Bank Ozk (OZK) 2006 Q1 法說會逐字稿

Good morning. At this time, I would like to welcome everyone to the Bank of the Ozarks first quarter 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 session. (OPERATOR INSTRUCTIONS).

Thank you. Miss Blair, you may begin your conference.

Good morning. I'm Susan Blair, Executive Vice President in charge of Investor Relations for Bank of the Ozarks. The purpose of this call is to discuss the Company's first quarter results and our outlook for upcoming quarters. Our goal is to make this call as useful as possible in understanding our recent operating results and future plans, prospects, goals and expectations at Bank of the Ozarks.

To that end we will make certain forward-looking statements about our plans, goals, and expectations including statements about economic and competitive conditions, our goals and expectations for revenue growth, net income, earnings per share, net interest margin, including the effects of the flat to slightly inverted yield curve and intense competition, net interest income, non-interest income including service charge, mortgage lending and trust income, gains or losses on the sales of securities or other assets, non-interest expense including the cost of opening new offices and devoting increased resources to expand and develop staff, our efficiency ratio, asset quality, interest rate sensitivity, including the effects of possible interest rate changes, future growth and expansion, including plans for opening new offices and replacing existing offices and loans, lease and deposit growth.

You should understand that our actual results may differ materially from those projected in any forward-looking statements, due to a number of risks and uncertainties, some of which we will point out during the course of this call. For a list of certain risks associated with our business you should also refer to the forward-looking information caption of the Management's Discussion and Analysis section of our periodic Company reports and a description of certain risk factors contained in our most recent annual report on Form 10-K, all as filed in the SEC. Forward-looking statements made by the Company and its management are based on estimates, projections, police, and assumptions of management at the time of such statements and are not guarantees of future performance. The Company disclaims any obligations to update or revise any forward-looking statement based on the occurrence of future events, the receipt of new information or otherwise.

Now let me turn to the call over to our Chairman and Chief Executive Officer, George Gleason.

Good morning and thank you for joining our call today. Prior to this year's first quarter we had reported 20 consecutive quarters of record net income and diluted earnings per share. Earnings growth from quarter to quarter during that period progressed with almost metronomic precision.

Preparing for quarterly press releases and conducting conference calls such as this one became a relatively routine manner. However, understanding the many factors that led to our first quarter 2006 results requires more explanation.

Technically, our first quarter 2006 results were our 21st consecutive record quarter. Compared to the fourth quarter of 2005 net income was up $14,000. And if you compute diluted EPS to two decimal places it also improved minutely from the fourth quarter. Of course such small margins and improvement are not consistent with our historical results or our long-term goals and expectations.

A number of factors affected first quarter earnings. These factors included some normal seasonal variations in earnings and the normal ebb and flow of business results from quarter to quarter. But the most important factors affecting first quarter earnings were three strategic initiatives. They are all expense-related but growth-driven. We are pursuing these initiatives because we believe they are in the best long-term interest of our Company and our shareholders, even though such actions can negatively impact earnings in the short-term.

Today, I want to focus the majority of my attention on these three initiatives, why we believe they are important to our Company and our long-term shareholder value, and how they impacted first quarter results.

The first matter I want to discuss is what I will call our branching initiatives. Our previously announced plan to add a record 12 new banking offices in 2006. Not only is this a record number of new offices but these offices are all related to our entry into four important new markets. Because of the size of these markets and the many business opportunities they present, some of these offices are being staffed with more people - especially more lenders - than our typical new office.

Even though only two of these offices opened in the first quarter starting in late 2005 and throughout the first quarter of 2006, we hired many of the people who will staff the offices to be opened this year. In our last conference call and in our annual report, I talked at some length about the importance of these markets and their potential for our Company. So I will not go into detail on that today.

Suffice it to say that we believe that the opportunities in these markets for growth in loans and leases and deposits and income over the next decade and even beyond, justify our planned investment in people and facilities.

The second element relates to our longer-term plans for corporate growth. I will call this our corporate growth initiative. In late November and early December of each year we conduct a manpower assessment of our entire Company. Our President and Chief Operating Officer Mark Ross along with Diane [Hillman], our Senior Human Resources Officer, and I have a series of meetings with every supervisor in the Company. These meetings take approximately two weeks. We discuss every individual staff member, related budget items and future staffing needs for each office or department, given our plans for Company growth and expansion.

As we performed this assessment in late 2005 and considered our Company goals for growth of the next one, three, five and 10 years. We determined that it was time to make a number of staff additions to support our future growth plan. Some of these admissions are business producers, such as loan officers, mortgage loan counselors and private bankers. And other additions include what I describe as corporate staff.

Further as we looked at our longer-term plans, we identified a need to develop a number of future supervisors and managers from within our existing staff. As a result of all of these conclusions and as part of our 2006 plan, we are hiring additional production personnel in a number of existing offices and hiring additional corporate staff members.

Also in some cases we are giving better than normal 2006 salary increases to appropriately compensate our staff members and to help us retain and develop our next generation of supervisors and managers. All of these actions are intended to help reach our one-, three-, five- and 10-year growth goals.

The third item that significantly impacted first quarter earnings was what I will refer to as our deposit initiative. In our January conference call, I stated that after approximately one and a half years of being relatively defensive in regard to deposit pricing and growth, we expected to be more aggressive in this regard in 2006. The details of that shift in strategy were finalized shortly after that conference call as part of a quarterly marketing strategy session, in which I participate along with Dan [Rollett], who heads our deposit pricing and deposit acquisition efforts, and Susan Blair, who heads our marketing efforts among other things.

After evaluating recent growth and prospects for future growth in each of our offices, and analyzing our competitive condition and position and other relevant factors for each market, we launched a deposit growth strategy which was somewhat more aggressive than I had anticipated at the time of our January conference call. This involved repricing a number of our products in many markets.

This shift in strategy was the most significant contributor to the sharp drop in our first quarter net interest margin compared to the fourth quarter of 2005. It also led to increased marketing and public relations expense.

We believe there are times when it is best to be defensive in deposit pricing and times when it is best to be aggressive. We strive to develop and implement our deposit strategies based on the long-term best interests of our Company and our shareholders. Sometimes this adversely affects earnings in the short run.

With today's flat to slightly inverted yield curve, intense competitive conditions and at this stage of a long Fed tightening cycle. it may not intuitively seem to be the ideal time to launch a major deposit growth initiative. However as we have evaluated our markets, our competition and our various opportunities, we have concluded that this is the right time for us to the more aggressive in regard to deposit pricing and growth. This put additional pressure on our net interest margin in the first quarter; but we are looking well beyond this quarter's or even this year's results to the longer-term.

Collectively the branching initiative, the corporate growth initiative and the deposit initiative significantly impacted first quarter results. In addition to the pressure on our net interest margin just discussed, these initiatives resulted in unusually large increases in our first quarter noninterest expense which was up 17.5% compared to the first quarter of 2005 and up 10.7% from the fourth quarter of 2005.

Most of this increase was due to increased salaries and benefits attributable to our branching initiative and our corporate growth initiative. By comparison in 2005, noninterest expense increased 6.6% compared to 2004. While the growth in salary and benefit expense and the decline in net interest margin in the first quarter were both significant, we are looking at them in the context of our long-term plans aimed at maintaining high teens to mid-20s percentage growth over the next decade. In that context, these decisions seem to us to be an important and appropriate investment for the future.

As I mentioned previously, there were also seasonal factors that contributed to our first quarter results. The first quarter of each year is in my opinion the most challenging. The pipeline for both portfolio and available for sale loans usually tends to empty out towards year end and has to be refilled as the new year starts. That is why over the past five years on average, only 13% of our annual loan and lease growth has occurred in the first quarter, and only 20% of our mortgage lending income for the year has been earned in the first quarter. Also over the last five years, only 22% of our annual service charge income has been realized in the first quarter.

Thus, we entered the first quarter running into the headwinds of a continuing challenging yield curve environment and tough competitive positions and facing an uphill climb from the normal seasonality of the first quarter. Then to make our first quarter rates even more challenging we launched a record branch expansion, accelerated our staff growth and development efforts, and intensified -- initiated a significant shift in deposit strategies.

Now we try to maintain a good balance between our goals of achieving long-term growth and short-term earnings. However we are more focused on building long-term shareholder value than achieving short-term results, even though we do care a lot about our short-term results. Our actions in the first quarter, I think, demonstrate our paramount focus on longer-term objectives.

In fact, our first quarter results show significant strides toward accomplishing those long-term objectives. In other words, our three recent initiatives are already starting to produce results. For example I would point to our record quarterly increase and deposit. During the first quarter, deposits grew $145 million, which surpassed our previous best quarterly deposit growth of $118 million which occurred in the fourth quarter of 2004.

Our first quarter deposit growth was accomplished with essentially no change in broker deposits as our dollar volume with such deposit was relatively flat from the beginning to the end of the first quarter. After launching our more aggressive deposit initiatives in late January, our number of new accounts and our dollar volume of new accounts in February and March were among our best ever.

Another example I would point to is our best ever first quarter loan and lease growth and our excellent loan and lease pipeline going into the second quarter. As I have already mentioned, over the last five years. Our first quarter loan and lease growth has on average accounted for only 13% of our loan and lease growth for the year. In that context, our $54 million the first quarter alone in lease growth looks very positive.

Let me change directions now and give you some specific guidance on various balance sheet and income statement components. We believe that various initiatives I've already discussed will lead to significant loan and lease, and deposit growth in both 2006 and for many years to come. Our stated goal is to maintain loan and lease, and deposit growth from the high teens to the mid-20s in percentage terms.

Based on our first quarter results, the excellent loan and lease pipeline we have going into the second quarter, and our current expectations regarding competitive conditions and business opportunities, we believe that goal is achievable for the remainder of 2006. And more importantly, our actions are intended to lay the foundation for achieving that growth rate over a much longer period of time.

In regard to net interest margin and net interest income, both declined in the first quarter in large part due to our late January repricing of a large number of deposit accounts including non CD and CD accounts. Based on our assumption of our one or two additional Federal reserve rate increases in 2006, we anticipate some further margin compression in the coming quarters. But we do not believe that that further margin compression will be as significant as experienced in the first quarter when we repriced so many deposits.

Based on our current strong loan and lease pipeline, we expect that excellent growth and earning assets will allow us to once again post record net interest income in the second quarter. We did not achieve record net interest income in the first quarter, which ended our streak of 19 consecutive quarters of record net interest income. In the first quarter we simply did not achieve enough growth and earning assets early enough in the quarter to overcome the net interest margin compression.

Our income from deposit account service charges is traditionally at or near its lowest of the year in the first quarter. As I've already mentioned over the last five years, first quarter service charge income has been on average only 22% of the total for the year. We expect service charge income will improve from first quarter level and the subsequent quarters of 2006 because of the normal seasonal pattern, our entry into new markets and our expectation for good customer growth from our ongoing deposit initiatives.

First quarter mortgage lending income over the last five years has on average accounted for only 20% of the year's mortgage lending income. We expect mortgage lending income to improve in the subsequent quarters of 2006 from the first quarter results. This expectation is based on normal seasonal patterns which suggests that the second and third quarters of the year are typically our best quarters for mortgage lending income.

In addition, we have added or expect to add new mortgage originators in the new markets in which we are expanding in 2006. And we believe we will gain traction in the mortgage business in these new markets as 2006 progresses. This will contribute to improvements in mortgage lending income from the first quarter level.

Trust income grew in the first quarter, improving 11.3% compared to the first quarter of 2005. We expect continued growth and trust income in 2006.

During the first quarter, noninterest income received an unusual boost from $1,833,000 in pretax gains, primarily securities gain. Over the past several years, we have recognized some net gains from the sales of securities or other assets in most quarters. However, the first quarter of 2006 gains were unusually large. It is unlikely that we will often repeat gains of this magnitude. With all of the pressure that our various branch and corporate growth and deposit initiatives placed on our first quarter earnings, we were very pleased to benefit from this unusually large volume of gains.

The net gains realized in the first quarter were primarily attributable to our sale of $76 million of investment securities. Most of these securities sold were municipal bonds. Early in the first quarter, we began to sell Arkansas municipal bonds from our portfolio because of what we believe was an unusually aggressive bid situation available for such bonds. When we looked at the prices at which we could sell Arkansas MUNYs and reinvest in non Arkansas municipal bonds and U.S. agency mortgage-backed products, we concluded that selling the Arkansas municipal bonds was the right decision.

In making this decision we considered such things as credit ratings, call features, maturity dates as well as relative yields.

As the quarter progressed, we found bids becoming more aggressive on certain non Arkansas municipal bonds and we began to sell some of those bonds as well. Later in the quarter we were primarily investing in U.S. agency mortgage-backed products. We will continue to actively monitor and manage our investment securities portfolio with the goal of finding relative value among various investment products available from time to time.

During the first quarter we both sold and purchased large volumes of investment securities because we thought it appropriate and profitable to reposition the portfolio. Whether or not we will engage in similar transactions in future quarters will depend on our assessment of market conditions and opportunities existing at the time.

As we have discussed in recent conference calls, our securities portfolio has been a high performing portfolio and an important contributor to our earnings. Its contribution to first quarter earnings was particularly apparent due to the large volume of security gain.

In regard to noninterest expense, we expect our growth rate of noninterest expense in the subsequent quarters of 2006 to continue to be above our growth rate at non-interest expense in recent years. However, since a large portion of our salary increases and many staff additions occurred in the first quarter of 2006, we expect the growth rate in noninterest to expense to slow somewhat in each subsequent quarter of the year. And by the first quarter of 2007, we hope to return our growth rate of non-interest expense to the ranks we have typically experienced in recent years.

I usually conclude my prepared remarks with comments on asset quality but as you can see from the reported numbers. our asset quality ratios continued to be excellent in the first quarter of 2006. We continued to benefit from our strong credit culture and the resulting favorable asset quality. As I have already mentioned our first quarter loan and lease growth and our current loan and lease pipeline make us very optimistic about our prospects for loan and lease growth in 2006. These expectations of accelerated loan and lease growth are due to good production from existing lenders and lease originators, the addition of new lenders and leasing personnel and our entry into new markets. Let me emphasize that growth is not being achieved by diminishing our traditional underwriting standards.

In closing, let me say again that our first quarter 2006 results were not consistent with our expectations or our goals. However, these results are mostly due to the fact that we invested heavily during the quarter in our branching initiative, corporate growth initiative and deposit initiative. While these expenditures diminished first quarter income we believe that the long-term benefits from these efforts will far outweigh the short-term impact.

At this time we will entertain questions. Let me asked Shante, our operator, to once again remind our listeners how to queue in for questions.

(OPERATOR INSTRUCTIONS) Barry McCarver. Stephens Inc.

Good morning George. Just quickly on the margin. Your comments on the call I thought were just a little bit counter to what I understood when I read the press release. I just wanted to clarify that.

You talked about the potential for a little bit further compression going forward in the quarter; but in the press release you mentioned that you repriced the deposits without putting that to use immediately on the loan side so there was at least a potential for a little rebound in the margin in the second quarter. Is that the way I'm reading that correctly?

I did not intend that to be communicated that way in the press release and that's not the way I read it. We repriced the deposit products that we repriced right at the end of January. I think the effective date of most of those repricings was the 28th or the 29th of January. So you have about on the non maturity non CD deposits you have roughly two-thirds of the impact in the quarter. Of course on the CD products that we priced you have got the impact of everything that rolled over in the quarter and repriced that and new pricing and you'll have an ongoing effect of that.

So we expect that there will be over the next couple of quarters a continuing impact from the repricing of those products. We hope to somewhat mitigate. But I doubt we will fully mitigate that from a net interest margin perspective that with what we expect to be excellent growth in earning assets. So our view is, as I said here in the conference call, that we think there will be some further impression on the net interest margin in percentage terms. But we believe that the growth in earning assets is going to be strong enough that it will get us back on a record net interest income pace in the upcoming quarter.

And, hopefully, we would hope that the earning asset growth would be sufficient to keep that trend going forward.

Maybe I was just trying to be too optimistic. I was digging.

I appreciate it. Thank you.

The only other thing I had, too, which was really related to that was the tremendous deposit growth you had in the quarter in terms of the repricing did it seem like you maybe overshoot the mark a little bit? Is that why it was so strong? I was a little surprised by that.

I don't think we did overshoot the mark. I think we are right where we need to be and the results were very strong. We had good growth across the board. We had good growth in retail accounts. We had good growth in commercial accounts. We had good growth in governmental accounts. The growth in governmental accounts was very strong as we picked up a couple of really nice pieces of business there. But it was strong across the board. I don't think we overshot the mark.

Just lastly, in terms of the staff additions I believe you hired one individual on the corporate staff side during the quarter - if I'm not mistaken - and to work on the retail branching. How many executives there? I can't remember what we talked about before if there were two or three individuals you thought you might hire during the year.

To give you an example of some of the changes we've made in the Arkansas Democrat Gazette and reporting on our press release commented that the first of the hirings was Jack [MacRae] who's come into our real estate acquisition development group to help us with site acquisitions and so forth. But, actually, that was an assumption that they made that was erroneous. He is certainly not the first. Some of the corporate staff people that we have added this quarter or late in the fourth quarter include the increase in our CFO staff there. We have two senior level guys, Paul Moore, our Chief Financial Officer and Greg McKinney, our Controller. We've added an assistant controller.

In our general counsels office where for the last couple of years we've had one lawyer we' added two. In marketing where we've had one senior level person we went to two. In loan review we went from two loan review officers to three. Jack's addition takes us from one guy handling our site acquisitions and branch development to two guys there. We added back office support people over the last two quarters and branch support and credit administration, computer techs.

And just across the board, there's been a broad-based initiative to build that staff. Basically what we're doing is putting the people in place that we believe are necessary to have in place at the outset to try to double the size of our Company through organic growth over the next three to four years, which is our basic three-year and five-year goal is to basically achieve that growth rate at the high end of our target growth rate over the next several years and achieve that kind of growth. So we are trying to put in place the people to manage that process and do that effectively; and it is creating some costs on the front end but we think we get a good payback for that in time.

So already pretty significant on a corporate side, then, it sounds like.

Yes. As far as numbers of people, we talked in our last conference call about the number of staff. We probably didn't add more than a proportionate number of staff in the first quarter as far as our hiring plans of people for the year. But we added a lot of the heavier salaries in there and the majority of our annual raises occur in the first quarter. So while we would expect that overhead component to continue to increase we would expect it to do so at a decelerating rate throughout the remainder of the year.

Okay. That's very helpful. Thank you, George.

Thank you.

(OPERATOR INSTRUCTIONS) (technical difficulties)

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Brian Martin from Howe Barnes Investments.

I just wanted to -- you gave a little bit of color on Barry's question but the absolute number of FTE employees at the end of the quarter. Can you give what that number was?

Yes I can. That number at the end of the quarter was 656 FTEs. At the beginning of the quarter, that number was 629 FTEs. So we added 27 FTEs during the quarter.

And you are still, I guess still comfortable -- I know it's a relative range of about 150 as you talked about on last quarter's call. Is that still --?

Yes. If we add everybody that is on the agenda for the year, we would add 123 more people over the next three quarters. And, again, I would comment that the more significant salaries people probably have occurred in the first quarter. For example, I've got pretty much my entire senior management and lending team for Northwest Arkansas, Texarkana and Garland County in place even though we haven't opened all those offices. We've added a couple of high-level people in our Frisco office even though those offices aren't in place.

So the personnel that we have left to add are more your teller CSR branch manager level personnel. So a lot of the heavy lifting is done there even though we've got quite a few numbers to go.

One last question. More on the deposit side. I know a couple of years ago, before rates really started going up, you guys were fairly aggressive and last year a little bit less aggressive. You talked about right now, you feel this is really the time to be aggressive. I guess two questions. Wondering if you could give a little color on the rational -- why you think now is the time to be aggressive and secondly when you were aggressive this last quarter was it throughout your entire footprint? Was it more targeted toward certain markets? If you could give a little color on that, I would appreciate it.

First I would answer your last question first and say, probably somewhere between 80 and 90% of our office is probably just a little more than 80 maybe. We're actually involved in repricing a major portion of their products; in all of our offices 100% of the we've repriced certain products. So it was a fairly broad-based effort.

I'm glad you asked your first question because, normally, our mindset would be at the beginning of a Fed cycle is when you need to be aggressive and you need to be conservative towards the end of the Fed cycle because in our experience people tend to kind of overshoot rates at the end of a Fed tightening cycle. However, even though that would be our normal mindset we feel that there are some unusually good competitive opportunities right now.

I will give you some examples and try to explain that. We saw some of our competitors become extremely aggressive on loan pricing a couple of years ago at the outset of the Fed tightening cycle and particularly aggressive in fixing loan rates at a time we thought variable, for certain, was the way you ought to be going instead of fixing. Then about six months ago to nine months ago, we saw extreme aggressiveness on some deposit pricing even though we've had several Fed rate increases since then. We saw some of our competitors pricing deposits at or above where deposits are being priced today and that made no sense to us at that point in the tightening cycle. So we maintained a fairly defensive posture.

As a result of some of this fairly significant aggression by some of our competitors over the last couple of years, with what we thought were old-time points, some of our competitors have done considerable damage to their net interest margin. Their ROEs, ROAs, efficiency ratios and so forth. And we feel like we are in a good strategic position vis a vis our competitors today to step up the pace.

I would analogize this for some of our runners that are listening now. You say these runners that kind of fall in the pack and they are running behind the leaders of the race who go out too fast early in the race and at a strategic point they pick up the pace and go to the other side of the road and leave their competition behind.

We feel like we are very well positioned with excellent asset quality and very good earnings metrics, and that some of our competitors are not quite so well-positioned, and that this is an opportunity for us to pick up the pace and achieve some substantial market share gain at a favorable cost to market share gain ratio. We think we can get a lot of bang for our buck with the strategic initiatives we've launched right here. Yes, this is a challenging earning environment and a terrible yield curve environment and seems like all the wrong time to pick up the pace. But again to use a sports analogy we are sort of doing this as Lance Armstrong in the mountains. And we think we got the energy and the staff and the opportunities to pick up the pace now and we can make some significant gains on our competition for doing so. Yes it will cost us some money this year but we think we will get paid back multiple times for that with increased earnings on the market share that we think we can gain from future earnings. So that's our strategy.

I appreciate it. How about -- I guess the aggressive posture then. Is it something that you anticipate kind of throughout '06? Is that your tactic here or is it -- are you going to address it more quarterly or --?

We will monitor that on an ongoing basis and certainly want to be able to be flexible and adjust as circumstances warrant. As long as we feel that a more aggressive posture is generating sizable gains that will - even if they cost us some money in the short run - will pay us back significantly for that in the future, we will stay in an aggressive mode. If we reach a point we feel it's not being productive then we would adjust strategy accordingly.

So we are going to monitor it literally on a daily basis, but my most likely scenario is we are going to be in a fairly aggressive mode throughout this year. But again we reserve the right to adjust strategy as circumstances change.

Thanks very much.

Thank you.

Peyton Green from FTN Midwest Securities.

A couple of the questions that I had have been answered but, George, maybe if you could comment. It seems like it's getting a little easier to pull people over from a talent perspective. And I think you made a little bit of a reference to it in your press release. How is -- I mean do you think you've done what you needed to do to make sure that you keep everybody in place that you need to keep in place? And also if you could comment on what the environment is like in terms of finding talented people to staff the branch network?

That's a great question and, of course, people are the critical element to the success of our Company; and one of the reasons that we have given as good a raises as we have given this year is that we certainly as you alluded to or suggested in your question wanted to retain the excellent team of bankers that we have. And, yes, we are finding some particularly good opportunities to hire people that we think provide a really valuable addition to our team and some of these are quite unexpected.

Over the last couple weeks, for example I've had calls from three different divisional presidents who came to me and said, "We have an opportunity to we think hire a lender or at least have a discussion with a lender in an office that would be a significant addition to our team there." And it's not an office that we had budgeted hiring an additional lender to but they've indicated an interest in talking and it was not something we expected.

So we do seem to be finding a few more opportunities out there now than before and since our Company is absolutely dependent upon excellent bankers to achieve our future results and growth -- if I find a dozen good lenders that weren't budgeted next week and they are all people that we believe can come in and make a positive contribution to the Company I would go hire every one of them even though they weren't in the budget and weren't in the plan. We would adjust the plan to allow for the recruitment of excellent talent and we do seem to have very good momentum in that regard.

We have been extremely pleased. For example, northwest Arkansas I've got eight high level lenders on the team in that market and when we made our plans to go up there, I was concerned about our ability to hire lenders up there. We got four lenders on the team that are all excellent lenders in Hot Springs, Garland County and the same is true. We've been able to hire some good people in Texas. Above Texarkana and Frisco. We are very encouraged about our ability recently to recruit talent.

Do you think this is stemming from others that have changed their compensation or trying to tighten down on their compensation as margin pressures run through the income statement over the last year or so? Or is it just you gained more momentum and awareness in those markets?

I'm not sure of the reasons and they probably vary from case to case, but the opportunities are there. We want to try to capitalize on them where we can.

So I mean when you look at the hiring pipeline, would you say it's better today than it was a year ago?

I would say we've had more success adding key people, yes, in the last quarter than we probably did a year ago. Yes. I would say that's an accurate statement.

Then in terms of the competition are you seeing them be more aggressive on the lending side from a pricing perspective or on the deposit side? Or is it still pretty much in line with how it's been?

I don't think we've seen much movement from our competition in recent months. I think that environment is about where it is and as we have stepped up our emphasis on deposit pricing, we've seen very little movement from most of our competitors. And as I've already mentioned I think some of our competitors - particularly some that have been extremely aggressive - have gotten themselves in a position where they don't have a lot of room on the earnings side to move. So I feel like we've got a strategic opportunity here to gain some significant share in some of our markets.

Thank you.

Thank you.

At this time there are no further questions.

All right. Thank you very much for joining our call today. We appreciate your interest. We look forward to talking with you in about 90 days. Thank you very much. Have a good day.

Ladies and gentlemen, this concludes today's conference. You may now disconnect.