Simmons First National Corporation (SFNC) Q3 2018 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Simmons First National Corporation Third Quarter Earnings Call and Webcast. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] I would now like to introduce your host for today’s conference, Mr. Steve Massanelli. Sir, you may begin.

Good morning, and thank you for joining our third quarter earnings call. My name is Steve Massanelli, and I serve as Chief Administrative Officer and Investor Relations Officer at Simmons First National Corporation. Joining me today are George Makris, Chairman and Chief Executive Officer; Bob Fehlman, Chief Financial Officer; David Garner, Controller and Chief Accounting Officer; Marty Casteel, Chairman and CEO of Simmons Bank, our wholly-owned bank subsidiary; Barry Ledbetter, President of our Southeast Division; and Matt Reddin, President of Banking Enterprise. The purpose of this call is to discuss the information and data provided by the Company in our quarterly earnings release issued yesterday and to discuss the Company's outlook for the future. We will begin with prepared statements, followed by a Q&A session. We have invited institutional investors and analysts from the equity firms that provide research on our Company to participate in the Q&A session. All other guests in this conference call are in a listen-only mode. A transcript of today's call, including our prepared remarks and the Q&A session will be posted on our website simmonsbank.com under the Investor Relations tab. During today's call and in other disclosures and presentations made by the Company, we may make certain forward-looking statements about our plans, goals, expectations, estimates and outlook. I’ll remind you of the special cautionary notice regarding forward-looking statements and that certain matters discussed during this call may constitute forward-looking statements, and may involve certain known and unknown risks, uncertainties, and other factors, which may cause actual results to be materially different than our current expectations, performance or estimates. For a list of certain risk associated with our business, please refer to the Forward-Looking Information section of our earnings press release and the description of certain risk factors contained in our most recent Annual Report on Form 10-K, all is filed with the U.S. Securities and Exchange Commission. Forward-looking statements made by the Company and its management are based on estimates, projections, beliefs and assumptions of management at the time of such statements, and are not guarantees of future performance. The Company undertakes no obligation to update or revise any forward-looking statements based on the occurrence of future events, the receipt of new information or otherwise. Lastly, in this presentation, we will discuss certain GAAP and non-GAAP financial metrics. Please note, that the reconciliations of those metrics are contained in our current report filed yesterday with the SEC on Form 8-K. Any references to non-GAAP core financial measures are intended to provide meaningful insights. These non-GAAP disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. I’ll now turn the call over to George Makris.

Thanks Steve, and welcome to our third quarter earnings conference call. In our press release issued yesterday, we reported net income of $55.2 million for the third quarter of 2018, an increase of $26.3 million or 91.3% compared to the same quarter last year. Diluted earnings per share were $0.59, an increase of $0.15 or 34.1% from that same period in 2017. Included in the third quarter earnings were $1.3 million in net after-tax merger-related and branch right-sizing costs. Excluding the impact of these items, the Company's core earnings were $56.5 million for the third quarter, an increase of $28.8 million or 103.7% compared to the same period in 2017. Diluted core earnings per share were $0.61, an increase of $0.18 or 41.9% from that same period in 2017. Our loan balance at the end of the quarter was $11.9 billion, an increase of $492 million from last quarter, and an increase of $1.1 billon or 10% since year-end. Our markets in North Texas, Northwest Arkansas, Southwest Tennessee, Middle Tennessee, St. Louis, Kansas City, and Oklahoma City have all outpaced the Company's average growth rate. Our loan pipeline, which we define as loans approved and ready to close, was $464 million at the end of the quarter. On a consolidated basis, our concentration of construction and development loans was 97.4% and our concentration of CRE loans was 296.8% at the end of the quarter. Total deposits at September 30th were $12.1 billion, an increase of $135.1 million from last quarter, and an increase of $1 billion or 9% from year-end 2017. The Company’s net interest income for the third quarter was $143 million, and 81.4% increase from the same period last year. Accretion income from acquired loans during the quarter was $10 million. The accretion income in the third quarter was approximately $5.2 million more than our original estimates due to accelerated cash flows of acquired loans. Based on our cash flow projections, we expect accretion for the fourth quarter of approximately $4.2 million. Our net interest margin for the quarter was 3.98% compared to 3.99% the previous quarter. The Company's core net interest margin which excludes the accretion was 3.71% for the third quarter compared to 3.70% the previous quarter. Since December 31, 2017, core loan yield has increased 44 basis points, while cost of interest bearing deposits has risen 42 basis points, and cost of borrowed funds has risen 70 basis points. The subordinated debt issuance at the end of the first quarter had a 5 basis point impact on our third quarter net interest margin. The timing of existing subordinated debt prepayment had an additional 1 basis point impact. Our non-interest income for the quarter was $33.7 million, a decrease of $4.3 million compared to the last quarter primarily due to decreases in debit card fees and mortgage lending income. As of July 1st, we became subject to the interchange rate cap, as established by the Durbin Amendment, resulting in a $3.3 million reduction in debit card fees in the third quarter compared to the second quarter. As a reminder, we estimate that we will receive approximately $7 million less in debit card fees in 2018 and $14 million less in 2019 on a pre-tax basis. Mortgage lending income was $1.4 million less than the second quarter, mainly due to fewer transactions driven by the rising rate environment. SBA income remained flat when compared to the second quarter as we remain selective in our loan sales, as premium rates have lowered in recent months for the 6% to 7% range compared to 10% during the first quarter of the year. Non-interest expense for the quarter was $100.3 million. Core non-interest expense for the quarter was $98.5 million, which represented an increase of $1.5 million when compared to the second quarter of 2018. $1.2 million in computer and software items were expensed during the quarter as part of our Next Generation Banking platform initiative. In addition, we spent an incremental $1.1 million in the third quarter for marketing campaigns directed towards deposit growth and $1.1 million of 401(k) profit-sharing expense. Our efficiency ratio for the quarter was 53.74%. Income tax expense was lower in the third quarter due largely to discrete tax benefits related to tax accounting for a cost segregation study and a state deferred tax asset adjustment. At September 30, 2018, the allowance for loan losses for legacy loans was $55.4 million with an additional $1.3 million allowance for acquired loans. The loan discount credit mark was $54 million for a total of $110.7 million of coverage. This equates to a total coverage ratio of 93 basis points to total of gross loans. At the end of the third quarter, non-performing assets were $71.9 million, $4.1 million decrease from the second quarter. This balance is primarily made up of $40.8 million in non-performing loans and $31.1 million in other real-estate owned, which includes $9.6 million in closed bank branches held for sale. $2.8 million in closed bank branches was added in September as we closed 10 branches. During the third quarter, our annualized net charge-offs total loans were 36 basis points. The provision for loan loss during the quarter was $10.3 million, which includes an increase due to strong legacy loan growth and an increased loan migration during the quarter from the 2017 acquisitions, which is consistent with our previous guidance. During September, the Company sold approximately $32 million of substandard rated loans that consisted of both legacy and acquired loans. The loans had adequate reserves, thus no additional provision expense was required. However, the sale increased net charge-offs by approximately $4.6 million. Excluding these charge-offs, our annualized net charge-offs total loans were 12 basis points. Our capital position remains very strong. At quarter end, the common stockholders' equity was $2.2 billion. Our book value per share was $23.66, an increase of 21.3% from the same period last year. Our tangible book value per share was $13.48, an increase of 5.2% from the same period last year. The ratio of tangible common equity was 8.1%. We're very pleased with the organic balance sheet growth we’ve experience this year; our bankers have done an excellent job. While we have substantial funding sources available to sustain the current level of loan growth. During this time of rising rates and tight liquidity we intend to grow loans at a balance pace with the growth of our core deposit funding. We have a commitment to provide capital for our relationship clients, which we will consider a priority as we manage our loan opportunities. This concludes our prepared comments. We will now take questions from our research analysts and institutional investors. I’ll ask the operator to please come back on the line and give instructions and open the call for questions.

Thank you. [Operator Instructions] Our first question comes from the line of Brady Gailey of KBW. You line is open.

Hey. Good morning, guys.

Good morning, Brady.

I know last quarter we talked about kind of a forward quarterly expense rate of around $95 million, you all came at $98.5 million, and I understand there are couple of things that push that up in 3Q. But going forward, how do see your kind of quarterly expense rate trending?

Well, Brady we still think that $95 million is a good run rate on a consistent basis. However, we’ll say that we're much more focused on what our efficiency ratio is, so we still intend to invest in our business. And you probably noted that during the quarter we had little over $1 million on our technology project, most of that was related to the change, the Workday, which completely replaced our accounting in HR systems. That went live in August. Also you probably note that our loan growth has far exceeded our expectations for the year. And while we've experienced good deposit growth throughout the year, loans have outpaced deposits. And therefore, we chose to spend a little extra marketing dollars to promote deposits, to keep that loan growth going at current place. So we will manage our expenses appropriately within that efficiency ratio range. But as we see opportunities based on strong growth and other market conditions, we’ll take advantage of that. So when we take a look at budget, that's what we know. We've got to be flexible and deal with what we don't know. You also may recall that at the beginning of the year when we talked about how we were going to allocate some of the benefit from the tax rate adjustment, we were very clear that we were going to share some of that with our associates. And obviously, we've been very successful financially this year. And I think our accrual for our profit sharing plan demonstrates that we're sharing that profit building with those who made it possible. So we'll continue to do those things and we think are good business decisions. But based on what we know today $95 million a quarter is still a good run rate.

Okay. And then loan growth, in past you’ve talked about the 10% to 12% range, if you look at the last couple quarters and you've been higher than that kind of in the mid-teens, if not a little better in 3Q? Is that 10% to 12% still the right way to think about forward loan growth or could it be better?

Well, I’m going to let Matt predict what our loan growth is going to be, but I'll make a couple of comments. One is, obviously the intent of rising rates has slowed the economy down a little bit, and I think we all have seen that demonstrated and prove out in the marketplace. Our mortgage loans were down this month and I think that's probably the national trend. Commercial loans are in that same bucket in – when you expect two more rate increases in the next six months. You have borrowers really questioning whether or not the cash flows based on today's rates are realistic. So we're seeing a little bit more hesitancy on the part of borrowers to take the risk they may have been willing to take a year ago, but Matt you might talk about our loan pipeline and what you see going forward.

Yes. Thanks, George. Brady, tell you, if you look at kind of our approved rating closed, we're that ran from the second quarter to $613 million, now it’s at $464 million. I think George is right that, while we’re seeing really good opportunity, we remain disciplined to conserve underwriting as we always have as well as our pricing standards and relationship standards. And so as George commented earlier, we’re going to make sure we can take care of our existing customers and we have plenty of capabilities to do so. But as long as we can grow deposits, based on our standards, we will continue to look at those opportunities, but we do see that that pipeline that shrink I think it’s relative of rising rates.

All right. And then finally for me, just an update on the M&A. George, I know you said, it kind of be back in the game next year, but your stock price is off, but I guess everybody is off, at least the publicly traded guys, so just an update on kind of how you're thinking about M&A as we enter 2019?

We continue to believe that there are excellent opportunities for us in the M&A arena. We're having some really good conversations currently. The stock price and the devaluation of the banking sector has somewhat of a negative impact on the optics around an acquisition, especially when you consider a privately held banks don't see that same fluctuation on a daily basis that publicly traded banks see, however, we believe that the whole industry is affected by that valuation. So to the extent that we can all see eye to eye on relative valuation. We believe there's still really good opportunity, because the value of our Company relative to some of those we compete within the M&A business is still very healthy. So it really just depends on the reasons for the merger, the timing of the merger. I have to believe that over the course of time, the pricing will take care of itself.

Got it. Thanks guys.

Thank you. Our next question comes from the line of David Feaster of Raymond James. Your line is open.

Hi. Good morning, guys.

Hello David.

Good morning, David.

So we’re sitting here at the low-end of the core NIM range. There is a lot of moving parts today with the sub debt, the seasonal strength in ag. I just wanted to get your thoughts on the core NIM going forward. Is that 3.70% to 3.80% range still reasonable? Or could we see the core NIM kind of inflect going forward as you start growing loans like you talked about it at that more balanced pace?

First of all, we probably should have been clearer last quarter about what that range should be. We took on additional sub debt. So we refinanced some debt that we have, but we also took on a little over $100 million of additional sub debt. That additional debt by itself is going to cost us 5 basis points with regard to our NIM. So really that top end of the range should move from 3.80% to 3.75%. We believe that 3.70%, 3.75% is still a good range, and we intend to balance our ability to raise our core loan yields with our deposit cost increase. And I think we've demonstrated since first of the year when we combined Bank SNB and Southwest Bank into Simmons Bank that we've been able to manage that process since the end of 2017. And we’ve had a little variance quarter-to-quarter, but some of that's been driven by the timing of paying all – some of the refinanced debt. So we still believe the 3.70%, 3.75% was a good operating range for us. We also believe that we're still in a lag position for loan yields catching up to deposit costs. So we're a little more optimistic about the ability maybe to expand that NIM in the future. But currently, we are very satisfied with the ability to balance cost to deposits with loan yields.

Okay. That's great color. Thank you. On – your commercial loan growth was notably strong in the quarter, which is kind of in it’s dark contrast to what we've seen from several other banks this quarter, where pay downs and competitions really weighed on growth. What do you think is driving your ability to grow C&I loans in an outside pace? And are there any specific segments where that were notably strong or where you're gaining share?

Well, I’ll ask, Matt, to sort of address that for us.

Yes. That’s a good question. The C&I growth that we’ve seen quarter-to-quarter has been in our energy group. If you look at our group that came onboard from Bank SNB very, very experienced team. We have very disciplined conservative underwriting and we’ve taken advantage of that over the last two quarters. Now we’ll tell you now that with the robust energy sector right now. We are seeing bigger banks come down to compete, while credit standards are staying good, credit spreads are getting smaller. So we are seeing that slow down now, but we’ll remain discipline on our credit spreads.

Got it. Last one for me. I just wanted to kind of get your thoughts on fee income more broadly. It's been tough in some of these sectors with mortgage in SBA, like you talked about margins coming down. Just kind of wanted to talk – to hear your thoughts on fee income going forward, where do you see the most opportunity to grow fees, and start getting that ratio of fees, the revenues back up? Are there any other lines you’d like to add or supplement either organically or through M&A?

Yes. First of all, I’ll answer your last comment first. And that is through M&A, yes. Non-interest income lines of business, where acquired banks is very important to us. So that's going to be a priority. We have lagged behind in our ability to rollout some of our fee businesses throughout our new footprint, particularly our wealth management group. Now that's going to be a real focus for us over the next two years. We need to make sure we get our wealth management group prominently entrenched in all of our markets. But we've not made that priority in the past, but it will be going forward. We're going to lose the Durbin income, that's a big chunk to overcome. So $14 million pre-tax revenue out the window for 2019 just because we exceeded a certain size. Doesn’t make sense, but that’s the way it is and those are the rules of the game. I will say this. Our mortgage group does a fantastic job. We view mortgage as a very necessary product if we're going to call ourselves a community bank. We do not intend to create a mortgage company. It is going to be one line of business we offered in all our communities. So we're going to be subject to in our mortgage business what effect rates have on normal course of home purchases. And I think you see that reflected. The SBA, we obviously have two choices. We can leave SBA loans on our books and collect that interest over the life of the loan or we can sell those loans or the guarantee fortune early on in the process and book fee income. It's sort of a breakeven analysis for us. If the premium in the marketplace indicates it’s a better option to go ahead and sell those loans and book fee income, we will do that and you've seen us do that in the past. Currently that's not the case. So with the rising rates, SBA loan yields are very, very good. And when the premium only is 6% to 7%, it doesn't justify selling those in the marketplace. We're better off keeping them on the books. So that will fluctuate based on what’s most advantages to the Company long-term. So, yes our fee income is extremely important to us, diversity and everything we do including our revenue stream is sort of table stake for us. So we are going to focus on driving that non-interest income going forward in all of our lines of business.

Okay, great. Thank you.

Thank you. And our next question is from the line of Matt Olney of Stephens. Your line is open.

Thanks. Great. Good morning, guys.

Hey Matt.

Hey Matt.

I want to go back to the discussion on operating expenses, and I'm still confused why the expense run rate should be close to that $95 million after seeing these 3Q results. Are there any more cost savings coming from previous acquisitions? Is the deposit campaign now complete? Just any more color will be helpful on that.

Well, we have the expense savings from the branch closures that we'll have in the fourth quarter going forward. They didn't close until the end of September. So we got no benefit in the third quarter at all from the branch closings. So there is going to be a little benefit from that. The other two expenses were sort of one-time occurrences. Now our profit-sharing plan, we'll just have to take a look at what we plan to do in 2019. But I think we have exceeded our expectations this year, and therefore, that profit sharing number was up proportionally. We still feel pretty good about what our budget looks like. Our compensation expense was down, and we would expect that to continue to go down as severance payments roll off, we have some retirements at the end of the year. So we're fairly comfortable with that number.

Matt, on the profit sharing, as George said that was part of what we gave back to the associates as part of the tax savings for the year as we got to the – into the third quarter. The numbers became a little truer what the year end results would be. And so that was more of a true-up of the number, not indicative of one quarter. So it's really a one-time adjustment on some of that. Now, it will be higher in the fourth quarter as we accrue that one quarter, but it was a year-to-date catch up.

Okay. And I think earlier you mentioned that you are trying to manage to an efficiency ratio. I think you mentioned that when you talked about expenses. Can you give us more color about what efficiency ratio you're trying to manage to over the next few quarters?

Yes. So here are the financial metrics we use internally as we make decisions. One is our target ROA of 1.50%, and a lot of that's going to be dependent on whether or not we're successful in driving this non-interest income up to a 30% level, where it is today at about 21%. Of course, a lot of that revenue has no assets tied to it. So we expect we should get to 1.50%, and we're going to manage between 50% and 55% efficiency ratio. So from time-to-time, we're going to have investments that we need to make. For instances, we rollout our coverage of our wealth management group. We're going to have to hire people with no revenue associated and invest in those markets, put those people in place. So we can offer those products and services. So those are really the two financial drivers that we use internally that we think – we base our decision on. ROA at 1.50%, efficiency ratio between 50% and 55%.

Okay. That's helpful, George. And then on deposit growth and deposit cost, you mentioned you ran some new campaigns during the third quarter. Can you talk about the success of those campaigns, and interest bearing deposit cost? I think ticked up around 21 bps this quarter, which is a pretty good size jump from where we were previously. Are you saying that you expect that cost, the relative increase to slow down somewhat in the next few quarters as the campaign ends or any color there would be helpful?

Yes. I do expect that growth slow down and I expect our loan yields to pick up a pace. And once again, we expect to manage those on a balance basis for the fourth quarter. We'll take a look at – what it looks like in 2019, which we're pretty good about the fourth quarter. I’ll say this, Matt. You probably heard it from most every bank that you cover. And that is deposit gathering is real challenge today and it's – really a couple of factors that I'd like to mention that we see happened in marketplace, one is there are billions of dollars it used to be in the banking system and now reside in FinTech companies or other payment systems. That could really help if they were back in the banking business. We are a little disappointed in the way our public funds are managed. Public funds are to be given to those institutions that help drive the local economy. And I think we have seen at least recently more of a bid process to maximize return instead of understanding that maybe there is a responsibility of public entities to help drive the economic growth in their geographers. So those two factors control billions of deposit dollars. And I think that's why you see so much emphasis on digital banking, and we obviously are very interested in our digital offerings as well. But we’re much more focused on growing deposits in markets we currently serve then going nationwide with a digital deposit gathering. That doesn't do those local economies any good when the group that holds those deposits is not investing in the growth in that economy. So [something's got to give] at some point in time. I don't know what that answer is, but I do know it's having an effect on the banking business and it's causing us to really take a good hard look at whether or not we're interested in funding transactional loans. We value our relationship particularly with our commercial customers. Those customers that think of us as their primary bank, we're going to make sure we have the capital to support their growth. So the other shift we’re seeing here is in our commercial customers. They're happy to make a choice of who is going to be my primary bank? And are they going to have the ability to fund my growth going forward? Because some of these transactional loans are going to drive up in the marketplace, not only at Simmons, but in other banks as well.

And as a follow-up George, you mentioned capital and I was confused about the prepared remarks. Did you say that you guys paid down some sub-debt capital over this year, but you also issued new sub-debt capital? I was confused in that point.

No, Matt, as you know back in March, we have the $330 million in sub debt we raised. But there was a timing of paying off either sub-debt or trust preferred. We had about $20 million at 6% that we’re not able to pay off until September 30 is actually called on September – we called it on September 30. So that was the sub-debt. The rest of it was the TruPS.

Yes, but Matt, we raised $330 million in the second quarter. $220 million was to refinance current debt, a $110 of that was new debt on our books.

Got it, okay. Thank you, guys.

You bet.

Thanks.

Thank you. And our next question comes from the line of Bryce Rowe of Baird. Your line is open.

Thanks. Good morning.

Good morning.

Good morning, Bryce. How are you?

I’m doing well. Thank you. Just a couple of questions here. I just wanted to ask about the sale of sub-standard loans and if there are – any more planned within that bucket. And what brought on or initiated that process?

Well, I don't know that we have anymore currently that we’re marketing. Our experience is this. We would rather eliminate substandard loans then foreclose and take assets into say other real estate. That's not a good prospect for us. The longer we hold that other real estate, the more we get to write it down. So our philosophy is to move those loans while we can. It's a large distraction to our business going forward, and I would say that these while they were performing for the most part had become a large distraction. They also take a quite a bit of allowance associated with them and we won’t free that up. So I think it was one-time situation as we manage our portfolio. We saw an opportunity to go ahead and get rid of those troubled loans, increase our asset quality and move forward. So Marty or Matt may have other comments about that.

Well, that's exactly right. But I think we’ll always be looking at opportunities. We get calls every day as to all our other financial institutions, loan barrowers. And if our loans match up and it’s in our best interest, we think we will do so. We do not have an actively plan right now to market, a pool of loans, but that could change tomorrow.

That's helpful. And then maybe wanted to ask a little bit more about the deposit campaign. It sounds like it may have wrapped up in the third quarter, so I was curious if that did in fact correct. And then wanted to get an understanding of kind of the nature of the deposit campaign? Was it directed at certain markets or certain medium, just any color around that would be helpful? Thanks.

Hey, this is Matt. I’ll give you some color yet. It was the market that – well two ways, but specifically it was marketed to market where we have low market share and we direct campaign, new customer to the bank, CDs and money markets. But also as you can imagine, we solicited the existing customers of our bank that we now had additional share of new money that we could bring into the bank in those markets, we did that as well. But it was low market share markets for us where we knew we had opportunities.

And tell me it's wrapped up in the third quarter, Matt, and if you’ve been able to kind of quantify the results of the campaign?

Sure. So it’s still ongoing, but the direct marketing is wrapping up, but those opportunities are still coming into our branches and calling in. So we're still seeing new growth, but we're not direct mailing anymore. And if you look at overall campaign so far in new money, it’s $400 million of new deposits to the bank through that specific campaign. Now that’s specific products, now that’s not indicative of other existing products that we’ve sold on our existing deposit rates.

Great. That’s helpful. And then maybe one housekeeping item. From a tax rate perspective, you called it out as being lower here in the third quarter. I'm curious what you're seeing for the fourth quarter?

Well, I’ll tell you, first off, it was a bit of an anomaly for all of 2018 as we've had several adjustments. A lot of it related to the acquisitions and the conversions from one state to another on our charters. During this quarter, we did complete cost segregation study, and some of it related to the new acquisitions we had and the buildings they had there and others. We’re able to take advantage of that. That cost savings – the segregation study was pretty substantial. We also had some new market tax credits that hit in this quarter that were then as benefit and a proportionate for our state taxes on the deferred taxes. A lot of that hit this quarter and in prior quarters. I would say, we’ll have this year even into the fourth quarter, we’ll probably be in that same range of tax rate. But I would estimate that in 2020, we’ll be back to the normal rate, of say…

2019.

I'm sorry, 2019, normal tax rate in the 23% range is rough estimate right now.

Great. Thank you, guys.

Thank you. End of Q&A

Thank you. [Operator Instructions] And I'm showing no further questions at this time. I’d like to turn the conference back over to Mr. George Makris for closing remarks.

Okay. Thank you very much, and I want to thank all of you for joining us today. We said at the beginning of the year that we had several integration projects going on during 2018 that should be able to demonstrate our future growth of our Company. And I’m awfully pleased with the organic growth that we've been able to accomplish this year, while doing those integration activities. We've grown organically by over $1 billion this year. We think that we have established our reputation in the marketplace as a bank that is very flexible and easy to do business with, and we hope to capitalize on that in the years to come. So thanks again for joining us, and we'll look forward to visiting again next quarter. Have a great day.

Ladies and gentlemen, thank you for your participation in today’s conference. This does conclude the program. You may now disconnect. Everyone, have a great day.