Mercantile Bank Corp (MBWM) 2018 Q4 法說會逐字稿

Good morning, and welcome to the Mercantile Bank Corporation Fourth Quarter 2018 Earnings Results Conference Call. (Operator Instructions) Please note, this event is being recorded.

I would now like to turn the conference over to Mike Houston. Please go ahead.

Thank you, Kate. Good morning, everyone, and thank you for joining Mercantile Bank Corporation's conference call and webcast to discuss the company's financial results for the fourth quarter and full year 2018. I'm Mike Houston with Lambert IR, Mercantile's Investor Relations firm. And joining me are members of their management team, including Bob Kaminski, President and Chief Executive Officer; Chuck Christmas, Executive Vice President and Chief Financial Officer; Ray Reitsma, President of Mercantile Bank Michigan; and Bob Worthington, Senior Vice President, Chief Operating Officer and General Counsel.

We will begin the call with management's prepared remarks, and then open up the call to questions. However, before we begin today's call, it is my responsibility to inform you that this call may involve certain forward-looking statements, such as projections of revenue, earnings and capital structure as well as statements on the plans and objectives of the company's business. The company's actual results could differ materially from any forward-looking statements made today due to the factors described in the company's latest Securities and Exchange Commission filings. The company assumes no obligation to update any forward-looking statements made during the call today. If anyone does not already have a copy of the press release issued by Mercantile today, you can access it at the company's website, www.mercbank.com.

At this time, I'd like to turn the call over to Mercantile's President and Chief Executive Officer, Bob Kaminski. Bob?

Thanks, Mike, and good morning, everyone. Thank you all for joining us. As you saw this morning, Mercantile released its fourth quarter and full year 2018 financial results and announced an increased first quarter dividend as evidence of our confidence in the bank and commitment to enhancing total shareholder value.

On the call today, we will provide an update on our overall performance, financial results along with our key areas of strategic focus. We will also discuss loan development, growth initiatives and asset quality. Afterwards, we will open the call for a question-and-answer session.

As was outlined in the earnings release this morning, fourth quarter 2018 operating results represent a continuation of the strong performance demonstrated during the first 9 months of the year, resulting from improved operating performance and balance sheet growth. This was evidenced in the healthy net interest margin, consistent loan fundings, which were produced from the ongoing strength of our commercial loan pipeline, and another quarter of solid net loan growth and the continuation of our improvement in an already sound asset quality. As a result, Mercantile reported a strong performance for the fiscal 2018 with growth in total revenue and earnings per share.

We are pleased with the increases in certain fee income categories and remain committed to controlling overhead cost, while at the same time, investing in our people as we continue to prudently grow our business. Despite a reduced level of mortgage banking activity income in 2018, due to lack of inventory in our market and lower refinance activity, we are confident that the combined effects of our mortgage production strategies, consistently elevated level of prequalifications and focused efforts to sell a greater percentage of originated mortgage loans will lead to growth in our mortgage banking results. Ray and Chuck will provide more details on these areas momentarily.

In addition to this financial strength, we are proud to report that Mercantile Bank of Michigan, once again, received an outstanding Community Reinvestment Act rating from Federal Banking Regulators, which reflects our continuing focus on meeting the needs of the communities we serve. This is the fourth consecutive exam cycle covering more than 13 years that Mercantile has earned the highest CRA rating. Less than 10% of all banks in the United States receive an outstanding.

Turning to the Michigan economy, the directional trend remains positive. Even as rising interest rates and a tightening job market and housing market are increasingly evident, employment in our primary market continued to grow and overall real estate conditions remain healthy. Overall, our client base remains positive on the economic outlook for 2019 in our market and seeks to appropriately assess and leverage opportunities to expand their businesses.

In summary, our sustained strength and core profitability is evidenced by our performance in 2018, solid capital position, healthy commercial loan pipeline and bank-wide strategic initiatives to properly position us to enter 2019 in strong fashion and to take advantage of future growth opportunities in the coming year and beyond.

That concludes my prepared remarks. I'll now turn it over to Ray.

Thanks, Bob. During the fourth quarter, total loans grew by $55 million. Commercial term loans funded to new and current clients totaled $136 million. We are very pleased with these results as the level of new commercial term loan originations exceeded $500 million for the fourth consecutive year. Funding activities were consistent with the first 9 months of 2018, contributing to a net loan growth rate of 7.6% during 2018.

During the fourth quarter, the commercial loan portfolio grew $54 million, this -- included in this number is $10 million of loan growth funded by our Troy office, which opened in March of 2017. The office provided $40 million in incremental commercial and residential loans during 2018.

All commercial loan segments, most notably the commercial and industrial loan portfolio, grew during the year. And our solid growth in commercial loans depicts our ongoing efforts to identify new lending opportunities and meet the credit needs of our existing customers.

Note also that our pipelines continue to be solid. We entered 2019 with a pipeline that is consistent with the prior year, and our current commitments to fund construction projects total $170 million. We continue to build momentum in generating noninterest income with growth in credit and debit card fees, payroll-processing revenue and treasury management income during the fourth quarter of 2018.

As we will look forward to growth in these areas in our business in the coming year, the strong results in the fourth quarter were more than offset by a decline in income from mortgage banking activity, although, growth in these revenue streams during the full year 2018 surpassed the decrease in mortgage banking activity income. While the increase in residential mortgage loans reflects the continued success of our strategic initiatives that were focused on expanding our market penetration in 2018, our mortgage banking activity income declined during the 2018 periods compared to the respective 2017 period, primarily due to the impacts of a limited supply of homes for sale in our markets as well as lower refinance activity due to rising residential mortgage loan interest rates, as Bob mentioned earlier in the call.

Noninterest expense for the fourth quarter 2018 grew slightly faster than the growth of net interest income, primarily due to increased salary costs, including annual employee merit pay increases and higher stock-based compensation expense as well as pay increases for all hourly employees, which were implemented April 1, 2018.

As stated earlier, our strategy is to reinvest a portion of the savings from the Tax Cuts and Jobs Act of 2017 in our employees, customers and community. Our employees are talented and dedicated, and these investments are consistent with our service-based approach to the market. We had $1.8 million in net loan recoveries during the year, and year-end asset quality performance metrics continued to reflect our strong portfolio. Total nonperforming assets are under $5 million at December 31 or 0.15% of total assets.

Our lending officers and management continue to diligently monitor our loan portfolio for potential signs of stress. Total deposits for the year declined slightly, reflecting a $69.2 million decrease in local deposits, which was partially offset by $10.5 million increase in out-of-area deposits. Although average non-interest-bearing deposits grew $61 million.

Continuing growth in our local deposit base remains a strategic priority. Wholesale funds ended the year at $474 million or approximately 16% of total funds, an increase of about 5 percentage points from the prior year period.

That concludes my comments, I'll turn it over to Chuck.

Thanks, Ray, and good morning, everyone. This morning, we announced net income of $11.6 million or $0.70 per diluted share for the fourth quarter of 2018. Comparatively, during the fourth quarter of 2017, we earned $8 million or $0.48 per share.

Net income for the full year 2018 totaled $42 million or $2.53 per diluted share compared to $31.3 million or $1.90 per diluted share during the full year 2017.

Net income during the fourth quarter and full year 2018 also benefited from a reduction in the corporate federal income tax rate, which was lowered from 35% to 21% effective January 1 of 2018 due to the enactment of the Tax Cuts and Jobs Act.

Our year-to-date effective tax rate was approximately 19% during 2018 compared to about 32% during 2017. We remain pleased with our financial condition and earnings performance and believe we are very well positioned to continue to take advantage of lending and market opportunities while delivering consistent results for our shareholders.

Our net interest margin was 3.98% during the fourth quarter and 3.96% for all of 2018. Our net interest margin was 3.79% for all of 2017. Our net interest margin has benefited from the interest rate hikes by the FOMC over the past couple of years and was further supported from the recording of interest income that stemmed from periodic successful collection efforts on purchase-impaired and certain originated-impaired commercial loans.

Our yield on earning assets increased 35 basis points during 2018, primarily reflecting a 31 basis point increase in our loan portfolio yield. Improved investment portfolio yield and a lower level of excess liquidity maintained at the Federal Reserve also positively impacted our yield on earning assets.

Our cost of funds as a percent of average earning assets increased 9 basis points during the fourth quarter of 2018, compared to the 4 or 5 basis point increases during the previous 3 quarters. The increase during all quarters are a reflection of higher interest rates on certain money market deposit accounts, time deposits and borrowed funds, in large part due to the increasing interest rate environment.

We recorded $0.6 million in purchased loan accretion and payments received on CRE pool loans during the fourth quarter of 2018 and $4 million for all of 2018. We recorded similar results of $0.7 million and $4.6 million during the respective time periods in 2017. Based on our most recent valuation and cash flow forecasts on purchased loans, we expect to record additional quarterly interest income totaling about $0.2 million throughout 2019.

In addition, we expect to receive, in aggregate, almost $2 million in principal payments on purchase impaired CRE pool loans over the next several years, which will be recorded as interest income upon receipt. We expect our net interest margin to be in a range of 3.85% to 3.90% during 2019. This forecast assumes no further changes in the prime and LIBOR rate.

The overall quality of our loan portfolio remains very strong with continued low levels of nonperforming loans and loan charge-offs. Nonperforming assets as a percent of total assets equaled only 15 basis points at the end of the fourth quarter. We recorded a net loan recovery during each quarter of 2018 totaling $1.8 million for all of 2018.

Loan charge-offs totaled just $0.4 million during the fourth quarter and only $1.5 million for all of 2018. We recorded no provision expense during the fourth quarter, reflecting a net loan recovery of $0.7 million that was offset by increased allocations from loan growth and changes in a couple of reserve environmental factors. Provision expense for all of 2018 totaled $1.1 million compared to $3 million in 2017.

We expect to record quarterly provision expense in a range of $0.5 million to $1 million throughout 2019, assuming a steady economic environment. Our loan loss reserve totaled $22.4 million at the end of 2018 or 0.88% of total originated loans. This coverage ratio has remained steady for many quarters and no significant changes are expected during 2019.

With regards to CECL, we expect to have our model up and running by the end of the first quarter and plan to run this new model in parallel to our existing model through the end of 2019.

We recorded noninterest income of $5.4 million during the fourth quarter of 2018, which includes a onetime $0.9 million accounting adjustment related to mortgage banking activities in prior years. Excluding this adjustment, noninterest income totaled $4.5 million for the fourth quarter, near the top of the estimated range provided on our last conference call.

For all of 2018, we recorded increases in most fee income categories, included an almost 9% increase in treasury management fees, payroll processing revenue and credit and debit card fee income when compared to 2017.

Mortgage banking operations continue to be hampered by ongoing low inventory of homes listed for sale throughout our market, especially in the Western Michigan area, however, we do believe that we have increased our market share over the past couple of years. We expect quarterly noninterest income to be in a range of $4.6 million to $4.9 million during 2019.

We recorded noninterest expense of $22 million during the fourth quarter of 2018 and $86.2 million for all of 2018. For all of 2017, our overhead cost totaled $79.7 million. The 8.1% increase primarily reflects increased salary costs, in large part reflect the annual employee merit pay increases and a onetime pay increase for all hourly employees that was effective April 1. We also increased our training and charitable contributions budget for 2018.

Currently, we expect quarterly noninterest expense to total in a range of $22.0 million to $22.5 million during 2019 with our effective tax rate remaining near 19%.

Total deposits at year-end 2018 were $59 million lower than at the end of 2017. Local deposits declined $69 million, but broker deposits were up $10 million. Noninterest-bearing checking accounts continued to grow, increasing $23 million during 2018, in large part reflecting new commercial loan relationships.

The overall decrease in local deposits mainly depicts the managed reduction of public unit time deposit, reflecting the strong competition and resulting relatively high interest rate as well as declines in certain personal nontime deposit accounts stemming from depositors using their funds for investments and expenditures.

As of year-end 2018, wholesale funds comprised 16% of total funds, up from 11% as of year-end 2017, in large part due to reduced excess liquidity, strong loan growth and the aforementioned decline in local deposits. We have instituted various initiatives to grow our local deposit base.

As of year-end 2018, our loan-to-deposit ratio equaled 112%, compared to 101% and 100% at year-end 2017 and '16, respectively. When adjusting for our sweep accounts, the loan-to-deposit ratio declines to 107%, 97% and 95% during the respective time period.

The increase in the loan-to-deposit ratio over the past couple of years reflects 2 primary factors. First, we have increased our reliance on wholesale funds during this time period. And second, a majority of the reliance on wholesale funds is with FHLB advances versus broker deposit. In obtaining wholesale funds as needed, we have purposely extended the duration via longer term fixed-rate bullet advances, generally 3 to 7 years, thereby, mitigating potential interest rate risk from our fixed rate commercial real estate loans.

Advance rates for these time frames had generally been cheaper by as much as 20 to 30 basis points than broker deposit. While this program negatively impacts our loan-to-deposit ratio, we believe it is prudent to manage the interest rate risk from our commercial lending activities and to obtain the needed funds at a cheaper cost.

As of year-end 2018, our availability at the federal home loan bank totaled about $383 million. We remain a well-capitalized banking organization. As of year-end, our bank's total risk-based capital ratio was 12.3% and in dollars was approximately $72 million higher than the 10% minimum required to be categorized as well capitalized.

We are -- we were active in buying back our stock during the fourth quarter, buying about 200,000 shares for almost $6 million at an average price per share of $29.73. We have remained active, thus far in 2019, having bought about 120,000 shares for approximately $3.6 million at an average price of about $30.25. We currently have approximately $6 million available in our current buyback plan.

Those were my prepared remarks, I'll now turn the call back over to Bob.

Thank you, Chuck. At this point in the call, we will now open it up to the questions-and-answer session.

(Operator Instructions) The first question is from Brendan Nosal of Sandler O'Neill + Partners.

Just want to start off here on the margin. So I believe you guys said 3.85% to 3.90% for full year 2019. And if we look at where you ended the year, obviously, a stronger number of 3.98% and even backing out the PAAs, you're kind of above that 3.90% mark. So just curious as to your thoughts as to why it seems like the core margin could come down a little bit from here throughout 2019?

Yes, Ben, this is Chuck. Good question. I think there's really 2 primary reasons for that. One is the increased reliance on wholesale funds. Certainly, wholesale funding is more expensive than most local deposits, so there's some pressure there. And then second, as I noted, we're not -- in my estimates, in my range, we're not projecting any further interest rate increases, which obviously have a very positive effect on our asset yield. So what we're expecting is there is some lag in our cost of funds that we knew that once the interest rate environment did stop increasing from the FOMC, that there would be a lag effect on our cost of funds. And for a period of a few quarters, especially, the first few quarters when we get into that time period, we would see continued increases, albeit smaller than what we have been seeing. But some increases in our cost of funds as we have some fixed rate CDs and the occasional FHLB advance that will mature and will have to be refinanced at the higher rate environment. So I think it's a combination of those 2 things that put us into that 3.85% to 3.9% range.

Okay, that makes sense. And then if we were to see 1 or 2 rate hikes this year, I know it's not expected widely currently but if we were, do you still think the net interest margin would benefit from that?

Yes, absolutely. We still have -- about 55% of our commercial loans are tied to floating rates as they have been. So we generally see on our asset yield probably a 10 to 12 basis point increase every time the Federal Reserve increases the Fed funds rate. So that will certainly continue. I would think if we do get those rate increases, we would see further increases in interest rates on deposits and FHLB advances and those types of things too. So there definitely would be an offset. But for the most part, our asset yield would equal, if not exceed, I think, those increases in the cost of funds as long as the Fed keeps raising interest rates.

Got it, great. And then last one for me before I step back. Just looking at the average balance sheet this quarter, it looks like loans now make up about 88% of total earning assets. I'm just wondering how much more remixing, if any, you think could take place over the next couple of quarters? Or are you pretty much more or less tapped out on that remixing dynamic?

Yes, I think we'll probably see that lower a little bit. One of the things that with our excess funds that we keep at the Federal Reserve, we do that on an average basis because there is quite a bit of volatility from day-to-day and week-to-week. And what we saw -- what I saw going into the fourth quarter is that our year-to-date average, we try to keep it around $40 million. I think our year-to-date average through the first 9 months was still around $60 million, $65 million. Because the first part of last year, we did have some excess liquidity that we no longer have. And still I let that -- that $40 million average was much lower than that during the fourth quarter, as I just tried to balance out that year-to-date average. Here in the first quarter and into the second quarter, we'll build that back up closer to the $40 million mark. So that 88% number that you talked about will likely be 86% to 87% for most of 2019. And that has some impact on the margin question you had earlier as well.

The next question is from Kevin Reevey of D.A. Davidson.

First question is, I know when we talked last quarter, you had talked about 3 of your deposit-gathering initiatives focused on a couple on lending with deposit opportunities and then cross selling your cash management product and the third leg of that was your leveraging your muni relationships, can you give us an update as to where you stand on those 3 initiatives?

Yes, I'll touch on muni, then I'll let Bob or Ray touch on the other ones in regards to the commercial lending efforts. On the municipal side, I think we can kind of -- what we have been doing over the last year or 2 years, I think there's kind of 2 groups here. We have some really strong and very much appreciated municipal relationships on the nontime deposit side, so some savings accounts and some checking accounts. And those, we definitely have kept strong relationships with. Sometime those relationships come with time deposits, and we have been active in bidding on those time deposits as part of our entire relationship mantra with that. The public time deposits that we have been letting go over the last, again, year or 2 years, are those that are just time deposit customers only, and those generally tend to be municipalities that put their deposit opportunities out there for bid. And so it could be anywhere from 2 to 10 banks that are out there bidding. And those are the opportunities, if you will, that we've been kind of staying away from and shy of because of the very, very strong competitive market. But having said that, again, if we go back to those relationships that we have that are strong banking relationships, we have their operating accounts, we have their savings account. We still have some very good time deposit relationships with those folks as we make sure that we continue to price those relationships on an overall basis. And that will continue.

Yes, Kevin, this is Bob. Our deposit initiatives remain one of our most important areas of focus in 2019. I think what you saw in the fourth quarter was -- we continued to maintain some very nice growth all year in noninterest-bearing deposits, especially on the commercial side. If you look at the fourth quarter, I think we were -- we were hampered a little bit by some cyclical, some seasonal patterns of deposit withdrawals that happen typically around year-end. But be that as it may, the initiatives are something that Ray is leading the charge on. And that is wrapped into the focus that we have with promoting our treasury products. And the ability to tie those together to get the complete customer wallet as far as deposit relationship with that, which I think we do a very good job on. I think we're also looking at some additional initiatives, with respect to deposit-only customers that are out there. And I think -- like I said, from the standpoint of the focus of all of our calling officers, loan people, deposit people, everybody is focused with a great intent this year on gathering those local deposits.

If I could just add, as we add commercial relationships, we've done a very nice job of adding the full complement of treasury services. And our adoption rate by our clients has been very strong. And so over time, that will certainly build the deposit base that accompanies those activities.

And then you had some pretty strong C&I loan growth in the quarter. What was your line utilization at the end of the fourth quarter? And can you remind us where that was at the end of the third quarter? And were there any particular industries or sectors that contributed to that growth?

Kevin, this is Chuck. I'll talk on the line usage. It's been staying pretty consistent right around 50%. So most of the -- that vast majority of the C&I loan growth that you spoke of is really new relationships that have come to the bank, not only during the quarter, but previous quarters that are now in a funding phase.

Yes, and I would add to that, that the nature of the relationships that we added, they came from consistent long-term calling efforts. And one of the more significant relationships that came into the bank was one that had been with its prior bank for decades. And a consistent long-term calling effort resulted in the fruition of that relationship in our bank.

I think what we also see is a great diversity in our pipeline, our C&I pipeline that you look at the new customers that are coming onboard, they're coming from a variety of industries within our market. And that's encouraging because it shows the breadth of our calling efforts, the breadth that our loan officers are engaging clients to develop relationships. And as Ray said, when they do come to fruition, we'll get some very nice victories there, as we did with the particular customer that Ray mentioned.

(Operator Instructions) The next question comes from Damon DelMonte of KBW.

So just -- wondered if you could talk a little bit about loan growth in the outlook. And I think in your prepared comments, you guys noted that the economy still seems to be holding up pretty good. How do you look at the state of the pipelines? And what you think that could translate into growth for 2019?

This is Ray. Our pipelines are very consistent with what they have been in the past. And for that matter, the economic environment is very consistent with what we've seen in the past as our customers supply us with ongoing results, that certainly seems to be the case. So we really don't expect the results that come out of the pipeline or the impact of the economy to be much different in the very near future than it has been in the past.

And the nice thing that we're seeing is that despite the nice consistent, strong level of fundings that we saw in the fourth quarter and resulted in net loan growth, the pipeline has been remaining amazingly consistent, which shows that lenders are out there, continuing develop new relationships and replenishing the pipeline. Keeping it at the same level at as it was despite some very nice loan fundings during the quarter.

If I can just add, final line to your answers here. I think you get from Ray and Bob's comments here is that we feel pretty confident that our fundings can be similar to what they've been over the last few years. And we've hit by over -- for commercial loans, we've hit over $500 million in new term fundings over the last 4 years. We see the environment, per our comments that, that would be -- it seems to us that it will be relatively consistent if the economy continues to hold throughout this year. As we always talk about the big unknown, I think that's the hardest to predict are the payoffs. And it was gratifying to see that the payoffs, some of which we want, certainly. But the payoffs in 2018 were actually a little bit lower than what we saw, especially in 2017. So our gross fundings were actually a little bit lower in 2018. But our net loan growth was higher because we didn't have quite the level of loan payoffs. But on an overall basis, we're kind of budgeting, forecasting our net loan growth to be similar to what it was last year in that 7% to 8% range.

And then with respect to the margin this quarter, Chuck, were there any benefits from interest recoveries? I think you may have mentioned something like that in your remarks.

Yes, there was a little bit -- there's probably maybe -- when we talked about interest recoveries, I assume you're talking about originated loans. I think we may have had a -- might have had about 1 basis point. But we certainly got some more purchase income, as we talked about, I think it was $600,000, which was about $400,000 more than what our forecasts were. And that was primarily through one payoff of a purchase impaired loan that we got during the fourth quarter that was the one of those CRE loans. So there's definitely a few basis points there.

The next question is from Daniel Cardenas of Raymond James.

So a quick question. I think, Chuck, you mentioned that your wholesale funds were about 18% right now, is that correct?

It's 16% right now.

16%, okay. So as you kind of look at that total, I mean, where is kind of the maximum that you guys want wholesale funds to represent?

We'd really don't want to get over 20%, we would like to keep it around 15%. We're projecting probably close to 16%, 17% for this year. Just given some of the dynamics that happened, especially the strong loan growth through the fourth quarter and the ongoing strong loan growth and the fact that we do need to get our excess liquidity back up to where we want it over time. So that 16%, 17% I think is probably what we're shooting for, for this year. That's a level that we're comfortable with. Again, per my comments, not only on this call but in previous comments and investor meetings and stuff is, if we have to go out there and get the wholesale funds, which obviously, we do have to from time-to-time given our strong loan growth, the good part of that is it does allow us to do some really good things, we believe, in managing that interest rate risk. And while we like 55% of commercial loans that are floating rate, the other 45% are fixed rate, primarily -- especially on the real estate side, are 5-year fixed rate balloon. So if we do go -- if we have to get the wholesale funding standpoint to fund loan growth, there's definitely an advantage to being able to go out there to the federal home loan bank system and get those advances in those 3- to 7-year terms that I mentioned and do what we believe is a prudent thing in managing our longer-term interest rate risk.

Got you. Makes sense. All right. And then maybe just kind of jumping over to the loan side. When you look at your growth expectations for 2019, can you give us give us a little bit of color as to geographically where most of that growth, I'm assuming most of that growth is coming from the Western part of the state? But maybe some update as to what the footings look like on the Eastern part of the state? And maybe some thoughts on expectations for talent additions in '19?

Dan, this is Bob. I think if you look -- your assumption is correct that the majority of our growth will come from our activities here in West Michigan, as that is our largest and strongest market that we've had for a long time. We are expecting some nice growth in the market in Southeast Michigan based in Troy. Those folks are doing a very good job over there. And I think that's an area that has tremendous potential. And the size of the market alone will give us some really good opportunities, so we look forward to continuing to leverage those opportunities as we go into 2019 and beyond as well. That said, I think if you look in all the rest of our markets, some of the smaller -- including some of the smaller rural markets, we are seeing some good activity in the pipeline from those areas, certainly not to the size comparison that you get in West Michigan and Detroit area. But there are some nice activities happening there and some nice opportunities that we're leveraging as well in the company. So regarding your question on talent acquisition, we're always looking to add new folks to the Mercantile team, that's been our culture. That's the most important thing. Over the course of any year, we maintain conversations with people in our various markets, and we know who the people are that we'd like -- we think will be a good fit for the Mercantile team and we'd like to have them onboard at some point. So you maintain conversations. And at some time, the time might be right to add that person on the team. But as we said in the past, culture is extremely important to us. And so we maintain a very flexible approach to having conversations with people as we gain a sense that they will fit our culture, and you develop plans and strategies to eventually have them join the team, if their situation changes down the road with their current employer.

Okay. Great. And then last question just on the buyback, given just kind of where the stock is right now, kind of at $34-ish level. I mean does that squelch your appetite for buying back stock? Or is this a price level that would still kind of pique your interest?

Yes, I think -- Dan, this is Chuck. I think the $34 in our opinion and in discussions with our board is getting a little bit lofty from what we're trying to accomplish from buying back our stock. So we've been very active, certainly, when it was in the upper $20s and even low $30s. Obviously, we like what the stock's doing this morning. Hopefully, it holds. But word is, right at this minute, it's starting to get above our target where we would be active.

There are no additional questions at this time. This concludes our question-and-answer session. I would like to turn the conference back over to Bob Kaminski for closing remarks.

Yes, thank you for joining us on our call today. We certainly appreciate your interest in our company. And we'll, of course, look forward to talking with you again after the end of the first quarter. That concludes our call. Thanks again.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.