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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good day everyone and welcome to the Cadence Bancorporation Fourth Quarter 2017 Earnings Conference Call. All participants will be in listen-only mode. The comments are subject to the forward-looking statement disclaimer, which can be found in the press release and on Page 2 of the financial results presentation. Both of those documents can be located in the Investor Relations section at cadencebancorporation.com.
After today’s presentation, there will be an opportunity to ask questions. Please also note today’s event is being recorded. At this time I would like to turn the conference call over to Mr. Paul Murphy, Chairman and CEO. Sir, please go ahead.
Thank you and welcome to our fourth quarter call. Joining me for today’s call are Sam Tortorici, Valerie Toalson and Hank Holmes. As a result of a really great year, in 2017, I'm pleased to announce the first quarterly dividend of $0.125.
As I mentioned in the earnings release, we are very pleased with our core operating performance, our credit metrics are really good for the year, core deposit growth, a top focus is showing solid results, earnings were very good and we continue to enjoy a healthy NIM.
Really proud of our great team of bankers that are out making a lot of calls and business is growing throughout the footprint across various lines of business. The strong growth during the quarter brought us to just shy of $11 billion in total assets. Our new loan production in the quarter was good, pipelines for loan and deposits are attractive and diverse, we feel good about our outlook.
Expenses linked quarter increased, but includes a number of non-operating expenses, and Valerie's going to tell you more about that in a moment. I'd like to ask you to turn your attention to Page 3 of the presentation, look at a few of the highlights there. Net income of $14.7 million includes a one-time tax charge relating to tax reform of $19 million. Backing that out, our net income would have been $33.7 million or roughly $0.39 a share, ROAA of 1.26 and return on tangible of 13%.
I like our adjusted operating revenue at $113.6million, it's up 21% from the prior. NIM of 3.59% is solid, and again, Valerie will give you more detail on that in a moment. Loan growth up $821 million or 11% from the prior year, really a good number. Core deposits would be an exceptionally great story, up $1.2 billion up 18% from the prior year.
And fourth quarter was really strong over $500 million in growth there. So Sam's going to chime in on that here in a bit. The efficiency ratio was higher than we would've liked at 58.4%, but as I mentioned, contained a number of non-operating expenses, some of which were outlined in the press release.
Our goal remains to get into that 50% to 52% range. From a credit standpoint we've got a lot of numbers to be proud of, our non-performers decreased from 2.2% to 0.85% compared to the prior year. This decline was mostly a result of restructuring of energy credits and just active portfolio management. As a result of the decline in non-performers and credit resolutions, we reversed $4.5 million of the loan provision in the quarter. This includes $2 million in reserves, which were specifically allocated to hurricane risk that did not materialize.
Charge-offs for the year were net $4.4 million or six basis points. Pretty good credit year. Page 5, we highlight the full year operating results. Really a good year for Cadence. Net income, excluding the one-time tax charge was $121 million up 84%. Earnings per share, excluding the one-time charge were $1.78 or up 71% really proud of these numbers.
Net interest margin increased 27 basis points to 3.57%, driven by our asset sensitivity and rate increases. Again the efficiency ratio of 54.8% it is an improvement from just under 60% prior year, but we remain very sharply focused on expenses and seeing some improvement there in the future.
Page 7, a lot of good numbers to report. I would first comment on the quality of our non-performers, 90% of those are energy and 72% were paying in accordance with their contractual terms. So technically, accounting wise, they're non-performing but that gives you a little more insight.
Overall, the originated portfolio past dues are really very low at 23 points. A bit more on energy. The loan portfolio ended up flat for the year. We had some growth in Midstream. As you may recall, our Midstream net charge-offs lifetime-to-date are zero. So great performance there. That's about 60% of the portfolio, meaning Midstream is 60% of the portfolio.
And of course, the recent improvement in oil and gas prices has had a positive effect overall on really all aspects of the business. So with that, I'll pause and turn it over to Sam, and ask him to go into more detail on our core deposit growth.
Thanks, Paul. I'll be referring to Page 8 of our presentation. As Paul mentioned, one of the things that we're most pleased with in the quarter is our performance in core deposit growth. Our quarterly growth in core deposits was the result of the ongoing focus of our bankers for the past several quarters on multiple initiatives to help build our core deposit funding.
We grew core deposits, which excludes our broker deposits by $538 million or 7% linked quarter. And we grew core deposits for the year, $1.2 billion or 18%. The drivers here are primarily the expansion of commercial deposit relationships and our treasury management services along with consumer retail CD growth.
Core growth has allowed us to reduce our broker deposits, which came down by $245 million over last year, bringing our broker deposits down to 8.8% of total deposits. Our total deposit growth was 6% during the quarter, which brought our total deposits to $9 billion as of year-end. Our focus continues to be on growing core customer deposits. We are again pleased with our results in this area and the resulting improvement in our deposit mix during the quarter, evidenced by our non-interest bearing deposits as a percent of total deposits increasing to 25%, a fifth consecutive quarterly increase.
With that, let me turn over to Valerie to go through a little more of our quarterly performance.
Thank you, Sam. Turning to Slide 9, our net interest margin has improved very nicely from the same quarter a year ago, up 28 basis points to 3.59% from 3.31%. This increase is largely due to the impact of the short-term Fed rate increases on our asset sensitive balance sheet.
As a reminder, we've got about 70% of our loan portfolio that is floating rate and that's reflective of our heavy C&I commercial business focus. Compared to the third quarter of this year, the margin increased seven basis points, made up of increases in the earning asset and loan yields, partially offset by a five basis point increase in our cost of funds.
If we break it down a little further, the total loan yields for the quarter were 4.72%, an increase of 46 basis points over the prior year's fourth quarter and an increase of 17 basis points over the linked quarter. Included in that the originated loan portfolio yield in the fourth quarter was up 44 basis points over the fourth quarter of 2016 and up six basis points over the linked quarter.
Turning to cost of deposits, total cost of deposits was 69 basis points in the quarter, an increase of 22 basis points from the prior year's fourth quarter and up five basis points from the linked quarter. This quarter’s deposit cost increase included an October 1 reset of our up CD product, of which about $1.2 billion that changes every six months based on LIBOR.
The cost of funds, which includes holding company debt – the total cost of funds, which includes holding company debt was 89 basis points, up 20 basis points from the prior year and up five basis points from the prior quarter. Our total deposit beta is just shy of 30% on a full year basis or about half that of the originated loan beta, which has been nearly 60% on a full year basis.
If we move on to Page 10, the non-interest income platform. The pie chart on the right is a good summary of the breadth of our non-interest income sources that we believe is a nice complement to our overall core banking businesses. For the fourth quarter, adjusted non-interest income was $25.6 million, up 15% from the prior years quarter and down 5% from the linked quarter marginally due to the sale of a segment of our insurance division in the third quarter, that resulted in a $1 million gain in that third quarter and then lower related revenues in the fourth quarter.
Our other fee business lines were stable, with the exception of a softer quarter in mortgage banking revenue, due to both seasonality and putting – having more on balance sheet growth there versus mortgages sold, which drives this non-interest income. Our assets under management grew nicely, ended the quarter at $5.64 billion.
Moving to Slide 11, this quarter's pretax, pre-provision net earnings was $47.2 million, up $7.7 million or 20% over the prior year's quarter, and down $4.6 million or 9% from the linked quarter. As Paul noted, the linked quarter decline was due to the higher fourth quarter expenses, which were up $10 million quarter-over-quarter driven by several non-routine items, including $1.2 million in expenses specific to our November 2017 secondary offering, $800,000 in non-routine tax consulting costs, approximately $2 million in legal costs associated with certain pre-acquisition related litigation and contingent fees related to a legacy acquired bank.
Additionally, given the strong operating performance of the bank in 2017 as well as an increase in our market cap, our incentive accruals increased quarter-over-quarter approximately $700,000. Given the loan growth in the quarter, our unfunded commitments provision increased quarter-over-quarter about $800,000. We had some technology licensing updates, just over $0.5 million as well as some other seasonal variances and expenses that tend to run higher in the later part of the year.
So while this quarter's expenses were high compared to recent quarters and resulted in a efficiency ratio for the quarter at 58.4%, the full year efficiency ratio improved significantly from 59.9% in 2016 to 54.8% in 2017. For the full year of 2017, total expenses increased $16 million or 6% over 2016, while our revenues increased $58 million or 16% over 2016. We like that formula, and given our balance sheet growth we continue to work toward a longer-term efficiency ratio in the 50% to 52% range.
With that, operator, we'd like to open it up for questions.
Ladies and gentlemen, at this time we would begin the question-and-answer session. [Operator Instructions] And our first question today comes from Steven Alexopoulos from JPMorgan. Please go ahead with your question.
Hey, good morning, everybody.
Good morning.
Good morning, Steven.
I wanted to start on expenses. Valerie, following up on that laundry list of one-time or unusual items you just ran through, how should we think about the run rate for expenses as we move into the first quarter?
Yes. So I think it's good to kind of step back and look at it from an annual perspective. If you look at our annual expenses 2016 to 2017, they increased 6%. I think we had talked about kind of that mid-single-digit growth rate. And that's what we would expect as we look forward into, say the coming year, is a target of mid-single-digit growth on our overall operating expenses.
As far as the first quarter goes, if you look at our quarterly history, you'll see that the fourth quarter tends to be higher for a number of reasons. First quarter does also have a little bit incremental historically in payroll taxes and some of those kind of things, just because some of that is front-loaded. But otherwise, we expect that overall 6% increase on an annual basis to be fairly spread out as we go through the year.
Okay. Does the lower tax rate change your thoughts around expenses at all and maybe picking up the pace of investment?
Yes, Steve, this is Paul. We – it does change our thoughts a bit. I mean, we're going to do a variety of things, we're going to increase our merit pool a bit, we'll increase our minimum wage and also increase 401(k) match, we're going to see the bank, pick up a higher portion of insurance for all of our associates, and we're going to initiate an employee stock purchase program. So all of those initiatives would be included in Valerie's 6% target number. And – but we will be investing some of that money really on our associates, as much as anything. It wouldn't – the tax thing wouldn't require – wouldn't prompt us to go build a branch that we otherwise wouldn't have built or other major expense initiatives than the ones that I've just mentioned.
Right. One of the tax benefit, however, will fall directly to the shareholders.
Okay, that’s helpful. On the loan growth, which is very strong in the quarter, I was looking for a little bit of color on C&I. And specifically, what drove that lift and what you're calling out as other C&I on the slide? Maybe just comment on the pipeline here, post-tax reform.
Sure, Steve, I can help that. This is Hank. We saw a lot of diversified loan growth throughout the year. In the fourth quarter, really, our specialized industries grew, we saw a number of deals in our kind of general C&I. And I'd love to give you a specific industry and location, but it's really diverse, it's throughout the footprint. And we're really proud on the team in the loan growth. They did really great job in the fourth quarter. One thing I will add to it is, we did see some CRE loans pay off in the fourth quarter.
Having said that, we have really a built in organic growth, with we – as you know, we primarily focus on construction lending, and we had a very robust last 18 months on the CRE side, so we'll see some nice growth from them going forward. Typically, when we have a number of closings like we did in the fourth quarter, our treasury management pipeline continues – really grows with that. We have seen that, and so we're very optimistic on the pipeline, the treasury front in the first quarter.
Historically, we have seen a little bit of a fall off in business generation in the first quarter, when they had such a big fourth quarter. That's not the case this time. We really – our pipelines continue to grow. I'm very – I'm optimistic about the first quarter both on the loan and the treasury side, and our team is out making a lot of calls and bringing in a lot of business.
That's excellent. Thank you, and maybe just one final one. Valerie, the level of accretion was a bit off this quarter. Can you help us think about just, what's a good starting point for the margin and what's a more reasonable run rate for the accretion? Thanks.
Yes. So Steve, if you – in our actual press release we have a table, that is Table 4 – that's Table 3, that breaks down the accretion into the scheduled as well as in kind of the recovery that's really – that’s the bumpy part. The schedule, you can see is pretty consistent. And if you look at the past quarter – couple of quarters of trend there, I think you'll be able to get a good idea for how that could go on forward. The recovery piece, I guess that has been bumpy kind of based on various work out efforts. I would expect that that's not going to be large on a regular basis.
Just as that portfolio continues to work down, those tend to be smaller in nature. Every now and then you get a decent sized one, but I would expect it's be a little bit more modest as we go forward. So as we look at our margin, a number of things kind of play in. If you kind of strip out that accretion, we were pretty much flattish during the quarter. We did have an interest rate movement in December. We are an asset-sensitive bank. And if you look at the impact of those into 2017, it has been on a net basis positive for us. And so we do expect positive movement in our margin when we do get rate increases. We also had, in the fourth quarter, the $1.2 billion in our UP CD product that repriced up on October 1.
Now that product's been grandfathered, we're not adding to that population. But again it won't reprice until April 1. So that again is something that will come into play as we look at the first quarter.
Got it. Okay.
And other than that, I would expect consistent behavior really in our balance sheet at this point.
Very good. Thanks for taking all my questions.
Absolutely.
Thanks Steve.
Our next question comes from Brady Gailey from KBW. Please go ahead with your question.
Hey, good morning. This is Mike Belmes on for Brady.
Good morning, Mike.
Good morning. Just kind of wanted to touch upon energy a little bit. Noticed NPLs ticked down, there's some revaluation on the reserves there. Can you guys kind of give an outlook on what you're seeing and thoughts on loan growth opportunities going forward?
Hank, you want to comment?
Sure, I'd be happy to. So one of the things, we've seen out of this downturn is really a more conservative look on the energy front, primarily in the upstream business and advance rates being a little bit more conservative and overall capital structures. And so, as the industry rebounds, I feel positive about our opportunities. And we are seeing a little more activity in our – within our – in energy group. And so overall, I'm – I feel positive about opportunities to grow that portfolio. I do think it will be in line with our projections with a – for the entire portfolio growth as Valerie mentioned earlier.
Got you. And I guess just as a follow up, on the credit side. Do you think we could see some maybe modest releases related to this portfolio going forward or is it kind of like the majority has been already realized at this point?
Yes, I would suggest that there is a Slide 16 in the presentations deck that details out the energy loans by category and has their reserves balances by category as well. And so you can see that, for example, the E&P portfolio at the end of 2017 has allowances, as a percent of outstanding balances at 4.6%. Midstream 30 basis points, which is very, very disciplined because of its performance supporting that. And then the energy services at 2.5%.
And so if you look at those compared with where we have been historically, you can make some assessments there. And as we continue to work through, we still have some nonperformers in that portfolio that were continuing to work through. But of course, they've come down significantly. So the amount of potential declines in those reserves, I think, would also be impacted, based on the balances that are left in that portfolio.
I think I would just add, probably not much.
Got you. That’s helpful. Appreciate the color. And then kind of revisiting loan growth again, we had the tax reform passage and kind of what are you've been hear from customers? Are they increase – is there increasing demand for investment, are you guys seeing greater loan growth opportunities out there?
I'll comment and I'll invite others as well. Yes, I mean people are much more positive. They are thinking about ways to take better care of their employees, to do some expansion that they've might not otherwise have considered. There are just a number of examples where it's going to be assimilative effect, for sure, to the economy in my view.
I agree 100%
Got you. So say sound like there's some upside to that at high single, low double loan growth targets you guys laid out previously?
Well, we would always – or at least in my case, tend to be the optimist. But I – that's the bigger we get than the harder it is to do that percentage increase, and so that kind of compete a little bit with your suggestion. But we have – it's certainly, something that we could beat.
Great, great. Appreciate the questions. Thanks.
Our next question comes from Jon Arfstrom from RBC Capital Markets. Please go ahead with your question.
Thanks. Good morning.
Hi, Jon.
Question, maybe for Sam or Hank, you guys touched on a little bit, but deposit growth the last two quarters were very strong. You scratched the surface a little bit on it. But can you talk a little bit more about what's going on and what's driving the deposit growth?
Yes, hey John, this is Sam, thanks for the question. Yes, deposit growth has been a highlight for us all year. It was particularly strong the last couple of quarters. As you know, we have – of our total deposits – about $3 billion of that is retail, with the bulk of the balance being commercial. And as we continue to grow and expand our commercial relationships, we just – we pressed hard on the deposit front. We target industries and sectors that are typically deposit rich and we've had increasing success with that.
And I'll just have to highlight our treasury management team and our treasury platform is being a real differentiator for us. We win larger opportunities, but we're hitting singles and doubles every day, every week with small business, middle-market clients. And that's why you continue to see our noninterest-bearing as a percent of the total that's increased for five consecutive quarters, now up to 25% of total deposits. So our deposit pipeline continues to be very solid and our treasury sales pipeline is also very solid. So we see that we've got really good momentum here and are encouraged coming in this strong at the beginning of the year.
Okay, good. Yes, it's good to see the core funded growth. I mean, it's rare to see that. Valerie, just a question for you back on the margin. You've seen the loan yields respond after the December rate increase and I guess the question is, you're expecting the margin to lift a bit in Q1?
Well, I guess I'd refer you back to kind of how it's behaved through 2017 as you look at the rate increases. Our loan portfolio, like some 70% of it is floating rate and it will reprice based on 30-, 60- and 90-day LIBOR. So there's a little bit of our lag period there. But that is overall the net – that end result is definitely favorable to have a rate increase on those loan yields
Okay. Okay. On expenses, the $233 million is the base that you would like us to build off of, just to clarify now?
Yes. The full year 2017.
That’s right.
The expense is correct.
Okay. Good. Good. And then one more for you Paul, the dividend decision on the capital plan. I think people liked the dividend. But can you talk a little bit about how you think through the capital plan going forward?
Right. Yes. So, Jon, when we're on the initial road show, we said that we had visioned at some point, we would commence a dividend and timing to be determined. And so just looking at really the strong year, the capital creation, the taxes, I mean a variety of things, we felt comfortable making the move now. And the long-term capital plan, we want to be efficient with capital. And we'd like to be, of course, nowhere close to the regulatory guidelines, but maybe somewhere between peer in the regulatory guidelines. We'd like to run a little bit of on the lean side in the long-term.
Yes, okay. Okay, thank you. Nice job.
Thanks, Jon.
Thank you.
Our next question comes from Jennifer Demba from SunTrust. Please go ahead with your question.
Hey, guys. It’s actually Steve on for Jennifer.
Hi, Steve.
I was hoping you guys could give us some of your latest thoughts on M&A. Has the environment changed at all with tax reform?
Yes, Steve. Well, we continue to be interested in M&A, and from time to time, had dialogues with potential partners. With respect to the tax rate, I don't know that, that has a big impact on it. I mean, certainly, I guess, with – in many ways kind of help to think about valuation. I mean, you've got more cash flow coming from potential partners. But the challenge in M&A is always timing on the side of a target in terms of what's the right thing for them and their shareholders. So in summary, we would like to be successful with M&A. But our core business plan is doing just great. And if we wind up, standalone then we won't be disappointed.
Thanks. And then I guess going back to kind of deposit cost and the competition environment there. I know you guys talked about that CD that automatically resets with LIBOR. But have you changed any other rates, any geographies or any kind of areas of higher deposit cost capitation?
I mean, the only thing is we do get – it's a little bit more spying, you tend to get a little bit more pressure in the private banking and some of the wealth type accounts. And so we're keeping with market, except I would say that we're trying to be a little bit tighter on that. We have seen our deposit betas go out throughout the year. But they're still well below where we're modeling. And so it's something that we're being tight on. But also wanting to make sure that we're balanced in a way. And I think we've been pretty successful, when you see the growth in our deposit base as compared to the growth in our deposit cost, it really is – it really has been a good year for us.
And I would just say, our deposit betas are a bit higher than on average and our asset betas are even more attractive than average. And so it's working out fine for us.
And what do you guys model, can you remind me on that, for deposit betas?
We’re modeling now, it's about a 55%-ish longer term.
Okay, perfect. Thanks.
Thank you.
Our next question comes from Michael Rose from Raymond James. Please go ahead with your questions.
Hey, good morning. Thanks for taking my questions. Appreciate the expense guidance, but wanted to move on to some of your fee businesses, specifically any investment advisory in insurance business, both have had pretty good performance. Any sort of outlook for those businesses we're moving to 2018 and maybe an overall target for fees?
First off, I would just say we're really proud of our team on the investment advisory group and our trust team combined are just really a great group of professionals. In terms of outlook, I think they'll have consistent growth in their business, along the lines of what they've been doing. In terms of M&A, we would love to find something where we can maybe add to these businesses, if there's companies in their areas that might be additions for us. So I don't know, Valerie, what would you add?
Yes. I think it's solid revenue source on interest bearing area. And so it does grow slower than our interest earning side of the income statement. But it's solid for us and it's good business and certainly, a great complement to our loan and deposit lines.
Okay, that’s helpful. And then maybe just a broader question on, obviously, efficiency improvement has been a big story for you guys. Do you guys have any sort of targets, as we think about the next couple of years, is it relates to efficiency or profitability ROAA, ROATCE stuff like that? Thanks.
So our initial goal of that 50% to 52% range is still very much our goal. In longer term, I'd like to be even better than that. And we think we'll make nice strides in that direction next year. We think that as Valerie mentioned, first quarter is a little bit more of a challenge with some heavy payroll taxes in the first quarter. But we would expect to see linked quarter improvement throughout the year. And I think it's – our goal would be to be in that 50% to 52% run rate by the fourth quarter.
All right. Thanks for taking my questions.
Our next question comes from Brad Milsaps from Sandler O'Neill. Please go ahead with your question.
Hey, good morning.
Good morning.
Thanks for joining us, Brad.
Thanks. You guys have addressed almost everything. But just kind of curious, in terms of the provisioning going forward. Do you still expect to kind of provision at something kind of 1% of net loan growth? Would that be fair depending upon the category?
Yes, I think, it's going to kind of vary, obviously, like you said depending on category and so forth. But that's where we would – with stable credit metrics, it's reasonable to think things would be consistent at that level.
Okay. And Valerie, I appreciate the detail in Table 4 on the accretion. But just kind of curious, can you remind us how much of left in each bucket in terms of credit and an interest rate mark yet to be recognized? And then second, it's kind of a modeling question, but do you have the impact of the change in tax rates on – for the NIM in the first quarter?
So we’ve got – yes, I don’t have handy the total amount of accretable yield. It's – it somewhere south of $100 million, probably close to $75 million at this point. But again, I'd probably refer you to our public disclosures on that, I just don't have that number handy at this point in time. And as far as the tax impact on the NIM, I'm sorry, could you restate that question?
Yes. Just with your FTE adjustment, I don't think it's a huge headwind. But it doesn't change anything on net basis. But just curious if you add kind of what the basis point impact might be?
Yes, I don’t have that. I mean, effectively if you just – we have about $400 million or so, the municipal deposits that affects that tax equivalent yield. And so taking a look at where we have been historically and then factoring in the lower tax rate, we are expecting effective tax rate for next year between 21% and 22%. That may get you close.
Okay, great. I’ll follow-up. Thank you.
[Operator Instructions] Our next question comes from Matt Olney from Stephens. Please go ahead with your question.
Hey, thanks. Good morning, guys.
Hi, Matt.
Most of my questions have already been addressed, but I wanted to follow-up on one item. I think you guys have a few swaps on the balance sheet. Can you just give us an update of the amount of swaps and – is there something you still expect to hold. Could you give an update there, it's helpful.
Yes. Sure. We've got about $1 billion still of swaps. Now we had $300 million – we did have $1.3 billion, $300 million of that rolled off the end of 2017. Of that $1 billion that remains, about $380 million rolls off the end of 2018, another $300 million the end of 2019 and then the remaining $350 million 2020, it's a little bit longer term. And so that is on our balance sheet right now. We don't have any plans to changes. We do talk about that on a regular basis in our outcome meetings. But right now, we think it's prudent to keep those where they are.
And Valerie, at this point what is the overall impact of the swaps on the margin right now?
Yes. So where we are today, assuming that there is no rate changes, it's probably about $1.5 million reduction of our net interest income on an annual basis and our interest income on an annual basis as a result of those. And then if that basis points go up, then that negative impact, probably, for every 25 basis points would go up a couple of million dollars, $2.5 something along those range. And the biggest impact we've got on the 2018, we are receiving fixed debt 1.3%. We've got the disclosures in all of our public disclosures. And so when you compare that to the one-month LIBOR, that's the biggest piece that is driving that impact for 2018.
Okay, that’s helpful. That’s all from me. Thank you.
[Operator Instructions] And ladies and gentlemen, at this time, I'm showing no additional questions. I'd like to turn the conference call back over to management for any closing remarks.
So in summary, we feel like 2017 was a really solid year. We're pleased with our progress. I'm especially proud of our great team and grateful to them for their hard work and dedication. And I would close by saying, rest assured, that our Cadence bankers are working hard to do a good job for clients and for shareholders. With that, we stand adjourned.
Ladies and gentlemen, that does conclude today's conference call. We do thank you for attending. You may now disconnect your telephone lines.