Fulton Financial Corp (FULT) 2015 Q2 法說會逐字稿

(Operator Instructions)

I would now like to turn the call over ort Laura Wakeley, Senior Vice President of Corporate Communications.

Thank you. Good morning everyone and thank you for joining us for FFC's conference call and web cast to discuss our earnings for the second quarter. Your host for today's call is Phil Wenger, Chairman, President and CEO of Fulton Financial Corporation. Joining Phil is Pat Barrett, Senior Executive Vice President and Chief Financial Officer. Our comments today will refer to the financial information and related slide presentation included with our earnings announcement which we released at 4:30 yesterday afternoon. These documents can be found on our website at FULT.com by clicking on Investor Relations and then on news. The slides can also be found on the presentation page under the Investor Relations on our website.

On this call, representatives of Fulton may make forward-looking statements with respect in both financial condition, results of operation and business. These forward looking statements are not guaranteed for future performance and are subject to risks, uncertainties and other factors. Some of which are beyond Fulton's control and difficult to predict. And which could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. Fulton takes no obligation other than required by law to update or revised any forward-looking statements whether as a result of new information, future events or otherwise. In our earnings release we've included our Safe Harbor statement on forward-looking statements and we refer you to this section and we incorporated it into today's presentation. For a more complete discussion of certain risks and uncertainties affecting Fulton, please see the section entitled risk factors and management discussion and analysis of financial conditions and result of operations set forth in Fulton's fillings with the SEC.

In discussing our performance, representatives of Fulton may make reference to certain Non-GAAP financial measures. Please refer to the supplemental financial information included with Fulton's earnings announcement released yesterday for a reconciliation of those Non-GAAP financial measures to the most comparable GAAP measures. Now I'd like to turn the call over to your host, Phil Wenger.

Thank you, Laura. Good morning and thanks everyone for joining us to discuss our second-quarter performance. After I share my prepared remarks our Chief Financial Office, Pat Barrett will provide details surrounding the quarter. Then we will be happy to take your questions. We will refer to our slide presentation throughout our discussion. Comparisons are to link quarter unless noted otherwise. Our cautionary language regarding forward-looking statements is on slide number 2.

Turning to slide number 3, second quarter highlights. We reported diluted per share earnings of $0.21. We saw a $310 million link-quarter increase in combined ending loans and investments. Core deposits increased as well as non-interest income. Other expenses were flat. We will look more closely at all these areas and others throughout the call. Our second-quarter return on average assets was [0.86%] and our return on average tangible equity was 9.83%.

In the credit area we saw moderate average loan growth link-quarter led by our Pennsylvania, New Jersey, and Maryland markets. We were pleased with our C&I and construction loan growth. Overall loan growth was slightly offset by lower average home equity and residential mortgage balances. Average loans were up 3.1% in the second quarter of 2015, as compared to the same period in 2014. Loan growth was tempered as a result of $50 million in loan payoffs or pay-downs of criticized and classified loans. Our loan pipeline at the end of the second quarter exceeded levels at the end of March 2015. And at the end of June 2014. We feel good about this momentum as we enter the second half of the year. However, competition for quality credit is intense, exerting pressure on earning asset yields.

The loan loss provision increased, as in the prior quarter we had recorded a negative loan loss provision. Overall asset quality remains very good, as demonstrated by quarter-end delinquencies dropping to the second lowest level we have seen in nearly four years. Average deposits, increased link-quarter, and in comparisons to the same quarter of 2014. We're pleased that the 7% year-over-year increase came primarily in the non-interest bearing demand deposit category. We're also pleased to see significant link-quarter increase on our non-interest income, excluding security gains. This increase came from a number of major revenue categories. Including service charges on deposits and other related revenue, which includes merchant and debit card income. Mortgage banking income increased as a result of a significant improvement in spreads on loan sales due to improved secondary marked pricing.

Mortgage origination for the first six months of the year were up 18%. Mortgage applications, while down slightly link-quarter were up year-over-year. The refinancing activity accounted for 42% of our second-quarter activity, compared to 60% in the first quarter. At the end of the quarter our mortgage pipeline stood and $212 million. Which is down 11% link-quarter but up 10% year-over-year. Recruiting efforts for high-producing mortgage originators are ongoing. Of course, mortgage volume and mortgage sales gains for the remainder of the year will be largely determined by the future interest rate environment. We were pleased that total non-interest expenses were flat link-quarter despite modestly higher outside consulting services costs associated with our continued BSA/AML build out. We still expect to see our total spend on BSA/AML related work to decrease in 2015, largely in line with our previous guidance.

We completed the consolidation of two additional branches in July, bringing our total branch consolidations to 25 over the past two years. We will continue to look for opportunities for additional efficiencies within our branch network. Future decisions are contingent on keeping the appropriate balance between our customers' desire for convenience and changing delivery channel behaviors. Branch consolidations resulted in $1.1 million of implementation costs in the first quarter of 2015 and $520,000 in the second quarter. We expect additional costs of approximately $200,000 in the third quarter. As we indicated on previous calls, the eleven branch consolidations completed this year are expected to generate approximately $3 million of annualized costs savings. Savings from changes to benefit programs and elimination of certain positions is expected to generate an additional $3.5 million in savings annually. The anticipated total annualized savings from our combined cost reductions initiatives is $6.5 million, with approximately $4.7 million to be realized in calendar 2015. Opportunities to further reduce our expenses are being continuously evaluated.

This quarter we saw a 7 basis point reduction in our net interest margin in comparison to the 0 to 4 basis point quarterly compression on average that we provided in our outlook. Pat will discuss that variance in his comments. In June we initiated a transaction which will have a long term benefit to our net interest income. We issued $150 million of subordinated debt at an effective rate of 4.7%. The proceeds were used in July 2015 to redeem $150 million of trust preferred securities at an effective rate of 6.52%. The annual decrease in interest expense as a result of transactions, is approximately $2.7 million. However, due to timing, the second quarter of 2015 included $375,000 of incremental interest expense as a result of this subordinated debt issuance. We will begin to see the benefit of this transaction on our interest expense in the third quarter.

Turning now to capital. Capital levels remain among all regulatory minimums under Basel III standards. As you know, we increased our quarterly cash dividend from $0.08 to $0.09 in the first quarter, reducing the current yield of approximately 2.75%. Early in the second quarter, our Board approved the repurchase of up to $50 million of our stock through December 31 of this year. As of today, we have repurchased 1.5 million shares for approximately $19 million, on an average price per share of $12.36 under that program. Since the beginning of last year, we have repurchased over $17.8 million of our shares, at an average price per share of $12.01 under a series of Board authorized share repurchase programs. These actions are consistent with our continuing goal of generating and deploying capital for the enhancement of long-term shareholder value.

Before revealing our 2015 outlook, I want to take this opportunity to personally thank our entire team for their ongoing work for developing the infrastructure necessary to satisfy the requirements of our existing BSA/AML enforcement action. It remains our goal to put these enforcement actions behind us in early 2016. Based on our expectations for the second half of the year, we're updating our outlook for the year as follows. In light of recent trending, we expect loan growth to be at the low end of the range in our outlook. Our outlook for deposit growth remains unchanged. With respect to our net interest margin, we anticipate that we will experience margin compression of 5 to 8 basis points over the remainder of 2015. Non interest income growth for 2015 is expected to be at the lower end of the range in our outlook. And finally, our outlook for non-interest expense growth for the year remains unchanged at the low single digit rate. Excluding the $5.6 million cost of debt extinguishment in the third quarter of 2015.

At this time I'd like to turn the call over to Pat for a more detailed discussion of our second quarter performance. When he concludes, we'll both be happy to take your questions.

Thanks Phil, and good morning to everyone on the call. Unless I note otherwise, quarterly comparisons are with the first quarter of 2015. Starting on slide 4, as Phil noted, our earnings per diluted share this quarter were $0.21, a net income of $37 million, which decreased $3.4 million or 8.4% from the prior quarter. Earnings per diluted share decreased by $0.01 or 4.5% from the first quarter, and were unchanged from the second quarter of 2014. The decrease in earnings reflected a decrease in net interest income, a $5.9 million increase in loan loss provision, and a decrease in securities gain, partially offset by an increase in non-interest income.

Moving to slide 5, and as previously noted, our net interest income declined $661,000 or 0.5% driven by a 7 basis point decrease in net interest margin. The yield on average earning assets declined 9 basis points, while the cost of average interest bearing liabilities decreased 3 basis points. Average interest earning assets increased $97 million or 0.6% due to growth and average loans. The 9 basis point decrease in the in the earning asset yields was driven by lower loan yields and lower interest income on investments. In addition, the first quarter of 2015 included a $1.2 million special dividend on FHLB stock, that increased average yields net interest margin by approximately 3 basis points. Average interest bearing liabilities remained flat in the second quarter. Our average cost of interest bearing liabilities decreased 3 basis points. The average cost of deposits remained unchanged at 41 basis points, while the average cost of long term debt decreased 5 basis points, reflecting the impact of the maturity of $100 million of subordinated debt in April.

As previously discussed, in June we issued $150 million of subordinated debt, under redemption of trust preferred securities. Second quarter impact of this issuance was an increase in net interest expense of approximately $375,000 or 1 basis point of margin. The ongoing impact of this re-financing will be a decrease in annual interest expense of approximately $2.7 million, or $680,000 per quarter, of which approximately $500,000 will be reflected in the third quarter. A related note is we will recognize, as Phil mentioned, a one-time charge in the third quarter of $5.6 million, as a result of the debt extinguishments. This charge will be reflected in non-interest expense.

As a reminder, our outlook for 2015 was for net-interest margin compression at 0 to 4 basis points per quarter, on average. Based on the interest rate environment based at the beginning of the year. Our second quarter compression exceeded this range, driven by lower than expected loan and investment yields. Furthermore, the 3 basis point decline in margin, due to the absence of the FHLB special dividend, was only partially offset by reduced interest expense of long-term debt. While the lengthening of the outlook for interest rate hikes, combined with the third quarter impact of seasonal excess liquidity in flows, we expect additional margin compression over the second half of the year to be in the range of 5 to 8 basis points as Phil mentioned.

Turning to credit on slide 6, based on our valuation of all relevant credit-quality factors, particularly an increase in net charge offs of impaired commercial loans, we recorded a $2.2 million provision for credit losses in the second quarter, as compared to a $3.7 million negative provision in the first quarter. Net charge offs increased $9.8 million from the first quarter, resulting in annualized net-charge off rate of [38] basis points, compared to 8 basis points for the first quarter. The increase in net charge offs was primarily due to two impaired loans, which as we previously discussed migrated to non-accrual status during the first quarter.

Non-performing loans remained flat in the second quarter, total delinquencies decreased $19 million or 8%, the decrease was reflected primarily in reduced emerging delinquencies for loans less than 90 days past due. Non-performing loans accounted for 1.13% of total loans at June 30, while the allowance for credit losses to non-performing loans outstanding decreased from 120% to 113%. For perspective, over the last five years, net charge offs, non-performing loans, and delinquencies have declined significantly, reaching levels that are not expected to materially change in the near term, absent significant changes in economic conditions. However, some volatility from quarter to quarter remains likely.

Moving to slide 7, non-interest income, including securities gains, increased $3.5 million or 9%, reflecting increases across most fee categories, including over-draft fees, debit card income, merchant fee income, and mortgage banking income. Note that the increase in mortgage banking income resulted from higher spreads on sale gains. In comparison to the second quarter of 2014, non-interest income excluding securities gains increased $314,000 or 0.7% with modest increases in merchant fees, debit card income, and service charges. Being partly offset by a $400,000 decrease in mortgage banking income. Mortgage sale gains increased $1.5 million, but net servicing income declined $1.9 million. This decline was largely driven by the absence of a second-quarter 2014 adjustment to the amortization of mortgage servicing rights.

Through the second quarter of 2015, securities gains of $2.4 million, reflected sales of equity securities, as we took advantage of favorable market conditions. Our original outlook for 2015 for the growth rate of non-interest income, was in the mid to high single digit range. Based on our actual results for the first six months of the year, and subject to continued strength in mortgage banking income, will likely trend toward the lower end of that range for the full year.

Moving to slide 8, total non-interest expenses were essentially unchanged from the first quarter. Occupancy costs decreased $1.9 million due to seasonal fluctuations in snow removal and utilities costs. ORE and repossession expenses decreased $1.2 million. These decreases were largely offset by a $2.4 million increase in outside services expense. As Phil noted, and as you'll see when we get to slide 9, our outlook for overall BSA/AML related costs remains largely unchanged. Although the year on year drop in BSA/AML related outside services is likely to be approximately $4 million, compared to the $5 million decline we original anticipated.

Our outlook for 2015 for the growth rate and non-interest expenses was in the low single-digit range. As I previously mentioned, we'll recognize a one-time $5.6 million debt extinguishment charge on the redemption of trust preferred securities on the third quarter of 2015. Excluding the impact of this debt extinguishment cost, our outlook for non-interest expense growth remains unchanged. Income tax expense decrease $1.3 million, or 10%, while our effective tax rate remains near 25%. We expect our effective tax rate to continue at this level for the remainder of 2015.

And turning to slide 9, as previously mentioned, we continue to make progress toward building out our regulatory compliance infrastructure. Total BSA/AML related staffing and outside services costs continue to be largely in line with our expectations of 2015. Slide 10 presents our profitability and capital levels over the past five quarters. As you'll see, we continue to demonstrate stable capital and profitability measures even with the revenue and expense headwinds that we face.

In conclusion, on slide 11, we have included a summary of our original and updated guidance for the year for easy reference. Thank you for your attention, and your continued interest in Fulton Financial Corporation. And now we'll be glad to answer questions.

(Operator Instructions)

Frank Schiraldi, Sandler O'Neill

Good morning. In the past, you guys have talked about the difficulty of holding floors on the C&I side. Is that the case, is that still playing out, and does that perhaps better position you, better position Fulton for even a small move in the lower end of the yield curve?

You know, Frank, I believe that our total loans at their floors at the end of the first quarter was between $3.3 and $3.4 billion, somewhere in that range. And at the end of the second quarter, that number was down to roughly $3 billion. So it is dropping each quarter, at a fairly slow pace.

Okay, that's helpful. Thanks. Sorry if I missed it, Pat, but if in terms of the NIM guidance for the remainder of the year, what does that bake in in terms of interest rate hikes?

Well, as far as the impact on margin, essentially nothing. We wouldn't expect interest rates, short-term interest rates, and what we're modeling now to move up until right at the end of the year or possibly early 2016. It'd be great if it's moved up earlier, and Phil talked about loan floors, we still have 50-plus basis points of differential on the $3 billion of loans that are at floors. So even a 25 basis point hike will begin to have an impact on those, and certainly will start to have an impact on the origination yields as well.

Okay, great. Thinking about a strategy going forward, you talked about getting BSA compliance behind you. In terms of 2016, does M&A once BSA/AML is sort of upgraded, does M&A move a lot higher in terms of your list of priorities or do you think -- is there still stuff you're focused on internally that maybe pushes that still to the back burner?

I believe Frank, that it will push that higher. As we go through 2016 and get released from the orders, yes.

Okay. All right. That's all I have, thank you.

Thank you.

Chris McGratty, Keefe, Bruyette & Woods.

Good morning, everybody. Pat, on the margin, a question given the loan floor commentary, maybe if you could kind of elaborate on how you're thinking about the transition from margin degradation to stabilization given the floor? Is that something if we get a hike in the back half of the year, closer to year-end, that we see the first half of next year kind of stable, or is it an immediate benefit by your estimation?

You know, I hate to put predictions out there on margins percentage. Because there's so many disparate unrelated things that can happen to the numerator and the denominator. I think from a dollars perspective, we would really hope to see before a margin rate inflection occurs, that our dollars will start to grow again of net interest income. Instead of continuing to be compressed each quarter. We're hoping that we've reached that level as we were exiting the second quarter. We actually saw our dollar compression stabilize toward the end of the quarter. From a rate compression perspective, I think that even with a rate hike, there would be a bit of a lag, we wouldn't see an immediate same quarter positive impact.

Okay. That's helpful, thank you. And just on the guidance on the fees and the expenses, adjusting to the non-recurring, is the updated expense guide -- come out to a $117 million $118 million run rate for the back half of the year? I want to make sure I got all the adjustments, and kind of the fees to $44 million $45 million.

On expenses, if you just annualize the first half of the year into the second half of the year, excluding the debt extinguishment cost, you'd see expenses going up by 3%, which would be the high end of the low single-digit guidance range. And we've got an extra day in the second half we have to fight against. We have persistently high levels of platform investment, outside services costs, and certainly higher salary and benefits costs. That are not -- that they're in our run rate. We're going to do everything we can to work on each of those line items. I think you should take note that we said excluding the $5.6 million. We're sticking with our low single-digit guidance range. You should infer that including that, we might be a little outside that range.

All right. Thank you. Last question is [obviously it seems like] the deal is going to close in about a week. Can you talk about any opportunities that have presented themselves to date?

I think that we've indicated all along we felt we would be able to pick up some customers and some employees, and I think we still feel that way.

Great, thanks.

Bob Ramsey with FBR Capital Markets.

Good morning, guys. I wonder if you could help me revisit the $6.5 million of run rate expense savings from the first half initiatives. How much of that was already in the second quarter expenses?

Let's say about $0.5 million of one-time expense and $900,000 of ongoing benefit. And that will reach a steady state for the most part on benefit in Q3 of about $1.6 million. We'd expect an additional $700,000 of run rate savings in Q3 versus Q2. We will, as Phil mentioned have a couple hundred thousand, about $200,000 of one-time expense because a couple of our branches we aren't actually closing until now, this month.

Okay.

Q4 will be clean of all one-times and should be a steady $1.63 million run rate of benefit.

Okay, got it. That's helpful.

Just to be clear, that's the savings from the branch -- as far as the employee benefits, I believe most of that has already been baked in.

Absolutely.

Yes.

Okay. I was hoping you could talk a little bit about fee income. Obviously you did have some strength in several buckets, overdraft fees, debit, merchant, swap income. Just curious if -- how you're thinking about this quarter, kind of what drove the strength? Next quarter, do you continue to build on these levels or was there anything -- I don't know how much exactly was commercial swaps. Was there anything lumpy that maybe pulls back in next quarter? Or how you're thinking about the fees?

Part of it is seasonal. And we expect that seasonality to continue this quarter. In a positive light. So much of the fee income growth rate is going to be dependent on mortgage volumes. It's really early to tell in the quarter how that's going to play out.

Okay. But as far as swap fees and overdraft, all that basically nothing other than seasonality, it's pretty straightforward?

I think so, yes.

Yes.

We think so.

Yes, I'd just add to that. I think we've been experiencing a compression on service charges, particularly overdraft fees for such a long time, that it gets hard -- we're very reluctant to call a trend, after one quarter of nice pickup. It's even hard to call it seasonal given that we've been compressing for so many quarters.

Okay. Fair enough. I think someone asked you if thinking about the run rate in the back half of the year, at $44 million to $45 million is in the right ball park. I know you all have given sort of full-year guidance, but I just -- not exactly clear on sort of what's in the starting point with or without security gains et cetera. I'm just curious if that ball park seems right to you.

We had $165 million last year in run rate. We were guiding towards a mid to high single-digit. 5% to 8% increase in our original annual outlook. And we're dialling that back to low to mid-single digit, 3% to 5%. And that's for the full year. So you can back out the $85 million that we have already printed this year. And come up with an estimate on the remaining two quarters. It's actually a little bit lower than the second quarter actual $44 million. That's how I get through the math. And we'll update you in the third quarter.

That is helpful. As far as what the guidance actually means. Okay. Last question and I'll hop out, but you did bring the allowance to loans ratio down a bit this quarter. I think in the past, you had talked about continuing to have that ratio trickle lower by, I don't remember what you said, three our five bps a quarter, and definitely seem to be some pickup there. How are you thinking about allowance to loans today? And at what pace maybe if credit remains on the trajectory we're on today, you can continue to bring that allowance down.

So we're still higher than our peers, but we're getting closer. There is room for a sum reduction, but it's the amount of reduction is going to slow.

Okay. When you say it'll slow, do you mean from the 3 to 5 basis points you guys were doing? Or from the bigger step down? I think you're almost 10 this quarter.

Well, definitely from the bigger step down we had this quarter.

Okay. All right, thank you guys.

Casey Haire with Jefferies.

Good morning, guys. I just want to follow up on the expenses, it sounds like you guys got a little more than half of your cost saves in this quarter. I'm just curious why we're -- we're not really seeing it. You see if we look at expenses year-over-year, that salary and occupancy line is actually up year-over-year. And the revenue comp comparatively is down. Why are we not seeing it show up as meaningful leverage?

Well, I think our guidance from the beginning of the year would have indicated that the savings that we were going to have, we are investing in other places in the company. I think that's a simple way to say what's happening.

I think our bias is a more expensive platform, and we're trying to find ways to rationalize our expense to help mitigate that. Versus we're creating cost saves to bring expenses down, and then deciding whether to invest. If that makes sense? We're -- a lot of the people we've hired over the last two years, and are continuing to hire, are for different jobs and roles and higher levels and higher cost levels than the jobs that we're eliminating as we rationalize unprofitable branches. Right? It's not an easy dollar for dollar trade.

Understood. Then just switching margin, obviously the securities yields took a big hit this quarter. We all knew about the FHLB special dividend. Was there a premium amortization sort of headwind this quarter that you didn't see coming? If so, why would that not be a tailwind going forward, given where we are with rates? What is the biggest headwind to the margin going forward? Is it loans, securities? Just some color there, please.

Sure. So the biggest -- I'll make one comment then Pat can finish The biggest headwind is loan yields. And I would say in that regard, a larger percentage of our production right now is going on floating rates than has in the past. And pushes those yields down.

So just to expand on, that I think we've been tracking to about a 50-basis point gap between new originations and loan roll offs for the last several quarters. This quarter it was closer to 70 basis points. That doesn't show up in NIM, it takes a long time for one quarter's net origination to roll through to the average loan yields to make a difference. But over time it does, you know, definitely create challenges.

I'd say that -- to get back to your initial entry point on the investment and securities yields, it was not driven by amortization. There were seven or eight different drivers that affected that. The largest one did not even round to the 1 basis point. It was actually re-pricing and contracting yields on municipals and on our auction rate securities. That were probably the two bigger drivers. Then it was just a range of other small cash flow and other things.

We did, towards the latter half of the quarter, actually throughout the quarter, we were sort of re-investing some of our excess liquidity and building back up some our excess -- turning our excess cash into securities, both MBS and CMOs. And we were investing I think $300 million of ending balance increase that we will see filter into the yields going forward because we were definitely investing it at lower yields than the average portfolio, I think closer to 2% versus our yield of 2.5%.

Okay, great. Last one for me, on the capital front, you guys got a pretty decent sized chunk of the buy-back done this quarter, yet TC ratios held pretty stable. Based on sort of the asset growth forecasted that you guys are talking about, we're not going to see much degradation in that TC ratio. Would that prompt you to adopt a more aggressive capital management policy?

Well, we're going to get through the repurchase program that we have now, and then our Board will talk about how we want to move forward and a lot of that will depend on how the BSA is progressing, and when we can start getting in the acquisition game again. I think there's just a whole lot of factors that are kind of up in the air right now.

Okay, thanks for taking the questions.

(Operator Instructions)

We'll go to David Darst with Guggenheim Securities.

Good morning. As you discussed the investments you're making to build a more expensive platform is the word you used, is there a long list of more investments that you need to make over the next 2 to 3 years or will you get to a point where as some of these projects are done, you'll be able to just roll into the next project and then limit expense growth and maybe get back to some lower efficiency ratio?

Hey, David. We think we're well on our way to completing most of the initiatives we have going.

Is this three quarters left? Or you think you'll get operating leverage sooner than that?

Well, our first goal is to get operating leverage because our revenues are growing. I think we're getting closer to that with -- if we can continue to grow loans and have that decrease in margin happen at a lower rate, we can start growing revenues. If we do that and hold expenses constant, we'll have positive operating leverage.

Okay. And then --

Go ahead.

I'm sorry, you can finish.

I was going to say, we also think that we will have built a framework for -- that would support an institution larger than what we are.

And then the [$15] million payoffs that you said were criticized and classified, was that strategic on your part or did those just materialize?

Well, I think that most of those folks were able to find better deals some place else. And strategically, we made the decision to let them go.

Okay. And then --

It wasn't a result of sales or anything of that sort.

Right. Okay. Just as you're thinking about your current pipelines, how do you see the construction portfolio trending over the next year? Is that still something that should still be a pretty good contributor to growth?

It should be, yes.

Okay great. Thank you.

Matthew Breese with Piper Jaffray.

Hi, guys actually Matt Kelley. What have you noticed on deposit pricing in your markets throughout the quarter compared to what we're seeing over the winter and fall of last year? Any changes at all in the competitive environment and what some folks are offering for promotional high balance money market type stuff or anything like that?

You know, I would say at this point we have seen very little change in deposit pricing.

Okay.

And I imagine people are experiencing the same thing we are with what used to be the seasonal in flows of Q1 and Q3, don't all flow back out again in Q2 and Q4. The liquidity levels just keep rising without having to get out and compete for them. In our markets, anyway.

Okay, got it. And then on deposit service fees, overdraft, have you made any changes recently to your consumer deposit pricing matrix? Or overdraft charges or anything different there that might be driving some of the changes that you saw during the second quarter?

No.

Okay.

We have had no changes in pricing.

Yes.

Okay.

We've been -- I had mentioned it earlier, we really have seen probably much more compression and decline in those charges over the last two years then a lot of other banks have. And I think this -- hopefully this will represent a little bit of a turning point. I kind of hesitate to call it seasonal or not. I think it would be great to get another quarter under our belts and then maybe talk about what we see as a trend.

Okay. Got it. Thank you.

That does conclude today's question and answer session. Mr. Wenger, at this time, I'd like to turn the conference back over to you for any additional or closing remarks.

Well, thank you all for joining us today, and we hope you'll be able to be with us when discuss our third quarter results in October.