Ameris Bancorp (ABCB) Q3 2015 Earnings Report, Transcript and Summary

Good day and welcome to the Ameris Bancorp’s Third Quarter 2015 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mr. Dennis Zember, Executive Vice President and Chief Financial Officer. Please go ahead.

Thank you, Colyn. And thank you all for joining us today on the call. During the call, we’ll be referencing the slides and the press release that are available on the Investor Relations section of our website at amerisbank.com and also on SEC website in the 8-K that we filed this morning. Ed Hortman, President and CEO and myself, will be the presenters and available after our prepared comments to answer any specific questions you might have. Before we begin, I’ll remind you that our comments may include forward-looking statements. These statements are subject to risks and uncertainties. The actual results could vary materially. We list some of the factors that might cause results to differ materially in our Press Release and in our SEC filings, which are available on our website. We do not assume any obligation to update any of the forward-looking statements as a result of new information, early developments or otherwise, except as maybe required by the law. Also during the call, we will discuss certain non-GAAP financial measures in reference to the company’s performance. And we’ve got a reconciliation of these measures and our GAAP financial measures in the appendix to our presentation. And now I’ll turn it over to Ed Hortman.

Thank you, Dennis, and good morning everyone. And thank you for joining our third quarter earnings call. I’m going to review the highlights of our quarterly results, then give an update on our recent acquisitions, and make a few comments about M&A in general. First on the results front, we reported operating earnings per share of $0.49 which is up 13% from the $0.43 per share we reported in the same quarter in 2014. Total operating earnings for the quarter totaled $15.9 million, which is an increase of 35% from the third quarter of last year. Of course earnings per share growth is less than the growth in nominal [ph] earnings because of the additional 5.3 million shares we issued in first quarter of this year. Our operating results practically mirror the accrual results; we’re only excluding the net amount of 209,000 from actual earnings which included the combination of investment security gains and some larger conversion related costs that we incurred. Actual earnings for the quarter came in at $15.6 million compared to $11.7 million in the second quarter last year. Our operating return on average assets for the third quarter was 1.22, 1 basis point from where we were year ago. Operating return intangible capital was 16.3% which is down from 17% in the third quarter last year. Our return on tangible equity is lower in the current period, obviously due to the additional tangible equity compared to the year ago period. For the third quarter, we reported an increase in tax equivalent spread income of about $8.5 million or 21.5% when compared to the same quarter in 2014. We picked up about 800 million of liquidity when we closed the two acquisitions in the second quarter and we’re about two-thirds of the way through the initial efforts at deploying those funds. We will complete the deployment of funds by the end of the year and expect to be on the full run rate with spread income as we start 2016. Dennis will discuss in a little more detail where we’re at on this strategy in a few minutes as well as provide some color on the net interest margin, but suffice it to say we’re on track with where we thought we’d be on yields and margins heading into the fourth quarter and into 2016. Non-interest income for the quarter was very strong, coming in at $25 million, up 40% from third quarter of last year and up 21% from the previous quarter this year. We continue to build non-interest income from multiple sources. The level of diversification we’ve achieved between spread income and non-interest income is noteworthy, essentially in line with the fact that we’re less focused on volume in those businesses than we are just on pure profitability. One item of interest being expressed by some investors is the level of revenue on recent acquisitions and to what extent our forecast were interrupted by the decline in deposit balances prior to the acquisition. In our initial forecast back in January we announced the two transactions in forecast and incremental pick up in service charges of 4 million per quarter. The pick up this quarter came in at 4.35 million. The additional revenue we earned are not being subject to amendment [ph] more than laid up for the higher level of runoff and deposits that we experienced. In our opinion it’s really good news and gives us confidence about our expectations going forward. Our mortgage revenues were strong during the third quarter and that’s normally our best quarter. Total revenue in the retail mortgage division came in at $12.3 million compared to $8.6 million year ago. Warehouse lending revenue was up 70% compared to the third quarter last year and net income in this division increased to about $845,000 for the quarter. SBA revenues and profitability there were down slightly from where we were a year ago, but our pipeline going into this quarter is strong and we made several good hires in the third quarter that will move the needle we think in the next few quarters. On the expense side, we had about $48.4 million of operating expense compared to $38.6 million in the same a year ago. Of course the main reason for the increase is the growth in total assets from the two acquisitions we closed in the second quarter of this year as well as the increase in revenue from our commission oriented businesses. Dennis will cover this in more detail, but we have about $2 million in quarterly operating expenses that we expect to remove with branch closures and the final integration of two transactions, and we expect the vast majority of that will be prior to year-end. Credit quality expense is another item that’s received a lot of the picture. Our high level of credit quality expense over the last couple of years and especially the last few quarters has caused too much noise for investors to appreciate kind of progress we’ve made, building our real core earnings machine. We took a credit charge in the second quarter of this year to accelerate the movement of non-performers and to allow us to achieve a normal level of credit expense going forward. For the quarter, we reported $2.1 million of credit expense, which compares very favorably to our previous quarters. We have forecasted our run rate would be in the $2.5 million range going forward and we are still confident in that level. On the balance sheet, we had steady asset levels of about $5.2 billion which is what we expected. Total loans, including loans held for sale increased by 204 million over the linked quarter and were up 825 million against the same quarter in 2014. On just the organic side, when we exclude covered loans and purchased pool loans, we saw an increase of about $78.2 million or 10.5%. For the year, we’ve grown organic loans about $300 million which is tracking to about a 12% growth rate. We’d really like to see that a little higher to be able to deploy the cash flows of the mortgage loan pools and the traditional commercial assets. We continue to see good momentum on the deposit side, although non-interest bearing was slightly lower in the quarter, I expect to rebound in the fourth quarter as we normally see a transition from ag loans to checking accounts in the fourth quarter as well as some inflows from our municipal customers. I was really pleased to see a great quarter of capital build. Tangible book value grew by $0.50 during the quarter to $12.31 and our tangible common equity to tangible assets increased to just over 7.75% one quarter after we completed the two transactions. I like where our company is situated with respect to capital ratios and especially with the capital build I expect over the next few quarters. Before I turn it over to Dennis, let me update you on the M&A activity. We completed the conversion of M&S Bank in Gainesville, Florida at the end of September and that went smoothly. We are on track to get the cost savings we’d outlined on both that transaction and the branch acquisition with back office integration and branch closures and our revenues coming in just what we planned them to. We announced earlier this month the deal in Jacksonville, Florida where we would be acquiring Jacksonville Bancorp. The investor presentation was filed on October the 1st, and can be found on the SEC’s website. Jacksonville Bank is a $500 million bank in Jacksonville, Florida. And we believe a very strategic deal for us and one that has meaningful potential upside. The deals meet [ph] the tangible book value and the capital ratios and is very modestly accretive to earnings. We expect deal to close sometime in the first quarter and then we would expect the conversion before the end of the second quarter of 2016. We always get asked about M&A and what the current situation is there, and I would just say that we are still having conversations as we always are but our focus, our number one focus is on our operating results for 2016, closing and integrating the Jacksonville Bank transaction and delivering the operating results we have been talking about. So with that Dennis, I’ll stop and I’ll turn it over to you to provide some more details.

Okay, thank you Ed. I am going to add just a few comments about our results. And again, I’ll be referencing the slides that we published this morning. Ed covered most of our operating results through page five of the presentation. So, let’s move to slide six, concerning total revenue for the quarter. Total revenue for the quarter, excluding accretion, came in at $69.7 million. We are excluding about $3 million of accretion in the third quarter of this year which is almost exactly what it was in the same quarter a year ago. Against the first quarter of this year, before there was any impact from the two acquisitions, this is about $15.9 million quarterly increase in total revenue or about 30%. Approximately $10.7 million of that increase relates to the increase in revenue from the two deals that spread and non-interest income, so $10.7 million per quarter. There is about $2.5 million per quarter that relates to stronger mortgage results which is what we expect in the third quarter, especially relative to the first quarter of the year. And $1.9 million is the net improvement we’ve had in our core bank revenue which includes about $800,000 in lower covered loans revenue. We’re showing another pick up in the fourth quarter total revenue to $72.1 million. And again most of that is just what Ed mentioned in our ability finish the deployment of the liquidity we picked up in those two deals. Mortgage normally does slow in the fourth quarter; we expect that to happen but we expect slightly higher commercial loan fee as well as the slightly better quarter with SBA gain. Regarding our net interest margin, we came in at 3.81% in the quarter, when you exclude accretion income which is down 6 basis points from the previous quarter. Our deployment strategy is going to help that ratio, but we do expect an influx of seasonal liquidity we get in the fourth quarter, Ed mentioned that on the deposits side. I think that that’s going to probably keep us in the 3.80 to 3.85 range, at least for the next quarter and probably into the first quarter of 2016. As we go into 2016, if we’re successful, remixing the cash flows off the mortgage pools into traditional commercial assets, we could see a pick-up in net interest margins regardless of what happens or doesn’t happen with interest rate. Ed covered non-interest income improvements, so let’s skip ahead to slide eight or operating expenses. For the quarter, we show higher expenses total -- showed higher total expenses of about $9.8 million compared to the same quarter in 2014. Against the first quarter of this year, again before any of the acquisition activity, we showed higher bank level operating expenses of $7.5 million per quarter. Our recent announcement concerning branch closures as well as the remaining integration savings we expect from Merchants and Southern, should reduce quarterly operating expenses by about $2 million per quarter till we expect to start first quarter of 2016. We do have other expense initiatives that we’re working on but we’re not ready to discuss that we’re targeting for the first-half of 2016 that we believe are necessary to slow the growth of operating expenses and ensure that we get our targets on efficiency and overhead ratios. On the line of business side, we do expect some additional investment in both mortgage and SBA, it’s not as much really in the fourth quarter but as we move into 2016 and we continue to scale both of those businesses really about the same pace that we expect the rest of our operations to grow. Skipping ahead to slide 10 on loans, some of this -- I’ll repeat some of what Ed said but there are several moving parts here. First, we did increase our position in the purchase mortgage pools to approximately $410 million from $269 million where we ended the second quarter. In the fourth quarter, we do expect to see another improvement, maybe at about that same level we had in the third quarter in those pools until we come into the first quarter when we expect to sort of remix those assets. We had covered loan runoff of about $18.6 million, so covered loans ended the quarter at about $191 million or only about 5% of total loans. Organic growth in loans which for us we include legacy loan growth net of purchase loans runoff came in at $78.2 million for the quarter about 10% -- 10.5% annualized. Like Ed said, that’s a little slower than what we were looking for, but still a positive trend here as the amount of internal growth we’ve had this year relative to covered loan run-off. In all of -- just some perspective, in all of 2014, covered loan runoff negated [ph] about 51% of our organic growth in loan and closer to 70% of our incremental revenue. For the year-to-date period in 2015, covered loan runoff has only been 26% of our internal growth. And when we look forward to 2016, we’re forecasting only 12% to 15% of our organic growth to be replacement for covered loan runoff. The treadmill we’ve been on replacing covered loans and covered loan revenues is winding and we are looking forward to seeing real improvement in spread income and total outstanding in the coming quarters. One last slide before I turn it back to -- for Q&A is slide 13 regarding credit quality. In the quarter, we moved about 9.7 million of non-performers, and going into the fourth quarter we have another 11 million that are either under contract or have some form of resolution in hand. With this I just wanted to reiterate our confidence level on achieving the 1% target on non-performers to total asset by the time -- by the end of 2015. So with that I will turn it back to Colyn for question-and-answer.

I’ll start with on SBA. There’s been a lot of talk about that this quarter just as results have come out a little weaker than I think the Street had forecast. I know that GOS, gain on sale margin was down little bit, nothing huge but 100 basis points. Can you just comment on that business and what are you seeing as far as demand by that paper and again on sale spreads?

We are not seeing really any pullback in the gain on sale levels. For us, it was just not getting enough loans sold. I mean we show on one of our slides, we sold $8.8 million. We produced a good bit of loans that are not fully funded. So, we’ve been building a pipeline of SBA loans that were waiting to be fully funded before we can sale. And that’s again why we think fourth quarter will be better. For us, this year will probably be somewhere closer to 65 million to 75 million in total production. And we think each business development officer ought to be doing somewhere in the $10 million range. So again, for us, this business just hinges on recruiting the right people. And we’re doing that but it’s just we’re pretty selective on both the loan officer and the credits we’re putting out.

So, the purchase of the pooled arms, I think I’m reading you right that that will be done by the end of the year and that book should max out at about 550 at year-end and then from there on, the plan is to transition that into the regular loan book. Is that the right way to think about that?

Yes. I think 550 maybe a little higher than that. We picked up -- in the two deals we picked a 1 billion and 50 million of earnings asset, some portion of that we loaned. Well, 195 million of that was in loans, so it really left us with call it 850 million of real liquidity to invest. And we are debating internally and we like these purchase mortgage pools a little better than we thought we would. The cash flows are more reliable, actually faster than what we thought the yields are better relative to bonds. But I think somewhere between 500 million and 600 million is probably the right way I think.

And then the guidance for the core margin to be that’s 3.80 to 3.85, you add the accretion to that to get sure your reported margin accretion has been running around 3 million a quarter year-to-date. Do you think that’s ballpark kind of the right number over the next year or so? And once Jax becomes online, will that accretion -- will that quarterly accretion number pick up at all or will stay pretty much the same?

On Jax, we did -- we have a pretty conservative credit market, just under 5%, higher than their loan loss reserves. There could be some non-accretable debt flow over from that but we’re not as much -- we understand investor angst with the level of accretion. And again we’re not trying -- Ed and I’ve said several times that we’re serious about book value. So, where in the past we amount [ph] traded some book value in an M&A deal for a good credit mark, we’re not doing that as much. I don’t think you’ll see as much accretion coming of the Jax Bank deal, as you have the others. $3 million, I would say it’s somewhere $2.5 million to $3 million a quarter, maybe 20 basis points is what I would add for the pickup from accretion.

Okay, great. Congrats on the quarter and congrats on getting the stock in the 30s, well done.

Our next question comes from Tyler Stafford with Stephens Incorporated. Please go ahead.

Just a follow-up on Brady’s question on the purchase mortgage portfolio. How much cash flow should that throw off in ‘16?

At 500 million, we had forecasted about 150 million a year. So, if we say we take it to 600 million, that’s maybe 200 million a year.

And then with the remix that you guys are doing over the next couple of quarters and absent the impact from JAXB be, how much actual earning asset growth will we see in 2016 roughly?

We’re probably something into 5% range. And again that’s going to be -- we’re not wanted to standstill on the deposit side, but we’re not going to be aggressive given where we are on the mix of earning assets. So, 5% or so. It goes back to one thing what Ed had mentioned about the kind of capital build we expect, a lot of that comes from -- not a lot of growth in total assets just more of the remix.

Did you guys recognize any of the previously discussed cost saves in 3Q or should all that be coming over next couple of quarters?

There was some -- there was about probably $300,000 of the cost saves from Merchants & Southern, so on an annual basis about 1.2 million out of Merchants & Southern, the rest of it is personnel, system; most of that being realized this month, so probably have a full run rate going into the first quarter.

So with everything that you guys are doing on the expense side and earning asset side or mixing that, clearly going to make some good progress on the profitability and the efficiency ratio here in the next few quarters. Any commentary or thoughts on where profitability and efficiency could trend as we kind of get through this remix and cost cuts by year-end call it?

Our efficiency ratio is 60% and forecasting when we get that is difficult, but between these cost savings and the additional pick-up on revenue and the way we’re getting the revenue really is not -- there is no new expense load for that, probably second or third quarter that we get closer to that. Profitability ratios I think probably all way in the 1 in a quarter to 1.30 range and the capital build -- we probably not going to be doing 17% and 18% return on intangible capital but 15% or so is long-term I guess what we would forecast. What we did this quarter from an ROA standpoint, we feel pretty comfortable with. Obviously, we’ll pick up some with what you said the cost savings and the additional revenue, but probably 1.25 to 1.30.

And maybe one last one if I could sneak in, do you have the new purchase refi mix within mortgage this quarter?

I don’t have it for the whole quarter, but one of the marks was 91% purchase, 9% refi. And I can’t remember it was either July or August, but I don’t have it for the whole quarter but I’ll get that. Again it’s -- what we have been -- what it has been for quite a while driven with our construction lending with brokers -- excuse me with construction firms or with real estate brokers or real estate agencies, not really focused at all on refis.

Our next question comes from Christopher Marinac from FIG Partners. Please go ahead.

Dennis and Ed, I want to ask you about the risk management team and sort of what you have in place prior to the JAXB merger and what you have to do in addition to that as to sort of either meet standards or just bring them on board, you need a lot of additional team for that?

Chris, we have a really strong risk management team, we don’t need any bill there but I would tell you there is some -- every transaction we have anticipated, we have had a conservative effort and have the resources in place prior to seeking approval for those. And so in that vein, I think over the next six months or so, 12 months, you will see us building a little in compliance particularly in our key security areas that are not real gaps out but I think as we continue to grow, we’ll need more expertise. So, from a risk management perspective with Jacksonville Bank, we’re in good shape; we don’t need any bill there at all.

And would you envision as Jacksonville gets integrated next year that you consider additional external moves or will 2016 be more of an organic focus to you?

I mean if you look at our history, you can just kind of assume that we are going to continue M&A. There are still plenty of targets that meet our criteria. But I’ll reiterate what I already said, our focus, our number one focus is going to be delivering 2016 results and making sure our core machine is running smoothly and we’re making a progress we need to make on expense control disciplines. So, I guess the short answer to your question is yes, but let’s -- one of strategy as opposed to one strategy.

And just I guess one last question just to -- want to build a little bit more to look at your growth here in Atlanta. From the standpoint of sort of what you are seeing, have you been pleased to what the growth there and I guess elaborate on opportunity here locally?

We are very pleased with our production there. As we look around and see where opportunities are, that market is clearly an opportunity market. But with our large footprint, we’ve got opportunities -- similar opportunities in other markets. Atlanta is clearly the biggest market and we will continue to look at opportunities there.

Our next question comes from Peyton Green with Piper Jaffray. Please go ahead.

Good morning. Certainly congratulations on a very fine quarter. Just wondered, maybe Dennis, if you could comment a little bit more, as we get out kind of into the middle of 2016 and kind of what your thoughts are. I mean if we look at the bank separating out mortgage and SBA, certainly the mortgage and SBA businesses have been doing very, very well. The bank is still kind of operating with an efficiency ratio of around 70%. And another cost save initiatives that you’ve highlighted, really don’t kick in until 2016. But what is the core goal, from an efficiency prospective for the bank; what’s kind of the business model perspective of where you think the company should be, as of five plus billion asset entity business model going forward?

There is several -- I’ll give you several initiatives that we are working on and sort of highlight what you’ve mentioned in the core bank. We’ve made a big deal internally about the fact that we’ve been getting all of our growth really from M&A and from what you mentioned the non-interest income line of the business. And really our core bank is still 80%, has been struggling with economic situations. There is a lot of refinance business and it’s sort of hard to keep the assets on your balance sheet; a lot of banks are doing that. But for us additionally, the covered loan runoff are replacing that; 2014 was 70% and this year -- of our incremental revenue this year, it will probably be about 35% of our incremental. Going forward, I’d maybe point; I don’t think that’s going to be the case. Remixing the earning assets from purchase mortgage pools into commercial assets, there is a real pick-up in the company on production goals and production standards and fee income and fee income standards. And that we believe we are in the right economic period to be a little more aggressive. If you look at deposits, we’ve been growing non-interest bearing deposits in our company at right -- more than 20% organically and then probably another 20% through M&A, so we’ve built a really nice book of non-interest bearing deposits. But when you look at the rest of our deposit portfolio, we’re kind of -- we’re down or flat and so total growth in deposits without M&A is really in the single-digit. And so that’s not made our branches look as efficient as we wanted to. We’ve got initiatives to change that to see internal growth be -- in the deposit side to be better, like I was telling someone earlier, at least 5%. So, I think some of the growth initiatives that we’re expecting in the core bank is something that we’ve not seen growth in core bank revenues and at least the same feel on core bank operating expenses. When you back out the operating expense pick up that we’ve had from the M&A and you look at just what the bank’s done, it’s really not been that it’s not been that much. There is some discipline on operating expenses in the core bank and most of that’s just been because of more of a flat line on core bank revenues. I think that’s going to change.

So, if we looked at year-over-year and we saw $9 million increase in revenue and 7 and change million increase in expenses, is that what you are really talking about, keeping expenses flat than revenue growing?

I mean at least ought to be increasing. I mean revenue ought to be increasing. If we are increasing revenue at 9, we’re seeing maybe 4.5 million or 5 million increase in expenses, something that’s more closer to our 60% maybe even little accretive to that.

Our next question comes from Jennifer Demba with SunTrust. Please go ahead.

This is Michael Young on for Jennifer. Dennis and Ed, I was just curious with all the liquidity on the balance sheet, if we do get a rate hike, say at the end of the year, what could we expect to see you all do differently with that liquidity or even elsewhere within the franchise if we start to see rates rising there?

I think if -- Michael, if we see rates rise, I don’t there is -- if we see rates rise, the 25 or even 50 basis points that’s been talked about. I don’t know if that would cause the change in our business plan. I think what it might do is it would hopefully increase -- there’d be some increase in say 5 or 10-year treasuries and spreads that would -- a lot more spreads that would slow down the pace of refinance activity in commercial assets and probably see more of our production hitting the balance sheet in the net fashion. That we might -- if that were the case, maybe we -- right now we are looking at the 12% to 15% growth in our organic loan book, maybe we be more careful with staying at the top end of that range.

And also just as we look out to next year, what areas maybe excluding SBA and mortgage but on the lender side, what geographies or product types are you targeting, maybe more hiring or growth in?

Right now, we have only got about $75 million of residential construction, that’s outstanding and then we’ve got lines that are obviously larger than that. But for our loan portfolio that sort of tracking to $4 billion that we feel like we could stand a little more concentration there, so the residential construction but it’s nothing we’d be looking at. And as far as market, our top five markets are what they have been Atlanta; Jacksonville; Savannah; Charleston; Columbia. With our M&S deal, we are in Gainesville, Florida; really that’s a pretty good market. We are Greenville, South Carolina, really that could be a good market for as well. That answer your question?

Sure. But any specific targeted plans on hiring in any of those markets specifically?

We are definitely looking to hire -- say, we are looking to hire really in all those markets. If we get an opportunity at the right cylinder, absolutely we’re looking all of those markets for a new hire.

Our next question comes from Peyton Green with Piper Jaffray. Please go ahead.

Dennis, I wanted to ask you a straight question the other way. Fed fund is flat through ‘16, and the loan income is down, how would that affect the margin guidance?

Maybe probably 5 to 10 basis points lower. It just -- if the tenure were to come down say into the 175 range, I guess it’s what you are asking -- if the tenure were to come down and we were to see what we would see as even faster payoff and refinance activity in the commercial assets. We would -- given our -- how much we want new commercial assets, we would probably track that even lower, so I would say probably -- I would say 5 to 10 basis points.

Okay, so core it’s 380, 385 would be…

370.

365, 370 somewhere in there. Okay, great. Thank you.

Our next question comes from Nancy Bush with NAB Research. Please go ahead.

I am looking at your last slide and I am looking at it as somebody who is new to your stock, so maybe I can take a fresh perspective here. When you talk about the discount to your peer group and the reasons for it, the overhangs causing the discount at TE and you note that lower volatility in earnings will drive higher multiples and you’ve got the Jacksonville conversion and acquisition coming up. And you are talking about conversations with companies in Atlanta. And I guess my question would be are you at that point of lower volatility and can you handle these announced acquisitions and ones that maybe announced in future without an added element of volatility that’s going to keep your valuation low?

Nancy, that’s a good question. I would just say that we’ve done quite a lot of M&A. We have done -- I guess we’ve average two transactions a year for the last seven years. So, we really understand how to manage that and what it takes to be successful and kind of the plateaus to avoid, and how to manage through that [indiscernible].

I mean I would say we are at a point especially doing the smaller deals, we have got to a point where we as Merchant and Southern, we did -- we announced the deal, we closed it, we got approval and closed it in about 100 days, did a conversion in the same quarter. So, I think we can defiantly on the smaller deals, announce one integrated sales risk management and all that and get the results.

The piece I think to the question is the discount valuation, when you look at the deals we have done, the last three, four deals we did were diluted to book value.

Right.

So as revenue, as earnings is ramped up, we’ve priced much differently on earnings than we are on book value. So, I think we’re being discounted because we diluted book value. So, going forward, what we’ve said for the last year or so, we’re not going to do any transaction that dilutes book value. We won’t bill book value back and we’re seeing that come back. So that we clearly have. The other overhang I believe is credit cost involved at brining credit. And we said in the second quarter that the large charge should help volatility there. And we came in less than that guidance number for the third quarter. But we think 2.5 million is still a good number going forward. So if we can remove those two overhangs, it will clearly help us.

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

I have no closing remarks. If you have any other questions or comments, you can call Ed or I directly. And with that we’ll say good bye, and have a good weekend.

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.