Community Financial System Inc (CBU) 2009 Q1 法說會逐字稿

Please note that this presentation contains forward-looking statements within the provision of the Private [Security] Litigation Reform Act of 1995 that are based on current expectations, estimates, and projections about the industry, markets, and economic environment in which the Company operates.

Such statements involve risks and uncertainties that could cause actual results to differ materially from the results discussed in these statements.

These risks are detailed in the Company's annual report and Form 10-K filed with the Securities and Exchange Commission.

Now I would like to introduce today's call leaders, Mr.

Mark Tryniski, President and Chief Executive Officer; and Mr.

Scott Kingsley, Executive Vice President and Chief Financial Officer of Community Bank System.

Gentleman you may begin.

Thank you Betty.

Good morning, and thank you all for joining our first quarter conference call.

Despite our best efforts and intentions on improving results over last year's first quarter, we did produce earnings-per-share that were $0.04, or 11%, lower than 2008.

There were a number of factors going both ways that drove our results this quarter, and I will comment on the most significant of those.

First is credit costs, which were $0.05 a share higher in 2009.

Our provision however was in line with our expectation given the current economic environment.

Our asset quality remains very strong, which we expect will continue, absent material economic degradation, with net charge-offs of only 30 basis points for the quarter and nonperforming loans of only 49 basis points.

Our delinquency ratio of 1.33% remains low and consistent with the past several quarters.

We are in this environment satisfied with asset quality.

Our mortgage origination activity in the first quarter was a record for us of over $100 million, virtually all of which we sold into the secondary market.

In fact our mortgage portfolio actually shrink by nearly $40 million in the quarter.

With mortgage rates averaging under 5% for the quarter, we did not feel that strong growth in long-dated, low-rate assets was in our best longer-term interests.

The strength of this secondary market activity however did result in approximately $2 million of related noninterest income for the quarter.

Operating expenses were up 15% for the quarter, almost entirely a result of bank and non-bank acquisition activity in the latter half of 2008.

This also included a material increase in FDIC assessments equating to $0.03 per share for the quarter over 2008.

An important factor affecting our first-quarter results is a tremendous excess liquidity position we had throughout the first quarter of 2009.

It was an average of $122 million greater than that of 2008's first quarter, and at the end of the 2009 quarter actually stood at $250 million.

That growth was the result of un-deployed funds from the fourth-quarter Citizens' branch acquisition as well as tremendous deposit growth in the first quarter of over $160 million, representing an annualized deposit growth rate of 17%.

At a yield of 25 basis points on that excess liquidity for the quarter, this position relative to our average asset yield equates to an earnings penalty of approximately $0.045 per share.

We are hopeful of productively reducing this liquidity over the course of the next several quarters through a combination of loan growth, capital markets opportunities, and targeted deposit reductions.

With that said, as a general observation, the environment right now is a very difficult one for productive liquidity deployment.

On one hand, we are in the midst of a declining economy and deteriorating credit cycle.

On the other hand, interest rates are at all-time lows on both the short and long ends of the curve.

The end result is that it's very difficult to be adequately compensated for risk in the current environment with respect to both credit and capital market assets.

We have been disciplined and patient in deploying this excess funding and will continue to be, and are not inclined to make inopportunistic investment decisions for the benefit of near-term results to the detriment of the longer term.

Lastly, our fourth-quarter acquisition of 18 branches in northern New York from Citizens Financial Group has been successfully integrated.

Through the end of the first quarter our execution has been very strong with both loans and deposits up from the date of acquisition, which is in our experience atypical in an acquisition, and it's a result we are very pleased with.

These markets continue to be strong and we expect will be productive for us through 2009 and beyond.

Looking forward to the remainder of 2009, we see both opportunities and challenges.

On the challenges side of the ledger, holding asset quality tight in a declining economic environment will continue to be an important focus as will productive deployment of excess liquidity.

On the opportunities side, both our retail and commercial businesses are performing well with full-year growth expected for both loans and deposits.

We also expect as we have benefited over the past few quarters to see continuing opportunity for many high-quality customers of the large banks seeking relationships with the generally stronger regional banks like ourselves.

Those would be my prepared comments.

I will turn it over to Scott.

Thank you Mark and good morning everyone.

I would like to make a few remarks on the first quarter as a follow-up to the items Mark just covered.

First as mentioned in our release, first-quarter cash earnings-per-share, which excludes the after-tax effect of the amortization of intangible assets and acquisition-related adjustments were $0.37, a full $0.05 per share, or 15.6%, above GAAP reported earnings of $0.32 per share.

This $0.20 per share differential on an annualized basis continues to be a meaningful value driver for our Company.

I will first discuss some balance sheet items.

Our business lending portfolio grew $19.7 million, or 1.9%, on a linked-quarter basis in the first quarter, representing our sixth consecutive quarter of annualized growth in that portfolio above 5%.

As Mark mentioned, our consumer mortgage portfolio was actually down $36 million from December, reflective of our decision not to portfolio lower-rate, longer-term assets and instead sell most of our originations to Fannie Mae.

Asset quality results continue to be very favorable in this portfolio with the first quarter of 2009 representing our eighth consecutive quarter of net charge-offs rates under 5 basis points in that portfolio.

Our home equity portfolio of approximately $325 million also declined approximately $10 million in the quarter and was also likely influenced by low longer-term mortgage rates.

In addition, we did experience lower line utilization again in the first quarter, indicative of our customers' desire to continue to delever despite the low rate environment.

Asset quality results continue to be very favorable in this portfolio also with very low loss rates consistent with those in the consumer mortgage portfolio.

Our consumer indirect portfolio of nearly $530 million at quarter end was basically flat with year end and reflected another difficult quarter for most participants in the automotive industry.

A byproduct of very low new-vehicle sales has been an improvement in used car valuations, where the largest majority of our lending is concentrated.

Net charge-offs for the last two quarters have been around 70 basis points, which is higher than we experienced for the six quarters ended June 30, '08 but still reasonable and manageable levels.

With our bias towards A and B paper grades, yields have remained very consistent.

Quarter-end deposits, as Mark mentioned, were up $161 million from December and included seasonally expected increases in public funds including the core municipal customers we acquired in the November branch transaction.

Core deposits excluding time deposits grew 32% annualized in the first quarter and represent 63% of total deposits at March 31, 2009.

The continuation of a very favorable funding mix change we worked diligently at.

Our capital levels in the first quarter remained strong.

The Tier 1 leverage ratio stood at 7.16% at quarter end.

Net unrealized gains in our investment portfolio at quarter end were $16 million despite the carrying value of our Level 3 investment assets, which is almost entirely comprised of pooled trust preferred securities being $25 million below book value.

The valuation of these assets continued to reflect market and interest rate volatility as well as the absence of an active market for these types of securities.

Our holdings, which are super senior, continue to fully perform.

Shifting to the income statement, our reported net interest margin for the first quarter was 3.82%, up 1 basis point from the first quarter of 2008 and down 4 basis points from the fourth quarter.

Proactive management of funding costs continued to have a positive effect on results, as Mark mentioned, and as additionally, first-quarter earning asset yields were challenged by our high level of net liquidity.

First-quarter noninterest income excluding securities gains and losses was up 17.5% over the prior year.

As Mark mentioned, mortgage banking revenues increased nearly $1.8 million over last year's first quarter, reflective of a very robust quarter of new secondary market originations.

Our employee benefits administration and consulting business increased revenues by 11% over last year's first quarter, principally on the strength of acquired growth from the Alliance Benefit Group MidAtlantic transaction completed last July.

Deposit service fees increased 9% over last year derived from the branch acquisition completed in November as utilization of core depository services actually declined slightly in the quarter, related to lower consumer utilization.

Our wealth management businesses experienced a 6% year-over-year decline in revenues, the result of continued erosion in equity market conditions.

Operating expenses, excluding acquisition expenses of $44.3 million, increased $5.9 million, or 15.4%, over the first quarter of 2008 and reflected the ABG acquisition completed last July and the branch transaction in November.

In addition the Company recorded an additional $1.3 million of FDIC insurance assessments in the quarter.

Salaries and benefits costs increased $2.5 million, or 12.2%, over the first quarter of last year and included nearly $800,000 of additional pension costs related to the performance of the plan's underlying assets in 2008.

The branch and ABG acquisitions added approximately 140 additional FTEs to our Company in the second half of 2008, accounting for the remainder of the increase.

Excluding the acquisitions and the incremental pension costs, core people-related costs were essentially flat compared to the first quarter of 2008.

Occupancy and equipment expenses, which tend to be seasonally high for us in the first quarter, increased to $648,000, or 11.6%, year-over-year and reflect the additional 18 branches acquired in November, which upped our branch facilities count by 11%.

Amortization of intangibles, both core deposit and customer list related, increased $574,000 over the first quarter of 2008, again reflective of last year's transaction.

Other operating expenses, principally customer processing, communications, marketing and development, and postage costs were up 10% over last year, reflective of our larger base of customers and accounts.

Our effective tax rate in the first quarter was 21.5%, reflective of our current mix of nontaxable and fully taxable securities.

I will now turn it over to Betty to open the line for questions.

(Operator Instructions).

Damon Delmonte, KBW.

I was wondering if you could provide a little color on the increase in nonperformers this quarter?

Sure.

They are up a little bit over the fourth quarter.

Was it a $1.5 million or something like that?

Yes, about $2.5 million.

Yes.

There's -- it's mostly smaller credits.

There's nothing of significance there in terms of large credits.

In fact, if you look at the entire list of nonperformers, the largest credit in that group is about $1.1 million.

It's a residential real estate property.

All of the other properties are actually less than $1 million, and the average is probably in the $200,000 range.

So there's nothing really of any significance there to speak of really (inaudible) [out of] the $15 million, the largest credit's about $1.1 million.

Okay.

Great.

And then with respect to the margin going forward, Scott, you -- do you think that we've kind of bottomed out this quarter?

Well, I think that's a reasonable assessment to make, Damon, under the premise that I certainly don't perceive that we will be in the position of having $160 million to $200 million of net liquidity invested at the Federal Reserve at 25 basis points.

So I think we should certainly get lift from that.

That being said, I don't think that we've got a whole lot of room to work on the deposit side with lowering the rates.

I think we could actually make some assessments on a couple of our products on the deposit side and actually lower the volume, but I don't see us actually lowering the underlying rates materially.

I would say on the loan yield side, David, I think things are holding in there.

I don't think -- I think we've seen the erosion in the first quarter of what happened with the last round of Federal Reserve adjustments from December.

So I think that -- I think your comment's a fair one.

And then just lastly, could you quantify -- do you have any Shared National Credit exposure?

No, Damon (multiple speakers)

No.

We are not (multiple speakers)

No.

We certainly have some small participations in our market, but we don't have any Shared National Credits.

Jason O'Donnell, Boenning & Scattergood.

Congratulations on the good quarter.

Just wanted to follow up with a couple of questions.

Regarding looking at deposit growth, I'm just wondering what exactly you attribute that to in terms of the strength?

And how sustainable is that going forward?

Well, that's a good question because I think it was really central to a lot of our results in the first quarter in terms of the growth of this liquidity and our inability to deploy it effectively.

The deposit growth was about 8% -- 7.8%, 8% for the quarter.

And actually if you look at that with more granularity, the core deposit opponent of that, the non-timed deposit component actually grew by itself about 8% -- so annualized 30% growth in non-timed deposits.

Now part of that is this important effort we've had underway for several years now to grow core deposits and to gain share in our markets and to be more aggressive in pursuing those because of their economic value, and we've been pretty successful.

So we are going to continue to do that.

I think the -- if you look at the components of the deposit growth, a good part of that -- just about half public funds, and I think it was a little more non-public funds than public.

Right.

But [who are the] -- the $160 million, about $80 million of it -- I guess it was half and half -- was public funds.

So the public funds will -- that tends to be a little bit more seasonal.

We think that will probably decline potentially a bit in the -- over the course of the second and third quarters.

We're going to keep trying to grow the core deposit funding, so I think the strong results of that, it was a little atypical.

Obviously 30-something percent growth annualized in one quarter is a little atypical.

I think a lot of it is just the fact that the savings rate in the country has gone from zero to almost 5%.

I think people have been -- become fearful of the equity markets and done some liquidation and want to be in something with less principal risk.

I think frankly a lot of it's we have been experiencing some success with customers from bigger banks coming into our branches.

So I think it's a combination of those things.

I don't think it will last forever.

If you look historically, we don't grow in deposits in our markets at these kind of levels.

So I think it's something of a somewhat temporary aberration, but we will continue to work hard in our markets despite excess liquidity to grow those core deposit relationships.

Okay.

Great.

And then also just real quick I wanted to circle back.

I know we talked about this before regarding the special one-time FDIC assessments.

It seems like there is some inconsistencies in the way that different banks are accounting for this.

I just wanted to make sure for modeling purposes, you guys are looking to take -- if we get clarity on the amount of the charge, are you likely to take the whole thing in the second quarter, or are you going to be accruing for that over the second and third quarters?

Jason, right now my impression of that is that -- to your point -- if there is clarity on the charge -- sort of the process of formality through the FDIC -- that we think that that is a second-quarter charge -- so if it's 10 basis points and it's going to be based on the second-quarter average balances, even though it's not payable till the end of the September quarter, we would expect that from an accounting standpoint that's accruable in the second quarter wholly.

Fair enough.

Then finally I just -- I wanted to just talk to you real quick.

On the acquisition front, what is your appetite at this point for doing another branch deal this year?

Are you guys seeing any additional opportunities?

As you are looking at that at all?

I think our appetite would be dependent upon the opportunity.

You know as part of our strategy, we continue to look for what we consider to be high-value opportunities for us in terms of creating growth in shareholder returns over extended periods of time.

It's a difficult environment right now.

Obviously valuations are way down and there's a lot of fear and paranoia, performance is not particularly good across the industry.

This quarter was -- to date from what I've seen has been very bad in terms of particularly asset quality and further capital markets write-downs, so it seems like it's been a tough quarter.

So I think all of that means there's not going to be a whole lot of activity.

I think the activities that we would expect to see would be that the institutions that are having difficulty from a credit side or a capital side, the inability to raise capital and some of those kinds of things.

But we would certainly consider other branch transactions if we were successful in pursuing those, and we continue to look all the time at different things and consider our options and our alternatives, so it would be something that we would consider.

We certainly think that we could if we needed to raise the capital in the capital markets if we needed to.

I don't know about the current valuation levels and raising capital here, but I certainly think that we would be successful in raising capital if we needed to.

And Jason, I will follow up Mark's comments with, I think -- back to the branch side -- it's logically getting an audience with somebody from some of the larger banks that may have the opportunity to dispose of some branches.

I think that's the real challenge for this year.

I just think that their attention is focused in other spots, so us getting on the screen is actually going to be a difficult one.

There is some possibility I think though of future opportunities in the future.

There's a lot of dislocation in these larger banks.

There is a lot of scrambling.

There's a lot of -- it's a very fluid environment right now, and I would expect that there will be a great deal of continuing opportunities on both the branch and whole bank side as a result of all of the issues in the industry.

(Operator Instructions).

David Darst, FTN Equity.

I understand the liquidity side of your margin, but it looks (technical difficulty) your short-term borrowing rate went up during the quarter, and I just wondered why you didn't take the opportunity to pay down some of your borrowings?

Yes.

David, there is a sort of an accounting anomaly to that descriptor.

We really don't have any borrowing obligations that are in a short-term nature.

They meet the criteria for being disclosed as short-term because they are callable debt obligations, but given the current rate environment it's highly unlikely that the counterparty, in this case the Federal Home Loan Bank, will call any of our obligations in 2009.

So I think for practical purposes, for comparison and modeling purposes, our debt portfolio is basically fixed, and I think until there is a noticeable move-up in rates, there would be no incentive for the counterparty to call.

Do you have any maturities of these higher-yielding borrowings this year?

Not significant, David -- understanding that we are in the current environment -- and it seems a little bit odd talking about higher-yield instruments because our average yield is 4%.

Our average cost on these debt obligations is 4%, but there is really nothing meaningful in 2009 from a maturity standpoint.

There's a little bit in 2010, but then there is a concentration beyond that.

And we did it, David, look to -- as you commented on -- we did look to using some of this excess liquidity, in fact some of the proceeds from the Citizens acquisition, which were in the $400 million range.

We did pay down some debt in the fourth quarter.

We've looked at that, and the net present value calculations don't get us to the point where it would be a productive deployment of that liquidity.

Okay.

And how about when you were going through some of the equity account and securities, Mark, did you make any adjustments to the trust preferred, Mark, this quarter?

David, the valuation of the trust preferred went down about $2 million this quarter.

So if our unrealized loss going into the quarter on those was $23 million, $24 million, it's now $25 million, $26 million.

But not a material change down.

Okay.

Were there any other negative marks to the OCI account that would've offset improvements in like MBS securities?

There were not anything significant, David.

I think for the most part the -- our MBS portfolio, our agency securities and treasury securities performed pretty consistent with the end of the year.

Mark, looking at your fee income [businesses] (technical difficulty) the -- say the 401(k) business, as an administrator, how much market risk do you have in that revenue stream?

David, I can take that one.

If you looked at our benefits administration business today and you're running about $28 million of annualized revenue stream, about 40% of those revenues do share -- do carry some type of market-related risk.

So it's an important question, and let me make sure I handle it completely -- that we [had] already actually experienced that, if you think about this year over year.

As an example that the -- just using our portfolio, the average customer's 401(k) balance within our portfolio is down about $10,000 over the last 15 months, and it's roughly -- if we're getting paid roughly 15 basis points on that, that's about a $1.7 million or $1.8 million annualized revenue decline associated with just that part of the asset.

Now that being said, not all of our revenues are tied to the market, but there is some meaningful portion of that that actually is, and if you think about that over the last sort of seven years going into late 2007, we got the benefit of people always adding to their 401(k) balances and the fact that the market was rewarding them with upside performance.

So it's a good question, David.

As much as the revenues in that business were up, they are principally related to the acquisition we did last year.

The net margin performance of that business is actually down year-over-year due to the fact that we have had declining revenues associated with those market at-risk revenues.

I think the assets under administration [have] fallen from the $4 billion range to the $3 billion range in the quarter.

(multiple speakers) last year's first quarter (multiple speakers) yes.

Last year's first quarter, right.

So we lost -- there's been a significant decline in the assets under management, which as Scott says translates into lower revenue.

Now, that -- I think we lost, what in the first quarter?

It was $0.01 or $0.02 a share?

-- related to those asset declines and the associated revenue.

So it's not insignificant.

Okay.

And then considering this was a full quarter of the acquisition in your expense base and then you've also got the seasonality, how much should we factor out for seasonality going into the second quarter?

Yes ,David, that's a -- I think on the occupancy side is really where you see the seasonality.

I don't think you really need to really adjust your models radically for seasonality associated with people-related costs or customer-processing costs.

On the seasonality side, maybe it's 8% to 10% higher in the first quarter than it typically runs the balance of the rest of the year.

As we've said before, it's clearly a little bit more expensive to heat and plow in our ZIP codes than it is to air condition and mow.

But that is indicative of historic trends.

I would say 8% to 10% higher in the first quarter than you see in the late quarters.

John Stewart, Sander O'Neill.

Most of my questions have been answered, but I just -- I wanted to just follow up on a couple of things.

First, just back to the thoughts on the M&A.

You commented that the appetite depends on the opportunity.

Is -- does the [Citizen] branch deal -- I realize you said it was fully integrated, but does that take you out of the market for any period of time?

No.

We are -- I mean that's -- that integrated.

We are really doing well up there.

We are hitting on all cylinders.

So there is no residual operational carryover or demand on that other than the normal ongoing operations and management attention that it would otherwise deserve.

So that doesn't affect -- if your question was really a capital question, then as I said I think we would have the ability to take a look at additional branch acquisitions and look at the markets at that point in time, make a judgment relative to our ability to fund them with a capital issuance.

I think we've got opportunities that we know in terms of abilities to issue capital, sometimes directly to investors.

So I think we could -- if it's a capital question, I think we could.

I think we would have to look at these valuation levels, whether it makes sense for us, and that would be dependent on the opportunity and the circumstances in the capital markets at the time.

But I don't [see] -- and we will continue to look at branch and whole-bank opportunities, as well as pursue certain branch and whole-bank opportunities, opportunistically of course.

John, certainly I would comment that what we've seen in the market in certain cases and at least in a couple of transactions where the branch dispositions have been sort of regulatory forced, the fact that potentially the seller would actually be the issuer of some capital is probably not something we had factored into our equation six, 10, 12 months ago.

So in those situations that's probably a question that was off the table six months ago that apparently one can ask today.

And then just back to the color on the margin -- or I should say the outlook, Scott, you are suggesting that the margin could have bottomed assuming that you are able to put the liquidity to work that you have sitting around now; right?

That's correct.

And then just finally, you said the mortgage origination line was $100 million in the first quarter.

What does that look like so far in the second quarter?

It's -- we are still running at a pretty good pace, but we're nowhere close to that activity that we saw in the first quarter, John.

There was so much activity say for the first three weeks of January that if you think about sort of the mortgage closing process, we delivered most of that stuff in March, so the activity for sort of March and April that would likely be delivered into May, June is pretty modest compared to those activities.

Can you sort of help us quantify what -- is it 25% of what it was?

Half of what it was?

Probably closer to the 25% than the half.

Rick Weiss, Janney Montgomery.

Just following up with John's questions on the mortgage banking, when you are selling those loans, are you -- is servicing released?

No, we are retaining the servicing, Rick.

Which is really where the majority of the $2 million income came from from the mortgage banking activities in the quarter.

The majority -- some of it was gain on sale with spread differential, but the biggest component was the mortgage servicing rights.

And that's all in the "other bank service commission and fees line," right?

That $2.3 million?

(multiple speakers) [with] all the mortgage banking?

Mortgage banking and other services, it's all housed there.

Yes, yes.

About how much of that would be mortgage banking and -- versus the other elements?

It's about -- to Mark's point, it's close to $2 million that's mortgage banking in the first quarter with the other $300,000 being a range of other.

Okay, because that usually picks up in the third quarter I guess, that line?

Remembering, Rick, that in the third quarter is when we typically record our annual dividend from the New York Bankers Association mortgage and disability trust programs.

Historically in the third quarter that results in about $600,000 to $700,000 of additional revenue that we don't record sort of proactively across the year.

Instead, that's recorded just in the third quarter.

Okay.

That should be the case for this year too?

It should be.

Okay.

Great.

And just in terms of deposits liquidity, how are you pricing deposits relative to competitors?

I think probably as -- probably, Rick, as consistent with our pattern in the past, we don't look to be the high-rate guy in any of the markets.

We don't look to be exactly at the bottom.

In those markets where we have the flexibility to be the lead, we have a little bit more opportunity to set the mark, and people sort of follow along with us.

But I think we typically want to stay to the middle toward the bottom in those marketplaces that have full-blown competition that comes from multiple sides, sources.

In those markets where we have a distinctive advantage, we have the luxury I think at times to be able to set the rates and people move around us.

And that's -- a good percentage of I guess your total deposits would be in those markets where you are actually the rate setter (multiple speakers)

Yes.

We would probably say at a minimum of 35% to 40% of the markets.

But again, the piece that clouds that a little bit is -- as you know, is even in our more rural markets, we're not far from HSBC or KeyBank or some of the other sort of larger regional banks that don't exactly tend to have the same balance sheet book that we do.

So from time to time sometimes a little bit more expensive depository products are very productive for them.

Okay.

And I guess a final question.

Any particular concerns that you're seeing on the watch lists?

Or anything outside the ordinary?

You know, I would say, Rick, the usual kinds of things.

Nothing of any -- a material credit of significance that we are losing a lot of sleep over.

It's just the evolution of the credit cycle really, and it's just what you saw this quarter for example, where the nonperformers are up a couple million.

It's a lot of smaller things for the most part, but it's pretty clear.

We are seeing generally I would say at this point more downgrades than upgrades.

And we're seeing some upgrades, but we're also seeing I would say more downgrades than upgrades.

So I think we would expect that to continue a bit, and we've built that into our budgetary expectations for 2009, and so far, as I said, the provision in the first quarter was pretty consistent, as were the charge-offs, with our expectations.

So I think we will likely continue to see that.

The commercial -- it's more on the commercial portfolio than -- the installment portfolio is actually continuing to perform okay.

The mortgage portfolio is just highly clean.

I think in the first quarter our net charge-offs were $60,000.

So it's more -- we're -- and we're spending a lot of attention on it.

We've got -- our credit administration and lending folks are spending a lot of time with those portfolios that we've identified as having maybe a bit more potential for trouble -- the auto industry obviously; commercial real (technical difficulty) -- that for us is performing exceedingly well, we don't see a lot of trouble there right now; our ag portfolio, which is not big but milk prices are down to $12 a hundredweight, and that makes it difficult for the farmers.

So we've -- I think we've done a very good job of mobilizing our credit administration resources around a risk management effort to identify and manage the risks associated with the commercial C&I portfolios that we feel could evolve more rapidly and deteriorate relative to the others, but that's what we are seeing right now, Rick.

And we have no other questions in queue.

Very good.

Thank you Betty.

Thank you all.

We will talk to you next quarter.

That concludes today's conference.

Thank you for participating.

You may now disconnect.