Trustmark Corp (TRMK) 2006 Q3 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to Trustmark Corporation's third-quarter earnings conference call. At this time, all participants are in a listen-only mode. Following the presentation this morning will be a question-and-answer session. (OPERATOR INSTRUCTIONS) It is now my pleasure to introduce Joey Rein, Director of Investor Relations at Trustmark. Please go ahead.

Thank you, Stacey. I would like to remind everyone that copy of our third-quarter earnings release as well as supporting financial information is available on the Investor Relations section of our website at Trustmark.com, by clicking on the news release tab.

During the course of our call this morning, management may make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We would like to caution you that these forward-looking statements may differ materially from actual results due to a number of risks and uncertainties which are outlined in our earnings release as well as with our other filings with the Securities and Exchange Commission.

At this time I would like to introduce our Chairman and CEO, Richard Hickson.

Good morning. Thank you for joining us. I have with me Zach Wasson, our Chief Financial Officer, and Louis Greer, our Chief Accounting Officer. They will be happy to join me in answering any questions you might have after I make a few comments.

I think all of you have had a chance to see the press release. We earned $29.8 million reported or $0.53 a share; core earnings, a little over $0.50 a share, $0.51 a share. Essentially flat core earnings but some major shifts in the Company relative to loan growth, growth in deposits, continued restructuring and paying down of low yielding bonds, some good growth in fee income. So I will cover those for you and be happy to answer any questions.

We concluded the integration of Republic National Bank in Houston at the end of August. We are 60 days into it now. Jim Outlaw and Chip Bryan are both very, very busy. The loans and deposits that came over were about $460 million in loans, about $620 million in deposits. Those are both within $10 million of where they were when they came up. As a matter of fact, I think I looked yesterday; loans were down $9 million, deposits up $14 million. So it is steady as she goes.

We have lost a few people. Those people have left and gone to extremely small -- under a $100 million startup banks. Those people, Chip and Jim have replaced those people with some very solid people that were in the Republic. Our Trustmark legacy operation there, we are functioning well and moving ahead in Texas. I feel very, very good about where it is today.

If we look at loans, loans year-over-year are up 7%; however a somewhat anemic 4% excluding Republic. If we look at linked-quarter and subtract Republic, which came in at about $460 million; we also did our normal annual student loan sale, which was $27 million; and we allowed our 1-to-4 mortgages to run off around $18 million. That gave us net loan growth in the correct areas of around $115 million or annualized about 7%.

Principally about $50 million of that loan growth was in the Jackson MSA; about $15 million of it in Florida; about $20 million of it in Texas. And for the first time we saw nearly $10 million loan growth in the quarter in Southern Mississippi along the Gulf Coast. So we are pleased that. I think you'll see us continue to grow owner occupied real estate, commercial and industrial. You'll likely see us allow our 1-to-4 mortgage portfolio continue to drift down as we grow other loans.

Taking a look at deposits, it was a tremendous story. Deposits excluding Republic were up 13% year-over-year. The growth was a very large number for us. When you look at it and the growth was in the right places, year-over-year $950 million; $142 million of it non-interest-bearing. A significant amount of the other portion of it was in interest-bearing demand deposits and savings.

Early in the quarter, we adjusted rates on core deposits that were non-interest-bearing. When it hit, it took the adjustments on interest-bearing checking, money market, also did that with Republic to be sure they were in market. You have seen some of the impact of that in our ALCO meeting yesterday we discussed it at great length and feel that with the Fed where it is and with the competitors where they are, we are not feeling pressure to make any more core shifts in deposit cost at this time.

CD rate seems to have settled out in the 5.25 range and Zach has more detail on what we did to interest checking and other, which I think was about mid quarter. So I feel pretty good about that. Our ALCO position is still where it was and Zach can comment on that if you have any questions. But seeing some loan growth in Jackson and along the Gulf Coast gave us some positive sign.

On the Gulf Coast mainly its the home building started now in our administrative committee yesterday with our top 70 executives, a number of them talked about what they were doing and seeing on the Gulf Coast. It is, to quote them it is a beehive of planning and discussion, but yet to get moving with much construction going on. We are seeing some of the block grant money released. We expect to see that speed up. Our Gulf Coast branch now is about between $18 million and $20 million in deposits and we are expecting to see some loan growth down there next year. We are in place doing a lot of calling down there.

Relative to the reserves and loan losses, we have not seen the commercial losses and we have recouped those reserves pre-tax, we recouped another $1.4 million or about $900,000 after tax. We are still holding some reserves for our 1-to-4 portfolio and our consumer portfolio. We have a number of people who are very smart, do a lot of analytical work loan by loan on these consumer loans and it's still too early to tell whether we will have the level of losses that we are holding. It depends on case-by-case what the block grant people to do. We are not seeing people abandoning houses. We are still seeing them make payments, but it is going to be a while so we are still holding those reserves and think it is prudent to do so.

On the loan loss side, you can look in our stat sheet on page three and you'll see net charge-offs were about $1.5 million, which is still extremely good and there was nothing in particular in there relative to recovery or charge-off. There was a little uptick in our auto portfolio, but nothing of any significance to give us any concern. We are still feeling very, very good about credit quality as we look forward. We did back end our Florida operation loan by loan. We don't see any problems there. We feel we did a very good job of underwriting, see nothing down there at this time that would move the needle on us as far as our nonaccruals increasing of any significance or charge-offs there.

Loan loss reserve stays in very good shape. Remember now our loan portfolio at $6.5 billion, round numbers $3.5 billion to $3.7 billion is commercial. The remainder is consumer related. There is about $1 billion of 1-to-4s in there and about $700 million of auto and other consumer. If you take a look at our loan loss reserve, we use a 20 quarter average on an annual basis in building our consumer reserves, so if you pull that out and you take a look at where we are reserved against our commercial loans, it is in the 150 range, which is very strong. And I think you need to recognize that when you look at the total level of our reserves that our portfolio is very, very diversified.

We still continue opening branches. We've opened six new ones this year; two in Memphis, one in Houston, two in the Metro Jackson area and one on the Gulf Coast. They have about $35 million in deposits in them. They're doing very well. They are very attractive branches. We anticipate opening one more this year and then another six to eight next year. Next year they will be principally in Florida, in Destin and Ft. Walton, and Houston. We have some great sites in Houston and we've broken ground and we're looking forward to having those.

Relative to the securities portfolio, it is still -- the runoff year-over-year approximately $300 million. There is about another $85 million they expect to run off this year at about a 3.5 rate and then $300 million next year at about a 3.6 rate. We are using that to pay down wholesale debt, which is down very significantly.

Zach, I may have used that wholesale debt number being down instead of what I said was average deposit gross of $950 million. I am not sure. I have got written on my stat sheet -- you may want to correct me there.

But year-over-year wholesale debt is down well over $900 million also. And what I see us right now is when I look over the last couple of years, we have a significant presence in Florida and Texas relative to our size. We've gotten about 11 or 12% of our deposits and loans in the Houston marketplace. Memphis is coming together very well under Gene Henson. He is expecting some pretty good loan growth for the fourth quarter. Holistically looking at the Company, we are getting rid of our reliance on wholesale funding in a very significant way.

We are undergoing some expenses because we are building branches and building for the future. We are building the Company right now on a two- and three-year basis. We made a very strategic acquisition in Houston. We got a great bank with extremely good people and I feel good about where we are. I don't wake up in the mornings worried about credit quality. I wake up in the mornings talking with people about making calls on companies and getting after new business.

I would be happy to answer any questions.

(OPERATOR INSTRUCTIONS) Charlie Ernst, Sandler O'Neill.

I wanted to talk a little bit about the margin and just kind of what the core trend was in the quarter. I know that you have obviously got Republic in there and if I am correct, I think they had a higher margin than kind of the current run rate. So I want to know, A, what was your interpretation of the impact of the [trunk]? B, how much did Republic contribute to the mathematical margin this quarter? Just kind of what your thoughts are on the core trends right now.

Zach, do you want to do that?

Sure. Charlie, this is Zach Wasson. When we look at how much Republic contributed during the quarter, essentially acquired them on August 25. We don't have a full quarter to see their complete impact. We estimate that they will help our margin anywhere from 7 to 10 basis points not including the impact of issuing the [trunk] securities which were at LIBOR plus 172. But as far as this quarter, the impact would have been nominal just in that they were in our numbers only for one month out of three.

As far as our trends on our net interest margin, we do in our last 10 Q disclose that we are relatively neutral to the move in interest rate. We are feeling the same pressures everybody else is on deposit pricing and loan pricing, yet we do have a fairly balanced position. As Richard mentioned, we did go through our high yield checking accounts and high yield money market accounts and refreshed the pricing on those so that in all of our markets we have competitive products. That particular strategy probably cost us $2 million to $2.5 million in additional expense over a one-year period. So our margin is at a bit decreased during the quarter. We are fairly confident on the margin and the repricing in our balance sheet.

What about amortization of bond premium?

The bond premium amortization, since rates did fall during the quarter in the long end, we amortized more premium on our CMO securities there in the quarter probably in the range of $350,000 to $500,000. So that had a negative impact this quarter. Charlie, does that address most of your questions?

I think that is pretty much it. Just in terms of the moving parts this quarter, it seems that you have got the hurricane reserve, which I think you all said was at $1.4 million and you have got a modest bond gain and then you've got sort of a negative carry from your MSRs this quarter between the mark and also the hedge that there was a little bit of a negative there.

We absorbed -- we look at the acquisition of Republic, all the due diligence, all the other issues. There were some expenses in there, Charlie, that I am not sure we'd totaled them all up yet, but they are all in there. Louis, some estimate of what was expensed in there?

A little more than $0.25 million, probably that much or a little more.

Okay, great. Thanks a lot.

John Pancari, JPMorgan.

I just wanted to see if I can get some more detail on the people that you lost that you mentioned over at Republic, just a little bit of color around -- were they all bankers and the level they were in general? And I guess in general if you can just characterize where the attrition is running in terms of employees if it is a bit behind or ahead of where you are expecting?

We met our overhead expense costs. I would prefer not to talk about any individuals. We did lose some lending people who left and went to start up smaller banks. My assumption is that is where their comfort zone was and they possibly have in their mind that somebody else can build what Chip Bryan and are going to take a bet on that. That seems to have subsided and between the people that Chip had in his organization and we had in our organization has created some opportunities internally for some very experienced Houston people.

So at this stage it is not a major factor for us, although we wish we had not lost those people, that always happens. We were expecting some of that.

Okay. That's helpful.

The sky is not falling if that is what you are asking.

Right, right, okay. On the loan growth front, even excluding the (indiscernible) loan sales and some runoff in residential, all in all growth was still a little bit modest, but it was certainly well diversified across your franchise. I guess if you can just give us an expectation of where you expect loan growth to range over the next several quarters? Should it pick up a bit from these levels?

I don't think anyone knows the answer to that question anywhere. I will just give you a philosophical feeling. I went into commercial lending in 1971. Every time our senior loan committee meets, it has $30 million to $40 million new business. It had about $38 million on it this morning. A significant amount of that gets booked. A significant amount pays off. It is going to depend on the nature of the real estate portfolio and how many $10 million or $15 million apartment complexes are in there and the move to permanent, whatever.

Our loan growth is principally going to come out of DeSoto County below Memphis, Rankin and Madison, which are growing here in the Jackson MSA at rates that are very good, and Houston at the present time. I do not see our loan portfolio growing at the rate that it has grown in the Florida Panhandle principally because it is slowing down down there. We are still making loans. We are turning down a lot of loans down there. I went down there and visited with all the officers individually and they aren't wanting to take any exposure of any significance with -- they have taken everything to scorched earth for their future underwriting and underwriting it in that way.

Now facts. I don't see Trustmark as some company who has the capacity to grow loans at 15% a year. We are a company, we are a national bank. We are going to have a solid, quality loan portfolio. Traditionally we have had lower charge-offs. We pay a lot of attention to that and $400 million or $500 million a year is about all I can digest.

Now we don't make great big old loans. Okay? We have a core of about 200 companies that we have commitments of over $5 million to and our top end where you see us is in the $20 million range. We would have a couple of three relationships that are extremely strong that would have more debt than that, but not much more than that. Now that's about $1.5 billion outstanding of that $3.7 billion. I expect we will see more relationships in that size come about in Houston, $10 million, $15 million relationships that have been built over many, many years here. But we are not strategically located like these people who can grow out and grow loans 15%, 20% a year. You know 7%, 8%, 9% a year is about all we are going to be able to digest.

Okay, lastly if I can ask one quick question on the expense side, I know you indicated that the expense run rate was a bit high just partly related to your branching efforts. Should we expect that you're probably going to run at a bit higher run rate here through '07 as you are still got somewhat aggressive branch buildout plans?

I think that is logical to assume.

Remember we did add Republic this quarter, which contributed about $1.5 million of additional operating expenses.

But we also are working to close and consolidate branches on an ongoing basis. But net-net our number of branches will be up.

Right, okay. That's helpful. Thank you.

Andy Stapp, Cohen & Company.

Most of my questions have already been asked, but it is my understanding that the residential loans you are allowing to run off are those loans that are outside of your footprint. Could you -- what does that balance down to now approximately?

No, I do believe that -- would you say that, Zach?

In general it is about $1 billion -- in that range, could be a little bit less. About $750 million of that is ARMs. (multiple speakers)

About $250 million of it is ARMs around 750. Our 15-year AM loans, pristine credit quality that we cherry pick through the years and a number of them have been on the books four and five years, so what would the normal run off a month in that portfolio be if we --?

Probably 15 million.

15 million or so and you can call it a surrogate bond portfolio if you want to. Can we tell them the yield on that?

I don't think we have disclosed the yield on the individual portfolio. We've got the yield on some of the loans.

It has a good yield; still a positive yield for the wholesale funding. There is no desire on our part to build loans today from our mortgage company. We did that. We have made an awful lot of money from that portfolio particularly when we were wholesale funding at 1 and 2% and it served a great purpose. It helped leverage us and use capital and now that we are seeing and have much more potential for C&I and construction lending loan growth in Houston, we will do that.

Our Company earns relative to everything a lot of money quarter in and quarter out, over 14 ROE, 140 ROA. That is pretty consistent and we have shown an awful lot of discipline. We've given up a lot of earnings right now that I think you're going to be proud of us later. You take a bond spread of $1 billion there and say it is under water, what 1.25% or so? That is about $12 million. We are very low on the number of bonds to total assets. And if we had a normalized bond portfolio of, say, $1.5 billion and it was earning 1% to 1.25%, that is about another $20 million. So you can see that we are taking some tough medicine right now and I haven't a clue when the yield curve is going to change, but there is one thing about it. Sometime it always does and we are going to be in one whale of a good position relative to peer to put an awful lot of revenue on our books if and when that ever happens.

If it doesn't, it doesn't, and the runoff is going to add to earnings next year because every month there is $20 million, $25 million running off that is under water and will be paid out wholesale funding.

Okay, and I missed the amount of student loans that were sold during the quarter.

27 million.

Okay. Great, guys. That's all for me. Thanks.

(OPERATOR INSTRUCTIONS) Bain Slack, KBW.

Just two quick questions. One, with the Republic deal, where there any I guess merger-related charges or anything onetime in nature there?

Just the $250,000 in expenses, mostly legal and investment banker expenses were capitalized. So not a major onetime event on our income statement.

Okay. The other question with the solid deposit growth you had I think you had mentioned in the initial comments that some this looked like some block grant money coming in. Is there a way to quantify that, how much of this growth was that money?

Probably $2 million. There had been, you know, out of 600 customers at that point we had had five that had gotten block grant money. It is insignificant. The growth that we have seen, and it is interesting, we opened one branch down there in the three county area and I think it had 17 or $18 million in deposits in it. And it had been opened, what, three months? What we have is six or seven towns like Hattiesburg, which is 75,000, 80,000 people; a company called Brookhaven, Laurel, Macomb, towns of 15,000 to 25,000 people down there, and their year-to-date deposit growth I think is $190 million and year-over-year is $250 million. That is sticking.

Now whether that's folks moving up from the Gulf Coast, they all still got a lot of new residents, all their companies made a lot of money down there in the cleanup and other things. So that's growth in deposits that I expect to stick and it is well-balanced and we had about $10 million loan growth down there in the quarter and their loan portfolio in those towns is about $600 million.

So relative to comparing us, say, to Hancock that is down there in that zone, we did not pick up a massive amount of insurance dollars. I think ours principally what they're telling me is just increased activity in the southern part of the state, which is anywhere from 60 to 80 miles off the coast itself.

Okay. I guess -- I guess it also sounds like -- I picked up from the comments is that the home block -- or I'm sorry, the block grants might just be starting. Is that kind of the --?

It is just beginning.

Okay.

Just beginning. There's 17,000 and I think less than 500 checks have been issued and I think the governor or someone said the other day it is now getting to a point it should accelerate very quickly over the next few weeks.

Now how much money are people getting? What are they going to do with it? Well, still an awful lot of discussion going on down there on infrastructure. There is not much that can happen south of 10 except repairing of houses and that has been going on for months. There is still a tremendous number -- our Sunday paper had the number, but I think there are 38,000 trailers occupied in the state down there and you see some of them in big trailer parks. A vast majority of them are pulled up next to the house that's possibly, probably half destroyed or something like that. So it is going to take a little while.

The building, everything that is really going on is going on further north. People are holding to that land. They think it is really going to be worth a lot of money, and then some of the infrastructure money, a few hundred million dollars is just getting ready to be released to the cities to begin building fire stations and water systems and whatever. So I think a year from now we will know much more about the Gulf Coast and I think it will really be that long to tell.

Okay, great. Thank you.

Gary Tenner, SunTrust Robinson Humphrey.

Just a question -- I think most of them have been answered already but if I heard you correctly, it seems about half of the loan growth for the quarter came out of Jackson. Anything new there in terms of drivers of loan growth there? Because that seems like a pretty decent number, more than half or so of the net number.

We're seeing relative to accounting with 125,000, 150,000 people in it in Madison County, a big boom, relative to the size. A lot of -- both of our major hospitals that are major relations to us have outpatient clinics going up there. Doctor groups are building up there. A lot of home building, and we are principally the lead in that market. We are talking about $250,000 to $300,000 homes, just neighborhood after neighborhood. We're seeing the same thing in Rankin County, which is the county about the same size as Madison out to the East.

We were talking yesterday with groups of officers and it is just solid midsized homes being built and people moving into them. Whether that is -- there in Madison County probably 20,000 jobs up their related to Nissan now. A lot of these people have said hey I'm going to stay in Nissan. I was talking with the man that runs North America for Nissan the other day. He said, you know, we have been operating there now. Quality is good. We're through with our turnover. People have been here a couple of years. Yes they're beginning to say let's build a house, let's buy a house. So we're not talking about the management you could put on a cul-de-sac, okay -- senior management, but these 5000 jobs and a lot of these people lived out and were driving 50, 75 miles to work. So I think that is what you are seeing is finally some of that.

Another McDonald's going up and another Subway and whenever out in that area, it's just steady, solid growth which we are pleased. If anything happens in this Jackson MSA we're going to be right in the middle of it with our marketshare and we are in the middle of this AmSouth Regions merger. It has not happened yet. We are kind of getting our helmets polished and everything ready to go. It is going to be fun. They are a good bank, but we know every trail.

Great. Thanks very much.

Peyton Green, FTN Midwest Securities.

I was wondering how you might expect to benefit from the AmSouth Regions situation?

You would know better than I.

Fair enough.

They are an extremely tough competitor. It could be a long time before if they changed the signs over here in Jackson. But to tell you that we have not doubled up our calling and that we don't know who everybody is in Jackson and where they bank would be an understatement and we are seeing some success.

Okay, so people are not necessarily waiting on the conversion before they move.

You are never going to see, Payton, another deposit guaranty situation because Regions and Union Planters, in my opinion, did an excellent job in their conversion. They took their time, so no, it is just -- I have got a list of 300, 400 people, pretty well-off people that I see every day coming and going. I was at a fundraiser for the governor last night. I was the host. I probably saw 30 of those people. And I am saying, well, it has been nine years now, Randy, and it is not deposit guaranty anymore. Why don't we sit down and talk about this?

So, nothing is going to fall out just wham overnight, but I think just like folks in Birmingham are looking at things, whatever happened in Memphis with the bank that has left there, we know it is going to be hard work but we know it is a good opportunity.

Okay.

That's all I can tell you. I don't expect to see hordes of waves of accounts moving over here. We have like 17,000 new accounts from back ten years ago in the year the deposit guaranty, and that was operationally driven. That was mass-market retail. You're not going to see a big mass-market retail. Regions and AmSouth are good banks. They're going to know how to do a retail integration.

Okay. Richard, are you seeing any more opportunities that would help improve the growth rate of the overall franchise, like the Texas activity?

You know what I don't understand is I guess that senior loan committee package and it has got new money of $30 million, $40 million in it every week and all these regionals that I talk to that do all these pipeline reports, they are expecting these things to start funding up. But is anything is going to happen? We're just going to have more people calling and doing more midmarket business in Houston. We're going to do it on service and no one can beat us on rate if that is what they want to do on a good loan.

We don't intend to make a bunch of low rate loans, but we don't have to back away because we can handle it if necessary if it is a floating-rate loan. You're expecting us to start growing loans at 12, 14% a year. Absolutely not.

I just didn't know if there were any other M&A opportunities or -- now that you've got the Texas operation pretty much in place (multiple speakers)?

No, from your perspective 60 days is in place. I still see a lot of work to do, but, look. There are many significantly attractive opportunities coming on the market. However, the prices are up there and Republic was a uniquely well put together franchise that was just core of small business. I don't see too many other banks like that coming on the market. Chip just did a very good job. If something comes along, we will be very competitive. If it is the right size -- both in Florida and Texas.

Fair enough. How do you all see competitively, I mean there's been -- it might not be as much true in Mississippi but certainly in other markets the credit spread has kind of withered away as charge-offs have disappeared over the past two years. How do you all see that?

I would not exclude Mississippi.

Okay. How do you see that playing out and how do you see it playing out versus your appetite for loan growth?

Well, with our free cash flow from earnings after dividend, I guess we could grow loans $700 million or $800 million a year easily. We would have an appetite to grow loans $500 million a year, $600 million a year. We could work together scenarios between all of our regions where that might happen. But you always have payoffs that are unexpected.

Now as far as pricing, I think these small banks have about whipped up on us as far as loan pricing. Most of the -- we are the target here because we own this market and I can't think of anyone that -- I hope that it will decrease. A lot of these little banks have gone out and made a lot of loans we would not make and we are seeing a little choke on their part.

Okay, good enough. Thank you.

Both credit and regulatory.

Charlie Ernst, Sandler O'Neill.

Just two quick follow-ups. Richard, the charge-offs level this quarter, as you pointed out, has been bouncing around a little bit. Do you consider this to be a pretty good run rate right now or just how are you feeling about that?

Charlie, James Lenoir and I look at it. We have seen no uptick in specialty mentioned loans; other classified loans are not growing at all. You know we have that one large nonaccrual loan and it's still working along. I don't see any exposure that is not fully reserved for there, so I just have my fingers crossed that it is going to continue to run at half the levels we would expect it to run. Somewhere it is going to normalize. But anything we have seen -- we have been centrally underwriting using APPRO both in our auto company, cards, our consumer loans now for a few years. We've been using B2B Fair Isaacs on our small-business loans under $0.5 million for two or three years and essentially everything has been washed through that and looked out.

So that is all I can tell you is the system, the process is strong. Our people are accustomed to it. They are not rebelling against it. We may make fewer loans, but we're making better loans.

Secondly I was looking at Republic's six-month numbers from the [FR] (indiscernible) and I think it showed that their expenses were about $9 million when on a monthly basis would be about $1.5 million and your expenses were up $2 million this quarter. But you said that you had kind of $1 million in extra expenses, so those numbers don't completely reconcile.

No, you have to look at a full quarter and we are very comfortable with what Chip and Jim did with expenses there. I hate to comment -- some of the initial numbers I am looking at we might have done a little better than we expected, but I would prefer to wait and look at the full quarter and be able to give you something accurate.

Okay, thanks.

Having no further questions, I'd like to turn the conference back over to Mr. Hickson for any additional or closing remarks.

Thank you. I appreciate your questions and I appreciate your interest in us. We have been talking about expanding our footprint in higher growth markets and we are doing it. We are doing it at a pace that we feel we can manage it. If you look holistically at our cost of doing it, if you take what we paid for Allied and you take what we paid for Republic and add the two together and take $710 million in loans and $760 million in deposits -- wow.

You took at what we paid for our franchise in Florida and look at its earnings, it is probably the best acquisition that will ever be made at Trustmark. Our Fisher Brown Insurance Agency is doing very well down in Florida. They are meeting their earn-out. They are in the third year. We all know each other very well. It is a very good cultural fit. I expect Republic to be a good cultural fit. We will continue the discipline of not buying unprofitable bonds and our asset size will probably not grow too much because of letting our bonds run off.

We all know someday the yield curve will change. We will be positioned for it. I really appreciate it. I feel good today. We're focused on getting new business and I thank you for joining us.

Once again, ladies and gentlemen, that does conclude today's call. We thank you for your participation and you may disconnect at this time.