Ameris Bancorp
NASDAQ:ABCB
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Ameris Bancorp
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Good morning and welcome to the Ameris Bancorp Third Quarter 2019 Financial Results Conference Call. [Operator Instructions]
I would now like to turn the conference over to Nicole Stokes, Chief Financial Officer. Please go ahead.
Thank you, Ally. And thank you to all who have joined our call today. During the call, we will be referencing the press release and the financial highlights that are available on the Investor Relations section of our website at amerisbank.com. I'm joined today by Palmer Proctor, our CEO; and Jon Edwards, our Chief Credit Officer. Palmer will begin with some opening general comments and then I will discuss the details of our financial results before we open up for Q&A.
Before we begin, I'll remind you that our comments may include forward-looking statements. These statements are subject to risks and uncertainties. The actual results could vary materially. We list some of the factors that might cause results to differ in our press release and in our SEC filings which are available on our website. We do not assume any obligation to update any forward-looking statements as a result of new information, early developments or otherwise, except as required by law.
Also during the call, we will discuss certain non-GAAP financial measures in reference to the Company's performance. You can see our reconciliation of these measures and GAAP financial measures in the appendix of our presentation.
And with that, I will turn it over to Palmer for opening comments.
Thank you, Nicole, and good morning to everyone who's joined our call today.
I wanted to share a few highlights about the quarter and why we're excited about the rest of 2019. And then the opportunities we see coming into 2020. For the quarter, we earned $68.5 million or $0.98 per diluted share on an adjusted basis, which is up over 8% compared to the third quarter of last year. This represents a 1.57% return on average assets and 18.95% return on tangible equity.
Our efficiency ratio increased to just over 57%, which was expected as the cost saves from the Fidelity acquisition aren't fully realized yet, and we're still running two core systems until November of this year with the conversion.
For the year-to-date period, we earned $156.3 million or $2.85 per diluted share on an adjusted basis, which is actually up 19% over 2018 results, and this represents our year-to-date return on assets of 1.55%, and 7% improvement from the same period last year.
We've been very pleased with our organic growth on both the loan and the deposit side. Our loan to deposit ratio has been very stable at 94%; and if you exclude the Fidelity acquisition, our loans actually grew over $283 million or almost 13% annualized during the third quarter alone. So that leaves our year to date annualized loan growth at 13.75% for the year, and our annualized non-interest-bearing deposit growth at 13.58% for the year, which is pretty impressive.
Our loan production in the Banking segment was up 151% this quarter over the third quarter of last year. Yields of course, were down on the new production as we would all expect with the recent Fed cuts, but the pipelines are encouraging, they are strong as we look into the fourth quarter. So, we feel very encouraged about that.
As expected, we did see some dilution in tangible book value this quarter compared to last quarter, and that's really due to the Fidelity acquisition, but we anticipate consistent growth in tangible book that you will see going forward, as we're still haven't polled [ph] on the M&A activity, but even with the dilution from the acquisition, we have tangible book growth of over 14% growth since September of last year, which is certainly noteworthy.
Nicole is going to get into the financial details in a few minutes, but I did want to hit on a few things first. And looking back at and we like to do look backs, what do we say versus what we did.
And looking back at what we’ve said we were going to do last December when the Ameris Fidelity merger was announced, and where we are today. I'm really proud of our team's accomplishments.
When we announced the deal, we had pro forma branches at about 199 branches combined. By the end of the third quarter, we're down to 172 branches, which is a net reduction of 27 branches, since the announcement of the merger, and we've done this very strategically and with very little attrition in terms of our core funding.
And then also at announcement of the deal, we said there'd be $0.18 dilution on the EPS during 2019 that would then bring single-digit accretion in 2020 with the built-in cost saves, and we've actually had better than expected results so far based on our execution and accelerated execution of some of the cost save strategies earlier than we had initially expected.
We projected our pro forma TCE to tangible asset ratio to be at 8.37% post-acquisition, and we're reporting 8.43% TCE ratio today, which is slightly above our projections. And I mentioned, all these things really to reinforce how serious we are about executing the strategy and ensuring that we're on track with the plans that we had outlined.
So far, we've hit all the targets we're looking forward and we've delivered on the goals we've established and we're confident that hitting our targets is what's going to continue to create franchise value for our Company and our investors and it's going to position us exceptionally well for any economic environment that we operate in.
One other noteworthy milestone that I'll mention in our Company's history is that we, we have officially moved the bank charter and the holding company offices to Atlanta and we will become the largest bank holding company headquartered in Atlanta, Georgia, after the truest deal closes.
We initiated the formal launch of our rebranding, hopefully some of you have seen that in terms of our strategy there this month. It's been very well received, and we remain deliberate in terms of our efforts to drive that brand in all of our markets.
One big point to mention is the integration, it's in full swing, it's going well, we've already - the SBA Group has already been through conversion. The mortgage integration is about 75% complete as I sit here today, and it will be fully completed by the time we do our core system conversion at first week in November.
The way our operations and technology colleagues have worked through this integration has been amazing and we're right on track. And as I said in our press release, being able to deliver these kind of financial results that we did this quarter, while also working through one of the largest integrations that our Company has done is - it is really a true direct reflection of the team and how hard all our bankers are working, and I look forward to have an integration behind us in the fourth quarter, so we can get back to business, it's been 100% of our time on the organic growth opportunities and continuing to execute the strategies that we have in front of us.
But I'll stop there now, and turn it over to Nicole and let her discuss the financial results in more detail.
Great, thank you, Palmer.
As you mentioned, Palmer, today, we're reporting adjusted earnings of $68.5 million or $0.98 per share for the third quarter, and that's compared to $43.3 million or $0.91 for the third quarter of last year.
These adjusted results primarily exclude about $65 million of merger charges, a $4 million gain on a BOLI proceeds, about $1 million recovery of MSR impairment from prior quarters, and $889,000 of loss on branch sale building - or branch - the sale of branch building.
Including these items, we're reporting total GAAP earnings of about $21.4 million or $0.31 per share. The $0.98 per share adjusted EPS represents an 8.5% increase over the $0.91 we earned in the third quarter last year, and the income - the $68 million of income represents a 58% increase over the third quarter of 2018 adjusted earnings.
Our adjusted return on assets in the second quarter was 1.57%, which was an increase from the 1.56% reported last quarter and the 1.53% reported in the third quarter of last year. For the year-to-date period, our adjusted ROA is 1.55% compared to 1.46% last year-to-date. And as previously stated, we continue to aim for an ROA between 1.55% and 1.65% going forward.
Our adjusted return on tangible common equity was 18.95% in the third quarter compared to 18.79% last quarter and 20.50% in the third quarter of last year. For the year-to-date period, our 2019 adjusted return on tangible common equity is 18.87% compared to 18.47% last year.
As expected, we saw a decline in tangible book value this quarter due to the Fidelity acquisition. We ended the quarter with tangible book value per share at $20.29, down $0.52 from the $20.81 at the end of June. While this dilution in tangible book value was larger than anticipated and it was a - and is a result of additional contract termination fees from certain vendor contracts, tangible book value is still up over 14% from this time last year.
All of our additional merger expense - expenses that are related to the contract terminations will result in future cost savings as we work to improve processes going forward. We believe that all significant merger and conversion charges have been recorded in the third quarter, and no material additional expenses are anticipated going forward related to the Fidelity integration.
Our tangible common equity ratio decreased 25 basis points to 8.43% from 8.68% at the end of the second quarter, which was also in line with our projections. We expect that our capital build will continue, and we still plan on finishing 2019 with double-digit growth in tangible book value per share.
Our GAAP net interest margin declined by 7 basis points from 3.91% to 3.84% during the quarter. There was a lot of moving parts, so I'm going to try to take this below and I apologize some of this is going to be repeat from last quarter, but I just want to make sure that I'm clear on the margin.
So, if you go back to last quarter, we anticipated the Fidelity acquisition was going to negatively impact our margin by 11 basis points. We anticipated that every 25 basis point cut would reduce our margin by another 5 basis point to 6 basis point, except for that first cut in July because we had enough tailwind to absorb that.
Well, we did a little better than expected. The Fidelity merger impacted our margin by approximately 9 basis point and the first Fed cut in July impacted our margin by approximately 3 basis point. You notice on the balance sheet, we had extra loans held for sale, and we also used FHLB borrowings to fund that held for sale activity, because of the mortgage, we're going to talk about that a little bit later, but the impact of having those extra held for sale loans to holding those loans longer at a smaller spread that impacted our margin by about 4 basis point.
And then we had tailwinds including purchase accounting in the quarter that offset about 9 basis points of margin compression. So we ended up with, really only 7 basis points of margin compression rather than the 11 basis points that we had anticipated.
During the third quarter, our yield on earning assets declined by 9 basis points while our funding costs only decreased 4 basis point. However, our total interest-bearing deposit costs decreased 11 basis point as we continue to stay focused on our deposit costs.
And we continue to believe that every 25 basis point cut by the Fed will squeeze our margin by 5 basis points to 6 basis points that we plan or hope to manage to 45 basis point. Our core bank production yields declined to 5.08% for the quarter against 5.49% in the second quarter.
On the deposit side, we continue the momentum on noninterest-bearing deposit and improved our mix such that noninterest-bearing now represent 29.85% of our total deposit compared to 28.9% at the end of the second quarter and 25.4% this time last year.
Noninterest-bearing deposit production was over 13% of our total deposit production. Growth in non-interest income was exceptional during the third quarter as we talked about just a second ago, in addition to the increase in service charges because of the additional deposit account from Fidelity and that was partially offset by the Durbin impact this quarter, but our combined mortgage group had record production in earnings due to the interest rate environment.
During the third quarter, mortgage revenue grew over 186% compared to the second quarter of this year and over 276% from the same period last year and a large portion of that is with the addition of the new Fidelity team.
Mortgage production continue to hit record levels. Although, we saw a decline in the gain on sale to 2.67%, down from 3.11% last quarter and that gain on sale spread was impacted by a shift in product mix as well as the transition of the Fidelity pricing model and the Ameris pricing model.
Loan production in the retail mortgage segment was 278% higher than the third quarter because of the addition of the Fidelity bankers to the team as well as the increased productivity from the low interest rate environment. We do not anticipate mortgage activity to stay at this high level and we believe will return to a more normal historical volume in the fourth quarter.
Historically, Ameris did about $2 billion of production a year and Fidelity did about $3 billion a year for a combined production of $5 billion. They did $1.8 billion just in the third quarter, which is about a 48% combined increase in production over historical third quarter level.
And they did this production while being distracted with the integration, because of this volume and operational strain of the integration, we ended the quarter with higher than anticipated mortgage loans held for sale, which we funded with short-term FHLB advances. We believe these loans will be packaged and sold as quickly as possible in the fourth quarter and our held for sale numbers as well as wholesale borrowings to fund those will come back down during the fourth quarter and as I already discussed that will help with the margin in the fourth quarter.
As Palm already mentioned, the mortgage integration is approximately 75% complete. Our adjusted efficiency ratio increased to 57.25% this quarter, because we do not have the full system integration complete and we still have administrative cost overhang from the Fidelity acquisition. We previously guided that we plan to maintain an efficiency ratio below 60% for the remainder of 2019 and we're well in line with that expectation.
We actually did a little better than expected because of earlier execution of some of the cost saves. Total non-interest expense were $192.7 million for the quarter. However, when you remove the merger and conversion charges and the loss on sale of branches, our adjusted non-interest expense was about $127 million, which is up $51.5 million from the second quarter, approximately $26 million or half of that increase was in the core bank and administrative functions due to the Fidelity acquisition.
Income in this area also increased by about $42 million equating to a 62% efficiency ratio in that growth without a fully realized cost saves that we'll realize after data conversion in the fourth quarter.
Most of the remaining $25 million increase in non-interest expense was in the retail mortgage division mostly in salaries and commissions. This increase is attributable to increased production, both because of the Fidelity acquisition as well as the low interest rate cycle this quarter.
As I already stated, production increased by over 200% in that division, and revenue increased to over $39 million, which is more than enough to cover this increased expense. On the balance sheet side, organic loan growth was about $283 million or just over 12% annualized.
The details of this production have been included in the investor presentation, but it was split among our bank segment and our lines of business with approximately 35% of the growth in the core bank and the remaining growth split evenly between mortgage and warehouse, premium finance and specialty lines.
I sound like a broken record on credit - credit quality but they remains strong. I'm sitting next to Jon Edwards, our Chief Credit Officer who is available to take any questions during the Q&A, but I will hit just a few high point.
Our annualized net charge-off ratio was 7 basis points of total loans and 19 basis points of non-purchased loans. Our non-performing assets as a percent of total assets increased to 73 basis points compared to 51 basis points last quarter and this was due to the Fidelity acquisition.
The quarter-end NPA number was 19 basis points less than the projected number from our original due diligence and also the diversification across loan type and geography can be seen in the loan slides as well.
And then the final thing, I'd like to touch on - before I turn it back over to Palmer is the integration, but not just the data conversion, but the actual team integration and I have to tell you that things are going very well.
As Palmer mentioned earlier, we moved the holding company headquarters to Atlanta earlier this month. The majority of the executive team members are living in Atlanta with several of us relocating ourselves and our families there recently. I personally closed on my home last week in Atlanta.
And that - it had more stress on quarter end by buying a new home and I'm learning all about what real traffic really - what traffic really means, but honestly and seriously, we're all committed to Ameris and what the future holds for us. The relationships we have as a team and the leadership we've received from Palmer has really made the team dynamics and this transition easier than any of us anticipated.
With that, I'll turn it back over to Palmer for closing comments.
Thank you, Nicole.
I'd like to conclude with this comment. As you know, so much of life and opportunity it's about timing and I can tell you that our timing for bringing everything together here at Ameris whether it'd be our teammates, our Board, our systems or the overall integration, it couldn't be better as we position the bank to take advantage of the tremendous opportunity we have in front of us in the markets in which we operate and we're definitely in the right place at the right time and more importantly, we have the right teammates to make it happen.
So, with that, I'd like to thank everyone again for listening in for our third quarter earnings results as we look forward to the rest of 2019 and to what 2020 hold for us.
I'll turn it back over now to Ally for any questions from the Group.
[Operator Instruction] The first question comes from Casey Whitman with Sandler O'Neill.
Just a few questions with regards to loan growth. Just more broadly, I was wondering if you could just talk to us about the organic loan growth at the bank segment and production this quarter. Is a lot of that being driven by the Atlanta market, or are you seeing good growth throughout your markets? I guess, my question will just be what markets are growing more than others or are there more opportunities in particular markets for you guys.
Right now, where we're seeing most of the loan growth, the predominant loan growth this last quarter and the activity in terms of production is coming out of Atlanta and then parts of our Florida market in that order.
And then also you referenced the sale of a I think a Corporate Finance Group portfolio in the quarter, can you just give us an idea of the timing of that sale, and kind of the decision there?
Sure, Casey, that was the Corporate Finance division that we got with the Hamilton acquisition last year. And from a credit and a risk, we really - we're not big fans of that portfolio. So that had been planned for a while to dispose of that and/or to sell those loans. They had been moved to held for sale at the end - during the second quarter and then we closed on that during the third quarter.
And lastly on the loan growth, would just be, the indirect auto, I guess how is the runoff been trending in that and can you just remind us of what we can expect the run-off to be per quarter in that book?
Sure. So, when we did the acquisition of Fidelity, it was about $1.2 billion, $1.3 billion. Today or at the end of September, it was down to $1.05 billion and we - the run-off amount is about $130 million to $150 million a quarter.
And it's paying off just as we had - as it always has. That's one thing about that line of business is, it is very predictable in terms of cash flow and it continues to perform that way, and asset quality remains pristine.
I'll just ask one more and let somebody else jump on. Just with regard to expenses, you mentioned some accelerated cost saves in your prepared remarks. Can you just sort of remind us or walk us through how much more on cost savings you have to come out of line between the fourth quarter and first quarter between the bank and the mortgage groups? And just sort of help us out with how we should think about the timing of all those cost saves heading?
Sure, so we had anticipated about 20% of those coming into the third quarter, coming out of the third quarter, I should say. And then about 30% coming out in the - another 30% coming out in the fourth quarter, and then the rest of it coming out in 2020.
So we have our data conversion set for the first weekend of November, and so we still have what I call kind of some of that that overhang of expenses from running two systems and so that's really the pick-up in the fourth quarter over the third quarter is that we will have lot of those administrative costs gone and the duplicate systems by the end of November.
So, we were a little bit ahead of our cost saves. We had projected 20%, we're closer to 25% to 30%. And then we anticipate another 20% to 25% in the third quarter which is or sorry in the fourth quarter, which is similar to what we had said before, it's just, we picked up 5% more in the third quarter and then the rest will be coming out in the first quarter.
Our next question comes from Jennifer Demba with SunTrust.
Question, will any of this mortgage production activity bleed into fourth quarter?
Jennifer, the piece that might bleed. So we have - it's the bundling and the selling of that, but we have those market fair value. So we don't anticipate - now there could still be, I mean, I don't think all of the volume just shut off September 30.
So, there will be some overhang some - like a little bit, but we really think the fourth quarter is going to come back to more normal volumes. The biggest impact in the fourth quarter is going to be bundling and selling of those loans, but there shouldn't be an income statement impact for that.
As Nicole said to Jennifer, the momentum is certainly there. And so that will carry us into the fourth quarter, but it will be at a much more normalized rate than what we've experienced this quarter.
Nicole, do you guys have a preliminary estimate for your loan loss reserve adjustment for CECL?
That's a great question - and Jennifer, and what we have not given out guidance in the past with a specific number with the Fidelity acquisition coming on. We have run that third quarter run, and we're still analyzing that. I think there will be some additional guidance in the 10-Q about that.
What we have said and we'll continue to say even with knowing that it's only October 18 and to get all of the Fidelity data from two systems into the CECL model is that we still are not surprised and that what the model is showing is still in line with our projection, so we are certainly not surprised with the results, and I think there will be more guidance in our third quarter queue that we file with the SEC.
One last question, any hiring done during the third quarter, you mentioned disruption opportunities, just give some more color there.
Well, you know for us fortunately, just given our position in the market. The disruption, we're able to take advantage of with our existing teammates without having to really bring in a lot of new folks.
But that being said, we are constantly in front of a lot of folks right now. I think, we'll start seeing more movement there as we move into the fourth quarter. We have made a few new hires - couple then in Florida in particular but that we've got a very active pipeline to answer your question.
Our next question comes from Tyler Stafford with Stephens.
I wanted to start on the mortgage business and you mentioned a couple of times expecting fourth quarter to return to a more normalized level. So just to be clear, are you, are you kind of saying, go forward is roughly $5 billion. But with the normal kind of bell curve seasonality in the summer months so then we should see $5 billion roughly annually with fourth quarter kind of dropping off seasonally.
That's right. And so the third quarter results were about 43% elevated over. If you look at the historical third quarter Ameris and the third quarter Fidelity, you put those together, we're elevated - were elevated about 60% and we think about 43% of that is related to the kind of the low rate environment, we saw a little bump in our repurchase.
I mean our refinance as we proposed to purchase and so fourth quarter we're expecting to go back down to, if you took the Fidelity fourth quarter run rate of September and the Ameris fourth quarter run rate, historically kind of go back to that plus maybe a 10% to 15% bump just because of the year-over-year growth.
And then Nicole, do you have what the purchase first refi mix was in the third quarter?
I do. So we typically both run about 85%. Well actually Fidelity was a little bit higher. Ameris ran about 85% purchase and 15% refi and Fidelity ran about 89% purchase. And this quarter, it dropped to 70% -- about 71%, 72% purchase.
On a combined basis?
On a combined basis. That's right.
And is this kind of 2.67% gain on sale margin that you saw in the third quarter? Is that what you'd expect going forward as a normalized level?
I think it will normalize over time. So that in 2020, it will get closer back to a normal a little bit a higher closer to the Ameris gain on sale number. I don't think that'll be instantaneous in the fourth quarter.
And then - the mortgage business had I think $1.3 million servicing right recovery. I guess how much servicing income did you realize this quarter and then any thoughts on what you plan to do with that servicing portfolio?
The servicing portfolio at this point, we've looked at several different functions as opportunities to do that. And as of right now, the plan is to retain that and to continue to service that. Through today and Tyler [indiscernible] that number growing in front of me I'll have to get a view on that.
That’s okay, that’s fine.
Just a little bit separately.
That's fine. And I guess lastly just on kind of mortgage-related you mentioned the held for sale balance is coming back down. Is there a normalized level of HFS that you plan to keep now with Fidelity in the fold?
Yes, we think that that normalized level is somewhere between 400 and 450 with the normalized number combined. And just to kind of it’s a great, great - it's not really necessarily your question, but I mean, it's a great time for me to talk about that. One of the things with our mortgage companies coming together going through the integration. One thing that they really focused on with continuing to service the customer so, they didn't slow production.
They were able to continue and the piece that did kind of slowed down with that backroom of packaging and getting them sold. So that's really why that number grew, but again we expect that to go down, probably a more normalized numbers between 4 and 4.50.
Our next question comes from David Feaster with Raymond James.
So I'd like to just start on the margin. So I guess, looking at the fourth quarter with the held for sale wind down that you talked about being about 4 basis point help. And then the indirect runoff offset by a September cut. It sounds like you think you can hold your core NIM fairly steady here?
So well when you think about that September cut that really was even though it was a third quarter event. We don't have the really impact of that in the third quarter because it was so late in the third quarter and then if we had another cut. So and that we're still guiding that we could have you know 4 basis points, 4 to 5 basis points of margin compression in the fourth quarter and then - you know could potentially be another cut.
And then do you have any expectation, could you just give us some thoughts on your accretion expectations going forward?
Sure so, the only guidance that we've given for 2019 because we're being cautious because of seasonal impact for next year. So and you'll see that our accretion income went up this quarter by about $1 million, $1.1 million into that that's about the normal run rate for the fourth quarter as well.
And then just following up on the loan origination strength that you're seeing in Atlanta. Obviously there is a lot of disruption there as you've mentioned. Could you just talk about, we've talked before about you want to get more in that middle market there, which is a huge opportunity. How is that going, what success have you seen in the middle market in Atlanta?
Yes Tyler, we're starting to see success there. Obviously there is a lead time on those relationships and a lot of them, been locked down for years. But we're starting to see some movement there and on the lower middle market end and that's where we're really focused. And so, I think as we move into especially into 2020 that's, where we'll start seeing more of that lift. But the migration of those relationships certainly - there is a lead time with that, but we're encouraged by the, not just the opportunities but the execution on that especially in the Atlanta market.
And then I guess just high level. Could you just talk about what you're seeing in the market. Anecdotally, we've heard that pricing competition increased in that - as underwriting standards are loosening with less recourse and lower levels of leverage. Are you seeing a similar phenomenon and are there any segments or markets where you're seeing that more?
No, I’ll tell you competition is fierce in terms of pricing, but I will tell you that all the banks that we run into in terms of competition. Nobody is compromising on the asset quality itself. Structures are getting a little bit looser in terms of duration and pricing, but there aren't any deals out there that we're seeing other banks do that just don't make sense, which is encouraging for us as an industry. That being said, there is still a lot of movement out there and in terms of the different sectors.
We have certainly pulled back a little bit I just threw a discipline and a caution on a lot of our commercial construction. But that's more just us position ourselves in terms of the capital as a percentage of some of these construction loans, not because we're seeing any cracks or inherent cracks in any sectors out there. I mean if you look at absorption, especially on the multifamily side and on the single-family side, it's all still very strong.
There is actually a lack of inventory in a lot of our metro markets. So, we still feel very encouraged by what we're seeing and right now do not see any or anticipate any cracks in the near future.
Our next question comes from Woody Lay with KBW.
So it's good to see the interest bearing deposit costs come down. I was just wondering what impact Fidelity had on that number and sort of what impact was just legacy Ameris cost of deposit?
That's a great question. So the Fidelity impact was included in that their deposit costs were about 25 basis points less than ours. And then also we dropped deposits across the board. So it's a little bit hard to give an exact number, because Fidelity, we drop their rates with the July cut and the Ameris rate with the July cut as well. So it would be absolutely blended of both items.
And I think last quarter you said you were assuming a 50% deposit beta in your margin guidance. Is that still holding through?
Yes.
[Operator Instructions] Our next question comes from Christopher Marinac with Janney Montgomery.
Palmer in the call I want to drill back down on the competition comment a few minutes ago. How often do you have price concessions either on deposits or loans? And as you move relationships in the future is that going to be part of the equation or something that you can avoid?
Well - we certainly try to avoid and I would tell you we have less concessions on the deposit side and more concessions on the loan side. So as a result because we look at it from a relationship standpoint Chris and so we are. We do feel the pressure more on the loan side, then people trying to beat us down on the deposit side. So we look at it holistically, but that being said, I think the important thing is to make sure we aren't looking at just transactions and looking at the entire relationship which is how the bankers are.
We're getting flows and some of our deals wherever we can which just hard to believe. I didn't think we'd be saying that again, but we are getting flows in people now borrowers in particular are more sensitive that and aware of that. But we have been successful in implementing some of the flows, especially if we're being competitive on the rate.
Over time, is there a percentage of the portfolio that you think will have flows I know it's kind of an evolution as you reset?
I would love for a higher percentage to have flows, but right now I think what we're able. We’re more successful in obtaining the flows as obviously on the residential construction lending. On the commercial side, as we're trying to take business and take more market share and having to be more competitive that's where we're having less success in terms of the flows.
But we're having more success and where you'll see it is on the liability side in terms of bringing over that core funding. So if you look at the balance there in terms of the NIM pressure while we may be given a little bit of a yield up on the loan side or hopefully garnering more on the local funding side to offset that.
And the last question this has to do with the systems conversion. Once that's behind you, to what extent are there new products and sales that you can implement other things kind of in the wings that you'll see next year?
Well, the exciting part of that is more looking at the efficiency. We’re big user of sales force then seen of. And fortunately both companies legacy, Fidelity and Ameris utilize that technology. And you will see us leveraging more and more of that, not only in specific areas throughout the bank obviously new online account openings. We're focused on streamlining that process with lot of what we're going to be focused on it is tweaking the current technology we have and just making it more efficient in the process more efficient.
And banks today still have way too much bureaucracy in terms of execution and the fun thing about being $17 billion, $18 billion bank is being able to make small tweaks here and there that can be meaningful in the overall scheme of things. Whether it's just reduction of paper or just efficiency through less printer use just a lot of simple technologies there that we're zeroing in now. And so our Chief Innovation Officer which is our CIO obviously is - that's his sole mission right now.
This concludes our question-and-answer session and concludes the conference call. Thank you for attending today's presentation. You may now disconnect.