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Edited Transcript of CARO earnings conference call or presentation 25-Oct-18 2:00pm GMT

Q3 2018 Carolina Financial Corp Earnings Call

CHARLESTON Oct 31, 2018 (Thomson StreetEvents) -- Edited Transcript of Carolina Financial Corp earnings conference call or presentation Thursday, October 25, 2018 at 2:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Jerold L. Rexroad

Carolina Financial Corporation - CEO, President & Director

* William A. Gehman

Carolina Financial Corporation - Executive VP & CFO

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Conference Call Participants

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* Blair Craig Brantley

Brean Capital, LLC, Research Division - SVP and Senior Equity Research Analyst

* Catherine Fitzhugh Summerson Mealor

Keefe, Bruyette, & Woods, Inc., Research Division - MD and SVP

* William Jefferson Wallace

Raymond James & Associates, Inc., Research Division - Research Analyst

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Presentation

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Operator [1]

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Good day, ladies and gentlemen, and welcome to the Carolina Financial Corporation 2018 Third Quarter Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded. I would like to introduce your host for today's conference, Mr. Bill Gehman, Chief Financial Officer. Please go ahead, sir.

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William A. Gehman, Carolina Financial Corporation - Executive VP & CFO [2]

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Thank you, operator, and welcome to the Carolina Financial Corporation investor call. Please refer to Slide 2 regarding forward-looking statements and non-GAAP financial measures. Now I'd like to turn the call over to Jerry Rexroad, CEO of Carolina Financial Corporation.

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Jerold L. Rexroad, Carolina Financial Corporation - CEO, President & Director [3]

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I'd like to thank all of you for attending the Carolina Financial Corporation Third Quarter 2018 Earnings Call. Overall, very pleased with the quarter. I think most of you know that we were interrupted in September by a fairly large hurricane that really impacted a majority of our markets. Our team has certainly worked very hard to continue to provide excellent service to our customers, while at the same time trying to help them, really, survey how they're going to get through the storm and get back on their feet. And they've spent a lot of time working with customers over the last 1.5 months, and I thank them very much. Overall though, third quarter net income was $15.2 million or $0.66 per diluted share. That compared to $8 million in the prior year quarter or $0.49 per diluted share. Operating earnings were slightly better, up 94.7% to $15.4 million or $0.67 per diluted share, and that's up for $7.9 million or $0.49 per diluted share for the third quarter of 2017. Loans receivable grew at an annualized rate of 7.9% or approximately $138 million since the beginning of the year. Our deposits grew $155 million since the beginning of the year and core deposits increased $49 million. We did have a provision for loan loss in the third quarter of 2018, $750,000. That was primarily driven by organic loan growth and unknown hurricane effects that could occur, as we go forward. Tangible common book value per share was $18.69 at September 30, 2018. That compared to $15.71 at the beginning of our year.

As I've mentioned, Hurricane Florence made impact to landfall on September 14 near Wilmington. It had an impact over most of Eastern and Coastal North and South Carolina. Our businesses as a company in the mortgage area, in the commercial area, consumer retail, all experienced impacts in September due to business interruption. This particularly happened in the mortgage business.

A number of our branches are located in areas that were directly impacted by Hurricane Florence. Approximately 2/3 of those branches actually closed beginning September 11 as a result of evacuation orders by both the governors of North and South Carolina.

As of Monday September 17, 2018, we had reopened approximately 51 of those branches. And then for the remainder of the week, got the other 10 branches, that were closed, opened. As of today, we only have 1 that has not opened and that one is being repaired, and we hope to have it fully operational here in another few weeks.

Throughout the hurricane, we were able to maintain customer support functions for our customers. We had to move a lot of people to various areas that were not impacted by the storm to be able to do so. But our team members did a great job of moving and being there to take care of our customers throughout the storm.

During the storm and the week before and after, we actually waived the foreign ATM fees. There were other financial impacts related to the storm. I will say that the impact of Hurricane Florence on our markets is not completely known. There -- a lot of the flooding just actually went down really about 3 weeks ago. It actually kind of continued all the way into October. So we have talked, I think, to a majority of our customers, particularly our larger customers. We've certainly assessed as much as possible at this point in time. But we do know that there were some financial effects, some of which we were able to measure and some which we weren't. We did have limited mortgage banking activities throughout much of September. And in our Eastern and Coastal markets of North and South Carolina, we had a number of delayed closings on mortgage loans in which we provided free extensions to our customers. This, of course, reduced our margin on those loans. We had cost related to relocating employees to serve our customers during the storm, repairs to our facilities, compensation cost, and then contributions to relief efforts. All of those impacted our third quarter.

Delayed closings on commercial loans certainly occurred and we did have limited business activity in many of our markets for a good part of September. We did not try to quantify that impact as it was pretty much impossible to quantify that. In addition, we did increase our provision for loan losses for unknown effects of Florence. We believe that the aggregate financial effect of these items was a reduction in income and an increase in expense of approximately $500,000 to $600,000 on a pretax basis for the quarter.

Let's talk a little bit about our commercial banking segment. CresCom Bank had a good quarter. Net income of $15.3 million or $0.67 per diluted share compared to $7.8 million or $0.48 per diluted share in the third quarter of 2017.

Operating earnings were slightly better, $15.4 million, $0.67 per diluted share for the third quarter of '18 versus $7.7 million for the third quarter of 2017 or $0.48 per diluted share. Our return on average asset for the banking segment was 1.67% for third quarter of 2018. And that compared to 1.41% for the third quarter of 2017.

Operating results on return on average assets were just slightly better. Real pleased with our net interest margin. Our yield on loans actually increased for the quarter 8 basis points. When you exclude accretion income, it increased 3 basis points. Our yield on securities actually increased 16 basis points when you compare it to the prior quarter, 3.59% compared to 3.43% in the second quarter of '18.

Accretion income for the third quarter was $2.2 million, and it was $1.9 million in the second quarter. Cost of funds did increase 7 basis points from 85 basis points to 92 basis points. If you exclude accretion income, our net interest margin actually increased 1 basis point in the third quarter of '18 compared to the second quarter of '18.

Operating efficiency in the banking segment, again, very good, pretty constant over the last 4 quarters. I did mention in the prior calls that we were adding strategic senior management positions to the company to support our next level of growth in size and scale. The majority of those are done. I think we have 1 more that we're negotiating on. So I would say that the majority of that expense has been now put into the company. Our noninterest expense divided by average assets was 2.08% in the third quarter of '18. The same as it was in the second quarter. The bank efficiency ratio was 48.2%. That compares, again, exactly the same number in the second quarter of 2018.

Balance sheet growth, 7.9% growth in loans receivables since the beginning of the year. We grew $30 million. As I had mentioned in the second quarter call, we have experienced several companies that have actually sold their businesses, resulting in some fairly large payoffs that occurred in the third quarter. In addition, we have seen some extremely aggressive pricing by our competitors on some loans that we've chosen not to participate with.

I think our concern remains that there is some extremely aggressive pricing by competitors on the lending side. And quite frankly, it will likely have some impact on us. However, when I look at our pipeline, it remains very strong. If I look at business activity in our markets, remains very strong, and the opportunities that we're talking to customers with, I would say, in all honesty, is probably very close to an all-time high. So extremely aggressive and competitive markets, but I think our team is doing a great job with identifying the opportunities. And overall, for the third quarter, was pretty pleased considering that we knew we had some pretty large payoffs related to sales of companies.

Deposits increased $51 million for the quarter. Overall, what we would really expect during the summer, I think we did have some reduction right at the end of the quarter, particularly related to Hurricane Florence. But overall, pretty pleased with where we stood on our deposit growth during the quarter.

Our asset quality remains excellent. NPAs to total assets was 0.32%. We had 2 basis points of charge-offs. And again, we believe that our portfolio with a low -- with a fairly high concentration of what we believe to be lower risk assets, particularly in the 1-4 family, continues to perform very well. As we mentioned earlier, the loan loss provision of $750,000, primarily driven by organic loan growth and also by hurricane-related impacts that I had mentioned previously.

Deposit cost of funds was 0.73% for the quarter. And so with that, I'll move over to Crescent Mortgage and our Wholesale Mortgage segment. Really very pleased for the third quarter. They did have some hurricane effects also. They do a lot of business in the Southeast. And so there's no doubt that they had a lot of delayed closings, and to some degree, some effect on margin. But when you really look at the result, $190 million in closed loans compared to $205 million in the second quarter, really very pleased. Our margin remained very nice at 165 basis points. A year ago, in the third quarter, we were 144 basis points. So overall, very pleased in a market that certainly understand -- understanding some reduction in business due to rising rates and the Fed increases over the last 2 years.

Our Wholesale Mortgage segment actually made $555,000 for the third quarter of 2018 and that compares to $449,000 in the second -- in the third quarter of 2017. That team has worked very hard to try to maintain market share without sacrificing margin. I think they've done a really good job on an industry that is down close to 15% to 20% in production over where it was probably a year ago.

Our shareholder results continue to be very good. Our return on tangible equity -- common equity was 14.68%. Our return on average assets was 1.66% slightly better on an operating basis. Just a reminder, the company did complete the sale of 1.5 million shares on June 11, 2018. That resulted in net proceeds of approximately $63.1 million.

Our earnings per share I'd mentioned earlier, again, very pleased with operating earnings of $0.67 this quarter compared to a year ago quarter of $0.49 and, of course, our tangible common equity has shown significant increase from over a year ago. It's $18.69 at the end of the third quarter compared to $15.27 at the end of the third quarter 2017.

I would like to kind of complete my remarks by just thanking our team members for all their hard work in serving our customers. Many of our team members had to drive to work 2 hours and go home with drives of 2 hours because of all the flooding and the circuitous routes that they had to take to and from work. Thank you so much. We're doing a good job of continuing to just work hard every day to exceed our customers' expectation. And overall, considering the challenges that we had in September, I felt like our results for the quarter were very good. Very pleased, as I look forward. I think we continue to remain very optimistic that our markets are very strong, and our teams that are serving those markets are very strong. So with that, I'll open up the call for any questions that you may have.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from the line of William Wallace with Raymond James.

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William Jefferson Wallace, Raymond James & Associates, Inc., Research Division - Research Analyst [2]

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Jerry, I wonder if you could just maybe help us kind of quantify or think about the impact to loan production from the hurricane? So you had, presumably, a lot of loans that were in the pipeline to close that didn't close late in September. So I'm curious, do you anticipate -- should we see a bounce-back in the fourth quarter? Or is this just lost time? And the fourth quarter is going to be what the fourth quarter is going to be?

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Jerold L. Rexroad, Carolina Financial Corporation - CEO, President & Director [3]

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There will be some bounce-back, Wally. But at the same time, particularly in the Coastal markets, there was not a lot of activity there for a while. So when you think of real estate activity along the eastern part of North and South Carolina, there were just not people out, particularly on the mortgage side, looking for homes for a period of time. And so I think there is some just lost activity that we experienced in the third quarter. It may even impact a small amount in the fourth quarter. Probably offset the bounce-back from the delayed closings, quite frankly. On the commercial side, again, kind of the same thing, only a little different. A lot of businesses right now are trying to actually make sure that they've totally cleaned up their properties and are taking care of what they got. So there's going to be a little bit of delay, I think, in the fourth quarter. When I look forward on that, I think things look good. I think our pipelines of activities look really good. And I look at the people that are now back in the markets and are -- the roads are busy. But there was just a period of time that was really slow. And for commercial, there's just going to be -- there's just going to be kind of a delayed impact. On the deposit side, unfortunately, a lot of the storm was a flooding event and a lot of it was flooding in non-flood zones. And so the -- I'm not sure that we will get a huge amount of deposit flurry that you'd get from a wind event where the deposits all come back into the bank while people rebuild. This is a little different. A lot of people are having to deplete some of their funds. And we certainly saw that in September. It was a really slow month for our commercial businesses. Looks like October is definitely, from what I can tell, looks good. But we lost a good month. Fortunately, we really don't have a lot of exposure to, I think, some of the businesses that really, really depend on September to be a great month for them. But it will definitely have an -- it definitely has had an impact on our deposits in the September month and October month.

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William Jefferson Wallace, Raymond James & Associates, Inc., Research Division - Research Analyst [4]

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Okay. All right. Fair enough. And maybe on that same -- in that same vein, there had been -- you had some commentary about the deposit market just really being competitive, especially in markets like Charleston, where other banks that are fast growers were being very promotional. I'm curious if that experience has continued? And how you look at the pressures both on the long pricing side and on the deposit side? And how you're thinking about your core margin, excluding the purchase accounting accretion moving forward?

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Jerold L. Rexroad, Carolina Financial Corporation - CEO, President & Director [5]

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So you're right. There was some extreme pressure in the second quarter on deposit rates. I would say, it's not as bad in the third quarter. It's still competitive on the deposit side, don't get me wrong. There are some specials out there you look at and you shake your heads on. But overall, I was really pleased that our cost of funds, when you exclude noninterest-bearing deposits, I think we were up -- Bill's getting ready to hand it to me. But I think we were up 10 basis points. So I was really pleased with that. I think we try to be very, very conscious of what we're doing. On the lending side, we have definitely lost some loan relationships over loan pricing. There's just no doubt about it. And we're going to remain very disciplined in our approach. We believe that as a community bank, we offer a highly relational service to our customers. And I think as a general rule, we've done very well getting paid a fair price for the service that we do. We have lost some loans in the past. Maybe a year ago, I would have said, I don't think that would have happened. But overall, I think there's going to be some bumpiness, maybe, to loan growth, but I feel pretty good about the future. I feel like loan growth, particularly as we go into next year based upon what I see in our activity pipelines, it looks really good. And so the fourth quarter is going to be a real challenge. I mean, we got -- there's a lot of people, particularly in the Myrtle Beach, Wilmington, pretty much any of those markets that pretty much run from probably Greenville, North Carolina down to Myrtle Beach. Those markets are impacted, and a lot of things that were being planned to do will probably be delayed a couple months. But -- so we're going to work hard on fourth quarter to try to make sure we maintain our loan growth. It will probably be most challenging quarter we have. But to be truthful, I thought third quarter would be really, really challenging, and I thought our team really came through and did a good job. But loan pricing probably is, to me right now, a bigger concern than deposit pricing.

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William Jefferson Wallace, Raymond James & Associates, Inc., Research Division - Research Analyst [6]

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So putting that altogether, I mean, do you think that -- from what you're seeing right now, I mean, do you think that you can still hold the line on margin? Or do you think that the pressures are mounting enough that there could be some downward movement?

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Jerold L. Rexroad, Carolina Financial Corporation - CEO, President & Director [7]

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So when I looked at margin, Wally, I got to look at it over a year period because, as you well know, our business is very cyclical at the tourism markets. We often lose a decent amount of noninterest-bearing deposits as we go through the winter. And so we should -- we probably will see some margin pressure in the fourth quarter. I will say that offsetting some of that will be the fact that the Fed increased rates right at the end of September, and we should get some pretty healthy benefit for that in the fourth quarter. But cost of deposits have to be impacted because of the seasonality. But if I look out over a longer period of time, right now, I feel like we've done a really good job on holding the line on loan pricing. And I think we've done a very good job on continuing to grow deposits in a really pretty competitive market. And I think you're right. It's going to be challenging. But I'd like to hope that when we get here and look at a similar quarter in the third quarter of 2019, that margins holding pretty close to where we've got it. I don't think you're going to see the growth in margin, like we saw over the last 4 quarters. That's definitely probably not going to happen. But being able to hold steady as long as business activity remains good in the summer next year, absent seasonality, I feel pretty good.

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William Jefferson Wallace, Raymond James & Associates, Inc., Research Division - Research Analyst [8]

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Okay. And then just 1 last question and I'll hop out, but the stock is down 20%, 25% over the past month or 2. You're now trading around $1.65, $1.70 at tangible book value. I'm curious how you might think about a stock repurchase program? And what the puts and takes there are? And what the appetite for you and the board would be to buy shares, given the big move?

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Jerold L. Rexroad, Carolina Financial Corporation - CEO, President & Director [9]

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Well, it's a great question. And I think anybody that knows me well knows that we truly believe that our job is to maximize the value of shareholders' investment over the both the short and long term. And certainly, a stock repurchase, at this point, would probably be fairly accretive to earnings in particular. I will say that when we raised capital in June, it was our intent to continue being an acquisitive company. It's still our intent to be an acquisitive company. I think it's going to be harder in the short term to do that, given the fact that most sellers do not understand relative value. And so in other words, if we were exchanging stock for stock, there's really no difference between selling the company today and selling it 6 months ago. But the fact is, is when you look at it on a per share basis, when our stocks drop 25%, it's a lot harder to convince them of that, and it takes time for them to digest that. And so it's my honest belief that doing an acquisition in the short term is a lot more challenging today than it was 3 months ago. But we're out meeting with people, talking to people that would be good partners for us, and we're going to continue to work on that. So we're not going to jump into a stock repurchase without a lot of thought as to the entire strategic objectives of the company. But I do admit that it is certainly pretty accretive right now, and we're going to look at maximizing our returns on capital. And we're going to continue to think about those things as a whole. But I will say that we do understand that stock repurchase today certainly is a fairly accretive transaction. And we're going to look at it and kind of consider this part of our strategic plan as a whole.

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Operator [10]

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(Operator Instructions) And our next question comes from the line of Blair Brantley with Brean Capital.

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Blair Craig Brantley, Brean Capital, LLC, Research Division - SVP and Senior Equity Research Analyst [11]

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Just a follow-up on Wally's question about capital deployment. I know we've talked about it in the past about kind of the mortgage servicing side. Is there any change -- any change in view there in trying to get some more of those assets?

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Jerold L. Rexroad, Carolina Financial Corporation - CEO, President & Director [12]

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Well, we didn't actually mention it on the call, but I'll go ahead and say that we have been aggressive in looking at acquisitions of portfolios of servicing that really fits what we would like to do. The details of that will definitely be in the 10-Q. But you could -- from an asset standpoint, we did deploy capital behind that this quarter. We like that asset. I think our timing, quite frankly, was really, really good. Because right now, the pricing of servicing is actually getting, I think, a little bit higher then maybe I want to invest in it. But yes, you'll see in the Q that we put on a pretty substantial amount of servicing for us in the third quarter. I think probably somewhere in the $0.75 billion addition in notional amount. So like the asset, liked the pricing of that asset, probably, 60 days ago better than I like it today. But we're going to continue to look to be opportunistic because we continue to like that asset a lot. We believe it gives us a good return.

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Blair Craig Brantley, Brean Capital, LLC, Research Division - SVP and Senior Equity Research Analyst [13]

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Okay. And then looking at mortgage and kind of the expectations going forward, the MBA forecast recently updated and the numbers actually increased their expectations a little bit. What is your view on kind of what you're seeing out there and your expectations for your mortgage business?

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Jerold L. Rexroad, Carolina Financial Corporation - CEO, President & Director [14]

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I think it depends on where you're at, Blair. And our markets definitely took a hit for 30 days due to the storm. And right now, it looks like they're bouncing back nicely. I hate to always comment on MBA projections because there's a lot of different, I think, thought process that goes into that. I think if interest rates continue to go up that it's going to be pretty hard for there to be a material increase in mortgage activity. On the other hand, for us, we are seeing some competitors get out of the wholesale business. And I think there's probably a better opportunity for us to gain market share on the wholesale business than there ever has been before. On the retail side of our business, I do notice that there is some cost cutting by competitors, particularly on back-office staff, and we've been pretty fortunate. We've actually picked up a number of people to our team over the last 120 days. So we believe that it's important to try to be very consistent in our mortgage business. We try to deliver a very high level of service. We think we get paid for it. And when I look at the mortgage banking activity in both the wholesale and the retail side and subtract the hurricane, I thought they had a pretty good quarter, considering what we're hearing from our peers.

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Blair Craig Brantley, Brean Capital, LLC, Research Division - SVP and Senior Equity Research Analyst [15]

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Okay. And then -- and so with some of those competitors pulling back, should that help margins a little bit? Or what's -- anything there?

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Jerold L. Rexroad, Carolina Financial Corporation - CEO, President & Director [16]

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I don't know that it'll help margin a lot, because margin, to some degree, is driven more by the very large players. And if anything, I see them contracting margin, particularly at the beginning of the third quarter. It seems to get a little bit better as we got to the end of the third quarter. But no, I wouldn't suspect that we're going to get a lot more margin. I do think there's an opportunity to pick up people that are experienced in the industry. And I think there's an opportunity to gain customers who really may have lost somebody they've been doing business for a good while. So I think those 2 opportunities exist. I don't know that margin will really expand unless we saw a pretty healthy increase in volume. And I'm going to be honest, I just don't see it.

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Blair Craig Brantley, Brean Capital, LLC, Research Division - SVP and Senior Equity Research Analyst [17]

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Okay. Speaking to the talent side, on the commercial -- for the commercial bank, I know you guys have been adding some talent here and there. I mean, what's the view going forward? Are you still seeing some good opportunities to get some seasoned lenders?

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Jerold L. Rexroad, Carolina Financial Corporation - CEO, President & Director [18]

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We are, but we're also being very careful. So I think we've added people that we really feel good about to the team, and it takes time to get them to where they understand our culture and credit style. And so we're really probably more focused right now on really trying to get that team -- those new team members up and productive. We certainly will, as we go into 2019, continue to look for people. But to be honest with you, we're at the point in time in the year now where moving somebody over is generally difficult. Most people want to wait till the bonus is paid. And so I wouldn't really expect anything until latter first quarter. And that really, timing wise, works out good for us because that should give us time to really, really get the new team members more inculcated into our culture and our credit style. And then, I think, we will start looking a lot more aggressively in certain markets as we go into the beginning of that second quarter of '19.

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Operator [19]

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And our next question comes from the line of Catherine Mealor with KBW.

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Catherine Fitzhugh Summerson Mealor, Keefe, Bruyette, & Woods, Inc., Research Division - MD and SVP [20]

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And I jumped on late, so I apologize if this has been asked. But I just wanted to get your view on buybacks, given your level of capital and where your stock is currently trading?

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Jerold L. Rexroad, Carolina Financial Corporation - CEO, President & Director [21]

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Yes, that question was asked by Wally. And I'll make sure not to repeat my...

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Catherine Fitzhugh Summerson Mealor, Keefe, Bruyette, & Woods, Inc., Research Division - MD and SVP [22]

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It was? Okay.

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Jerold L. Rexroad, Carolina Financial Corporation - CEO, President & Director [23]

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I won't repeat my answer in case I happen to, yes, say something slightly different, but we're...

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Catherine Fitzhugh Summerson Mealor, Keefe, Bruyette, & Woods, Inc., Research Division - MD and SVP [24]

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No worries. I'll get it in the transcript, no worries. And then my other question, and again, this might have been asked. I'll go for it. I have a bunch of calls at the same time right now. It's just on M&A, and also given the pullback in your stock price, how you think about M&A and leveraging that capital?

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Jerold L. Rexroad, Carolina Financial Corporation - CEO, President & Director [25]

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Yes, I'll answer that one. Wally did kind of -- I kind of answered that a little bit, but it is certainly more difficult to get people to think about selling when they don't understand relative value. And most of them, they looked at where they were -- they started thinking about it back when banks were trading 25% higher. And so they kind of arrived at a price in their mind that was based upon where banks were trading at that time. And most of the smaller banks, as you know, don't trade very often. And so they may be sitting there and their stocks moved a very small percent and they look at the people who could buy and they've moved like ours had. And it just takes a while for their brains to kind of recalibrate. Some of them can't, quite frankly, and say I thought I was worth $1.80 a buck and now they're telling me I'm worth 25% less than that. So we definitely have -- we're out aggressively trying to find the right partner for our company that we think adds value. I will also suggest -- and I didn't say this earlier, but I would also suggest that I think there are some that are probably more willing to stretch on a deal than we are. I think when we're underwriting deals, and we have underwritten some, that in all honesty, we do not see a 0 credit cost as part of that underwrite. And we're looking, I think, maybe more conservative than others. But it's been our belief from day 1 that being acquisitive is very important to our strategy, but being acquisitive where it's accretive to all shareholders is more important. And we really, really think that if you look back at the deals that we did over the last 4 or 5 years and look at the effects on our return on average assets or return on average equity and our growth in EPS over that period of time, we've done deals that we thought were good for both the shareholders that were being bought and our shareholders. And so we're going to continue to look at it that way. And there be -- may be some others that decide to stretch more than us. So there's really a couple of things that I see in the acquisition front. One, relative value. Two, I fear there's some stretching on price, but we're active. We're looking for the opportunity. And we are talking to people about what are their plans down the road. So hopefully, we will find the right partner that believes in our value system and the way we view shareholder value over the long term. And we are definitely continuing to remain acquisitive.

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Catherine Fitzhugh Summerson Mealor, Keefe, Bruyette, & Woods, Inc., Research Division - MD and SVP [26]

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That's helpful. And one other question. Just kind of on the health of your market, can you give us any commentary on what you're seeing in terms of credit? I mean, credit has just been so good for so long. We saw one announcement with Bank OZK that had some credit stress on a large project, potentially in one of your markets. So can you just kind of tell us what you're seeing? And are there any signs of stress in any pockets?

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Jerold L. Rexroad, Carolina Financial Corporation - CEO, President & Director [27]

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I also read that very intently and am still trying to find out exactly which retail center that was. But our -- from what I can tell, health of the retail market seems to be very good. We -- the storm absolutely had an impact. But it's funny, if I looked at our volumes on residential retail mortgage on a daily like basis right now, that gives me a pretty good idea of what the health of the market is from a sale standpoint. I feel pretty good. And so if you look at the traffic that's -- and I've been in Wilmington after the storm a couple times. I've been in -- obviously, I've been in Myrtle Beach a lot. I've been in Charleston several times. During -- right after the storm, it was really slow. But if you go today, it looks like -- it actually looks good to me, just from an observational standpoint. Now that's not an economic standpoint, but I think the markets look good. We're not really seeing a whole lot of change in asset quality at all. And I'm probably -- I probably -- actually trying to think how to say this. But I'm actually very encouraged by how quickly these markets have bounced back from a major, major flooding event. I am just so proud of the people in our communities, because the fact of the matter is, to a great degree, other than a lot of people having to rebuild their homes on the weekends and trying to find contractors to rebuild from flooding, the markets really look good.

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Operator [28]

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And I'm showing no further questions at this time. And I would like to turn the conference back over to Jerry Rexroad for any further remarks.

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Jerold L. Rexroad, Carolina Financial Corporation - CEO, President & Director [29]

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Again, thanks for joining our call. Thank you team members for all your hard work during the quarter. I appreciate the questions that were asked. They were certainly very, very good. And we're continuing to work hard to create value for our shareholders over both the short and long term. Thank you for attending. Bye-bye.

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Operator [30]

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Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may all disconnect. Everyone, have a great day.