Earnings Call: Q4 2019

Jan 27, 2020

Good morning, and welcome to the South State and CenterState Merger Call. All participants will be in listen only mode. Please note this event is being recorded. I would now like to turn the conference over to Will Matthews. Mr. Matthews, please go ahead. Good morning and welcome. Thank you for joining us. This is Will Matthews and joining me on this call are Robert Hill, John Corbett, John Pollock, Steve Young. Earlier this morning, we issued a joint press release to announce a merger of equals of South State and Center State. Both companies also separately issued their respective Q4 earnings releases. We will discuss today's merger announcement on the call, then provide some brief comments regarding each company's 4th quarter earnings. As noted in our earnings releases, this call will take the place of the earnings calls previously scheduled for tomorrow and those calls have been canceled. We have posted presentation slides that we will refer to on today's call on each company's Investor Relations website. Before we begin our remarks, I want to remind you that comments made by management teams of both South State and Center State may include forward looking statements within the meanings of the Private Securities Litigation Reform Act of 1995. These such forward looking statements we may make are subject to the Safe Harbor rules. Please review the forward looking disclaimer and Safe Harbor language in today's press release and presentation for more information about risks and uncertainties, which may affect us. Additional information about the merger can be found in the forthcoming registration statement and proxy statement. Now, I'll turn the call over to Robert Hill. Good morning and thank you for joining us on this our legacy of service goes back over 100 years. Ensure commitment to our customers and the high quality organizations you have built that make this next step possible. I will start off with some background around what has brought us to this important day. I will then turn the call over to John Corbett, who will provide insight into the transaction and the significant opportunities that are ahead of us. Then, Will Matthews will provide a financial overview of the merger, and he and John Pollock will touch on the quarterly results for each company. If I could summarize a key to our success at South State, it would be described as a series of great partnerships. Those partnerships have included other banks, members of our team, customers and Board members. That same key to success is what has brought us together today. For a long time, John Corbin and I have been building 2 companies on a parallel path. About 10 years ago, John and I began to spend time together as our banks faced similar challenges and opportunities. The relationship grew beyond the 2 of us as other members of our teams also began building relationships that help each company. Almost 2 years ago, John and I had lunch together and discussed the decade ahead of us, our rapidly changing industry and our vision for the future. We both felt the next wave of consolidation would include a few important banks of like size combining. We did not know at the time how right we were. We also agreed that a shared vision, a committed management team in growing markets were key to the success of these transactions. Clear leadership for the decade ahead was also important to both of us. And at the end of this meeting, I asked John if he would consider a long term partnership with him as CEO and me as Executive Chair. We agreed that we would absolutely embrace this opportunity and our respective roles if the circumstances were right. 1 of our investors told me that she considered our company thoughtfully opportunistic. I knew John and his team operated in a similar way. And over the last 2 years, we continue to thoughtfully explore a combination of our banks. For the last 5 months, our executive teams jumped in and have worked jointly to build a framework for success. We also spent a lot of time in each other's markets. This allowed us to understand how each bank was built, to discuss the opportunities available if we combine and to build trust. So while we are announcing this today, this has been years in the making. The work that has been completed already positions this merger for success. More importantly, it positions us as the leading bank in the Southeast. Bangda will continue to perform at a high level with the opportunity to serve over 1,000,000 customers. But most importantly, it has an amazing leadership team, a team that is won today and committed to our success. I'm very proud to turn the call over to our CEO, John Corbett. Thank you, Robert. Good morning, everyone, and thanks for joining us in short notice. Robert and I have a lot of ordinary days. Today is not an ordinary day. Both recognize that the world is changing faster than ever before. Likewise, the banking business is changing faster than ever before. Today's announcement represents our acknowledgment of the changing world around us and our plan to proactively lead our banks into the future together. This future is bright and will bring a new level of digital convenience to our clients, while at the same time strengthening the personal relationships that define us. It's a future that both of our teams are excited to create. Most of you in the investor community have followed our bank since the financial crisis and you know how closely aligned we are. Both companies are positioned in high growth markets with meaningful scale. Both are funded by low cost checking accounts, both share a conservative credit mindset that makes us built for the long run. South State philosophy of soundness, profitability and growth is one that we both share. We really have been building the same bank for 20 years in neighboring geographies. Previous announcements, I referred to our focus on the 3 Ms to make a merger successful. The math, management and the math. I'll add a 4th in today, which is this moment in time. If you refer to the map on Page 4, see the pro form a franchise which will be the 8th largest bank in the Southeastern United States with $34,000,000,000 in assets and presence in 10 of the 15 largest markets. Robert and I both believe in the importance of scale. We believe that having over $1,000,000,000 in deposits in a high growth MSA gives us the scale necessary to hire the best leaders and talent in the market. And that is what this franchise delivers in dynamic markets like Charlotte, Orlando, Tampa, Greenville, Charleston and Atlanta. As you can see on Page 9, it's simply a franchise map that can't be replicated. In our new peer group, the franchise will be home to the fastest growing geography, Southeastern United States. Our second focus is an engaged management team. Robert mentioned our 10 year relationship. We have very similar backgrounds. We both went to college in South Carolina and then we both started our banking careers with large regional banks in Charlotte, North Carolina. Both left the big banks early in our careers to start de novo banks in rural markets. Both led our banks through the financial crisis and we were both opportunistic to take advantage of the FDIC roll ups in the downstream consolidation that occurred over the last decade. And most important, we both believe in surrounding ourselves with people that are smarter than we are. Robert mentioned that we have been talking about combining our companies for almost 2 years before any of the other MOEs were announced. We have taken that time for our management teams to get to know each other on a personal level, to learn about each other's families and other priorities in life. That relational time over the last 5 months has allowed us to build an executive team that we can announce with confidence today. We all agreed that we needed a clearly defined leadership structure with clearly defined roles and responsibilities. You can reference the executive team on Page 6 of the investor deck. Will Matthews will serve as Chief Financial Officer. John Pollock will be Senior EVP and help lead us through the conversion as well as serve on the Board of Directors. Steve Young will be responsible for Capital Markets and our specialty lines of business. Renee Brooks will serve as Chief Operating Officer. Greg Lapointe will lead our sales force as Chief Banking Officer. Richard Murray will be the President of the holding company. This is a formidable and young team. They are all in their 40s 50s with a lot of runway ahead of them. In addition to the executive team, we have named an expanded operating committee of 16 leaders with clearly defined roles and responsibilities. And unlike most mergers over the last decade, there is no geographic overlap, which means that the entire geographic leadership team stays intact without disruption. 3rd M is math. Not only is this a powerful Southeastern franchise with a formidable leadership team, This company will produce top tier returns for our shareholders. The return on tangible equity of 18% is projected to be the highest return in the nation for our new $25,000,000,000 to $50,000,000,000 peer group. Will is going to review the modeling assumptions which are conservative and achievable. Pro form a company will produce earnings per share accretion over 20%, minor book dilution and a quick earn back. And the long term power of the franchise will continue to be the granular deposit base comprised of over 1,000,000 deposit accounts and a top quartile cost of deposits of only 59 basis points. And then the final M is this moment in time. It's human nature to procrastinate and kick the can down the road rather than make the appropriate strategic moves, even when we know that it's logical. As our teams thoughtfully evaluated the landscape and strategic options before us, we absolutely know that this is the right moment in time to create this partnership. Some will wait on the sidelines and see what evolves, while others will be proactive and pick their partner. We've chosen the latter and in doing so we are combining the 2 premier banks in the Southeast before the opportunity passes us by. Will is going to walk you through a financial overview of the transaction and then a brief recap of the CenterState 4th quarter results. Will? Thank you, John. Slide 14 outlines the key modeling assumptions. This is a 100% stock transaction with a fixed exchange ratio of 0.3001. Our modeling is based on consensus estimates, and we estimate $80,000,000 in cost saves, representing approximately 10% of the combined consensus 2020 NIE base, a number we believe is reasonable. 25% of the cost saves are assumed realized in 2020, 75% in 2021 and 100% thereafter. DDI is modeled at 1.75 percent and we expect approximately $205,000,000 in merger and integration costs. Expected credit mark on loans is approximately 1.1 percent with 15% of that being PCD. Turning to Slide 15, that modeling generates EPS accretion in excess of 20%, minimal tangible book value dilution and an earn back inside of a year. Let me now give some brief highlights on our quarter before John Pollock does the same for South State. Interstate is pleased to report a strong finish to the year with $0.56 reported EPS $0.57 adjusted EPS for the 4th quarter, which brings the full year 2019 diluted earnings per share to $1.87 reported and $2.13 adjusted. This resulted in an ROTCE of 18.8 percent reported, 19.1% adjusted and an ROAA of 1.63% reported, 166 adjusted for the quarter. We had another strong revenue quarter in Q4 with record $208,300,000 led by continued strong performance in our non interest income business lines, particularly correspondent and mortgage. Our NIM improved 6 basis points over Q3 aided by an increase in accretion income due to some payoffs on acquired loans. Our core NIM, excluding all accretion, declined 6 basis points in line with our 5 basis points to 8 basis points expectation. And we are pleased that we were able to manage deposit costs down by 7 basis points to 67 basis points. Growth. In spite of a record quarter of loan production at just over $1,000,000,000 loans only grew 2% annualized for the quarter and 3% for the year as we continue to find elevated levels of payoffs. Our ending deposits declined slightly for the quarter, but average deposits were up 3.6% with average DDA up almost 8%. For the year, core deposit growth was 2.9% with DDA growing 5.4%. Turning now to expenses. Our the strong performance in some of our commission and incentive based business lines as well as a true up of year end incentive accruals based on performance. With that, our efficiency ratio was still a strong 54.3% or 52.1% on an adjusted basis. On credit quality, our Q4 net charge offs were 15 basis points for a full year total of 9 basis points. Approximately half of the quarter's charge offs were on loans with specific allocation from prior periods. NPAs continue to be very low at 26 basis points of assets, down slightly from Q3 levels and in line with our 5 quarter trend. And with CECL becoming effective this month, we estimate our allowance as a percentage of total loans to increase in the range of 50 to 70 basis points. Additionally, we estimate a reserve for unfunded commitments in the range of $5,000,000 to $10,000,000 Based on these ranges, this would result in a reduction in our TCE ratio of 20 to 35 basis points. With the strong returns we produced, our tangible book value per share grew 11% to $12.76 in a year in which we completed our largest acquisition and repurchased 4.6 percent of the company. We ended the year with strong capital position with a TCE ratio of 10.1%. I'll now turn it over to John Pollock. Thank you, Will. First, a few comments about how we finished fiscal year 2019. For the year, net income totaled $186,500,000 or $5.36 per diluted share, representing a 1.21% return on average assets and a 15.11% return on average tangible equity. Adjusted net income totaled $195,700,000 or $5.63 per diluted share represents a 1.27% return on assets and a 15.82% return on tangible equity. Our lines of businesses all performed well during the year helping offset much of the reduction in revenues from a full year impact of Durbin on debit card fees. Minimizing expense growth while making appropriate new investments in our company is one of our key long term financial targets. During 2019, we were able to reduce expenses over the 2018 levels. We decreased expenses on a GAAP basis by $16,300,000 or 3.9 percent, decreased adjusted expenses by $600,000 or 0.2%. During 2019, total deposits increased 4.6% with non interest bearing deposits increasing by 6%. Net loan growth totaled 3.2% in 20 19 and was below our longer term goals. Although we had record production levels, asset quality remained pristine with very low levels of problem assets and net charge offs of only 4 basis points on our non acquired loan portfolio. With loan growth a little below our targets and earnings retention strong during the year, we were able to retire 2,100 and 65,000 shares of common stock at an average per share price of $72.52 We also declared common stock dividends for the year totaling $1.67 per share, which is a 21% increase over 2018. And just to wrap up my comments on 2019, tangible book value increased by $2.83 for the year to $39.13 at year end, which represents a 7.8% increase over 2018. So now let me turn to our 4th quarter performance. Net income totaled $49,100,000 or 1.4 $5 per diluted share, which represents a return on average assets of 1.23% and a return on average tangible equity of 15.79%. Excluding branch consolidation costs and security gains, adjusted net income totaled 50,300,000 dollars or $1.48 per diluted share. This represents a return on average assets and tangible equity of 1.26% and 16.17% respectively. Our net interest margin declined 9 basis points with lower yields on interest earning assets of 15 basis points, partially offset by lower cost on interest bearing liabilities. Our total cost of funds declined to 60 3 basis points this quarter as we were able to bring down the cost of all funding categories. Non interest income levels excluding securities gains were down linked quarter by $900,000 mostly on lower mortgage banking income from strong third quarter levels. Adjusted non interest expenses excluding branch consolidation costs increased $2,800,000 linked. Our FDIC insurance expense was $1,100,000 higher due to a larger third quarter credit we received from the FDIC as a result of the insurance fund exceeding its target level. We also had higher business and development expenses of $900,000 and higher professional fees and marketing expenses of about $900,000 These were partially offset by $1,300,000 in lower salaries and benefits costs as we finalized our year end incentive accruals. And finally, with CECL becoming effective this month, we continue to estimate our allowance under the new standard to be in the range of $105,000,000 to $120,000,000 and the initial capital charge to reach this level will reduce our tangible common equity by 20 to 30 basis points. With that, I will now turn the call back over to John Corbett. Thanks, John. And I know there are a lot of employees on the call as well. Take a look at the power of the franchise we are creating. What an exciting moment. What an exciting future. Operator, we open it up for questions. Thank you. We will now begin the question and answer session. The first question today comes from Catherine Mealor with KBW. Please go ahead. Thanks. Good morning and congratulations. Thank you, Catherine. I wanted to first start just thinking about growth. You laid out a lot of great financial profitability targets. But as we think about how the pro form a company will what the growth rate will be on the pro form a company given you'll be a much bigger balance sheet? How should we think about that? Sure, Catherine. This is Will. I will take a stab at that. We continue to have aspirational goals of growing the company over a cycle at close to 10%, but recognize that different economies will allow for different levels of growth within our credit box. And we think for the foreseeable future that a growth rate in mid single digits is probably more realistic to expect. Okay. And then, any thoughts about you both have been active on buybacks, any thoughts on how you'll handle that from now until the deal closes and then thoughts on that after the deal closes? Yes, Catherine, this is Will again. The buybacks are in the consensus estimates, which is what we use in the modeling. And as I think you know, both companies have demonstrated that they're good capital stewards independently, and we would expect and plan to continue to be good capital stewards together. Both companies have authorizations in place. Both companies have strong capital formation rates. So all of that gives us optionality. There is of course some limitation once you print the proxy, but we'll continue to be thoughtful capital sewers and opportunity. Okay, great. And then one last one, have you made decision on how you'll handle the core conversion and what processor you'll be using? Catherine, it's John. Hey, John. We really want to take some time to get our teams together to look at the facts and the data and make a thoughtful decision there. We're thinking that the conversion probably will not occur until sometime in the spring of 2021. Great. All right. I'll sit by the queue. Thank you and congratulations. Thank you. Thank you, Catherine. The next question comes from Michael Rose with Raymond James. Please go ahead. Hey, good morning. Just wanted to follow-up on the last question. So of that $205,000,000 of pre tax merger and integration costs, would that include any costs related to technology investments and a potential systems upgrade on your core processor? Thanks. Yes, Michael, it's John. So naturally, the deal charges cover all of the contract terminations that you would typically expect in an integration. From a digital standpoint, the consensus estimates currently anticipate digital investments that both companies are making. And candidly, I think it's fair to say that South State is a little further down the journey of the digital transformation in Center State. And this merger gives us a chance to accelerate the speed to market for digital for both banks. South States really been on the journey for about 4 years led by Renee Brooks and she's going to serve as the company's Chief Operating Officer. She'll continue to lead efforts for the combined bank as we evolve into the digital world. Okay. Maybe as a follow-up, looks like the total CRE to risk based capital form a is about 280%. Is there a thought process over time to bring that down closer to where you guys CenterState legacy has been historically? And will that impact future growth rates moving forward? Thanks. Hey, Michael, this is Will. We do a pretty strong pro form a capital ratio, 10.5%. Our TCE ratio, the high 8s. Our total risk based cash flow, north of 12. And these are all with buybacks assumed in the modeling. If you look forward, we are accreting TCE at 30 to 40 basis points a year with the buybacks and that would increase in the 60 to 70 basis point range without buybacks. And I guess one last point I'll note is that we do have room in our capital structure for additional Tier 2 capital. So we have the option of issuing sub debt as needed. So all a way of saying that we don't think capital will be a constraint on our ability to grow. Okay, that's helpful. And maybe just one last one for me. So of the 10% expected revenue or expense savings. Would you view that to be somewhat conservative? The numbers does seem a little bit lower than I might have expected. And then can you also talk about any what you see as potential revenue synergies? Thanks. I'm sorry, Michael, I didn't catch the second part of your question. On revenue synergies, what do you see as potential revenue synergies? Great. Well, this is Will. Why don't I take the cost saves, Bart and I'll let Steve take the revenue synergies. The first thing I'd say about the cost saves and this is true of both the cost saves and the deal costs, there was a joint effort between our 2 management teams over a period of roughly 12 plus weeks or maybe longer dating back to October. And we think that less than 10% of the combined NIE is a reasonable number, a thoughtful number. And we've also been thoughtful about the timeline in which we think we will realize those cost saves. There are concentrated in centralized overhead and IT efficiencies. And we don't want to ever be in the business of over promising and under delivering, but I think those are thoughtful numbers. I'll let Steve address the revenue synergies. Yes, sure, Michael. As far as modeling, we don't model any revenue synergies in the deal, but just to give you a couple of ideas, we are really excited about the platforms that each company has built that can be leveraged into the pro form a company. 2 examples of that are our Wealth Management business and our Capital Markets business, including our swap business and international are just examples of platforms that will be leveraged in the combined company. Additionally, just having more scale in our mortgage, our treasury management business will also be key to our go forward success. Okay. Thanks for taking my questions. Thanks, Michael. The next question comes from Jennifer Demba with SunTrust. Please go ahead. Thank you. Good morning. Congratulations. Thanks, Jennifer. First of all, the credit quality of both organizations has been excellent. I'm just wondering, as you look out over the next 5 years or so, what kind of net charge off level would you see the combined company aiming for what kind of range over a cycle? This is John, Jennifer. I think if you look back over the last decade, the history kind of speaks for itself. Both companies have had very clean credit and it's something that we take a great deal of pride in. You look at the philosophy of South State where soundness comes first. And I think that as we think about CenterState's philosophies, we're right there. We live through the crisis and we're building this bank for the long run through multiple cycles. So I think the best proxy for your answer is the history of the company's charge off ratios over the last 10 years, which has been very good. Okay. And as you come together to be $34,000,000,000 in assets, are there any businesses, business lines you anticipate entering or emphasizing further as a larger organization? Jennifer, this is Steve. Again, I think there's some platforms that continue to be leveraged in this merger. I think obviously these wealth management platforms and capital markets will continue to grow. We clearly want our mortgage business to grow, our treasury management, those are key focuses in the future for our continued growth. Thank you. The next question comes from Tyler Stafford with Stephens. Please go ahead. Hey, good morning guys and congratulations on the deal. Thank you. Hey, I wanted to start on the cost savings aspect of the deal. So the $80,000,000 that was asked about earlier, agreed does look like a conservative number. But at the same time, you guys do have a lot of hiring opportunities in the pro form a market. So I'm just wondering how much of those cost savings do you think are going to be reinvested and what underlying expense growth rate you should be thinking about? Let me take the hiring piece of that question, Tyler. One of the things that's so attractive about this combination is that these are 2 great geographies, but they don't overlap. They're contiguous, but they don't overlap. And in doing this, we're keeping our leadership structure exactly as it is from our market presidents and regional presidents' standpoint. So, there is nothing about this merger that's going to change our focus on recruiting great bankers just like we would have done if we were an independent organization. Will, any additional thoughts on that? I would just say one overarching theme is that and this is true for our entire industry is that we will have to continue to take expenses out of our existing brick and mortar delivery system in response to changing customer patterns and take that money to reinvest in technology. I think opportunistic hires that present themselves to us are things we want to continue to take advantage of. And Tyler, you're of course aware of our commission based, incentive based business lines that where the non interest expense fluctuates with the non interest income as well. Okay. Thanks for that, Will. And then I don't know if Robert or John wants to take this next one. But one of the aspects that was maybe a bit misunderstood at announcement of the Park Sterling deal was some of the loan portfolio runoff. So I'm just wondering if there was any portfolio pruning at, I guess, legacy CenterState that we should be thinking about in terms of the outlook here? Pretty much every merger we've had in the past has always been kind of a repositioning of the balance sheet as we move through it. As we mentioned, we've spent quite a bit of time together over the last couple of years, especially the last 5 months. There's never been a merger where we've been more closely aligned from a risk management perspective or a credit culture perspective. So just like the geographic not having the overlap is we can build from day 1. Same thing in terms of the loan portfolio. There's nothing that we see that we would be moving away from. It's all is how we now take advantage of these lines of business and build over a larger footprint. Okay. Thanks, Robert. And then just last one for me is just around the 20% EPS accretion. So just thinking about legacy CenterState, the fixed income business has doubled the last two quarters relative to where they've historically run. And I think looking at Street estimates, there's around $40,000,000 of accretion in legacy Center States estimates. And then you mentioned there is the buyback in both companies' assumptions in their estimates. So can you just level set for us, one, what we should be thinking about in terms of the fixed income business at legacy CenterState in terms of kind of a normal run rate here? And then in terms of the accretion with all the moving pieces here, what's a reasonable estimate for the accretion on a combined basis? Thanks. Yes. Thanks, Tyler. This is Steve. Let me address your question maybe holistically and try to describe it this way. Both companies as we think about revenue, both companies have really similarly structured balance sheets with really strong low cost core deposits. So those revenue components naturally outperform in a higher rate environment. In addition, both companies have constructed really strong fee based businesses to perform when rates are lower. And so we believe as you think about the combined companies in either rate environment, we have the tools to excel. You've seen that play out over the last few quarters. John Pollock mentioned that in his prepared remarks and of course you've seen that with our own bank that the fee income businesses when margin got compressed, they have outperformed. I would imagine that over time, the yield curve will stabilize, that the margin will stabilize and the fee income businesses would come back down to more normalized levels. But ultimately, from a total revenue perspective, I'm not sure that there would be much change. So hopefully that's helpful as we think about the overall pro form a revenue. And then just on the accretion part of your question, Tyler, we are estimating that in 2021, less than 10% of our net income is represented by accretion and it moves down from there. Okay. Thanks, Steve and Will. Very helpful. The next question comes from Kevin Fitzsimons with D. A. Davidson. Please go ahead. Hi, good morning guys and congratulations. Just very quickly, most of the questions have been asked already, but just you really emphasized how close we aligned the 2 companies were both financially, culturally, strategically. I'm just curious to the extent you can give us some examples of the areas where you were different. And maybe they were easy differences to work through or maybe they're going to be more difficult differences to work through either that you did work through in the negotiation or that you're going to have to work through in the integration? Thanks. Devin, it's John and I'll start on the credit side. There is a slide on Page 13 where you can take a look at how we've built the asset side of the balance sheet. And what you find is that it's fairly similar, but if you look at the pie of how we've allocated credit, South State is slightly more leaning towards residential real estate, Center State a little bit more towards commercial real estate. But from a similarity standpoint, both companies have got an outstanding track record. I think one of the nice things is that combining the 2 companies diversifies our loan book geographically. Both of them are granular loan books and deposit books. We both bank local businesses. Neither bank is in the business of banking national shared national credit, those types of things. So I think there's a whole lot more similar than there is different. Okay, great. Thanks. And just one further out question. I know you're going to be completely focused on the integration for quite a while, but when you look at the map of the 2 franchises combined, it jumps out at you that some of the states where you might aspire to expand into once you get into that mode and just a few look like North Carolina, Georgia, Alabama, what would be as a combined company once you're past the integration, is that something that you would aspire to in any particular markets in those states? Yes. Look, as you can imagine, there's only one thing on our minds this morning and for the foreseeable future and that is having the best integration of these 2 great companies that we can. But we're not thinking about other strategic opportunities anytime soon. We're going to execute this thing very well. We've been talking about it for nearly 2 years and the management team has been hyper focused on it for 5 months. So that is job 1 and that's all we are focusing on this morning. Okay. Thanks. The next question comes from Christopher Marinac with JMS. Please go ahead. Hey, good morning. I wanted to ask about the incentives that both of you look at together going forward. I know it's early in the process, but historically CenterState had a ROA and EPS incentive and SouthState was an EPS driven incentive the last year. So would those kind of remain intact or will you kind of change the dynamic for the combined company and do something that's more sort of deeper and broader in terms of how the incentives work for the management team and further on down the line? Yes, this is John. I think you heard the prepared remarks from both John Pollock and Will Matthews and I think you heard them both talk about building tangible book value per share over time. So, finding that balance between growth and tangible book value per share over an entire cycle and growing earnings per share, I think those are the 2 focuses going forward. Great. Thanks for that, John. And just a quick follow-up, I know you talked about expenses earlier for another question. Are hiring and hiring still happening this year for each company or would that be on pause until you get the merger closed and then re examine new hires? No change. Look, there's no overlap. So this merger, the great thing about it is there's such limited disruption in our field bankers. We want them doing exactly the same thing in the next year than they were doing the last year. Great. Thanks. The next question comes from Michael Young with SunTrust. Please go ahead. Hey, good morning. John, before you guys crossed $10,000,000,000 in assets through acquisition, you made a concerted effort to hire some bankers to, I guess, support the organic growth initiative pro form a. Would you do a similar sort of hiring ramp into the close of this deal to ensure that the pro form a growth rate can be sustained? Yes, I think it's the same answer I gave previously. We're always focused on recruiting great bankers and we're focused on retaining and motivating our current bankers. So really no change in our approach to recruiting great teams of bankers just as we've done. This merger announcement will not change our thinking. Thanks. And maybe bigger picture just on the timing of the announcement, you mentioned that you guys have been in talks for several years and maybe a little more serious here recently. But can you talk about, is it the digital investment that really pushed this to fruition or were there management succession issues or anything else that would have kind of driven this deal now? Yes. Look, both companies were incredibly strong companies standalone and individually. But as Robert mentioned, when he and I have spent time talking over the last 2 years, we just see where this industry is going. And if you have an opportunity to put the 2 best companies together, you take it before the opportunity passes you by. But clearly, digital is the future and we're both committed to that. And Renee is doing a great job at South State we're going to be that's going to be a top priority of ours going forward. Okay. Thanks. This concludes our question and answer session. I would now like to turn the conference back over to John Corbett for any closing remarks. Well, thanks everyone for your time today. We are going to be participating in the KBW conference in Florida next month and we look forward to reporting to you again soon. Have a good day. This conference is now concluded. Thank you for attending today's presentation. You may now disconnect.