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Operator
Good morning and welcome to the WesBanco fourth-quarter 2016 earnings conference call
(Operator Instructions)
Please note: This event is being recorded. I would now like to turn the conference over to John Iannone, Vice President, Investor Relations. Please go ahead.
- VP of IR
Thank you, Anita, and good morning. Welcome to WesBanco's fourth-quarter and full-year 2016 earnings conference call. Our fourth-quarter and full-year 2016 earnings release, which contains consolidated financial highlights and reconciliations of non-GAAP financial measures, was issued yesterday afternoon and is available on our website, 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 website for one year.
Forward-looking statements in this report relating to WesBanco's plans, strategies, objectives, expectations, intentions, and adequacy of resources are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. The information contained in this report should be read in conjunction with WesBanco's Form 10-K for the year ended December 31, 2015, and Forms 10-Q for the quarters ended March 31, June 30, and September 30, 2016, as well as documents subsequently filed by WesBanco with the Securities and Exchange Commission, which are available on both the SEC and WesBanco websites.
Investors are cautioned that forward-looking statements, which are not historical fact, 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 any forward-looking statements. Todd?
- President and CEO
Thank you, John. Good morning, everyone. On today's call, we will be reviewing our operational and financial results for the fourth-quarter and the full-year 2016.
Key takeaways from our comments are: 2016 was another successful year for WesBanco, as we made steady progress on our business and balance sheet strategies, and we managed for the long-term success of our key stakeholders. We have maintained our strong culture of credit and risk management as evidenced by the continued improvement in our credit metrics. We are driving positive operating leverage, while controlling operating expenses. And we continue to generate loan growth across our markets and are pleased with our loan pipelines as we enter 2017.
We are pleased about our results for the quarter, as well as for the year, as well as several milestones achieved this past year. Excluding merger-related expenses, we earned fully diluted earnings per share of $0.59 on net income of $26 million for the fourth quarter of 2016 and $2.37 per share on net income of $95 million for the year ending December 31, 2016. Full-year net income grew 8% year over year, benefiting from continued loan growth, improvement in our net interest margin, and the consummation of Your Community Bankshares merger, which was completed in September.
So, 2016 was another successful year for the Bank. We completed the merger with YCB in just over four months from the date of announcement, and subsequently grew to $9.8 billion in assets.
We have strong market share across five states now, including our legacy West Virginia market, as well as several major metropolitan areas. We maintain top-10 market share in our legacy markets, including the Columbus and Pittsburgh MSAs. We added new markets with strong demographics in both southern Indiana and northern Kentucky, including top-10 market share in the Louisville area.
We remain committed to returning value to our shareholders, as demonstrated by increase in our dividends by 71% since 2010, including the 4.3% dividend increase announced earlier in 2016, increasing tangible book value per share by 40% since 2010 to $17.19, and during 2016 our stock price increased 43.4%, which was greater than our peer group average, several NASDAQ compiled indices, as well as the S&P 500. In addition, we continued to receive national accolades for our performance, including once again being named one of America's best banks in 2017 by a leading financial magazine.
We also remain committed to maintaining a strong financial institution for our shareholders. Our capital ratios and credit metrics continue to be strong, allowing us to be well positioned for the future. While the provision for credit losses increased slightly during 2016, primarily due to loan growth, our credit metrics continued to improve. For example, net charge-offs as a percent of average loans was 12 basis points versus 23 basis points last year.
Non-performing loans, as a percent of total loans, decreased to 63 basis points versus 89 basis points a year ago. And allowance for loan losses represented 70 basis points of total loans compared to 82 basis points in 2015.
Our consolidated and Bank-level regulatory capital ratios are well above the applicable well-capitalized standards promulgated by bank regulators and the Basel III capital standards. In addition, total tangible equity to tangible assets improved 25 basis points year over year to 8.2% as of December 31, 2016, which included the YCB acquisition and lower accumulated other comprehensive income during the fourth quarter.
Our long-term growth is focused on five key strategies: growing our loan portfolio with an emphasis on commercial and industrial lending; increasing fee income as a percentage of net revenues over time; providing traditional retail banking services; maintaining expense management; and expanding our franchise. As you know, on September 9 we welcomed the customers and employees of YCB into the WesBanco family. And over the November 4 weekend we successfully converted YCB with the integration and branding of our products, services, systems, and processes. We remain excited about the opportunities of our new Indiana and Kentucky markets, and what they provide, and are encouraged by the enthusiasm of our newest employees.
These high-growth markets, which have great demographics and very diverse economies, have expanded our already broad and balanced market distribution. We are eager to provide our broad array of products and services to our new retail and commercial customers, while continuing to deliver the exceptional service to which they are accustomed.
We continue to appropriately remix and manage our balance sheet while encouraging total loan growth. This strategic effort is being accomplished primarily through the control of our securities portfolio, and meeting the deposit needs and product needs of our customers. In addition, our net interest margin has shown stability and improvement over the last few quarters, mainly from the combination of our balance sheet remix strategy and the acquisition of YCB. I would now like to turn the call over to Bob Young, our Chief Financial Officer, for an update on our fourth quarter's operational and financials. Bob?
- EVP and CFO
Thanks, Todd. Good morning, all. As Todd mentioned, over the November 4 weekend we converted and integrated Your Community Bankshares into WesBanco, and incurred anticipated merger-related costs of $2.7 million, or $1.7 million after tax, or $0.04 per share, during the fourth quarter, in addition to the $6.9 million after tax or $0.17 per share recorded during the third quarter of 2016. For the 12 months ended December 31, 2016, we reported GAAP net income of $86.6 million and earnings per diluted share of $2.16, net of the above-mentioned merger-related expenses. Excluding these expenses from both periods, net income would have increased 8.3% to $95.3 million, with earnings per diluted share up $0.03 to $2.37.
For the year, the return on average assets was 97 basis points, and return on average tangible equity was 12.73%. And when excluding the impact of merger-related costs, these ratios were 1.07% and 13.96%, respectively.
For the quarter ended December 31, 2016, we reported GAAP net income of $24.2 million and earnings per diluted share of $0.55. Excluding merger-related expenses, net income would have been $26 million and earnings per diluted share of $0.59, as compared to $23 million and $0.60 per share last year. For the fourth quarter, return on average assets was 98 basis points and return on average tangible equity was 13.01%, reflecting the impact of merger-related costs. Again, when excluding these costs, return on average assets would have been 1.06% and return on average tangible equity would have been 13.91%.
Unless otherwise stated, my remaining earnings-related comments will focus on the fourth quarter's results, and exclude the impact of restructuring and merger-related expenses. Total portfolio loans of $6.2 billion as of December 31, 2016, increased $1.2 billion or 23.4% year over year, reflecting $1 billion in loans from the YCB acquisition and organic loan growth of 3.4%. Organic loan growth was driven primarily by the commercial real estate, commercial and industrial, and home equity loan categories, reflecting our expanded market areas and additional commercial lending personnel.
Furthermore, organic loan growth was achieved through an 11% year-over-year increase to $2 billion in loan originations during the 12 months of 2016, and continued to be driven by our strategic focus on commercial and industrial, as well as home equity loans, which grew organically 10% and 8% year over year, respectively. These two loan categories now represent 26% of the total loan portfolio, as compared to 21% five years ago, as they have grown organically at a compound annual rate in the low-double digits over this period.
In addition, we continue to be judicious with the loans we book, as we will pass on deals where we feel the pricing or structure is not reflective of the credit risk. While this strategy might cost a few percentage points of loan growth now, it provides significant benefits to the Company and our shareholders over the longer term.
To provide a little bit more clarity during the anticipated 2017 rising rate environment, approximately 60% of our total loan portfolio is either variable or adjustable rate, with approximately two-thirds of our combined commercial real estate and C&I loans in this group. Our loan pipelines going into 2017 remain robust, and we continue to anticipate mid-single-digit loan growth, tempered by quarterly fluctuations in our construction and commercial real estate portfolios from project paydowns, property sales, and refinancing into non-Bank markets.
During the quarter, we continued our stated strategy of reducing the size of our securities portfolio through the sale of certain investment securities to help maintain the balance sheet below $10 billion in total assets in the near term, while funding loan growth. As a result, as of December 31, securities represented 23.7% of total assets at year end, as compared to 28.6% at the end of 2015, a decrease of approximately 5 percentage points.
At the same time, our total portfolio loans have increased to 64% of total assets, as compared to 60% a year ago. The current size of the securities portfolio provides us the near-term flexibility to continue to manage the size of our balance sheet while supporting loan growth.
Total deposits increased 16.1% to $7.1 billion at December 31, 2016, primarily due to the YCB acquisition. Total organic deposits, excluding CDs, increased 2.3% year over year, reflecting our deposit and funding strategies as well as customer deposit product preferences. As a result, interest-bearing and non-interest-bearing demand deposits organically grew 10.8% year over year. In total, demand deposits now represent 47.4% of total deposits, a nearly 7 percentage point increase from the prior year.
Lastly, as we have focused on the overall size of the balance sheet in order to remain under $10 billion in total assets in the near term, federal home loan bank borrowings of $0.9 billion have decreased 9% since June 30, and now represent 14.1% of average interest-bearing liabilities. In addition, CDARS and insured cash sweep money market balances have been reduced by approximately $250 million year over year.
Net interest income for the fourth quarter increased 18.3% year over year to $71.7 million, due to a 14.4% increase in average earning assets to $8.6 billion, as well as a 10 basis point increase in net interest margin, which were driven by the YCB merger and our continued remix of securities into loans. While our net interest margin has benefited from the remix, which was worth 10 basis points in the fourth quarter, and the impact of purchase accounting, it also reflects increased funding costs associated with a higher proportion of federal home loan bank medium-term borrowings and higher junior subordinated debt costs, otherwise known as [TruPS], as these are mostly three-month LIBOR-denominated instruments.
During 2016, the net interest margin decreased 9 basis points year over year to 3.32% due to increased funding costs associated with federal home loan bank borrowings and lower earning asset yields. Average loan rates declined during 2016 due to the low interest rate environment for most of the year, the repricing of existing loans at lower spreads, and competitive pricing on new loans.
Turning now to non-interest income and non-interest expense, for the fourth quarter, non-interest income increased 7% from the prior year to $21.4 million. This $1.4 million increase was driven by higher deposit service charges and electronic banking fees, reflecting a larger customer base from the addition of our new Indiana and Kentucky markets. Net securities brokerage revenue declined year over year as a result of market factors and our deposit retention strategy. Customers continue to be receptive to the back-to-back fixed-rate loan swap product in the current interest rate environment, and as a result we realized approximately $2.7 million of commercial customer loan swap fees and market value-related income during 2016.
We continue to manage operating expenses diligently, as evidenced by our full-year efficiency ratio, excluding merger-related costs, of 56.7%, an improvement of 36 basis points year over year. In fact, since 2012, the year we expanded our Western Pennsylvania market with the acquisition of Fidelity Bancorp, we have reduced our efficiency ratio by more than 400 basis points. This achievement required the diligent efforts of our management team and all employees, while they ensured our customer service levels remained high.
Now, the key to this improvement is our focus on positive operating leverage, as revenue growth exceeded expense growth by a ratio of almost 2 to 1 during 2016. As we have mentioned before, our general rule-of-thumb target is to have $2 of return for each $1 of investment.
Additional technology and personnel related costs prior to the conversion resulted in higher operating expenses during the fourth quarter. However, as we mentioned last quarter, we began to realize some of the expected cost savings from the YCB merger during the latter half of the quarter upon completion of the conversion and still expect to achieve our target expense savings as scheduled. Reflecting the YCB acquisition and conversion, non-interest expense excluding merger-related costs increased year over year during the fourth quarter of 2016 to $55.6 million, consistent with our expectations.
Turning now to asset quality and regulatory capital ratio metrics, for the three months ended December 31, 2016, the provision for credit losses was $2.1 million, primarily reflecting loan growth and an additional provision for a credit impaired classified commercial real estate credit inherited from ESB. However, most other credit metrics continued to show year-over-year improvement as evidenced by lower non-performing loans, non-performing assets, and criticized and classified loans as a percentage of total portfolio loans.
Net charge-offs as a percentage of average loans were 0.08% for the three months ended, and 0.12% for the 12 months ended December 31, 2016, which improved 12 and 11 basis points, respectively, year over year. The allowance for loan losses decreased year over year from 82 basis points to 70 basis points as a result of the acquired YCB loan portfolio being marked to market as of the acquisition date.
We continue to maintain strong regulatory capital ratios as our capital ratios remain well above the well-capitalized standards required by bank regulators and Basel III capital standards, with our tier 1 leverage capital ratio of 9.81%, Tier-1 risk based capital ratio of 13.16%, total risk-based capital ratio of 14.18%, and common equity Tier-1 capital of 11.28%. Lastly, our tangible equity to tangible assets ratio improved to 8.20% as compared to 7.95% a year ago. All of the ratios as of December 31, 2016, were higher than anticipated from the date of the merger announcement.
Tier 1 leverage was somewhat lower than at the end of the third quarter due to the fourth quarter having a full quarter of average assets reflective of the acquisition. And the tangible equity ratio was 6 basis points lower due to reduced accumulated other comprehensive income primarily from fair market value adjustments in a rising rate environment from the available-for-sale portion of the investment portfolio.
Before opening the call for your questions I would like to provide some thoughts on 2017. Regarding preparations for the $10 billion asset threshold, we currently do not anticipate any changes to our plans as we continue to methodically phase in the costs of our infrastructure build. In addition we will continue to monitor and assess the timing and impact of crossing the threshold.
We will continue to pursue our balance sheet strategy to reduce investment securities, while funding mid-single-digit loan growth. We are currently modeling two 25 basis point Fed interest rate increases during 2017, one each in June and December, which in addition to purchase accounting accretion of 5 to 10 basis points per quarter, should help the overall net interest margin.
As I mentioned, approximately 60% of our total loan portfolio is variable rate or adjustable over time, and of that, roughly 50% will re-price during 2017. In addition, in conjunction with the anticipated rise in market rates, we expect net interest income to rise during the year due to our current asset-sensitive position.
Lastly, we still anticipate achieving 75% or greater of the targeted cost savings from the YCB acquisition during 2017, with the remainder early in 2018, and will continue to carefully control discretionary operating expenses throughout the year. We are now ready to take your questions. Operator, could you please review the instructions?
Operator
(Operator Instructions)
Catherine Mealor, KBW.
- Analyst
Hi good morning. A follow-up for you Bob on the margin. It looked like you just mentioned that there should be about 5 to 10 bps per quarter of fair value accretion in 2017. That is a little bit of a lower level than we saw in the fourth quarter and so you are saying all in the reported margin, even with a little bit of lower fair value accretion, should still move modestly higher next year from the 342 level just given the asset sensitivity? Is that a fair take away?
- EVP and CFO
Yes. And just a remark about the fourth quarter up 10 basis points. There were some prepayments of YCB loans, not credit impaired loans but just regular loans, and the mark on those prepayments would be taken into account in the fourth quarter.
About 3 basis points would be due to prepayments beyond what our normal prepayment speed assumption would be when we do our market to market analysis. That is why the guidance would be between 5 and 10. There might be a couple periods where you have higher prepayments and a couple periods where you would not. So hopefully that answers.
- Analyst
Got it, that makes sense. And on the prepayment, is it fair to say that because you had a higher level of prepayments this quarter, that is what drove the fairly flat linked quarter end of period loan balances? Did you have some YCB loans that just prepaid, came off and maybe softened what would have otherwise been a stronger growth on the legacy portfolio.
- President and CEO
No, Catherine, this is Todd. It really wasn't related to YCB at all. That portfolio is continuing to perform well and we've put some nice assets on since the closing in the fourth quarter, so nice big ones in the marketplace as well, too. We have a lumpy business with our construction portfolio and have talked a little bit about that in the past.
We had a great year in terms of originations. $2 billion was by far 11% higher than anything we have done in the past but the construction portfolio, whereas a lot of loans that went to the permanent market place I think partly because rates were anticipated to rise in the fourth quarter which they did. And a lot of the stabilized or near stabilized properties went into the secondary market. I spent the day with a number of developers just last week and we had a number of developers have pretty much cleared out all of their construction and taken all of the permanent market and now they're going back in to start doing construction again. So we have a nice pipeline but a lot of things went to the market -- secondary market earlier than we had anticipated so production looked good.
It is also why we are building out the C&I portfolio is to flatten that out a little bit so you don't have the gyrations with the construction portfolio. Some quarters it helps you, some quarters construction hurts you. Fourth quarter was one where there were not payoffs that were not planned, just things that went to the secondary market a little bit earlier than we had thought because of the favorable rate environment in the secondary market.
- Analyst
Makes sense. So in your outlook for single-digit loan growth into next year, is that kind of dynamic taken into account. Do you feel like the dynamic you saw in fourth quarter should slow a little as we move into next year?
- President and CEO
Yes. I think we traditionally run in that mid single-digit range. I don't think we see any change. We have nice newer markets that have some bigger growth rates associated with them that we are looking forward to being involved with. But we still have that dynamic of low double-digit growth in C&I and low single-digit in commercial real estate and it blends out. It seems to be blending out the last few years around mid single-digit and we would anticipate that same dynamic going forward.
- Analyst
Great. And then maybe one more back to the margin just on the funding side. What are you modeling, Bob, for your funding costs as you think about the margin moving higher? And how long until we really start to see those deposits start to move upward?
- EVP and CFO
We are not anticipating that deposit rates are going to go up as a result of the prior December increase just as they did not for the industry after the December increase of late 2015. So we are really not anticipating until after the June increase we would start seeing a little bit of an increase initially in CDs and money market accounts. Money market account in terms of beta would be higher for the higher tiers than they would be for the lower tiers, but that is when we would start seeing a little bit of movement in deposit rates.
I don't think that is significant for the year and recall the second increase for us isn't planned until the end of the year. Now in accordance with our review of Blue Chip forecasts and analyzing we've looked at the most recent one and we will continue to look at those as they come out end of first quarter and we are cognizant that the [dock plot] from the Fed has between three and four increases in it. We will continue to review our assumptions and determine whether our forecast needs to be adjusted in accordance there with. But that is our current thinking as of our budget preparation here in the fourth quarter.
- Analyst
Okay. Sounds great. Thank you for the color.
- President and CEO
Thank you.
Operator
(Operator Instructions)
Bob Ramsey, FBR.
- President and CEO
Hello, Bob.
- Analyst
Good morning guys. Another question on margin. It sounds like if I understand correctly you lose a few basis points of accelerated accretion, but you will more than make up from that just from the rate increase. So I am guessing that means you're getting maybe 4 or 5 basis points lift from the December move. That sounds like more than I would have thought. But am I thinking about that the right way?
- EVP and CFO
No, I think you I thinking about that in the right way. I don't want to suggest there was a lot of impact from prepayments. Todd gave you the update. There were not a substantial amount of prepayments coming out of YCB. It does not take but $1 million, $2 million, or $3 million, or $4 million loan and you are bringing all of the future accretion on that loan into the fourth quarter and that does, as I said it had between a 3 basis point and 4 basis point impact.
The fourth quarter has a day count issue for all banks and so typically you have a little bit lower net interest income in the first quarter but a slightly higher net interest margin. But then as we move through the quarters, that 2 basis points or 3 basis points if you would expect to get from the lift in an asset sensitive balance sheet on the loan portfolio, minus a little bit as I suggested to Catherine on the deposit side, should get us that mid 340s number that you are looking at in the fourth quarter.
- Analyst
Okay. Got it.
- EVP and CFO
If it runs higher then we will see what happens.
- Analyst
Okay. And on the next increase even -- I know you said maybe you'd start to see deposit moves but to 2 basis points to 3 basis points off the next increase we get seems reasonable again?
- EVP and CFO
Yes.
- Analyst
Okay, great. And then shifting gears to talk about fee income. I know you guys said growing fee income proportionately is one of the priorities. I am just curious, one, so can we interpret that to mean that fee income this year should grow at a faster than the mid single-digit loan growth rate you guys are targeting? And two, what areas you see the most opportunity for in fee income?
- President and CEO
We typically don't give the guidance in terms of where we think we will finish up on fee income but I would tell you that we like the fee-based businesses we have. We are at 23.7% now. We would like to get up to the higher 20s at some point in the future. We were there before we had the two S&L acquisitions that brought us back down.
The trust fee business is a strong business for us, had a strong year last year. Swap fee income I think has been good. Part of that has because of the yield curve. Hopefully that'll be good for us this year as well too.
And the new markets that we are moving into in the Louisville, Kentucky, and New Albany and Elizabethtown areas like that where some of the private banking trust, insurance products that we have that those markets did not have get deployed and we roll through with the execution of those strategies in those marketplaces. We would expect to have a solid year in terms of fee income and the hope is over time to take that percentage, that 23.7% or 24 percentage points of fee income in take that up closer to the 30 mark in the future.
- Analyst
Okay. Great thank you.
Operator
Casey Whitman, Sandler O'Neill.
- Analyst
Good morning.
- President and CEO
Hi Casey.
- Analyst
Just ask one more question on the fee income this quarter. It seems like it should have been up little more just since a full quarter of contribution from YCB coming on. Can you maybe walk through the movements that we saw this quarter just so we can get a better idea of the run rate here?
- President and CEO
Yes. I think we can do that. In terms of the income overall, our deposit charges were up pretty significantly, a little over $1 million fourth quarter 2016 versus fourth quarter 2015. Electronic banking fees up about $600,000, trust fees were up about $200,000 and about $1.2 million in swap fee income that came in as well, too.
I was disappointed in the brokerage business. Part of it was we moved to more of an external focus there where our brokers are out looking for additional money bringing in and not mining high rate CDs because a lot of those high rate CDs are gone now. So a shift in that business model in terms of how we approached it and I would view 2016 as a transition year with that.
But I was disappointed with the way that came out. I felt we were lower than we should have been there. I would expect better traction to that in future years. But other than that, I think all of the fee-based businesses, feel pretty good about where we are at and the kind of year that we had.
- EVP and CFO
And Casey, in terms of mortgage banking, given the rate volatility in the fourth quarter and you are probably seeing this with other banks as well, and mortgage banking is not a significant banking for us as it is for others, but nonetheless there was a negative adjustment for the mark to market on loans held for sale as well as the net of mortgage commitments to the secondary market in the fourth quarter. And so that did reduce our gain on sale of loans by about $0.5 million.
- Analyst
All right great. Moving on to expenses. Bob, can you quantify how much more you expect to realize in cost saves from YCB?
- EVP and CFO
Well, what I can tell you is that if you take a look at the $55.6 million that we talked about as the fourth quarter net of merger-related expenses and you think about the comment that Todd or I made in our scripted remarks about there being some additional operating expenses for running two IT systems and having the personnel related to the conversion there from September 9 until November 30 or shortly thereafter, that visibility does not start coming through until mid-December-ish and we will start seeing more of that in the first quarter.
Again, like margin, you have a day count issue in the first quarter, but we would expect that in terms of the run rate from the fourth quarter of that $55.6 million you should see something in that 2.5% to 3% to 3.5 % reduction in the first couple of quarters and then in the back half of the year that comes back as a result of our normal salary increases. We would have talked about that last year. Does that give you guidance?
The guidance I gave you in the fourth quarter about what we expected expenses to be up in 2017 over the normal highs or the post YCB expenses is still good. And I also think non-interest income will be up nicely in 2017 despite the factors that we talked about affecting the fourth quarter.
- Analyst
Okay, just to clarify the 2.5% to 3.5% reduction for the first two quarters, is that in each of those quarters or just the first quarter and the second quarter it holds there and then third we see it pick up a bit?
- EVP and CFO
The second quarter would hold at a similar level to the first quarter and then you would see it pick up in the third and fourth. Some banks do first of the year increases. Our increases our mid-year.
- Analyst
Okay great. And are all the one-time merger expenses in there now?
- EVP and CFO
Yes. There will be a little bit that dribbles but nothing significant.
- Analyst
Okay. Last question. Can you give us an update on the M&A strategy and has chatter picked up with higher bank multiples since the election?
- President and CEO
Our approach on the M&A side it really hasn't changed much despite the run-up in the market stock prices. Our approach is still to manage under $10 billion. We've got probably two years worth of run rate before we organically start pushing up against that limit. If we continue to bring the securities portfolio down as Bob mentioned into the 18% to 20% range which is more in line with what we've done in the past and more in line with our peer group.
That, plus the couple hundred million we're below $10 billion is right now, that gives us about two years worth of run rate at a mid single-digit loan growth number. So we continue to look at, we said before, probably back half of 2017 or sometime in 2018 we would like to be able to find an opportunity to go over preferably through an M&A event but we want to be judicious about that. We will continue to be really disciplined about that. That's the first part.
The second part is I have not seen anymore additional chatter. I think a lot of smaller banks are out there kind of evaluating what the last 60 and 90 days has meant for them. Some got the multiples that they were looking for a year ago in the run-up in their prices, but some of the smaller banks did not get that. I think one of the things we benefited from is we seem to have closed the gap, a little bit of gap we had from a discount perspective to the peer group, which makes our currency stronger obviously looking for an opportunity.
But I have not seen any increase in chatter. We have a pretty defined list of opportunities that we want to look at over the next couple years and we are just going through that. But we will continue to be the disciplined bank in M&A and we're going to be that same way. So we may find something in the next couple years that makes sense for us or we may not but no change in strategy or timing to go over $10 billion.
- Analyst
Okay. Thanks for taking my question.
Operator
This concludes our question-and-answer session. I would like to turn the conference back over to Todd Clossin for any closing remarks.
- President and CEO
Thank you. We are pleased with our performance during 2016. We are excited about our opportunities for 2017. And we are going to continue to be focused on our strategic vision and enhancing shareholder value. I want to thank you for joining us today and I hope to see you all at the upcoming investor event and have a good day. Thank you.
Operator
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.