Simmons First National Corp (SFNC) 2016 Q4 法說會逐字稿

Good day, ladies and gentlemen. Welcome to the Simmons First National Corporation fourth-quarter earnings call and webcast.

(Operator Instructions)

As a reminder, today's conference call is being recorded. I would now like to turn the conference over to Burt Hicks, Investor Relations Officer. Please go ahead.

Good morning. My name is Burt Hicks and I serve as Investor Relations Officer of Simmons First National Corporation. We welcome you to our fourth-quarter earnings teleconference and webcast. Joining me today are George Makris, Chairman and Chief Executive Officer; Bob Fehlman, Chief Financial Officer; Marty Casteel, President and CEO, Simmons Bank, our wholly owned bank subsidiary; Barry Ledbetter, Chief Banking Officer; and David Garner, Chief Accounting Officer.

The purpose of this call is to discuss the information and data provided by the Company in our quarterly earnings release issued yesterday and to discuss our Company's outlook for the future. We will begin our discussion with prepared comments, followed by a question-and-answer session.

We've invited institutional investors and analysts from the equity firms that provide research on our Company to participate in the Q&A session. All other guests in this conference call are in a listen-only mode. A transcript of today's call, including our prepared remarks and the Q&A session, will be posted on our website, Simmonsbank.com, under the Investor Relations tab.

During today's call and in other disclosures and presentations made by the Company, we may make certain forward-looking statements about our plans, goals, expectations, estimates and outlook. I remind you of the special cautionary notice regarding forward-looking statements and that certain matters discussed during this call may constitute forward-looking statements and may involve certain known and unknown risk, uncertainties and other factors which may cause actual results to be materially different than our current expectations, performance or estimates. For a list of certain risks associated with our business, please refer to the forward-looking information section of our earnings press release and the description of certain risk factors contained in our most recent annual report on form 10-K, all as filed with the SEC.

Forward-looking statements made by the Company and its Management are based on estimates, projections, beliefs and assumptions of Management at the time of such statements and are not guarantees of future performance. The Company undertakes no obligation to update or revise any forward-looking statements based on the occurrence of future events, the receipt of new information, or otherwise.

Lastly, in this presentation, we will discuss certain GAAP and non-GAAP financial metrics. Please note that the reconciliation of those metrics is contained in our current report filed with the US Securities and Exchange Commission yesterday on form 8-K. Any references to non-GAAP core financial measures are intended to provide meaningful insight. These non-GAAP disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.

With that said, I'll now turn the call over to George Makris.

Thanks, Burt. Welcome to our fourth-quarter earnings conference call. In our press release issued yesterday, we reported net income of $27 million for the fourth quarter of 2016, an increase of $3.2 million, or 13.4%, compared to the same quarter last year. Diluted earnings per share were $0.85, an increase of $0.07, or 9%.

Included in the fourth-quarter earnings were $1.8 million in net after-tax, merger-related and branch right-sizing costs. Excluding the impact of these items, the Company's core earnings were $28.8 million for the fourth quarter of 2016, an increase of $2.8 million, or 11%, compared to the same period last year. Diluted core earnings per share were $0.91, an increase of a $0.05, or 5.8%.

We continued to be very pleased with our operating performance. For the quarter, our efficiency ratio was 55.5%, return on assets 1.29%, return on equity 9.3%, and return on tangible common equity 14.7%.

Year to date, we reported net income of $96.8 million, or $3.13 diluted earnings per share. This included $4.6 million in net after-tax, merger-related and branch right-sizing costs. Excluding the impact of these items, the Company's core earnings were $101.4 million, or $3.28 diluted core earnings per share.

Our loan balance at the end of the fourth quarter was $5.6 billion. Total loans increased by $231 million during the quarter, including a reduction in agricultural production loans of $53 million. The legacy portfolio grew by $384 million, of which approximately $61 million migrated from acquired legacy and $91 million of acquired loans paid off during the quarter. Total loans increased $714 million during 2016.

We remain optimistic about future loan growth as our pipeline, which we define as loans approved and ready to close, has increased from $374 million as reported at the end of the third quarter to $426 million at the end of the fourth quarter. The pipeline includes several construction loans with funding periods longer than 90 days. We expect to fund approximately two-thirds of the pipeline loans in the next 90 days. All regions in the Company are experiencing good loan growth.

The Company's net interest income for the fourth quarter of 2016 was $74.3 million, a 9.2% increase from the third quarter. Accretion income from acquired loans during the quarter was $6.6 million, a decrease of $4.5 million from the same quarter last year. Based on our cash flow projections, we expect total accretion for 2017 to be approximately $14 million compared to $24.3 million in 2016.

Our net interest margin for the quarter was 4.12%, which was down from 4.53% in the same period last year. The decline in net interest margin was significantly impacted by the decrease in accretion income. The Company's core net interest margin, which excludes the accretion, was 3.76% for the fourth quarter of 2016 compared to 3.87% in the same quarter of 2015. Because of the competitive rate environment and our loan mix, we expect our margin will remain in the 3.7%, 3.8% range.

Our non-interest income for the quarter was $36.3 million. We had nice increases in mortgage lending, trust income, and debit and credit card income. Non-interest expense for the quarter was $66.9 million, while core non-interest expense for the quarter was $63.9 million.

At December 31, 2016, the allowance for loan losses for legacy loans was $36.3 million, with an additional $1 million allowance for acquired loans. The Company's allowance for loan losses on legacy loans was 0.84% of total loans. The total discount credit mark is $35.5 million for a total of $72.7 million of coverage. This equates to total coverage ratio of 1.28% of gross loans.

During the fourth quarter, our annualized net charge-offs, including credit card charge-offs, to total loans were 20 basis points. Excluding credit card charge-offs, our annualized net charge-offs to total loans were 14 basis points. Our asset quality continues to be very good and we continue to make good progress managing the problem assets remaining from the FDIC and metropolitan portfolio.

During the quarter consolidated non-performing loans to total loans decreased from 0.95% to 0.91%. Non-performing assets, total assets, decreased from 0.83% to 0.79%. During the first quarter of 2017, we will explore options to further reduce problem loans.

Our capital position remains very strong. At quarter end, common stock holders equity was $1.2 billion. Our book value per share was $36.80, an increase of 6.5% from the same period last year, while our tangible book value per share was $23.97, an increase of 9.1% from the same period last year.

On October 21, we completed the merger of Citizens Bank into Simmons Bank. The period from the execution of the definitive agreement until total systems conversion was less than five months. We are very proud of the ability of our team to execute on the integration of our acquisitions.

On November 17, we announced the acquisition of Hardeman County Investment Company, Inc., headquartered in Jackson, Tennessee. We expected to complete the merger during the first quarter of 2017. On December 14, we announced the acquisition of Southwest Bancorp, Inc., of Stillwater, Oklahoma and we anticipated completing the merger during the third quarter of 2017.

Together, these acquisitions will increase our total assets by approximately $3 billion and allow us to move into the attractive Oklahoma, Texas and Colorado markets while expanding our market share in Tennessee and Kansas. However, on the final day of the comment period, related to our Federal Reserve merger application for Hardeman, we received a comment from the same individual who provided comments on our applications related to the acquisition of First State and Liberty Banks. Our application for the Hardeman acquisition has been removed from the St. Louis Federal Reserve district and now will be processed in Washington. We have submitted a response to the comment, but have no indication of the timeline for consideration from the Fed.

Although the final orders from the Federal Reserve in Washington related to the earlier comments determined the comments to be without merit, the orders were not delivered until six months after the comment was filed. We do know, however, that a delay in the merger process interjects substantial transaction risk, and the primary party at risk is the institution to be acquired. We expect with the cooperation of the management of both parties, we will again successfully manage this additional risk.

We are hopeful for a quick resolution to the comment that will get us back on track. Now we expect the closing of the Hardeman acquisition no earlier than the second quarter, and it's too early to determine the effect on other applications which today have not been filed.

On January 17, 2017, we merged our finance company into Simmons Bank. We have ceased making new loans in that group. Our loan balance when we merged was approximately $50 million.

The customer base we served is in need of services we provided, as their alternatives are, for example, pay day lenders in less regulated markets; however, the regulatory scrutiny and risk to our Company associated with this portfolio was disproportion at to its relative size. We hope to incorporate some of the lending programs previously in the finance Company into our consumer lending product portfolio.

This concludes our prepared comments. We will now open the phone line for questions from our research analysts and institutional investors. At this time, I'll ask the operator to come back on the line and once again explain how to queue in for questions.

(Operator Instructions)

Our first question comes from Matt Olney of Stephens.

Hey, thanks. Good morning, guys.

Hi, Matt.

I want to start on loan growth. Obviously a pretty impressive quarter in the fourth quarter. Anything else you can tell us about the details behind that, whether it's by market, by loan type? I know you've hired some new lenders over the last several quarters. Can you talk about how much of the growth was from these new lenders versus the legacy lenders? Thanks.

Matt, I'm going to get Barry Ledbetter deal with that question. Thanks for your comments.

Again, we've had a good loan growth. It's really from all of the markets. It was in Central Arkansas, Northwest Arkansas, quite a bit of growth still in St. Louis and in Nashville, as well. Again, we continued to approve and close a lot of loans in Kansas City, we just haven't funded all those loans yet. Our loan growth has really been spread throughout our footprint.

How do I think about loan growth in 2017 as far as the momentum? Will some of this kind of carry forward into next year? By the sound of the pipeline, my guess would be yes, but any comments on that?

We expect -- our pipeline, as you heard, has increased from $374 million to $426 million. As we look out into different regions, it's really spread throughout all of the regions. Again, we're going to continue to have good loan growth in Northwest Arkansas, Northeast Arkansas, Central Arkansas and even into Pine Bluff, too, as well as the AGRI loans that I hope to start funding at the end of the first quarter. Continue to have a good pipeline in Nashville, in middle Tennessee and really throughout Kansas and Missouri and Southwest Missouri, Springfield, St. Louis, and Kansas City. Loan growth looks very positive in those markets at this time.

Matt, this is George. I would tell you that our expectations are that by the end of the year, we'll have net loan growth of over $500 million. We don't know exactly which quarter that's going to come in. We've already mentioned that we've got several large construction loans on the books, and as those get funded they will all be spread out throughout the year.

I think our lenders are starting to understand the benefits of a larger balance sheet. We continue to make community-based loans, but we're also getting to take a look at some loans that we never really got to look at before we are the size that we are today. I think that we're starting to reap the benefits of being a larger company.

Matt, that obviously would be excluding any future acquisitions.

Sure, understood. Thanks for that. As far as the core margin outlook, I believe, George, you said 3.70% to 3.80%, which I believe is a little bit lower than we talked about back in October. Can you just talk about the competitive pressures that have changed over the last few months? Where are you seeing that?

Well, primarily in some larger CRE loans we're going to take a look at. Those are really competitive in the marketplace, so it takes a lot of small loans at a higher rate to make up for one larger loan at a lower rate. The other thing that complicates it a little bit, Matt, obviously is seasonality of two portfolios. Our credit card portfolio, which has a higher yield will play down during the first quarter. Toward the end of the first quarter our AGRI loans, which have a little higher rate, will start to fund. There's going to be a little noise. As one pays off, another starts to build up and we continue to get that pressure of those larger loans at lower rates.

Matt, also remember our first quarter, as George said, the ag loans will continue to pay down through the quarter and in the second quarter is when the next wave will fund and credit card will pay down, so we are going to have a much lower margin in the first quarter than we will the balance of the year.

Got it. Understood. Okay, I'll hop back in the queue. Thanks guys.

Thank you.

Thank you. Our next question comes from David Feaster of Raymond James.

Hey, good afternoon, guys.

Hi, David.

Is there any concern that this individual whose commented on now three-year deals might do so on the Southwest Bank deal and potentially delay that?

Well, that's certainly completely out of our control. The frustrating part, David, is that the process just comes to a screeching halt any time there's a comment, whether it's from that individual or someone else. He has history of making comments on multiple deals, so we're not singled out. We don't feel like we're being abused by him. He's abusing the whole system, quite honestly, in my opinion.

We're hopeful that there will be some process change that will allow quicker resolution to these comments. Quite honestly, there's nothing that he brings that's not examined on a regular basis in due course through our regulatory exams. The problem right now with the process is that in the interim between exams, it just stops the application process. The issue for us in this particular deal is that we have delayed getting in front of our soon to be new associates in Tennessee with job offers. We have also had to postpone date certains for systems integration. Both of those dates are on hold right now until we get some indication of the application approval.

We're continuing on with filing this, for having shareholder meetings, being prepared to close the deal, but until we get the regulatory approval, our hands are tied. It's not necessarily that we have that much of a concern with the comment. It's the process of administering the resolution to the comment that slows down the whole system right now.

Got you. Could you give us your thoughts on non-interest expenses going forward and maybe walk us through some of the puts and takes of how much of the CNB expense are already -- or in your expense saves are already in your run rate and seasonality from FICA and payroll taxes that might impact the first quarter? Whatever color you can provide.

We estimate the FICA impact in the first quarter is about $1 million. We have a run rate next year in our budget of roughly about $64 million. You'll have some quarters a little higher, some a little lower, but that's our target level for next year. That's fully inclusive of CNB. No other acquisitions in those numbers. I would say the majority of the cost saves were in Q4 or will be fully in Q1, but we realize most of those in Q4. Again, $64 million or so on the cost run going forward.

Okay. Similar, does your outlook for the coordinate include the deals or is that just included in CNB?

Just current.

Okay. Last one for me. Could we talk a little bit about fee income and maybe the puts and takes there? Mortgage was obviously very strong, but what are your general thoughts on fee income in 2017?

I'll let Marty talk specifically about mortgage and then we'll talk a little bit about maybe trust and investment and other forms of fee income.

David, our mortgage volume in 2016, like everyone's, is very strong, but 35% of that was refinanced. We fully expect the refinance volume for 2017, based on where interest rates are today and where they are expected to move, will deter refinances, so we would expect volume to be impacted. We will try to manage that impact through our managing margins, but we do fully expect production volume to be off in 2017.

David, I'll talk a little bit about the opportunity for other fee income. I think we've mentioned several times that we're really good in the trust business, but we don't have it fully integrated across all our markets. That's the real priority for us. We expect to make good headway during 2017 in rolling out some of those services in markets where it's previously not been offered. We would expect a continual steady rise in our fee income exclusive of the seasonality in rate-driven environments like our mortgage income. We'll continue to see it increase through about 2017.

As a reminder, we did close down our institutional investment group this year and you'll see about $0.5 million a quarter in revenue that will be lower. But the bottom-line impact is basically breakeven.

Okay. Got it. Thanks, guys.

Thank you.

Thank you. Our next question comes from Brady Gailey of KBW.

Hey, guys.

Hi, Brady.

The guidance for yield accretion of $14 million this year for 2017, is that just the scheduled accretion or does that also include some of the more one-time accretable yield benefits like a pay off of an acquired loan?

Yes, Brady this is Bob. It is our scheduled on our current banks that we have, so no future banks and it doesn't include any special one-time when loans pay off. That's our scheduled amount for next year.

Now realistically, you'll have some pay-offs so that number could come in higher.

It could. I don't -- it's less likely we'll have as much income as we have in the last two years from the special pay-offs. Some of those non-accretable yield loans have paid off when we've taken those to income, so we'll have less of that but yes, in reality, it will be higher than the $14 million scheduled.

It's hard to tell. As you've seen this year, I think we gave guidance that we would be at about $23 million this year. If you looked at the first quarter, it looked like we were going to be significantly above that number. As we move through the year, it looked like we were going to be below it and we ended up the year right at $23 million. It's very lumpy as you go through the year, but the $14 million is scheduled right now.

Okay. I think last earnings call we talked about forward a provision run rate of around $3 million to $4 million a quarter and a core efficiency ratio of around 55% in 2017. Do those numbers still feel right?

Yes, both of those -- our target level on the efficiency ratio is 55% going forward. Even with acquisitions we believe that number will be at that level. Our provision going next year in the budget is right at $1.1 million or so a month, so you're right on it, $3 million to $3.3 million per quarter. That's our target level. Now, loan growth can change those numbers. We're hopeful that loan growth is higher than that and requires a bit more in there.

Brady, you know that's something we struggle with all the time. I know that what we look at and compare our allowance to the market is a percentage of loans. We unfortunately can't look at it like that anymore.

We actually have to allocate per loan based on the credit quality and as, once again, as our loans migrate from acquired to legacy, those are only past loans that are moving. They get the lowest allocation in our formula assigned to them. What you see in the additional allowance are those allocations based on loan growth period. As you can see, when you take our growth in the allowance and the growth in the loan portfolio, they are at a lower level than 84 basis points. I would expect that to continue along that trend.

Okay. That's helpful. The tax rate, I think this quarter and last quarter it was 31.5% is that -- it seems a little low compared to where you all had been running historically, but how do you look at the tax rate going forward?

Well, we shored up the taxes as we got to the end of the year, so it's a 32.5% for the year, is what our full rate was. We would expect going into next year it to be closer to 33% as we expect higher income levels. The higher income levels will be at a fully taxable amount. If you look at this last year it's a pro-rata amount of the benefit we get from the municipal income.

On the tax topic, post Trump's win people are talking about a lower corporate tax rate. Have you all looked at any sort of sensitivity that you might have to a reduction in the corporate tax rate?

Well, you hear in the market a lot of people are giving guidance on 5%. If every 5%, this is the impact, I think that's a pretty easy calculation. You take the 5% of the pretax income and can come up with that number. There's also a question on what's the impact on deferred tax asset and for us, there's roughly, for about every 5% there's about a $4 million deferred tax asset we would have to write down and basically it's about less than a year recovery earn back on that number.

Okay.

We're hopeful for that but we're not booking any dollars yet.

Finally for me, just on the holdup with the M&A, so he has filed on previous deals with you all before, right?

That's correct.

Okay. With those two deals that he filed on before, how much did those delay the process? Was it just a month or two?

Yes, bottom line, it delayed it about two months. Even though the period for the Fed to actually rule on the comment was six months, we went ahead and had shareholder meetings and got approval of shareholders and we were ready to close as soon as we got approval from the Feds. The actual delay was only a couple of months in what our original timeline was. The First South Bank deal could have similar delay, because we're going to move right on through the process with shareholder approval and we'll be ready to close as soon as we get approval from the Federal Reserve.

That's all I had. Good luck with getting the approvals.

Yes, thanks.

Thank you.

(Operator Instructions)

Our next question comes from Stephen Scouten of Sandler O'Neill.

Hi, Stephen.

A question for you maybe just following up on Brady's last question with the delays. Is this guy the one that's been out there doing some of these CRA comment letters that's delayed several deals we've seen in the marketplace? Secondarily, is it normal for you to not have filed the OKSB application yet or has this already delayed even your filing of that application?

No, that's very normal with the OKSB application. In fact, if you recall, we didn't expect to close that deal until the third quarter of this year. We really don't know if it's going to delay the OKSB transaction at all. But the fact we haven't filed the application yet is normal course. The guy that filed the comments, Matthew Lee, okay? He's well known in the banking industry.

Perfect, yes.

You just need to know who -- what we're dealing with.

Yes, I've had several banks where he has delayed things, so that's not surprising. I appreciate that. Going back to the tax rate, I know you said it's pretty simple math on a 5% decline, but just so I'm clear, say the corporate tax rates went down 15%. Are you saying you'd realize a 15% reduction in your effective rate or would it be safe to assume that you would lose some of that, just given municipals and state taxes and other effects there?

Yes, you would lose some on your municipals but it's effectively if you went down to -- if we're at an effective rate of 33% next year and it goes down 15%, it's going to be 15% of 35% that would go down.

Okay, that makes sense as a percentage of it. Okay.

That's right.

Great. George, you mentioned that you're still seeing really strong competition, especially on the larger CRE deals. Can you tell us kind of what new loan yields are coming on at and if you've seen any help so far from the December hike?

We really haven't seen much help from the December hike yet. Many of our floating rate loans are consumer-based, so they require a certain notice before we are able to move those. We expect to see that toward the end of January to kick in. I'm going to let Barry talk about the yields we're seeing on more larger competitive loans.

Well, unfortunately, it doesn't appear that the market is adjusted well in the larger loans. We're still seeing competitive pressure on the large loans that we seen in the past. I think that it's like all banks are looking for high-quality, low-risk loans and so far we haven't seen opportunities to increase those rates a lot of those larger loans.

Generally, on average, Barry, you say prime for somewhere around --

Somewhere around prime and a lot of these are construction loans and they will have 18-month construction loan and then they will term out three to four years. So a lot of those are tied to prime or maybe when they turn them out they'll be 50 basis points above prime.

Okay. Are you putting floors on many of those loans right now, or is it usually just a prime floater?

Well, generally, again we're talking about competitive pressures there, we tried to always put a floor in there but I'd say a lot of loans we are able to have a floor but then it requires us to have that ceiling as well. It's probably mixed as far as the opportunities we have to put floors on those loans.

Okay. That makes sense. Maybe one last question for me. One of the attractive things about you all's balance sheet today is in your loan-to-deposit ratio still only 82%. So curious as to what you think the path for that metric will be and how you might lever up your balance sheet towards the loan book, especially if you are going to add on maybe $500 million of growth this year. Just want to hear your thoughts around that and what you think the opportunity is.

Well, we certainly strive for 90% loan-to-deposit ratio. Based on your cash flows of our investment portfolios, we plan to fund that growth primarily through those cash flows. So we have established an ALCO policy that will allow us to fund that $500 million of loans this year.

I don't know that we'll get to 90% this year. It may take us two years to get there, but based on the trajectory of the last two months pipelines, we think that within two years we'll be at 90% loan deposit. That's always going to depend on our internal need for liquidity, so to the extent that we don't do anything to attract additional deposits, I think you could expect that 90% within the next two years.

Keep in mind, we've got, as George, said $1.6 billion in our security portfolio. We don't have a level that we're trying to maintain at that point. We have that much in there right now to be fully invested on our liquidity side, but we'll allow that number to go down to a manageable level to keep us at the 90% or so.

Okay, fantastic. Thanks, guys, on the -- and congratulations on the strong growth this quarter. Impressive.

Thank you.

Thank you. Our next question comes from Peyton Green of Piper Jaffrey.

Yes, good morning. Couple questions. One, I was wondering when your last CRA exam was.

2012.

Maybe for Bob, what would you expect the 25 basis point move to do? Maybe a better way to ask it is if we got another one in June, this slow, methodical bump in rates, do you think the asset sensitivity will prove out or do you have to go more than another 50 basis points to start to see it?

I think we're going to start seeing some benefit from the December one, a portion of that. I think if the forecasts are right and we have another 25 basis point increase in June, in July, I think we'll start realizing even more of that benefit. I think every -- there's several million dollars, obviously, for each quarter basis point it goes up in there, what we project out.

Okay. That will be several million per year, per 25 basis points?

On an annualized basis, yes. Okay. You mentioned about the securities portfolio and it potentially funding loans over the next couple of years. What is the cash flow that you expect to get off the securities book? What's kind of the roll off yield? Is it consistent with what the securities yields are listed or is it lower or higher?

Yes, I would say -- well, first off, the roll off is about $250 million to $300 million per year somewhere is the cash flow, is the projected right now. The roll off, as your -- obviously, you can reinvest a little bit higher today than what the roll off is coming off, but it's a pretty consistent portfolio from what's rolling off of what we would be able to reinvest.

Okay. Again, the preference would be to fund loan growth absent deposit growth, rather than buy additional replacement securities?

Exactly, yes. We'll use that security portfolio to help fund the loan growth.

Okay, great. I may have missed this, and I apologize if I missed it earlier, but the mortgage number was quite strong, or the loan sale gain number was quite strong this quarter. Was there anything in particular that drove that? What's the outlook for 1Q?

It really was a good 2016, Peyton. We had good volume, we had a good strong fourth quarter and I did mention earlier that our refinance volume of 2016 was in the 35% of the portfolio -- of the volume range. We do not expect that to continue into 2017 and so we do expect volume, absolute volume, in the mortgage production to be down, absent our hiring additional originators. We're planning on a lower volume for 2017.

Okay. Good enough. Thank you.

There was nothing -- just timing. Sometimes the sales occur and the trades take place in a quarter and sometimes they might be a little carryover. I don't think there was anything significant that happened in the quarter, though.

Okay, great. Thank you for taking my questions.

Thanks, Peyton.

Thank you. I'm showing no further questions at this time. I'd like to turn the conference back over to Mr. George Makris for closing remarks.

Thanks to each of you for joining us this morning. Obviously, we're pretty proud of our performance, particularly in the fourth quarter of 2016 and based on our outlook, we're looking for a great 2017. Thanks again for joining us and have a great day.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Have a great day, everyone.