Federal Agricultural Mortgage Corporation (AGM) Q3 2016 Earnings Report, Transcript and Summary

Welcome to the Farmer Mac Third Quarter 2016 Investor Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation there'll be an opportunity to ask questions. [Operator Instructions] Please note this conference is being recorded. I would now like to turn the conference over to Tim Buzby, CEO. Mr. Buzby, please go ahead.

Thank you. Good morning. I'm Tim Buzby, Farmer Mac's President and CEO. Farmer Mac is pleased to welcome you to our third quarter 2016 investor conference call. Before I begin, I will ask Steve Mullery, Farmer Mac's General Counsel, to comment on forward-looking statements that management may make today, as well as Farmer Mac's use of non-GAAP financial measures. Steve?

Thanks, Tim. Some of the statements made on this conference call may constitute forward-looking statements under the securities laws. We make these statements based on our current expectations and assumptions about future events and business performance. We do not undertake any obligation to update these statements after the date of this call. We caution you that forward-looking statements are subject to a number of risks and uncertainties. Actual results may differ materially from the results expressed or implied by the forward-looking statements. In evaluating Farmer Mac, you should consider these risks and uncertainties, as well as those described in our 2015 annual report on Form 10-K, our subsequent quarterly reports on Form 10-Q, and our other filings with the SEC. In the analysis of its financial information, Farmer Mac sometimes uses measures of financial performance that are not presented in accordance with generally accepted accounting principles in the United States, which we refer to as non-GAAP measures. The three non-GAAP measures that Farmer Mac uses are core earnings, core earnings per share and net effective spread. Farmer Mac uses these non-GAAP financial measures to measure corporate economic performance and develop financial plans because, in management's view, they are useful alternative measures for understanding Farmer Mac's economic performance, transaction economics and business trends. These non-GAAP financial measures may not be comparable to similarly labeled non-GAAP financial measures disclosed by other companies. Farmer Mac's disclosure of these non-GAAP measures is intended to be supplemental in nature and is not meant to be considered in isolation from, as a substitute for, or as more important than the related financial information prepared in accordance with GAAP. Disclosures and reconciliations of these non-GAAP measures can be found in the Form 10-Q and the earnings release posted on Farmer Mac's website, www.farmermac.com, under the Financial Information portion of the Investors section. A recording of this call will be available on our website for two weeks, starting later today.

Thank you, Steve. As we have mentioned on previous earnings calls, we believe that the relative value Farmer Mac brings to the agricultural and rural credit markets is greater in environments where credit is a bit tighter, allowing us to further deliver upon our mission. It's important to note that Farmer Mac is continuing to maintain its credit requirements and underwriting discipline, but we are certainly getting more opportunities to look at new business in today's environment and our results throughout 2016 continue to bear this out. More broadly, third quarter results were strong across the board, including robust new business, improving spreads, stable credit quality and growing profitability. As you know, our new business can vary significantly quarter-to-quarter, in part driven by scheduled maturities. Third quarter 2016 was a good quarter for us, particularly in terms of new loan purchase volumes, and it also included the refinance of a maturing $500 million AgVantage security with a large agricultural lender. Farmer Mac ended third quarter 2016 with outstanding business volume of $17.2 billion. We completed more than $1.1 billion of business volume this quarter, resulting in net growth of $131 million after maturities and repayments. In our Farm and Ranch line of business, we purchased $283 million of new loans this quarter, which reflects more than a 60% increase compared to third quarter 2015. This higher volume is being driven by an ongoing level of primary demand from land sales, as well as increased demand for credit, given the tighter agricultural economy. Net of repayments, our Farm and Ranch loan purchase business grew nearly $150 million in the third quarter. Our USDA guarantees line of business also experienced net growth this quarter. We purchased more than $119 million of guaranteed portions of USDA loans, which was a 30% increase from the amount purchased in third quarter 2015. Net of repayments, our USDA guarantees line of business grew by more than $60 million in third quarter. In our Institutional Credit line of business, we successfully refinanced a maturing $500 million AgVantage security with MetLife this quarter. The refinance included Farmer Mac's purchase of four new AgVantage securities of varying terms, ranging from two years to five years which, when combined, reflected an increasing in spread compared to the maturing security. By breaking this one larger security into four smaller sized tranches, we reduced the need for Farmer Mac to increase its liquidity investment portfolio near the new maturity dates, which helps reduce a drag on earnings. We also completed more than $28 million of new AgVantage fundings for smaller customers, including $16 million under the Farm Equity AgVantage product. We believe that the AgVantage funding products within our Institutional Credit line of business are strategically important for Farmer Mac and provide a good long-term growth driver for us, as more financial institutions recognize the competitive benefits of these wholesale funding solutions. Farmer Mac generally earns returns on book equity exceeding 20% on its AgVantage products, which are assets that have a very high level of credit protection. Farmer Mac's net effective spread for third quarter 2016 grew in both dollars and percentage terms compared to second quarter 2016. This was driven by a combination of factors, including improved LIBOR-based funding costs, growth in our business and other factors. Compared to third quarter 2015, net effective spread grew significantly in dollar terms and decreased modestly in percentage terms. We will describe those changes in more detail in a few minutes. Credit quality of our portfolio remains stable. As of September 30, 2016, $18.4 million, or 0.31% of our $6 billion Farm and Ranch portfolio, was 90 days delinquent, compared to $32.1 million, or 0.56%, at year end 2015. As we have mentioned previously, we expect that over time, Farmer Mac's 90-day delinquency rate will eventually revert closer to our historical average of approximately 1%, due to macroeconomic or other factors. On balance, we believe a reversion closer to our historical averages is healthy and that Farmer Mac's business can benefit through higher volumes and potentially wider spreads in such an environment. With that as background, I would like to turn to Dale Lynch, our Chief Financial Officer, to cover our financial results in more detail. Dale?

Thanks, Tim. As reflected in our third quarter 2016 results, Farmer Mac is executing well on the opportunities within its markets. To Tim's earlier point regarding Farmer Mac's relative value increasing in periods of tighter credit, our third quarter results continue a strong credit that began in the second half of 2015 and has continued throughout 2016. Fourth quarter 2015 and the first nine months of this year have definitely provided Farmer Mac increased opportunities to see new credit and wholesale funding business. We believe the outlook for us is positive, even as the agricultural economy continues to adjust to lower commodity prices and drought conditions in some parts of the West. It grew to a record outstanding business line by $17.2 billion as of September 30, 2016. As Tim mentioned, this growth was led by strong agricultural loan purchases within our Farm and Ranch and USDA guarantees lines of business. Spreads on new assets generally remain stable, and our funding costs on LIBOR-based assets have improved, due to changes in our funding strategy and some general improvements in the market. And as Tim mentioned earlier, our credit quality remains good. Turning to our financials, Farmer Mac's third quarter 2016 core earnings were $14.4 million, or $1.36 per diluted common share, compared to $13 million, or $1.23 per share, for second quarter 2016 and $13.2 million, or $1.17 per share, in the year-ago quarter. The $1.4 million increase compared to second quarter 2016 was primarily due to higher total revenues, which included a $0.8 million after-tax increase in net effective spread and a decrease in credit and operating expenses. Credit expenses declined relative to second quarter, resulting from net releases from the allowance for losses of $20,000 after tax in third quarter 2016 compared to net provisions of $0.3 million after tax in second quarter 2016. Operating expenses decreased sequentially by $0.3 million after tax; driven by lower G&A and competition and benefit expenses. The decrease in G&A expenses was driven by a decrease in legal and accounting fees and travel-related expenses. The decrease in compensation and benefits expenses was due to seasonally higher payroll taxes during second quarter 2016 related to the payouts of variable incentive compensation which did not reoccur during third quarter 2016. The $1.2 million increase in core earnings from the year ago quarter was driven primarily by increases in net effective spread of $1.2 million after tax and guarantee and commitment fee income of $0.1 million after tax. This increase was offset in part by an increase of $0.1 million after tax in credit-related expenses due to lower releases to the allowance for losses in third quarter 2016, as compared to third quarter 2015. Turning now to GAAP net income, third quarter 2016 net income attributable to common stockholders was $16.4 million, or $1.54 per diluted common share, compared to $8.4 million, or $0.70 per diluted common share, for the year ago quarter. The year-over-year increase was primarily due to the effects of unrealized fair value changes on financial derivatives and hedged assets, which was a $0.9 million after-tax gain in third quarter 2016 compared to a $4.5 million after-tax loss in third quarter 2015. Turning to spreads, Farmer Mac's net effective spread for third quarter 2016 was $32.2 million, or 86 basis points, compared to $31 million, or 84 basis points, in the second quarter 2016 and $30.4 million, or 88 basis points, in the year ago quarter. The $1.2 million of sequential increase in net effective spread in dollar terms is primarily due to several things. One, a continued improvement in third quarter 2016 of LIBOR-based funding costs for assets indexed to LIBOR, due to adjustments in Farmer Mac's funding strategies for these types of assets and to improvement in the LIBOR-based funding markets; two, growth in our average of outstanding business volumes; and three, a higher spread on a large AgVantage security that was refinanced during third quarter 2016. The two basis point sequential increase in the net effective spread in percentage terms was primarily due to the improvement in our LIBOR based funding cost and a higher spread on a large AgVantage security refinance. Each of these two factors contribute approximately 1 basis point to overall net effective spread for third quarter 2016. The $1.8 million year over year increase in net effective spread in dollar terms is primarily attributable to growth in average outstanding business volume and a higher spread on the large AgVantage bond refinance this quarter. The two basis point year over year decrease in net effective spread in percentage terms was due to a higher average balance maintained in our lower earning cash and investment securities portfolio in third quarter 2016 compared to third quarter 2015, which was done to increase Farmer Mac's liquidity position. This decrease was partially offset by the increase in spread on the large AgVantage security that we refinanced this quarter. Turning now to our four lines of business. Net effective spreads for third quarter 2016 and second quarter 2016 were as follows. $10.7 million, or 190 basis points, for Farm and Ranch, as compared to $9.9 million, or 178 basis points in second quarter. $5.2 million, or 107 basis points, for USDA guarantees, compared to $4.6 million, or 96 basis points. $2.6 million, or 105 basis points, for Rural Utilities, compared to $2.6 million, or 103 basis points. And lastly, $11.4 million, or 75 basis points, for Institutional Credit, compared to $11.4 million, or 77 basis points. From a credit perspective, portfolio quality remained stable during third quarter 2016, as sub standard assets, total allowances and 90 day delinquencies remained near their second quarter 2016 levels. Sub standard assets as a percent of the Farm and Ranch portfolio increased slightly, to 2.2% from 2.1% in second quarter. As of September 30, 2016, the total allowance for losses was $6.9 million, or 12 basis points of the $6 million Farm and Ranch portfolio, compared to $7.1 million, or 12 basis points of the Farm and Ranch portfolio as of June 30, 2016. As Tim mentioned, 90 day delinquencies in the Farm and Ranch portfolio were $18.4 million, or 31 basis points of the Farm and Ranch portfolio as of September 30, 2016, compared to $22.1 million, or 38 basis points as of June 30, 2016, and $36.7 million, or 67 basis points, in the year ago quarter. For Farmer Mac's other lines of business, there are currently no delinquent AgVantage securities or Rural Utilities loans held or underlying standby purchase commitments, and the USDA securities are backed by the full faith and credit of the United States. As a result, across all of Farmer Mac's four lines of business, the overall level of 90 day delinquencies, comprised entirely of Farm & Ranch loans, was just 0.11% of total volume as of September 30, 2016, down from 0.13% of total volume as of June 30, 2016 and 0.23% in the year ago quarter. In terms of business volume, we added more than $1.1 billion in new business this quarter. Looking at the specifics for the quarter, we added the following new business, $528 million of AgVantage securities purchases, $283 million of Farm & Ranch loan purchases, $156 million of Farm and Ranch standby purchase commitments, $87 million of USDA securities, $32 million of Farm Ag guaranteed USDA securities, and lastly, $20 million of Rural Utilities loan purchases. After repayments, our net outstanding business volume increased $131 million this quarter. Turning to capital, Farmer Mac's $588 million of core capital as of September 30, 2016 exceeded the statutory minimum capital requirement of $475 million by $113 million, or 24%. This compares to core capital of $564 million, or $102 million in capital above the minimum requirement, as of December 31, 2015. In terms of liquidity, Farmer Mac had 151 days of liquidity as of the end of third quarter, compared to the minimum regulatory requirement of 90 days. More complete information about Farmer Mac's performance for this quarter, for third quarter 2016 is set forth in our 10-Q which we filed with the SEC today. With that, Tim, I'll turn it back to you.

Thanks, Dale. New business volume continues at a nice pace, and it is driving growth across most of our lines of business and product offerings. Our financial performance continues to be strong, with improving overall spreads, prudent expense control, and our credit quality remains favorable. With the goal of fulfilling our mission to serve rural America, we are actively seeking to help bring new capital to agricultural and rural communities. We continue to sign up new banks for our loan purchase and credit protection products. We see new and continued interest from those in the industry for our wholesale funding products, including some with smaller sized customers, and we believe this provides attractive additional growth opportunities for us. At this time, we'd be happy to answer any questions you may have.

Thank you. [Operator Instructions] And the first question comes from Eric Hagen with KBW.

When you communicate with your customers, would you say they've started doing anything differently over the last year or so with respect to underwriting or provisioning that might make you consider changing anything you guys do, given the overall state of the ag economy right now?

We certainly are mindful of changes that have occurred over the course of the last year. What we have seen is people managing their businesses a little bit differently and looking to Farmer Mac as a solution. So there are a lot more conversations, you might say. I think many bankers, in particular, community bankers, are cautious as they see lines of credit coming due and people looking to restructure their balance sheets, farmers restructuring their balance sheets. So we haven't made any explicit changes to our underwriting guidelines. As far as provisioning, you mention that. We haven't seen any issues within our portfolio that have caused us to change our provisioning. That's not to say that other institutions haven't seen that. Again, typically the stress that farmers face usually shows up in operating loans and equipment loans before it shows up in real estate loans. And our portfolio is comprised of all real estate loans. So there probably is and I think we could say that there are institutions that a substantial portion of the lending is operating loans that are seeing stress and are adding provisions within their own balance sheets.

So just to be clear, the general tone has changed from some of your customers, but nothing has changed materially at Farmer Mac.

The general tone is one of caution, and certainly we are also expressing that tone, the idea that there is stress in the agricultural marketplace today. We recognize that. And as we put new business on our books, we are mindful of the fact that it is a different environment than it was one year ago or two years ago.

And then one more, if you don't mind; can you provide an update for us on the progress you're making on renewing the $1.5 billion in AgVantage that's maturing next year? And can you remind us how many individual loan that makes up in that bucket?

Well, it's not individual loans, its individual bonds. The customers that we have those maturing bonds with, we are in regular contact with. The $1 billion bond that's coming due, that is with MetLife. And as you saw last quarter, we refinanced a $500 million bond with them and we have ongoing conversations with all of those customers, with the intent of trying to refinance those. Certainly, gaining new business for our portfolio is always a challenge. And certainly, maintaining the business that we have is also a challenge. So we do focus on that very heavily progress.

I would just add that the bond we have with MetLife, $1 billion bond that Tim mentioned, we had two $500 million bonds with MetLife this year, one in January and one in July, that each were refinanced at 100%. So while we certainly don't give guidance on those things and things can change, certainly was encouraging to see 100% refinance with MetLife this year.

Right. Is there anything that would have to change in the interest rate environment that would possibly get them to look elsewhere to refinance that loan? In other words, what keeps you up at night with respect to the yield curve and how it might change in renewing that bucket of loans?

To us, it's not really the yield curve. The fact that we do maintain a cost of funds advantage versus non GSE borrowers allows us to provide in that consistent savings. In certain environments, like today's, where rates are lower, generically, and spreads are tighter, we do make a little bit less money on some of these deals. But we're certainly able to price through the market where Met can otherwise secure funding. And we generally will provide them a cost of savings advantage that can range from 25 basis points to 60 basis points or 70 basis points, depending on the maturity of the bond. And their treasury function finds those savings material. So I think that's a pretty consistent advantage that we can supply to customers like Met.

That's a helpful answer, and thank you very much. Appreciate it.

That's a good point. I just wanted to mention, too, the bond that is maturing next year is actually an off balance sheet security. So it's not on our balance sheet and we're effectively just earning a GV on it right now. We're not really earning spread. So if we do refinance that, it would come onto our balance sheet. We should earn something presumably significantly more than just the GV.

Significantly more. How much more?

Well, it'd be a typical AgVantage bond spread, which you'll get our balance sheet or our filings. I think our weighted average spread on our AgVantage bond business is roughly 77 basis points. With MetLife, the spreads will be a little bit less than that, given their high credit quality, they're a AA minus entity. So something less than that, but something more than 15, for sure.

Got you. Great. Thank you very much again. I appreciate it.

Thank you. And the next question comes from Brian Hollenden with Sidoti & Company.

Good morning, guys, and thanks for taking my call. Within net portfolio growth of $131 million and Farm and Ranch and USDA securities net growth of about $210 million, which segments experienced a net contraction and why?

I think our Rural Utilities loan line, product line is experiencing modest declines as the loans gradually amortize down. Our loan purchases within the utilities line of business has been slow. And I think that's a factor of the dynamics within that market. Loan portfolio growth for Rural Utilities lenders is not growing at a very rapid rate. In fact, it has been declining for a number of years. But I think the general environment this year is sort of low, low single digit growth. So just not a lot of growth there. And our lending partner, which is CFC, National Rural Utilities Cooperative Finance Corporation, they're tending to retain more of the loans on their own balance sheet. So we're getting to see less opportunities with that. Having said that, where we are seeing new business within the utilities sector is really on the Institutional Credit side. We're providing wholesale funding to CFC and they're using that to their advantage as a better, lower cost source of funding. So while that loan portfolio may not be growing in the current period and hasn't really been growing for a couple of years now, we are seeing good growth in the AgVantage bond business with our utilities partner.

And with the sequential 2 basis point increase in net effect spread, can we conclude that spreads have bottomed, or are the current spreads higher due to a mix shift in the quarter?

I don't know whether they've bottomed, I can't say that. And again, I don't want to give any forward-looking statements on that item. But if you look at the history of where we've been over the last five years, spreads have ground tighter and tighter and tighter on the pricing side and that kind of, I think, bottomed out somewhere between 2013 and 2014 and you've seen pricing pretty much stable since then. But the furthest spread compression was driven around some funding costs that we experienced. Now we've adjusted to that funding cost dynamic and you've seen some improvements in spread driven by that adjustment in our strategy. But again, on the asset side, we haven't seen significant changes in prices one way or the other for some period of time. For the very best credits, you are seeing pretty competitive pricing on our loan purchase business, but generically I don't think you're seeing wholesale changes in pricing one way or the other. So I think the improvement that you've seen has to do more with our funding than it has to do with asset pricing.

And then just one last question, if I may; with 90-day delinquencies at 31 basis points of the Farm and Ranch portfolio compared to 67 basis points year-over-year, when can we expect a reversion of the mean toward that 1% and what's been holding the delinquencies at this historically low levels recently?

We've been expecting that reversion for some time now. And we continue to expect that over the course of the next year. I think the fact that agriculture has done very well for the past decade, leading up to this recent downturn, has positioned many borrowers in a position that they're able to weather the storm that they're currently in. I think as we talk to lenders around the country, we see a common theme of the upcoming year, which would be year two of low commodity prices and stress, is when people will start to feel it. A lot of people in the industry are talking about cash flow, liquidity, the ability to have additional land that could be used to tap equity in order to meet demands, current demands. Again, we've been expecting delinquencies to tick up over the course of the past year or so. It hasn't occurred. We continue to expect that to happen. And certainly when it does, we will detail whether it's part of a broader trend that we see or individual loans, what the make-up is. So we're certainly monitoring our credit quality on a regular basis, and again, do expect some deterioration in the future, but nothing outside of the expectations of what we think we've priced into our products and what we think has been prudently accepted in terms of credit risk.

And I would just add, the seasonality to that effect, a significant portion of our loan assets have payment dates in January and July; so if there is going to be a change in our delinquency data, you'll typically see those things emerge in Q1 or Q3 of a given year.

[Operator Instructions] And our next question comes from Jesus Bueno with Compass Point.

Very quickly back to the allowance. Currently, when you look at your allowance relative to the Farm and Ranch loan portfolio, it's been fairly stable over the past several quarters. What exactly would trigger you to look at increasing that relative to the loan portfolio? Is it more seeing actual charge offs come through, or would an increase in delinquencies be your tell to go ahead and start adding there?

Well, an increase in delinquencies would certainly cause that. We also, prior to delinquencies, we evaluate loan quality. And you can look in our disclosures where we talk about sub standard assets and others. So an increase in sub standard assets, which would come from either our customers or our servicers or ourselves looking at the loan portfolio and deciding that certain loans have deteriorated for one reason or another, which may happen prior to delinquencies, that would cause an increase in the allowance that we would set aside. So if you think about it in terms of the cadence, first you see an increase or a decrease in quality in terms of sub standard assets. Then you would see delinquencies, then you would see charge offs. All of those items would affect the allowance, as well as our ongoing general judgmental look into the portfolio, as we feel, if we see deterioration in credit quality, even if it doesn't come forth in those statistics, we could then also judgmentally add to the allowance, at that point.

Got it. Thank you. And just as it relates to net effective spread, as we're thinking and modeling going forward, we've seen today a steepening of the yield curve. But if you could just talk about how that impacts. And I know you try and stay neutral relative to rates, but how would that impact net effective spread? And if we were to see a rate increase in December, if there were to be any impact there, what we should expect?

I'll take the first part first. Generically, I think a higher rate environment, all else being equal, will generally create wider spreads in that kind of environment, on one hand. On the other hand, a 25 basis point increase in December is probably unlikely to be material enough to drive that. You really need to see an increase in the yield of the 10 year Treasury to make a meaningful difference in spreads for us as a commercial lender in agriculture. So partially 25 basis point increase here, I think, are unlikely to have any kind of material impact on our spreads. As far as the technical's around a potential rate hike, we plan for that in our funding strategy. So we tend to try and pre fund ahead of Fed announcement dates so we're not in the market on those dates so we can avoid and kind of disruption. So you can expect us to be doing that here throughout November, to get our funding's done ahead of the December Fed announcement date. And that's our normal course operations.

Got it. Appreciate the color. And just moving back to the provision, I just want to make sure I had these numbers right. If we do assume a normalized provision over time, obviously yours has been running low, but is the $3 million to $5 million range for provision, is that still the right way to think about where your provisions should be, if we're seeing 1% delinquencies?

Do you mean per year, Jesus?

Yes, on an annual basis.

We have not seen net provisions of that magnitude in a long time. I'm not sure how many years. But if you look at, if you model the growth in the portfolio, if you're saying, well, it should be X, driven by the growth in the portfolio, a provision of a couple hundred thousand to several hundred thousand on a net basis, all else being equal, on a quarter like we just had, might be attributable to growth. Overall credit quality rose, as Tim mentioned. If we see that manifest in 2017, you could see an additional increase. But a $3 million to $5 million net expense is not something that we've seen for a long period of time.

And then going back several years, one of the common things we would tell investors back then was that if you see us add to the provision $0.5 million or even $1 million over the course of a quarter or two, we will be commenting on it and letting you know what's driving those changes. And it won't be a surprise if we see delinquencies tick up to 1%, you are going to see some provisions as a result of that, just because of the way the math of the calculation for the allowance for losses works. But certainly as we, if we do see delinquencies march up to that 1% and we do therefore put away additional dollars into the allowance for losses, that is to be expected. And again, we will be letting you know our interpretation of that and what we see. And if we have any visibility further into the future, we'll also let you know about that, as well.

And I could ask one more, just on capital planning. You've had your dividend here for about a year, and obviously, your earnings profile has improved. As we think about over time where you could get to in terms of a payout ratio relative to your operating earnings, is there a targeted level that you have in mind? What kind of thinking do you have behind long-term for the dividend?

We typically would announce our dividend increase effective with our release in March of our 10-K, and that would be effective beginning for the first quarter of 2017. What we signaled last year was an adjustment in our payout, in our dividend strategy to increase the payout ratio to become more in line with some of our financial peers, banks, for example. If you look at the S&P bank indices, payout ratios for banks that might be similar size to Farmer Mac could be in the 30% to 40% range. So I think we signaled our intention to get to approximately a 30% payout ratio over time. I think we're currently at about a 20% in payout ratio, rough numbers, and that was up from about a 15% payout ratio. So the increase in the dividend that we announced effective for 2016 added about 500 basis points to our payout ratio. So you can look at that and say, well, if they made similar moves in the coming year or two, to 5% a year, just as a proxy, that would get you to 30% payout ratio. And then the plan would be to keep it approximately at those levels. Modest change in earnings up or down shouldn't affect the dividend level in terms of it coming down. It should be a very sustainable, maintainable dividend payout ratio at that level.

Thank you. And as there are no more questions at the present time, I would like to return the call to Tim Buzby for any closing comments.

Thank you. And I'd like to thank everyone for listening and participating this morning. We look forward to our next call to report our fourth quarter and full year 2016 results in March. Thank you.

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