income of $26 million for the fourth quarter of 2016, and $2.37 per share on net income of $95 million for the year ending December 31 of 2016. Full year net income grew 8% year-over-year benefiting from continued loan growth, improvement in our net interest margin and the consummation of Your Community Bankshares merger, which was completed in September. So, 2016 was another successful year for the bank. We completed the merger with YCB in just over four months from the date of the announcement and subsequently grew to $9.8 billion in assets. We have strong market share across five states now, including our legacy West Virginia market as well as several major metropolitan areas. We maintained top 10 market share in our legacy markets, including the Columbus and Pittsburgh MSAs. We added new markets with strong demographics in both Southern Indiana and Northern Kentucky, including top 10 market shares in the Louisville area. We remain committed to returning value to our shareholders as demonstrated by increase in our dividends by 71% since 2010, including the 4.3% dividend increase announced earlier in 2016, increasing tangible book value per share by 40% since 2010 to $17.19, and during 2016 our stock price increased 43.4%, which was greater than our peer group average, several NASDAQ complied indices as well as the S&P 500. In addition, we continue to receive national accolades for our performance, including once again being named "One of Americas Best Banks in 2017" by a leading financial magazine. We also remain committed to maintaining a strong financial institution for our shareholders. Our capital ratios and credit metrics continue to be strong allowing us to be well-positioned for the future. While the provision for credit losses increased slightly during 2016, primarily due to loan growth, our credit metrics continue to improve. For example, net charge-offs as a percentage of average loans was 12 basis points versus 23 basis points last year. Non-performing loans as a percent of total loans decreased to 63 basis points versus 89 basis points a year ago, and allowance for loan losses represented 70 basis points of total loans compared to 82 basis points in 2015. Our consolidated and bank level regulatory capital ratios are well above the applicable well-capitalized standards promulgated by bank regulators and the BASEL III capital standards. In addition, total tangible equity to tangible assets improved 25 basis points year-over-year to 8.2% as of December 31, 2016, which included the YCB acquisition and lower accumulated other comprehensive income during the fourth quarter. Our long-term growth is focused on five key strategies: Growing our loan portfolio with an emphasis on commercial and industrial lending, increasing fee income as a percentage of net revenues over time, providing traditional retail banking services, maintaining expense management, and expanding our franchise. As you know, on September 9, we welcomed the customers and employees of YCB into the WesBanco family, and over the November fourth weekend we successfully converted YCB with the integration and branding of our products, services, systems, and processes. We remain excited about the opportunities of our new Indiana and Kentucky markets and what they provide, and are encouraged by the enthusiasm of our newest employees. These high-growth markets which have great demographics and very diverse economies have expanded our already broad and balanced market distribution. We are eager to provide our broad array of products and services to our new retail and commercial customers while continuing to deliver the exceptional service to which they are accustomed. We continue to appropriately remix and manage our balance sheet while encouraging total loan growth. The strategic effort is being accomplished primarily through the control of our securities portfolio and meeting the deposit needs and product needs of our customers. In addition, our net interest margin has shown stability and improvement over the last few quarters mainly from the combination of our balance sheet remix strategy and the acquisition of YCB. I'd now like to turn the call over to Bob Young, our Chief Financial Officer, for an update on our fourth quarter's operational and financials. Bob?

Thanks, Todd. Good morning all. As Todd mentioned, over the November fourth weekend, we converted and integrated Your Community Bankshares into WesBanco and incurred anticipated merger-related costs of 2.7 million or 1.7 million after-tax or $0.04 per share during the fourth quarter. In addition to the 6.9 million after-tax or $0.17 [ph] per share recorded during the third quarter of 2016. For the 12 months ended December 31, 2016, we reported GAAP net income of $86.6 million and earnings per diluted share of $2.16 net of above-mentioned merger-related expenses. Excluding these expenses from both periods, net income would have increased 8.3% to $95.3 million with earnings per diluted share of $0.03 to $2.37. For the year, the return on average assets was 97 basis points and return on average tangible equity was 12.73%, and when excluding the impact of merger-related costs, these ratios were 1.07% and 13.96% respectively. For the quarter ended December 31, 2016, we reported GAAP net income of $24.2 million and earnings per diluted share of $0.55. Excluding merger-related expenses, net income would have been $26.0 million and earnings per diluted share of $0.59 as compared to $23.0 million and $0.60 per share last year. For the fourth quarter, return on average assets was 98 basis points and return on average tangible equity was 13.01%, reflecting the impact of merger-related costs. Again when excluding these costs, return on average assets would have been 1.06% and return on average tangible equity would have been 13.91%. Unless otherwise stated, my remaining earnings-related comments will focus in the fourth quarter's results and exclude the impact of restructuring and merger-related expenses. Total portfolio loans of $6.2 billion as of December 31, 2016, increased $1.2 billion or 23.4% year-over-year, reflecting $1.0 billion in loans from the YCB acquisition and organic loan growth of 3.4%. Organic loan growth was driven primarily by the commercial real estate, commercial and industrial, and home equity loan categories, reflecting our expanded market areas and additional commercial lending personnel. Furthermore, organic loan growth was achieved through an 11% year-over-year increase to $2 billion in loan originations during the 12 months of 2016, and continues to be driven by our strategic focus on commercial and industrial as well as home equity loans, which grew organically 10% and 8% year-over-year respectively. These two loan categories now represent 26% of the total loan portfolio as compared to 21% five years ago as they have grown organically at a compound annual rate in the low double-digits over this period. In addition, we continue to be judicious with the loans we booked as we will pass on deals where we feel the pricing or structure is not reflective of the credit risks. While this strategy might cause a few percentage points of loan growth now, it provides significant benefits of the company and our shareholders over the longer term. To provide a little bit more clarity during the anticipated 2017 rising rate environment, approximately 60% of our total loan portfolio is either variable or adjustable rate with approximately two-thirds of our combined commercial real estate and C&I loans in this group. Our loan pipelines going into 2017 remain robust and we continue to anticipate mid single-digit loan growth separate by quarterly fluctuations in our construction and commercial real estate portfolios from project pay downs, property sales, and refinancing in the non-bank markets. During the quarter we continued our stated strategy of reducing the size of our securities portfolio through the sale of certain investment securities to help maintain the balance sheet below $10 billion in total assets in the near term while funding loan growth. As a result, as of December 31, securities represented 23.7% of total assets at year end as compared to 28.6% at the end of 2015, a decrease of approximately five percentage points. At the same time, our total portfolio loans have increased to 64% of total assets as compared to 60% a year ago. The current size of the securities portfolio provides us a near term flexibility to continue to manage the size of our balance sheet while supporting loan growth. Total deposits increased 16.1% to $7.1 billion at December 31, 2016, primarily due to the YCB acquisition. Total organic deposits excluding CDs increased 2.3% year-over-year, reflecting our deposit and funding strategies as well as customer deposit product preferences. As a result, interest bearing and non-interest bearing demand deposits organically grew 10.8% year-over-year. In total, demand deposits now represent 47.4% of total deposits and nearly seven percentage point increase from the prior year. Lastly, as we are focused on the overall size of the balance sheet, in order to remain under $10 billion in total assets in the near term, federal home loan bank borrowings of $0.9 billion have decreased 9% since June 30, and now represent 14.1% of average interest bearing liabilities. In addition, SEDARs and insured cash REIT money market balances have been reduced by approximately 250 million year-over-year. Net interest income for the fourth quarter increased 18.3% year-over-year to $71.7 million, due to a 14.4% increase in average earning assets to $8.6 billion as well as a 10 basis point increase in net interest margin, which were driven by the YCB merger and our continued remix of securities into loans. While our net interest margin has benefited from the remix, which was worth 10 basis points in the fourth quarter and the impact of purchase accounting, it also reflects increased funding costs associated with a higher proportion of federal home loan bank medium-term borrowings and higher junior subordinate debt costs, otherwise known as TRUPs as these are mostly three months LIBOR-denominated instruments. During 2016, the net interest margin decreased nine basis points year-over-year to 3.32% due to increased funding costs associated with federal home loan bank borrowings and lower earning asset yields. Average loan rates declined during 2016 due to the low interest rate environment for most of the year, the re-pricing of existing loans at lower spreads and competitive pricing on new loans. Turning now to non-interest income and non-interest expense; for the fourth quarter non-interest income increased 7% from the prior year to $21.4 million. This $1.4 million increase was driven by higher deposit service, charges and electronic banking fees, reflecting a larger customer base from the addition of our new Indiana and Kentucky markets. Net securities brokerage revenue declined year-over-year as a result of market factors and our deposit retention strategy. Customers continue to be receptive to the back-to-back fixed rate loan swap product in the current interest rate environment and as a result we realized approximately $2.7 million of commercial customer loan swap fees and market value-related income during 2016. We continue to manage our operating expenses diligently as evidenced by our full year efficiency ratio excluding merger related costs of 56.7%, an improvement of 36 basis points year-over-year. In fact since 2012, the year we expanded our Western Pennsylvania market with the acquisition of Fidelity Bancorp, we have reduced our efficiency ratio by more than 400 basis points. This achievement requires the diligent efforts of our management team and all employees while they insure to our customer service levels remained high. Another key improvement is our focus on positive operating leverage as revenue growth exceeded expense growth by a ratio of almost 2:1 during 2016. As we have mentioned before, general rule thumb target is have to $2 of return for each $1 of investment. Additional technology and personnel-related costs prior to the conversion resulted in higher operating expenses during the fourth quarter. However as we mentioned last quarter, we began to realize some of the expected cost savings from the YCB merger during the latter half of the quarter upon completion of the conversion and still expect to achieve our target expense savings as schedule. Reflecting the YCB acquisition and conversion, non-interest expense excluding merger-related costs increased year-over-year during the fourth quarter 2016 to $55.6 million consistent with our expectations. Turning now to asset quality and regulatory capital ratio metrics; for the three months ended December 31, 2016 the provision for credit losses was $2.1 million primarily reflecting loan growth and an additional provision for a credit impaired classified commercial real estate credit inherited from ESB. However most other credit metrics continue to show year-over-year improvement as evidenced by lower nonperforming loans, nonperforming assets, and criticized and classified loans as a percentage of total portfolio loans. Net charge-offs as a percentage of average loans were 0.08% for the three months ended and 0.12% for the 12 months ended December 31, 2016 which improved 12 and 11 basis points respectively year-over-year. The allowance for loan losses decreased year-over-year from 82 basis points from 70 basis points as a result of the acquired YCB loan portfolio being mark to market as of the acquisition date. We continue to maintain strong regulatory capital ratios as our capital ratios remain well above the well-capitalized standards required by bank regulators and Basel III capital standards with our Tier 1 leverage capital ratio of 9.81%, Tier 1 risk-based capital ratio of 13.16%, total risk-based capital ratio 14.18%, and common equity Tier 1 capital of 11.28%. Lastly, our tangible equity to tangible assets ratio improved to 8.20% as compared to 7.95% a year ago. All of the ratios as of 12/31/16 were higher than anticipated from the date of the merger announcement. Tier 1 leverage was somewhat lower than at the end of the third quarter given the fourth quarter having a full quarter of average assets reflective of the acquisition and the tangible equity ratio was six basis points lower due to reduced accumulated other comprehensive income primarily from fair market value adjustments in a rising rate environment from the available-for-sale portion of the investment portfolio. Before opening the call for your questions I would like to provide some thoughts on 2017. Regarding preparations for the $10 million asset threshold, we currently do not anticipate any changes to our plans as we continue in the product lease phase in the cost of our infrastructure bill. In addition we will continue to monitor and assess the timing and impact of crossing the threshold. We will continue to pursue our balance sheet strategy to reduce investment securities while funding mid single-digit loan growth. We are currently modeling two 25 basis point that interest rate increase during 2017 one each in June and December which in addition to purchase accounting accretion of 5 to 10 basis points for quarter should help the overall net interest margin. As I mentioned approximately 60% of our total loan portfolio is variable-rate or adjustable over time and out of roughly 50% we re-priced during 2017. In addition in conjunction with the anticipated rise in market rates, we expect net interest income to rise during the year due to our current assets sensitive position. Lastly, we still anticipate achieving 75% or greater of the targeted cost savings from the YCB acquisition during 2017 with the remainder early in 2018 and we will continue to carefully control discretionary operating expenses throughout the year. We are now ready to take your questions. Operator, could you please review the instructions?

We will now begin the question-and-answer session. [Operator Instructions] Our first question today is from Catherine Mealor at KBW. Please go ahead.

Good morning, Catherine.

Hey, good morning. Bob, up for you; Bob, on the margin, it looks like you just mentioned that it should be about five to 10 bip per quarter fair value accretion in 2017. So that's a little bit of a lower level than we saw in the fourth quarter. And so, you are saying all in the reported margin even with a little bit of lower fair value accretion should still move modestly higher next year from this 342 level just given the asset sensitivity, is that a fair takeaway?

Yes.

Okay. And then…

And then, just a remark about the fourth quarter of 10 basis points, there were some prepayments of YCB loans, not credit impaired loans, but just regular loans, and the mark on those prepayments would be taken into account in the fourth quarter. So, about three basis points would be due to prepayments beyond what our normal prepayment speed assumption would be when we do our mark to market analysis. And so that's why the guidance would be between five and 10. There might be a couple of periods where you have higher prepayments and a couple of periods where you wouldn't, so hopefully that…

That makes sense. And on the prepayments, is it fair to say that because you had a higher level of prepayment this quarter that that's what drove the fair lease flat linked quarter ended period loan balances? Did you have some YCB loans or just prepaid came off and maybe softened what would otherwise been little bit of stronger growth on the legacy portfolio?

No, really -- Catherine, this is Todd. It really wasn't related to YCB at all. That portfolio was continuing to perform well and we put some nice assets on since the closing in the fourth quarter, so nice big ones in the marketplace as well too. We've got a lumpy business with our construction portfolio and we have talked a little bit about that in the past. We had great year in terms of originations and 2 billion was by far 11% higher than we've done in the past, but the construction portfolio -- a lot of loans that went to the permanent marketplace went probably because rates was anticipated to rise in the fourth quarter, which they did, and a lot of the stabilized or near-stabilized properties went into the secondary market. I spent the day with a number of developers just last week, and that number of developers have pretty much cleared out all their construction and taken all the permanent market and now they're going back in to start doing construction again. So we get a nice pipeline, but a lot of things went to the market -- secondary market earlier than we had anticipated, so production looks good. It's also why we're building out the C&I portfolio was to flatten that out a little bit, so you don't have the gyrations with the construction portfolio; some quarters it helps you, some quarters construction hurts you. Fourth quarter was one where there were not pay-offs that were not planned, just things that went to the secondary market a little bit earlier than we had thought because of the stable rate environment in the secondary market.

It makes sense. And so, your outlook for single-digit loan growth into next year, is that kind of dynamic taking into account, do you feel like [indiscernible] on the fourth quarter should slow a little bit as we move into next year?

Yes, I think we traditionally run in that mid single-digit range, and I don't think we see any change. Obviously we've got some nice newer markets that has some bigger growth rates associated with them, they were looking forward to be and involved with, but you know, we still have that dynamic of low double-digit growth in C&I and low single-digit growth in commercial real estate and blends out -- seems to be blending out the last few years around mid single-digit, and we would anticipate that same dynamic going forward.

Okay, great. And if I may, one more back to the margin; just on the funding side, what are you modeling, Bob, for your funding cost as you think about the margin moving higher, and how long until we really start to see this deposit start to move upwards?

Yes, we are not anticipating that deposit rates are going to go up as a result of the prior December increase, just as they didn't for the industry after the December increase of late 2015. So, we're really not anticipating until after the June increase where we start seeing a little bit of an increase initially in CDs and money market accounts, which have -- well, the money market accounts in terms of data would be higher for the higher tiers than they would be for the lower tiers, but that's when we would start seeing a little bit of movement in deposit rates. I don't think that's significant for the year, and recall the second increase for us is in plan until the end of the year. Now in accordance with our review of blue chip forecast and analyzing, we looked at the most recent one and we'll continue to look at those as they come out here in the first quarter, and we're cognizant that you know, the DocPlus from the Fed has between three and four increases, and it will continue to review our assumptions and determine whether our forecast needs to be adjusted in accordance to their way, but that's our current thinking as of our budget preparation here in the fourth quarter.

Okay, it sounds great. Thank you for the color.

Thank you.

Thank you.

[Operator Instructions] Our next question comes from Bob Ramsey of FBR. Please go ahead.

Hi, Bob.

Hey, good morning guys. So, sort of another question on margin; it sounds like if I understand correctly, you lose a few basis points of accelerated accretion, but you will more than make up from that just from the rate increase. So, I'm guessing that means you are getting maybe four, five basis points less from the December move. That sounds like more than I would have thought, but am I thinking about that the right way?

No, I think you are thinking about that in the right way. There was -- I don't want to suggest there was a lot of impact from prepayments, I mean, Todd gave the update; there were not a substantial amount of prepayments coming out YCB, but it doesn't take about $1 million, or $2 million, or $3 million, or $4 million loans, and you are bringing all the future accretion on that loan into the fourth quarter, and that does -- as I said, it had a two and three and four basis point impact. The fourth quarter has a day count issue for all banks, and so typically you have a little bit lower net interest income in the first quarter, but a higher -- a slightly higher net interest margin, but then as we as we move through the quarters that two or three basis points if you would expect to get from the lift in an asset sensitive balance sheet on the loan portfolio minus a little bit of as I suggested to Catherine on the deposit side, should get us -- you know, mid 340s number that you're looking at the fourth quarter.

Okay.

And if it if higher, then we'll see what happens.

Okay. And then on the next increase even maybe I know you said maybe you'd start to see a little bit of the positive moves, but two to three basis points off the next increase we got seems reasonable again?

Yes.

Okay, great. And then shifting gears to talk about fee income, I know you guys said growing fee income proportionately is one of the priorities. Just curious you know, one so -- can we interpret that to mean that fee income this year should grow at a faster than the mid single-digit loan growth rate you guys are targeting and kind of to what areas you see the most opportunity for fee income?

Yes, we typically don't give the guidance in terms of where we think we're going to finish up on fee income, but I would tell you that we like the fee-based business we have, we are 23.7% now. We'd like to get up higher 20s at some point in the future, we were there before. We had the two S&L acquisitions that have brought us back down, but the trust fee business is a strong business for us, it has a strong year last year. Swap fee income I think has been good. Part of that's because of the yield curve. Hopefully that will be good for us again this year as well too, and the new markets that we are moving into in the Louisville, Kentucky, and New Albany, in areas, Elizabethtown areas like that where some of the private banking trust, insurance products that we have that those markets didn't have get deployed and we roll through with the execution of those strategies in those marketplaces. We would expect to have a solid year in terms of fee income, and the hope is over time to take that percentage, that 23.7 or 24 percentage points of fee income and take that up closer to the 30 mark in the future.

Okay, great. Thank you.

Our next question comes from Casey Whitman at Sandler O'Neill. Please go ahead.

Hey, good morning.

Hi, Casey.

Good morning.

Just to ask one more question on the fee income this quarter, it seemed like it should have been up a little bit more than just the full quarter contribution from YCB coming on, can you maybe walk through the movements that we saw this quarter just so we can get a better idea of the run rate here?

Yes. I think we can do that. In terms of fee income overall, our deposit charges were up pretty significantly a little over a $1 million fourth quarter '16 versus fourth '15, our electronic banking fee is up about $600,000, trust fees were up $200,000, and about $1.2 million in swap fee income that came in as well too. I was disappointed in the brokerage business, part of it was we moved to more of an external focus there where brokers are out looking for additional money brining in and not and mining you know, high rate CDs, because probably those high rate CDs are gone now. So, it will shift in that business model in terms of how we approached it. And I would view 2016 as a transition year with that, but I was disappointed with the way that came out. I felt we were lower than we should have been there and I'd expect better traction of that in future years, but other than that I think all the fee-based businesses feel pretty good about where we're at in the kind of the year that that we had.

Okay, great.

And in terms of -- Casey, in terms of mortgage banking, given the rate volatility in the fourth quarter, and you are probably seeing this with other banks as well, and mortgage banking isn't a significant business for us, it is for others, but nonetheless there was a negative adjustment for the mark-to-market on loans held for sale as well as net of mortgage commitments to the secondary market in the fourth quarter, and so that get reduced our gain on sale of loans by about $0.5 million.

Great. Moving on to expenses, Bob, maybe can you quantify how much more you expect to realize in cost saves from YCB?

Well, what I can tell you is that if you take a look at the 55.6 million that we talked about as the fourth quarter net of merger-related expenses, and you think about that a comment that Todd and -- Todd or I made in our scripted remarks about there being some additional operating expenses for running two IT systems and having a personnel related to the conversion there from September 9 until November 30, or shortly thereafter, that visibility doesn't start coming through until mid December-ish, and we'll start seeing more of that in the first quarter. Again like margin, you have to day count issue in the first quarter, but we would expect that in terms of the run rate from the fourth quarter off that 55.6 you should see something in that 2.5% to 3%, 3.5% reduction in the first couple of quarters, and then the back half of the year that kind of comes back as a result of our normal salary increases. We would have talked about that last year that. Does that kind of give you a guidance, and the guidance I gave you in the fourth quarter about what we expected expenses to be up in 2017 over the normal highs or the post YCB expenses is still good. And I also think non-interest income will be up nicely in 2017 despite the t factors that we talked about affecting the fourth quarter.

Right. Just to clarify, the 2.5% to 3% reduction for the first two quarters, is that in each of those quarters or sort of just the first quarter and then second quarter withholds there and then third quarter we see a pick up of it?

The second quarter withhold at a similar level to the first quarter, and then you'd see a pick up in the third and fourth. Some banks do first year increases, our increases are mid-year.

Okay, great. And are all the one-time merger expenses in there now?

Yes, there will be a little bit dribbles, but nothing you can hear.

Okay. Last question, can you give us just an update on the M&A strategy and I guess as chatter picked up with higher big multiples since the election?

Our approach on the M&As that hasn't changed much despite the run up in market stock prices, you know, our approach is still to manage under 10 billion. We got probably two years worth of run rate before we would organically start pushing up against that limit if we continue to bring the securities portfolio down, as Bob mentioned into the 18%-20% which is more in line with what we have done in the past and more in line with our peer group, that plus the couple of hundred million were below 10 is right now gives us about two years with the run rate at mid single-digit loan growth number. So, we continue to look at -- as I said before, come with back half of '17 or sometime in 2018, we would like to be able to find an opportunity to go over preferably through an M&A event, but we wouldn't be judicious about that. We're going to continue to be really disciplined about that. Is that going to answer the first part of the question, the second part is I haven't really seen any more additional chatter I think, a lot of smaller banks are out there kind of evaluating what the last 60-90 days has meant for them. Some got the multiples that they were looking for a year ago and the run up in there prices, but some of the smaller banks didn't get that. And I think one of the things we benefited from is we have seemed to have closed the gap, little bit gap we had from a discount perspective to the peer group, which makes our currency strong, obviously we look for an opportunity, but I haven't seen any increase in chatter, you know, we've got a pretty defined list of opportunities that we want to look at over the next couple of years, and we are just going through that, but we are continuing to be disciplined bank in M&A and we're going to be that same way. So, you may find something in the next couple of years that make sense for us that we may not, but no change in strategy or timing to go over 10.

All right, thanks for taking my question.

Sure.

This concludes our question-and-answer session. I would like to turn the conference back over to Todd Clossin for any closing remarks.

Thank you. Well, we are pleased with our performance during 2016. We are excited about our opportunities for 2017, and we are going to continue to be focused on our strategic vision and enhancing shareholder value. I want to thank you for joining us today. I hope to see you all in the upcoming investor event, and have a good day. Thank you.

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