Enterprise Financial Services Corp (EFSC) 2016 Q2 法說會逐字稿

Good day and welcome to the Enterprise Financial Services Corp earnings call. Today's conference is being recorded. At this time I would like to turn the conference over to Mr. Peter Benoist. Please go ahead, sir.

Thank you very much and welcome to our second quarter call. We appreciate all of you taking the time to listen in. I have joining me on the call today Scott Goodman, the President of our bank, and Keene Turner, our Chief Financial Officer.

Before we begin, I'd like to remind everybody on the call that a copy of the release and accompanying presentation can be found on our website. The presentation and earnings release were furnished on SEC Form 8-K earlier today. Please refer to Slide 2 of the presentation titled Forward Looking Statement and our most recent 10-K and 10-Q for reasons why actual results may vary from any forward-looking statements we make today.

On a reported basis, fully diluted earnings per share of $0.61 represented another record quarter for the Company. Earnings were up 13% linked quarter and 42% on a year-over-year basis. The quarter produced a 1.33% return on average assets and a 14% return on tangible common equity. Year to date the Company delivered a 1.27% return on average assets and a 14.3% return on tangible common equity. Tangible book value per share has increased 13% from the year-ago period.

More importantly, our core financial performance showed continued strong improvement in the quarter with core net income per diluted share of $0.49 versus $0.47 a share in the first quarter period and a 29% increase over the prior year. Core return on average assets and tangible common equity of 1.07% and 11.98% showed strong improvement over the prior year's returns of 0.93% and 10.41%.

The drivers of our performance continue to be, first, strong but disciplined loan growth, up 13% year over year with core portfolio yields having increased 3 basis points over the prior year period. Second, strong core deposit growth of 15% year over year, excluding time deposits, with interest-bearing deposit costs declining 5 basis points over the same period. Third, net interest income dollars increasing 15% compared to the prior year which, coupled with a modest 7% increase in core non-interest expense and continued strong asset quality metrics, all combined to produce excellent results on both a linked quarter and a year-over-year basis.

Additionally, we've continued to position the Company for future growth from a management perspective with the elevation of several highly successful individuals to key position, including the heads of our specialty credit lines; a newly-named Kansas City market president; the newly appointed head of our fee businesses including wealth management, mortgage and our tax credit businesses; the appointment of a new chief credit officer; and the realignment of our operations and risk management functions under our chief financial officer. All of these changes which have occurred over the last 5 months are a testament to the managerial depth of our organization and our continued focus on management development and succession planning, which is key to the future success of any organization.

As we turn the corner toward the second half of the year our momentum remains strong. Our sales disciplines across all lines of business are showing strong success and our consultative sales model and focus on specialty lines of business continue to produce double-digit growth rates in loans, core deposits and treasury management revenues.

The board authorized an additional $0.01 per common share increase in the Company's quarterly dividend to $0.11 per common share. This is the sixth consecutive quarterly increase, evidencing the board's continuing confidence in the overall performance of EFSC.

I'm now going to turn the mic over to Scott Goodman to give you more color and detail on our second quarter performance. Scott?

Thank you, Peter.

Focusing your attention on Slide 4, you'll see that our loan growth was 13% over the past 12 months. Net loans increased at a 7% annual rate in the second quarter. Growth for the first half of 2016 is on track, largely due to the benefits we've experienced, further refinement to our sales process, as well as leverage we've gained from streamlining certain parts of our loan origination process.

Our already strong sales culture continues to improve. That said, as can been seen on Slide 5, aggregate C&I loan balances were stable in the quarter. We continue to exercise pricing discipline which resulted in some paydowns. Additionally, loans in the EVL book continued to selectively benefit from favorable market conditions by selling portfolio companies. Nonetheless, we are ahead of our high expectations to start 2016 and we are increasingly optimistic as we approach the typically stronger growth quarters.

Slide 7 shows portfolio growth by business unit. Our focus in the specialized lending area produced solid results growing $202 million over the last year. EVL and life insurance premium have led the way in this unit growing $82 million and $57 million, respectively. Life insurance premium finance posted strong net growth in the quarter reflecting a good balance of new client opportunities combined with additional fundings of existing loans.

Aircraft finance has also performed well tracking with growth expectations and maintaining competitive yields. New originations in the quarter include both new clients as well as expansion of existing relationships acquired with our aviation specialists. Growth in EVL and tax credit lending were flat for the quarter which is not unusual for this time of year.

Our St. Louis market continues to show steady growth. Though not our primary focus, we bank top-tier commercial real estate developers and experienced nice growth from this area as well as from the financial services industry. Kansas City experienced strong growth in the quarter after some typical seasonality earlier in the year. Both CRE and C&I contributed to this growth. Our Arizona market has taken advantage of the continued rebounding economy, growing 26% over the last 12 months.

Moving to Slide 8, deposits increased steadily, growing $96 million in the quarter. Additionally, we were able to maintain the relative proportion of DDA which demonstrates the impact of our focus on both the C&I and business banking sectors for this deposit growth.

As mentioned last quarter, we remained focused on elevating core funding as a priority within our sales process and have implemented a number of strategic initiatives to do so. Our core fee income businesses performed similarly to Q1. Deposit service charges grew 7% compared to Q1 due to the addition of new C&I clients over the last 12 months. Wealth management and mortgage continue to refocus under new leadership in both lines producing results similar to the first quarter. Gains from tax credit sales experienced normal volume for this time of the year.

Our view on competition in our markets has not changed. Competition is intense for quality C&I and CRE relationships. Larger regional players are using price as their differentiator. Our value-added model positions us well against our larger competitors while our product capabilities position us well against similar sized or smaller competitors.

We continue to focus on C&I predominantly and the specialized lending areas face fewer direct competitors. However, we are working hard in these areas to stay ahead of pricing and structure trends in order to defend and grow these businesses.

Now I'd like to turn the call over to Keene Turner.

Thanks, Scott.

We've continued momentum not only on our balance sheet, but especially for our financial performance. Our second quarter results definitely reflect continued success and focus on all of our priorities as we've delivered yet another strong quarter.

If you turn to Slide 9 and to dive a little bit deeper into what Peter said, reported earnings per share was $0.61 for the second quarter. $0.49 of that was core. Purchase credit impaired loans contributed $0.14 per share and we had $0.02 of non-core, non-interest expense.

I'd like to just point out briefly that PCI results were principally economic as they resulted from actual cash collections from recoveries and early repayments relative to the evaluation of those assets. I'll also just say that briefly we think our termination of loss share in the fourth quarter was well timed and has paid very, very strong dividends thus far in 2016.

We'll turn ahead to Slide 10 and look at the linked quarter trend for core EPS, which expanded from the priority quarter due to growth in net interest income, and again was $0.49 a share of core. The return on average assets was 1.07% and that's our fourth consecutive quarter above a 1% core return on average assets. Also, core return on tangible common equity was about 12% growth in the quarter and year to date and reflect the culmination of both our capital management efforts for organic growth and for our returns on average assets.

Moving ahead to Slide 11, we have a 5-quarter trends of core net interest income and margin. We delivered more than $30 million of core net interest income in the second quarter and that's a 15% growth rate from the prior year. Our continued focus on growing revenue primarily via net interest income and our other banking activities has been the primary driver of our expanded earnings power over a protracted period.

I'll just mention briefly, and again, Scott covered this, fee income was stable in the quarter at $6.1 million. And typically we have some seasonally higher tax credit sales in the first quarter. We found in the current quarter that also our tax credit allocation business was strong and made up some of the difference. And again, we're happy with the lack of change here and we think it's worth noting and we're continuing to focus on strengthening all of our key businesses.

Scott hit the highlights of balance trends for both loans and deposits in his comments, but I'll give you some additional flavor for the net interest margin trends. We had a 2 basis point decline from 3.54% in the quarter to 3.52% for the second quarter. Although we had a decline, the underlying fundamentals in net interest margin and net interest income are very, very strong. The yield on portfolio loans expanded again and it's 4.20% and we continue to fund the balance sheet well with deposits, mainly DDA.

The most significant driver of net interest margin in the quarter was the rapid reduction of PCI loan balances. That's on the purchase credit impaired loans. And we created -- and that was 3 basis points of pressure. And then, also, we had some accelerated amortization which was another basis point of reduction in the quarter.

Turning back to originated activities, our mix of funding and deposits remains favorable for our asset profile and we continue to efficiency fund the balance sheet in support of our growth. We consider our asset/liability management efforts to be successful both over the shorter and the longer term, and particularly because we continue to be focused and successful at growing net interest income dollars above all. Our outlook going forward is generally for stable core net interest margin and we're confident that we'll continue to drive growth in core net interest income dollars as we execute on our plans.

The balance sheet interest rate risk profile stayed modestly asset sensitive and our variable rate loans were just up a little bit, 64% of the total, and the loan-to-deposit ratio trended down slightly to 97%.

We're acutely focused on core deposit gathering, maintaining strong liquidity in support of future growth and we've done both successfully and more confidently in recent periods. First half portfolio loan growth is tracking right at 10% and we'll reaffirm our outlook for loan growth for the year at or above that 10% mark.

Turning to Slide 12 we'll talk a little bit about credit trends, which continue to be favorable and support our current and ongoing profitability. We experienced net recoveries in the second quarter of 6 basis points, but there was a slight uptick in non-performing and classified loans. So when we combine all of that, the provision was stable at $700,000 in the quarter and it actually drove the allowance for portfolio loans up a couple basis points to 1.23%. Coverages of the allowance for non-performing assets and loans are still strong and we always remain vigilant with credit quality as it's the number one driver of our core profitability.

Slide 13 delineates a five-quarter trend of core operating expenses, which totaled $20.4 million again for the current quarter. We had some variability in other expenses which offset the seasonal decrease in employer payroll taxes from the first quarter. Overall expense management has been strong at Enterprise. And again, as a reiteration from last quarter, we continue to invest in strong support of sustained revenue growth. Core efficiency as a result improved to 56% for the quarter and we expect to continue similar trends throughout 2016. However, given our recent investments in personnel, we have adjusted our expense target modestly up $0.5 million to be between $19.5 million and $21.5 million on a quarterly basis for the rest of the year.

On Slide 14 we take a look at our financial scorecard, which we look back a year from the current period. In that comparison we've grown core EPS by 29% with 15% in net interest income through continued portfolio loan growth, net interest margin defense and stellar asset quality. We funded the balance sheet successfully with strong deposit growth, maintaining a high proportion of DDA and improving the cost of our funding by 4 basis points. And additionally, our expense discipline has helped translate our success into core EPS growth with core efficiency around the mid-50% range. Nonetheless, we're increasingly intent on driving further growth in earnings and returns. We believe we're well positioned to continue to drive growth in core EPS and translate it to continued value for shareholders.

If you take a look at slide 15, it's a little bit longer view than we normally have and it demonstrates our continued progress in growing core earnings power. Over the last 2 years we've expanded core EPS by more than 25% annually and we've demonstrated strong and stable increasing core earnings. And again, $0.49 a share for the current quarter. We believe that at Enterprise we have superior people and a strong business model and that's really drive our results and we're intent on translating both to increasing value for our shareholders.

That concludes our prepared remarks and we'll open up for any questions that you might have.

(Operator instructions). Jeff Rulis, D.A. Davidson.

Thanks. Good afternoon.

Hi, Jeff.

The uptick in non-performing loans, you talked about three separate -- I guess could you break out kind of what loan types those were or any other color on those relationships?

I can take that one, Jeff. This is Scott. On the non-performers, two were rather small. One probably made up the bulk of the non-performer and it was really related to one low-income, multifamily credit, which we've been working through our process for some time now. We feel it's adequately valued and well reserved. Overall we don't see anything that we're concerned about from an overarching credit standpoint or any trends or aggregate portfolio issues that we're concerned about.

Got it. And Scott, we'll have you -- I guess just interested in the C&I bucket and you seemed to allude to more pricing competition led to perhaps some modest net runoff. I guess if you could expand on sort of the confidence going forward how that -- how you think that bucket refills and maybe the competition that is out there. Who is it that you're actually competing against?

Yes. I think overall, the overall C&I category I feel very good about because that encompasses a lot of our specialty businesses. I think we find more competition with larger mid-market what I'll call general C&I, kind of straight down the fairway C&I deals. We tend to see the larger regionals come into play there. And as I said, they're pricing aggressively. We're seeing sub-L-plus-200 rates now. And given our ability to generate other C&I assets with better yields and better profiles, we've backed away from it. Typically, the third and fourth quarter are strongest due to some of the seasonality in the specialty businesses. So the short-term down trend for this quarter in general C&I is not a concern to me.

Got it. Okay. And then maybe one last one just on the provisioning, looking just at the overall reserve. Maybe reserve to loans isn't a great metric internally, but I guess externally is there a guide that kind of -- is there some resistance below 120? If you could maybe talk about the reserving going forward.

Yes. I can't really give you any metrics there. I mean it's made up more of factors as it relates to non-performers and loan ratings so there's no hard and fast rule. I guess I would say empirically, when you look at it, we've had material improvements and already strong asset quality and yet we've continued to maintain a relatively nice-sized reserve there and this quarter even built it a little bit. So I would tell you that we try to be prudent with it and we're continuing to try to make sure that asset quality stays where it is or improves to the extent possible so that we can continue to drive profitability but, overall, I can't really give you any guidance there.

Fair enough. Thanks, guys.

Thanks, Jeff.

Michael Perito, KBW.

Hey, good afternoon.

Hi, Mike.

Hi, Michael.

Maybe a question starting on the comments and the prepared remarks about targeting the strong deposit growth. And you guys have seen some good stuff there. If I look back to last year there was a pretty big inflow of deposits in the third quarter and you guys were running with some higher cash it looked like for the back half of the year. I guess was that -- can you remind us if that was seasonally driven and is something you expect to repeat again this year and, if so, how you guys are thinking about kind of cash and deploying cash in the securities with the rate curve where it is?

So I guess I'll say, and then Scott can maybe comment on the specific businesses, but we do think that we're at our seasonal low. This tends to be a point where our customers begin to individually build cash positions toward the end of the year.

From a deployment standpoint, I guess I would say that we are seeing some less than desirable rates for where we typically put our funds and so ideally we'd obviously use that growth to fund the loans. But we have kept the investment portfolio or the investment portfolio plus cash at what we think is a relative -- in proportion to preserve our liquidity measures. So that would be, I would say, the number one thing that concerns me from a margin perspective, but I would also point back to my comments where we have strong underlying fundamentals with quarter positive gathering and stabilized portfolio loan yields. So that'll probably mitigate any success we would have had with expanding margin, but we still feel very good about growing net interest income and keeping margin in a relatively tight bandwidth.

Okay. That's helpful. And I guess maybe just asking in a more kind of like better scenario that the growth was good this quarter but was a little weaker than it was in the first quarter. Kind of just a follow-up, but I guess it sounds like -- would you guys more willing to just kind of hold cash and stay short in a scenario where maybe there was some excess liquidity outside of what you can deploy into loans or would you be confident that you could find some securities worth purchasing in the current environment?

I think what our philosophy has been, Mike, over the last couple years is we've attempted to at least not aggressively put cash to work when we think that maybe there are short-term implications in the market, but that also has an interest rate risk considerations to it as well. So to the extent that we believe that the current reinvestment environment is here to stay for a period of time, we'll have really no choice but to put money back to work.

That being said, I think the (inaudible) are extremely low rates and the 10-year at the [1.50] and below is a relatively short-term phenomenon. So we haven't rushed to put money into the market and we'd be a little bit more patient than normal. Hopefully that gives you some color. In contrast, if we build liquidity in certain quarters and we think reinvestment rates are good, we'll pre-buy for what we think is cash flow runoff and future growth. So that's about as much color as I can give you when it comes to our philosophy. And at the end of the day, there's only so long we can sit on cash before we need to put it into the investment portfolio.

Mike, this is Peter. I'd just add, because I think Scott alluded to it. Generally speaking, we see solid loan demand in the second half of the year, particularly in our niche businesses, and we certainly expect that to occur again this year. So I think from that perspective we have some pretty good confidence as it relates to redeployment in terms of the loan portfolio.

Okay. Yes, that's fair. I know it was more of a -- kind of a worse case scenario type question. Just was curious, but the color was helpful. Thank you.

Maybe one last one for me just on the growth in the service charges this quarter. I'm assuming it was driven by some of the continued initiatives you guys have on the treasury management side. I forget -- can you remind us, do you guys track any of that internally in terms of like how much of your current commercial deposit -- I mean client base is using your treasury management? Just trying to gauge kind of how far along you are in kind of this growth effort here.

We do. What we found over the last several years is that we have a relatively strong penetration of treasury management clients for those who I'll say are good candidates for treasury management. And when you look at what we've done on the deposit service charges, and specifically drilling down into treasury management, it's trended very consistently at that 10% level with the growth in portfolio loans.

So we're getting our fair share of TM out of the relationships. And again, not everything that walks in the door is a strong candidate for TM or necessarily carries a proportionate amount of fees. But overall we do believe that we're getting the right amount of penetration and that our new onboardings are tracking well with our historical performance. And I also would say that I don't think that our metrics would indicate that we're leaving -- there's a lot of clients where we're leaving money on the table and not getting their TM business.

So I mean it sounds like, without holding you to a number, there's room for it to continue to grow as loans grow, maybe not from 10% for 10%, but certainly at a higher clip than fees overall.

I think we would expect -- that's fair. We would expect that line item, to the extent it's mostly treasury management fees, to continue to trend strongly with the growth in our loan portfolio, and probably more specifically I'll say non-life insurance premium, finance, C&I loans.

Okay. Alright, guys. Thanks for all the color. Appreciate it.

Thanks, Mike.

Andrew Liesch, Sandler O'Neill & Partners.

Hey, guys.

Hi, Andrew.

Hi, Andrew.

You've basically covered all my questions except for one. Just curious, and it doesn't sound like it's really all that concerning, but I need to ask anyway. Just the general rising trend in classified assets over the last few quarters. Just curious what's been driving that.

Well I'd mentioned the -- this is Scott, Andrew. On the non-performers it was really that one [credit] that classified, I think. Again, when you're operating from a low base, the percentage increase looks probably a little worse than it is, where two of the credits that were added on the classified side, both C&I credits. One was a manufacturer/distributor, which is under really an ABL-type structure. The other was participation in a club deal with a service business. So we know the CEO well. Not related businesses. Again, I don't think we see any trends that are alarming, necessarily, from any of those sectors or any of those credits.

Alright, thanks. That's my only question that's left.

(Operator instructions). Peyton Green, Piper Jaffray.

Yes, good afternoon. I was wondering maybe if you could--.

Hi, Peyton.

Just talk a little bit -- you were optimistic about the volume picking up in the second half of the year and just curious maybe if you could give a little bit of color on the pipeline that existed maybe at June 30 versus how it existed a quarter or two ago.

Pipeline looks good. I think generally we really developed a strong sales process over the last few years where -- I'll call it the top of the sales funnel. We're getting a lot more looks at deals. Part of that is we brought in a new CRM system. We've added additional talent. I think we've just become more prescriptive in our process. So we're getting a lot of looks. The pipeline is consistent. I think the seasonality is more related to the specialty businesses. But I feel good about the deals that we're looking at, feel good about the consistency, feel good about the makeup of the pipeline.

Okay. And then maybe just to follow-up, was production where you wanted it in the second quarter and just payoffs and paydowns were higher or was it just a normal seasonal drop?

Most of it is normal seasonality. I think production was consistent. I think some of the payoffs we had, I mentioned and you can see in the general C&I category, really related to sales of businesses. The M&A markets are active. I think the EVL portfolio just naturally as it has grown has a little more churn to it. Usually the third and fourth quarters are more robust in the EVL business. So some of those sales of businesses in that portfolio probably sticks out a little bit more in the second quarter than it would further on in the year.

Okay, great. Thank you very much.

Thanks, Peyton.

Thanks.

Brian Martin, FIG Partners.

Hey, guys.

Hi, Brian.

Hey, just one thought. You guys talked about the competition on the loan side as far as pricing, and at least for these regular C&I. I guess can you -- is there -- are you seeing any of that on the deposit side? I mean I know you guys are more focused on the deposit gathering and you've seen -- and the funding costs are down year over year, but just what's the -- I guess what's the temperature of the deposit market pricing today?

Yes, I think -- this is Scott again. I think we're seeing a little more focus on it, predominantly by the smaller banks. We're not usually competing head to head on consumer deposits with those smaller banks. So from a relationship basis I think we're still happy where we see pricing going on the deposit side. I'm not seeing anything crazy out there.

Okay. So not really seeing any pickup at all I guess is fair to say?

I think banks are more focused on it. Certainly we're seeing the ask on the deposit side along with the loan side when we're competing on a relationship, so I certainly think there's focus. I think the larger banks are more rational still with their deposit pricing. Again, it's mainly some of the smaller banks and it's more time deposit pricing. I haven't seen anything crazy on earnings credit for balances. We occasionally see the special on money market but that kind of comes and goes. But I would say all banks that we -- at least that I have seen us compete against, are focused on asking for the deposits.

Okay, perfect. And just a couple others. The classified, Scott. I guess they were up this quarter. Were those more regular C&I or were those from niche businesses or do you comment on that?

No, they're not -- they are more the general C&I. The one deal was a manufacturer/distributor. It's under an ABL-type structure so I think we feel good about how we've got that structured and secured. The other was more of a service business. So no, they weren't niche businesses.

Okay. Alright. And then just the last two. In the fee income you talked about the tax allocation fees and kind of the switch this quarter. I guess is that type of growth or those fees, are those going to be somewhat lumpy, I guess? Is that how that works? Or I guess can you give any thought on just -- it sounds like you're definitely diversifying and getting the benefit from that, but just how to think about those prospectively maybe just over the next 12 months or whatnot. Is it pretty stable? Is it going to just come and be a bit more lumpy?

They typically are more lumpy I think. When you look at our level of fee income you tend to look at it on an annual basis, and then we can kind of predict the tax credit brokerage business and the rest will be there at some quarter throughout the year and applying some level of growth to it. So they do vary by quarter. I think I was just in my comments trying to point out that we do have a number of diversified businesses. We spend a lot of time talking about the seasonality of our tax credit brokerage and wanted to point out there our allocation business is also very strong and can deliver and make up for portions of that revenue in quarters when we expect it to be seasonally lower. So we had that phenomenon last year in the second quarter and this year again and we'll see how that trends out throughout the year.

Okay, perfect. That's helpful. Thanks, Keene. And then just the last one maybe, I don't know, for Scott or for Peter, just kind of the temperature on M&A. I mean I think -- I know you guys have communicated your strategy, but just as far as the dialogue and discussions, I guess has there been a pickup in activity in your sense or how would you gauge that today?

I'd just comment, Brian, we spent a lot of time on that on the first quarter call. I would say really no significant shifts since the first quarter.

Okay. That's helpful. Thanks, Peter. That's -- maybe just a last thing. Peter, you talked about in your remarks all the changes you've made to management. I mean are you effectively done with all the management changes or significant changes or are there more that are still yet to be done?

Well we're never done with management succession and development, Brian. It's a process. I think my point in alluding to it in the call was to tell you that we have a very intentional process. It's a very effective process. It includes every level of management including the CEO. It's an internally-driven process and it's governed by our board. And in that context I would say, no. We will hope that there will always be additional promotions and opportunities for folks at Enterprise to be more successful.

Okay, I gotcha. Alright. Thank you.

Thanks, Brian.

Michael Perito, KBW.

Hey, thanks, guys. Just wanted to sneak in one more follow up on the dividend. I know that the board seems to address it every quarter so there's probably not a ton you can give us, but just any additional information that you could give us on kind of the thought process and maybe what drivers the board considers when considering a dividend increase to help us maybe try and frame what increases we could expect in the future?

Yes. So I guess I would say our posture with dividend increases is that it's a way for us to manage capital given relatively thin trading in the stock and continuing to manage it in a context of growth. So we look at what level of capital we think we need to support growth and what the other realistic alternatives are. And I would say, just in the context of Brian's question, at just over 9% tangible common equity and tangible assets I think we're well position to capitalize on M&A and things like that.

So the dividend increase is, one, a reflection of our continued growth in earnings and, two, really just to continue to manage the strong build that would have come if we had for example kept a $0.0525 dividend starting 6 quarters ago. So it's really a reflection of all those alternatives. And we have a plan with respect to it and we continue to reevaluate it given where actual results come out and where we think the opportunities are and any other opportunities to finance capital, whether that's weakness in the stock, which we hope doesn't exist.

Alright. Thanks, guys.

Thanks, Mike.

And with no further questions in queue I'd like to turn the conference back to Mr. Benoist for any additional or closing remarks.

Great. Thanks very much. I'd just like to thank all of you for your time this afternoon and your interest in the Company. I think we hopefully have indicated we feel good about our momentum. I think the outlook for the second half looks very strong so we look forward to our third quarter call and we'll be talking to you then. Thanks again for joining us.

This does conclude today's conference. We thank you for your participation. You may now disconnect.