Hilltop Holdings Inc (HTH) 2016 Q2 法說會逐字稿

Good day and welcome to the Hilltop Holdings Q2 2016 conference call and webcast. Participants will be in a listen-only mode. (Operator Instructions). Please note, this event is being recorded. I would now like to turn the conference call over to Ms. Isabell Novakov, Senior Vice President, Investor Relations. Ms. Novakov, the floor is yours ma'am.

Good morning. Joining me on the call this morning are Jeremy Ford, President and CEO, Hilltop Holdings; Alan White, CEO, PlainsCapital Corporation; Darren Parmenter, Principal Financial Officer, Hilltop Holdings; and John Martin, CFO, PlainsCapital Corporation.

Before we get started, please note that certain statements during today's presentation that are not statements of historical fact including statements concerning such items as our business strategy, future plans, and financial condition are forward-looking statements. These statements are based on management's current expectations concerning future events that by their nature are subject to risks and uncertainties.

Our actual results, capital and financial condition may differ materially from these statements due to a variety of factors including the precautionary statements referenced in our discussion today and those included in our most recent Annual Report and quarterly report filed with the SEC. Except to the extent required by law, we expressly disclaim any obligation to update earlier statements as a result of new information. And now, I would like to hand the presentation over to Jeremy Ford.

Good morning and thank you, Isabell. For the second quarter of 2016, net income was $31.1 million or $0.32 per share. Provision for loan losses was $28.9 million for the second quarter of 2016 primarily driven by a non-recurring, full charge-off related to one large loan, which had a $24.5 million outstanding principal balance. Adjusted net income was $33.1 million or $0.34 per share when excluding transaction and integration costs related to the SWS Merger. In connection with the SWS Merger, during the second quarter, Hilltop incurred $2.3 million in pre-tax transaction and integration costs.

For the second quarter of 2015, net income was $29.6 million or $0.30 per share. Our ROAA was 1.05% in the quarter relative to 0.97% prior year. Our ROE was 7.07% relative to 7.12% in Q2 2015. Hilltop's four operating segments reported $58.5 million in pre-tax income. PlainsCapital Bank contributed $21.6 million, PrimeLending contributed $28.1 million, Hilltop Securities contributed $18.3 million, and National Lloyds recorded a $9.6 million pre-tax loss. Hilltop's common equity increased to $1.8 billion, up $34 million from March 31, 2016. And we remain well capitalized with a 13.18% Tier 1 leverage ratio.

Hilltop's Q2 2016 results demonstrate the operating leverage for our platforms and strong fundamental trends in each of the Company particularly with the exceptional performance of our mortgage-related businesses. Moving forward to the next slide. Here are the financial highlights and I'll talk to the items not previously discussed. Our net interest margin had modest improvement from higher loan yields and lower cost of funds, rising to 3.8% from 3.7%. Our total assets increased to [$13.1 billion] from $11.7 billion in the prior quarter. Our loans increased to $5.8 billion from $5.7 billion in the prior quarter and our deposits increased to $7.1 billion from $7 billion in the prior quarter. Hilltop's NPAs to total assets improved to 20 basis points and our Tier 1 leverage ratio improved to 13.18%. I'll now turn the presentation over to Darren Parmenter.

Thank you, Jeremy. Moving to Hilltop's net interest income and margin. Our taxable equivalent net interest margin increased by 10 basis points in the second quarter to 3.8% compared to 3.7% in the first quarter. Higher loan yields and balances coupled with lower rates on borrowings drove the improvement. The cost of our interest bearing deposits remained relatively flat. The net interest margin was 72 basis points greater due to purchase accounting driven mainly by the accretion of discounted loans by $17.3 million and the amortization of premium acquired securities of $900,000.

Hilltop's net interest margin and taxable equivalent net interest margin was reduced by the Broker-Dealer's securities lending business. The net impact of this was 65 basis points. The Bank's taxable equivalent net interest margin for the second quarter was 4.87% from 4.73% in the first quarter.

Moving to noninterest income, our noninterest income for the second quarter was $346 million, up approximately 15% from prior year. Net gains from sale of loans, other mortgage production income, and mortgage loan origination fees increased $24.7 million in the quarter. Investment advisory fees and commissions decreased $1.1 million or 1.5%. Net insurance premiums earned were down $1.6 million to $38.7 million in the second quarter. Other noninterest income increased $22.6 million or 102.4%.

Moving to noninterest expense, our noninterest expense was $367.4 million in the quarter, up 4% from prior year. Compensation was $217.3 million versus $200.3 million in prior year representing 59% of our noninterest expense. During the quarter, we incurred $400,000 in employee comp expense related to the SWS Merger. This compares to $2.9 million we experienced in the second quarter of 2015. Loss in LAE policy acquisition and other underlying expenses were down $4.5 million to $48.5 million in the quarter. Occupancy and equipment expenses decreased $3.9 million or 12.7% versus prior year.

Other expenses increased $5.4 million or 7.7%. During the second quarter, we did incur $1.9 million in transaction and integration-related costs due to the SWS Merger compared to $1.5 million in prior year. Moving next to Hilltop balance sheet. Our total assets grew by 11.5% in the second quarter. Loans held for sale increased $206.1 million or 15.3%. Gross non-covered loans held for investment increased $106.4 million. Broker-Dealer and clearing receivables increased $887 million or 64.7%. Our securities declined by $167.6 million. Gross loans held for investment covered and non-covered to deposits was relatively flat at 81.3% and our total deposits increased $142.6 million or 2%. Our short-term borrowings increased $179.9 million or 21.6%. Our common equity increased $33.9 million, almost 2% primarily due to earnings. With that, I'd like to turn the call over to Alan White.

Okay. Thanks, Darren. Quarter 2, 2016 had an ROA of 0.66% driven by an elevated provision substantially due to the loan that Jeremy was referring to, the one-time charge-off that we had. Let me just stop there and give you a little background. That loan originated in 2014. We had it on our books for about 18 months. It was amortizing monthly. Never missed a payment. Around May 1, we got some intelligence that we might have some issues on documentation.

As we began to investigate that documentation, we suspected fraud. On May 15, when they did not make the payment, we called the note. We demanded payment from the borrower and the guarantors. On or around June 15, we sued the company and we sued the guarantors. So this has moved pretty fast. About 30 days ago, they received service and we're in the process of aggressively suing them and going after collection of our debt from that standpoint. So this is a big surprise for us.

I want to assure you there are no other surprises. If you look at our loan quality, we're about 11.46% in classified loans. That's down from 14% in the first quarter. Our past dues are way less than 1%. Our total non-performing assets to total assets is 0.20%. Our total non-performing loans to total loans is 0.33%. When you look at our energy credits, we're down to 4.2% of total loans, our energy, that's $233 million, 34% of that is stocks, bonds and cash. We have paid down in this quarter $10 million in the energy side. That all came off of --basically off of classified loans. They reduced from $38 million to $28 million.

So we feel good about where our energy portfolio is. We do not have any national shared credits and we continue to monitor that and to do well and we do not see any contagion in our other markets. So that's a little bit about our portfolio that maybe helps you have a little better feeling about what happened and it was a surprise and it surprised all of us, but we are vigilantly trying to collect it.

Our interest margin for the quarter was 3.83% after purchase accounting. That's quite good. We still remain in that [3.60 point, 3.80 point] range on our net interest margin, which is strong. Our loan growth for the quarter was about 5.5% annually. That excludes the warehouse loan and the stock loan line at Hilltop Securities. If you look at where we are year-to-date, we're 15% annualized year-to-date. We still think we're going to end the year in that 10% range that I had been telling you all along. So we still feel good about our growth.

Our actual pipeline went up from $1.6 billion to $1.8 billion in the quarter, $200 million increase. That's primarily real estate commitments that we made and we anticipate they will fund up. So we felt like we had a pretty good month or a pretty good quarter in loan growth especially with the increase in our unfunded commitments.

Our noninterest bearing deposits still remain very strong at 0.32%. We're operating 63 branches. We did dispose of a branch in The Woodlands in the second quarter and currently, we have five new branches planned over the next year that will be coming on.

As far as PrimeLending, we had a really good quarter. June was the best month we've ever had at Prime. Our loan volume increased to $4.2 billion for the quarter, up 8% over this time last year. Purchase volume was 79% in the quarter versus our -- in the industry, which is about 54%. So we are a strong purchase lender. When the MBA comes out and tells you it's going from a three and three to three and six, part of that is going to be purchase and we're going to get our share of that. So that's a good move for us.

Our gain on sale margin actually improved from quarter-one -- from quarter-two 2015 to quarter-one. We have a committee that -- an optimization team that works on fees and rates and they've done a really good job of keeping that net gain on sale margin in there and we're doing very well. Our overall market share is 0.81% in quarter two. Low rates have fueled the industry volume growth through refinancing but PrimeLending has continued to improve its purchase business. Our purchase market share is up 8 basis points to 1.19% of the total market.

We continue to receive nice recognition from the industry. They were recently named Above Average originator of jumbo loans, both residential and mortgage loans by Moody's, which is very well thought of and as well we ranked Number 2 in Fortune's Best Workplace in Finance and Insurance. So we're proud of that.

Hilltop Securities continues to make good progress. After integration costs, they made $19.1 million before -- pre-tax income in quarter two which is a great improvement. Pre-tax margins continue to improve including integration. Over the last five quarters, it's done nothing but get better. Our capital markets is doing well. Our clearing is really starting to show good results and that's been well received because that's going to generate more deposits for us that we can use in the buying side. And we continue to add strength in the TBA housing business and the public finance business.

So the business lines drove about a 25% increase in net revenue in the second quarter versus second quarter of 2015. That's what we've been looking for. Our compensation to net revenue ratio was 58% in quarter two compared to 72.8%. So you can see this is a significant reduction. There's been a reduction of staff, which has reduced compensation and with the increased revenues and shift of the revenue mix, we're seeing good results from there.

National Lloyds, it's been spring and that's our time where we have our most difficult seasons. We had storms in April and May and continued to mirror last year's first quarter activity, but an earlier than anticipated end to spring storms, after an early start, allowed a strong finish in June that resulted in a loss and LAE ratio of 96.1% versus last year where it was 102.3%. So we're coming out of that and coming out of it in good shape. Quarter two is seasonally the toughest weather in Texas with LAE ratio of 96.1% is below the averages. Quarter two average over -- up below the average over the last three years. The expense ratio is 33.9%, remained relatively flat to quarter two, 2015 which is a result of continued process improvement and reduction in variable expenses.

Direct premiums declined year-over-year to $42.7 million in quarter two compared to $46.6 million in quarter two, 2015. This has continued because of the efforts by management and past initiatives to lower geographic concentrations and risk and offset by moderate increases in rate. So this is a design by us and the results are showing less risk in trying to flatten us out a little bit. So, overall the Company's had a good quarter. If we could take that one item out of there, we had a great quarter and we will continue to progress as we've done. So with that, I'll turn it over to John.

Thank you, Alan, and good morning. Pre-tax income at the Bank was $21.6 million in the second quarter. That's compared to $45 million in the second quarter of 2015 and that was largely due to the $24.5 million charge-off that both Alan and Jeremy had discussed. The increase in net interest income was a result of growth in our non-covered loan portfolio and improved net interest margin pre-purchase accounting.

Noninterest income decreased compared with the second quarter 2015 primarily as a result of lower exchange fees and lower ORE income attributable to the FNB transaction. Noninterest expense decreased from the second quarter due to reduced occupancy expense resulting from industrial branches, lower professional fees, and lower repossession and foreclosure expenses. We fund a line at PrimeLending, which had $1.5 billion authorized at the end of June and $1.4 billion was outstanding.

Our Tier 1 leverage ratio was 12.72% versus 12.70% at the end of the first quarter. Our loan portfolio of $5.8 billion is about 50% real estate, 12% construction and development, and 28% C&I. On the deposit side, we have a strong noninterest bearing percentage of 32%. Alan has talked about our energy exposure. We do not have Shared National Credits in the energy portfolio and we continue to have relatively small balance of loans in Houston and the surrounding region.

Our unfunded energy commitments are all subject to borrowing bases and credit review prior to draw-downs. The energy portfolio did increase in the first quarter and that was driven by one large revolving line of credit to an existing customer that was secured by cash and marketable securities. The energy portfolio continues to decline and was about 4% of our total loans at the end of the quarter.

On the credit quality, Alan just talked about that. It continues to improve. The non-performing assets are down to 20 basis points and the absolute dollar value is also improving. Capital ratios do show a flattening out -- a small decline and that's a result of growth in the loan portfolio and in particular in growth in the higher risk-weighted assets. Our loan portfolio classification, the covered loans is largely real estate, 91% of the PCI covered loans are real estate and the non-PCI covered loans is 95% real estate. When you get to our non-covered portfolio, on the PCI side, we have 73% real estate, but when you get to the rest of the portfolio, it's more, 47% real estate and 30% C&I.

The purchase credit-impaired loans that -- loans from which is probably not all of the contractually required payments will be collected, and includes covered and non-covered loans. The covered loans coming from the FNB transaction. PCI loans had a total discount of about $179 million, $161 million of that was related to the covered loans. The weighted average expected loss on the PCI loans associated with the PlainsCapital, FNB, and SWS Merger were 32%, 18%, and 15% respectively. On our non-PCI loans, the portfolio -- we carried our non-PCI loans at about 98.6% of the unpaid principal balance.

PrimeLending as we've discussed a few moments ago had a strong credit -- a strong quarter with pre-tax income of $28 million versus $21 million in the second quarter of 2015. Our origination volume was $4.2 billion and that was $317 million greater than the second quarter of 2015 and largely attributable to the growth in the purchase business which increased to 78.6% in the second quarter versus 76% in the second quarter of 2015.

Refinance volume actually decreased compared to the second quarter of 2015. Noninterest income increased $24.7 million or 14.7% due to the higher sales volume and higher revenue both gain on sale and average origination fees, the corresponding increase in noninterest expense of $17.7 million or 12% compared to the same period of 2015, which reflects increased salaries and benefits, branch location, and technology initiatives that we've had. PrimeLending retained approximately 25% of the loans or retained servicing approximately 25% of the loans that were originated in the second quarter and we ended the quarter with a servicing asset of about $33.5 million. With that, I'll turn it back to Jeremy on Hilltop Securities.

Thank you, John. Hilltop Securities had an exceptional quarter. The pre-tax income was $18.3 million versus a pre-tax loss of $1.9 million in the second quarter of 2015. After adjusting for the pre-tax integration related costs, the pre-tax income would have been $19.1 million.

Our net revenue increased 25% to $110 million. This is primarily due to a $23 million increase in income earned from derivative and trading portfolio activities. The noninterest expense increased by only $1.4 million to $92 million in the second quarter. And the broker-dealer segment provided the banking segment with $850 million of core deposits representing 38% of the total available FDIC insured balances.

Moving forward to National Lloyds, it had a typical seasonal pre-tax loss, but improvement from last year. Pre-tax loss was $9.6 million relative to $12.5 million in the prior year. We had seasonally normal severe weather in Texas during the first half of 2016, though the claim counts reflect an earlier start and end to the anticipated storms that helped drive the 2016 improvement.

Our reinsurance limited the retained losses from these sub-catastrophic events of the weather. The direct premiums written declined relative to the second quarter of 2015, which reflects continued efforts to reduce concentrations, agent management initiatives, and competitive pressures. And that concludes our prepared remarks.

(Operator Instructions) Brady Gailey, KBW.

So maybe we'll start with this charge-off. I guess Alan, you gave us a great run down on kind of what happened but maybe just share what type of loan this was? And roughly $25 million, is this one of your larger loans or just talk about how big (multiple speakers).

It's pretty good size loan obviously. It was a surprise obviously. It was a commodity trading loan. That was supposedly what it was here in Dallas.

And did it have anything to do with the energy downturn that took it down?

No, no. No, it didn't.

It's suspected fraud and I can't go -- I'd love to tell you all about it, but right now, we're in litigation and investigation and everything else and I just can't go much further than what I've said and I'm not trying to be difficult, I'm just doing what I'm told.

You understand where we are? We took a hit, we got out of it. We're pursuing the guarantors vigorously and time will tell, but it's behind us and hopefully, we can get some of it back or all of it back.

How large are your largest loans?

Brady, we've got some that are -- we got one that's $90 million and they vary. I would say most of our loans are in the $25 million -- $10 million to $25 million range would probably be our sweet spot down the middle, but we do have some that go a little bit higher. We don't like to make loans like a $90 million, but it's such a good deal and such a good customer and there's limited risk, you know, we've had that one for quite a while.

Yes. So on the flip side, mortgage, record earnings there, that really helped offset a lot of the increased provision. So when you look at mortgage volumes for the first half of the year, they're around $7 billion. Do you think that's repeatable in the second half or do you think we'll see a slowdown?

Well, third quarter ought to be good. Second quarter was really outstanding and if things continue to go the way they are, third quarter will be good. We don't anticipate fourth quarter being as good and that's normally the cycle, but normally the cycle is the first quarter is not any good, and it was good. So I think we're looking in the range -- we did $13.5 billion last year. I think we're looking in the range of $14 billion plus this year and with the MBA coming out with the increased forecast of [3 and 6], we're going to get our share of that market.

Now, it just depends on what happens. Everybody thinks well, because the rates went down, it's all refi, well, it's not with us, it's purchase. And of course with rates going down, people are buying houses and our markets that we deal in are strong Texas, California, up the East Coast, Washington and Oregon have really come on for us. So our markets are strong. So if everything stays the way it is, we should have a good last half of the year.

All right. And then finally from me, you announced the buyback, $50 million last month. I don't think you repurchased any stock in the second quarter. How are you thinking about the buyback with the stock over [22]?

Well, we did not do any repurchases in the second quarter and the buyback's out there and we are going to evaluate it and be prepared to repurchase as we see.

Is that something you think you'll actually do by the end of the year or it's more a wait and see?

I think that we will do some of it at the least and then just depending on the market, I think one of our goals is to offset any equity dilution from -- sorry, any share dilution from equity awards. So, that we'll do some component of it.

All right. Thanks, guys.

Michael Young, SunTrust.

I wanted to start on the net interest margins. It seemed like it was a little stronger, I understand higher loan yields but was there a fee income component maybe in that, that jumped up or do you see that sort of level holding from here?

Michael, there was a little noise in it but not much. It should be maybe a little lower than where it was, but not significantly.

Okay, and along the same lines, Jeremy I think in the past you'd said the broker-dealer receivables were going to maybe maintain a little bit lower balance. Obviously those jumped up to kind of record levels this quarter. So just curious about your outlook going forward there? Any change in your thoughts on that business?

No, it really ramped up towards the end of the quarter to that north of $2 billion range and we're still -- it's a lower margin business and we still want to have that running about $1.5 billion. So I would go back to thinking about $1.5 billion of the stock rolled out.

Okay. And one last one on the broker-dealer, obviously better pre-tax margin contribution this quarter, really good actually. Was that continued kind of mix shift towards the higher margin businesses like TBA that drove that? And then maybe just kind of your outlook for the back half?

Sure, there was certainly some mix shift to the higher margin businesses and that had a big part of it. I think the underlying part is there's a lot of improvement in several of the businesses as Alan mentioned and a lot of that's revenue. And also we're starting to see the benefit of the cost saves and all the restructuring work that we've done.

Okay, that's great. I'll hop off now.

Okay, thanks.

Matt Olney, Stephens.

Hey, I want to go back to that large charge-off that was discussed earlier. I'm just trying to figure out in hindsight, do you feel like the loan officer was doing the appropriate due diligence? I'm trying to understand if you think you need to restructure any kind of controls or procedures you guys had there internally?

No. Obviously, we've looked at it and we've tried to put some things in place, but no, that's all hindsight. When you look at it and when it's suspected fraud, and to the level this was, it's really hard. And this was brought into our bank by a relationship. And we were trusted in that relationship maybe too much and then the thing got sideways and I really can't get into all of it. I'd love to once this thing goes, but we just got duped, Matt.

And originally, Alan, was there any collateral on this loan?

Oh, yes. Well, we thought there was. That's why we went ahead and took the loss because anything that we thought we had wasn't there other than the guarantors. And that's really all we had to hold our hat on and that's what we're suing for.

And is there any more exposure to these same guarantors?

No. To us? No, we had no more exposure other than going after the money.

Okay. And then shifting over, I guess, Jeremy, can you just kind of talk higher level about the variable cost structure of the various segments? I mean obviously revenue was very strong this year. I'm trying to make sure that the associated expenses with the strong revenue was all taken in 2Q and could we see a mismatch into 3Q?

Are you speaking to the broker-dealer?

Yes, broker-dealer and mortgage.

Okay. Well, it's -- I don't see -- maybe tell me on -- I think we had a mix shift. I don't see any like -- are you saying something's going to develop into the third quarter?

Well, I'm just, obviously with the higher revenue in some of the variable commissions, you take higher expenses. I just want to make sure that 2Q captured some of those higher expenses or if we could see some of that into 3Q?

No, I think Q2 captured the higher expenses appropriately and I think that with every quarter where we have like seasonality and other things in the market, that you'll have some mix shift in these businesses and the broker-dealers that will impact the underlying profitability.

In the mortgage business, we have fixed cost in there. We have to increased our fixed cost obviously to handle the volume, but with the fixed cost because of increased revenue, which comes with increased expense, because we're paying out more commissions. So obviously if the commissions drop off, those fixed costs should come down some too, but this was fully loaded second quarter. Second quarter was huge in the mortgage business and June was the biggest month we've ever had. And July looks pretty good.

Okay. Thanks, guys.

Brett Rabatin, Piper Jaffray.

Wanted just to go back first to the mortgage banking and you mentioned strategically increased loan pricing that helped gain on sale margin in the quarter. I guess a question on that is does the gain on sale margin kind of hold up where it was in (multiple speakers) [2Q]?

It actually increased Brett and not only did we -- we wereable to affect loan pricing, we were also able to affect fees. So both of those aspects, we're able to bump up our gain on sale and we've had a lot of fluctuation in rates. As you know, 10-year bounced around and we've been able to hold on those rates and not have to come down when they drop. That's where this team has worked very well and not have to adjust rates down as they dropped significantly on people's commitments. We didn't give in to them and drop. So that's why our gain on sale margin held in there and was even actually better than last quarter.

I guess my question is, is that going to hold going forward in terms of your gain on sale margin?

Yes. It -- I don't see any reason, it's held for the last eight or nine quarters. It ought to continue to do so.

Okay. And then you mentioned Alan that the loan pipeline looked pretty good for the back half of the year. Was just curious what you're seeing growth in and then the opportunities that --?

No, I would tell you, 80% of our growth is coming in real estate and 20% is in C&I and that's what we're seeing and that's what's in the marketplace.

Okay and then just lastly, I was curious about your views on the M&A environment currently and if you guys have any optimism that you'll be able to do support bank acquisition over the next few quarters?

Well, I think it's similar to what we've said for several quarters. But we just -- we continue to pursue M&A opportunities and we're actively evaluating several opportunities, but at the same time being patient and I think that we view that our excess capital, the primary purpose for it will be M&A.

Okay. Thanks for the color.

Thanks.

Jesus Bueno, Compass Point.

Thanks for taking my questions. Just very quickly, it was great to see such a strong quarter in mortgage banking, even with a $6 million MSR market, still record quarter. Just in terms of taking market share, it looks like you did make meaningful progress in gaining market share in the purchase market. I guess going forward have you brought on new loan officers or have you looked to bring on additional capacity to further improve market share? Or I guess what are your plans?

We've got 35 new loan officers onboard since first of year. We've got six new branches -- or, no, we've got 15 new branches since second quarter of last year. So yes, we have spread our footprint some. But you've got to remember, when we're running 79% purchase volume and the rest of the country is running 54%, we're going to gain market share. And that's why we like to see these numbers go up because that's our bread and butter, is purchase mortgages and people buying houses and they like the rates.

Just on the outlook for accretion. Do you have any -- I guess sense -- the guidance for next quarter, what to expect there?

Jesus, we're expecting to stay in the range of $15 million to $16 million a quarter for the next couple of quarters.

Okay. That's great. And lastly just jumping back to insurance. So obviously it was a year-over-year, the loss ratio was down, but again last year was also a pretty bad season for storms. And I know this year it started in March and like you said ended early. But I guess my question is in terms of -- was there any bleed maybe from the first quarter into the second quarter that made that loss ratio higher, given the fact that June was pretty benign? And just in terms of possible bleed into the third quarter, should we expect that or should we just expect that to revert back so that -- I guess historically the insurance sales would be profitable in 3Q?

Okay. So, no, we didn't have any bleed into the second quarter from the first. We didn't have any adverse development to speak of. And we're I think we hope and expect that we've contained the losses in the second quarter. And I think also as we said the early kind of start and into the spring season of storms, we had a really strong June. And so we hope and expect from that, that we wouldn't have any bleed into the third quarter. I think we'd have a real strong third quarter or remainder of the year.

Great, I might slip one more in. Just on provision, obviously the charge-off impacted this month's provision, but I guess going forward, how should we think about provision just essentially kind of like ex the one loan charge-off this quarter, use that as kind of a run rate?

I think that would be good.

Great. I appreciate you taking my questions. Thank you.

I'm seeing no further questions. This will conclude today's conference call. We would like to thank the management team for their time today and we thank you all for attending today's presentation. At this time, you may disconnect your lines. Thank you, take care, and have a great day everyone.