Triumph Financial, Inc. (TFIN) Q3 2016 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen, and welcome to the Triumph Bancorp Third Quarter 2016 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to your host for today's conference, Mr. Luke Wyse, Vice President of Finance and Investor Relations of Triumph. Sir, you may begin.

Good morning. I would like to thank you for joining us this morning. I'll go over a few housekeeping items and then hand it over to Aaron Graft, our CEO, to lead the presentation. Triumph Bancorp filed its third quarter earnings release last evening as well as a slide deck, and these items will form the substance of our call this morning. If needed, copies of the earnings release and slide deck are available on the Investor Relations section of our website, www.triumphbancorp.com, or by calling our Investor Relations Department at (214) 365-6936. To begin, I would like to offer a few reminders. Some of the remarks made today will constitute forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. We intend such statements to be covered by the Safe Harbor provisions for forward-looking statements contained in the Act. We caution you that forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results or events may differ materially from those expressed in or suggested by the forward-looking statements. Any forward-looking statement made by Triumph on this conference call speaks only as of the date hereof. New risks and uncertainties come up from time to time, and it's impossible for Triumph to predict these events or how they may affect it. Triumph has no obligation and does not intend to update any forward-looking statements after the date hereof except as required by applicable law. On this call, we may discuss a number of financial measures considered to be non-GAAP under SEC rules. Reconciliations of these financial measures with GAAP are included in the earnings release and slide deck filed last evening. At the conclusion of our remarks, we will open the telephone lines for Q&A. With those reminders, I would like to turn the call over to Aaron. Aaron?

Thank you, Luke. We are pleased to report on our third quarter results, which now include our acquisitions of ColoEast, which closed on August 1, and Southern Transportation Insurance Agency, which closed on September 1. We've accomplished a lot since the last time you've heard from us, and I'm excited to share these developments with you. The acquisition of ColoEast has provided a stable and low-cost deposit franchise and created a foothold for us in new markets in Colorado and Western Kansas. It brings diversity to our loan portfolio and provides scale that will improve our operating leverage. Our staff has been focused on the successful integration of ColoEast into Triumph, and we are on target for our core system conversion in early November. Our Triumph Insurance Group's acquisition of Southern Transportation Insurance Agency adds important new transportation insurance markets and a strong team of experienced producers and staff. In addition to the ColoEast and insurance acquisitions, we strengthened our regulatory capital and funding position with our issuance of $50 million of sub-debt on September 30. Bryce will provide further details on these transactions. As disclosed in our earnings release, Triumph earned net income to common stockholders of $4.5 million or $0.25 per diluted share for the quarter. Adjusted to exclude approximately $1.4 million of tax-affected ColoEast acquisition costs expensed during the quarter, our diluted earnings per share were $0.32. We are at or ahead of the schedule in the pursuit of our $0.50 per share run rate that we have targeted for Q4 of 2017. The ColoEast's transaction helped us in that pursuit. One thing I want to highlight, in particular, our adjusted ratio of net noninterest expense to average assets decreased 70 basis points from the prior quarter to 3.15%. That's an improvement of 18% in our operating leverage and there are more synergies to come. The improvement of our operating leverage is a material next step to us reaching our long-term goal of achieving a core return on assets of 1.5% or better. Our organic loan growth, excluding the impact of the acquired ColoEast's loan portfolio, remained strong in the third quarter at $89 million, an increase of 6.3% from the second quarter. Our adjusted yield on loans and adjusted net interest margin, which excludes the impact of purchase loan discount accretion, declined as expected quarter-over-quarter due to a shift in our loan mix from the ColoEast acquisition. As a result of that transaction, our percentage of commercial finance loans to total loans decreased to 33% at September 30, compared to 43% at June 30. Our long-term target is to keep that number near 40%. Our commercial finance lines of business will generally grow more quickly than our community banking portfolio, so we expect to return a 60-40 target over time. Our commercial finance portfolio is up $140 million or 28% year-over-year. Triumph Business Capital, our factoring subsidiary, continues to perform well as the dollar value of invoices purchased this quarter increased $54 million over the prior quarter to $488 million. And we continue to gain market share as we added 109 net new clients in the third quarter and 254 net new clients year-to-date in 2016. The average invoice size purchased this quarter increased slightly to $1,291 versus $1,259 in the prior quarter, an increase of 3%. And the number of invoices purchased increased from 345,000 to 378,000 in the current quarter, an increase of nearly 10%. During the third quarter, the balance of outstanding receivables declined $16.2 million at Triumph Business Capital as we completed the transition to a new lockbox provider that processes invoice payments from account debtors. This change significantly reduced our payment collection cycle times and created a onetime acceleration of the timing of approximately $30 million of receivables collections. The acceleration of collection times is a good thing in factoring as the faster we can collect invoice payments from debtors and redeploy the funds, the higher our effective yields will be on those outstanding balances. Total revenue at Triumph business capital increased this quarter by $710,000 or 8% over the previous quarter to $9.1 million. Our asset management business continues to make progress as it was named staff and services provider for an additional CLO issued by Trinitas Capital Management this quarter. What we're not pleased with this quarter is that our credit quality metrics got worse. Some of this is due to the loans acquired in the ColoEast acquisition, which we are not concerned about as we mark this portfolio to fair value in our purchase accounting for this acquisition. But in addition to the ColoEast acquisition, we experienced increases in nonperforming assets as well as specific allocations and charge-offs in our provision for loan loss. The provision increase was related to three individual credits and the increase in nonperforming assets picked up two additional credits for which a specific provision was not required. While we are optimistic about our ability to work through these assets and hope to realize some recoveries, the fact is our current asset quality ratios are not consistent with where we want to operate the bank. Our internal goal is to limit NPAs as a percent of assets to 1% or lower. We are focused on taking actions to quickly improve this ratio. As we look in the rearview mirror at the ColoEast transaction, we continue to evaluate additional acquisition opportunities. We look at every new opportunity through the lens of achieving our long-term goal of being a geographically diversified community bank and achieving a core return on assets of 1.5% or greater. We are committed to serving our community bank customers and a nationwide network of small businesses focused on the transportation, health care, manufacturing, distribution, agriculture and staffing industries. At this point I'd like to turn the call over to Bryce to provide his thoughts on our financial performance in the third quarter. Bryce?

Thank you, Aaron. I would like to begin by providing an overview of the impact on our financial statements of the ColoEast and Southern Transportation Insurance acquisitions. As part of the ColoEast acquisition on August 1, we acquired loans with an unpaid principal balance of $473 million and recorded a purchase discount of $12 million, reflecting a fair value price of 97.5%. We assumed $653 million of deposits. This included $445 million of transaction accounts and $208 million of time deposits and it roughly doubled our balances of noninterest-bearing demand accounts to $340 million. We recorded a core deposit intangible of $7.2 million that will be amortized over 10 years utilizing the sum-of-the-years'-digits method. We assumed junior subordinated debentures with a face value of $11.9 million. These instruments mature in 2035 and 2037, and they bear interest at an average of LIBOR plus 171 basis points. We recorded these debentures after estimated fair value of $7.7 million. We expect our accounting costs to be LIBOR plus 475 basis points. We assumed TARP securities with a face value of $10.5 million with $4.6 million of accrued and unpaid dividends as of the acquisition date. We paid off the TARP securities and accrued dividends on August 31. The accrued dividend for the month of August prior to redemption of $104,000 was recorded as a dividend on preferred stock. We incurred $1.6 million gross or $1.4 million tax effective of ColoEast acquisition-related expenses in the third quarter for employee severance, system contract termination, accounting, consulting, valuation and legal work. We recorded $12.1 million of provisional amount of goodwill. Together with a core deposit intangible that's resulted in dilution of tangible book value per share of $1.07. We expect to meet or exceed our targeted cost savings of approximately $5 million phased in over the upcoming year following the acquisition. Regarding the acquisition of Southern Transportation Insurance company on September 1, we paid [ $2 point ] million of cash and an asset purchase to acquire the business. The purchase resulted in $600,000 of goodwill and $1.6 million of customer intangibles. Slides 7 and 8 as well as the tables attached to the earnings release present the current historic mix of the loan portfolio. As Aaron mentioned, organic loan growth, excluding ColoEast, was $89 million or 6.3% this quarter. The breakdown of this organic growth includes a net increase of $31 million of a commercial finance portfolio and a $58 million increase in the community banking portfolio, including a $37 million increase on our mortgage warehouse portfolio. The acquired ColoEast portfolio included farmland and agricultural production loans. Starting this quarter, we've broken out the ag loans on Slide 7 on the investor deck, which shows as of this quarter end, we have $139 million of loans in farmland and $125 million of agricultural production loans. Slides 8 through 10 present trend information for net interest margin. Yield on loans this quarter was 7.42%, a decrease of 108 basis points from the second quarter, again due substantially of a change in the loan mix resulting from the Colorado acquisition. The adjusted yield on loans, which excludes the impact of approximately $4.7 million of purchase loan discount accretion we recorded during our third quarter, was down 70 basis points to 7.10%. As of September 30, we had $18 million remaining in loan purchase discount, of which we currently expect $15.4 million to accrete into income over the remaining lives of the acquired loans. Of this accretable amount $8.6 million is expected to accrete by the end of 2017. Prior to acquisition, the ColoEast loans were yielding approximately 5.5%. Regarding interest expense, the cost of total deposits and total funds improved, decreasing by 6 basis points and 7 basis points this quarter to 57 basis points and 61 basis points, respectively. Contributing to this improvement was the lower cost deposit base assumed from the Colorado acquisition. Net interest margin remained strong at 5.79%. Adjusted net interest margin, which excludes loan discount accretion, was 5.53% for the quarter, a decrease of 45 basis points from the previous quarter due to the factors I just mentioned. We earned noninterest income of $6.1 million for the quarter ended September 30. Excluding the impacts of gains and losses on sale of loans, securities and REO adjustments, noninterest income increased $1.2 million from the prior quarter. Most of this increase is due to additional fees associated with the growth in consumer loan and deposit accounts in conjunction with acquisition of ColoEast. Noninterest income in the third quarter also includes $1.6 million in asset management fees earned by Triumph Capital Advisers. TCA now manages approximately $1.47 billion of CLO assets, earning approximately 31 basis points on average in management fees. TCA has also been engaged as the staff and services provider to Trinitas Capital Management, which is the named asset manager for a $407 million CLO issued in June and another $409 million CLO issued in September. As staff and services provider, TCA performs certain middle and back-office functions and earns a 26 basis point fee based on the assets in the respective CLOs. In total, TCA now provides services for approximately $2.3 billion in fee-generating CLO assets, consisting of both CLOs for which we're asset managers and CLOs for which we provide staff and services for a fee. Our annualized revenue earned from these fee-generating CLO assets equals approximately 30 basis points of such assets. Triumph also holds minority investments of $3.4 million in the subordinated notes issued by the Trinitas Capital Management CLOs. At September 30, Triumph also holds a $10.4 million equity investment in one CLO warehouse, down from $17.3 million as of June 30. These CLO warehouse investments earned noninterest income of $657,000 in the third quarter and $774,000 in the second quarter of this year. For the third quarter of 2016, noninterest expense increased $5.5 million from the prior quarter to $25.8 million. Our noninterest expense this quarter includes $1.6 million of expense associated with the ColoEast acquisition activities. The remaining increase is primarily due to the cost associated with incremental additions of the ColoEast personnel, facilities and activities into our operations. Our adjusted efficiency ratio improved 2.5% from the prior quarter, and our adjusted ratio of net noninterest expense to average assets decreased 70 basis points from the prior quarter to 3.15%. As mentioned previously, we expect to meet or exceed our cost savings targets for the ColoEast operations in terms of both amount and timing, but these savings are just now beginning to show up in our results. Slide 13 presents our asset quality ratios, all of which increased quarter-over-quarter due to the addition of loans acquired from ColoEast as well as deterioration experienced in other parts of our loan portfolio. Past due to total loans increased 106 basis points to 3.86% at September 30. Our past due loans increased $36.1 million from $39.5 million at June 30 to $75.6 million at September 30. Approximately $19.2 million or 53% of the quarterly increase was due to past due loans in acquired ColoEast loan portfolio. Nonperforming loans, which also includes TDRs and factored receivables greater than 90 days past due, increased by $22 million to $44 million, and as a percent of total loans increased 69 basis points to 2.25% as of September 30. Of the $44 million balance of nonperforming loans at September 30, $7.4 million are loans acquired from ColoEast, which were brought over with $1.2 million of purchase discount and $24 million of commercial finance loans, including $2.1 million of the factored receivables. Most of the increase in nonperforming loans this quarter is due to three credit relationships that have deteriorated and were placed on nonaccrual. Nonperforming assets, which also includes OREO and other repossessed assets, increased $24.3 million to $52.7 million this quarter, and as a percent of total assets increased 45 basis points to 2.05% as of September 30. Our provision for loan loss expense this quarter was $2.8 million due in part to general reserves for organic loan growth experienced during the quarter, but primarily due to $700,000 of specific allocations on the two impaired loans and a $1.4 million partial charge-off of another. For the September quarter, charge-offs net of recoveries were $1.7 million or 10 basis points of average loans. Our ALLL increased $1.1 million to $14.9 million, but as a percent of total loans decreased 22 basis points this quarter to 76 basis points as of September 30. As a reminder, loan loss reserves related to the acquired ColoEast loans were not carried over to Triumph upon acquisition as the loans are measured at their acquisition date fair values, resulting in a $12 million purchase discount on those loans, which includes the impact of credit inefficiencies and expected future losses. The combined balance of our total unamortized purchase discount and ALLL as a percentage of total loans is 1.7%, which is an alternative view of our credit risk coverage. With that, I'd like to turn the call back over to Aaron.

Thank you, Bryce. At this time, we'd like to turn the call back over to the operator for questions.

[Operator Instructions] Our first question is from Jared Shaw with Wells Fargo Securities.

Could you give a little detail, I guess, on the relationships from your end that were driving the increase in the non-performers? What categories they're in? What the expectation for workouts are? And what the potential for loss content is, sir?

Sure. I'm going to let Dan take it and then I'll -- I can finish it up.

Good morning, Jared. As Aaron mentioned, $7.4 million of the increase was the result of the acquisition and those assets have been marked to fair value, so we feel comfortable with the valuation. Of the reminder, really 2 clients in the heavy manufacturing sector account for those increases. The economic conditions for those entities have been soft and these clients have seen it over the last 6 months. We, in each case, think that we're properly collateralized. We're in the process of workout and negotiation with these clients to find solutions, either refinance or, if need be, liquidation, but we feel comfortable with the valuations we have in the collateral. We don't think that this is the result of an underlying weak trend in our portfolio or the credit quality of our portfolio. We do have one other client in the heavy manufacturing sector with exposure of less than $6 million. There we're properly collateralized and that company is performing to plan.

Yes. So Jared, on those that -- those 3 credits are sort of the sum total to the exposure to that industry, which is where the nonperforming assets increase, the organic nonperforming asset increase came from this quarter. And as Dan said, we view ourselves as adequately collateralized, and so we don't view this as anything systemic other than just these two clients experience slowdowns.

Okay, okay. And then with the move of the lockbox services on the factoring, with that accelerated circulated cash flow this quarter, did that help the margin or the loan yield this quarter as well since you shortened the pay cycle on those loans?

This is Bryce. I'll take that one. I mean, overall, for those factoring relationships on the individual basis, it would have increased our effective yield. But the portfolio in total overall effective yield quarter-over-quarter was about the same. It is really a kind of change in mix within the types of factoring going on with Triumph Business Capital between the nonrecourse, recourse, freight and broker, kind of mix change in there which occurs from time to time over the course of the year. So on individual accounts, [indiscernible] that's why cash yields are higher.

Is it the growth rate of the factored receivables or is it really more of a -- is this an efficiency opportunity for you?

This has nothing to do with the growth rate. This is just an efficiency of processing these receivables. But as we look at the growth rate, we look at the number of invoices purchased because that's really where you can tell the growth rate and that's generally correlated to the growth of net new client relationships, both of which have grown every quarter since we've been public and even before, as a result of the investments we made in technology and marketing and back-office operations. This move with the lockbox just got rid of a delay in collection that was slowing things down about a week. And so we wanted to pointed it out to you that since you saw the net funds employed drop, that's sort of a onetime brought that just reflects an acceleration of our operating processes. And so we don't expect to see it in the future, and we expect invoices purchased and the number of net new clients to continue to grow as we reinvest in this business.

Okay, all right, great. Then, I guess, shifting just to the asset management fees in the Trinitas that we saw. So there was a new issuance in September and we saw the one in June, but overall fees still declined. Was that just paid down on some existing CLOs that were out there? Or if you could explain that. And then what does the pipeline look like for the next quarter or so on the CLO side?

So the answer to the first question is yes, it's the paydown in historical CLOs that you would expect to see. The answer to the second question, as I said in the past, I would not say we're in a position to make that call. I mean, we see the same general economic data that the market sees. But Trinitas, which is independent of us, makes the call based on a variety of factors of when and whether to issue a new CLO based upon economics that really we have no control over. And then, of course, related to that, we're competing in order to get them to hire us as staff and services provider. So it's 2 steps removed from being able to say what the market is doing to what our fee generation will be. I expect based upon the quality of people that we believe are around Trinitas that they will continue to get CLOs done. And I expect based upon the quality of the services, I believe, we provide Trinitas that we'll continue to be hired. But it would be impossible for me to say if there's going to be one done before the end of the year.

[Operator Instructions] Our next question is from that Brad Milsaps with Sandler O'Neill.

Aaron or Bryce, just wanted to see if you could give us a little maybe more color on kind of how you feel about the directionality of the NIM. I know there's a lot of moving parts with ColoEast coming in. I know you typically get a slowdown in the factored receivables in the first part of the year. So I assume, directionally it's probably down just because you get one more month of ColoEast. But beyond that just kind of curious what your thoughts are, particularly as it relates to kind of how you fund yourself going forward. It looks like you've used a lot or if not all of the liquidity from the deal.

That would be an accurate assessment. So what I would say, Brad, as you know, the commercial finance portfolio, all things being equal, is just going to grow faster than everything else in our portfolio. And so with this transaction, we knew there would be a shift in assets. And frankly, if you look at what Colorado East stand-alone loan yield was, it's actually pretty respectable among community banks. It's just not as good as ours because very few other banks have the commercial finance engine we do. So what would happen just left to its own devices is you would expect and, hopefully, we broadcast this, we don't expect to be able to grow our Colorado East market at a rate, which stays up with our commercial finance business, just like we don't grow our Iowa and Illinois markets that fast, and I'm not sure any community bank markets grow that fast. So left alone, you're going to see commercial finance start to drift back up towards that 40% ratio, and if it gets back to that 40% ratio, which it will do, absent another acquisition, I think you'll see our NIM return to where it was. It is true that we're going to experience marginal compression as we have to rely on time deposits, unless and until we make another acquisition that brings additional transactional deposits, but that's an incremental cost overall. And as for what we're seeing in our commercial finance portfolio, the competition is fierce. But I don't see us seeing any new pressures on loan yields in those lines of business that we haven't already seen and priced in the last year. And I would say the same is true in our community bank business. It's competitive, but there's not new pressures. So this decrease in NIM is just merely a function of the numerator and the denominator changing as a result of this acquisition, and we expect it to grow right back into line over the next few quarters.

Okay, great. That's helpful. And then Bryce, just a follow-up on the expenses. I was writing quickly, but it sounds like almost everything, the growth in the quarter is related to ColoEast. I think initially you guys were looking for around 20% cost saves, it sounds like you can do better. What would be anything major in the run rate at this point and sort of can you give as a little more color on kind of the timing of when those begin to show up. Is it in the fourth quarter? In another words, the expense growth in another month may not be as great as you might think? Or any other color there is helpful?

I would say that the biggest factor in the near term would be the one you already pointed out of having three months of Colorado included in the fourth quarter rather than just 2 months as we did here in the third quarter. As far as other significant bumps or adjustment out there, I'm not seeing any at this point other than just kind of normal trend.

So it's more maybe first quarter when those start to fall out when you start to see those?

As far as -- we've already realized probably close to half of the run rate expense reductions in Colorado. There are about half of it left that will kind of come evenly over the next 3 quarters.

And next question is from Christopher Nolan with FBR.

This is actually Matt Brotman on for Chris Nolan. My first question is on the ALLL. That fell to 76 basis points this quarter. I'm wondering would that be a fair run rate or do you expect that to grow back up to the 97 basis point level from recent quarters?

Remember at the end of what we were talking about earlier, the reason that fell is just a function of purchase accounting. When we purchased Colorado East, we -- you wipe out the ALLL and it comes into the purchase discount. So right now, we think a better way to look at what our general reserve is against our portfolio would be to combine the ALLL plus the purchase discount, which is 1.7%. So to say 76 basis points is your provision is just part of the story. It's more like 1.7% when you allow for purchase discount. The second part though and Bryce can jump in on this is, yes, we would expect ALLL to grow as we move forward back to at least that 1% level and depending upon other factors, it could go higher. But right now, the only reason that changed was just a function of purchase accounting.

Much appreciated. And my other question was, actually, I was hoping you could provide a little additional color on the $1.4 million loan relationship that drove net charge-offs?

It's Dan Karas, I can. We have one commercial finance client that we're in an exit mode. We don't, as part of this liquidation, have sufficient clarity on the amounts or timing of the recovery. And so we thought it's prudent to take the charge now and then work on recovery down the road.

[Operator Instructions] Our next question is from Jefferson Harralson with KBW.

I wanted to ask you about the increase in the average invoice size. Is that -- do you think that's due to diesel prices going up? Or is that due to just a different mix of the relationships that you're bringing in?

We can't really point to anything, Jefferson. It's not statistically significant enough for us to tell there is that shift in invoices for -- as we've talked about in the past depending on the type of freight moving. And so this isn't a material enough shift to establish a trend line on anything that we can see. But to the extent we do identify one in the future, we'll certainly share it.

All right. And it just seems like that would be a nice driver for you guys if -- when diesel stays at least flat or maybe starts to moving higher.

It would be a -- if you look at our invoice purchases compared to -- if you look at December 14 when invoices were, I believe, $1,700 to $1,800 an invoice, it would add several million dollars of earnings pretax that would be -- there would be no additional risk. So -- I mean, we're positioned for when that happens. We just have no idea when it'll happen.

So that sounds like 30-plus percent or more earnings without any increase in invoices purchased.

Correct, if oil goes back to $80, $90, $100 a barrel and freight tightens up. We're not betting on those things, but were it to happen, it would just naturally flow through our earnings.

All right. And just -- and a follow-through on Jared's questions on the cycle time. I guess, you said it saved by a week. How much was the cycle time before? And it seems like that might, if my math is right, that could be increasing your yields by 15% or 20%, am I thinking about that correctly?

We don't think it'll be that substantial over time. There's some -- if you dig down underneath that, since we've owned this business, the average turn ratio for our invoices has been between 36 to 38 days. What we had been experiencing in increasing scale was a delay that either had to tie with our lockbox operations or the postal service because a lot of these customers, there's still a delivery of the check. And we were being frustrated that how long it was taking to process and post these. When we switched it over, we saw an immediate improvement, but I don't think it's fair to model that going out into the future because it's -- we haven't had that happen long enough. We certainly feel more comfortable and very pleased with our new lockbox operations, and we've even talked about adding geographic diversity to that, so that if an invoice were paid from a California account debtor, for example, that it wouldn't have to come to Texas first, but we could establish a regional location. If we end up doing those things, it could increase, but I would strongly encourage you not to assume that we're going to achieve 15% better yields on that whole portfolio going forward.

I'd just add to that, just a little bit differently. The average turn is now back to where it normally ran for the last couple of few quarters and then slowed down on the turn. So it's really kind of back to normal.

Okay. That makes total sense. And last question on the ag production loans that came over from ColoEast. I have been seeing, I think, some cattle loans -- I know, cattle prices are down, I have been seeing some cattle loans going on to NPL. Is there a big piece of this $125 million that's cattle? And if so and if you know about that business, am I right that, that is a risk to bank lending because of falling cattle prices?

Well, it certainly -- there is a risk in falling cattle prices, and I can't give you the specific breakdown on the production side between what's crops and what's cattle, but cattle does make up a component of that. What I will say is that the team that we have in Colorado and Kansas have been in this sector for decades, many of whom started in the farm credit system. They have been through multiple cycles as have our clients. And the smart clients built equity in the value of their land over time, and they have that ability to use that, if you will, to weather the storm.

And it looks like we have a follow-up from Brad Milsaps with Sandler O'Neill.

Aaron, I'm just curious if you could update us on the M&A environment. What you guys are seeing out there? Kind of what if you had to gauge the probability of you guys doing another deal, call it, in the next 6 to 12 months?

Sure. Well, we continue to look at all sorts of opportunities, our primary focus being on institutions that fit the profile of Colorado East where we pick up sound community banking operations and excess liquidity. We do look at sort of niche opportunities in asset generators that would fold within current things we do in our commercial finance business. We're having multiple ongoing dialogue -- or dialogue with multiple parties. And so it's impossible for me to predict, but I certainly would hope that within the next 12 months, we'll be able to announce at least one deal. I mean, we certainly are working hard at it.

I'm not showing any further questions. I'll now turn the call back over to you for closing remarks.

Thank you, everyone, for joining us. And we'll talk to you soon.

Ladies and gentlemen, this does conclude the program, and you may now disconnect. Everyone, have a great day.