ConnectOne Bancorp Inc (CNOBP) 2017 Q2 法說會逐字稿

Please stand by, we are about to begin. Good day, ladies and gentlemen, and welcome to the ConnectOne Bank Corporation second quarter 2017 earnings call. As a reminder, today's conference is being recorded. At this time, I'd like to turn the call over to Mr. Joe Calabrese with the Financial Relations Board. Please go ahead, sir.

Thank you, Leia. Good morning everyone and welcome to today's conference call to review ConnectOne's results for the second quarter of 2017 and update you on recent developments.

On today's conference call will be Frank Sorrentino, chief executive officer, and Bill Burns, chief financial officer. The results, as well as notice of the accessibility of this conference call on a listen-only basis over the Internet was distributed in this morning in a press release that has been covered by the financial media.

At this time, let me remind you that certain statements and assumptions in this conference call contain or are based upon forward-looking information and are being made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Such forward-looking statements are subject to numerous assumptions, uncertainties and known or unknown risks which could cause actual results to differ materially from those anticipated. These risk factors were fully disclosed in the company's filings with the Securities and Exchange Commission.

The forward-looking statements included in this conference call are only made as of the date of this call and the company is not obligated to publicly update or revise them. In addition, certain items used in this call are non-GAAP financial numbers, reconciliations of which are provided in the company's earnings release and the company table schedules which have been filed on form 8K with the SEC on July 27, 2017, and may also be accessed through the company's website at ir.connectonebank.com. Each listener is encouraged to review those reconciliations provided in the earnings release together with all other information provided in the release.

I will now turn the call over to Frank Sorrentino. Frank, please go ahead.

Thank you, Joe, good morning, and thank you for participating in today's conference call to review ConnectOne Bancorp's results for the second quarter ended June 30, 2017. We certainly appreciate your interest and are delighted to have the opportunity to share with you our solid operating and financial performance year to date.

Regarding our format today, Bill will provide detailed color on our financial results in a few minutes. I will begin today's discussion with a strategic review of the company's performance, as well as update you on our operating results and tell you a bit more about how we are positioned for the rest of the year. We will also leave some time for Q&A at the end of the conference call.

We are exceedingly pleased with our second quarter operating performance, highlighting our continued ability to capitalize on opportunities and serving our growing client base and consistent execution against key operating objectives. Those include maintaining strong organic loan and deposit growth, delivering accelerated and sustained earnings growth, improving return on equity, and building and refining our infrastructure.

Today before we start speaking about our operating results, let's just talk about our taxi portfolio. As you saw in today's press release, we recorded a $9.7 million pretax expense as a result of further weakness in the valuation of New York City taxi medallions, thereby reducing the carrying value of our portfolio which is predominantly corporate medallions in New York City to $50.9 million. This reflects a per medallion valuation of approximately $374,000.

The valuation of the medallions on ConnectOne's balance sheet has been and will continue to be reflective of market conditions. We have been very disciplined in this respect. Bill will speak a little bit more about this in a few minutes. Due to the charge, we reported diluted earnings-per-share of $0.24 for the second quarter versus $0.37 in the sequential quarter and $0.36 in the prior period.

Our entire taxi medallion portfolio is classified as held for sale. With this quarter's write down, our taxi medallion exposure is now down to a level where, regardless of any final resolution, we expect no negative impact on our strategic plans. We also expect the volatility to subside in the future.

Let me also add our New York City taxi medallion portfolio continues to cash flow quite well, right now, above 6% on our exposure of $50.9 million. So we do not feel any pressure to pursue a fire sale.

With that out of the way, let's talk about our operating performance this quarter, which has been exceptional. Excluding taxis, we earned $0.42 in the second quarter, 10% higher sequentially. During the second quarter, total demand deposits including interest and non-interest-bearing increased by 16% on an annualized basis.

Our principal focus of this company is further developing our ability to accelerate the deposit growth so that it is commensurate with ConnectOne's traditionally strong loan growth. We believe ConnectOne is positioned to achieve additional deposit growth driven by increasing our commercial loan portfolio, enhancing cash management service capabilities, expansion of our municipal private school relationships, and the utilization of our modern branch model which allows our staff to focus on sales.

Our strategy of high-quality customer service, competitive rate structures and selective marketing enables us to gain market share, extend our competitive position and achieve strong progress in our core deposit growth.

We have recently bolstered our team with cash management specialists whose deep experience will drive additional opportunities for deposit gathering at ConnectOne. Additionally, earlier this year we launched our online deposit account opening program which will allow us to augment our deposit gathering capabilities for both new and existing clients.

We continue to build momentum in loan originations and loan growth. Our loan receivable of $3.8 billion at June 30 reflected record loan growth of $190 million. And we achieved overall loan growth year-to-date of $286 million or 16.4% on an annualized basis.

Our total loan growth reflected strong performance across several lending sectors and continues the ongoing potential of our strategic focus. Consistent with our emphasis on diversifying our loan mix, ConnectOne's loan growth for the quarter included an increase in commercial and industrial loans of $70 million, representing an annualized growth rate of more than 50% for this non-commercial real estate segment.

While we don't expect 50% growth in C&I every quarter, we do expect this segment to help us diversify away from our reliance on commercial real estate in the future. In terms of our CRE lending, multifamily increased by $117 million as we were very opportunistic in this space, booking lower LTV purchase money mortgages at better spreads.

Meanwhile, our construction book decreased as loans permed out, some of which we financed and some which were paid off. And our other CRE growth was essentially all owner-occupied.

We are also seeking to increase our residential loans held in portfolio and we continue to make progress in this regard. While our second quarter loan growth was above historical levels, the expectation over the coming quarter is for growth in the low to mid-teens, which will contribute to a lower loan-to-deposit ratio.

Moving forward, our loan pipeline remains strong heading into the second half of 2017, and we anticipate continued diversification of our portfolio as well as a continued focus on market opportunities in the spaces we are comfortable with. Additionally, to drive our performance and support future growth, we continue to invest in our people, our infrastructure and our technology.

At ConnectOne, we have a strong track record of offering our client the latest technology to meet their evolving needs. Consistent with this, we are proud to announce a few new partnerships within the fintech space.

First with Zelle, which is a consortium of top 30 banks in the country to provide real-time payments right from your mobile banking app. ConnectOne's forward thinking has landed us a first-mover position in this space, as Zelle is well-positioned to disrupt the person-to-person market currently monopolized by Venmo.

Second is with Encino, which provides ConnectOne with one of the most efficient and streamlined deposit and loan operating systems in the industry. One that is built on the salesforce CRM platform. This partnership will continue to support our best-in-class efficiency metrics, and at the same time, enhance our excellent reputation for sense of urgency with our clients.

Equally important to improving our efficiency metrics are a number of other near-term initiatives including the ongoing redesign of our branches to ConnectOne's modern office model, which will enhance our clients' experience while building a sales-focused model. We are also deploying an update of our mobile app to provide our business and consumer clients with the usability that they demand.

In closing, it was a solid quarter. We have had a strong first half of 2017 and we are well-positioned to deliver on our near-term priorities while continuing to provide increasing value to our clients and our shareholders.

We have experienced strong deposit and loan growth and our earnings power remains strong. Our strategies for growth, business and profit are very deliberate, and we are very confident in our fundamentals.

Our New York City initiatives are yielding results in both attracting new bankers and clients that are no longer served by any community focused bank. ConnectOne continues to fill a void for personalized service vacated by the largest institutions and by banks leaving our markets due to consolidation. In fact, it is still the largest segment of our client acquisition story.

We are moving ahead with solid capital foundation and we remain well on track to achieve our objectives to further strengthen our balance sheet, grow our profits and book value per share for the full year. At this time, I would ask Bill Burns, our Chief Financial Officer, to review the highlights of our second quarter financial performance. Bill?

Thank you, Frank. Let me start off with some comments about the taxi valuation. We were one of the first banks two years ago to recognize there was weakness in the sector. We were among the first to place the assets in nonperforming and to take a charge.

So as Frank just mentioned, we've been very transparent in reporting charges valuation allowances that are consistent with available market data, which admittedly at times has been challenging. As you know, we have the medallion portfolio classified as held for sale. We believe this is the correct classification because this is our preference, but it does not mean we are required to liquidate the asset, especially at a core valuation that would hurt long-term shareholder value.

The cash flow on our adjusted portfolio value of about $50 million yields in excess of 6%. So I think it is clear we do not need to sell. Our decision rests on price versus our view on risk adjusted value. Details regarding our valuation methodology are forthcoming in on our second quarter queue.

Now to operating results. From an operating perspective, we had a very, very strong quarter by all measures. Loan and demand deposit growth are strong, our net interest margin widened, credit quality remained excellent, our efficiency ratio improved significantly from the first quarter, and operating earnings were above what was expected by the market.

At June 30, total assets had grown organically to $4.7 billion. It's an increase of $250 million in just the first half of 2017. Loans led the way growing by $190 million from the prior quarter. That is more than 20% on an annualized basis. For the half, it is up 16%, and our expectations are we will grow at about 15% for the entire year, could be a little more, could be a little less.

So echoing and highlighting Frank's comments regarding C&I growth, it was particularly strong, about $70 million for the quarter and our C&I origination loan yields are in the 4.75% to 5% range. Loan spreads are in excess of 300 basis points in this category.

By comparison, multifamily portfolio origination yields averaged 370 in the quarter with spreads of 175 basis points or more. I think that is pretty good and higher than it has been recently.

Our securities portfolio grew as well. The average balance of our security's portfolio grew by more than 5% during the quarter, ending up at more than $400 million at June 30.

So we are targeting a level that is about 10% of interest earning assets. Right now, we are at about 9%. We view this as a prudent level given our capital position, our liquidity, while still providing room for loan growth.

The tax adjusted yields on the portfolio fell during the quarter from 334 to 316 and I will explain why. Last year, we reclassified our entire portfolio as available for sale and I see now more banks are doing this.

This transfer in turn facilitated our strategic shift from corporates and lower beta municipals to government security shorter duration mortgage-backed securities. Most of this rotation is complete, and at this point I expect the yield to remain about constant going forward as the portfolio grows.

Net interest income was very strong for the quarter increasing by more than 5% from the linked quarter, due both to margin expansion as well as an increase in loans and securities. Average interest-earning assets increased by about 3% on a linked basis, led by growth in loans and securities while we managed our cash balances to a lower level.

The margin expansion of 5 basis points versus the sequential quarter was due to a higher yielding loan portfolio and better asset mix, offset by slightly higher cost of funding, as well as the lower yields of securities I just mentioned. Deposit costs are coming under increasing competitive pressure, but we have been modeling these increases all along.

And overall, we do believe we can maintain the current net interest margin in the 3.40 to 3.50 range. The flat yield curve does make it difficult to widen the margin from this level, but our balance sheet remains asset sensitive and we would benefit from higher rates.

Obviously, a driver of net interest margin is non-interest bearing demand deposits. This quarter's average demand is up 15% from last year's second quarter, and continues to remain a focus of both our commercial and consumer divisions.

Now turning to the provision for loan losses. The $1.5 million we recorded during this quarter was primarily allocated to support loan growth at a rate of about 75 basis points. During the quarter, there was no releasing of reserves and no charge-offs, reflecting continued sound asset quality.

Next our operating expenses. Excluding taxi charges, expenses were essentially flat from last quarter. Increases in compensation expense due primarily to higher staff count, they were offset by lower occupancy and a continued focus on expense management.

Our operating efficiency ratio improved to 41.6% from 44% in the first quarter, which is indicative of our extremely efficient infrastructure, one that relies less on brick and mortar and focuses more on leveraging technology.

We were quite a bit better in the second quarter versus first. That was expected as typically we have seasonal factors working against us in the beginning of the year. Having said that, we continue to grow the core balance sheet and core revenue at a faster pace than infrastructure costs, costs which include any investments in technology. Our expectation is that we can continue to drive efficiencies.

Finally, the tax line, we are targeting a tax rate of approximately 31.5% on our operating earnings. The taxi charges do temporarily reduce the effective tax rate, but on a core basis we are targeting 31.5%. And with that, I will turn it back over to Frank.

Great, Bill, thanks. Before turning the conference call over to your questions, I'd like to just take a moment to discuss some of our strategic priorities and outlook for the remainder of 2017.

I am proud of our management team's performance. And we continue to believe the overall environment and the market fundamentals provide ConnectOne with an excellent opportunity to enhance earnings and build book value.

We are continuing to increase momentum across our platform which gives us considerable confidence in our outlook for the remainder of the year and beyond. ConnectOne will continue to focus on creating a desirable franchise as well as maximizing shareholder value.

We have certainly demonstrated this through our ability to attract and retain talent in the deposit and loan origination areas, our continued investment in the necessary technology infrastructure to create additional operating leverage, and our expansion into new markets at a measured pace.

Within a consolidating bank environment, value creation for ConnectOne can also be achieved through M&A by engaging with potential partners that would augment our existing plans or by partnering with a desirable franchise seeking one of the best markets in the country.

With that said, this concludes our prepared comments. We are now going to turn the call over to the operator and open it up to any questions that you may have.

Thank you. (Operator instructions) Collyn Gilbert, Keefe; Bruyette, & Woods, Inc.

Thanks. Good morning, guys. If we could talk a little bit about the loan growth and outlook. Obviously, it was very strong this quarter. What do you see driving that? And especially, it is a good yield on the C&I side too, maybe just talk a little more about what is happening on the C&I side.

Thank you, Collyn. As you know, momentum has been building here at ConnectOne. We started and we had said in the past over the last number of years we have been building some infrastructure around the ability to generate C&I type loans.

We have hired a number of individuals over the last couple of years. That is starting to gain some momentum. We really saw quite a bit of that in this quarter. Our expectation going forward is we see a decent size, if not larger contribution, coming from the C&I space.

We also -- just in general, over the loan portfolio we have had momentum in a lot of different areas, whether it be our expertise in multifamily lending or in other forms of CRE and construction. Although in this quarter, as you noted, our construction portfolio remained somewhat flat. We are sort of happy about that. That is our disciplined approach to how we approach the construction segment.

Okay. Okay. That is helpful. Then just on the funding side, Bill, maybe talk a little bit about -- I know you said deposit pricing pressure, you are modeling that in -- maybe just talk a little about your broader funding strategy and what specifically you are seeing in terms of deposit pricing pressure in the market.

Well, from a commercial relationship perspective, we are always trying to drive non-interest-bearing demand. So a lot of this depends on the success we have had there. We have had success over the past year and I look forward to more of that in the future.

In terms of the pricing pressure on the interest-bearing transaction accounts, the competition keeps raising rates, and so we need to raise rates just to protect the balances we have and to possibly grow. But again, it is just a small portion of our total funding costs and it is not really impacting the margin in a very significant way.

Okay. And how about on the borrowing side, what you are doing there? Is there an opportunity -- go ahead...

You mean federal home loan bank borrowings?

Yes, yes, yes.

Yes, we continue to fund part of the balance sheet there. Our preference is to do it through deposits, but there's a tremendous amount of liquidity there, there's $1 billion of availability, the federal home loan bank. So I think we use it when we need to, but there's not a particular strategy to increase our federal home loan bank borrowings.

Okay. Then, just to confirm, did you say, Bill, 15% targeted loan growth for the year?

Yes, I think that is good, if you want to pick one number. It could -- you know, we can't control these things. It could be a little bit higher or a little bit lower. You can see the second quarter was much higher than the first quarter. Those kind of swings in loan growth per quarter is normal.

Yes. Okay. Okay. Then tying it to the NIM guidance there, obviously you came in better than I think even what you guys were expecting for the quarter. Maybe talk about the variables as you are looking at your NIM for the rest of the year.

You know there are so many variables, right? Depends on non-interest bearing demand, is a big driver and then the mix in the portfolio because we had more C&I, the spreads are a little bit wider, that helped the margin. So it really depends.

When I average it all out I am really looking at a flat margin, and that includes the negative effect of the purchase accounting. So if you take that out, I am really projecting a slightly widening margin. I think I said in my prepared remarks between 3.40 and 3.50, was a place I was comfortable with.

Oh, you did, you are right. Yes, okay, good, yes. Okay, good. Were there no prepays this quarter?

There were some. There always is some and it probably added a couple of basis points to the margin for the quarter. As you are analyzing this, we had lower cash balances. If you take those two items out it was kind of a flat, slightly up quarter in terms of margin, but not compressing.

Got it. Okay. Then just finally the taxi portfolio, any update there in terms of interested parties in the portfolio or timing on a sale, or just maybe thoughts there?

All I would say, Collyn, in that regard is certainly as we sit here today there is definitely more interest that is coming to market relative to the taxi medallion portfolio, from whether it is private equity, other owners, other people interested in the space that probably didn't exist even 6 months ago.

So while I cannot sit here today and tell you there is any sort of sale contemplated, the level of interest is much, much higher today in the space. I am assuming that is because where the valuations are today relative to the cash that is coming in or the cash flow that is coming in from those medallions.

Okay. Okay. That is helpful. I will leave it there. Thanks, guys.

William Wallace; Raymond James

Thanks. Good morning, guys. I wasn't going to lead with taxi but since you were just talking about it, I will. Maybe, can you just talk a little bit about underlying trends that your seeing from the cash flows from the fleet, leasing to the drivers, changes out of TLC that are contemplated?

Then maybe if you could tie those thoughts into -- I know you have to be careful about giving a number -- but how you would think where a -- you mentioned you are not going to sell at a fire sale value, so how do you think of where you draw the line of a value that you would be willing to accept to move these off the balance sheet, versus a value that you think is too economically detrimental to shareholders?

Wally, I think you sort of hit the nail on the head, and let me take the last part first. The portfolio today is for the -- I think it is over 95% or 96% paying. Those payments are generating an over 6% return on our portfolio as it stands today.

We have to put that up against whatever potential sale offer would be made to us, and that is what we will look at in order to make a decision. At this time, we have not had -- or had the opportunity to sit down and get to a finalized number. I can't tell you what that would be.

As far as the industry in general, there are a lot of changes that have occurred and continue to occur at the TLC, which are two sides of the same coin. On the one hand, we are seeing loosening of regulation for taxi in a lot of different regards that we believe are beneficial to the industry. On the other side, there is increasing momentum about further regulation and changes in regulation relative to all the TNCs.

At some point, those things are going to meet at the middle and we will get some equilibrium in the space but as we sit here today, that is not true. The number of non-taxi or transportation network vehicles continues to rise in the city.

Notwithstanding the fact that those drivers are not really making any money, that has driven some pressure back towards taxi for more drivers to want to go back to taxi, we still believe today and we have seen evidence that the revenue that is going into a single taxicab has not really diminished all that much. But it is the driver who is in control of a fair share of that revenue and it is not making its way back to either the operator or the medallion owner.

Until that whole scenario plays itself out, it is our belief there will continue to be pressure on the medallion space. I do believe we are getting closer to the bottom. I think as you saw, many banks recently have either taken some charges or revalued their portfolio, taking a lot of this information into account.

We have been one of the first to come out and do that. I do believe over time that we will get to some equilibrium in the market, and I believe we are a lot closer to that today than we were, let's say, a year ago.

Can you put some numbers behind what the cash flows that the fleets are able to collect on a medallion when they are leasing out to drivers? And maybe what that has done this quarter versus last quarter, or last year?

Yes, there's still a lot of variables that go into that today. It depends on the size of your fleet, your driver operation, whether you have an individual medallion, a corporate medallion, it is -- there's no simple answer to that. It is a complex answer to what seems to be a simple question.

Yours are all corporate, mostly all corporates, right?

Correct.

That is true.

At the end of the day, that's going to be the primary driver of value for anyone who is looking to buy these assets, is the cash flow that is actually getting collected from the drivers to the operator, I mean to the owner. Right?

Right. I think it has been pretty stable, the cash flows in the industry. But these are medallions we're valuing, and the medallion valuation is more based on the cash flows from the medallions which is the least amount. It is two different things.

I appreciate your question about the industry. I think it has been stable in terms of the cash flows per cab.

Okay. Thank you. Hey, in the prior press releases, you gave the gross loan fundings amount. I did not see it in the release, I apologize if I missed it, but can you -- what was that number this quarter?

In the gross, most gross sense, it was $500 million in the quarter. That includes loans that matured and we refinanced here.

Last quarter, it was $340 million that you put in the release --

$340 million. It was $500 million this quarter.

Okay. Wow. On the two fintech partnerships that you highlighted in your prepared remarks, Frank, I assume there's some investment associated with these. I'm wondering if those have the potential to pressure the efficiency ratio nearer term or does your continued expense management offset any costs that get layered on because of those partnerships?

As we have always said, our infrastructure costs are pretty much baked in. We do not expect any blip in or spike in our expenses due to these, whether they are partnerships or moving into new spaces. It is all modeled into what our expense structure is.

Okay. All right. Great. Just one housekeeping question. Bill, you mentioned the tax rate, you are 31.5% kind of core expectation, assuming no additional taxi valuation adjustments. Are those adjustments, are those nondeductible?

No, it is not that. It is that you can apply in our marginal tax rate of 40% to 41% for any special charges.

Okay. Okay. Thanks. That is all I have. Thanks, guys.

Matthew Breese; Piper Jaffray.

Good morning, everybody. I just wanted to talk about the mix of the loan portfolio a little bit. Frank, you seem a bit more bullish on residential for-sale housing. You also talked about growth in the commercial segment. Just thinking about those two items looking out a year or two years, how do you see the mix of the loan portfolio evolving?

We definitely see increased capability here at ConnectOne to generate and book more C&I exposure. We are very bullish on the for-sale market, specifically in our market area. We expect to see more in the way of both for-sale construction and first mortgages for residential properties. More specifically, in the jumbo area for those.

I think the combination of those things will take some pressure away from our CRE concentration. I don't think it's going to change it dramatically, but I think you're going to see a directional shift and a change over time.

Thinking about residential loan growth, the last two quarters have been quite strong, certainly stronger than we saw last year. Is this 3% to 4% a quarter kind of rate, is that something we should look for going forward here?

Yes, and hopefully a little bit higher. That is what we are aiming for.

Okay.

Matt, that also ties into our quasi-private banking model, right? Where the client that we are servicing has a business and owns a high-valued home and we want to do that mortgage as well to be part of a complete relationship.

Understood. Okay. Then could you provide us with the commercial real estate concentration this quarter? If we are talking about a directional change lower, just give us some idea of the extent that that might change.

It was about the same as the prior quarter. There was almost no change in the concentration. Our aim is to lower that ratio.

Okay. Then on the fintech partnerships, admittedly I don't know much about either of these, I just wanted to get a sense for where is the need coming from? Are the customers demanding it? If there is a P&L impact from a revenue perspective, I would love to hear that. Or is it more of a growth engine for relationships and deposits, is that more the goal?

In the first case, with the Zelle product, for those of you who know what Venmo is, this is a Venmo competitor. It was designed by some of the top banks in the country. There is a consortium of banks, of which we are one of, that are participating in this product.

This is a product we believe from everyone, from the millennial generation on forward to just about everybody that is moving from a check-based system to a cashless and mobile payments platform, this is going to be the product of choice. It is instant, real-time payments over a network, and it really does not matter what bank you are with if you are within the consortium.

Whether you are with one of the top 10 banks in the country or you are with ConnectOne, you will have immediate ability to transfer funds amongst any number of people. I believe close to 88% or 89% of the population is covered just with those 30 banks.

To me, that is a product that people may not know they want today but they are going to want it, and we are going to be there. We have a first-mover position in this product space.

That is just being a little bit forward thinking and making sure that ConnectOne is relative. Whether you are a business client, a consumer client, does not matter, we want to make sure that we have the right tools and the right products for any client, anytime, anywhere.

On the other hand, Encino is more an internal, more an internal product, although our clients will see a change in the utilization of that product. That product is going to allow us to really streamline, further streamline all of our operations inside. From credit underwriting through credit administration, every point of contact with our client, every point of contact within the bank for every person that works here, revolving around the client.

Being able to do that in an automated way, having small business loans, have automated decisioning, giving regulators, auditors, even clients themselves and their experts access into the system to be able to provide information in a real-time basis. And further reduce our costs over time.

From a revenue generation perspective, we believe that, like we believe with a lot of things with ConnectOne, if we can convince our clients that we act with a sense of urgency and we're going to be the ones to get the first and we can do it in an efficient manner and we can close it with a guaranteed certainty of execution, we are going to win those transactions. We are going to win those relationships and we are going to win those market initiatives. Encino is the partner that is going to help us to make it even better or to further our ambitions to be one of the most efficient banks in the country.

Very good. Look forward to hearing more about that. Interesting. That is all I had. Thank you, guys.

It appears there are no further questions at this time. I will turn the call back over to Mr. Sorrentino for additional remarks.

Thank you and thank you, everyone, for joining us on our second quarter earnings call. We look forward to speaking to everyone again in our next call in October.

Thank you. Ladies and gentlemen, that will conclude today's presentation. We appreciate your attendance. You may now disconnect.