Greetings and welcome to the QCR Holdings, Incorporated Fourth Quarter 2017 Conference Call. Yesterday after market close, QCR distributed its fourth quarter press release and we hope that you’ve had an opportunity to review the results. If there is anyone on the call who has not received a copy, you may access it at the Company's website, www.qcrh.com. With us today from management are Doug Hultquist, President and CEO; and Todd Gipple, Executive Vice President, COO and CFO. Management will provide a brief summary of the quarter and then we will open up the call to questions from analysts. Before we begin the call, I would like to remind everyone that some of the information management will be providing today falls under the guidelines of forward-looking statements as defined by the Securities and Exchange Commission. As part of these guidelines, I must point out that any statements made during this call concerning the Company's hopes, beliefs, expectations, and predictions of the future our forward-looking statements and actual results could differ materially from those projected. Additional information on these factors is included from time-to-time in the Company's 10-K and 10-Q filings which may be obtained on the Company's website or the SEC's website. As a reminder, this conference is being recorded and will be accessible on the Company's website until February 2, 2019. At this time, I will now turn over the call to Mr. Doug Hultquist at QCR.

Good morning, everyone. Thank you for joining us today and I would like to welcome you to our quarterly earnings call for the quarter ended December 31, 2017. Initially, I will recap some of the highlights for the fourth quarter and full-year 2017 and we'll then turn the call over to our Chief Operating Officer and CFO, Todd Gipple, who will provide additional color on our financial results. Yesterday, we announced reported earnings of $9.9 million and diluted earnings per share of $0.70 for the fourth quarter of 2017. Core earnings which exclude acquisition and other costs related to the Company’s previously announced acquisition of Guaranty Bank and Trust Company and cost related to the core processor conversion of Community State Bank as well as the reduced tax expense due to the write-up of the Company's net deferred tax asset also equaled $9.9 million and diluted earnings per share of $0.70. I will ask Todd to provide more detail on these non-core items later in the call. Our core earnings were improved significantly this quarter as we experienced strong expansion in net interest income due to our strong loan growth throughout the year. A very strong quarter of swap fee income and relatively well controlled provision and other expenses. Additionally, we closed the acquisition of Guaranty Bank and Trust in Q4 and saw the benefit of those earnings for the full quarter. Our core EPS increased by $0.07 or more than 11% over Q3. Earnings for the full-year were quite strong with core net income of $36.3 million and diluted EPS of $2.66 versus $29.4 million and $2.31 for the same period a year ago. This represents an increase in EPS of approximately 15% on a year-over-year basis. We continue to demonstrate very strong loan growth as we grew loans…

Thanks, Doug. Good morning everyone. Thanks again for joining us on the call today. I wanted to begin by providing a bit more color on the non-core items that impacted the fourth quarter. First, we reported $2.1 million in after-tax acquisition costs and post acquisition compensation, transition and integration costs related to the acquisition of Guaranty Bank and Trust. In addition to closing the transaction, we also accomplished the full data processing conversion and merger of Guaranty Bank into our Cedar Rapids Bank & Trust charter during Q4. Total after-tax transaction costs related to the Guaranty acquisition, including amounts recorded in both the third and fourth quarter were $2.7 million. Second, we incurred a $753,000 after-tax cost in the fourth quarter to terminate the core processor contract for our Community State Bank charter. CSB had a long-term data processing contract in place and we acquired the bank in August 2016. That would have resulted in a $4.4 million pre-tax termination fee at closing. As part of the renegotiation of our Company's existing core processing contract during the fourth quarter, we were successful in significantly reducing this termination fee to $1.1 million pretax, and we now plan to convert CSB on to our core data processing platform in late 2018. Finally, we recorded a $2.9 million increase in our net deferred tax asset as a result of that Tax Cuts and Jobs Act that reduced income tax expense by a like amount in the fourth quarter. The net impact of these core items was no net difference between reported earnings and core earnings both resulting in net income of $9.9 million and $0.70 in earnings per share. Net interest income increased $3.2 million in the fourth quarter as compared to the third quarter. This significant increase in net interest income was…

Thank you very much, Todd. I hope that our comments have provided a bit more insight into the numbers. We can now open the phone lines for questions.

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Jeff Rulis with D.A. Davidson. Please go ahead.

Hey. Good morning, guys.

Hey Jeff.

So yes, I just kind of wanted to touch on the expense run rate. I just kind of want to see what the first quarter is looking like kind of backing out those one-time merger and acquisition costs to get to a little bit of a more core number. And then kind of just when exactly you think the Guaranty conversion is going to happen. And just if you see cost stepping down further after that?

You bet. We will have a fair amount more detail on the K on some of these numbers on a more granular and line item basis. First off, Guaranty conversion already happened. That happened late in the fourth quarter. You might be thinking about CSB. That one is scheduled for late in the fourth quarter of 2018. To give you some better comparative data on our non-interest expenses, a lot of noise of course, but we had reported around $31.3 million in non-interest expense for the quarter, that included around $2 million of expenses related to Guaranty. That is pretty much right on top of their annual run rate prior to acquisition. So we’ve not yet seen cost saves. Again, we did not merge and convert them until late in the fourth quarter. So we really didn't anticipate that happening yet. Those will start to roll in those cost saves in Q1. We also had around $4.4 million in acquisition and integration costs that we reported in Q4. We had a little bit of elevated compensation in Q4 related to the very strong quarter on fee income and earnings. So if you strip out those items, we were at around $23.8 million in QCRH only, core or more normalized expenses. So that really was the QCRH run rate in Q4, again, the Guaranty expenses are at about a $2 million run rate per quarter. We still expect to see a 30% cost save there. So that should be down to around $1.4 million of additional cost from Guaranty. I would anticipate about half of that happening in Q1 and we would be fully there in Q2 to get down to that $1.4 million post cost save number. So a lot of noise there, a lot of chop. I hope that helps everybody get a stronger lead on where we expect expenses to go.

Definitely yes, I appreciate the color on that. And then just kind of change in views here. So looking at on just expectations for 2018 as far as loan and deposit growth go. Can you just kind of give a broad outlook on where you see that kind of coming from? I know commercial and CRE have been strong, but just kind of you guys outlook for 2018?

Yes. Jeff as you know in 2017 both were stronger than what we would have predicted and pretty balanced among the charters, also pretty balanced among the type of loans originated. So we're continuing to look at that 10% to 12% growth rate on the loan side, and roughly the same on the deposit side.

All right. Great. Thanks for that. I’ll step back.

Thank you.

The next question comes from Nathan Race with Piper Jaffray. Please go ahead.

Hey guys. Good morning.

Good morning, Nate.

Good morning, Nate.

Todd maybe just around the core margin outlook for 2018, obviously we saw some nice core loan yield expansion in the quarter. So just kind of curious to hear your updated thoughts on the step up in deposit cost that we can expect in 2018, assuming we get two more rate hikes this year at least, and then just the other thoughts on just kind of competitive dynamic out there in terms of loan pricing going forward?

Sure, great questions, Nate. We will continue to see some pressure on funding costs. We've experienced very low beta thus far with now cumulatively 125 basis points of Fed increases, we've really been able to maintain funding costs in a fairly tight range. So we're very pleased with our outcome there, but we're going to continue to see pressure. Part of that's been offset for us by the acquisition of the CSB and the Guaranty portfolios have very good core deposits with very low betas. We are very pleased about those acquisitions. So continued pressure on funding costs, certainly I think everyone knows we were a bit more liquid in the quarter. We talked about that in the PR in our leading comments. Our loan to deposit ratio was down a little below 90% for most of the quarter, prior quarter was touch over 91%. So as Doug just told you, we expect to continue to see strong loan growth, so we'd like to move that loan to deposit ratio and our loan to total asset number back up a little bit over 75%. So that will help offset some of that funding cost pressure. We are for the very first time starting to see a little bit of lift in three and five-year pricing on loans, and by little bit I mean a little bit, it's unfortunate. Again, we've had 125 bps of rate increases, we've seen almost no beta in loan pricing for new loans. We've seen the lift in our floating rate loans, of course, but new loan volume it's been very tough to get better paid there. We are for the first time starting to see a little bit of traction there. So we're somewhat optimistic that with additional hikes to come that we're going to start seeing some lift in loan betas. So our expectation is a fairly tight range for margin next year. I think it would be difficult for us to predict or comment on any margin expansion. It's just going to be difficult to hold on to margin. If you look back at our five quarter history, you can see there's been couple basis points up, couple basis points down from quarter-to-quarter and that's really today what we're expecting for next year.

Got it. That's great color. I appreciate that Todd. Is there a FTE benefit that we should be taking out going forward as it relates to tax reform?

Well, yes, related to tax reform, we talked about our rate being at a 15% to 16% range, and what I did want to comment on is just a little more color around that. So our tax equivalent yield will likely drop somewhere around 14 basis points, and again, we all know that the bottom line impact is zero, it's just really a non-GAAP reporting of tax equivalent yield. But our tax equivalent yield would be impacted by about 14 basis point if we look at 2017, so that might move around a little bit. And then if we were to layer in the new tax rates in our core earnings for 2017, we would have seen about a 10 basis points lift in ROA and about $0.27 of additional earnings per share. So that's a little more color on the new tax rate and its impact on tax equivalent yield, ROA, and earnings per share. And again, those numbers are all based on looking back to 2017 not necessarily a prediction of 2018 impact.

Got it. Okay. And then just think about swap fees obviously really strong in the quarter, so just curious if there's some larger transactions that may have drove that number up sequentially and just kind of how you are thinking about your overall fee income growth for 2018. I appreciate your guidance around 10% growth in wealth management income budgets. Any other broader comments just in terms of the overall pie outlook for 2018?

Yes. There were a couple very large ones in Q4 Nate, on the swap side and we continue to be talking to our commercial clients about swaps. We think it makes a lot of sense for them, given the rate environment. So never able to predict those, we’d love it to be more consistent. SBA has been a bit soft, same with USDA. Primarily on the USDA side, again those are larger and also take longer and are more difficult to predict. We really feel good about the strides we've made in wealth management income during 2017. Obviously, the market helped, but we've brought in a lot of new assets, had assets add into existing accounts, and then also picked up a couple 100 million in the Guaranty acquisition and some nice talent there as well.

And Todd, just to clarify on the expense outlook, so if we take $23.8 million from your core run rate and then you layer on $1.4 million from Guaranty. Is that’s the right way to be thinking about it, around $25 million into perhaps the second quarter on the clean run rate basis?

Exactly Nate, I would say in a range of $25 million to $26 million maybe starting out a little higher on that scale in Q1. We won't have all the cost saves implemented for the entire quarter. So that is the right way to think about that.

Okay. Perfect. I appreciate all the color guys. Congrats on the solid quarter.

Thank you, Nate.

The next question comes from Damon DelMonte with KBW. Please go ahead.

Hey. Good morning, guys. How is it going today?

Great, Damon. How about for you?

Doing great, it’s a Friday. So that’s a good thing right. First question is just kind of follow-up on the margin. Todd, could you give a little guidance as far as what you're expecting from equivalent yield impact? I think this quarter you said it was around $745,000. What can we look for in the upcoming quarters?

You bet. So Damon, we obviously still have the CSB accretion that's rolling down, and we're expecting that to be at about 380K a quarter without any acceleration. So that's just scheduled. And then we brought on Guaranty of course, the yield mark there is a little more modest, fair amount, smaller portfolio. Total mark there and we'll have more color on this in the K. But total mark there is about $2.4 million, and so think about that is around 600 a year-ish, and so on a combined basis we're probably going to be more in a 500 to 600 range in the early part of the year this year. So down a little bit because of the continued roll down of the CSB number. Hope that makes sense.

It does, it does, yes. Thanks. And then I guess can you just kind of go back to the fee income, sorry if I missed. This is asked and you addressed it. But as we try to think of a normalized quarterly run rate, I know it's tough with the swap fee income and the gain on sale of the USDA and SBA loans and stuff. But I mean should we think about this more in kind of upper $6 million to low $7 million quarterly run rate?

Yes. So when you think about the combined number on gains on sales on government guaranteed loans and swaps. So again, we talk about those three buckets USDA, SBA and swaps together. We're going to continue to look at that as about $4 million per year business for us. So Damon, we had $4.3 million this year, an exceptional year last year. We had some large USDA numbers in 2016, and I think we had $4.8 million for total year of that year. We still think about it as a $4 million core business for us. Unfortunately to make your guys job tougher and ours are little bit harder to explain. That’s a very, very choppy, and probably has not been more choppy than it was this year. We had a great start in Q1 had virtually no results in Q2 and Q3 and then we had a lot of deals come together in Q4. So it's going to remain very choppy, kind of think about that business in that range of $4 million per year. And then trust and investment advisory fees combining about $3 million for this most recent quarter, and so that we expect to continue to see that growth at about 10% cliff.

Okay. That's helpful. And then how do the pipelines look for the SBA, USDA and the swap fee income kind of in the first quarter after such a strong fourth quarter?

Yes. Well the good news is we still have a pretty solid pipeline. They will continue to be lumpy in terms of when they get booked. Doug indicated SBA being very light and pretty modest. Candidly the marketplace isn’t supporting a lot of SBA activity right now. A lot of banks are willing to do those deals without guarantees and we're not, and so we're not seeing a lot of activity there. USDA we have a pipeline swaps, we have a pipeline still very good transactions for our clients. So we continue to look for ways to help our clients with those two transactions. So we did have a lot of success in Q4, but it didn't completely empty the pipeline. We still have some expectations in 2018.

Got it. Okay. That's helpful. Thank you. And then I guess with regard to the tax savings you guys are going to be seeing, have you given thought to any types of initiatives or in your internal programs that you may look to undertake just given the extra dollars that are hitting the bottom line?

I think how we look at it, Damon is, it is going to improve our ROA and improve our earnings per share and we're happy about that. I know our shareholders should be happy about that. We expect to continue to need to invest in people and invest in technology. We're not looking at it as we now have a bucket of x dollars to go ahead and spend on that. We'll just continue to do what we have done which is build scale and invest in people and technology when needed. So we don't necessarily have any stated initiatives with regard to compensation issues. We feel like we have the best people in banking and have a very highly incentivized culture in terms of compensation. And so we expect to keep it that way and really will just see a lot of these benefits go to the bottom line. That's our expectation.

All right. That's all that I had. Thinks a lot. Appreciate the color.

Thanks Damon.

Thanks Damon.

[Operator Instructions] The next question comes from Erik Zwick with Stephens Inc. Please go ahead.

Good morning, guys.

Good morning, Erik.

Hi Erik.

First, maybe just a follow-up on the margin, just to make sure I understand. If I think about the excess liquidity impact in the fourth quarter the negative 5 basis points. Are you expecting to see put that to work. I'm just trying to kind of be keen on that from a starting point for the 1Q 2018 margin would it be the kind of the [3.65%] level or are starting closer to [3.60%]?

Yes. I think that where we ended the reported quarter would be a good starting spot. We don't necessarily see that liquidity snapping back entirely right away. It didn't really all happen at the end of the quarter. While it did ease a bit and we had a higher loan growth in December than the average for the quarter. We do expect to continue to bring on core deposits. And so I think we're going to be in this 90% loan to deposit to 91% loan to deposit ratio for a while. We believe it's always a good time to grow core deposits, and while we like to put those to work immediately, sometimes we have a little bit more liquidity. But Erik, I would use our reported number for Q4 as you are leaping off point for your model.

Understood. That’s helpful. And then on kind of the deposit growth, that sounds like the outlook for growth is good, but you continue to see pressure on those costs. Are you able to quantify your expectations about the deposit beta in 2018 at all?

Well I think if we looked at our deposit beta and our Treasurer, John Oakes and I just did this, but we looked at our beta from 12/31/2015 when the hike started at 12/31/2017, we've now had five hikes for 125 basis points. Our actual beta has been 25 over that period. So we've seen roughly 32 basis points of increase cost on deposits. So that is we consider that to be a pretty solid performance on beta. Now a bit of that has been benefited from the addition of the CSB and the Guaranty core deposits, of course. But I would expect go-forward betas to be on the higher side. I’ll give you a little bit more color on mix. So we tracked our total rate sensitive funds quite tightly and that's roughly about $790 million of our total funds or about 22% of our total funding is very rate sensitive. Those typically have a high beta, 75 to maybe 90 beta, but it is only 22% of our funding. So that's the fortunate thing. We have around $760 million of floating rate loans. So about 96% of our very rate sensitive funds are covered by floating rate loans. So very close to a match there. And of course, those floating rate loans would have 100 beta with the contract terms. So that's why we're thinking about margin in a fairly tight range next year. Those two things working to offset each other.

Great. Thanks. And just one more for me. In light of the outlook for increased after-tax earnings due to the tax code changes, how are you thinking about the uses of your capital today? Certainly, organic growth is a priority? But as you think about dividends, potential buybacks, and M&A, what's your view today?

Yes. Erik, as you’ve probably have heard us say before, organic growth is always our first choice and we've been fortunate to be able to continue that the last couple years in addition to the M&A activity that we've undertaken. And end market, acquisitions would be second choice after organic growth and then we would also look at other attractive markets in the upper Midwest. So and talking with our senior management group and our board, we continue to plan to invest our equity back into the business and don't have plans at this point in time for other uses of that.

That’s great. Thanks for taking my questions.

Thank you.

The next question comes from Daniel Cardenas with Raymond James. Please go ahead.

Hey. Good morning, guys.

Good morning, Dan.

Hi Dan.

Just a couple questions here. Just touching briefly on the M&A front. What is the environment looking like and as you look at your footprint, what is the viable pool of candidates look like? Is that shrinking pretty dramatically as you continue to grow or are you willing to kind of go downstream and do some smaller deals?

Yes. I think Dan that that population does continue to decrease. Size of transactions does matter, and you do just about as much work in a $600 million acquisition like Ankeny was compared to $250 million at Guaranty. So we will continue to look, but as you say, those candidate pools are shrinking.

Okay, good. And then for the deposit – organic deposit growth that we saw this quarter, how much of that was public funds related?

Well Dan, we picked some significant funds from city and school. I think we talked about that on the call, in the Q3 call. And we think about those less as public funds because they're not really bid. They're more relationship. So we really don't have a significant amount of what I think we all consider to be true public funds that are subject to bid. We obviously had to do proposal for that relationship, but we think about those as core deposits. But we have picked up over $100 million of those deposits in Q3 and Q4. They are fairly price sensitive, so don't want to indicate that they're going to behave like retail core deposits. They are fairly rate sensitive, but not subject to bid frequently. And we're really happy about having those on board. In addition to providing funding, we are seeing some pretty solid fees every month from servicing those accounts. So we view those as more of a relationship.

Yes. And Dan, part of the reason those came our way is in our proposal process we have presented to them our new treasury management platform and that conversion took place in Q4 and has gone over very well with our commercial clients. So while we like the retail deposits that we've acquired with CSB and Guaranty, we are also very focused on continuing to expand our commercial deposits and now we have a more sophisticated treasury management program to support that.

And then on that $100 million or so that you've picked up over the last couple quarters, what's the average cost on that portfolio?

Yes. Probably in the low 1s, 1 teens, 1 20s. So again, a little more pricey certainly than retail core deposits, but cheaper than overnight funding certainly.

And when you give your deposit growth guidance that's including these types of funds in that growth?

Yes. I think that was certainly – those were a couple of very large wins in Q3 and Q4. They're not going to tend to come in $120 million chunks. But as Doug indicated, we're optimistic about the deposit growth because of our new treasury management platform. We've added some folks to those teams. The conversion is over. Those teams are now focusing on growing treasury management deposits with a better platform and one that we've heard our clients say they believe is better than Wells Fargo and U.S. Bank. So that’s a bit behind the optimism about keeping pace with core deposit growth. Hope that makes sense to you Dan.

Yes, it does. Okay. And then last question for me is. Just kind of given some of the improvements that we are beginning to see on the credit quality side in a pretty well behaved credit environment, how are you guys thinking of charge-off levels in 2018?

Well Dan, we really don't have any crystal ball telling us that we're going to have charge-offs in a substantial amount in 2018. We feel pretty good about the year we just had. We did have elevated charge-offs in Q4, but Doug about that in his opening comments that that really was a result of that one large CRE project. We had it fully reserved at the end of Q3 and simply took the charge-off and moved it into ORE in Q4. So we view that as a one-time blip and we certainly expect to see 2018 be much more like the rest of 2017 was in terms of pretty modest charge-offs.

Excellent. Great. Thanks for the color guys. Good quarter.

Thanks Dan.

Thanks a lot Dan.

[Operator Instructions] The next question comes from Brian Martin with FIG Partners. Please go ahead.

Hey guys.

Hey Brian.

And most of my stuff here has been answered. Maybe a couple little things. And Doug you just touched on kind of the M&A, just from a commentary on maybe a smaller population like you referenced there. I mean, I guess can you just talk about the level of discussion, I mean are they similar, lighter, heavier and maybe just if the population is a bit smaller now, I mean does it expand your horizons a bit to improve that? Or I guess is it still a same market you would look at and doesn’t really change the population?

Yes. Pretty much the same population Brian, pretty steady. I think the Tax Act has caused some potential sellers to pause because as they look at what that does to their bottom line they say gee, maybe we should continue because our ROA is going to be that much larger. But I cannot say that the Tax Act has really changed our strategy from an M&A standpoint. We're still upper Midwest. We like to be in communities of size that can support commercial banking and wealth management, so that's pretty much the same.

Okay. And no change in dialogue. I guess, maybe it’s less now, is that what it sounds like from the commentary?

I'm sorry Brian, what was the question?

Yes. I just going to say, it sounds as if the conversation are less today than it has been based on kind of what you just outlined?

Maybe less in numbers, like I say, I think a number of folks have paused, but in terms of how we would compare in our outlook for the next year, or a year and a half to the last year or so, I'd say pretty steady.

Okay. That's helpful. Thanks Doug. And then on the loan pipeline, I guess kind of regard to the guidance, I guess should we still expect some level of seasonality. I mean I don't know where that maybe you comment on where the pipelines are today? It was obviously a strong fourth quarter, but do you expect maybe a little bit of weaker performance in the first quarter just given normal seasonality and then kind of a normal build. Is that still fair to think about it that way?

Yes. I think you probably saw some accelerated activity in Q4 with the Tax Act, but our seasonality of our commercial portfolio is just not really very predictable. So I don't think we're predicting that any one quarter is going to be stronger than the others.

Okay. And just going back to the SBA, USDA comments, I mean it’s seems like the swap activity that you guys said obviously was much stronger fourth quarter, but and you just kind of sticking with the $4 million type of number. I mean I guess do you expect next year to see – it sound like you expect to see some pick up in SBA, USDA and maybe curious a bit more of it’s weight and than we saw this year. Is that that kind of seen there? And it sounds like on the USDA side, I guess that maybe not on the SBA side. Is that kind of read into your comments?

I think that’s right. We tried to work with the number of our downstream correspondents on the USDA side. And as Todd mentioned earlier on the call on the SBA side, we’re seeing many competitors originate those loans without the SBA guarantee. And that's just not a direction that we care to hit.

Okay. Perfect. And Todd, maybe just one on the tax benefit. I think you talked about related to the stock options exercise. I mean that number is kind of bounced around? It sounds like your guidance does not include that impact, I guess is there a way to think about that in a particular quarter, if there's more or less impact based on the stock options exercised in restricted stock?

You bet, Brian. You're exactly right. Our 15% to 16% ATR is guidance without the impact of the benefit from stock option and RSAs. And that historically has been about a 2% additional benefit. And that tends to come in lumps. Q1 is always pretty significant there. So you might see bigger benefit in Q1, then much of the rest of the year. That just happens to be when a lot of our incentive-based equity grants vest and people take advantage of them as they should. So Q1 tends to be a little stronger, but over the entire year probably reduces our effective tax rate by about 2% number.

Okay. That’s helpful. And you characterized this quarter, Todd is more on the heavier side in Q4 based on what I think it was about 400K?

Yes. We did have a little bit more here in Q4. So now that we're experienced for a full-year with that new GAAP accounting. I think you can typically expect to see a bigger lump in Q1 and Q4, probably modest amounts in the middle two quarters.

Okay. And then just in your comments on the CSB conversion later in 2018, I guess, just the rationale for waiting to do that. I guess is there something maybe I missed that you guys have commented on that, but the wait till later in the year is driven by what?

That's a great question Brian. Really two things going on there. We had not anticipated a schedule on that CSB conversion until we were successful in negotiating that fee down and that happened right at the end of the calendar year. So that really started the race to prepare for a conversion. Those typically take six to 12 months to plan for. And what we've got is we have some changes in our core system that we have today that we want to get implemented first before we convert CSB on to that platform. So we have a few upgrades with our core processing platform, Fiserv signature that we need to implement this spring and summer before we bring CSB on. So I hope that makes sense. It's really more staging than anything else.

Okay. And then it sounds like there is cost savings that come out of that, is that kind of a 2019 event with regard to renegotiating the contract or is that I guess when is that kind of go into the numbers if you will?

Right. So the cost savings related to getting CSB converted would certainly be 2019. We did experienced some cost savings in our core contract when we renegotiated that. It's really going to help us pay for additional new technology. It's going to help us cover the cost of the Q2 platform that we've talked about and some of the other new technologies we expect to add to the platform. So on a net basis, we're not expecting to see a big drop in the DP cost. The good news is we're not going to see any increase from some of the new technology. We're going to pay for that with the savings on the core.

Okay. That’s helpful. I appreciate it. And then just last one for me guys. Doug or maybe Todd you talked about it as far as the ROA or maybe, Doug, going as far as kind of if you look back where things would have been in 2017, but just giving your outlook with the tax reform and other momentum you guys have. I mean as far as your ROA outlook, can you just talk about how you are thinking about that in maybe 2018 and 2019 and the escalation that you would expect or kind of – maybe if you have any ranges as far as how you are thinking about that today?

Yes. Brian, we are reluctant to give a lot of guidance on bottom line ROA. We are very committed to continuing our work to expand ROA. Our goal is to be in the upper quartile of the peer group, so that's what we're chasing. We know the entire peer group is going to see a lift from the reduced tax rate. What we are comfortable with is talking about the impact. If we were to look at core earnings in 2017, it would have lifted ROA from 103 basis points to 113 basis points, so 10 basis point lift. So lift is not as dramatic for us as it is some of our peers because our effective tax rate was already lower than most of our peers. And we've worked hard to do that, and so the benefit is not as significant. But you can certainly expect to see a lift like that perhaps a little more as earnings go up into the future. But the lift we would have seen in 2017s 10 basis points ROA, and so if you translate that into your modeling and everyone else doing it with their models and looking at a 15% to 16% tax rate and then maybe another 2% benefit from what we see on reduced tax expense due to the options in RSAs. That's really the ROA outcome that we're expecting.

Gotcha. Okay, I appreciate that Todd. I appreciate the color, and thanks for taking the questions guys.

Thank you, Brian.

Thanks Brian. End of Q&A

This concludes our question-and-answer session. I would like to turn the conference back over to Doug Hultquist for any closing remarks.

Well I appreciate the relationship that we have with all of you and appreciate your interest in calling in and all the questions. So we know there is a lot of noise this last quarter and this last year, but on a net base, we're feeling good about what got done in 2017 and what's ahead for 2018. So again, thank you for the relationships.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.