Earnings Call Transcript - OSBC Q2 2022

Operator, Operator

Good morning, everyone, and thank you for joining us today for Old Second Bancorp, Inc.'s Second Quarter 2022 Earnings Call. On the call today is Jim Eccher, the company's CEO; Gary Collins, the Vice Chairman of our Board; and the company's CFO, Brad Adams. I will start with a reminder that Old Second's comments today may contain forward-looking statements about the company's business, strategies and prospects, which are based on management's existing expectations in the current economic environment. These statements are not a guarantee of future performance and results may differ materially from those projected. Management would ask you to refer to the company's SEC filings for a full discussion of the company's risk factors. On today's call, we will also be discussing certain non-GAAP financial measures. These non-GAAP measures are described and reconciled to their GAAP counterparts in the earnings release, which is available on our website at oldsecond.com on the homepage under the Investor Relations tab. Now I will turn the floor over to Jim Eccher. The floor is yours.

Jim Eccher, CEO

Good morning, everyone, and thank you for joining us. I have several prepared opening remarks and will give you my overview of the quarter and then turn it over to Brad for additional color. I will then conclude with some summary comments and thoughts about the future before we open the floor up to questions. Net income was $12.2 million or $0.27 per diluted share in the second quarter of 2022. Net income adjusted to exclude West Suburban acquisition-related costs and net gains from branch sales was $13.8 million or $0.31 per share in the second quarter. On a same adjusted basis, return on assets was 0.90%, returns on tangible common equity was 15.94%, and the efficiency ratio was 62.69%. Earnings in the quarter were favorably impacted by an increase in net interest income of $4 million, but offset by a minimal MSR valuation mark-to-market gain compared to last quarter's MSR mark-to-market gain of $3 million and net losses on mortgages sold due to the sharp increase in interest rates. The second quarter of 2022 continued to reflect the positive impacts of the West Suburban acquisition in our financials. At this point, we are outperforming our own expectations on both cost savings and revenue that we had set for ourselves internally. More importantly, we have made substantial progress in rapidly expanding our loan origination capabilities with new teams contributing substantially to our results this quarter. Regarding West Suburban, the systems conversions and branding were successfully completed early in the second quarter with no significant customer disruption. Overall, we could not be more pleased with where things stand today from both a balance sheet positioning and operational standpoint. The second quarter also reflected the highest quarterly loan growth we have ever produced, excluding acquisition impacts. We had $222.7 million or 6.6% of net loan growth quarter over quarter, or approximately $230 million exclusive of PPP runoff. As we had hoped, prepayments did finally slow somewhat and allowed continued strong origination activity to impact the balance sheet. Activity within the loan committee remains very strong and line utilization remains materially unchanged during the quarter. Recent hires are really starting to hit their stride and the cultural fit has been fantastic. We are seeing significant pipelines in commercial real estate, healthcare, leasing, and importantly, sponsored finance. We are busier than we have been in many years. The net interest margin expanded substantially this quarter moving to a tax-equivalent net interest margin of 3.18% for the quarter compared to a tax-equivalent NIM of 2.88% in the first quarter. The bulk of the margin benefit resulted from balance sheet mix improvements and the impact of rising rates on the variable portion of the loan portfolio and full quarter effects from the first quarter balance sheet growth. Here, too, we consider ourselves ahead of schedule, and the trends underneath the surface are much more positive than the bottom line indicates. The stabilization and improvement that you've seen thus far in the margin are primarily more a product of liquidity deployment than an upward move in rates. The story going forward will be very different in the quarters ahead. I'll let Brad talk more about that in a minute. Our nonperforming loans increased by $4 million compared to the prior quarter with downgrades to a couple of credits. We recorded net charge-offs of $250,000 in the second quarter compared to $293,000 in the first quarter. Total classified loans increased $36.6 million to $103.2 million from $66.6 million last quarter. Five larger credits were downgraded from substandard or from a watch to performing standard, and we continue to monitor the cash flows and financial conditions of these borrowers. Overall, we remain confident in the strength of our loan portfolio. Other real estate owned decreased $750,000 in the second quarter, primarily due to three property sales. The allowance for credit losses totaled $45.4 million at the end of the second quarter, which is 1.3% of total loans, which is consistent with the total ACL as of March 31. At quarter end, $1.3 million of provision for credit losses was recorded, which was offset by an $800,000 reduction of reserves for unfunded commitments based on a review of line utilization trends. Our outlook is cautiously optimistic as the underlying economy appears strong, albeit with significant uncertainties. We believe that we are more than adequately reserved under base-case scenarios but continue to modestly overweight more pessimistic scenarios given the high degree of uncertainty. Expense discipline continues to be strong, and we are far ahead of schedule in cost-saving targets announced with the acquisition. Total merger-related costs of $3.3 million were recorded in the second quarter, which were then reduced by net gains on branch sales of $1.1 million, all pretax. The branch sale gains are recorded as a contrary to occupancy expense. Net adjustments to GAAP net income totaled $1.6 million after tax or $0.04 per fully diluted share. As we look forward, we will continue to focus on deploying liquidity in order to more fully leverage the quality of the deposit base by building commercial origination capability for the long term and making prudent investments in the securities portfolio in the short term that do not carry excess spread or credit risk. As we have said before, the goal is to obviously build back towards an 80% or greater loan-to-deposit ratio in order to drive the returns on equity commensurate with our recent historical performance. I think we made some solid strides in that regard this quarter. Brad will provide additional color in his prepared comments.

Brad Adams, CFO

Thank you, Jim. Net interest income increased $4 million relative to last quarter and $23.3 million from the year-ago quarter. Margin trends increased due to loan portfolio growth as well as due to the increase in security and loan yields due to market interest rate increases. In addition, deposit costs decreased 1 basis point quarter-over-quarter and the total cost of interest-bearing liabilities remained unchanged at 24 basis points in the second quarter of 2022. I would point out that loan yields did not meaningfully help the margin in Q2 due to the timing of the rate increases and less PPP benefit. I would note that the June-only margin was 3.46% versus 3.18% for the full quarter. There is a significant amount of upside that remains. To the extent that loan growth remains as strong as it has been and the balance sheet mix continues, the margin should meaningfully outperform. The second quarter itself saw a significant move in rates in addition to a widening of credit spreads all along the curve, but none more dramatic than the under-3-year portion of the curve. Longer portfolios than Old Second's would have seen relative outperformance to ours given the sharp inversion from the 2-year portion of the curve. The mark on the securities portfolio recognized through AOCI went from a $9 million gain at December 31 to a $35.5 million unrealized loss at March 31, and was $64.7 million unrealized loss to June 30, a decrease in portfolio value of over 5% since year-end. We'd like to remind investors that we have been exceptionally cautious in deploying excess liquidity. The portfolio duration, effective duration was 2.8 years at June 30. The weighted average life was 4.5 years, and over one-third of the entire portfolio is variable. Our fixed-rate MBS exposure is minimal compared to peers, and our absolute exposure to fixed-rate issues is also extremely short going into this move. While it's not fun to see the impact, this move was exactly what we were preparing for, and it wouldn't change much with the benefit of hindsight. On the under-two-year portion of the curve, gaps like this, even exceptionally cautious portfolios can initially look dislocated. I'm confident in my belief that we have the right positioning and the relative conservatism will serve us well. This obviously impacts tangible capital levels, but a recession scenario would likely serve us well as a lower rate assumption would not need to bleed very far out the curve in order for us to recapture significant tangible book value. The rest of the balance sheet looks fantastic. The deposit base, as you may know, is extremely granular and insensitive to rates. On the loan side, we do have some latency, but existing balances feature high concentrations of variable rate structures and relatively short duration on the asset side. Barring a change in current macro expectations, Old Second will transition quickly into a higher rate world with a rapidly improving profitability profile. On the expenses front, we're performing better than I expected, but this is the first full quarter of impact following annual performance reviews and wage pressures remain very real in our markets. Additionally, volume-related expenses have an impact given the level of activity that we are currently seeing, which is unprecedented in our history. In the last several quarters, we have welcomed talented new executives in operations, credit administration and human resources. These new leaders bring with them significant experience from much larger banks and strong track records of success. We remain active on this front and believe we have a compelling story to tell prospective additions. So I'm hopeful we'll be able to spend some of the upside in the cost savings to both strengthen Old Second's foundation and also enhance the core asset organic growth rate. When you grow like we have through acquisition, there are challenges and upgrades that need to be made to increase the level of sophistication of the organization and the overall talent level. I'm exceptionally proud of what we've been able to accomplish and the people that we've been able to welcome. This is a much better bank than it was 12 months ago. This is a much better bank than it was 18 months ago with the rapid increase in talented people. Deposits declined a bit from first quarter levels, primarily from municipal account seasonality; but some parked funds did exit, and a modest impact from rate-sensitive acquired accounts existed as well. The resulting remix and improvement in the loan-to-deposit ratio clearly benefited the margin. Margin trends from here will be a function of loan portfolio repricing, which we expect to pick up meaningfully following the recent 75 basis point hike. Confidence is high, and we have seen positive developments in C&I and utilization rates as well. As Jim mentioned, we do feel quite a bit better on the loan growth side of things. I would not expect a repeat of this quarter's performance given the magnitude of it. I don't think we have ever done anything like this. The trends are clearly very positive. The end result is that margin trends are expected to trend strongly in the right direction. If the forward curve is accurate, the first two rate hikes will benefit us, but not to the degree of any subsequent moves would. Noninterest income decreased from last quarter with a decrease of $2.9 million quarter-over-quarter and MSR mark-to-market gains as well as net losses on residential loans sold of $262,000, obviously, a very disappointing quarter in residential lending. Losses on the sale of mortgage loans resulted from a significant ramp-up in fallout and hedging that underperformed. Our mortgage business is strictly legacy Old Second and operates largely in the lower-income brackets, and that demographic is having a very difficult time with the level of inflation that exists in basic necessities. We are still working to penetrate legacy West Suburban markets in DuPage County to further diversify this business. This negative impact on noninterest income was partially offset by card-related income increase of $398,000 in service charges on deposit increase of $254,000. Wealth management income remained strong at $2.5 million for the second quarter. Provision for credit losses on loans of approximately $1.3 million was recorded during the quarter, and our economic outlook slightly declined quarter-over-quarter with an unemployment rate projection increasing to approximately 4% to 5.5% through June 30, 2023, and over the remaining life of the loans. This is an increase from the approximately 3.75% to 5.25% estimate from last quarter. I would expect loan growth to outpace provision growth over the near term, though that could change with significant worsening in the macro environment. We recorded a provision for credit losses reversal of approximately $800,000 on unfunded commitments due to a review of funding utilization rates on commitments. We are pleased with how credit has performed. And although total classified loans increased this quarter, we continue to consider credit metrics as stable and excellent. We have said previously that it's unlikely credit gets better from here, and we have adopted a cautious stance and are monitoring credits closely. Expenses are difficult to manage this year and mid-single-digit increases in salary and double-digit increases in benefits, reflecting wage inflation and a difficult environment to hire. We are managing through this and are thankful for the flexibility and opportunities for synergies that exist for us right now. Our efforts in the coming quarters will be to finish delivering on the synergies, continuing to bring additional talent on board, helping our customers, and funding quality loan growth with the expectation of an improving margin. We need to build back capital a little bit following the investment in West Suburban, but we look to be on track in all major strategic initiatives.

Jim Eccher, CEO

Okay. Thanks, Brad. In closing, we remain confident in our balance sheet and the loan growth opportunities that are ahead of us. Rising interest rates will certainly be beneficial to our bank's profitability in the second half, and we are paying close attention to credit and expense line items. We believe our credit and underwriting have remained disciplined, and our funding position is strong. Today, we have the balance sheet and liquidity to take advantage of a rising rate environment and have the financial strength to wait for this to occur. So that concludes our prepared comments this morning. So I'll turn it over to the moderator so we can open it up to questions.

Operator, Operator

Your first question is coming from David Long with Raymond James.

David Long, Analyst

The last quarter, you talked about a downtick in expenses before moving higher? I know you talked about some of the wage inflation pressures, but some of the other lines had big jumps when the wages and compensation didn't seem to be materially higher in the quarter. Just wanted to walk through what changed in the quarter? And is this the right run rate? Or do we need to take the $35 million after the noise and then add on a little bit for wage inflation from that point?

Brad Adams, CFO

So let's talk first about what's nonrecurring in here. It's not entirely clear, just looking at the breakdown of it. We've got a little over $900,000 in salaries and benefits that's nonrecurring. Then there's a net $756,000 benefit in occupancy, a $1.7 million charge in computer and data processing, $50,000 in legal expenses, and $220,000 in other. So the sum total of that is $2.1 million. And that puts us basically at run rate. We do have some volume-related expenses that are very high here, and I expect some mortgage-related expenses to come out beginning in the third. So are we modestly a bit higher than what I would have expected this quarter? Yes. I'd say wage increases for us are very real. If we'd had this conversation a year ago, we would have had relatively few people above the $15 an hour rate at the bottom of the pay scale. And now everybody is above that level. There are banks paying $20 an hour in our markets are not far from our markets. It is difficult to maintain employment levels. In terms of where we are, I still think kind of that basically $35 million number feels right. Maybe $34.5 million after we get the mortgage expenses out, that sort of level going forward.

David Long, Analyst

Okay. Great. Appreciate that. On the deposit side, I think we have understanding you had some great loan growth, and I'll go back in the queue and let someone else ask about that or I'll hop back on. But on the deposit side of things, balances were down a bit in the quarter. Just walk us through what happened there in the quarter with the deposit balances and your expectations for the back half of the year?

Brad Adams, CFO

We experienced a decrease of $200 million in deposits, with about $50 million coming from time deposits and another $50 million from parked liquidity that was anticipated to exit from legacy Old Second; this was never intended to be permanent. Around $35 million to $40 million was associated with rate-sensitive funds, and the majority of the decline was due to seasonal factors related to municipal deposits. We do not expect a quick outflow from our deposits. Historically, our strongest deposit quarters occur in the first quarter, followed by a decline over the next two quarters, with a rebound at the year's end. The only notable change affecting our future outlook is the anticipated $35 million in rate-sensitive withdrawals. Overall, we feel more stable moving forward.

Nathan Race, Analyst

Question just kind of on the loan growth outlook, both near term and long term. Jim, it sounds like pipelines remain strong entering the third quarter. And I'd be curious to kind of hear some of the drivers in terms of the growth that we saw here in Q2. I imagine it's mostly market share gains. And just given that you guys have added a lot of commercial banking count over the last few years now, particularly more recently, how do you guys kind of think about more of the longer-term loan growth outlook? Obviously, we have a macro slowdown, but I imagine a lot of your growth is going to be coming from share gains. So within that context, I'd be curious to hear kind of what inning are we in, in terms of a lot of those bankers that you've added in terms of kind of bringing over the balance of their portfolios from their previous institutions, with the exception perhaps of the sponsor financing that I believe is still operating under noncompetes or solicits.

Jim Eccher, CEO

Yes, Nate, good question. I mean, we're obviously very pleased with performance with asset generation in the quarter. It was very broad-based with contributions up and down the commercial bank, significant contributions from sponsored finance after really not producing anything in the first quarter. While they are bound by noncompete, they have a unique ability to generate new opportunities without a violation of the noncompete. So they performed well. Healthcare had a great quarter, our middle market C&I group did as well. Our commercial real estate group and equipment leasing group also had a good quarter. So almost clicking on all cylinders here. Pipelines do remain strong, albeit not as strong as last quarter, but we do expect another good quarter in the third quarter, barring any material prepays or paydowns. Beyond the third quarter, Nate, it's pretty difficult to know what's going to happen in the fourth quarter. Certainly, this rate hike could potentially choke up new loan demand, but we are pretty bullish based on what we're seeing at loan committee today. Certainly seeing low double-digit loan growth this year is certainly realistic.

Nathan Race, Analyst

Got you. And just as we think longer term about the loan growth opportunities in your markets and with the teams that you've added, are we still kind of in the early innings in terms of a lot of those makers bringing over the balance of their relationships and portfolios from previous institutions?

Jim Eccher, CEO

Yes. I would say early innings is fair. And we really like the fact that a lot of them are operating in nationwide market share. So we're certainly not subject to local market conditions.

Brad Adams, CFO

So I would say, assuming a normal level of accretion, which would be in the neighborhood of $900,000 to $1 million, I think it's certainly foreseeable that we would see a margin above 3.50% in the third quarter, sizably, potentially sizably so.

Nathan Race, Analyst

And do you have that accretion number for the second quarter?

Brad Adams, CFO

$1.9 million in the second quarter, which was flat to first.

Christopher McGratty, Analyst

Maybe to start with, Brad. You talked about the spot margin of 3.46%. Do you happen to have the spot loan yield and also the spot interest-bearing deposit costs?

Brad Adams, CFO

So interest-bearing deposit costs are roughly equivalent to the average you see. There has been surprisingly little movement in our markets from anyone we compete with. The spot loan yield is a challenging question to address since it is heavily influenced by the accretion. However, I think it is safe to say that we are double-digit basis points higher than we were on a full quarter basis. So I think that's right. I think that anybody that has shown meaningful loan yield improvement this quarter has done so by putting on received fixed swaps. We have not done so up to this point. Obviously, it would have been best to do it a month ago before the recession started eating down the curve. But I think it's safe to assume that you can expect to see us start that process in the third quarter. We're going to leg into it. It's also possible we'll start to add some duration in the bond portfolio, although I'm hesitant there. It's tough to know what's going to happen, but I would say it's likely that you're going to see us carrying $100 million to $200 million and received fixed swap position on the loan portfolio as we talk next quarter.

Jim Eccher, CEO

Yes, Chris, the migration from special mention to problem was mainly focused on five particular credits, including three offices, two located in the city in good locations, and one in the Western Suburbs in an attractive market, along with two healthcare credits. All five credits faced challenges related to COVID, resulting in lower occupancy and weaker cash flow. We have solid guarantor support behind most of these, but they will require a market recovery to stabilize. We have set aside appropriate reserves for each of them. Loan to values remain strong, with four of the five at 80% LTV or better. Currently, we do not anticipate significant losses from defaults, but we are keeping a close watch on them. Apart from those five credits, the rest of the portfolio isn't showing much movement.

Brad Adams, CFO

And just to clear one point. It's not high-rise office. It's low-rise office. So not downtown.

Jim Eccher, CEO

Yes, it was taken this quarter. Yes, this quarter.

Manuel Navas, Analyst

Just thinking about the new lending, can you give a little bit more color in terms of how much of that is variable versus fixed-rate and kind of the yield on the new loans?

Jim Eccher, CEO

Yes, good question. Our sponsored finance group and healthcare groups are generally generating almost exclusively variable rate credit, so we like that a lot. But the commercial real estate group generally is sponsoring fixed-rate credits, and then our community banking and C&I group is probably a little bit of mixture of both. So we're probably seeing 50% of our asset generation is variable today. Yes, it has slowed. I mean we had about $50 million in purchase participation book that ran off in the quarter, and that is largely by design. But the legacy book has hung in there. In fact, legacy West suburban lenders had a very solid quarter in new originations as well. So we're very pleased with that performance.

David Long, Analyst

You just talked about the sponsored finance business, and it was a good quarter in originations. So do you have the June 30 balance in the sponsored finance portfolio?

Brad Adams, CFO

I'd rather not go there. I would say that they're performing very well and above our expectations. The balances today are two times what we assumed for the full year in terms of when we made the decision to model it out and what our return expectations were. It's a great team. They fit well. Everything is going very well.

David Long, Analyst

Got it. Got it. Okay. Understood. And then as a follow-up, the loan-to-deposit ratio still sub 70%. You talked about getting that back above 80%. What is your appetite to use wholesale funds if the deposit flows don't work in your favor here in the near term?

Brad Adams, CFO

Not opposed to it at all. I think it's fine. I mean, certainly, if the main concern for Old Second is at a world where rates fall, obviously, that would provide leverage to that. So it's not something that we'd shy away from. I think that we had, as a $3 billion bank, we traditionally added $200 million to $250 million overnight borrowing position for the bulk of 2019. There's nothing inherently wrong with it. I think that certainly, we are carrying a much higher securities portfolio than we traditionally have. So there's ample room to continue to fund loan growth, both from continuing to sop up what excess liquidity remains, which is substantial, funding out of the securities portfolio as well as increasing a borrowing position. If you'd ask me today where that loan-to-deposit ratio could be or if I answered it last quarter, I'm getting to 80%. I think I said three years or something like that. It obviously has the potential to get there much faster with this level of loan growth and some level of deposit attrition. But our profitability profile should change quite quickly in all respects. I would just close with there's nothing structurally different about Old Second today versus a year ago or two years ago during the last tightening cycle. I think at that point, we peaked out at around a 4.25% margin before the Fed decided to cover rates. I don't pretend to know what's going to happen from a macro perspective, but the nature of the balance sheet is the same. So it's just a question of growing the right earning assets, taking care of the deposit base, and staying diligent on credit. And those are all things that we're very much focused on.

Brian Martin, Analyst

Jim, could you provide an update on the hiring pipeline? It seems like your teams are performing well and your business is moving in the right direction. However, I'm curious about the current status of the hiring pipeline. I know you mentioned that you're actively looking, but I’d like to know how that's progressing today.

Jim Eccher, CEO

Yes, Brian, we certainly would be open to additional hires, although we've been obviously very busy closing and integrating West Suburban, not to mention our production this quarter was exceptional. We certainly are open-minded to that. We have kind of some dialogue with folks. And so yes, we will be in the market to continue that.

Brad Adams, CFO

No, it's not that high.

Jim Eccher, CEO

They are exceeding expectations at this point, Brian, and we couldn't be more pleased with the growth.

Brad Adams, CFO

So we'll move deposit rates this quarter. I would expect that you probably see us peak out at an overall cost of interest-bearing funds somewhere in the 50 basis point range.

Brian Martin, Analyst

Okay. And as far as when you start to see some stabilization, your expectation would be is that kind of early next year or mid-next year or even beyond that based on the timing of...

Brad Adams, CFO

That's a challenging question. However, if we consider the possibility of reaching a 3.50% Fed funds rate by the end of this year, which seems hard to envision, and if we are discussing this in the second quarter of next year, I would anticipate a loan yield of 4.50% to 5% along with a 50 basis point overall cost for interest-bearing liabilities. As I mentioned earlier, there is nothing structurally different in this balance sheet that would prevent a margin of 4% to 4.25%. That’s where we should be, provided we don't encounter significant macroeconomic issues, which often seems to happen. I don't want to appear overly optimistic; people might know me as somewhat of a pessimist, and I'm sure there are risks out there that we need to keep in mind.

Brian Martin, Analyst

That's right. Well, we're not asking about the tax rate either, Brad. So just maybe the last one for me was the new loan yields, kind of where are the new loan yields coming on today?

Brad Adams, CFO

Yes, we have proactively moved those levels up and added floors where appropriate. But we are certainly up 75 to 100 basis points from the lowest point, maybe at the end of the year.

Nathan Race, Analyst

So just a question on the reserve trajectory from here. I know it's difficult to predict in a seasonal framework and with all the macro uncertainty out there today. But is the expectation that it kind of holds stable here, kind of absent the CECL macro adjustments? Or how do you guys kind of think about the need to provide growth relative to the reserve today and the charge-offs not expected to rise substantially any time soon?

Brad Adams, CFO

So with all other factors held constant in terms of a macro perspective and continuing to come down a little bit on the unfunded commitment, I would guess that we would probably reserve somewhere between 75 and 100 basis points with loan growth. That feels right to me right now. But if something happens tomorrow, jobless claims, it's hard to predict, but that's kind of what it feels like in a stable world right now.

Nathan Race, Analyst

Perfect. Got you. And then just on capital ratios, the total risk-based ratio came down in the quarter. But obviously, you guys are going to be generating stronger profitability with higher rates going forward. Any kind of update about opportunities to optimize the capital mix at this point in the interest rate cycle? Or how are you guys kind of thinking about those opportunities today?

Brad Adams, CFO

I believe we have more than enough capital. Not long ago, we were asked what we would do with all the excess capital, and at that time, we reported a 10% TCE ratio, which included a $50 million to $60 million gain on the bond portfolio. I never considered that gain to be core capital, and I don't view the current $50 million to $60 million loss as a loss of capital. Currently, we are above 7%, and we expect to return to 8% relatively soon. Although we're reporting a figure slightly below 6%, considering the current market conditions and the speed at which we can recover, even if the market remains stable for the next two years, half of that loss will disappear quickly due to the short duration of our portfolio. Our comparison to others may be slightly affected because we haven't reclassified funds to held maturity. Therefore, what you see reflects the actual state of our portfolio and the intrinsic value of our balance sheet. I am very proud of our achievements here. We have a substantial amount of capital and will generate it rapidly, so everything is looking good in that regard. I don't see any need to make changes at this time.

Operator, Operator

We have an additional question from Manuel.

Manuel Navas, Analyst

My question has been asked already and I'm good to go.

Operator, Operator

There are no additional questions in queue at this time. I'd like to turn the floor back over to Jim Eccher.

Jim Eccher, CEO

Thanks, Kelly. Okay, that concludes our meeting this morning. We look forward to speaking with you next quarter. Goodbye.

Operator, Operator

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