Community Financial System Inc (CBU) 2017 Q2 法說會逐字稿

Welcome to the Community Bank System Second Quarter 2017 Earnings Conference Call.

Please note that this presentation contains forward-looking statements within the provisions of the Private Securities 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.

Today's call presenters are Mark Tryniski, President and Chief Executive Officer; and Scott Kingsley, Executive Vice President and Chief Financial Officer.

Please go ahead, gentlemen.

Thank you, Paula.

Good morning, everyone.

And thank you, all for joining our Q2 conference call.

It was a very productive quarter for our team with our first full quarter of Northeast Retirement Services, which closed in February, and with the May closing of the Merchants Bancshares transaction.

Scott will provide more detail on the financials.

But in summary, we are highly pleased with Q2 performance, with earnings per share excluding acquisition expenses, up 14% over 2016.

And earnings per share excluding acquisition expenses and amortization, which we consider a proxy for cash earnings, up 22% over 2016.

This acceleration in earnings and dividend capacity is principally the result of NRS and a half quarter of the Merchants transaction, both of which we expect to continue to be firmly accretive to earnings generation in the future.

Supporting this earnings performance was improved expense leverage, credit quality and organic growth in noninterest income.

The integration of Merchants is nearly complete and works quite smoothly.

Cost synergies are ahead of plans and business performance has been strong with deposits and loan retention through July 27 of 97% and 99%, respectively.

For the remainder of 2017, we will continue to focus on NRS and Merchants as well as growing our organic business.

In addition, we're ahead of schedule with the formal [drive around] of our DFAST efforts, which should be completed in Q3.

As I said last quarter, the past 12 months have been very productive for our company and for our shareholders.

We discussed frequently with our shareholders in 2015 and 2016 the strategic investment of excess capital.

We could not be more pleased with the execution of our partnerships with NRS and Merchants, and particularly the double digit step-up in per-share earnings and cash flow being generated.

One quarter is not a trend make, but we are very pleased with the company's operating profile in the current and expected future strength of earnings and dividend capacity.

Scott?

Thank you, Mark, and good morning, everyone.

As Mark noted, the second quarter of 2017 was another very solid operating quarter for us.

And again, as a reminder, included a full quarter of the activities of the NRS acquisition we completed in early February and slightly over half of a quarter results from the Merchants acquisition completed on May 12.

I'll first cover some updated balance sheet items.

Average earning assets of $8.68 billion for the second quarter were 13% -- 13.5% up from the second quarter of 2016 and 12.4% above the first quarter of this year, reflective of the mid-quarter acquisition of Merchants.

On a year-over-year basis, residential mortgages and home equity instruments grew 2.3% organically, as the company continues to sell most of its longer-term secondary market eligible originations.

Consumer indirect loans were up 6.5% from the end of the second quarter of 2016, but only up modestly from the end of the first quarter of this year.

Although, our net charge-off and delinquency results in this portfolio continue to be excellent, we have generally seen some consumer credit erosion compared to last year in the application process.

Excluding the Merchants acquisition, business volumes were down from the year-ago levels, reflective of a number of outside unscheduled payoffs, but up modestly from the end of the first quarter.

Quarter-end investment securities were higher than the end of the first quarter, a result of the Merchants acquisition.

Average quarterly deposits were up $920.5 million year-over-year in the second quarter of 2017, also reflective of the Merchants transaction and continued success in core deposit [debt].

The second quarter of 2017 was again a continuation of the favorable overall asset quality results that we have come to expect.

Second quarter net charge-offs of $1.1 million or 0.08% of total loans were down $0.3 million from the second quarter of 2016 and also down from the 16 basis points of volumes we reported in the first quarter of this year.

Nonperforming loans comprised of both legacy and acquired loans, ended the second quarter at $22.9 million or 0.36% of total loans, 10 basis points lower than the ratio reported at the end of the March, and certainly benefited from the addition of the Merchants loan portfolios.

Our quarter end June 2017 reserves for loan losses represents 1.01% of our legacy loans and 0.75% of total outstandings within the addition of the Merchants loans.

Based on the most recent trailing 4 quarter results, our reserves represent 7 years of annualized net charge-offs.

Despite multiple reports of macro level auto industry concerns, the first half of 2017 net charge-off ratio at our auto lending portfolio was under 30 basis points of average loans, consistent with the previous 8 quarters and still favorable by longer-term historical standards.

As of June 30, our investment portfolio stood at $3.15 billion and was comprised of $581 million of U.S. agency, agency-backed mortgage obligations or 18% of the total.

$548 million of the municipal bonds were 17% and $1.93 billion of U.S. Treasury Securities were 61% of the total.

The remaining 4% was in corporate and other debt securities.

The portfolio contained net unrealized gains of $55 million as of quarter-end compared to a net unrealized gain of $165 million at the end of June of 2016 due to the meaningful movement up in market interest rates during the last 12 months.

Our capital levels in the second quarter of 2017 continue to be very strong.

The Tier 1 leverage ratio was 10.19% at quarter-end and tangible equity to net tangible assets ended June at 8.08% after the closing of the Merchants' transaction.

Tangible book value per share was $16.21 per share at June 30 and included $77.1 million on deferred tax liabilities generated from certain acquired intangibles or $1.53 per share.

Shifting now to the income statement.

Our reported net interest margin from the second quarter was 3.72%, which was up 7 basis points from the linked first quarter and 1 basis point lower than the second quarter of 2016.

Consistent with historical results, the second and fourth quarter of each year include our semiannual dividends from the Federal Reserve Bank were approximately $600,000, which added 3 basis points of net interest margin to our second quarter results.

In addition, we recorded approximately $900,000 of incremental purchase loan accretion compared with the second quarter of 2016, which added just over 4 basis points to our net interest margin.

Proactive and disciplined management of funding costs continue to have a positive effect on margin results, as total deposit costs in the quarter remained at 10 basis points, including the added deposits from the Merchants transaction.

Despite 3 fed funds rate changes in the last 7 months, our deposit beta has remained at 0 year-to-date.

Second quarter banking noninterest income was up $1.5 million from the second quarter of last year, reflective of the Merchants transaction in several core improvement initiatives.

Quarterly revenues from our benefits administration, wealth management and insurance businesses of $33.2 million were up $11.0 million from the second quarter of last year and included the NRS and Merchants transactions as well as 2 smaller insurance agency acquisitions completed earlier this year.

Second quarter 2017 operating expenses of $80.0 million, which exclude acquisition expenses of $22.9 million, were $4.3 million above the second quarter of 2016 and included a pair -- a partial quarter of operating activities from the Merchants transaction and the first full quarter of NRS results, including significantly higher intangible amortization, that resulted from the 2 acquisitions.

We have continued to invest in improving our infrastructure and systems, including those around requirements of DFAST, as we have officially gone through the $10 billion asset size threshold.

Our effective tax rate in the second quarter of 2017 was 31.0% versus 32.7% in last year's second quarter and included a $300,000 reduction in income tax expense related to the change in accounting per share-based transactions.

Excluding that change, the core effective income tax rate would have been approximately 32.3% for the quarter.

Looking forward, we continue to expect Federal Reserve Bank semiannual dividends in the second and fourth quarters each year.

Our first half of 2017 net charge-off results were again manageable.

And although we do not see signs of asset quality headwinds on the horizon, it would be difficult to expect improvements to current asset quality results.

Our core operating net interest margin has remained in a fairly narrow band over the last several quarters, a range we would expect to operate in for at least the next few quarters, including the impact of somewhat higher purchased loan accretion related to the Merchants' transaction.

The third and future quarters will reflect the full impact of the Merchants operating revenues and expenses as well as reflect the full impact of the additional shares we issued as part of the transaction.

Tax rate management for the foreseeable future will continue to be subject to successful reinvestment of our cash flows into high quality municipal securities, which has been a challenge at times over the past couple of years.

Our continued growth and income generation from fully taxable sources will continue to push our effective tax rate higher, barring any legislative changes to corporate tax rates.

We continue to expect a net reduction from Durbin mandated impacts on Durbin's interchange revenues, beginning in July of 2018 of between $10 million and $11 million annually.

In summary, we believe we remain very well-positioned from both a capital and an operational perspective for the remainder of 2017.

And as Mark mentioned, look forward to continuing to execute on both our acquired and organic improvement opportunity.

I'll now turn it back over to Paula to open the lines for questions

(Operator Instructions) And our first question will come from Alex Twerdahl with Sandler O'Neill.

First, I was just wondering if you can give us a little bit more color on the fee income trends we saw in the second quarter.

Specifically, is there anything that's seasonality-wise more that could contribute a little bit more in the second quarter or anything that's nonrecurring?

Or should we kind of think about it going forward as taking that $51.2 million in the second quarter adding a little bit more for the full quarter's impact of Merchants and that's kind of the right run rate into the future?

Sure.

I'll take a shot at that.

Absolutely, the second quarter, we typically generated about a $0.01 per share more in deposit service revenues.

It's more activity relative to our customers' account structures.

It's more opportunities for transactional-based outcomes.

So historically, we've seen about $0.01 per share difference in deposit service revenues in Q2 versus Q1.

That trend stays pretty close for Q3 and Q4, and then typically falls back in Q1 of the following year.

You hit it on the head relative to -- we should get a full quarter impact of Merchants in the deposit service fees line.

Merchants also had a pretty strong trust business.

So we'll pick up a little bit more income on the bulk management side from a revenue standpoint in Q3, from a full quarter standpoint.

That being said, our insurance business tends to be seasonally better in the first and second quarter compared to the third quarter, and it picked up a little bit more in the fourth quarter again.

Again, just sort of the seasonal timing of renewals that -- and those types of things.

On the employee benefit services side, NRS was in our numbers for 3 months in the second quarter.

So I think it's kind of status quo.

That business is growing very well.

The underlying core of the BPAS business is also growing, but at a probably lower -- low single-digit rate on an annual basis.

So I think our trend line there continues to expect that.

But I think you framed it fairly well with the exception of the banking noninterest income side of the Merchants' contribution, $51.2 million as a trend line to work out from is a pretty good number.

Okay.

And then if we exclude Merchants from the loan numbers, did loans grow?

Or are they down a little bit sequentially in the second quarter?

The second quarter, loans grew, is about 0.5%.

So they're up about $20 million.

Business lending was up.

Consumer mortgages were up.

Home equities were up a little bit.

The growth in the auto book was actually positive in the second quarter, but certainly less than the run rate of that business.

We're starting to see cost deterioration in the quality application flow as it relates to loan-to-value extended terms, FICO scores and some of those kinds of things.

Also, the economics of the business, given the move-up in rates.

The auto business has responded accordingly.

So we have changed our credit standards.

We're getting fewer -- the penetration is declined because of the quality applications were there.

So we were up a little bit in the second quarter, not as much as we typically are.

Usually, the second, third quarter is pretty good for us.

But we did have some growth in the commercial, as I said, in the mortgage business as well.

Okay.

And then just to follow-up on that question.

I know Merchants had some of that municipal finance business that was usually seasonally very light, I guess it ends the second quarter at a low point for the year.

Are those trends going to continue with you guys, where that whole portfolio kind of declines by $50 million into the end of the second quarter and then rebounds meaningfully in the third quarter?

We did experience that, Alex, and it is to say, it's the nature of the municipal lending, and actually, municipal deposit gathering.

In Vermont there is the 630 timeframe or the 630 quarter-end kind of the seasonally or year-end or year balance lows.

So we did get that $55 million to $58 million of runoff in the second quarter.

Most of that's post-acquisition, and we would expect most of that to come back onto the balance sheet in the balance of the year.

And we'd seek about 60% to 65% of that come back in the third quarter already.

And then what does come back is you'd seasonally see some deposit balances or some repo related funding outcomes that are municipal related also come back to the balance sheet in the third quarter.

And moving on, we'll go to Matthew Breese with Piper Jaffray.

I just want to talk about the margin and make sure I had all the pieces correct.

So this quarter included the Federal Reserve dividend, and that was roughly 3 or 4 basis points.

And then, excluding that, we're going to remain kind of where we are for the time being.

Is that accurate?

I think so.

And I think that the net results, Matt, of the -- excuse me, of the purchase loan accounting marks that -- we had a credit mark, as everybody has a credit mark.

And then we had an interest rate mark that also went through the same direction.

So we're accreting a slightly higher mark than we probably modeled.

And I think a lot of that is, remember, we modeled this transaction 9 to 12 months ago and we've had 3 fed funds rate changes since then.

So certain of your portfolios have been impacted from a market value standpoint by having a higher base line rate.

We actually experienced the same thing.

It created a higher customer deposit intangible because funding cost in theory at a wholesale level are higher than they were a year ago.

So I think you've got it.

We, again, will probably be telling people what purchased accretion is on a quarterly basis now.

In our other transactions, it's really never been margin up to bother mentioning.

Either the credit marks have been so slight or the interest rate marks have been nonexistent or essentially they came from the United transaction, the interest rate mark was a positive.

So really haven't had to mention that, we'll continue to mention it.

Again, I don't think we look at it being a significant change.

But it did help dissipate what would otherwise be a combination margin erosion that we had kind of been sort of telegraphing to people to the point where I think we feel pretty comfortable that we can stay in the sort of 360 to 370 range for at least the next 8 full quarters until you start to see any kind of pressure relative to the funding effects on the balance sheet.

Okay.

And then the $900,000 of purchase accounting this quarter, knowing that Merchants was only around for half a quarter.

How do you expect that to trend next quarter?

Will it be double that per se or double that minus a little bit because you since tend to wind down quickly?

How would you model that?

Yes, I would have guessed, Alex or Matt, that we would have been closer to something that was around $0.5 million a month.

So we ran ahead of our expectations for the second quarter.

But that being said, instead of $900,000, we think the number could be $1.2 million in the third quarter.

For a full quarter impact, absolutely, we do, on a general basis.

As you know, you're subject to the cash flows of the acquired portfolio.

And so if your cash flows run a little bit faster, your accretion kind of moves ahead of your contractual expectations.

(inaudible) as an example, if longer term rates move up, could we have some elongation of some of the other portfolios, maybe a little bit.

So that's how we've sort of got that benchmarked as we head into the third quarter.

Okay, that's very good.

And then on the expense front, again, given Merchants was only around for about half the quarter, but you did say expense saves were coming ahead of schedule.

Could you just give us a sense for next quarter total expenses with everything you see today?

Yes.

Let me take a shot at that.

And again, we're -- we are very pleased with where we are from a cost synergy standpoint with Merchants.

And a piece of that, if you remember, we had some discussions about Merchants' first quarter operating expense level was very, very low for them on a historic basis.

Some of that relates to the fact that, to the extent that they have some folks that knew they were probably going to be displaced post-acquisition, some of those people had left Merchants earlier in the year.

But now I'm using sort of a $49 million to $50 million quarterly run rate for salaries and benefits, using roughly $32 million to $33 million a quarter run rate for all other expenses, with the exception of amortization of intangibles, which I think you should use $5 million of quarterly amortization now that we have full quarter impacts of the NRS customer list intangible, which is giant.

And a full quarter of [CVI] that's been created as part of the Merchants transaction.

For you and for others, at $5 million, that's roughly $0.25 or $0.26 per share of intangible amortization, each and every year.

And again, as we've said before, we think that sets a proxy for current and future dividend capacity.

So, yes, I guess I have to pull on that thread a little more.

You guys historically have increased the dividend each year by $0.01 or $0.02.

Given what you just said and thinking about the next dividend increase, could we see that accelerate beyond the typical run rate?

It's Mark, Matt.

That's a discussion that we have with the board every fall, typically September.

So I expect that we'll have that again.

You're right.

We have historically raised the dividend annually by $0.01 or $0.02.

In fact, we -- this would be the last 24 years.

We certainly have capacity to continue to raise the dividend and we'll have that discussion with the board in a month or 2. As I said earlier, 1 quarter does not a trend make, but we feel pretty good about where we're at, and the sustainability of the earnings, and in particular, the cash flows of the company at this juncture.

So we certainly have, by virtue of NRS and Merchants, accelerated our dividend capacity.

But that's something we actually haven't looked at yet.

We need to also see where our capital levels play out, ultimately, because the second quarter capital levels, with the addition of Merchants, are a little bit skewed by the fact that you have a half a quarter of weighted average assets, but the capital has been (inaudible) times.

So we'll get a little bit more decline in our Tier 1 leverage ratio from 10-something to 9-something, we expect next quarter.

So when you take all that into account, but certainly in terms of the cash flow per share we're generating right now at $0.73 a share, compares quite favorably to the $0.60 a share we were generating a year ago at this time, also as I said, to repeat, we have full level of confidence in the sustainability of that cash flow generation.

So that will certainly be part of the discussion with the board here in a couple of months.

Right, right.

But despite the decline in Tier 1, you don't see a need for additional common equity, correct?

No, no.

We're -- I mean, at 10-something, even at 9, 9.5 or 9.2 or 9.3, wherever it goes to, that's still plenty of capital.

Particularly if you look at our balance sheet and the price quality of the balance sheet and looking at capital from more of a risk-based perspective, we're not uncomfortable at all running 9-something in capital.

In fact, because of the earnings level, it -- and now the amortization of the intangibles running $20 million a year, we're going to accrete that capital pretty quickly, regulatory capital, by virtue of earnings.

And to a greater degree, we need to capitalize organic growth and tangible capital by virtue of the -- not just [areas], but also the amortization intangibles.

So we will accelerate.

We will recapture a lot of that, what I'll call, modest capital dilution very quickly over the next 4 to 8 quarters.

Right, right.

That's what I figured.

Okay.

My last one is just around the pipeline -- the loan pipeline and the outlook for loan growth towards the back half of the year.

Right now, the loan pipeline is okay.

It's not great.

It's not poor.

It's typical, I think, for this time of year, the commercial side now adding in Merchants, and Merchants production this quarter was a little bit off, not the balances but the pipeline was a little off.

I think they've made efforts to get a lot of things through the pipeline prior to the closing in May, because they weren't certain about how quickly they were going to do that after we combined.

So it's good.

In a sense, they pushed a lot of things through ahead of the May close.

So they need to rebuild that pipeline a little bit.

In total, it's fine, it's not up, it's not down, it's probably where it ought to be right now for this time of the year.

The mortgage pipeline is off a little bit over where it was last year.

But we did have, organically, our growth in mortgages.

Last year second quarter, this year second quarter, it was about 3.5%, a little over.

So that's pretty typical of our mortgage business.

So there's -- the pipeline is a little off from last year, but it's not bad.

And part of the reason for that is there are inventory shortages in a lot of markets.

We've just started the homes for sale that there needs to be to generate a pipeline that would be above average at this juncture (inaudible).

And I think I'd commented on the auto lending business side and we expect our originations to slow down a little bit going forward, given what we're seeing in the market and the economics.

And next we'll hear from Russell Gunther with D.A. Davidson.

Appreciate your comments on the margin.

I just wanted to circle back there if I could.

So it sounds like 3 basis points from the dividend, 4 from purchase accounting, that's what accounted for roughly the 7 bps quarter-on-quarter.

Maybe just isolating for the March rate hike then, what impact that had on the margin this quarter and whether or not you'd expect June to be any more or less accretive?

But pretty modest for us on a net basis.

It was probably what happened is the small amount that we would have picked up in terms of net interest income generation, and therefore, margin support, was offset almost totally by the fact that the yields coming from the Merchants portfolio were modestly below the core yield.

So that's why I don't think you saw anything incremental to do that in that quarter.

And we have that more opportunity coming out of the June month with the second quarter.

I would say we probably pick up a bit more of an opportunity.

But that being said, the full quarter impacts of the Merchants funding costs will actually probably push our deposit funding cost above 10 basis points for the first time in 4 quarters.

So it won't be much.

So remember, the size of the deposit base versus the size of the asset that we'll reprice is probably significantly larger.

So in other words, the movement of 1 basis point on an almost $8 billion core deposit base versus a handful of basis points in variable rate commercial and variable rate consumer loans, takes a while for that to catch up.

So we're not suggesting a ton of positive impact of that.

But you've been right for the second quarter, we did pick up a modest pickup.

Okay.

And I appreciate the color there.

And then similarly, comments on the expense base.

Could you just remind us, I know you walked us through where third quarter could shake out.

But would we be through cost saves at that point or is there some ability to pick up some -- not additional saves but just kind of where we will stand at the end of next quarter, as it relates to Merchants cost saves?

Yes, I think we'll be prudent.

Again, I think the people-related costs, we're actually -- got accelerated faster than we probably had in our original projections.

So which means that the onus is us -- is on us for the third quarter to push through some of the other system-related items, some things where we thought we could get some processing leverage and some items to that.

But I will say, Merchants is a fairly efficient bank for a $2 billion bank.

So there are certainly spots that we've looked at, adding resources in terms of commercial and consumer support from markets where we think that there are outsized opportunities for us to continue to expanding growth.

So net-net, I wouldn't expect significantly more.

Okay, great.

And then last question, kind of heard you loud and clear on the loan pipeline.

But maybe just help us understand sort of where we are going to look to see some additional loan growth.

Are there pockets of strength kind of geographically or within the submarkets as well as within some of your different loan buckets that should kind of drive that low to mid-single digit organic growth?

Sure.

I start with the commercial portfolio.

The second half of the year is typically better for us than the first half of the year.

I would expect that to be the case.

I think the opportunity is for that to come from different geographies.

There are times when certain geographies that we're in are better than others, we're all kind of in the Northeast, so there's only so much to distinguish one market from another.

But some get hot in periods of time and cool off little bit just in terms of the flow of demand.

So I'm not suggesting that there's any one of those particular markets that are going to -- is going to be the source of outsized growth at all, but we would expect to grow the portfolio between now and in the commercial portfolio between now and the end of the year.

The mortgage portfolio, I would expect the same.

Typically, if you look back 10 years, it grows anywhere from 1% to 5%.

Even during the recession, on the credit crisis, we were still growing our mortgage portfolio.

So as the nature of just our -- the markets that we're in, they are more nonmetropolitans in nature.

So I expect our mortgage business will continue to grow at a low single digits.

I mean the portfolio that had the most variability in terms of its growth is obviously the auto portfolio, which now is a little bit over $1 billion.

That's been a really strong market for the last 8 years or so.

And it feels like it's getting towards the end of the game.

Again, from what we're seeing, there are competitors who are being overly aggressive, given the economics.

You're starting to see a modest deterioration in the quality of the application flows in some of the underlying metrics, as I said, around terming, LTV and FICO scores.

So that portfolio is much more cyclical in nature.

And there are times where you have a really good run in that business like we've had for the last 7 or 8 years and there are times when it's going to move the other direction.

And so, I would expect a slowdown in the growth of that portfolio going forward.

But again, I think, overall, I like the best on our loan book right now a lot.

And I think that we have the opportunity to continue to grow in our markets, those loan books with the exception of indirect, which could grow a lot or actually shrink depending on the market, low-single digits.

So that's probably got a lot more color.

But that, I think is a fair description of where we're at and what our applications are.

(Operator Instructions) Moving on, we'll go to Jacob Civiello with RBC Capital Markets.

Just one more question from me.

From a profitability standpoint, yet another quarter with demonstrated core ROA improvement.

I'm assuming core ROA is a metric that you'd target to measure your profitability.

Do you think that ratio kind of approach 1.5% over the next 12 or 18 months as acquisitions mature?

Well that's a lock-key number, Jake.

So we will say that at north of 130, we're pretty happy with our progress relative to moving that up.

I think as we continue to introduce more opportunities for noninterest income growth, which in the future we appreciate doesn't always take more balance sheet access to generate, I think the number could continue to move up.

Certainly over the last 4 to 6 quarters, we have moved that number up meaningfully and the income generation from our "nonbanking" businesses has moved up pretty noticeably.

So do I think that opportunity is out there?

I think it is for us.

But back to Mark's comment, a quarter does not make a trend.

We're 5 months into, I guess now, 6 months into NRS and 2.5 months into Merchants.

We'd like a full quarter realized results and we probably feel like we are -- we could be a little bit more optimistic prognosticators before we make that call.

I do think that if you look at the adjusted return, (inaudible), which I think you put in the back of the slide deck there.

So especially cash, cash earnings, but basically cash basis return on assets.

It's 145.

So 150, that metric is not far off and accepted.

But we just like gap up -- we like to focus on the economic value of enterprise, which is cash flow.

So I think from 145 to 150 on that basis is probably not necessarily unreasonable.

That's not a prediction.

But I'm just saying, I think we're not that far off.

We clearly invested a lot in our non-banking businesses.

That's clearly been -- those have been investments which have created highly positive and differentiating returns for our company, and we will continue to strategically focus on investing in those businesses to achieve greater earnings per share and cash flow per share.

So some of that also is a reflection of the relative growth of those nonbanking businesses versus the bank.

So they typically grow a little bit at a faster pace than the bank organically.

So absence acquisitions, that number can be greatly influenced by that.

It's clearly greatly influenced by NRS.

And it's got the other -- organically, the nonbanking businesses which have been growing pretty well organically themselves over the past couple of quarters.

So at 145, we think that it's a good number, meaning it's never lost.

The whole goal is to continue to drive performance, drive earnings, drive cash flow to higher levels per shareholder [now] . So I think on that basis, the 145 could go to 150.

But if we do another bank transaction and it has a low mix of nonbanking revenues, then that number could move back down as well.

So some of it, just as a function of M&A over time, I would suggest.

But at 145, I would say we're pretty satisfied with that, time being, but as I said, it's never enough.

That's helpful.

And to that -- I mean to that last point in terms of the M&A environment, both on the banking and nonbanking side, specifically to the nonbanking side, are you finding that as the size and scale of the different businesses increases that you're seeing more opportunities potentially materialize?

I would say the flow of potential look is about the same, Jake, at this point.

Not a lot different.

I know a lot of -- it's for several years now, the private equity firms have been interested in that, in that space.

So there's some competitive forces there that, frankly, put us at a slight disadvantage in many respects as public companies with regulated capital requirements.

So -- and that's been the case for several years.

I would say, there hasn't really been much difference, I think, that we've had -- there's a couple of folks whose attention we've got by virtue of that transaction that may or may not ultimately yield to other opportunities.

But I would say, it hasn't substantially increased the deal flow opportunities in that space as of yet.

And gentlemen, there are no further questions.

I'll turn it back to you for any additional or closing comments.

Excellent.

Thank you, Paula.

I think we're all set.

Appreciate everyone joining again.

And look forward to our Q3 call.

Thank you.

And that does conclude today's conference.

We'd like to thank everyone for their participation.

You may now disconnect.