WesBanco Inc
NASDAQ:WSBC
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Good afternoon, and welcome to the WesBanco, Inc. First Quarter 2018 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation there will an opportunity to ask question. [Operator Instructions] Please note this event is being recorded.
At this time, I would like to turn the conference over to John Iannone, Vice President of Investor Relations. Please go ahead, sir.
Thank you, Denise. Good afternoon. And welcome to WesBanco Inc.’s first quarter 2018 earnings conference call. Our first quarter 2018 earnings release, which contains consolidated financial highlights and reconciliations of non-GAAP financial measures, was issued yesterday afternoon is available on our Web site, www.wesbanco.com. Leading the call today are Todd Clossin, President and Chief Executive Officer and Bob Young, Executive Vice President and Chief Financial Officer.
Following the opening remarks, we will begin a question-and-answer session. An archive of this call will be available on our Web site for one-year. Forward-looking statements in this report relating to WesBanco’s plans, strategies, objectives, expectations, intentions and adequacy of resources, are made to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. The information contained in this report should be read in conjunction with WesBanco’s Form 10-K for the year ended December 31, 2017, as well as any documents subsequently filed by WesBanco with the Securities and Exchange Commission, which are available on the SEC and WesBanco Web sites.
Investors are cautioned that forward-looking statements, which are not historical facts, involve risks and uncertainties, including those detailed in WesBanco’s most recent annual report on Form 10-K filed with the SEC under Risk Factors in Part 1, Item 1A. Such statements are subject to important factors that could cause actual results to differ materially from those contemplated by such statements. WesBanco does not assume any duty to update forward-looking statements. Todd?
Thanks you, John. Good afternoon, everyone. On today’s call, we’ll be reviewing our results for the first quarter of 2018. Key takeaways from the call today are; successful completion of our merger with First Sentry Bancshares as we continue to execute upon our well deploying growth strategies; strong year-over-year growth and pre-tax earnings, supported by solid expense management; continued benefit from our shale energy-related core funding and deposits excluding CDs, demonstrated robust growth of 5%; and strategically balancing loan growth, while maintaining high credit quality standards, which will ensure the long-term success of our Company and shareholders.
We’re pleased with our performance during the first quarter, which reflected strong pre-tax growth of 11%, as well as the benefit of the new lower federal corporate tax rate. Excluding merger-related expenses, we earned fully diluted earnings per share of $0.76 on net income of $34 million. In addition, we generated solid profitability ratios with the core return on average assets of 1.37% and a core return on average tangible equity of 17.2%.
Our consolidated and bank-level regulatory capital ratios remain well above the applicable well-capitalized standards promulgated by bank regulators and the Basel III capital standards. During February, we announced 11.5% increased in our quarterly dividend rate to $0.29 per share, the 11th increase since 2010, representing an increase of 107% over that time period. The $0.03 increased was the result of our record core earnings during 2017, strong capital and liquidity positions, solid execution and well-defined operational and growth strategies and the recent change in the federal tax law.
Our long-term success remains dependent upon continued execution of our well-defined operational growth plans. As a reminder, our long-term growth strategy is focused on several key pillars; building a diversified loan portfolio with an emphasis on commercial and industrial and home equity lending; increasing fee income as a percentage of total net revenues over time; maintaining a high quality retail banking franchise and franchise enhancing acquisitions. And these pillars would not be possible if they were not built upon two strong legacies of our franchise and unwavering focus on delivering positive operating leverage, while making necessary growth oriented and risk prevention investments and maintaining our strong culture of credit quality, risk management and compliance principles upon which our company was founded nearly 150 years ago.
On April 5th, we announced the consummation of our merger with First Sentry Bancshares, and the appointment of Geoffrey Sheils, the President and CEO of First Sentry as our Market President for Huntington, West Virginia and the surrounding area. In addition First Sentry’s Chairman of the Board, Robert Beymer, will become Chairman of Huntington market advisory board for WesBanco, which will be comprised of the First Sentry board members to help ensure smooth transition in the regional market.
This merger fits perfectly with our strategic growth plans as it combines two institutions with solid credit quality and a strong focus on client service and community banking. Furthermore, I am pleased to welcome the customers and employees of First Sentry to the WesBanco family as we provide our newest customers with a broader array of banking services, as well as provide new and expanded opportunities for our newest employees.
Total year-over-year loan growth for the quarter continued to reflect the impact of our stated strategies related to our residential mortgage and consumer loan portfolios. When excluding these categories, loan growth in our focus categories was 2% over the last 12 months as commercial real estate pay-downs during the quarter returned to a more historical level. While this low single-digit loan growth was a little below expectations, we continue to believe that at this late point in the economic cycle it’s not appropriate to take outsized lending risks as we continue to see questionable terms being offered by others.
That said, our commercial and residential loan pipelines are solid and growing at quarter end remain optimistic on the opportunities as we continue to diversify and strengthen the quality of our overall loan portfolio.
We have maintained strong market positions across our legacy in major metropolitan markets with substantial market share in West Virginia, Columbus, global and Pittsburgh MSAs. During the first quarter, when excluding the impact of our strategy to reduce higher cost certificates of deposits, we realized robust year-over-year deposit growth of 5% with the majority of this growth occurring in demand deposits. Those demand deposits now represent approximately 51% of total deposits.
Further, the continued benefit from shale energy-related deposits in our legacy markets remains a core funding advantage that allows us to take target lending opportunities in our higher growth metropolitan markets. It’s important for our long-term success that we continue to invest in our company as we become a larger organization. Our target of $2 of return for each dollar of investment ensures that we deliver positive operating leverage on our growth strategies.
During the first quarter, we demonstrated both strong positive operating leverage and expense management, which resulted in an efficiency ratio of 55.1%. In fact, since 2012 when we expanded our Western Pennsylvania market, our efficiency ratio has improved by 450 basis points.
Lastly, I’d like to commend our community development team for their exceptional work. During February, we were rewarded multi-state new market tax credits from the U.S. Department of Treasury's Community Development Financial Institutions Fund totaling $40 million of investments, which implied a federal tax credit of $15.6 million over seven years. The WesBanco CDC serves the urban and rural areas across our footprint in the states of Indiana, Kentucky, Ohio, Pennsylvania and West Virginia with the goal of promoting meaningful community driven investments and funding a wide variety of businesses, providing critical social and commercial services to low to moderate income residents.
I would now like to turn the call over to Bob Young, our Chief Financial Officer for an update on our first quarter financial results. Bob?
Thanks Todd, and good afternoon to all of you. We reported strong year-over-year growth in both pretax and after tax earnings, as Todd mentioned, and we displayed solid expense management, both quarter-over-quarter as well as year-over-year. For the three months ending March 31, 2018, we reported net income of $33.5 million and earnings per diluted share of $0.76 as compared to $25.9 million and $0.59 respectively in the prior year period.
When excluding merger-related expenses, net income would have increased 28.7% to $33.7 million and earnings per diluted share would have increased 26.7% to $0.76. For the first quarter, total returns on average assets and average tangible equity were 1.37% and 17.2% respectively. And just as a reminder, our first-quarter results exclude the impact of the First Sentry acquisition since it closed after the end of the quarter on April 5th.
Turning to the balance sheet. Total assets as of March 31, 2018 grew to $10.2 billion year-over-year, driven by an increase in the securities portfolio as we refocused on growing total earning assets since we are crossing the $10 billion asset threshold with our acquisition of First Sentry. Total portfolio loans of $6.3 billion were flat compared to the prior year as we continued our efforts to prudently manage our loan portfolios to encourage growth in our focus categories without sacrificing credit standards.
During the past 12 months, total commercial loans increased 1.8% and home equity loans rose 3%. However, they were offset by the targeted reductions in the consumer portfolio as we reduced its risk profile, as well as increased secondary market loan sales as a percentage of residential mortgage loans originated, which caused the reduction in the amount of one to four family mortgage loans held on our balance sheet.
While seasonal factors negatively impacted the residential mortgage market nationwide, including WesBanco, our year-over-year decline of 2% in originations compares favorably to the 10% decline experienced nationally. Despite this slight decrease in originations, the percentage of mortgages sold in the secondary market during the first quarter increased to approximately 57% compared to 44% last year.
Total deposits, excluding CDs, increased 5.1% year-over-year due to strong growth in interest-bearing and non-interest bearing demand deposits, which reflect the strength of deposit gathering through our new and legacy markets.
We’ll turn now to net interest income and margin. The net interest margin continues to reflect the benefit from the increases in the Federal Reserve board's target federal funds rate over the past year, partially offset by higher funding costs as well as a flattening of the yield curve. As was noted last quarter, the first quarter's margin of 3.38% reflects a 6 basis point reduction related to the lower tax equivalent fee of the state and local municipal tax-exempt securities resulting from the Tax Cuts and Jobs Act. Excluding this reduction as well as purchase accounting increasing in both periods, the core net interest margin improved 4 basis points year-over-year. The increase in the cost of interest bearing liabilities is primarily due to higher rates for interest-bearing public funds, as well as certain federal home loan bank and other borrowings.
We continue to believe that our core deposit funding advantage is helping to contain our overall deposit funding cost. When including the growth in non-interest bearing deposits, our total funding costs have only increased 10 basis points year-over-year despite 425 basis point federal funds rate increases since March of '17. That said, we still expect deposit base to increase during the remainder of 2018 as the Federal Reserve continues to raise interest rates.
Now, a discussion of non-interest income. For the quarter ended March 31, 2018, non-interest income increased 4.8% from the prior year to $24 million, primarily driven by higher bank owned life insurance, trust fees and electronic banking fees, which more than offset lower mortgage banking income and other income. The higher bank owned life insurance revenue was due to higher debt benefits received during the period. Trust fees, which increased 5.9% year-over-year due to equity market improvements and organic growth and trust assets, is seasonally higher during the first quarter as compared to the other quarters, primarily due to increased tax preparation fees. While the volume of residential mortgage originations sold in the secondary market increased 26% year-over-year, reported mortgage banking income declined $400,000 due to $500,000 reversal in the mark-to-market on mortgage loans held for sale and commitments that benefited the first quarter of 2017.
Excluding last year's benefit, mortgage banking income would have increased 6.8% year-over-year. Lastly, other income increased $900,000 due to income in the prior year period from certain joint ventures that were inherited from a prior acquisition required to be dissolved, as well as lower commercial customer loan swap income, which vary quarter-to-quarter depending upon eligible loans and customer demand.
Let's turn to operating expenses now. Total operating expenses were well-controlled during the first quarter of 2018 as strong discretionary expense management continues to be demonstrated with most categories decreased both year-over-year as well as sequentially. Excluding merger-related expenses in both years, non-interest expense during the first quarter of 2018 increased $400,000 or 0.8% compared to the prior year period. The slight increase in the prior year quarter is primarily due to higher salaries and wages from normal compensation adjustments implemented in mid 2017, as well as the reclassification from employee benefits of about $700,000 related to the service cost component of the pension plan due to a new accounting standard that was adopted January 1st.
Let's talk about credit quality and capital. Overall, our credit quality and capital ratios continue to be strong and reflective of our legacy of credit and risk management. We continue to demonstrate strength across key credit quality measures as these measures declined to the lowest levels in more than five quarters. Further reflecting the consistent high quality of the loan portfolio, the provision for credit losses decreased from $2.7 million in the first quarter of 2017 to $2.2 million in the current quarter.
It is important to mention that our credit quality measures have been at or near historic lows over the last several periods. And as such, certain changes from quarter-to-quarter might vary in comparison to one another. But given these low historic levels, they would not necessarily suggest a material change in the direction of overall credit quality.
Before opening the call for your questions, I would like to provide some current thoughts on our outlook for 2018. It is important to remember that the yield curve continues to be pressured with a two year to 10 year treasury spread around 50 basis points at quarter-end and slightly lower than that as we speak today. Lower spreads generally result in lower margins for the industry. And despite our general asset sensitivity, we are not immune from such factors.
We currently do not anticipate much overall change in our net interest margin during 2018, considering expected lower purchase accounting accretion and higher anticipated deposit betas from a potential two or three additional rate increases offset by loan re-pricing. Asset mix changes might result in a slight decrease in net interest margin from higher securities levels.
We will continue to focus on expense trends to ensure positive operating leverage, while positioning the Company for the long term growth. We are planning our normal mid-year merit increases and expect marketing expense to be relatively consistent with the overall level during 2017, but spread somewhat more evenly throughout this year than during 2017.
Regarding the recent closing of the merger with First Sentry, we are planning the data processing and brand conversion related to this. We still expect cost savings of approximately 38% with approximately 75% phased-in during the last half of 2018 and the remainder attained during 2019. And just as a reminder, we anticipate a substantial portion of the merger related cost to be incurred during the second quarter.
We also currently anticipate our effective full year tax rate to be approximately 18% subject to changes in certain taxable income strategies that maybe implemented in future periods, including the potential benefit from the new markets tax credits we were just awarded. In addition, we continue to anticipate that overtime some portion of the benefit from the recent federal tax reform may result in lower than normal loan yields and higher deposit costs as such benefits are completed away by our industry.
We are now ready to take your questions. Operator, would you please review the instructions?
Certainly, Mr. Young. We will now begin the question-and-answer session [Operator Instructions]. And your first question will come from Catherine Mealor of KBW. Please go ahead.
First question just on securities book build this quarter. Can you just give us a little bit of color around that? And maybe question one is what's going to be average yield of what you're putting on from that and then also your strategy for size of the securities book moving forward?
I’ll let Bob cover the yield part of that. But I would say you that as we talked about in prior quarters, the plan wasn’t to continue to shrink it down to little bit low level or to build it back up again, it was to try to stay in that mid 20% range. So we’re there, it’ll be a percentage point or two at the high part of the mid-20s right now. And that was really driven by the crossing $10 billion and wanting to get a little bit of additional size associated with that and the lack of loan growth in the first quarter. But that doesn’t signal a continued increase in the securities book. I think we’re still comfortable in the mid-20% range, just wanted to get a little ahead of it, the curve, as it cross $10 billion.
So in answer to your question about incremental yield that we’re getting today on new purchases, just here in the month of March, I don’t having to add February with me. The yields we were typically getting on Fannie and Freddie CMOs were in the -- around the 3.2% area and then in mortgage bank pools it’s about 20 basis points lower than that. So hopefully that answers your question, Catherine.
And then, Todd, can you talk a little bit more about your outlook for loan growth. It feels like your commentary about how you’re just managing the credit risk. Is it a little different -- is there anything incrementally that you’re seeing in your markets right now that it’s driving that commentary or is it more just to remind us how your conservative culture and things like that?
Yes, and actually pretty close to what actually just last week I read all the reports from all the different markets on each commercial loan group does report every quarter. I would look at this and try and manage it in a holistic standpoint. So we’re trying to be discipline on deposit pricing and on expenses and on loan quality. And we think long-term that’s really the healthy way to look at it from an earnings perspective. But I would have like to have seen more loan growth over the last quarter. So it’s just, I think at this point in the business cycle, we just don’t want to think a lot of great risk. We’re seeing a lot of long-term rates out there 10-15-year fixed rates on commercial real estate projects, even from some pretty big banks, which surprises me.
And structure, a lot of things that are low recourse or no recourse, a lot of speculative projects and we’re passing on those. I mean, we’re doing enough of that obviously to stay busy but we’re just finding, particularly I think because the two 10 year spreads shrinking, as Bob mentioned, it’s down below 50 and the lower that goes it seems the more people are stretching to show some net interest income growth and we just think some of those risk areas are pretty high. The indirect area in particular, if you just look at in that and look at the spreads that are out there that banks are getting right now and that back out your cost of funds and look at what’s left and which credit costs and underwriting costs and marketing costs and people cost and there is no spread in it.
So I know banks are growing some of those areas but we just don’t see the return. And so I am happy with the continued mix shift that we’re seeing in terms of more heavily weighted toward C&I and home equity, and we look at our total balance sheet remix over the last year. I’d like to see more in C&I but it just seems like the customers are being pretty conservative right now. You would have expected more because of tax reform but also, I think people that I’m talking to and reports I am reading is people are little concerned about tariffs and what is that mean or doesn’t that mean even for pretty small companies that are in the supply chain and they’re just not willing to be aggressive.
So there is loan growth out there and we see it, we look at it but it doesn't fit the risk parameters that we like or the return. So we’re going to continue to be disciplined. And at the same time, really manage the expense base and manage the deposit rates and fees and everything else. So we continue to focus on overall profitability but not stretch, it’s a 10 year in the cycle.
The next question will come from Austin Nicholas of Stephens. Please go ahead.
Maybe just on the First Sentry deal, how are things going there. I know you have some prepared comments. But any changes to the initial loan marks? I don’t know if you’ve gone through those specific analyses yet.
I’ll let Bob jump in if he wants to. Obviously, we just closed it in the last couple of weeks, but nothing of any significant note. I mean, I think everything is still operating the way we had modeled it. And we feel like we’re at or ahead of the curve on pretty much all those different categories. And the integration between the two companies and the leadership we’re getting out of their team that’s staying with us has been really, really good, so that all feels good. Regarding the economics, I think we’re right on track of where we’re expecting.
So we have a third party engaged to assist with the loan mark and we’ll have that wrapped up primarily by in the second quarter. So more on that as we move forward. I don’t think at this point anticipate any significant change to loan market we socialized or discussed with you at the time of announcement, which was around 2.5%.
The only other item that I would suggest has changed a little bit would be that they didn’t have in our investment portfolio a mark to market of the substance at all back as of 930 when we last looked at their of their balance sheet. And I would expect that as we mark that here on April 5th that that would be a little bit negative. But that would assist us going forward, because you have accretion on that portfolio going forward. We did substantially restructure that portfolio after closing, so we’re really investing in some different types of securities with more current yields as well.
And that’s pretty small as you guys know. That whole deal is only 5% of our company's, so pretty smaller.
And then may be on deposits. Maybe what was the level of the shale inflow that you saw or shale related, I should say, in-flow deposits this quarter and then maybe how are those looking as we’re going into the second quarter? And I know there is correlation with the natural gas prices there.
There is little bit and we’ve seen that over the last few years, it will tend to track with it a little bit. But we were saying we were running in the low seven figure number about a year, year and half when prices were low and now we’re up into the low eight figure, $20 million of range the last quarter or so. And that seems to be pretty stable right now with the prices. So that’s the way I'm looking at it at this point is if it stays at these levels, which you don’t know what’s going to happen with the price of gas that’s the $20 million number for us.
And then maybe just one last one on M&A and future opportunities. I guess, given that the bank will be close to $12 billion in assets mid next year once the Durbin hits starts to come through. Maybe could you refresh us of what your M&A strategy is from here?
Yes, very, very consistent with what we've said in past meetings. We think it make sense to get the $12 billion to $13 billion over the next year or two combination of organic growth and the right opportunity if it comes along from an M&A perspective to get us there. But six-hour drive time of wheeling, something that could be in market where you can get a bit of an expense opportunity or preferably in markets growing pretty quickly too. So those are all breakthroughs we've talked about before and we’ll be prudent with regard to that in terms of accretion and earn-back expectations and everything else. But that no change from what we were looking at in the past.
[Operator Instructions] The next question will be from Russell Gunther of D.A. Davidson. Please go ahead.
Just a follow-up on the loan growth commentary. Todd, could you give us a bit of color in terms of any of your markets in particular where you’re seeing this increased competition?
It's really across the board and you’ll get different competitors in every market where I see, if it comes of our big cities, you got major regional banks and different banks in each of the cities. And then other of this banks are sizing and some smaller community banks. But you tend to see some of the really long-term fixed rates from some of the community banks although, we’ve seen a little bit of that from the bigger banks here very recently. But mostly that comes from the smaller banks that aren't focused I don’t think as on public earnings but those would be where we see that.
The structure items would be more midsized banks to little bit bigger than midsized where you’re seeing recourse being left-off early, little more speculative nature of things and some of the larger banks have just completely gotten out of the market, and we hear that as well too. So its multifamily things like that I think are the areas that we talked about in past that tend to get the most focus. We're still in those areas but we're just being very prudent about how we’re approaching.
And then just as it relates to the Dodd Frank reform, have you guys -- you guys had a chance to look at that. And any expectation for a benefit to WesBanco or how are you thinking about that?
I think if it does go through and become a law, we’re watching it pretty close. Obviously, the biggest impact on us would be the stress testing reporting. But even that is not a big impact. As you know, we've been building the expense of preparing for that into our run rate over the last three years or so and it's just basically in there. And we worked hard to get other expenses out of the company to keep that mid-50s efficiency ratio as we crossed over 10.
So we've been able to add the software expense and the people expense, the analytic expense. We've been able to add lot of that in there without it showing up in any quarter or any particular year. If that doesn’t get moved up to banks over $100 billion in size, that would really -- banks of our size of having the file that, but we've invested a lot and we think it's a good tool to have anyway just to run your bank, whether you required to do it or not. So we've got that investment made.
We're going to continue on with it, and we’ll be prepared to submit our filings when we need to or we should, I guess it'd be middle of 2020 at this point given that we've crossed in the second quarter, or if we're not asked to and required to submit it then still be to prepare and still use it as management tool.
And then just last question maybe for Bob. With the tax rate guide you gave around 18%. Is that inclusive of any anticipated or of the anticipated impact from the tax credits?
No it is not, that's current. We're still finalizing the actual agreement for the new markets tax credit. So I have not made an assumption about an additional reduction in the effective tax rate in the current year. It is reasonable to expect such, but it depends upon loans that we generate over the next few periods, and how that factors into the calculation, so more on that later in the year. I don't expect that to be a material amount, Russell, but at least in the first year. But it's certainly a good thing and it will generate a nice base of credits over the next seven years.
The next question will come from Steve Moss of B. Riley FBR, please go ahead.
I want to follow up on the M&A question. Just wondering what are you seeing in terms of deal flow these days, acquisition opportunities, has it picked up or has it slowed down here?
Actually pretty consistent, quite frankly. I mean I think the investment bankers will tell you that there's more movement toward negotiated deals than auctions, but there is still a lot of volume out there. I'm just going by what I read and what I see. But there is opportunities. I think people are looking in the future and wondering when's the recession going to hit, is it going to be two years or three years or whatever and banks have succession issues they've got to deal with and those don't go away. So a lot of those items are still there and people are trading at a pretty good premium right now compared to where they were a couple of years ago, because of some of the tax reform and what not.
So I think all those things would continue to drive M&A opportunities going forward and I don't see any slowdown from activity levels that I'm seeing.
And then I guess question for Bob just on the purchase accounting accretion expectations. How should we think about it as the year goes on? Is it a slow fade or is it a little bit more of a significant drop as we head towards the fourth quarter?
The current purchase accounting, which was 2 basis points less this quarter than first quarter of last year, 6 this quarter 8 last year. So when you're down to 6, you're thinking about a slow phase, you're not thinking about that going up or down materially. So 5 going to 4 would be our projection for the rest of the year, one quarter to another. That doesn't include First Sentry add, but as Todd mentioned earlier, at 6% the size of the company we don't expect significant marks to influence the income statement throughout the rest of the year. And the amount of earnings accretion from that deal is still projected to what we disclosed back in November.
The next question will come from Daniel Cardenas of Raymond James. Please go ahead.
Just a quick question on the credit quality front, I mean the numbers have been trending in the right direction here. Maybe if you could give us a little bit of color as to whether there’re any areas categorically that maybe you're little bit more concerned about. And then a quick follow up, how should we’d be thinking about charge-offs going forward, they’ve been very well behaved here. And do you see any significant alteration there?
We don't have any significant category or concentrations in particular category, we’ve got all that publicly disclosed in terms of what we have out there. But we're not seeing any concentrations built in any particular areas, whether it’d be an industry or geography, or anything like that. So from a concentration standpoint really no changes there. I think with regard to strategic charge-offs, and that get back a little bit to the loan question. This is a great market to push up problem assets and rate. So if you can be sharp on that and have some deals that maybe not even 100% served but still doing okay, but don't quite hit the risk return categories you want, those are getting snapped up by other banks. So I think that bodes well for us.
We feel good about the charge-off rates that we've had and had historically and well with the cycle. So you’re at some pretty low levels right now and you should be at similar levels at this point in the cycle. When that cycle turns, it will turn for everybody. But our plan would be to be on the better side of that top quartile in terms of credit quality, top quartile in terms of past dues charge-offs all of that, you don't get a lot of credit for that today, because we're still in a very strong economy. But there will be a point in time where that meaningful again and you want to be in the top quartile of that when that happen.
So we're been opportunistic with regard to pushing out a deal here or there where it doesn't make sense. But we're not seeing any builds in any particular areas, there’s nothing for us to be concerned about at this point in time. It’d just be the national economy of what may or may not happen in the future and we’d be impacted by it along with everybody else.
I just want to -- I just wanted to just, I would refer you to the MD&A, the recently published annual report. We use this when we go out on the road. But there are some really, some excellent write-up in there in the credit risk, distribution of loans by market area, by type of property, by C&I NAICS code, there is a discussion there about multi-family, about energy, the hospitality industry. So time limits us from being able to go through that industry-by-industry here in response to your question. I would suggest that that's a fairly good write-up and one that I haven't necessarily seen in a lot of other annual reports for companies of our size, so kudos to our Chief Credit Officer for helping us write that.
And we do manage those, not just act and then report what we did. We manage to within the categories that we -- where we want to be in those. So as Bob said, those are pretty accurate because of what we’ve done historically and we’ve see no big change in direction in terms of our approach.
And ladies and gentlemen, this will conclude our question-and-answer session. I would like to hand the conference back to Todd Clossin for any closing remarks.
Thank you. As I addressed in some of the Q&A, we remain focused on our disciplined growth, expense management and increase in our long term shareholders value. Looking at both obviously earnings growth and dividend growth and remaining well positioned for success in any type of operating environment that might come at us. I think we got the right teams and products in place across our franchise. We talked about the strong legacy credit quality and risk management. And we are slightly asset sensitive balance sheet and have demonstrated the ability to manage expenses appropriately. So I think we got some good flexibility in our approach going forward.
I want to thank you for joining us today. And look forward to seeing you at an upcoming investor event. Thank you.
Thank you. Ladies and gentlemen, the conference has concluded. Thank you for attending today’s presentation. You may disconnect your lines.