First Financial Bancorp. (FFBC) Q4 2014 Earnings Report, Transcript and Summary

Good morning. And welcome to the First Financial Bancorp Fourth Quarter Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mr. Eric Stables. Please go ahead, sir.

Thank you, Dan. Good morning, everyone. And thank you for joining us on today’s conference call to discuss First Financial Bancorp’s fourth quarter and full year 2014 financial results. Discussing our operating and financial results today will be Claude Davis, Chief Executive Officer; Tony Stollings, Chief Operating Officer; and John Gavigan, Chief Financial Officer. Before we get started, I would like to mention that both the press release we issued yesterday, announcing our financial results for the quarter and the accompanying supplemental presentation are available on our website at www.bankatfirst.com under the Investor Relations section. Additionally, please refer to the forward-looking statement disclosure contained in the fourth quarter 2014 earnings release, as well as our SEC filings for a full discussion of the company’s risk factors. The information we will provide today is accurate as of December 31, 2014, and we will not be updating any forward-looking statements to reflect facts or circumstances after this call. I will now turn the call over to Claude Davis.

Great. Thanks, Eric, and thanks for those joining the call today. Tony and John will be discussing the fourth quarter and full year results. But before they do, I would like to take the opportunity to acknowledge our great collection of associates, without their outstanding individual and collective efforts our success would not be possible. As an industry we’ve all experienced the challenges of a prolonged, low interest rate environment and as a company, we have faced additional headwinds related to the continued runoff of the high-yielding loan portfolios that we’ve acquired in the 2009 FDIC-assisted deals. The extra effort that our associates make everyday has helped create the success that we have the opportunity to discuss with you today. Fourth quarter was an exciting period for us, as we recognized the full impact of the three acquisitions in the Columbus, Ohio market. The data conversion, the re-branding efforts for the three acquisitions are all now complete. All significant costs associated with the acquisition have been recognized and essentially all of the efficiency-related opportunities identified during the integration have been implemented. Loan and deposit growth remains in line with our expectation and the First Financial brand continues to gain recognition across the Central Ohio region. We continue to see good opportunities to grow our balance sheet organically with competitively priced, high-quality loans and longer duration low cost deposits through our relationship-oriented product structure. However, the recent flattening of the yield curve is concerning and depending on this duration could have an impact on the Bank’s margin. The loan pipeline remained strong as we enter 2015. The origination yields are stable and the impact from the formerly covered loan portfolio will continue to be less of an obstacle as it becomes a much smaller percentage of our total earning assets. Likewise, we also recognized the environment for growth through acquisition is also improving, with several deals announced recently. Although, we will not comment specifically or speculatively on this topic, our strong capital position will support significant organic growth and consideration of additional acquisition opportunities should they develop and even more importantly meet our strategic objectives. Before I turn the call over to Tony, I am pleased to report that in conjunction with the earnings release yesterday, we announced our quarterly dividend of $0.16 per share to be paid April 1st. This translates into a 3.8% yield based on yesterday's closing price and remains on the upper end when compared to our peer banks. With that, I will now turn it over to Tony for further discussion of our operating performance.

Thank you, Claude. For the quarter, we reported net income of $18.6 million or $0.30 per diluted share, compared to $0.26 in the prior quarter. Our results for the quarter were impacted by acquisition-related expenses and other non-operating items, which reduced reported earnings per share by approximately $0.02. On an adjusted basis return on assets was 1.07% and return on tangible common equity was 12.24%. For the full year 2014, we reported net income of $65 million or $1.09 per diluted share, compared to $0.83 for the full year 2013. On an operating basis our full year 2014 earnings per share were $1.18. Average loan balances increased $358 million or approximately 8% over the prior quarter, due primarily to the first quarter impact of the acquisitions and strong originations during the third quarter. Period end loans were relatively unchanged from the prior quarter, as runoff of the formerly covered commercial loan portfolio offset otherwise strong organic loan growth. Loan origination pipelines remained strong and in line with expectation as we enter 2015 with no unusual slippage of funding when compared to previous quarters. With regard to asset quality metrics, you will notice a change in the presentation of the allowance for loan loss, related charge-offs metrics and other credit quality ratios this period. With the scheduled expiration of FDIC loss share coverage on the majority of the remaining loan balances from those assisted acquisitions. Beginning this quarter, the covered and formerly covered loan portfolios have now been combined into total loans and their related reserve has been combined into the allowance for loan loss. A more detailed explanation of these changes as they relate to net charge-offs, and non-performing and classified assets was included in yesterday’s earnings release. As a result of the change in presentation, the combined net charge-offs for the quarter were 27 basis points of average total loans on an annual basis, compared to 7 basis points for the third quarter. Net charge-offs related to the uncovered loan portfolio was $700,000 or 6 basis points of average total loans on the annual basis and net charge-offs related to the covered and formerly covered loan portfolios was $2.5 million or 21 basis points. Likewise, non-performing assets increased by $20.7 million or 31%. Total classified assets increased $48.9 million or 46% compared to the linked quarter. The change in non-performing assets and classified assets is also largely related to the inclusion of the covered and formerly covered loans. The $12 million of ORE generated from the formerly covered loans is now shown in total non-performing assets is carried at fair market value. Due primarily to the previously referenced change in presentation, the allowance for loan loss increased to 1.11% of total loans, compared to 0.95% of total loans for the linked quarter. Without this consolidated view, the allowance ratio would have increased slightly to 0.96% of total loans. In our view, a more appropriate and meaningful credit risk coverage metric for our total loan portfolio is the sum of the allowance for loan loss and related loan loss, net of the FDIC indemnification asset shown as a percentage of total loans. As of December 31, 2014, this ratio was 1.51% of total loans. We believe this level represents actual coverage for potential future credit losses and it tends to supplement our future credit risk coverage analysis with this metric. You will find the detail components of this ratio in our 8-K filing for the earnings release. Average deposit balance has increased by $443 million or 8% over the prior quarter due primarily to the first four quarter impact of the acquisitions. In the period, deposits increased by $123 million or 9% annualized over the linked-quarter as non-interest bearing deposits grew at a faster pace than interest-bearing deposits. Capital levels for the fourth quarter reflects strong earnings including our four quarter from Columbus and the dividend increase announced last quarter. Tangible book value per share increased 1.5% to $10.38 per share as of December 31st from $10.23 as of September 30th. We ended the period with tangible common equity ratio of 9.02%, a Tier 1 ratio of 12.69% and a total capital ratio of 13.71%. Our strong capital position will support significant organic growth and consideration of additional acquisition opportunities should they develop. The impact from the expiration of commercial loss share had minimal impact on our capital ratios and credit quality metrics other than as previously discussed. I’d like to remind you that the expiration of loss share does not change the overall accounting framework for these loans and they will continue to be revalued each quarter. With that, I will now turn it over to John for further discussion of our financial results.

Thank you, Tony and good morning everyone. We are pleased with the quarter’s results and as Claude and Tony noted in their remarks, we continue to execute on our strategy during 2014 with solid growth across our footprint, complemented by the strategic acquisitions in the Columbus, Ohio market. Directing your attention to slides two and three of the supplement, you will see our fourth quarter adjusted pre-tax pre-provision earnings of $28.8 million which excludes certain items related to covered and formerly covered loan activity as well as other significant items, increased $1.2 million or 4% from the third quarter primarily due to four quarters’ impact from the Columbus acquisitions and a strong organic loan growth during the third quarter. As shown on slide three, pre-tax pre-provision earnings as a percentage of average assets were stable at 1.58% on an annualized basis. Total interest income increased $3.4 million compared to the linked-quarter as average loan balances increased 8% for the quarter reflecting four quarters impact of the earning assets acquired in the Columbus transactions midway through the third quarter as well as the strong loan production in that quarter. Most of which closed late in the period. As anticipated, fourth quarter loan production was down from the third quarter as organic growth was offset by approximately $30 million of run-off in the covered and formerly covered portfolio during the period, resulting in a period-end total loan balance being relatively unchanged from the third quarter. To be clear on this point, total loans at December 31 now include approximately $165 million of formerly covered loans due to the expiration of non-single family loss sharing coverage effective during the period. In addition to average balance growth, interest income also benefited from a $400,000 increase from loans returning to accrual status during the period and loan fee income also remains strong during the fourth-quarter. While interest income continues to be impacted by the prolonged low interest rate environment and the slowly receding headwind from covered asset runoff, we continue to see a narrowing in the spreads between the yield on loans originated during the period and loans that paid off. The spread declined to 30 basis points for the fourth quarter, down from 106 basis points spread during the first quarter. While it can be volatile, this marks the fourth consecutive quarter we have seen narrowing of the spread. Interest income from investment securities was down modestly from the third quarter, as average balances declined $53 million. This decline reflects normal amortization, which was not invested back into the portfolio, as well as $74 million of sales during the period. The impact from the decline in securities balances was partially offset by a 3 basis point increase in the portfolio’s yield during the quarter. Additionally, the overall duration of the investment portfolio declined to 3.4 years, as of December 31st from 3.7 years as of September 30th. As we discussed on last quarter’s call¸ the decision to shrink the investment portfolio was intentional, as we continued to balance loan demands, other balance sheet dynamics and the interest rate environment. We are comfortable with the current side and duration of the portfolio and we will continue to manage the portfolio within a range as a percentage of assets, depending on loan demand, fee and spread income levels going forward. Total interest expense increased approximately $600,000 compared to the linked quarter, driven by a full quarter’s impact of the deposits acquired during the third quarter. As the integrations are now complete, we have started implementing strategies to more actively manage the cost of these deposits, while continuing to focus on core deposit growth and rewarding deeper client relationships. Regarding our overall core deposit strategies, we continue to see these efforts bear results and are pleased with our deposit generations heading into 2015. Net interest margin increased 1 basis point to 3.67% from 3.66% for the linked quarter. Excluding the benefit from the previously mentioned interest income recaptured during the period, net interest margin was 3.64% for the fourth quarter. Moving now to non-interest income, excluding covered loan activity and other items as noted in Table 1 of the earnings release, non-interest income declined $600,000 from the linked quarter to $15.2 million. The increase was driven by lower fee income, from our client derivative program, as well as lower deposit service charges and bankcard income during the period, partially offset by higher trust and wealth management fee income. Non-interest expenses for the fourth quarter, excluding covered expenses and other items as noted in Table 2 of the earnings release, totaled $47.6 million, a $900,000 increase from the linked quarter, primarily as a result of a full quarter’s impact from the Columbus, Ohio operations. We are pleased with the disciplined expense management effort across the company during 2014 and remain focused on maintaining a scalable and efficient operating platform going forward. Our fourth quarter results represent a strong finish to a productive year. Turning our attention to 2015, we look forward to the challenges and even greater opportunities that lie ahead. In regards to the loan portfolio, we're targeting mid-to-high single-digit loan growth for the year. With respect to expenses, we expect to maintain a stable expense base for the year and believe a modest increase to the adjusted non-interest expense total from the fourth quarter as noted in Table 2 of the release, represents a reasonable indication of our quarterly operating expense saves for 2015. With regard to net interest margin, we expect the margin to remain relatively stable with the fourth quarter through the first quarter of 2015, so we could see a 1 or 2 basis point change in either direction, depending on interest rate movements and loan payoffs during the period. Loan growth and to a lesser extent, runoffs from the higher yielding covered and formerly covered loan portfolio remain the major drivers of variability for that reason we are focusing on the first quarter of 2015 only. And finally, I will note that the first quarter is typically impacted by numerous seasonal factors that affect both income and expenses and that should be considered in establishing quarterly estimates. This concludes my remarks. And I will now turn the call back over to Claude.

Thanks, John. As we reflect on 2014, we are proud of our accomplishments and the success of the company. And as we look to 2015, we are excited about the future that includes both continued organic growth throughout our metro-centric footprint and additional strategic opportunities that meet our strategic operational and financial criteria should they arise. This concludes the prepared comments for the call and Dan will now open it up for questions.

[Operator Instructions] And our first question comes from the position of Scott Siefers of Sandler O'Neill. Please go ahead.

Good morning, guys.

Hey, Scott.

Good morning, Scott.

I guess Tony or John maybe first question is most appropriate for you. And I guess I just have a couple on sort of the covered loans and the credit impacts just given the expiration back in October, but -- so the covered loan portfolio came down very, very rapidly in the first quarter more so than has typically been the case. Can you spend just a second discussing anything you might have done, for example just given the expiration that you maybe just look about to get rid of it completely, or really what drove that decline? And then sort of the related question. Just given the impact they have had on all your credit metrics, how should we be thinking about charge-offs going forward? In other words was the 25ish basis points, was that kind of a catch-up number, or is that the run rate going forward, or is it somewhere in that much lower 7 to 10 basis points you guys have had the last couple of quarters? How should we think about that?

Well, when you break the charge-offs, I will take that piece of it, Scott, we would expect the legacy portfolio to remain fairly consistent with what we’ve seen across 2014, whether it will be continued to be as low as 7 it’s been the last couple quarters, it’s hard to say. But certainly, we don’t see significant credit issues on the horizon out of that portfolio. On the covered piece, that’s a little harder to judge. Those loans are still under 033 and get valued each quarter, and there is a lot of timing that takes place there. We still have about a little under $300 million of loans that are under that accounting framework. So it’s kind of hard for me to say right now what those would look like because of volatility. I will say though and John can speak more to the numbers here that we are very comfortable with where we landed on the commercial side of the house with the loss share expiration. We were under $40 million of what -- I guess the best way to frame will be criticized and classified portfolio out of all of that. And again, that’s all. There is the allowance, it has marks. So we are very comfortable with where we landed going forward.

Okay.

Hey, Scott. This is John. On your first question around the balances, just to be clear, the covered loan balances as of September 30th were approximately $330 million. The balance of the covered and formerly covered loans, which would include the loans at loss coverage during the fourth quarter was about $300 million at December 31. So the runoff was about $30 million during the fourth quarter. On our disclosures and on the balance sheet, we’ve highlighted on the put notes there the balance of the loans that remains subject to coverage for five more years, that’s the $135 million figure noted on the balance sheet there. So I just want to be clear there on what the runoff was. And that the biggest change or biggest driver in the change in the balance there from September 30 to December 31st was really the expiration of the loss sharing coverage on the commercial assets.

Okay. That makes more senses. I was obviously looking at that 135 versus the 332. So that color is helpful. And then I know you don’t want to out past the first quarter on the margin. But maybe more broadly, if you are comfortable could you -- I mean you’ve got very good loan growth and the outlook is still pretty good. With the goal be to generate positive NII growth throughout the year kind of regardless of what happens to margin, how do you think about that dynamic?

Yes. I mean, I think we are going to obviously and we’ve been doing this for a number of quarters now. We are going to defend it, the net interest income dollars very, very aggressively. It’s difficult to do, but we think that with our metro-centric approach we will be able to do that. Competition is fierce, say the least. Clients want longer-term fixed rate product. So we are staying creative there and doing a pretty good job in managing the product, but I think that we will continue to focus very hard on growing the dollars.

Okay. That’s perfect. Thank you guys very much.

Thanks, Scott.

Our next question comes from Chris McGratty of KBW. Please go ahead.

Hi, good morning, everybody.

Hi, Chris.

Hi, Chris.

Claude, if you kind of think about some of the Scott’s questions in the context of the efficiency ratio. You guys have done pretty good historically on getting costs out from deals and you’ve gone organically to your expenses couple of times. But given the fact, like you alluded to likely the pressure on the margin for everybody, is the right way to think about the efficiency ratio now that you have loss shares kind of expired or you’re going to still kind of stay a little over 60 or is something in the high 50s still aspirationally or maybe a little bit pushed out because of the curve based on the guidance of the efficiency?

Yeah. Certainly, high 50s, I would call it aspirational. Chris, I think to your point on just the yield curve and where we’re at in the rate cycle, I think, where we’ve been is probably more what we would expect. As Scott asked, what we’re looking for is NII growth and positive operating leverage overall as the covered portion becomes the less of the fact in the overall earning asset base. But to give significant enough operating leverage to move that into the 50s, you’re certainly aspirational, we’ll keep grinding forward but I think it will be challenging.

Okay. That’s helpful. Then Claude, maybe on capital deployment, you guys have the big dividend. You’ve done three deals and it seems like the cost savings are in. You guys are couple -- either couple of smaller transaction or one transaction away from $10 billion. Can you talk about how you’re thinking about that? When you might think in sense to kind of jump to $10 billion and what kind of size opportunities M&A you’re looking at?

Sure. I think, all of this that are above $5 billion, start thinking about the $10 billion in the ramifications of what that means. And we’re continuously, I think to the first point of operational planning, thinking about kind of what are the impacts from a stress testing compliance, kind of other regulatory management perspective and continuing to evolve our system to be able to handle it, should we exceed that $10 billion level. Chris, I would tell you though that we still think we got a ways to go unless we would do a big deal. And so I think, it’s at least, on the horizon, we got some time before we can cross that threshold. And certainly, I think as most people in our situation do, unless it’s clearly compelling to cross it, it’s not worthwhile to do so. So you need to really be prepared, ready and thinking about going much bigger. And I think we’re above the $10 billion. So we think we got some runway here before we get there but certainly planning forward in the eventuality that it happens. As it relates to size of deals, we don’t either have a minimum or a cap, although, we’re sensitive to too small and the resources that they constrain. And we’ve talked before about that $200 million to $300 million in upsize is our preference. That doesn’t mean we wouldn’t go below that which we did in ‘14. And on the high side, again no cap but you’re certainly always sensitive to what the disruption is to the organization organically. So we just always consider those factors as we look at opportunities.

That’s helpful. Thank you very much. The last question, what should you use for in the tax rate for about -- for ‘15?

Yes. Chris, as we noted in the release there, it can fluctuate quarter-to-quarter and especially, when you have tax rate changes in different state but we see it really in that 32% to 34% range for 2015.

All right. Thanks a lot.

Thanks, Chris.

Our next question comes from Emlen Harmon of Jefferies. Please go ahead.

Good morning. Claude, you noted the kind of volatility in the yield curve and it can have an impact on the margin. How do you guys go about kind of quantifying the impact on the NIM for movement in kind of the middle to longer and at the yield curves, I call it, kind of like the 5 to 10 year range? So kind of what the assets, let’s say, sensitivity if you have 25 or 50 basis point moves from one way or the other?

Yeah. Emlen, I will just give you a couple high level points and I can -- Tony or John can go in any detail they would like. But at least to this point, we've not seen a material change in loan pricing and we’re very sensitive to how we price loans and making sure that the spread there is appropriate given our cost of funds and that we hit a certain hurdle rate of return, which our teams had done a great job continuing to achieve as we inspired fourth quarter yields. I would say the biggest impact on the long end is how you reinvest on the investment portfolio side and the impact of the portfolio yield, which is one other reasons why we took the opportunity to sell some securities in the fourth quarter and reposition the portfolio that shortened the duration. So it’s really more to this point. And I emphasize to this point on how the yields we could see on the investment portfolio has not yet impacted, if you will, the loan yields per say. But the longer it persists, the more I worry that competitively that could happen. I don’t know Tony or John is there anything to add to that.

Yeah. As you said, our bias continues to be neutral to asset sensitive and we manage all of our products with that in mind. We have good diversity on the loan side, with some of our specialty businesses equipment finance franchise and that help us on our placement along the yield curve. But our bias price continues to be neutral to slightly asset sensitive.

Got you. And just kind of with where would you say the yield curve is today, any kind of cash flows coming off of securities book, are you able to keep that yield flat today or is there potentially just some natural compression there?

Yeah, there is about $15 million to $17 million of cash flows coming off the portfolio today. And I feel pretty good about our ability to keep that yield relatively flat.

Got you. Okay. And then just a quick question on kind of the runoff portfolio and kind of against your guidance for mid to upper single digit loan growth. What’s your expectation for what is left to run off from some of the acquired books?

Yeah. As you’ve probably seen the pace of runoff in the covered and formerly covered loans, it’s certainly slowing down and we expect that to continue as the mix of the portfolio shifts more towards the consumer loans with longer terms. So we think the pace of runoff there is going to slow it. We saw it slow in the fourth quarter. And we think that’s going to continue.

The other thing I would add kind of on that -- this is Claude -- that as you can imagine, we were kind of pushing very hard to resolve and continue to resolve those that are in that classified bucket. So we saw some pretty good reductions during 2014. And with the likely the exit number being much smaller, it’s more to the point of John, where we see that runoff slowing down into '15.

Okay. Thanks.

Thanks, Emlen.

Our next question comes from Jon Arfstrom of RBC Capital Markets. Please go ahead.

Hey, good morning, guys.

Hey, Jon.

Good morning Jon.

Emlen just took one of my questions. But just to put a finer point on it, the $135 million, it’s still covered the resi stuff that probably hangs around a bit longer. Is that correct?

Yes, I would say that’s accurate.

Okay. And then -- so going back to the pipeline Claude, in terms on the mid to high single digits, you do have a little bit of runoffs or maybe the real core numbers have been higher than that. What is the message from the clients in terms of borrowers? Are they more confident? I know it’s kind of ebbs and flows a bit, but what’s the mood today?

It’s still pretty good, Jon. I think we are continuing to see a good pipeline, I think good activity. Our clients are performing well. U.S. growth, as we’ve all seen, has been strong. I think the only concern we have is just what’s going on elsewhere in the world and the 24-hour news cycle and does it make them more conservative or nervous, or to the extent that they may supply multinationals who see a drop in activity that could be a potential headwind. But at this point, it’s not showing up in activity pipeline conversation. So at this point, we will feel pretty good about where our clients are at.

Okay. Can you give us an idea of maybe early returns in Columbus? I know it’s very early. And then also maybe an update on Fort Wayne, how that’s going?

Sure. Columbus, we just couldn’t be more pleased with. I think we have been able to retain the vast majority of all the teams that we had desired to retain as a part of the deal. And their embracing of our cultural and our products is just has been really terrific, with examples being, their ability to do some larger deals and maybe they were able to do it prior. They’re embracing products like our client derivative program that they would not have had before. They have come out of it. They shoot very strong there, with some nice fee income and the molding of the cultures, if you think about it, there were four separate cultures that had to come into one from ours and the other three that we acquired, that has gone well. I mean, it always a work in progress but we just couldn’t be more pleased from an overall financial performance. They’ve met and exceeded, kind of our models that we talked about when we announced the deals. So, we are really pleased with the team in Columbus, leadership they’ve shown and their financial results. Fort Wayne, some early, really strong team, they have continued to kind of evolved. It’s obviously a startup, so they’re starting from a very different place. We’ve finally able to into their permanent, kind of locations and they have as well are going to meet our original objectives before the market. And as we look to add other locations in Fort Wayne and Columbus, we see both as really good growth drivers for us in ‘15 and beyond.

Okay. Good. And then, I guess a couple more. In the release, you talked about potential for growth from strategic pricing opportunities and new products. Could you maybe cover what you mean by that?

Yeah. Again, I’d say growth and profitability. I’d say the first, when our pricing is -- if you look at the Columbus market, there are three small banks. Funding is always a little challenging when you’re smaller and you are growing loans quickly. We’ve got some pricing opportunities in that market and still it’s kind of rewarding the clients but it’s going to maybe bring down the overall costs of that deposit book. We also kind of see just the opportunity in some of the specialty areas that we’ve continued to grow throughout 2014. And add some really significant and kind of experienced talent in our assets-based lending, our cash flow mezzanine products, as well as continue our franchise at business growth. In all of those, we’ve seen very good yields, very good credit quality opportunities. So we’re really hopefully in that area. We will continue to see some nice growth as well.

John, this is Tony. I’d say we are floored by the economic environment in Columbus and our ability to tap into fairly quickly, so we’re very optimistic about that market.

Sure. It’s not just buckeye fever. It’s real.

Well that’s a 365 thing, John.

All right. I figured you would have a comment on that. Just, John, a quick question on the expenses. I just want to make sure I heard it right, the $47.6 million of the baseline that you’re using?

Yeah. We expect a modest increase from there in 2015.

Okay.

Mainly related, just normal compensation adjustments and other inflation, John.

Right. Okay. Good. All right. Thanks guys.

Thanks John.

Thanks you.

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

Thanks. Good morning, guys.

Hi, David.

Good morning, David.

Given your commitment to positive operating leverage, when you look out to 2015, if the revenue backdrop gets even more challenging than what we’re looking at today, what’s specific levers on the expense side can you pull to try to offset that and put out the positive operating leverage?

Sure. Dave, one other thing we are continuously doing, we started instituting last, about two years ago, some very kind of focused process improvement efforts and quite honestly, whether or not, we see the margin compressor not, we are going to continue to look for opportunities to be more efficient in the ways to reduce costs. So we always are looking to improve upon that expense base that John talked about and try to get that to a smaller number, improve the operating leverage. Other levers, obviously, if you are not seeing the growth in the margin expansion or stabilization if you will, than you are going to look for what the path you have that that you need to cut back and we are always looking at that, depending what sales results are.

Okay. Great. The rest of my questions have been asked. Thanks.

Thanks, David.

Thanks, Dave.

At this time, it appears that there are no other questions. I would like to turn the conference back over to Claude Davis for any closing remarks.

Great. Thanks, Dan. And again, thank you, everyone, for your interest in First Financial.