Hancock Whitney Corp (HWC) 2015 Q2 法說會逐字稿

Good morning and welcome to Hancock Holding Company's second-quarter 2015 earnings conference call. As a reminder, this call is being recorded. I will now turn the call over to Trisha Carlson, Investor Relations Manager. You may begin.

Thank you and good morning. During today's call we may make forward-looking statements. We would like to remind everyone to review the Safe Harbor language that was published with yesterday's release and presentation and in the Company's most recent 10-K and 10-Q. Hancock's ability to accurately project results, or predict the effects of the future plans or strategies, or predict market or economic developments, is inherently limited. We believe that the expectations reflected or implied by any forward-looking statements are based on reasonable assumptions, but our actual results and performance could differ materially from those set forth in our forward-looking statements. Hancock undertakes no obligation to update or revise any forward-looking statements and you are cautioned not to place undue reliance on such forward-looking statements.

The presentation slides included in our 8-K are also posted with the conference call webcast link on the Investor Relations website. We will reference some of those slides in today's call. Participating in today's call John Hairston, President and CEO; Mike Achary, CFO; and Sam Kendricks, Chief Credit Risk Officer. I will now turn the call over to John Hairston.

Thanks, Trisha, and good morning, everyone. Let me start by saying how pleased we are with second-quarter results. We observed continue progress from hard work and well-executed initiatives. We reported over $800 million in linked quarter organic balance sheet growth, an increase in over $6 million in core revenue, primarily driven by fee income, continued good expense management discipline, solid capital levels and strong credit quality, even in light of today's energy cycle, all reflecting the continued improvement in the organization's quality of our earnings. We have finally eliminated the gap between operating (technical difficulty). As indicated previously, we saw a significant drop in purchase accounting net income of $7.5 million, or about $0.06 per share, this quarter. That was a significant headwinds and we were very pleased to replace a substantial portion of purchase accounting revenue with core revenue this quarter, although the full impact of revenue growth on net income was diminished by our continuing investments in revenue bearing initiatives. I would also note that over the past 10 quarters, we have eliminated a gap of $0.22 of EPS and 41 basis points of ROA. That's an important point that I hope does not get overshadowed by continuing focus on energy. We grew the balance sheet organically with better than expected and geographically dispersed loan growth. Our margin compressed during the quarter, but reflected a stabilizing core loan yield and growth in net interest income. Fee income was up almost $5 million, or 8%, linked quarter with growth in many business lines. Expenses were up slightly but reflect increases in incentive pay adjusted for 2015 projections.

I'll make a few comments regarding energy. Our results reflect what we have indicated previously, downgrades and risk ratings with low expectation of significant charge-offs. Although we saw a sizable increase in criticized loans, there were no charge-offs on energy loans in the quarter. The provision and the increase in our criticized loans also reflect the outcome of a shared national credit review. As a result of the risk rating downgrades, we added $11 million to the energy reserve and as of June 30, the total energy reserves stands at $31 million, or almost 2% of energy loans. We were able to build the reserve and keep our total loan-loss provision in line with last quarter, primarily due to the excellent performance and improvements throughout the rest of our portfolio. For example, total charge-offs were only 3 basis points in the second quarter. As we have stated previously, further risk rating migration will occur throughout the cycle and the impact of migration will reflect the duration and depth of the cycle. Losses in previous cycles are reporting the investor deck. We expect losses will occur at some point as problem credits arise in are resolved. However, based on current conditions, we do not expect those losses to be significant and we have no energy losses thus far in the third quarter.

Before I turn the call over to Mike, I want to reemphasize the positive results we reported this quarter. I am pleased with the direction we're headed and I'm pleased to see all of our hard work reflected in our results. I'm exceptionally pleased to see granular loan growth in nearly every market and every line of business in the Company and that in five of the past seven quarters, we reported double-digit linked quarter annualized loan growth. I appreciate the efforts and dedication of our bankers in our corporate service areas and for their rising to the call to grow revenue in a very tough and very competitive market. Very proud of our team. We're also glad to have the material component of purchase accounting items behind us. We are building today from an improved quality balance sheet and income statement. Although there will be headwinds, I expect to continue growth in the second half of 2015 and with the information we have at the moment, we consider current quarterly Street estimates are reasonably in line with own projections.

I'll now turn the call over to Mike Achary to review our results in a little bit more detail. Mike?

Thanks, John, and good morning, everyone. I'll now cover a few highlights from the quarter. As John just noted, we had a positive quarter in all regards and are very pleased with the results. The Company's operating EPS was $0.51 a share. Consistent with prior guidance, net accretion income was down $7.5 million, or $0.06 per share, from last quarter. Please note that our operating and EPS does exclude almost $9 million of nonoperating expense items. Our core EPS was also $0.51 for the quarter. That was up $0.02 from last quarter and did help to offset a portion of the quarter's $0.06 drop in net purchase accounting income. Balance sheet growth and improve operating leverage were both themes for the quarter and were drivers for the $0.02 per share improvement in our core EPS. The quarter's balance sheet growth increased total assets just over $800 million, with loans up $420 million and our bond portfolio up just over $350 million. We completely funded the growth in loans dollar for dollar with deposits, which were up over $440 million. The loan growth was diversified by geography and business line. Slide 6 of our presentation deck shows a picture of pretty balanced and diverse loan growth.

The Company's energy portfolio remained virtually unchanged link quarter with a $5 million decline in outstandings. Energy-related pay downs were about $56 million for the quarter and were in line with our previous guidance. And so while we're very pleased with the quarter's loan growth, we are reaffirming our previous loan growth guidance of 5% to 8% end-of-period growth for 2015 over 2014. We do acknowledge a bias towards the upper end of that range is likely and as expected, the wild card is still energy-related loans and a potential for future payoffs. Our growth in assets also reflects leveraging the balance sheet through growth in the Company's bond portfolio. We added about $500 million in new mortgage backed securities at an average yield of 2.13%. While this activity drove the yield in the portfolio down 13 basis points from last quarter and led to some margin compression, it did increase net interest income. Our reported net interest margin for the quarter declined 25 basis points while the core margin declined 7. The decline in decretion accounted for about 18 basis points of the decrease in the reported margin.

Primary drivers of the quarter's core NIM compression included the bond activity I just noted, a full quarter's impact of the sub debt we issued last quarter and a slight decline in the Company's core loan yield of just three basis points. While we continue to be focused on stabilizing and growing our core loan yield we're not immune from the downward pressure on yields that's become a fact of life in this interest rate environment. Until that fact changes, slight compression in the core NIM is likely in the near term. Our asset quality metrics remain strong and John has already discussed our views on the portfolio. Charge-offs totaled only 3 basis points and we built the energy-related reserve without a significant increase in our quarterly provision expense. Our nonperformance reflect the net addition of one energy-related credit and we do note a fairly significant increase in our criticized book. But again, as John noted, this is in line with our expectations of risk rating downgrades and so we do remain optimistic that the current energy cycle will not results in significant charge-offs. Our fee income showed improvement in almost all categories and we expect to build from these results in the second half of this year. Expenses were up link quarter, but the increase was mainly related to incentive pay, which was adjusted for our projections for 2015. Capital was solid with a tangible common equity ratio at 8.12%, down 28 basis points due to the quarter's growth in assets. And finally, while we've already covered most of these items, our near-term outlook for certain balance sheet and income statement items is on slide 24 of our earnings deck.

I'll now turn the call back over to John.

Thanks, Mike. Let's just go straight to questions, Neicy.

(Operator Instructions)

Kevin Fitzsimmons, Hovde Group.

Was wondering -- one thing that you mentioned a few minutes ago was about the wild card of energy-related pay downs. On one hand, that would be a negative for your loan growth guidance and maybe (technical difficulty) wild card (technical difficulty) come in lower, but it would probably be viewed as a positive from a longer-term credit standpoint. What's your outlook on -- we hear from other banks about there's a lot of money out there available to take some of these loans out. Just if you can give us a little sense on what's happening on that front and what your outlook is for that happening with some of these loans.

Kevin, this is John. I'll start and then let Sam add some color to that. First, we did our best to forecast what we thought the pay downs may be and I think we shared $50 million a quarter. That number was $56 million for the second quarter. However, in several instances, we had a clients who were acquired by other clients, so it was an interesting quarter for what actually happened with the total book. There is still money out there and we haven't changed our opinion about what we call pay downs would continue to be. We still think around $50 million a quarter is a reasonable pace to plan for. That was evidenced this quarter with $56 million. We actually got pretty close to that number. However, the circumstance of how those pay downs occurred kept the total book about flat. As far as availability for subordinated debt and other capital raises, Sam, I'll let you speak to that.

Sure. Be glad to. We still have some clients that are active in that market. Some have some plans to continue pursuit of secondary financing and paying down some lines, but we are starting to see some tightening in the capital and secondary markets. It appears that there is some, as I say, some tightening in that space, but it is still available for, obviously, the best clients.

Okay, great. Thanks. Just one follow-up if I could ask about a little more on the outlook for expenses. You guys say slightly higher in the near-term and my understanding is that the past few quarters, expense growth has been a little higher because you've been investing in these revenue initiatives. Are we at a point or are we getting closer to a point where the investing parts of those initiatives has played out and we'd see more stable expenses while we'd see more of the revenue benefits emerge from those initiatives? Thanks.

This is Mike. I think that's exactly what we'll expect to see going forward. We do expect expenses probably to tick up anywhere from $1 million to $2 million per quarter going forward. Certainly, some of that will be the investments that we're making in our revenue bearing initiatives. But will also still working, as we always have been, to cut costs where strategically it's meaningful to do so. So it's a blend between those two activities going on, going forward. But I think what we are beginning to see this quarter, certainly on the fee income side is certainly some of the benefit related to the things that we've been talking about for a couple of quarters now and have been working on for probably a little bit longer than that.

Kevin, this is John -- I'm sorry, go ahead, Kevin.

I was just going to ask, are we at the early stage of that still and there's more to come or are you seeing a certain percentage of those -- the benefits from those revenue initiatives in the run rate this point?

I think we're definitely starting to see the benefits of those initiatives and so I would say we are at the early stages, yes.

Okay.

Kevin, what I was going to say earlier and I couldn't remember if it was your Jennifer who asked the question last quarter around hiring, but we set out to hire 30 or 40 bankers on an annualized basis. We've hired a little under 20 so far this year. I think the number is 18. We've expect to continue to that. As we find talent that's available, we have plenty of room on the boat to add folks so I don't expect that will actually end at any time as long as that talent is available. You didn't specifically ask that.

Got you.

When you said is it coming to an end, I don't expect that part will ever end.

Okay. Well, if you thought that was a good question, it was from me.

Jennifer may correct us a little later on.

Jennifer Demba, SunTrust Robinson Humphrey.

A couple of questions. First of all, on the leverage strategy, is that something you continue -- you plan to continue doing over the near-term, Mike? Can you give us some thoughts there?

By leveraging, I presume that you are talking about what we did with the bond portfolio this quarter?

Correct.

That something that we'll continue to certainly tweak and look at. The essential principle there is that we do like to keep our bond portfolio at about 20% of our asset base and saw an opportunity this quarter to deploy a little bit of leverage and certainly make a pretty nice spread on that leverage going forward. I'll also add that most of that activity happened toward the end of the quarter so in the third quarter, we'll see a little bit fuller impact from that particular strategy. Hopefully that answers your question.

It does. Thank you. My second question is for John. John, last quarter on the call you said you were comfortable that Hancock could see 25% improvement in your earnings base between -- from 2014 levels to 2016. Do you still feel comfortable with that guidance?

I do. Thank you for the question and to reiterate, that was 2016 core versus 2014 core. So at this point we wouldn't really back off that projection.

Okay.

Thank you for the questions, Jennifer. You have any others?

No, that will be it.

Matt Olney, Stephens.

Any commentary on how much of the 2Q loan growth is from the new bankers that you've hired recently that you mentioned a few minutes ago?

I guess the best way to answer it would be a couple ways. First of all, in terms of loan production, production was up 29% in the second quarter over the first quarter and was up 18% in the second quarter versus the second quarter previous year. Some of that production certainly came from bankers that were added, but I'll remind you, too, Matt, we added a number of bankers in the fourth quarter last year, so typically it takes a few months for that settling to occur, particularly in the corporate middle-market guys. But yes, I'd say some of the production improvement came, but really is evidenced by where the loan growth occurred. The increase in productivity really happened everywhere, not just from the bankers that were net adds.

Okay. That's helpful. Can you talk about your energy borrowers and their use of hedging future production. Has there been any change in the amount of production that is hedged today versus three, six months ago?

Matt, this is Sam. Right now about two-thirds of our client base is hedged. The average tenor's out a little over a year, approaching a year and a half. Obviously, the price levels that our hedging groups are going in are much lower. But it's very interesting. We still have clients that our hedging hedges anywhere from -- a broad range, $55 to $63 a share and in some cases as high as $82, $92 a barrel, I should say, through 2016, so it's really all over the board. Still, about two-thirds of our clients are hedged. Again, average tenor approaching about a year and a half.

Sam, that sounds like a similar number to what we heard last quarter, so I'm curious, did you have much [success] with some of your borrowers hedging additional production over the last few months?

They are maintaining the course they've been on. No significant changes there. They are continuing to operate in that band they've been operating in. The latest reduction in WTI here is a fairly recent development, so over the quarter that they've continued their legacy hedging approaches.

Okay. Thank you.

Emlen Harmon.

Starting off with a question for Mike, here. On the NIM, you saw 3 basis points of core compression this quarter. Is that reflective of what you talk about when you say you expect to see some kind of minor yield compression going forward? Or do you feel there's an opportunity to remix some to minimize some of that decline? I know you mentioned just the bond investments a couple of minutes ago, but I'm curious on the magnitude of compression you're expecting.

Sure, going forward. Again, the core NIM compressed 7 basis points this quarter and really the vast majority of that 7 basis points was really the full quarter's impact of the sub debt that we added toward the end of the first quarter. If you kind of backed that out, the real NIM compression, or core NIM compression, was really just a couple of basis points from last quarter. I would expect over the next couple of quarters for our core NIM to potentially contract or compress in about that range, so a couple of basis points per quarter. The big driver there, again, is going to be a little bit of the remixing that you mentioned on our bond portfolio but then also the things that are happening related to our core loan yield. That was down a couple of basis points this quarter and again, as we referenced a little bit earlier, in this interest rate environment is certainly is a challenge to not only arrest any kind of further drops in the core loan yield, but to increase it going forward. We do expect to see a little bit in the of downward pressure in that regard.

Got it. Thanks. On the reserve, it seems like credit is getting, or at least maybe risk ratings are getting better in other parts of the portfolio, in that you're able to increase the energy reserve without a meaningfully taking up the provision. Could you give us a little color what other parts of the portfolio are performing well and what do you think there is an ability to fund that energy reserve from that going forward.

This is Sam. I would say to your point, the remainder -- the other 88% of the portfolio continues to perform very well. You can see by the run rate this quarter on net charge-offs we continue to have very favorable results in terms of overall losses. The portfolio as a whole continues to perform as we expect. The one segment that obviously is getting a lot of focus is the energy portion. To the extent that we can offset any additional needs on the provision side, that's a different question and it's going to be a really driven by what happens here over the next couple of quarters, I think. Mike want to add anything?

Just to add a little bit to that, Emlen, just as we did last quarter, we really were able to fund the risk rating downgrades in the energy book by improvement elsewhere in the book and Sam just commented on that. So going forward, unless there is some kind of significant change in either local economies or the make up of our non-energy book, we really do expect that to continue for a little while longer. That probably means another quarter or so. In the end, the amount of provision that we have to add really is going to be very dependent upon the amount of continued improvement elsewhere in the book and then, of course, the level of risk rating downgrades that might be ahead of us in the energy book.

Okay. Thanks for taking the question, guys.

Michael Rose, Raymond James.

This one's for Mike. If we can dig into slide 13 and some of the scenarios you provided (technical difficulty) can you remind us what -- is it just purely a sensitivity or is there assumptions made around oil prices, et cetera, as they link to those forecasts.

Sure. I'd be glad to, Michael. That's exactly what this is. It really is a sensitivity analysis. We refer to it as a sensitized shock around what the impact of the different scenarios would have on our energy, a triple well. Again, we're not really making any sort of assumptions around the price of oil or the amount of demand or supply driving that price. It really is kind of a sensitivity analysis. Again, it means we put that together, it was really to help people understand again what we refer to as at risk fence post around the energy book.

Okay. That's helpful. You mentioned in the preamble that deposit growth continues to be strong. Is that a concentrated effort? Would you expect to match loan growth with deposit growth as we move forward?

That's exactly our objective in terms of how we would like to manage the balance sheet and how we are managing the balance sheet and we were able to do that this quarter and really last quarter. It may be something that we don't achieve every single quarter literally going forward, but it's certainly our objective on our loan growth with core deposit growth.

So we could expect that liability yields to continue to maybe climb a little bit higher, deposit yields climb a little bit higher, moving forward.

Yes, all things equal, but again, that depends very much on the mix of deposits and our ability to raise deposits without having to pay up for them, which is certainly part of our tactics and strategy.

Okay. Thanks for taking my questions.

Ebrahim Poonawala, Merrill Lynch.

I was just wondering if, Sam or John, you could give us an update on how you're thinking about the services piece of the energy book today and the risks to that, both in the falling, the recent pull back in oil prices that we've seen as you look out. I'm wondering, terms of is there a greater risk there in the back half of the year than how you're thinking about it today versus 60 days ago?

Ebrahim, this is Sam. As we look at the migration for risk ratings, particularly into the criticized categories, as we have said, we expected the first areas to be impacted were support drilling, followed by support non-drilling and the second quarter that's precisely what we saw in terms of the leads relative to the movement in the criticized category. Largest thing, support drilling followed by support non-drilling. As we've gone through the cycle, obviously, those services continue to be negotiated in terms of rates, margins, et cetera, and so their associated cash flow is impacted. As we go through the remainder of the year, again, depending upon on depth and duration of the cycle, those two segments are very likely to be the ones most heavily impacted. But again, our clients have been making but we think are appropriate adjustments. We've seen a little bit of consolidation here and there. We feel like, again, client selection over the last few years, or last couple of decades, actually, will serve us well long-term in this -- these spaces. This is actually the core competency in terms of the client base that [Whitney Bank] has banked for a number of years and so we think that client selection is precisely where we want to be as we go through this phase of the cycle. We're holding in there with the clients. We are continuing to see some compression in terms of cash flows, but that's not unexpected relative to our outlook when we started this year.

That's helpful. I think if John, if you could comment in terms of, obviously you feel good about loan growth right now. In terms of the strength across your markets so which areas you are seeing better growth coming out of or expectations in the back half of the year and a comparative landscape?

In terms of competition, I'll take that piece of it first, Ebrahim. Thanks for the question. It is tough. Everyone is looking for credits, just the same as we are. We've been very pleased with our production enhancements and a lot of that was due the initiatives we completed over the last three quarters and some of those are beginning to bear fruit. I think that the 5% to 8% guidance, we stuck to that because even in light of the growth that we' enjoyed in the second quarter, we're trying to be rational about how much energy pay down we can get. If you plot out end-of-period growth over the third and fourth quarter and arrive at our highest number at the top of that range, you can get a good sentiment of what are derivative confidence is. Obviously, if energy pay downs are more than we expect, than the number may be a little bit more muted than we are projecting. If they're less, like they were the second quarter, then we may be able to beat that number. Our confidence in every other than energy remains very strong. Even in light of mortgage, there's been some chatter the last several weeks about as long-term rates bounce up and down that the refi business may ebb, but we believe we were under punching our weight in mortgage anyway, and so getting a little bit more transaction share across our marketplace, we would think that we should improve production in mortgage, despite with the trend may be elsewhere in the back half of the year. Did I answer your question or do you want to redirect?

In markets like (inaudible) everywhere from Texas to Florida, or any markets that stand out?

The second quarter, Ebrahim, it was spread pretty well the way that we described in the packet. I don't recall the slide number in the investor deck -- slide 6 you will see where that growth was spread in the second quarter and while there is a little bit more impact of seasonality in the New Orleans market, I think that we'll see growth throughout. Now, if we could put in terms of super regions, we tend to think about Company in terms of the West, the central part of the Company where New Orleans is, and then the East. We think that East, which is Mississippi through Florida, will experience of the highest amount of absolute end-of-period growth. We think that the region around New Orleans will be just behind that and then the West, while production in everything not energy is expected to continue to improve, that's really where you feel the effect of the pay downs. So we think full growth fastest in the East, followed by the central and then a little bit more muted to the West because of the pay downs. Does that help?

That helped. Thanks. If I can sneak in, in a terms of a third world. Any -- if you could update us on your thoughts on capital, capital deployment and how you're thinking about it heading into the end of the year?

I'll be glad to, Ebrahim. Again, I think that by evidence of the asset growth we had this quarter certainly is evidence that organic balance sheet growth is by far in a way our number one capital deployment priority. And so we are absolutely achieving that kind of growth and even if you look back over the course of the last year, we grew our balance sheet by about $2.2 billion from June 30 of this year compared to June 30 of last year. Again, far and away, organic balance sheet growth is our number one capital deployment priority.

Thanks for taking my questions.

You bet. Take care, now.

Dave Bishop, Drexel Hamilton.

Sam, quick question for you. In terms of the most recent [SNC] exams, has there been any -- have you noticed, has there been any sort of change in how the regulars are viewing energy lending, how they are approaching it, commentary. Just curious, has there been any change from this cycle to the last in terms of what they're digging up or focusing on in the exams?

Thank you for your question. Yes, they are obviously very focused on a couple of things. Energy is point of [mind] for then. They spend a good bit of time during this last SNC exams cycle with all the banks that have energy exposures, digging into that pretty deeply. They're very interested in leveraged lending components these days. Those two are really sort of the focus and so they spent -- we spent a good a bit of time, as it all the banks involved in the SNC portfolio talking about those elements. As usual, they were diligent and asking all the right questions, so it was a really a focus on those two particular segments, I would say.

Got it. Then follow up. In terms of, I think you mentioned the support services, the oil field services sector using liquidity there. The decline of the end-of-period DDA balances this quarter, does that mean that related to maybe some of these oil field services clients is using that as the first line of defense to fund operations? I know it can be volatile in the end-of-period basis but just curious if any of that is related to clients drawing down cash.

Dave, this is Mike. Nothing specific and you hit the nail on the head. We do have, like many companies, a good deal of volatility, especially on the business or corporate side of our DDA book. I think at the very end of the quarter, you saw a little bit of that. Great. Thank you.

Jon Arfstrom, RBC Capital Markets.

Just a few follow-ups here. Sam, how much of the criticized increase was energy-related?

I don't have the precise percentage, but I would say that really most of it was energy-related. As you would expect, again, the remainder of the portfolio continues to perform very well and this is, the results you see are largely the result of energy-related issues.

Okay. And then just clarification on some of the provision outlook. Given your growth trajectory, and it looks like the rest of the portfolio is getting better. You are saying that there's still enough room in your overall reserves to maybe fund some of the energy growth potential, I guess, in reserves without really substantially increasing the quarterly provision? Is that the way to think about it?

John, this is Mike and thank you. Yes, that's what we believe at this point. Again, it's a matter of magnitudes and by that I mean certainly magnitudes of future risk rating downgrades on the energy book. Certainly, in the short-term we do have some ability to continue finding some of that. The magnitude, again, will depend on the size of that, what happens to our charge-offs and then certainly the level of overall loan growth is something that we're cognizant of.

Okay. Since I'm last in the queue here, maybe a couple more if I can. Slide 13, to follow up on Michael Rose's questions on the scenario analysis, it looks like the provision, or reserve potential, is a little bit heavier in Q2 versus Q1. I know these are just all estimates, but what's different and what's marginally causing a little bit more pressure in some of those scenario analysis outcomes?

I think part of what happened, of course, is the new version of slide 13 reflects the actual downgrades that we experienced through the second quarter. So the starting point is a little bit higher. Again, the scenario analysis on the right side of that slide picks up from that point. It's really not necessarily accumulative type of analysis. It really just sensitizes from the 6/30 start point.

Okay. Just one last one, a small one. Remind us what in the other nonoperating expenses and if you expect that to fade away at some point, that gap?

In terms of the increase this quarter?

Not necessarily if you can handle the increase but just generally what's in there and when that gap might close.

The reason for the increase this quarter was primarily our FDIC assessment and that was consistent with the asset growth and deposit growth that we had this particular quarter. The other items that are in that category are really just a hodgepodge of all the various things that are not part of personnel and occupancy and equipment.

I'm talking about the other nonoperating expenses that you guys carve out each quarter.

I'm sorry. The $9 million that was in that category this quarter, the vast majority of that was asset disposition expenses, associated, again, with some branches that were closing or branches that we plan to close down the road. It was also some personnel expense aspect to that related to severance and other costs.

Okay, good. At some point in the next couple of quarters, you'd expect that eventually to go away?

Yes, we do. In fact, going forward we really expect that category to be very minimum and don't expect to have the magnitude of expenses categorized there that we had in the past.

Okay. Thanks for the help.

That concludes today's question-and-answer session. I would like to turn the call back over to John Hairston for closing remarks.

Thank you, Neicy, and thanks for administering the call today. Thanks, everyone, for calling in and for your interest and for your questions. We look forward to visiting with you as opportunities come up in the next quarter. Take care and have a great weekend.

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone, have a great day.