First Commonwealth Financial Corporation (FCF) Q4 2016 Earnings Report, Transcript and Summary

Good day and welcome to the First Commonwealth Financial Corporation Fourth Quarter 2016 Earnings Release Conference Call and Webcast. [Operator Instructions] Please also note that this event is being recorded. I would now like to turn the conference over to Mr. Ryan Thomas, Vice President of Finance and Investor Relations. Please go ahead.

Thank you, Andrea. As a reminder, a copy of today's earnings release can be accessed by logging onto fcbanking.com and selecting the Investor Relations link at the top of the page. We have also included a slide presentation on our Investor Relations page with supplemental financial information that may be referenced throughout today's call. With me in the room today are Mike Price, President and CEO of First Commonwealth Financial Corporation; and Jim Reske, Executive Vice President and Chief Financial Officer. After brief comments from management, we will open the phone call to your questions. For that portion of the call, we will be joined by Brian Karrip, our Chief Credit Officer, and Mark Lopushansky, our Chief Treasury Officer. Before we begin, I would like to caution listeners that this conference call will contain forward-looking statements about First Commonwealth, its businesses, strategies and prospects. Please refer to our forward-looking statement disclaimer on Page 2 of the slide presentation for a description of risks and uncertainties that could cause actual results to differ materially from those reflected in the forward-looking statements. And now, I would like to turn the call over to Mike Price.

Thanks, Ryan. Good afternoon and welcome to our call today. Net income of $59.6 million in 2016 is a new high watermark for First Commonwealth. Our GAAP or unadjusted earnings per share in the fourth quarter and for the full year of 2016 were $0.20 and $0.67, respectively. Adjusting for $2.8 million of one-time merger costs due to the acquisition of 13 FirstMerit branches in early December, our fourth quarter core earnings per share increases to $0.22, in turn driving a 1.18% ROA and a 61.7%% efficiency ratio. The core earnings for the year are $0.69, which translates to a 93 basis point ROA and a 58.7% efficiency ratio for the full year. These same quarterly and year-end financial performance figures represent consistent improvement over the last several years. Consequently, we announced this morning a 14% increase to our quarterly dividend to $0.08 per share. As you look at the fourth quarter, I would draw your attention to just a few unusual items which impacted performance. Provision expense of negative $1.8 million represents a release of reserves stemming largely from some $5.1 million in partial recoveries on previously charged off loans. A portion of this recovery was from a second-quarter credit this past summer. Another portion was from a real estate related credit roughly one year ago. And the last portion of this recovery was from a credit, which had been charged off roughly two-and-a-half years ago. This was a nice credit tailwind for the quarter. Secondly, non-interest expense rose from $38.7 million in the third quarter to $45.7 million. Besides the aforementioned one-time merger expense of $2.8 million, employee expenses rose in part due to some increased incentive accruals in the fourth quarter. Additionally, the typical seasonal increases in hospitalization expense and the addition of FirstMerit employees increased non-interest expense in the fourth quarter, as well. Net interest income buoyed some $2 million to $52.5 million, as deposit interest expense remained well controlled and interest income rose due to a Federal Reserve interest rate increase and subsequent higher spreads on LIBOR and prime rate loans. Also, we had an adjustment in the quarterly swap valuations, which added $1.3 million to a non-interest income figure of $17.7 million. And this excluded net security gains for the quarter. Reflecting on the full year, where our GAAP earnings per share grew some 20% to $0.67, and net income increased $9.4 million or 19% to $59.6 million, I would offer the following. We had a more robust margin for the year coupled with strong commercial loan growth. This helped our net interest income increase some 6% to over $202 million. Provision expense was up $3.5 million in 2016 to $18.5 million, primarily due to a handful of credits that had deteriorated in the first half of the year. We also saw better mortgage fee income, deposit service charges and interchange income, which aided a $2.5 million increase in non-interest income to $64 million, and that excluded net security gains. Non-interest expenses fell significantly for the year as retail banking restructure created some $6 million plus of savings on a pretty healthy expense base. This savings enabled investment elsewhere, including continued expansion of mortgage and corporate banking. Commercial loan growth of 8.8% set the pace for First Commonwealth in 2016, as well as strong year-over-year growth in mortgage loan originations. Both of these overcame contraction in our indirect auto portfolio and our branch-based portfolio. All in all, our loans grew 4.2% year-over-year. For fund loans, total deposits increased $752 million to $4.9 billion by the end of 2016. Roughly $600 million of this increase stemmed from the December acquisition of 13 FirstMerit branches in northeast Ohio. More aggressive deposit gathering, coupled with the timely purchase of the FirstMerit branches, helped reduce our loan to deposit ratio to 98.8%, and lowered our short-term borrowings to $868 million or under $1 billion for the first time since the second quarter of 2014. Some other noteworthy 2016 items and perspectives that might be helpful to investors include, we entered into two deals in 2016 to include Delaware County Bank and the Columbus MSA, as well as the FirstMerit branches. In fact, the legal close and FirstMerit branch conversion occurred only four months after the deal was announced. Our Ohio franchise will have quickly matured, really from an outpost to a $1 billion plus depository bank in 2017. We have received regulatory approval for Delaware County Bank and are on track to close and convert in the second quarter. Also, the number of digital solutions and channels continues to expand rapidly and appropriately. In 2016, First Commonwealth launched online lending to complement online deposit account opening. We also enhanced our mobile and online platforms, we added a credit card product, we launched online chat, and added two more virtual wallets. Also, our asset sensitivity, coupled with the acquisition of two rich depositories, should serve us very well in a rising interest rate environment. I would also add that the transition from Bob Emmerich to Brian Karrip as Chief Credit Officer went smoothly in the fourth quarter, as Bob officially retired at the end of the fourth quarter. We also added Jeff Rosen to the team in December in a newly created position as EVP of Consumer and Small Business Lending. He will be based in Columbus and is charged with profitably growing our consumer and small business lending businesses, while jump-starting our alternative lending platforms. He's also charged with developing a de novo SBA capability. Along with our accomplishments, we have a list of challenges as we enter 2017. They include continue to grow our corporate banking business with the right risk/return profile, and this is after a very solid year; move from defense to offense in retail banking and grow households, deposits and loans; third, ensure acquisitions achieve financial targets and our Ohio households grow nicely; and, lastly and importantly, really maintaining cost discipline given the plethora of initiatives and acquisitions here at our Bank right now. We're genuinely excited about tackling these challenges to ensure our company continues to grow, prosper and we take care of our great customers. With that I'll turn it over to Jim.

Thanks Mike. Mike has already provided you with an overview of our financials, but there are a few items in particular that are worth highlighting that may help you understand our financial performance for the quarter and for the year. Our fourth quarter financial performance built upon the success of the third quarter and allowed us to end the year on a strong note. GAAP unadjusted earnings per share and return on average assets came in at $0.20 and 1.07%, respectively. Beginning with this quarter, we will report non-GAAP core income numbers, including earnings per share, return on assets, and return on equity, to adjust for one-time merger expense in addition to the core efficiency ratio that we began reporting earlier this year. We feel that this disclosure will be helpful to our investors. And, of course, a full reconciliation to the GAAP numbers will be maintained in our Earnings Release financials. Core fourth quarter EPS and ROA were $0.22 and 1.18%, respectively. Our return on tangible common equity was 12.46% on a GAAP basis and 13.73% on a core basis. Fourth quarter results included negative provision expense of $1.8 million, driven in part by $5.1 million in recoveries of previously charged-off loans. These recoveries more than offset all of the provision expense. Were it not for the recoveries, provision expense would have been $3.3 million, in line with last quarter's $3.4 million. Total provision expense for the year was $18.5 million. Credit metrics generally improved in the fourth quarter. Nonperforming loans as a percentage of total loans decreased from 1.13% last quarter to 86 basis points this quarter. And, despite the release in reserves, the ratio of total reserves to non-performing loans improved from 99.8% last quarter to 120% as of December 31. Spread income, as Mike mentioned, was up $2 million from last quarter, and the net interest margin was up 15 basis points to 3.44%. Due to the increasingly commercial nature of our balance sheet, roughly 62% of the Bank's portfolio re-priced as a result of the December Fed rate hike. We also closed the acquisition of the FirstMerit branches in December, which allowed us to pay down short-term borrowings that otherwise would have gone up by 25 basis points when rates went up. The yield on interest-earning assets increased by 12 basis points, and funding costs declined by 3 basis points during the quarter. As a result of all of this, the net interest margin was up 15 basis points over last quarter to 3.44%. Approximately 4 basis points of the NIM this quarter was due to the payoff of several assets that had previously been on non-accrual status. We anticipate a net interest margin in the range of 3.35% to 3.45% until rates rise again. Fee income included securities gains of $589,000 in the fourth quarter from the resolution of one of our pooled trust preferred security investments. Some of you who have followed our company for some time may recall that prior to the financial crisis the company had made a number of investments in pooled trust deferred securities issues by other banks. Like many banks that invested in these pools, we wrote these investments down severely as their value fell during the financial crisis. We received notice that this particular pool is being liquidated and we expect to receive the proceeds late in the first quarter. This amount of $589,000 is an accrual based on our estimate of the proceeds and will be trued up when the funds are received. This liquidation also allowed us to recognize approximately $250,000 of previously accrued interests, which added approximately 2 basis points to the net interest margin in the fourth quarter, out of the 4 basis points that I mentioned earlier. Fee income also benefit from approximately $200,000 of additional interchange income on debit cards due to our new FirstMerit customers. Mortgage gain on sale income was flat from last quarter, but at $4.1 million for the year was up $1.6 million over last year. Mortgage originations totaled $219 million in 2016. Noninterest income benefited from a positive mark-to-market on our swaps of $1.3 million. As we've discussed in quarters past, we have evaluation allowance against our back-to-back swap portfolio in case the customer defaults on the underlying loan. We have to add to this allowance as rates fall, resulting in a mark-to-market expense. And we can lower this allowance as rates rise, resulting in a positive mark-to-market gain. Looking back over 2016 and the first half of the year, we expensed approximately $1.5 million as rates fell. And in the second half of the year we released approximately $1.8 million back into pretax income as rates went up. The entire valuation allowance is now only approximately $350,000. So, if we enter a stable or steadily rising rate environment, we would expect to see less volatility from this item going forward. Non-interest expense included merger expense of $2.8 million in the fourth quarter. Not including merger expense, noninterest expense was up by $4.2 million over last quarter. This was mostly driven by $3 million of increased incentive expense, but some of this was just driven by the effect of the run-up in our stock price in the fourth quarter on accruals for long-term equity incentive plans. The other portion was driven by the productivity of our lending and other teams and our improved financial performance. As a result of increased fourth quarter expense, the core efficiency ratio was 61.7% for the fourth quarter, but as 58.71% for the full year 2016 is still under our 60% target for the full year. We would reiterate our previous guidance that while our goal and expectation is that efficiency will remain under 60% over time, in any given quarter it may fluctuate above 60% slightly, especially as we integrate our recent acquisitions. In other news our effective tax rate was 31.10% in the fourth quarter and 30.08% for the year. As a final note, please keep in mind that we expect to recognize merger-related expense of approximately $10.8 million in the second quarter 2017 as we close the acquisition of DCB at that time. And with that, we will take any questions you may have. Operator, questions.

[Operator Instructions] Our first question comes from Bob Ramsey of FBR. Please go ahead.

Hey, good afternoon, guys.

Hey Bob.

Hey Bob.

Hi. So, for my first question, I think on securities you all didn't reinvest much this quarter. Rates have moved higher. I'm just curious how you're thinking about plans to either buy back or buy more, or not.

Yes, sure, great question. We actually did. You may not have seen the net numbers for the quarter, but immediately following the election there was some movement in prices and we saw some opportunity in the market and we put some funds to work, and we'll continue to do that. Prior to that, I would say earlier in the year, we did not see a great deal of opportunity. In that environment, the effect was such that you had to extend durations so far out to get an acceptable yield that we were hesitant to invest the money. But that dynamic's changed a little bit. I could just tell you our general philosophy in the investment portfolio, we expect to keep it about where it is now at the level it is. Obviously, we're going to be a little opportunistic as we look at rates and make sure we make smart buying decisions. But we like to keep the level of the portfolio about where it is. And while the rest of the balance sheet grows around it, hopefully that gets us in a position of a less leveraged balance sheet over time. By doing that, that should improve the net interest margin as we go forward.

Okay, great. That's helpful. And then if I think at a high level about your margin guidance for the year, is it fair that you guys are saying, back out the accruals that happened this quarter because it's not recurring, and then from there you'll be plus or minus 5 basis points?

Yes, that's exactly it, Bob. I think stepping back, in a big picture sense, there's probably, given the rate environment, where we are now, there may be more upside to that than there is down side. But we also see this normal variability from quarter to quarter so we do want to give a range around the 3.4% number that you just mentioned.

Bob, this is Mike. The other thing I would just add is, in the fourth quarter we really saw the replacement of volume rate for new loans, whether it was on commercial, small business, or consumer at a little higher rate than the loans running off. So, that created some positive momentum, as well.

Okay, great. And then to the extent we do get another rate increase, with the next rate increase how does that impact the outlook for whatever period of time follows that rate increase?

We do look at that and we try to model that out as carefully as we can. And we think about in our ALCO process, like most banks, we look at parallel shifts, 100, 200 basis points, 300 points, and so forth. Also on a more granular level, try to say with just one 25 basis point rise in rate, what's the net effect to the Bank. And I think what we think is, we probably see an immediate effect of about 2 basis points in the NIM for a 25 basis point hike. But you have to keep in mind that's the immediate impact and the way our Bank operates, generally the effect of that is greater in the second year than it is in the first year, because you see the effect on the rising yields on the asset side and then, of course, the deposit to liabilities do not rise in keeping with that and you get more of the benefit as time goes on. And generally that means that our activity is greater in year two than it is in year one. That's been pretty consistent almost all of our modeling outlook on rates for a while now. Hopefully that answers your question.

Okay. That's helpful. And then maybe last question and I'll hop out, it looks like you had nice commercial real estate loan growth this quarter. I'm just curious what you're seeing in the market from a competitive dynamic. Have you seen others step back? Are you seeing shifts in demand? Is it a reflection of just some of the new geography you're in? Or what were the factors driving that?

I think it's both new geography and I think our team there does a nice job of targeting, really, some of the best developers in three or four metropolitan markets, and really doing high-quality grocery store, major tenant anchored projects that we're very comfortable with from a credit standpoint. And there's a little bit of pressure on pricing and also on structure. But we tend to back off from those deals. So, I think we're maintaining our credit discipline, but I also think we have a nice flow of deals from some of the top echelon of developers in the tri-state area.

Great. Thank you very much for taking the questions.

Thanks Bob.

Thanks Bob.

Our next question comes from John Moran of Macquarie. Please go ahead.

Hi guys.

Hey John.

Hey John.

Just a quick question circling back on the margin, the 4 basis points in recoveries, that's inclusive of the 2 that you guys brought back on the TruPs or is that 4 plus 2 for 6 total.

The 2 is part of the 4.

Okay. Got it. So, 4 and half of that out of TruPs. The borrowings that you guys paid down when you closed the branches in early December, did that happen pretty much instantaneous or is there some additional lag? In other words, the benefit of that was in for one full month of the quarter or did it come in later?

No, same day. Funds came in one wire in the morning and the other for funds to pay down the borrowings went out in the afternoon the same day.

Got you. As we think about 1Q set up, just putting a finer point on Bob's question, we got to take out the accruals, but then account for some additional tailwind here on that piece of it, correct?

That's right. All the borrowers are paid down right away. So, we thankfully - the borrowers were paid down maybe a week or two weeks in front of the Fed's rate rise. The Fed raised rates on the remaining borrowings. Those all went up and voided the rate increase on the borrowings we paid down. We got that benefit almost instantaneously. But that was in December. That was just for one month. So, you're going to see some effect continue in the first quarter.

Okay. Understood. Switching gears over to DCB, just timing. You guys say 2Q regulatory approvals in hand. Is it safe to assume that's day one of Q2 or pretty darn close to?

Yes. Really the legal close will happen in early April and then looking to convert the following months.

Okay. Perfect. And then just if I could get a little more - I think you guys gave some pretty good color in terms of where the growth came out of, 8% plus, I think, out of commercial, and then obviously de-emphasizing some of the consumer stuff. Looking forward into 2017, if you could provide a little bit of color in terms of pipeline, growth prospects, and then I think, Mike, you said that the replacement rates now are coming on above what's running off. So, if you see that continuing in terms of pricing competition.

Just a couple things. As we look to the future, we had nice pipelines in the commercial bank. In the commercial bank, particularly commercial real estate was really the engine. We're also trying to refine our pricing model as it relates to indirect auto. We let that run off simply because of the yields when they had fallen. And that ran off about $61 million last year. We're going to add another engine or two. We'd like to have SBA lending up and running. We get a nice franchise with DCB. We're going to build on that. And hopefully that provides some fee income and some outstandings and really augments our commercial and small business portfolio next year. And then, really, after retail restructure, which really was a lot of energy this past year, really looking to get some new momentum in traditional categories like HELOC, Q loan [ph], and having some nice promotions, and hopefully they'll be firing out of the gate here in the first quarter in 2017. We've grown the last year about 4, 5, 4%. We're hoping to do a little better than that. We've been pretty disciplined with margin and credit. And I think this could portend well, particularly with our expansion in Ohio. Those are new markets for us. And that's really where we're seeing some nice growth.

Just to follow up, you asked about replacement yields. We’ve talked about this over the past couple quarters where we've seen sometimes replacement yields overall will be up in a quarter and then down the next quarter. But in the fourth quarter they were pretty much up across the board. So, as long as the rate environment stays stable or even rises a little bit from here, we might just continue to see those positive replacement yields in the different portfolios.

Got it. Thanks very much for taking my questions.

Our next question comes from Matt Schultheis of Boenning. Please go ahead.

Good afternoon.

Hi Matt.

Hi. So, really quickly, if I look at third quarter to fourth quarter loan growth and I back out the $110 million or so that you purchased, came with the FirstMerit branch deal, it looks to me like you actually had loan runoff in the quarter, and was wondering if you can provide any color on what that was.

We did. And it was really some larger payoffs in our C&I book and also with our construction, which had really provided some nice growth the prior 18 months, really peaked and began to fall ever so slightly. Some of the payoffs we think were one-time items and a bit unusual. So, I think we can resume our growth trajectory into 2017.

Okay. Thank you for the color.

You bet.

Our next question comes from Collyn Gilbert of KBW. Please go ahead.

Thanks. Good afternoon, guys. I apologize, I missed the beginning part of the call, but just wanted to go to the expense and fee discussion for a minute, Jim. The trajectory for where you think expenses and fees could go post the FirstMerit branch closings, can you just give the color around that? And, specifically, I did hear you say about the efficiency longer term under 60%, maybe fluctuate quarter to quarter. Maybe more specifically, do you think we can get it back down below 60% in the first quarter after what was put up this quarter?

I appreciate the question, Collyn. I'll try to stick to maybe longer-term guidance because it's harder to predict it exactly quarter to quarter. It's a little wild given the guidance in the exact way I was doing it because as we work to integrate these acquisitions, there can be that quarter-to-quarter fluctuation and variability. So, it's hard to promise a sub-60% ratio in the first quarter in any given quarter. I do think what we're trying to do - and you know, Collyn, from covering us for a while, we kept talking about a fixed dollar amount of expenses as a goal. I think that really served the company well for a couple years as we really drove expenses out of the company, became much more efficient. But with the new expenses that we've taken on with the 13 branches in Ohio and with the expenses we'll take out through the acquisition in Ohio, I think we're going to move away from talking about a hard dollar figure of expenses and really think about it in terms of the efficiency ratio. That's really why we're trying to set up the guidance the way we are to target a sub-60% ratio. To answer your question more directly, longer term I really do think we can keep the ratio under 60%. The revenue that we should be able to pick up from these companies and the growth prospects we see in Ohio are going to give us the revenue that's going to offset the expense and keep us running as an efficient company.

Okay. And then on mortgage banking, did you offer color either financially or strategically on where you saw that line going or that business going?

Yes, we had a nice year. We almost doubled our production. We like the mix. We kept a little bit more on the balance sheet, probably 39%, 40%, than we had talked about previously. So, we had a little lower gain on sale, probably a little bit more on the portfolio. The business continues to grow. We like the mix that's coming from Ohio. I think we're getting now about 28% to 30% from Ohio with really some pretty good, robust newer construction. We're getting about twice the average mortgage size in Ohio that we are in Pennsylvania. We're doing a lot of terrific units in Pennsylvania. It just has been really strong for us in terms of new households, new credit-worthy households, cross-sell. It's been a nice business for us and it will really be a cornerstone for us for the retail bank. But we also expect it to continue to grow nicely into 2017, as well.

Okay. That's helpful. And then just qualitatively, Jim, on the provision - and obviously you had a lot of great credit trends and resolutions this quarter - does it change the way you're thinking about maybe the provisioning in the overall reserve going forward?

Not particularly. I do think it does speak to one thing. I think to really understand our company and our financials, it's good to look at us over longer stretches of time than any one quarters. The second quarter we had a large provision expense. Then, of course, you have the pullback this quarter. So, it's really helpful to look at it over a number of quarters. I think the full provision expense for the year was 18.5. That works out to about $4.6 million a quarter. Of course it didn't play out methodically that way, but that would be the average for the year. And Mike and I actually were just looking at this. If you look over longer periods of time it's anywhere from 2.9 to 4.1, but then if you look back two or three years. Mike?

Collyn, if you look back the last two years, it's 4.1 and four years it's 3.9. Of course, we're growing the franchise. But we really also expect our costs, not in whole dollars, but in charge-off and provision expense for the total portfolio, we're hopeful that will continue to converge to our peers, and that creates a good opportunity for us to grow our earnings. And that will really play out over the course of the next two or so years. The first half of the year, to your point, we had $17 million of credit costs and second half it was $1.5 million. So, quite a difference.

Okay. That's helpful. And then, just finally, Jim, what should we be using for a tax rate for next year? And if you said it already I apologize.

I just gave you the guidance. What we always do is give the quarter and then the past year. So, the effective tax rate for the fourth quarter was 31.10% and for the year 30.08%. If you look at the full-year figure, that's probably a good way to look at the year going forward.

Okay. That's great. I'll leave it there. Thank you guys.

Thank you.

[Operator Instructions] Our next question comes from Daniel Cardenas of Raymond James. Please go ahead.

Good afternoon, guys. Just a quick question on deposit runoff from the branch acquisitions, what did you guys see this quarter and was it in line, better or worse than expectations?

Are you speaking specifically to FirstMerit?

Yes, sir.

Or just in general?

FirstMerit and then if you want to comment about general runoff.

At the announcement of the deal there was $740 million in deposits. We projected about a 10% runoff. There was more than that. I think we ended up with about $595 million. And we'll work to grow that here in the ensuing quarters. We only paid for what was transferred over. That's the good news. We also had about $100 million of loans transport over. But it's a nice franchise for us, good activity and really a strong core. I think also a little bit of a dip could be seasonal as it relates to Thanksgiving and Christmas. That typically is a seasonal blip for consumers and businesses.

If I could just add to that a little bit, I think that when we priced it we did set that expectation. And we announced that we would have 10% runoff prior to close. We had been looking at some other recent transactions and they've run off, I think at the moment of close, it was about 16%. So, it was a little higher than that and a little more than that by year-end. But the other part of that was that when we looked at the transaction and when we priced the transaction, we had done that assuming a lower-for-longer interest rate environment. We, fortunately, got an interest rate rise within a few weeks we closed the transaction. I think in the initial projections we were thinking we would have at that time one rate rise per year and the first rate rise wouldn't come until sometime in the middle of 2017. So, that's all of which is to say that we got slightly less deposits than we thought, but, of course, we really only pay for the deposits that we received. And the deposits that we did receive are far more valuable than we thought they would be.

Perfect. And then just one last quick question here, with the branch acquisition behind you, DCB in the pipeline to close here in the next 90 days, do you have an appetite for additional M&A? And if so, maybe some color as to where you would look to go geographically.

We look at opportunities all the time. And I think over the last 18 months we've had the opportunity to do three relatively small acquisitions, which are our cup of tea at this point. They're very manageable, they add nicely, they have good brands. I think that if we told you we probably looked at 20-plus deals to do the 3. I think it will be a little episodic and they'll have to be right for us both financially and strategically. We certainly like Pennsylvania and Ohio, both in our footprint here in PA and also in Ohio, and to build upon the $1 billion bank we have in Ohio. But we also have very attractive targets here in western Pennsylvania, as well. So, we'll just see how that plays out.

Okay, great. Thanks, guys.

Thank you.

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

Just as always, we appreciate your sincere interest in our company. We enjoy meeting with you and look forward to a great 2017. Thank you for your interest.

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