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First Financial Bancorp (FFBC 3.94%)
Q4Â 2018 Earnings Conference Call
Jan. 24, 2019, 8:30 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
See all our earnings call transcripts.
Prepared Remarks:
Operator
Good day, and welcome to the First Financial Bancorp Fourth Quarter 2018 Earnings Conference Call and Webcast. 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 Mr. Scott Crawley, Corporate Controller. Please go ahead.
Scott T. Crawley -- Corporate Controller & Principal Accounting Officer
Thank you, Nicole. Good morning, everyone, and thank you for joining us on today's conference call to discuss First Financial Bancorp's fourth quarter and full-year 2018 financial results. Participating on today's call will be Claude Davis, Executive Chairman; Archie Brown, President and Chief Executive Officer; and Jamie Anderson, Chief Financial Officer.
Both the press release we issued yesterday and the accompanying slide presentation are available on our website at www.bankatfirst.com under the Investor Relations section. We will make reference to the slides contained in the accompanying presentation during today's call.
Additionally, please refer to the forward-looking statement disclosure contained in the fourth quarter 2018 earnings release as well as our SEC filings for a full discussion of the company's risk factors.
The information we'll provide today is accurate as of December 31, 2018, and we will not be updating any forward-looking statements to reflect facts or circumstances after this call.
I will now turn the call over to Archie Brown.
Archie M. Brown -- President and Chief Executive Officer
Thank you, Scott. Good morning, and thank you for joining us on today's call. Yesterday afternoon, we announced our financial results for the fourth quarter and full-year 2018.
Before I turn the call over to Jamie to discuss results in greater detail, I'd like to recap the progress we made this year and provide some highlights from the most recent quarter. After Jamie's discussion, I'll wrap up with some forward-looking commentary and closing remarks.
2018 was an exciting and landmark year for First Financial. We completed the merger with MainSource Financial Group, successfully integrating management, sales, support teams and migrating clients to unified banking platforms. Additionally, we continue to invest in strategic areas such as sales depth and technology.
Our full year 2018 earnings were very good, and on an adjusted basis reflected top quartile performance versus our peers. The earnings power of our high performing company enable us to achieve full year earnings of $2.28 per share, a 1.62% return on average assets, a 20.5% return on average tangible common equity and a 51% efficiency ratio, when adjusted to remove merger related and non-operating items.
Our fourth quarter results were exceptionally strong and marked our 113th consecutive quarter of profitability. We're very pleased with the operational performance of the company delivering industry leading returns on assets and average tangible common equity while expanding our net interest margin 9 basis points.
Core banking trends were positive and loan originations were stronger than they have been all year, however elevated payoffs, particularly in investment commercial real estate, led to a decline in overall loan balances. We were particularly pleased with our deposit growth during the quarter and maintained a pricing discipline that we believe benefits both our clients and our shareholders.
Additionally, I'd like to announce that First Financial's Board of Directors has approved 10% increase in the quarterly shareholder dividend to $0.22 per share. We also recently announced the share repurchase plan about the 5 million shares were approximately 5% of the Company's issued in outstanding shares.
Our strengthening capital levels and earnings consistency support capital deployment strategies, while still retaining capital sufficient to support future growth.
2018 was a significant year change for First Financial. We're highly encouraged by the way in which the company has come together culturally and performed financially. Successfully completing a transformational merger while producing top quartile returns, reflects the hard work of our associates and dedication to serving the needs of our clients and shareholders.
With that, I'll now turn the call over to Jamie to discuss further details of our fourth quarter results.
James M. Anderson -- Chief Financial Officer
Thank you, Archie, good morning, everyone. Slides three and four provide an overview of our fourth quarter 2018 performance. As Archie mentioned, we are pleased with our quarterly results, highlighted by strong earnings, revenue growth, net interest margin expansion and increased efficiency.
On slide five, we provided a reconciliation of our GAAP earnings to adjusted earnings, highlighting items that we believe are important to understanding our quarterly performance. For the fourth quarter adjusted net income was $59.7 million or $0.61 per share, which excludes income related to the exercise of a clean up call on securitizations associated with our 2009 FDIC-assisted transaction as well as severance and merger related costs.
As shown on slide six, these adjusted earnings equate to a return on average assets of 1.72% and a return on average tangible common equity of 21.3%. Further, our 49.3% adjusted efficiency ratio reflects continued diligence in managing expenses subsequent to the merger.
Turning to slide seven. Net interest margin on a fully tax equivalent basis for the fourth quarter increased 9 basis points from the linked quarter to 4.21% as the impact from higher asset yields, higher loan fees and a shift in funding mix outpaced higher deposit costs during the period. The purchase accounting impact margin was 29 basis points in the fourth quarter, which was unchanged from the linked quarter. However, we would expect this impact to moderate in 2019 and have modeled as such in future periods.
As shown on slide eight, our loan yields improved by 20 basis points and the yield on securities increased 9 basis points, muting the impact from a 9 basis point increase in our cost of deposits. Similar to the fourth quarter in which end of period securities balances increased in response to slower loan growth. We will continue to manage the size of the securities portfolio based on overall balance sheet trends.
Slide nine depicts our current loan mix and balance shifts compared to the linked quarter. End of period loan balances were relatively flat compared to the third quarter. Fourth quarter loan of originations were stronger than they have been all year, increasing 10% over the linked quarter, but the impacts from the increased origination activity was offset by elevated commercial real estate payoffs.
As a result increases in our CNI, commercial finance and mortgage portfolios were not enough to drive total loan growth for the period.
Slide 10 shows the current mix of our deposit base, as well as our progression of average deposits from the third quarter. Average deposit balances increased by a $162 million driven by growth and non-interest bearing deposits and brokered CD balances. In addition to balance growth, we are encouraged by our ability to maintain pricing discipline that benefits both our clients and our shareholders.
Slide 11 depicts our asset quality trends for the last five quarters. Classified asset balances, which we consider a leading indicator of credit losses declined 5%, while net charge-offs and non-performing assets both increased during the quarter leading to higher provision expense. Fourth quarter net charge-offs for 29 basis points of loans on an annualized basis, while full year net charge-offs of 15 basis points were relatively flat when compared to 2017. The increase in non-performing assets of $23.5 million was primarily driven by further deterioration of a single franchise finance relationship for which we believe the enterprise value exceeds the outstanding loan balance.
Finally, as shown on slides 12 and 13, capital ratios expanded during the period and remain in excess of stated targets, while tangible book value dilution from the main source merger has been substantially recovered. We will continue to evaluate capital strategies and deployment opportunities that support the Company's plan growth while delivering strong shareholder returns.
I'll now turn it back over to Archie for some commentary on our first quarter 2019 outlook.
Archie M. Brown -- President and Chief Executive Officer
Thanks, Jamie. Before we end our prepared remarks, I want to leave you with some insights into our outlook. As seen on slide 14, we believe that we are well positioned for continued success in the coming year.
Given our staffing investments and improve production levels, we remain optimistic in our ability to grow the loan portfolio. We expect loan balances to increase by low-to-mid single-digits on an annualized basis for the first quarter of 2019 which regard to deposits, we expect some declines in the first quarter driven by outflows of seasonal balances to remain optimistic in our ability to grow low cost core funding over the longer term.
Excluding the impact of purchase accounting and loan prepayment activity, we expect net interest margin to be relatively stable over the near term. Over the longer term assuming no further fed tightening, we will likely see some gradual decline in the margin from the impact of lagging deposit pricing pressures.
Our near-term credit outlook is stable with expected losses similar to the full-year 2018 levels. We expect fee income to seasonally decline over the next quarter and then rebound. Growing non-interest income over the longer term is a strategic priority, and we will continue to devote time and resources toward this effort. Of note will be the decline in interchange income over the back half of 2019 due to the lower rates required by Durbin.
With respect to expenses, we remain focused on efficiency, while continuing to make strategic investments to support the long-term success of our business. We anticipate an efficiency ratio in the 50% to 52% range moving forward. As I have previously mentioned in the last few weeks we've announced several capital actions related to the common dividend and share buybacks. Our continued strong earnings combined with modest balance sheet growth provide the company with enhanced capital flexibility. In addition to the actions announced today, we are interested in strategic acquisitions that will enable the company to drive higher non-interest income particularly in the wealth and capital markets areas. We are actively pursuing opportunities such as these.
Overall, I'm pleased with our progress in 2018 and building a company that can consistently and responsibly produce top-quartile returns. As move into 2019, I'm excited to focus on our strategic objective to grow the company in efficient risk appropriate fashion. We remain confident in our ability to sustain our high performance and our outlook for the future continues to be optimistic.
This concludes the prepared comments for the call. Nicole will now open up the call for questions.
Questions and Answers:
Operator
Thank you. We will now begin the question-and-answer session. (Operator Instructions) Our first question comes from Scott Siefers of Sandler O'Neill. Please go ahead.
Scott Siefers -- Sandler O'Neill -- Analyst
Good morning, guys. First thing I was hoping you guys could talk a little bit about is the NPA and charge-off increase. Jamie, in your prepared remarks, you noted the single franchise finance credit. Was that -- so that's the same I imagine as was migrated to special mention last quarter, I guess wonder if you could speak to that.
And then, second just the increase in both of those. Was that nuance all related to those special mention credits from last quarter? Or is there anything else that's kind of moving around in your non-performers or charge-offs?
Archie M. Brown -- President and Chief Executive Officer
Hey, Scott, this is Archie. Yeah, it was related to credits that had migrated in the third quarter we had previously been talking about. And of course, one was, I think vis-a-vis much larger of the two. I would say that, if we think about the root cause or what happen with this borrower, this is the borrower that's really been expanding probably too fast outside of just the part that we're involved with, so if he had other interest, as you said, expanding too fast has caused some problems for him, so that's really the core. Nothing else stemic really happening in the overall portfolio. But you look at our classified ratio, it's really been flat to declining over the last five quarters, so we feel pretty good about where credit is and again as I said in my outlook remarks, think that there will be probably similar was overall charge-offs as we had in 2018.
James M. Anderson -- Chief Financial Officer
Yeah, Scott. This is Jamie. Just to add on that, quickly on the charge-off side. Net charge-offs were little over $6 million for the quarter. And now coming off of the third quarter where we actually had net recovery, so you look at the two, and it's not kind of blended at that 15 basis points. But in the $6 million, there were two credits that made up over half of that charge-off number, and those were credits that we had identified in the third quarter as problem credits and they migrated through to non-accrual, and we charged those down to net realizable value in the quarter. So as you know, I mean, the charge-offs can be a little lumpy, and so we had good quarter in the third quarter. And then, had a couple hit in the fourth quarter to drive that number up.
Scott Siefers -- Sandler O'Neill -- Analyst
Okay. Perfect. But it sounds like the bottom line is -- is these are just, sort of, a couple of discrete items as opposed to anything broader based.
James M. Anderson -- Chief Financial Officer
Correct.
Scott Siefers -- Sandler O'Neill -- Analyst
Okay. Good. Perfect. Thank you. And then, just one question on the tax rate, and since this has moved, because you had given the expectation for the first quarter, but the fourth quarter tax rate was maybe couple 100 basis points below where it's been, it's look like you'll come back up in the first quarter. So I guess, one anything unusual in the fourth quarter number that took it down? And then second, just want to confirm when you talk about the effective tax rate of 19.5% in the first quarter, that is simply an effective tax rate, it's not a fully taxable equivalent rate. Right?
James M. Anderson -- Chief Financial Officer
Right, that's the effective tax rate. The 19.5% going forward. And to this clarify for the fourth quarter, there wasn't a one time item in there like a big refund or anything that we got from a previous period, it was really just chewing up the overall tax rate for 2018. And so it's really just a year end type of adjustment to get to our true tax rate. We were little conservative in the first three quarters with our -- in our accruals and just chewing that up for the year-end. To a smaller extent, we got some clarification on some of the deductibility of some executive comp. I think you saw in the third quarter, our rate was a little bit higher than is like 20.3%, and that drove it up there, plus just being on the conservative side in our overall accrual. So, it's really all within 2018, it's just chewing it up to our -- to an accurate tax rate for the year.
Scott Siefers -- Sandler O'Neill -- Analyst
Okay. All right, perfect. Thank you, guys, very much.
James M. Anderson -- Chief Financial Officer
Yeah. Welcome.
Operator
Our next question comes from Chris McGratty of KBW. Please go ahead.
Christopher McGratty -- Keefe, Bruyette & Woods -- Analyst
Hey, good morning, everybody. Archie, you talked about the pay downs in the commercial real estate book, and I think, it was pretty well telegraphed, there wasn't going to be a ton of growth this quarter. I guess, as it stands today, what gives you the confidence to go out with a low- to mid-single for the first quarter. Are you seeing any change in the pay down activity? Or is it just the production in the fourth quarter was really, really strong and pipelines may have changed. Thanks.
Archie M. Brown -- President and Chief Executive Officer
Yeah, Chris, I think a couple of things. One is, we believe some of those pay downs that occurred in the Q4 were just accelerated. They were, many cases, in the construction book that -- where that goes long. So to reach construction were probably in some sort of stabilization period, and they refinanced earlier than we had predicted, but we still had them coming out this year, so there's -- we think we accelerated into Q4 some of that, so that means that we think we'll ramp up a little bit better as we start this year. And then just looking at here we are, this point in the first quarter looking at our pipelines and various lines of businesses and they're actively projecting going forward and in our commercial business, in our ICRE business or Commercial Finance business or mortgage business all are showing what we believe to be some decent growth for the quarter, so that's that's kind of where we're getting our, I guess our confidence or view about the quarter.
Christopher McGratty -- Keefe, Bruyette & Woods -- Analyst
Okay. And with that as a backdrop, in terms of funding the growth, should we assuming kind of it comes from deposits, one for one or you're kind of -- is there going to be a bit of a remix from the bond portfolio maybe that's for you Jamie.
James M. Anderson -- Chief Financial Officer
Yeah, Chris. This is Jamie. So, if you look at the balance sheet, there ending balance and the securities portfolio was up about $150 million period-to-period, and that was by design based on just to kind of the back half of the year we didn't really see the loan growth that that we were hoping for. So, increase the securities portfolio by about $150 million to kind of, I would say, fill in that gap in the earning asset base. So, we will monitor that and see how the deposit -- the competition in the deposit marketplace is looking. And then, as that growth comes, we will slowly bleed back down the securities portfolio to potentially match that. I'm not -- depending on how the deposit balances go here over the next, over the short-term three to six months that will determine how much we bring the securities portfolio down. But you'll probably see a combination of the two.
Christopher McGratty -- Keefe, Bruyette & Woods -- Analyst
Okay. Great. And if I could think one more on the capital. The buyback, I guess, can you speak to ability or desire to use it. Is it -- is the plan in place just to have the flexibility or is it -- is there a level maybe in your stock that you might consider to regularly use the buyback? Thanks.
Archie M. Brown -- President and Chief Executive Officer
Yeah, Chris. This is Archie. We'll always look at future growth prospects organically as well as strategic M&A and make sure we can support the dividend. But I think our view of the actual buyback is that we'll plan to be opportunistic with regard to share repurchases evaluating this alternative compared to other potential uses of capital. When I plan to have a specific, we don't have a specific plan or target for the level of repurchases, so when market conditions warrant, we will take the opportunity under our plan to repurchase shares. And then, quarterly we'll provide an update on the level repurchases made in the previous quarter.
Christopher McGratty -- Keefe, Bruyette & Woods -- Analyst
Okay. Thanks a lot.
Archie M. Brown -- President and Chief Executive Officer
Yes.
Operator
Our next question comes from Nathan Race of Piper Jaffray. Please go ahead.
Nathan Race -- Piper Jaffray -- Analyst
Hey, guys. Good morning.
James M. Anderson -- Chief Financial Officer
Good morning.
Nathan Race -- Piper Jaffray -- Analyst
Just going back to the credit discussion around the franchise loan that occurred this quarter. We just want if you give us any other color in terms of -- I assume this was a quick service restaurant finance loan, and I'm just curious if this was a club deal or a share net full creditor, just any other background you could provide on the credit would be helpful.
Archie M. Brown -- President and Chief Executive Officer
Sure, Nathan. No, it's our loan, we originated it. It's again the main thing here is we provided financing for some acquisition of some stores for the borrower and then outside of all that he is just been trying to do some other things and grow fast and I think it has just put pressure overall on the credit.
Nathan Race -- Piper Jaffray -- Analyst
Okay, got it. And then just changing gears and think about expenses going forward. I appreciate the guidance for 1Q and I imagine you'll probably have some seasonal relief in the second quarter as some of those payroll items come off, so just curious how we should, kind of thing about the progression of non-interest expenses as we go through to tune into the back half of 2019?
James M. Anderson -- Chief Financial Officer
Yes. So this is Jamie. The outlook there for the first quarter in that $76 million to $78 million. It does have a little bit like you're talking about those low seasonal pop there that we have in some of the payroll taxes and what not. And then, as those -- but if you think about it as those bleed off then we have merit increases that kick in throughout the year, and so that, that level stays pretty steady throughout 2019, that $76 million to $78 million.
Nathan Race -- Piper Jaffray -- Analyst
Okay. Got it. That's helpful. And Archie, perhaps just an update on some of the hires that you guys were speaking to last quarter. I know that's been a focus of you guys more recently, so just curious to hear an update on that front.
Archie M. Brown -- President and Chief Executive Officer
Yeah, we are -- we're pretty close to full -- I think full staffing of our commercial banking groups and all of our markets. We got one or two hires to make, but for all intents and purposes, I think we're there, so I feel that we're starting up you're right in terms of staffing our ability to go forward outside of commercial, we did spend time in the last quarter and particularly adding to our mortgage banking group as well and while the environments a little tougher there, we think we're going to add some high quality originators that'll help us through the year as well.
Nathan Race -- Piper Jaffray -- Analyst
Okay. Got it. I appreciate all the color. Thank you.
Archie M. Brown -- President and Chief Executive Officer
Thanks, Nathan.
Operator
Our next question comes from Terry McEvoy of Stephens. Please go ahead.
Terence McEvoy -- Stephens Inc -- Analyst
Good morning.
Archie M. Brown -- President and Chief Executive Officer
Hi, Terry.
Terence McEvoy -- Stephens Inc -- Analyst
Just to make sure I'm clear on the margin outlook for the first quarter that that five basis point range, how much is that impacted by the loan fees which jumped up 4 basis points and what you did mention loan fees, I just want to understand that correctly.
James M. Anderson -- Chief Financial Officer
Yeah. Terry, this is Jamie. So do you look at the -- yeah, if you look at -- so loan fees -- there is some volatility to our loan fees, so if you look on page seven of the slide deck where we talk about the margin, we did in the fourth quarter, we didn't get over and above the third quarter, we didn't get about 4 basis point lift in our margin from loan fees. And those are primarily some larger prepayment fees that we see in our commercial finance area. But if you look over the last several few quarters, first quarter, second quarter, third quarter, it was averaging in that 13 basis point to 15 basis point range in it and we got 17 basis point contribution of fees to the margin. So, a little bit higher than the average, so on a conservative basis, if you look in the first quarter, where those could potentially come down a little bit that does contribute to a little bit of -- I guess, pressure from the fourth quarter on the margin. And then the other thing that you can see on this page that we got as well in the fourth quarter that could potentially flip the other way is, we got a nice benefit in the fourth quarter from our change in our funding mix, and some of that is seasonal based on businesses, we saw a lift in our business DDA accounts and that helped our margin by 4 basis points. And some of that is seasonal which will flip in the first quarter and also put a little bit of pressure on the margin that will offset the benefit that we see -- that will get from the December rate hike. So our balance sheet still remain slightly asset sensitive, so in the perfect world, rates are up or you can see here, our asset yields went up 12 basis points, funding costs went up 10 basis points. We get a couple basis point lift in our margin, but depending on mix and then the volatility of loan fees could put some pressure on that.
Terence McEvoy -- Stephens Inc -- Analyst
Thanks. And then just a question for which you mentioned interest in the fee generating businesses in terms of potential acquisitions. I just want to be clear potential bank acquisitions kind of off the table for 2019?
Archie M. Brown -- President and Chief Executive Officer
Yeah, Terry, thanks for the question. I don't know -- I would say, they're totally off the table, but I think we'll be looking more into -- if we did more banking, maybe geographic tuck-ins, smaller strategic kind of deals. And we're really not focused on large bank deals in the current environment, I think about where we are in the cycle, we're pretty sensitive to credit risk. And we just -- I think we'd shy away from something larger.
Terence McEvoy -- Stephens Inc -- Analyst
Okay. Thank you, both.
Archie M. Brown -- President and Chief Executive Officer
Thanks, Terry.
James M. Anderson -- Chief Financial Officer
Thanks, Terry.
Operator
(Operator Instructions) Our next question comes from Daniel Cardenas of Raymond James. Please go ahead.
Daniel Cardenas -- Raymond James -- Analyst
Good morning, guys.
James M. Anderson -- Chief Financial Officer
Hi, Daniel.
Daniel Cardenas -- Raymond James -- Analyst
Just two quick follow up question on the M&A. If you do look at something would it be primarily in footprint or would you be willing to kind of expand the franchise a little bit now that integration seems to be pretty well in place with the main source of deal?
James M. Anderson -- Chief Financial Officer
Yeah, Dan, on bank M&A, I still think we think about more and within footprint. We think there's markets that we certainly could improve our overall brand presence market share and that would be a priority if those kind of opportunities came up. I don't think we, at this point or -- I know we're not exploring anything, but I don't think we really be looking to expand the footprint at this point with regard to fee businesses, we probably would look a little bit broader than our core geographic footprint, but probably still want to stay somewhat close to the markets that we're in.
Daniel Cardenas -- Raymond James -- Analyst
Great. And then, in terms of branch rationalization, is that all completed or is there still a little bit of work left to be done?
Archie M. Brown -- President and Chief Executive Officer
Relative to the merger, Dan, it's virtually done there. There are a handful of branches I see I'm talking three or four that we have a little bit of work to do in terms of renovation in order to maybe make some consolidations, but that'll happen this year, and then I would say just outside of the merger there always -- we're always going through a rationalization process and evaluation process of our branch network. So it's possible throughout the year there could be some additional consolidations, but that would be more just normal course of how we do business.
Daniel Cardenas -- Raymond James -- Analyst
Okay. Good. Then last question for me, and I'll step back. As I look at your your tangible common equity ratio, kind of approaching the 9% level here shortly. What's kind of an optimal level that you guys would feel comfortable with that ratio?
James M. Anderson -- Chief Financial Officer
Yeah. Dan, this is Jamie. So internally, we kind of look at solidly at that 8% level, and obviously, we're -- with our profitability and even paying out somewhere between 35% and 40% of our earnings that that ratio is starting to build and that's why we saw a little bit of a bump in the 10% bump in the dividend. And then, as then it's announcing the stock buyback just to provide us some flexibility in managing capital. As we see and we'll assess that, monitor that as we see opportunities potentially in the M&A market or what not.
Daniel Cardenas -- Raymond James -- Analyst
Okay. Great. Thanks, guys.
James M. Anderson -- Chief Financial Officer
Thanks, Dan.
Operator
Our next question is a follow up from Chris McGratty of KBW. Please go ahead.
Christopher McGratty -- Keefe, Bruyette & Woods -- Analyst
Thanks. Jamie, just on the accretable, the comments on the glide down in the accretion. I guess, can you let us know what you're kind of the budget is expected accretion for this year. I think it was somewhat like $9 million, a little under $9 million past couple of quarters.
James M. Anderson -- Chief Financial Officer
Yeah. So we've been pretty -- if you look at this one slide we've been pretty consistent at getting 29 basis points, that's higher than our model. And when you think about it, based on the comments and what we're seeing in the loan books in terms of higher prepayments that's consistent with those higher prepayments we're getting more accretion. So as we look in -- in the 2019, our models would indicate those prepayments slowed down. We're going to start somewhere in that 22 basis point range contribution to margin in the first quarter and then that goes down by 1 basis points to 2 basis points a quarter throughout the year.
Christopher McGratty -- Keefe, Bruyette & Woods -- Analyst
Okay. So that 22 contemplates a slow down in prepays is what you are saying. Okay.
James M. Anderson -- Chief Financial Officer
It does, yes. Based on the levels that we're seeing -- that we saw in the back half of the '18, correct.
Christopher McGratty -- Keefe, Bruyette & Woods -- Analyst
Got it. Okay. And then the tax rate, I think you gave the first quarter, could you just repeat or maybe guide, I think first quarter is typically a little noisy for most banks, and 19.5% for the first quarter and then do we jump from there?
James M. Anderson -- Chief Financial Officer
No. No, we think it's 19.5% for all of '19.
Christopher McGratty -- Keefe, Bruyette & Woods -- Analyst
Okay. That's a non-FTE, right? That's a -- this a GAAP.
James M. Anderson -- Chief Financial Officer
That's our effective tax rate, correct.
Christopher McGratty -- Keefe, Bruyette & Woods -- Analyst
Got it. Okay. Thanks a lot.
James M. Anderson -- Chief Financial Officer
Yeah.
Operator
(Operator Instructions) As we have no further questions, I'd -- this concludes our question-and-answer session. I would like to turn the conference back over to Archie Brown for any closing remarks.
Archie M. Brown -- President and Chief Executive Officer
Thank you, Nicole. Just thank you guys for being on the call and your interest in the company and we wish you a good day.
Operator
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
Duration: 34 minutes
Call participants:
Scott T. Crawley -- Corporate Controller & Principal Accounting Officer
Archie M. Brown -- President and Chief Executive Officer
James M. Anderson -- Chief Financial Officer
Scott Siefers -- Sandler O'Neill -- Analyst
Christopher McGratty -- Keefe, Bruyette & Woods -- Analyst
Nathan Race -- Piper Jaffray -- Analyst
Terence McEvoy -- Stephens Inc -- Analyst
Daniel Cardenas -- Raymond James -- Analyst
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