M&T Bank Corp (MTB) 2006 Q4 法說會逐字稿

Good morning, ladies and gentlemen. My name is Carly, and I will be your conference operator today. At this time, I would like to welcome everyone to the M&T Bank fourth quarter year end 2006 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. [OPERATOR INSTRUCTIONS] It is now my pleasure to turn the floor over to your host to Mr. Don MacLeod, Director of Investor Relations. Sir, the floor is yours.

Thank you, Carly. And good morning, everyone. This is Don MacLeod, and I'd like to thank everyone for participating in M&T's fourth quarter 2006 earnings conference call, both by telephone and through the Webcast. I hope everyone has had an opportunity to read our earnings release issued this morning. If you have not read our earnings release, you may access it, along with the financial tables and schedules, from our website, www.mandtbank.com, and by clicking on the Investor Relations link.

Also before we start, I would like to mention that the comments made during this call may contain forward-looking statements relating to the banking industry and to M&T Bank Corporation. M&T encourages participants to refer to our SEC filings, including those found on Forms 8-K, 10-K, and 10-Q for a complete discussion of forward-looking statements. Now I would like to introduce our Chief Financial Officer, Rene Jones.

Thank you, Don, and good morning, everyone. I'll begin by covering a few points from this morning's press release, and then I'd like to respond to questions. Diluted earnings per share, which include the amortization of core deposit and other intangible assets, were $1.88 in the fourth quarter of 2006 compared with $1.78 in the fourth quarter of 2005, and $1.85 earned in the linked quarter. Amortization of core deposit and other intangible assets amounted to $0.10 per share in the third and fourth quarters of 2006 and $0.07 per share in the fourth quarter of 2005. There were no merger-related costs recognized in the fourth quarters of 2006 and 2005. After-tax merger-related costs of $1 million or $0.01 per share were recorded in the third quarter of -- excuse me 2006. Fourth quarter diluted net operating earnings per share, which exclude the amortization of core deposit and other intangible assets as well as any merger-related costs, were $1.98 compared with $1.85 in the fourth quarter of 2005, and $1.96 in the linked quarter. This morning's press release contains a tabular reconciliation of GAAP and non-GAAP results, including tangible assets and equity.

Net income for the fourth quarter of 2006 was $213 million, compared with $205 million a year earlier and $210 million earned in the sequential quarter. Net operating income for the quarter was $225 million, compared with $213 million in the fourth quarter of 2005 and $223 million in the linked quarter. Return on average assets was 1.50% in the recent quarter, up from 1.48% in the fourth quarter of 2005 and 1.49% in the third quarter of 2006. Net operating return on average tangible assets was 1.67% in the quarter, up from 1.63% in the prior year's fourth quarter and unchanged from the third quarter of 2006. Return on average common equity was 13.55% for the quarter, compared with 13.85% in the fourth quarter of 2005 and 13.72% in the linked quarter. Net operating return on average tangible common equity was 28.71% for the quarter, compared with 29.12% in the fourth quarter of 2005 and 30.22% in the linked quarter. The net interest margin in the fourth quarter of 2006 was 3.73%, up 5 basis points from the linked quarter and up 4 basis points from the fourth quarter of 2005. The linked quarter comparison was helped by a slight uptick in prepayment penalties. Excluding this item, the underlying trends are stable and consistent with the expectations for the second half of 2006 that we've previously shared with you.

Average loans for the fourth quarter were $42.5 billion compared with $41.7 billion in the linked quarter, resulting in an annualized loan growth of over 7%. Commercial and industrial loans grew at an annualized 3% over the third quarter. Seasonal pay downs of working capital lines contributed to the lower rate of growth. Commercial real estate loans were up an annualized 6% from the linked quarter, consistent with what we've been seeing all year long. Average consumer real estate loans grew at an annualized 38% in the linked quarter. Average consumer loans -- average consumer loans declined an annualized 2% from the linked quarter. The run up that we've experienced in indirect auto loans over the past 2 years have abated this quarter, and auto loans are actually up slightly from the third quarter on an end-of-period basis. Growth in home equity lines and other consumer loan categories remain slow. Home equity lines of credit are especially vulnerable in the current yield curve environment, where consumers with loans priced from the prime rate have more incentive to seek longer-term fixed rate financing.

In terms of credit, nonperforming loans totalled $224 million at the end of the recent quarter, compared with $180 million at the previous quarter end and $156 million at the end of 2005. As we noted in our press release, over the course of 2006, we've moved 4 relationships with auto dealers totaling approximately $41 million of loans over to nonperforming status. Two of those relationships were added in the recent quarter. The nonperforming loan ratio was 52 basis points at the end of the recent quarter compared with 43 basis points at the end of the third quarter. That ratio was 39 basis points at the end of 2005. Net charge-offs for the quarter were $24 million, representing an annualized rate of 23 basis points of total loans. And this compares with charge-offs of $17 million or 16 basis points in the linked quarter. Net charge-offs were up only slightly from the $23 million or 22 basis points experienced in the fourth quarter of 2005.

The provision for credit losses for the fourth quarter of 2006 of $28 million exceeded net charge-offs by $4 million and resulted in an allowance for credit losses of $650 million or 1.51% of loans. This compares with an allowance ratio of 1.54% at the end of the linked quarter and 1.58% at the end of 2005. Loans past due 90 days but still accruing were $111 million at the end of the recent quarter, down from $112 million at the end of the third quarter of 2006, and $129 million at the end of 2005. At December 31st, 2006, this category includes $77 million of loans that are guaranteed by government-related entities. Noninterest income was $256 million in the fourth quarter, compared with $249 million in the fourth quarter of 2005 and with $274 million in the third quarter of 2006. Recall that the third quarter result included a $13 million gain arising from the call of an advance from the Federal Home Loan Bank of Atlanta. Mortgage banking revenues were negatively impacted by lower volume -- by lower volume of sold loans during the quarter, although originations remain steady. In addition, the bid in the market for loans with servicing has softened, which reduces gain on sale margins.

Operating expenses, which exclude any merger-related charges and amortization of intangible assets, were $365 million compared with $356 million in the fourth quarter of 2005 and $388 million in the third quarter of 2006. The fourth quarter's results include a $1 million addition to the valuation allowance for capitalized residential mortgage servicing rights, compared with a $5 million impairment charge in the third quarter of 2006, and a $6 million partial reversal of the valuation allowance in the fourth quarter of 2005. In addition, the third quarter's results included an $18 million contribution to the M&T Charitable Foundation. Exclusive of those items, core operating expenses declined $1 million from the sequential quarter and were up $3 million, or less than 1%, in the fourth quarter of 2005. Adjusted to exclude security gains, intangible amortization and merger-related costs, M&T's efficiency ratio in the fourth quarter was 50.2% compared to 58 -- excuse me, compared with 52.8% in the previous quarter and 50.7% in the fourth quarter of 2005.

Before we turn to questions, let me briefly review some of the highlights related to the full year of 2006. Diluted GAAP earnings per share were $7.37, up 10% from 2005. Net income was $839 million, up 7% from 2005. GAAP return on common equity for the year was 13.89%, up from 13.49% last year. Diluted net operating earnings per share were $7.73, also up 10% from 2005. Net operating income was $881 million, up 8% from 2005. Net operating return on average tangible equity was 29.55% in 2006, compared with 29.06% in 2005. Average loan growth 5% to $41.4 billion and end-of-period loans were up 6% to $42.9 billion. The net interest margin of 3.70% in 2006 was down 7 basis points from 2005, and came in at the midpoint of the range we provided on this call last January. The provision for credit losses of $80 million more than covered net charge-offs for the year and was lower than last year's provision of $88 million. The ratio of net charge-offs to average loans declined from 19 basis points in 2005 to 16 basis points in 2006. M&T's efficiency ratio was 51.5% for 2005 compared with 51.2% in 2005. Overall, we are pleased to report our 13th consecutive annual double-digit increase in net operating earnings per share.

Turning to our outlook, we expect the net interest margin to remain fairly stable, and we feel that the full year margin should not differ materially from what we reported in 2006. Our expectations for overall loan growth are consistent with this past year's experience. That is to say, mid single-digit percentage growth. We are pleased with the signs and that the run-off in our indirect auto portfolio is turning around. However, there remains an excess of liquidity in the marketplace, which should continue to put pressure on loan pricing, and by inference, the loan volumes we're willing to book. That said, our loan growth expectations, combined with our margin outlook, will likely result in another year of modest revenue growth. This will again require us to carefully manage expense growth and our revenue expense spread in the coming year.

On the credit side, the outlook is mixed. It appears that the second quarter of 2006 represented the low point for the -- for credit costs, and overall credit costs are likely to trend higher in 2007, though our expectations are that those costs should remain moderate by historical [inaudible]. In terms of capital management, our philosophy is unchanged. We don't believe in warehousing capital. And while our share repurchase activity has slowed this year, we in fact used some of the capital we generated to make a very attractive investment in additional branches in Buffalo and Rochester. We would expect our tangible capital ratio to fall within our historical range of 5.2 to 5.6 as we progress through 2007. All of these projections are, of course, subject to a number of uncertainties, to various assumptions regarding the national and regional economic growth, changes in interest rates, political events and other macroeconomic factors, which may materially differ from what actually unfolds over the course of 2007. So, now I'll open up the call to questions, before which Carly will briefly review the instructions.

[OPERATOR INSTRUCTIONS] Jason Goldberg, Lehman Brothers.

I just wanted to follow-up with respect to the NPA linked quarter increase. Of the $41 million that tied to auto dealers, how much came in this quarter?

This quarter, Jason, we had, just give me one second. We had two auto dealers that we took to nonperforming. And that amounted to about $13 million. And then in addition to that -- in addition to auto credit, we had two assisted living facilities that combined for about $14 million that we took to nonperforming. Within that category, there was about -- one of the loans was a $10.6 million loan that has since paid off.

Okay. And the remaining $18 million increase?

There's no specific themes there, Jason. They are predominantly there's some uptick in the commercial side, which has been relatively low for a while. And I would say -- but there's nothing, no specific themes there. And I think really what you're seeing there is our nonperformings are sort of coming off the historical lows and back into a range that they've averaged over recent history.

Okay. And with respect, how much did prepayments add to the margin or [NNI]?

Prepayments were about 7.5, $7.5 million this quarter. Last quarter they were 3.3. So, if you take that and you take a couple of other smaller items, like we had the run off of some high rate CDs that we acquired in an earlier acquisition some years ago. If you take those, that added probably -- those two things added probably 4 to 5 basis points to the margin. So I think of the margin as pretty stable.

And that's what we should expect through the course of '07?

Yes, I think that's right.

All right. And then just lastly, it looks like C&I loan growth slowed vis a vis the recent past. Maybe just talk to your outlook there, and just maybe where pipelines are, et cetera?

Yes, sure. Let me just try to give you the pipeline information first. Pipeline remains strong. It was $1.6 billion at the end of this -- end of the year. At the end of last quarter, it was actually 1.4. So the pipeline remains relatively strong. I think what you're seeing, Jason, is that typically we get some pay downs in terms of line usage in a lot of our upstate New York markets. But in addition to that this year, where we would typically get a pick up in the Floor Plan balances in the fourth quarter, I think that with the difficulties that the domestic manufacturers are having, most the dealers are managing their inventory very, very carefully, and they're not taking on any excess inventory. So we didn't see as much of an uptick that we would usually see from the third to the fourth quarter in our Floor Plan.

Fair enough, thank you.

Adam Barkstrom, Stifel Nicolaus.

Hey, I wanted you to talk about deposits, maybe in a little more detail. We saw, I guess, a nice mix shift. Kind of the opposite of the trends that we've seen in the last couple of quarters where you actually saw some growth in DDA, saw some run off, and I think you referred to this higher cost CD runoff. But curious, is that more fourth quarter seasonality? Or are we starting to see some of the competitive trends in deposit growth in particular to DDA abate a bit? What's your take on that?

Yes, I mean, it's not a fourth quarter trend. I think you may have seen from time to time either Don Macleod or I have showed a chart that shows how deposit mix changes with the movement in Fed funds. And Fed funds have been stable. So I guess I expected somewhere at the beginning, first half of 2007 for the mix shift to start. It's already started. So I think we had a 16% annualized drop in our time deposit. That, in some part, was affected by these high rate CDs running off. But even if you exclude that, deposits were down and nonmaturities were up. So I think it started a little earlier than we thought. It seems for us, as well to make -- it makes much more sense for us today to focus on attracting customers to our savings and money market categories. And this is -- I think you're going to see more of that as we go into 2007.

So are you saying that you were encouraged by the growth in noninterest bearing DDA for 4Q, and you think it will see a resumption of growth through '07?

Growth is -- there are two separate things. Growth is one thing. But where -- with your existing customer base and where it makes sense for them to shift their deposits, I think it just makes less sense for them to shift money into time accounts and lock it up for a long time, because there's uncertainty with where interest rates are going. So they can keep that option by going into higher rate savings accounts. It just makes sense. So it's a very natural shift. Is that a good thing? It is what it is. On the deposit growth front, we've still got to do our work to sort of grow accounts and make sure the balances grow.

Okay. And then looking at investment securities balances. You're down to, I guess 15% now of earning assets. Can we consider that kind of the floor level here? Or do you anticipate securities portfolio continuing to run off?

I think our low was slightly lower than that in the second quarter of 2004. And so I think that right now I don't expect that to change. There's no possibility to make money with the curve as inverted as it is, and credit spreads so tight. And so I think Don is telling me that that 15 has been as low as 12.

I'm sorry, I didn't catch that.

I don't see any change.

What was the last thing you said Don is telling you?

That the 15% that you referred to has been as low as 12.

Really?

So we'll continue to run that portfolio off and use it to fund loan growth. It's more economical to do so.

Right. Right. And then, last question, I mean looking at compensation expenses. For the last four quarters, those have been down linked quarter for the last four quarters. How do you -- what's your anticipation for '07 for that? And then how are those expenses continuing down linked quarter for the last four quarters?

Well, let me just start with the full year. As you know, in the first quarter, we have seasonally high expenses in the first quarter. And a lot of that is centered in the salary and benefits area. Obviously, at the beginning of the year we have the FAS 123R, which was the first time this year. And that added $6 million to $7 million in the first quarter. And then starts to reverse itself as you work your way through the year. In addition to that we -- in addition to that we're paying out bonuses and raises at the beginning of the year, which obviously accrued throughout the year. But the point of it is, is that our FICA expense tends to be much, much higher in the first quarter. And so some of what you're seeing is just, in addition to sort of controlling expenses, it's just the logical sort of seasonality of the salary and benefit line.

In the fourth quarter versus the third, about $2 million of the decrease is just simply because they are a lower number of days, accrued days, in the fourth quarter than the third. And then we had a little bit of lower incentive comp in the fourth quarter, as well. So, I mean, I think year-over-year our salaries and benefits are up 5%. Just give me one second. They're up 6.1%. I think it would be about 5 if you normalize for the Citibank transaction. And that's as we thought. We thought that as we completed our infrastructure project, we would probably see higher salary growth there, because we'd be investing in people primarily in the mid-Atlantic and some of our faster growing regions.

All right. Then last question real quick. With the growth in DDA, and typically fourth quarter is seasonally a higher quarter for deposit-related fees, why -- can you give us some color as to why you're down on the linked quarter basis in deposit service charges?

Yes, sure. Just bear with me. Linked quarter -- I'm sorry, let me go back to that. Are you talking about the deposit service charges or deposits?

Deposit service charges linked quarter, down 4Q versus 3Q?

I'm sorry, I missed your question, Adam. In terms of deposit service charges, I think the commercial piece seems to be down seasonally. So if you take the drop, we had about a $4 million drop on a linked quarter basis. Half of that was commercial. I think much of that is simply seasonal reductions. In fact, there are three less, three fewer days where you can charge because of the holidays in December. On the consumer side, we were down $2 million, as well. And there, it was almost entirely due to lower NSF fees. And, I wish I had a great explanation for you. Typically that, we usually see a decline, but it doesn't come until the first quarter. And just people had lower NSF fees, lower NSF experience. But nothing that we really could put our finger on today.

All right. Great. Thank you.

[OPERATOR INSTRUCTIONS] Jen Thompson, Oppenheimer.

Couple of questions. First, you mentioned briefly the gain on sale margin being down fourth quarter versus third quarter. Can you give us any more color on the magnitude of that decrease, and what are the trends you're seeing recently there?

Yes, let me try to give you the whole thing. I think our -- if you look at mortgage, both our applications and our closed volume were pretty much spot on with the third quarter. We saw application volume of between $1 billion and $1.1 billion a month. So that was relatively steady. But we -- our sold volume was down 34%. And if you look to our held for sale portfolio, which you would see in our consumer real estate portfolio, on an as-add or end of period basis, you'd see that. The held for sale portfolio was up about $600 million. So likely, as we sell those loans in the first quarter you'll get a rebound in terms of realized gain.

In terms of gain on sale, we are seeing lower -- lower gain on sale margins. And I think that's for two primary reasons. First, if you remember back in the second quarter, we said that we had sold more of our loans servicing release. That number was probably about 80%, 81% of our portfolio, we had sold servicing released. In the third quarter, that dropped to 74%. And in the fourth quarter, it dropped further to 63%. I think it's probably more normal for us to see about a 50% number down there. So we've kind of moved down and that would lower your gain on sale.

And then the last item, Jen, is that a number of the banks reported some modest concern about delinquencies and particularly, in all day portfolios back in the third quarter. And we think that had the effect of softening the market a little bit for gain on sale, particularly within the all day portfolios. So as I looked at 2007, I would expect gain on sales to remain a little bit lower than what we saw in 2006. And that's predominantly because the middle of the year for us was, as I mentioned, was very high in terms of gain on sale. I thought it was abnormal. Now we're beginning to see that come back to a normalized level.

Okay. Can you give us any sense of the magnitude of the decrease in the gain on sale margin? Was it modest? Was it dramatic?

I guess what I would say is that we were averaging over 100 basis points. And I would say maybe 70 basis points is a more normalized level that you would expect to see, 70 to 80, maybe.

Going forward?

Yes. I would say [inaudible].

Okay. Okay. And the fact that you had more held for sale, is that a strategy shift? Or I think you just mentioned you expect to then reverse that and sell more of that in the first quarter. Would that be accurate?

Yes, that's accurate.

Okay. The -- also the effective tax rate, I think was below normalized levels last quarter. Came up a little bit. But still below what you had been indicating as a normalized level. How should we think about that going forward?

Yes, there are two things. We had some tax advantaged income in the form of bank-owned life insurance. And that's something that you should think about as an annuity. The income doesn't change much on a year-over-year basis. But it can be lumpy depending on whether benefits are paid out or not. So we had a little bit of that in the fourth quarter that was up. And then we also had additional sources of income that tend to have a lower tax rate. So it's just sort of where the income came from. Nothing unusual, though.

So you would expect that to normalize into '07?

Yes, I think that's right. It would come up, it would come back up into '07.

Okay. Great. Thank you very much.

[OPERATOR INSTRUCTIONS] Bob Hughes, KBW.

Rene, did I understand that the growth in the average balance of the consumer real estate portfolio also reflects held for sale balances? And you said that was, what, about 600?

Actually, if you were to remove the held for sale portfolio, you'd be up even higher on an average basis. So that portfolio is growing simply because as we look at mortgage -- some mortgages versus securities, it's just more advantageous for us to actually take on some of those mortgages instead of putting -- taking -- putting on more mortgage-backed securities in our investment book. Okay? So that's actually up. You have to look to end of period, which is really, pretty much in the month of December we had a big spike, which you'll see will be up plus 600,000 -- 600 million, I should say.

Okay.

So it's not really affecting the full-year averages. That still grew at a pretty strong rate.

Okay. And the growth that you're seeing actually in sort of the core portfolio, can you give us some sense for the characteristics of those loans? And are those coming out of your sort of your banking footprint? Or is any of that being portfolioed out of the Western Mortgage franchise?

The growth on the balance sheet?

Yes.

No, there's nothing specific there. No, there's nothing specific there. We're -- that -- think of those loans as loans as part of our discretionary portfolio. So we will pick the highest credit quality, best yielding notes there out of that -- out of what we generate, and use that to replace investment security. So it doesn't come from any specific area.

Okay. It can come from anywhere across your national sort of mortgage footprint?

Not at all. Not concentrated anywhere.

Okay. And then also, I was curious to hear that you have seen a turn around, I guess looking at the period end balances in the consumer indirect portfolio. What's really, what's really driving that? It doesn't sound like you feel a whole lot better about pricing?

We felt a little better about pricing in that, as I mentioned before, the thing to watch for there would be that the two-year LIBOR rate, if that dropped, we would see some relief. And that's exactly what happened. And I think that we're sort of very committed to the business. So we look at it very closely. Tweaked a few other things. But that was a positive. I think the question will be, as rates likely rise, will we be able to continue to have that volume at profitable levels? So far, it looks pretty good. I don't expect that kind of growth. But I also don't expect the same runoff that we saw in the past two years.

Okay. And then last question I guess is, how has the credit been in the consumer indirect portfolio so far? And do you think that some of the weakness you're seeing at -- in your Floor Planning portfolio suggests that maybe that's an early sign that we might see more weakness in the consumer portfolio?

Not at all. I mean, I took a look at delinquencies over several periods versus where we are today. They're not moving at all. The consumer portfolio, I mean just remains pristine in terms of its credit. And there are no signs whatsoever of any upward trends. The issue in the Floor Plan is really isolated to the fact that -- two things. That the domestic manufacturers are having difficulty selling cars. They're shifting from the large SUVs to -- and trying to shift over to lighter vehicles. And those vehicles have thinner margins. On top of that, there are still a lot of dealers out there in certain markets, and there are probably too many dealers out there. So it's a business that we really, really like. But the sort of underlying industry is having a little bit of difficulty. And as a result of that, we've sort of tightened up our process a bit. But I kind of -- I think, since we've now talked about it for probably four quarters, I thought it might make a lot of sense to say that we're very, very committed to it. But we think the losses will be a little bit higher.

Okay. And it's largely isolated to domestic -- ?

It has nothing to do with the behavior of the consumer, in terms of credit quality of the consumer.

Okay. Thanks a lot, guys.

Jackie Reeves, Ryan Beck.

Wanted to get your thoughts with respect to expansion opportunities throughout your footprint. You did mention in your opening remarks that you've opened a few locations. But if you could just maybe touch on opportunities that you may or may not see, pricing, the competition, and give us a feel for what's going on.

Yes, I mean, I can -- there's a couple of questions there. I mean, I think if we look at the quarter, we were pretty pleased with the loan growth that we saw. And in particular, if you look, for example, at the mid-Atlantic, we saw 11% loan growth from the mid-Atlantic. And what's interesting about that is that every -- each of the subregions in that area, so Chesapeake, Washington D.C., Baltimore County, all lof those -- every region had double-digit growth. We saw very nice growth in our metro region, which is New York City and middle market. And in fact, when you break that market down into some of the -- some of its subcomponents, Philadelphia experienced the lowest growth in C&I, and it was still over 20%. If you flip that back up to Buffalo, we saw much slower growth. I think we were down. In upstate New York, we were down 2% in our loan growth. So one of the things that we're seeing is that our opportunities are very mixed as we go throughout our footprint. It's a very diverse footprint. But there are nice pockets of very, very strong growth there.

I think the same is true on the deposit side. We're seeing mixed results on the deposit side. And I kind of give you that with a sort of preface, because you asked the question, well, where are we adding branches and where are we expanding. The branches that we added were the branches that we acquired in the -- on June 30th that I was speaking about. With respect to adding additional branches, I mean, we have plans to do three, four, or five branches throughout the mid-Atlantic. And I guess we look at that as being more opportunistic than any sort of an expansion plan. Our goal is to sort of reposition our franchise there to make sure that we are where our customers are. So we'll do, we'll do one or -- we'll do three, four, five new locations. But we won't have any large expansion plans.

Thank you.

Sal DiMartino, Bear, Stearns.

Most of my questions have been answered. But just one quick one. On your 2007 outlook, what kind of interest rate or yield curve assumptions are you building into the margin outlook?

We expect the curve to remain inverted. We're again, we're using the forward, Sal. And basically what that is telling us is that the curve from Fed funds to ten year LIBOR will remain inverted through the first half of the year, and then go slightly positive, maybe 28 basis points by December of '07.

Okay.

But I think the way we look at that is that we're also still somewhat skeptical. Because we, although the forwards are saying that still building in some probability of a rate cut, most of us are sort of sitting around the table saying, we're not betting on that. We don't think that that's too likely, that there'll be a Fed rate cut any time soon.

Yes, I'll take the under on that one, as well. Just a follow-up question on the margin. You mentioned in your prepared comments that there were about $7 million to $7.5 million of prepayments in the margin this quarter versus about $3.5 million in the third quarter. Is that correct?

That's correct.

Is there a normal level of prepayments that we should be building into the margin? Is it somewhere between the 3.5 and the 7.5? Or should we just kind of -- it's kind of a futile task?

Well, if you're trying to predict the quarter, it's a futile task. If you're trying to predict over time, I would say that $1 million a month is probably on the low side. And it's been high when we've seen the quarter be at maybe $11 million or so. It's probably in the middle. You're probably right. 4, 5, 7, somewhere in there.

Okay. Thanks.

Thank you. There are no other questions. I would like to turn the floor back over to management for closing remarks.

Again, I would like to thank all of you today for participating. And as always, if clarification of any of the items on the call or the news release is necessary, please contact our Investor Relations department at area code 716-842-5138. Thank you.

Thank you, ladies and gentlemen. This does conclude today's teleconference. You may disconnect your lines at this time, and have a wonderful day.