Prosperity Bancshares Inc (PB) 2003 Q2 法說會逐字稿

I would like to turn the conference over to your moderator, Mr. Dan Rollins. Please go ahead, sir.

Thank you ladies and gentlemen. Welcome to Prosperity Bancshares second quarter 2003 earnings conference call. This call is also being broadcast live over the Internet at www.Prosperity BancTX.com. and will be available for replay over the next few weeks. I'm Dan Rollins, Senior Vice President of Prosperity Bancshares and here with me is David Zalman, President and Chief Executive Officer; H.E. - Tim - Timanus, Jr., Executive Vice President and Chief Operating Officer , and David Hollaway our Chief Financial Officer.

This morning David Zalman will lead off with a review of our financial results of the second quarter of 230. He will also address some of the key factors impacting our performance, along with the significant milestones of the quarter. He will be followed by David Hollaway, who will spend a few minutes reviewing some of our financial statistics. Tim Timanus will discuss our asset quality. And I will provide an update on the progress of our pending acquisitions and our recently completed acquisitions. Finally, we will open the call for questions. During the call, interested parties may participate live by following the instructions that will be provided by our call moderator, Pat. Or you may e-mail questions to investor.relations@ Prosperity BancTX.com. I assume you have all received a copy of the earnings announcement we released earlier this morning. If not, please call Kara Smart at 713-693-9308. And she will fax you a copy.

Before we begin, let me make the usual disclaimers. Certain of the matters discussed in this presentation may constitute forward-looking statement for the purposes of the federal securities laws, and, as such, may involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of Prosperity Bancshares to be materially different from future results performance or achievements expressed or implied by such forward-looking statement. Additional information concerning factors that could cause actual results to be materially different than the forward-looking statement can be found in Prosperity Bancshares filings with the Securities and Exchange Commission on form 10 K and 10 K. All forward-looking statements are expressly qualified in their entirety by these cautionary statements. Let me turn our call over to David.

Thank you, Dan. And I would like to welcome everyone joining us today for your second quarter 2003 earnings announcement. It is exciting for me to be able to share the higher benchmarks that Prosperity Bancshares has been able to achieve year after year and quarter after quarter. This quarter Fortune's Small Business Magazine has recognized Prosperity Bancshares as one of American's fastest growing companies. In addition, we have also been recognized by the American Bankers Association Banking Journal as one of bankings top 50 performers of 2003. We at Prosperity are very flattered and appreciative of the recognition and we will work hard to continue our past performance.

Prosperity Bancshares again has set new achievements, earning $6,497,000, or 34 cents per diluted share, for the quarter ending. It is an increase of $1,702,000 more than the same quarter in June 2002. Our earnings per share of 34 cents are a 17% increase over the same quarter last year. Our non-interest income increased 71%, primarily due to more fee income from more account relationships. We are facing the same challenges most banks are facing right now, that being a declining net interest margin. We continue to make our numbers without restatement simply because we have increased our assets and continued to be focused on our efficiency ratios.

We continue to see growth in loans and deposits. Our loans show an increase of $220 million compared to the same period last year, or a 46% increase. Our deposits increased $535 million over the same period last year, or a 44% increase. The increase is due to mergers and acquisitions as well as internal growth. Our same store sales, which exclude 2002 and 2003 acquisitions, show a 10% increase in deposits and a 1.8% increase in loans on an analyzed basis. Although on a link quarter basis, our internal growth rate for loan ran 5.2% annualized, which indicates an economy that is picking up some steam.

Our asset quality continues to improve. Our non-performing loans ratio decreased from the previously quarter ending March 30, 2003, and over 90 percent of the all the non-performing loans have come from acquired banks. We continue to have good success in liquidating and selling these assets. We have completed, after a long period of hard work and planning, our computer conversion from being not that long ago a totally outsourced function to one of being totally in-house.

As of last week, all of our banks are on one system, and are functioning in house. A lot of hard work went into this project, and it is characteristic of the type of ownership attitude our associates exhibit. Our motto remains simple, real bankers offering personalized service with big bank capabilities. When you call our bankers, you will not get an answering machine, but a real person that will know your name. And if you need information, you will not be directed to some call center in the Midwest. It will be answered at the banking center you deal with every day.

We continue to focus on superior asset quality, strong cost controls and a growing team of professional bankers. Strong customer service, fair pricing on products, cost controls, exceptional asset quality, and return on shareholders equity continues to be the core strength and priority of our company. As mentioned in our last quarterly call, our board of directors did adopt the expensing of options and the expense report for this this quarter was $21,000.

I'm enthusiastic looking forward. We continue to see growth in our core business. We are becoming well known and well regarded in the state to customers and other bankers. I feel we have an image of integrity and also asset quality. But we are also regarded as being open minded to change and new challenges. Our associates are the best in the world with their hard work, compassionate concern for the customer and their ownship attitude. We will continue to grow internally as well through mergers and acquisitions, simply because of the organization we have now put in place.

Looking forward, we are reiterating we believe our earnings for 2003 will fall within the range of $1.32 to $1.34 in line with the analysts' estimates. And the caveat, as always, is our projections are always based on the belief that we will experience a relatively stable economy and that we will not experience some national or international event that will cause further economic uncertainty.

I would like to share with you some breaking news we have. I'm very excited, along with Don Hayes, Chairman, and Deke Hayes, President and CEO, to be able to announce that yesterday, Prosperity Bancshares and MainBancorp Inc. announced that we have signed a definitive agreement in which MainBancorp will be merged into Prosperity. This transaction solidifies our presence in the Dallas-Fort Worth metroplex. This transaction will increase our offices in the Dallas area by four, bringing our total number to nine, and will increase our assets in the area by approximately $200 million. After the closing of this transaction, we would have approximately $400 million in assets in the Dallas/Fort Worth area. Everyone at Prosperity welcoming Don and Deke and their entire banking team, and looks forward to prosperity for both of our companies. And with that, I'm going to turn it over to David Hollaway.

Thank you, David. A few more specifics on the financials. As David had mentioned, non-interest income was upyear over year 71%. And on a linked quarter or sequential quarter basis 4.4%. The comment I would make there is, that is all related to our deposit customers. And it is across the board, and it's just all the different types of products that we offer.

On the operating expense side, on a link quarter basis, we were essentially flat. Hopefully what I'm pointing out here is, we've been able to contain expenses against the back drop of these acquisitions, and in fact, kept expenses flat while adding $161 million in assets the first six months of this year. Our return on average assets and average equity for the quarter was 1.34% and 15.88% respectively. The efficiency ratio on a linked quarter basis went from 51.2% to 50.7%.

And, again, to repeat, another comment by David, just so we're clear here, same store loan growth, which were locations prior 2002, looking at it from first quarter to second quarter, we actually saw from a flat number in the first quarter to a 1.3% increase in the second quarter, which, on an annualized basis, as David had said, would be 5.2%. That's kind of in line with what we've modeled out, year over year. On the deposit side, on a year to date basis, if we annualize same store growth, we're running at about 10%. Again, that's where we've been running over the last few quarters. Specifics on net interest income and net interest margin.

The net interest margin was 3.77% for the quarter down from 4% in the quarter. Net interest income on a lean quarter basis was essentially flat. Based on the current conditions at 33103, we had projected a more begin for the balance of the year in the low 390s. However, the significant drop in the five-and-ten-year treasury rates created a huge challenge. As an example, the 10-year went from around 4% down to a low of 3.15% about a month ago. And the challenge for us is reinvesting the cash flow from our security portfolio at those low rates obviously impacts the margin. With a rebound in these yields, we should do better.

So it is a positive when we see the 10-year close yesterday in the 420 range. We were able to overcome the reduction in the margin on a link quarter basis by increasing our average earning assets. As you can see on the period end balance sheet at 6/30, we are now just shy of $1.8 billion in earning assets. In terms of what our margin will be going forward, it is hard to predict with rates as volatile as they have been. It is definitely a positive when the five-year hits 3% or moves past it and the 10-year surpasses the 4% mark. If rates fall back to the low levels that we saw a month and a half ago, such as the 10-year dropping back to 3.25, that would obviously not help our margin. Now, for some detail on asset quality numbers, I turn it over to Tim.

Thank you, Dave. Non-performing assets at June 30, '03 totaled $2.243,000, or .32% of loans, repossessions and other real estate, compared to $3,459,000 or .53% at March 31,' 03. This represents a 35% decrease in non-performing assets for the quarter.

The June 30, '03 total was compromised of $1,185,000 in loans, $50,000 in repossessed assets, and $1,007,000 in other real estate. 93% of these non-performing assets were asset of banks acquired by Prosperity since the beginning of 2002. Of the $1,185,000 in loans, $1,014,000 represents two credits in bankruptcies with payment plans waiting approval by the courts. Of the $1,007,000 in other real estate, $976,000 represents three properties that are under contract for sale, $765,000 of which has contingencies that could negate the closing of the sale.

With regard to the generation of new loans, the average monthly production for the quarter ending June 30, '03 was $25,235,000, compared to $19,282,000 for the first quarter of 2003. This represents a 29% increase, a trend we obviously hope will continue.

Over the last year, we have taken a number of significant steps to improve our operational efficiency and effectiveness. We are now performing all of our item processing, imaging and core data processing in-house. The transfer of these functions to our direct control should result in dollar savings and improved customer service. I will now turn it over to Dan Rollins to continue our presentation.

Thanks, Tim. I just wanted to spend a couple of minutes talking about where we are on the acquisition front. As you all know, in the last quarter, we did close on our two earlier acquisitions this year. In May we closed on the acquisition of Abrams Center National Bank, that was Ed Henry and his team. Those folks are in Dallas today doing a great job. They are on our computer system and fully involved in our organization today. And then on June 1, we closed on the Bank Dallas acquisition, Mark Lovorn and his team. Mark Lovorn is our chairman in Dallas and will be leading us up there. His team is fully on to our computer system, fully involved in our team and is on the ground doing well for us in Dallas. And all of that plays in well to yesterday's announcement of our acquisition of MainBancorp and their bank subsidiary, MainBanc in Dallas. Their four locations, along with the five we already have, their team of bankers and our team up there, Dallas is, we believe, going to prove to be a great market for us. At this time, I'd be happy to turn the call over to questions. Pat?

The lines are now open for questions. You can press star one if you wish to register for a question. Press pound to withdraw. Press pound one if you wish to register for a question at this time. I'll take the first question from Jennifer Denbeth at Sun Trust Robinson.

Good morning. I'm just recalling that you did a Royal checking promotion during the second quarter. I'm wondering if you can give us some color as to how that was added to the accounts this quarter.

Sure. Jennifer - Dan - that's a good question. I can tell you it was very successful. It added some 2,000 accounts into that program. Year over year, June 30 last year, we had 14,700 Royal accounts. June ending this year we had 20,200 accounts. That a 37% increase in that product base. And that certainly impacts the income that comes from there.

Same thing with the debit card side. Our debit card penetration into our market is even better than that. Our debit cards outstanding went from 14,300 a year ago to 28,100 this year. That's a 96% increase in debit cards out there for the year.

Thanks.

Thank you.

Our next question comes from Scott Allanus from Fan Company. Please go ahead, sir.

Good morning, gentlemen. Congratulations on your pending transaction.

Thank you, Scott.

Couple of questions, first, what was goodwill at quarter end?

In other words, you're looking at the intangible line item?

Yes, sir. $4.5 million is quarter deposit intangibles.

Looking at the asset number?

Yes. Total good will.

$About 82 million. So, take $4 million off of that and that will give you the good will piece of it.

With regard to MainBanc, could you talk a little bit about how you're going to go about improving their efficiency ratio? I know you all have done this 10, 15 times before.

Can you talk about that? Anything on the cost side that may be unique to this bank that may make improving its profitability easier or more difficult?

I don't see anything unique to this organization than any of the others, Scott. As you know, I think we've got a track record of being able to acquire and fold organizations into our organization. They have a complete full-service bank. They do a good job of taking care of their customers. We'll want to integrate those folks into our organization. And quite frankly we would begin working on that process and put an integration team together within the next couple of weeks.

I don't think there is anything we can identify on the front side that would say here are one item or two items that would make a big difference. I just think it goes back to the way we've done for all of our acquisitions in the past.

And secondly, as it relates to the loan volume, it's good to see things pick up sequentially. Could you talk a little bit about what your pipeline looks like for the rest of the year, and if you more or less saw your pipeline build throughout the quarter?

We're all pointing at each other here. I've got our pipeline report now. And the pipeline is strong, Scott. I think we're seeing that, you know, certainly we have more lenders on the ground today than we did a year ago. You would expect that to increase what is coming through the pipeline. If rates will not fall any further, that can eliminate some of the refies. We're still spending with refi activity coming out of the existing portfolio. If that slows down at all, we should see some of this stick. The pipeline looks good.

Thanks, Dan.

Our next question comes from the site of Dean Slatt from KBW -- please go ahead, sir.

Hey, two quick questions. One on credit quality, mainly net chargeoffs, and one on capital. On credit quality, the net chargeoffs for all of this is pretty high. Just kind of wondering, looking forward with the acquisitions that closed earlier this year and even with this MainBanc acquisition, what you see for the net chargeoffs over the next several quarters? Also, with this quarter, was this mostly due to the acquisitions or was there anything from the internal bug that popped up? And then on the capital side, I was just wondering, can you make -- get us comfortable with the tangible common equity ratio and where you see that going from here.

This is Tim. With regard to the net chargeoffs, virtually all of what you see for the quarter resulted from acquisitions that we made in 2002. I think that we're on the downside of that cleanup process, as I indicated in my comments earlier. The nonperforming decreased 3-5percent for the quarter, that I believe is indicative of the direction we're headed. As with any business, we can be surprised obviously. But based on what we see right now, we do think we're on the downside of it once again.

With regard to MainBanc, for example, the agreement that we had in place calls for the assets that are not up to our standards being moved out of the bank prior to closing. So we anticipate that if our due diligence holds true, that we will not have significant issues with that bank in terms of asset cleanup. So once again, we think there is light at the end of the tunnel, And we don't see deterioration in our core assets. Once again, virtually all of this has resulted from the banks we have added over the last year or two, year and a half. And I'll turn it over to Dave.

Let me comment if I can, Thane. David Zalman. Everything we're charging off, again, it has all been from the acquired banks. And there is really not anything in the chargeoffs that we didn't realize or recognize from our due diligence. In addition to that, even at year end last year, we put in an extra $500,000 into the reserve account at the very last quarter. And so none of this is unexpected. It was priced into the acquisitions that we did. And now it even -- going forward, you hate to make a statement. You don't know what goes forward. But even the ORE we've taken back, we've charged it down significantly. And when we sell it, we've seen some good recoveries, I think, already. This year we probably have over $400 something thousand in recoveries. Again, there's no guarantee that you're going to have recovery, but again, we take a pretty aggressive stance on what we do and charge it down pretty dramatically so we can get rid of it and get out of things quickly.

My point being, none of this is surprising. If you ask going forward, I think as long as we acquire banks, you're going to see probably -- I mean, this amount of chargeoff is off of the chart for us, if you look at us historically. So as we go forward, you'll probably still see continued chargeoffs if we acquire banks. If everything stopped, no, it would slow dramatically and get back to where we're normally at.

Okay.

Okay. Do you want me to hit tangible?

Tim talked about MainBanc. I was going to talk back again there. Tim's right. Our agreement does call for them to exit out of all of their watch list credits. And so we should see clean asset quality coming forward in that transaction.

There is always a pop-up, no matter how careful you are.

And jumping in on the tangible ratio question, as you can see, we're running about 445 at quarter end. We addressed that. Historically when you go back and look at it, we've really run thin on a tangible ratio. It is run of the -- one of the results of all of the acquisitions.

And looking forward, that's what is good about this one that we announced yesterday, it's partially stocks, so that helps. When stocks are involved, it repairs the tangible ratio. Going forward, we looked at our earnings going forward to help compare that ratio. We will continue to run it.

You and Keith have been following us since we actually did our IPO. You even know the numbers before we started. I think when we started buying failed banks in the '80s our tangible ratio probably at one time fell as low as 3%. So it is nothing new to us. Our tangible ratio, because of our acquisitive manners, have run very close. I think right now with this acquisition, we're probably running 5% tangible. If you add our trust preferred back in, you probably see 6, 7%.

6.5.

I think that is going to be reflective of our company as we grow and we do that. The way we hit the return on that, and the way we have our earnings and increase our growth has a lot to do with that capital ratio. It is a two-way sort, I guess. Hopefully, I would say that if our asset quality was a lot different, if we had -- if we ran our bank at 1%, non-performing loans and assets, it would be another issue. We don't. So historically, it looks good.

And our other options continue to be, instead of paying cash on transactions, we have the option of doing cash. And we also have the option of issuing additional trust preferred. Our numbers indicate if the laws don't change and all of that, we can even issue another $25 million in trust preferred. Enough said, I guess.

That's a good explanation. Thanks. One final thing, with the deal being announced, sort of a general question, since you are up in Dallas and looking around, I keep hearing of other banks want to be in the market. You all seem to get more of the acquisitions. I mean, is there competition up there? Are there more buyers out there? What are you all seeing?

I'll answer that. Yeah, as always, it is very, very aggressive. On all deals, there are a lot of buyers out there. I think we get the deals -- you know, there is really -- there's a lot more to it than just a cash transaction. And a lot of times people want to see a history. If you've been successful in your transactions, I think that makes a big difference. I think the people that join us really like the ability to run their own show, make local decisions and be real bankers. They don't have a call center in the midwest, if a customer has a problem, they get to take care of it there at their location. And I think bankers like that.

Great. Thanks.

Thanks.

Again, to register for a question, please press star one at this time. Our next question comes from Jeff Allen of Silverquest Asset management.

Good morning. A quick question. I gather that you guys believe that the new in-house technology capabilities are a pretty important deal for you. And just wondered if you could maybe quantify somehow the benefits you expect to get from that, perhaps in terms of the efficiency ratio?

Jeff, this is Dan. The in-house computer system is very important to our operations for several reasons. Cost is certainly one of them.

But more important than that, we need to be in control of what we're providing to our customers. In an outsourced environment like we were in, we couldn't control the product, we couldn't control the quality, we couldn't control the timing. We just didn't have control. In a $2 billion dollar bank, we need to be in control of what we've got going. Our team that has been working for almost a full year to bring this in house, we have today, full control of everything we're doing. And the efficiencies that will come from that, I think we'll start to see those fall in further over the next quarter or two.

More important that that, the ability we have to mine through the data and use our system to gain further sales tools for us is even more important than that.

This is Dave Hollaway. The other thing, it allows us efficiency going forward as we bring new partners into the fold. The incremental cost of adding new partners goes away. When you're in a service bureau, they are charging you for every account and every item you run through. When you're in-house, those economies are scale. You don't see a jump when you put a new partner in place.

The system we put in place is fully scaleable. We can grow this thing a long way on what we've got in place today.

Are there any specific targets that you could share with us or is it just sort of good stuff? In terms of the efficiency ratio or what have you.

I think, from an efficiency standpoint, we continue to look for ways to do that. We said a long time ago, we expected the overall computer changes that we've made starting last October to save $500,000 a year or more once they are fully in place. I think we'll see that happen.

Okay.

Dave, did you want to comment? If you look like now, Jeff and Dave, Dave Hollaway was talking about it earlier, we grew by $160 million this quarter. And I guess your expenses -- year-to-date expenses were less than they are right now. What you're doing, you're already seeing some of those efficiencies going into place. It is probably on the bottom line. It is not as dramatic simply because of the net interest margin.

As I commented earlier, one of the reasons we're able to hit the earnings has to do with the efficiencies we have in place.

Going forward, I'll be more direct with you, yes. We're going to have some cost savings right now. We're probably another five or six hundred dollars minimum from our existing saving that we're paying right now. As Dave mentioned earlier, going forward it is going to be a big help. When we were with Jack Henry, we had to pay for every account. And now it is very -- the cost is not so dramatic when you take somebody in and get a great deal of cost savings. So future mergers, it is dramatically in that sense.

This is Dave Hollaway again. I heard the other part of your question. Yes, I think where we're head the, are we going to be able to drive the efficiency ratio down in the future. I think that's true. We're a little over 50. I don't want to make any promises, because if we're being really efficient in certain areas, there may be opportunities that we want to save some of those dollars for advertising or whatever it would be. So it is kind of a moving target really.

Okay. That's very helpful. Thank you.

Thank you.

Our next question comes from John Arstrom of RBC Capital Markets. Please go ahead.

Good morning, guys. Couple of quick questions on the securities portfolio. Any gains and other income? Or is that straight other noninterest income?

No, John the -- our bank has never taken a position of a lot of trading. And right now we probably could -- I would have to go back and look at the gain in our portfolio. It is $23 million. So if we wanted to, we could. But the direct answer is no, none of the earnings is related to security gains.

The other question, I think last quarter you commented on the duration of the portfolio. I wonder if you could talk about how it is structured in the duration.

Right now, Dave probably has better numbers than I do.

The duration is two and a half years right now.

The duration is about two and a half years. The question I would add -- that's as it is today. Somebody has to ask the question, with interest rates being as low as they are, what does that extend to in a 300 basis points increase?

Right now we're positively gapped, meaning -- I don't know if I necessarily buy off on it as much. We have a 5% positive gap. Meaning if interest rates go up, we definitely show a lot greater in earnings. I think our duration would go up as well. As interest rates go up -- I don't have an exact number.

I think that's going to go up to three years or maybe a little over three years, if interest rates go up dramatically. And the gain we have in the portfolio would turn into a loss in the portfolio. But the positive side of that is, earnings would be -- would look a whole lot better, even though the valuation changes over a few years actually. I don't know if that's clear or not.

That's clear. That's exactly what I was getting at. Thank you.

Our next question comes from Joe Stevens of Staple Nicholas.

Hi, guys. First of all, nice quarter. Most of my questions have been answered. Let me finish up with two. If I look at the loan growth, when you pull out the acquisitions, it looks like loan growth was about 5% year over year. Is that sort of hitting your expectations? And sort of talk about what you expect for future internal loan growth, that's number one.

And then number two then, is a little bit about your margin, the last half of that year with the recent action.

Let me try the loan question. I think 5% is an acceptable number to us. I think we said all along we would like to see better growth. Everybody wants more. I think with where we are today in the economy and the rate structure that we are, I think we're pleased with the numbers we're turning out. Going forward, I think we've said we'd like to see 5 to 6% loan growth and want our team to continue to push toward that and hopefully do better. Your question on margin -- Dave, do you want to take that?

Margin. In regards to the Fed's recent action and the impact on the last six months of this year. Obviously there is some impact to us. The greater challenge is, the five-year and ten-year treasury have more effect on us because of our portfolio. When those things drop, again, like the ten-year being around 4 percent, it drops 80 basis points, that has a huge effect on us simply because of the cash flow coming off that port folio. Forty, fifty million dollars a month. If it drops to 310 you've got to reinvest it at that point. That can't be anything but negative in our world.

A direct answer is, if the interest rates stay where they are at right now, it is really going to give us a lot -- it gives me a more positive attitude for next year with regard to earnings. With the five-year, when it was hovering around 2.2-2.3%, the earnings is going to be extremely difficult or hard to make. I think if interest rates stay where they are at, it not only will help us, it will help everybody quite frankly. That's my opinion.

And with the loan question, Dan answered it, but I have to tell you, normally I don't get too excited. I try not to overdue anything. The bottom line, some of my comments you probably heard today, this quarter I feel a lot better than I did in the first quarter of the year. The first quarter, when we put this conference together, this talk, we almost had to look for positive things. The bottom line, in some of my comments you probably heard today, this quarter I feel a lot better than I did in the first quarter of the year. The economy looked weaker. As we put this comment together today, yesterday it was a whole lot easier. You could see loan growth, deposit growth. You could see an economy getting somewhat stronger. So I'm pretty excited going forward quite frankly.

Thanks, guys.

Thank you.

Again, to register for a question, please press star one. Our next question comes from Lolita Child of MainBanc. Please go ahead.

Good morning. With your previous acquisitions and integrations as well as your recent acquisition of MainBanc, how have your integrations affected the employment set of those working at the various branches?

That's an easy question. We don't come into any acquisition with a preconceived plan. We look at every position, we look at each person, and we try to integrate the entire staff into our organization.

Historically, if you look at our acquisitions, look at our prior acquisitions in the Dallas market, we have not let anybody go or terminated anybody. What you will see, there is a change. What we try to do is where people are actually related, a lot of times, to the back room operations, sometimes those are changed where some of those functions are more centralized. Not all of them. But sometimes they are changed.

And we really focus on the sales part of the team. Everybody that is in sales, we keep in those positions. But positions that have been replaced or transferred somewhere else, what we try to do is put the people into a different position. And it has worked real well. We have not let one person go in any of the acquisitions that we've had in Dallas so far.

And the process is -- takes six months or a year before all the process goes all the way through.

I will say, though, it's a retraining process for some associates.

Fantastic. Thank you very much.

Thank you.

We had no further questions at this time, sirs.

Okay. Thank you, everybody for participating. I look forward to talking to you again soon. Thank you very much.