Zions Bancorporation, National Association (ZION) Q2 2013 Earnings Report, Transcript and Summary

Welcome to the Zions Bancorporation Second Quarter Earnings Call. This call is being recorded. I will now turn the time over to James Abbott.

Thank you, Jamie, and good evening. We welcome you to this conference call to discuss our second quarter 2013 earnings. Our primary participants today will be Harris Simmons, Chairman and Chief Executive Officer; and Doyle Arnold, Vice Chairman and Chief Financial Officer. I would like to remind you that during this call, we will be making forward-looking statements, although actual results may differ materially. We encourage you to review the disclaimer in the press release dealing with forward-looking information, which applies equally to statements made in this call. A copy of the earnings release is available at zionsbancorporation.com. We intend to limit the length of this call to 1 hour, which will include time for you to ask questions. [Operator Instructions] With that, I will now turn the time over to Harris Simmons. Harris?

Thanks very much, James, and we welcome all of you to the call this afternoon or evening, depending on where you are. We're encouraged with the second quarter's results, which included positive performance in areas of loan growth, credit quality, capital levels and costs. Talking first about loan growth, we enjoyed stronger loan growth in the past several quarters, along with solid improvement in loan production volumes. We experienced strong growth in commitments, including more than a $600 million increase in unfunded commitments during the quarter, which is often a sign of customer optimism, and indeed conversations with our relationship managers suggest that customer optimism has improved compared to late 2012. So we do think the environment is getting better that way. Loan pricing remains competitive, although the yield on our overall production was pretty stable compared to the prior quarter, and this trend was confirmed by recent reports from our relationship managers suggesting that pricing today is not significantly worse than a quarter ago. As we've mentioned on prior calls and in conferences, the loan pricing pressure comes predominantly from the largest loans. The pricing on smaller loans, although down in the last 6 months, has been much more stable than the pricing of larger credits. In fact, small loan pricing is declining at a rate that's about 1/3 of the rate of decline of large loans, and that's important for us because smaller loans account for about 2/3 of our total production in a similar amount of our overall portfolio. Nevertheless, because we are still experiencing adjustable rate loans resetting lower and real estate loans refinancing at elevated speeds, we do expect further pressure on loan yields, perhaps to a lesser degree today than we did 3 months ago, given the rise we're seeing in 5-year and 10-year…

Thanks, Harris. Good evening, everybody. First, brief overview as noted in the release, we posted net income applicable to common shareholders of $55.4 million or about $0.30 per diluted common share for the quarter. In the prior quarter, we reported EPS of $0.48 a share. The most significant item that adversely affected or impacted EPS this quarter, when compared to the prior quarter, is the $0.14 per share impact from the tender offer for $258 million of our expenses senior notes, as well as the redemption of our 8% Series B Trust-preferred issues. Although these debt extinguishment costs impacted earnings this quarter, in combination with the issuance of lower-cost debt and other securities during the quarter, we made significant progress toward our previously and oft-stated goal of reducing interest expense on our cost of preferred capital going forward. On the revenue side of the equation, the income from the FDIC-insured loans was meaningfully higher than in the prior quarter and added about $0.03 per share to earnings. The negative provision for credit costs, including for both funded and unfunded loan commitments, benefited EPS by about $0.06 per share in the second quarter as compared to $0.12 per share benefit in the prior quarter. And additionally, security gains and losses, including OTTI, netted to a loss about $3 million or $0.01 a share similar to the prior quarter's level. Turning now to a little bit of a commentary on revenue drivers, I'll begin by noting that average loans held for investment increased by $419 million compared to the prior quarter or roughly 1%. We paid more attention to average loans because of the variability of period-end balances and because it's the number that actually drives earnings. End-of-period loan balances actually increased by a bit more, $471 million. Let me draw your…

[Operator Instructions] The first question comes from Josh Levin from Citi.

So if you look at the expenses, if you back out the $40 million through extinguishment costs, they ran around $411 million during the quarter. If you just went through a list of puts and takes, how do you see that $411 million trending over the next few quarters?

I'm -- you want to comment, James?

Well, Josh, I think with the core systems replacement project will begin to ramp up gradually, but it'll -- it's in effect at this point. We signed the contract and work has begun, so that's going to start to -- that'll start to appear at this point. It's official. The other credit-related costs that are partial offset to that continued to decline, and we've continued to see good performance on inflows and outflows of problem credits, so we're happy with that direction. And so there's just puts and takes, but I think it will -- and then the FDIC indemnification asset, of course, is a major driver of that $411 million that you mentioned, and that will be fairly quickly tapering down. We have about $51 million more of expense to go before that's gone, and that will be gone by the end of the third quarter of 2014.

I would just comment that the only significant thing that we've kind of changed here is this core product. And if you -- and major, just rough ballpark numbers at this time, but if you take $200 million and say 1/3 of that is capitalized, more or less, you're at kind of $130 million, $140 million a year -- over 5 years. So you're talking $25 million per year or $6 million per quarter. And that's ramping -- that won't all pop up instantly. It will ramp up over some number of quarters, probably several. So I don't think you're not looking at any significant spike up in total expenses. And as we noted, where credit-related costs and legal settlements and professional or legal services or -- and FDIC premiums should still trend down. So I don't think you're looking at a significant ramp-up in noninterest expense, if any, over the next year or so.

Okay. And then on the loan growth side, you guys sounded more optimistic than a lot of your peers, which have been dialing back expectations. You said -- where do you attribute the difference? Is it just mostly the fact that you -- a small business is more optimistic than large business right now?

I -- if you look at kind of what differentiates us from some of our peers, it is that we are more small- and middle-market business-oriented, and that's where we're seeing a lot of the activity. We have missed out on a number of larger deals because we won't match the pricing that some of the bigger banks are throwing out there on those deals. So I have not had a chance to listen to the color or in the commentary from many of our peers, but that probably is what distinguishes us.

Yes, Josh, I would just add. I mean, we -- our production on the small business really increased in the second quarter. It was a nice 25-or-so percent jump in terms of total volume coming out of the smaller-sized loans.

New production?

Of new production compared to the production that we saw in the first quarter.

Yes, that's not an annualized -- a 25% annual growth rate. That's just a jump in the new originations.

The next question comes from Ken Zerbe from Morgan Stanley.

So I guess the first question I had just on the FDIC-supported loan income that you're getting, I think I got most of your comments that you mentioned that the $50 million of amortization runs off by the end of the third quarter of '14. But should we expect that number, which I guess, was a net $6.6 million this quarter, it seems that you have basically twice as much income as amortization over the next 2 years. Is this a number that should run as sort of a 0 to net positive benefit for the next few quarters and then a more material positive in the back half of '14 and then into '15? How should we think about the net impact there?

George, I think he's got it. No, I mean that's pretty much it. What we we're -- we were trying to highlight a couple of things and I'll let -- one is that it was an unusually large benefit this quarter. And there will still be a benefit next quarter, it just won't be as large. And yes, the expense kind of runs out before the benefit does, which will run for another year. So I think you've got it about right. Anything else, James?

No, that's it. We do expect in the third quarter of this year, so next quarter, next reporting quarter, we expect the revenue number to decline to about the $20 million area, maybe $21 million, $22 million. So it will be a fairly significant drop. But then you're right, after the indemnification asset expense is exhausted, it -- the revenue remains for a considerable period of time there, a year or 1.5 years before it -- it'll be -- come to an end. Pretax benefit is about $50 million to capital if you want to look at it instead of an earnings stream an accretion to capital. That will be another way to think about it.

All right. Perfect. And then just one last thing, on the CDO, in the section where you're talking about CDOs, it says you had $4.3 million loss on the sale of 6 CDOs. Should we read anything into that in terms of the market is becoming a little more liquid that you might try to sell some of the TruPS a little bit, or is that just kind of a one-off?

I don't think the market is not yet liquid enough that we're likely to sell material amounts unless we see further improvement. But I mean one of the things that motivated us to do that was we did want to kind of test the pricing for -- on a variety of tranches at different points in the waterfall. They were directly securities that we own to make -- to kind of further validate our pricing of the whole portfolio. And so we selected 6 securities that were representative of various -- very, very different parts of our risk exposure. And generally I would just say, those prices tended to validate exactly what we've been doing.

The next question comes from Craig Siegenthaler from Credits Suisse. Craig Siegenthaler - Crédit Suisse AG, Research Division: So just to come back to the investment in the loan and deposit system, Doyle, it sounded like you excluded the $67 million that you'll be capitalizing. I'm just wondering under GAAP accounting, doesn't this get depreciated? And won't you have an increase of depreciation expense of about $2 million a quarter from this?

Well, first of all, you're being much more precise than I was with my -- in getting it down to $67 million. Yes, it will be -- this will be amortized, but not -- that won't start until it's placed into service. And we don't anticipate the first probably loan system beginning to convert into -- well into year 2 of this project. So it's -- again, you're not going to see anything like an instant jump in that expense.

Yes, so [indiscernible] there is 2015. Mid-2015 or so was when you'd start to see some amortization expense, perhaps.

You want to ask a follow-up on that one? Craig Siegenthaler - Crédit Suisse AG, Research Division: Yes, actually I do have a follow-up. And then turning back to the uncapitalized portion. It sounded like to the answer to your prior question some or most of that -- or maybe all that $6 million you targeted could show up in the third quarter. Is that correct, or am I a little early there?

I think -- it's way early. I wish we could hire that many people that fast and get on with this. But no, that's -- it's going to ramp up a little more slowly than that, I believe. Maybe a couple of million in the third quarter but we're -- the final decision was made about 1 month ago, maybe -- well, I guess, more like 6 weeks ago, and so we're beginning to actively recruit, and we have hired some people. Some of the project leadership we've been hiring over the course of the first half of this year already. So some of the more expensive people, if you will, are already on board and then the numbers. But the rest of it will ramp up over the next few quarters, not 1 quarter.

This is Harris. I would also note that some of -- not all of this is incremental spend either. I mean, a fair amount of this resource is internal resources that are currently working on other things. And I don't want to suggest that there isn't net addition. There certainly will be, but some portion of it, and it's a little early to know how much is going to be offsetting -- offset by other projects that were maintaining some of these old systems, for example. There are also current costs associated with maintenance of the number of these systems that will, as we put the new into place, will also disappear. So it's not all new add. There are offsets, including some -- what we expect will be some reasonably significant productivity benefits as we get this in place.

The next question comes from Erika Penala from Bank of America.

My question is on the capital level that you mentioned, the adjustments under Tier 1, do you think it's that adjustment that's more important in terms of $1 billion hit that you mentioned Tier 1 capital, or is it the absolute level relative to the Basel III hurdle? I mean in other words, even if you unwind in the CDO portfolio more slowly, that shouldn't really -- that impact shouldn't really impact your capital return plans for 2014. Is that a good way to think about it or...

Well, first of all, it's -- the impact is essentially entirely in noncommon Tier 1. That's kind of one point to make. Two, it is phased in over time. It's actually over 5 years. Third point that I would make is that if the phase-in for the non-globally active or internationally active systemic banks for this begins in 2015, that will -- that period is included in the upcoming CCAR forecast period. So it could begin to influence capital decisions in 2014 because it will be within the projection period. But beyond that, we haven't begun to do any analysis on that.

The next question comes from John Pancari from Evercore Partners.

I want to see if you can give us a little more color on loan growth in the quarter in terms of the drivers, more particularly around C&I. If you can give us some color on the regional breakout. How much of that came out of Texas, for example? And then a little bit more around the types of loans that you're seeing a nice pickup in demand.

I will let James give you some of the color. He's picked up on talking around our franchise.

Sure. Thanks, Doyle. John, in terms of the companies, the C&I geographically, Zions Bank actually had about $120 million worth of net C&I growth. California Bank & Trust also had a very strong quarter at $132 million or $133 million. Amegy was at $23 million positive, so it was -- it had just many, many historically strong quarters. And this was a good quarter for them, but not as strong as it has been in some -- in the past. Nevada and Arizona actually one point that is probably worth making here is that Nevada seems to have turned the corner. Nevada had net positive loan growth for the quarter, in total about $39 million. But just the C&I portion of that was about $21 million. So it's Dallas Haun, our CEO there, is leading a good improvement in getting more C&I done and relying a little bit less on real estate there. I'll pause there if you have a follow-up question.

No, no, that's helpful. And then on the commercial real estate side, I know you've been talking about an inflection in that portfolio. We're starting to see some there. I just wanted to get a better view of when you expect a material pickup there in the growth in those balances, particularly given the growth in the commitments that you see.

Well, I guess, I would comment a couple of things. One is prepayments, these have been pretty high on the term commercial real estate portfolio. And the impact from the 5- and 10-year Treasury moving higher is not reflected in the second quarter numbers. We may start to see some of that benefit of slower prepayment speeds in the third and fourth quarters if they remain up here. That would be hope, although the phrase is hope is a short comes to mind. The second thing that I would say on the construction and development, we still continue to see good commitment growth there. It's actually the commitment growth out of the construction and development teams this quarter came from a -- it was not all multifamily. So it was -- in fact, it was less -- far less than half was multifamily. It was -- industrial was a strong pickup this quarter for us, office, some retail. And so we're actually seeing a pretty diversified mix of production there. So that's a good story that we're happy to see that diversification. So the growth doesn't concern us there and is actually encouraging. And then in terms of balances outstanding, we would expect the construction portfolio to continue to grow at a reasonably good pace similar to the second quarter as we go throughout the third and fourth quarters.

The next question comes from Gaston Ceron from Morningstar Equity.

I just wanted to go back to the question on the offsets for the spending project that you detailed. I was just a little confused because I think in your comments, you talked about how some of these can be reduced by, I think you said, so-called environmental costs and regulatory sub-spends and FDIC premiums and things like that. I guess what I'm trying to understand is these offsets, are they all related to the project, meaning the reason that this could be a cost offset or were some of these going to happen anyway?

No, none of those things is related to the project. Those were things that were going to happen anyway. I was just trying to address the question of are we about to see -- I'll paraphrase the question that was, are we about to see ramp up in expenses after 3 years of really solid flat expense control by you guys? And the answer is -- the answer I try to give was no, you're not. But yes, there will be some incremental expense from this project. That's unavoidable. And we want to lay that out there. There will be some offsets directly attributable to this project. But the nature of the saves is that they come toward the back end -- back half of the project, whereas the spend starts immediately. But you can't get the first benefit until you actually turn on the first piece of the first system. And then the various expense savings, and we actually hope some revenue increase, occur -- ramp up over the back half of the project, kind of in years 3 through 5 to 7.

Okay, great. And then lastly, just on a different subject, you talked about competition and I think you said something about that you're not willing to match your pricing offered by some of your competitors. I'm just trying to get some color on how rational or not, frankly, the competition is being in your view.

I don't want to speculate on their own rationality. I'll just leave it at we're not trying to match that competition. We're not. I mean there's -- I guess, the areas where we're consciously being less competitive are probably large C&I loans and long-term CRE loans, 20, 25 years where the pricing from securities, markets and government-sponsored entities, et cetera, is just too thin for us to want to take on that interest rate risk. And that's why despite James' comments about hope, I think that over the rest of this year, we're probably likely to see some continued CRE term declines that will offset the construction and development CRE growth partially offset it just like we did this quarter. I think that's kind of the best outlook for next couple of quarters. And remember, we've been -- I think we've been very clear about this, too. We've made a strategic decision in this company not to let the CRE portfolio grow back to anything like the proportion of the total portfolio that was in circa 2006 and '07. We will be cautious about letting that growth get too carried away.

I was just going to add, if you look at capital as a scarce resource, which it is, and if you can get more than 100 basis points on the smaller loans, it's probably a good trade. If there's a little bit of higher costs associated with that, with doing the small loans because you don't get as many -- we have more employees that you could point to and say, well, you have more employees and that's -- it does require more infrastructure to do the small lending that we do. But it's a much, much higher yield.

[Operator Instructions] The next question comes from Marty Mosby from Guggenheim.

I wanted to ask you 2 questions. One is pretty simple. The Fab transactions on the capital side you completed this quarter. I'm estimating $0.04 to $0.05 of quarterly positive with most of that kind of showing up as we come moving to the third of fourth quarter. Is that about right?

Some of that's about right. You're probably about right there. Some of that is certainly recognized in the second quarter, Marty, and -- but we -- for example, Trust preferreds were done at the beginning of May. So we've got 2 months under our belt there, but we've got another month's worth of benefit to realize on average balanced basis. The senior debt was done really later in the quarter and so we -- that benefit will not really -- was not in the second quarter. And we'll get most of that in the third quarter, so that's right.

The total amount is about right, though, about $0.04?

I think it's right, yes.

Okay. And then, Doyle, as you go through this system change and overhaul on the deposit side and then looking at what's you're doing on both of your kind of your front ends here, are you going to be able to take off the shelf a package that you can kind of plug in or you'll -- because this project is so long in duration, are you really tailoring this and doing a lot of internal work that creates a little bit more risk as you're kind of going through the development process?

Good question. The answer is more I think toward the former. The system that we are going to implement is a modern integrated banking system that is used in probably by I think it's something like a couple hundred institutions around the world. Parts of it are used on Wall Street, but we would be the first U.S. implementation of a full integrated system. So there has to be some customization of that system for the U.S. market. The vendor, Tata or TCS, is obliged to undertake that on their own nickel. That's not our cost. We will, on the other hand, have to work with them and incur some costs to basically implement our product set and our operating methods on their system as you would with any other platform. But our overall goal here is to minimize the amount of customization that we have to do and pay for as we go through this rollout.

Okay. That's good to hear. Our past experience has been the more you try to develop yourself, first panel plug in with an engine that already works really, especially at the amount of time you're talking about it, it tends to really increase the risk of the projects so that's -- we fairly agree.

We are keenly aware of that, and have had numerous discussions internally about that and we'll institute kind of escalation processes to make sure that customizations requested by our banks, as we implement this are vetted at basically, the highest levels of the company before we go forward. There's a whole lot of reasons to -- including risk, but also including giving up future flexibility to take ongoing upgrade and whatnot that you got to be careful of. And therefore, we very much want to avoid as much customization as we can.

The next question comes from Jennifer Demba from SunTrust Robinson.

So Doyle, can you give us some thoughts on how long you think credit cost net charge-offs are going to stay unusually low? This has been source of upside for the group for a while. I'm just wondering about your opinion on how long your loan losses are going to stay so low.

James has indicated -- I mean, he wants to answer that question. And then I'll reserve the right to ratify or contradict whatever he is about to say.

We -- Jennifer, it's a good question. We actually -- I asked the same question of our Credit Administration folks, and I said, "We've had very successful recovery so far. What is the likelihood that those recoveries will continue?" Because the growth charge-offs are not -- I mean they're great. They're at very good level, but it's not what's driving the 6 basis points. It's the recovery side. And they did a fairly detailed analysis loan type by loan type. And as any analysis, it's not perfect and there are assumptions that were made. But we do think that the recoveries are -- we're nearing the end -- we're probably maybe 7 inning on the recoveries. We still have $15 million to $20 million more recoveries per quarter is the best guess coming out of our Credit Admin group for the next couple of quarters but then it does start to tail down based on when we charge it off and how much more exposure we have in those loans. So if you normalize the recoveries, you're probably back to the 30-basis-point to 40-basis-point net charge-off range, and I think that's fairly consistent with some of the concentration risk metrics we've put in place to keep us out of the loan types that cause problems, the stress testing keeps -- helps us keep an eye on, which loan types cost us the most in terms of financial charge-offs, so we're actively avoiding those, and just net, overall, better credit quality from our customers. Want a detail or...?

No, I'll first just state that James is going to keep his job, so you can continue to dial 801-844. Anyway, but I would -- the only -- I think James was spot on in what he described, which was what's the likely pattern of net charge-offs. If you're -- by credit costs, you're really getting to provision or lack thereof, I would say, basically, it's not at all how we get there, but net recoveries have driven a lot of the negative provision. They kind of -- the numbers are roughly similar orders of magnitude. But the underlying metrics of classified loans and loss severity and whatnot also continue to improve. So you take away the recoveries. If those begin to wane after another couple of quarters, maybe you're back to something like a 0 provision for a while, but you're probably not back to a significant positive provision for a couple more quarters after that, unless loan growth begins to pick up more significantly. Was that helpful?

[Operator Instructions] It looks like we do have one more question from Dave Rochester from Deutsche Bank.

Just a couple of quick ones here at the end, can you talk about what the all-in loan production rate was for the quarter? And if you have, then the rates you're getting on the large C&I and the smaller C&I loans?

So from a rate perspective on various loan types, on the C&I, I'll just give you that it was relatively stable versus the prior quarter. It was down 4 basis points. It's in the high 3s when you look at the all-in yields on below -- on the C&I production. You could talk to other banks out there and find out what loan pricing is on large loans, and you'll get probably a LIBOR plus 200. And so that will give you some sort of sense as to the fact that we're not doing a lot of large loans.

And I'm not sure what you're -- what metric you're asking us to divulge or just talk about on. Did you say gross production? Because that's kind of a weird number because as we calculate because it includes renewals and totally new loans in that -- what were you asking about there, Dave?

Just the all-in loan production rate, generally speaking. And then you talked about the large C&I rates coming in on the production side a little bit more during...

All-in production rate, you mean the rate on new production or the dollar?

Just on all product types. So what you produced in the quarter?

All product types was in -- about 3.85%, and that's a number we've given out historically. So that makes sense, if that's what you're asking us. We were at 3.87% last quarter. We were at 3.85% this quarter.

Great. And then just a quick question for Doyle on the liquidity side, what do you need to see in the long end of the curve for you to become more interested in plowing at least a portion of that excess cash in the securities?

We're just not likely to plow a lot of it into securities because again our basic belief is that as the economy improves, 2 things will happen. One is that loan production will continue to trend upward and at some point, the noninterest-bearing DDA balances that have largely been funding this cash are going to begin to be withdrawn because -- and for the same reason as companies get more optimistic, they will plow first -- some will plow their own money into expansion, withdrawing their cash balances. Others will borrow. And so our basic business is taking deposits and making loans, not taking deposits and buying long-dated securities. So...

Doyle's last call request generated a lot more patrons to the bar, I guess, if we use the analogy. So let's take 1 question but no follow-ups from the next couple of people here. Let's got to Steve Alexopoulos of JPMorgan. Steven A. Alexopoulos - JP Morgan Chase & Co, Research Division: Doyle, I just wanted to ask, I don't know if you gave this out but what is the pro forma Tier 1 capital ratio for the final NPR?

Tier 1 as opposed to CET1? Steven A. Alexopoulos - JP Morgan Chase & Co, Research Division: As opposed to Tier 1 common.

Yes, again if they were fully phased in today, and I want to emphasize that, those numbers would be fairly similar. Kind of in the -- that one would also be in the low 9.2% to maybe a little bit higher than that depending on exactly where we came out. But we -- as we actually get closer to the date, we think that they will divulge, but yes, it would be -- that's what -- you hit on. That's exactly what we're trying to convey that the way that rule was written, that's where the most significant impact to us would be, not on common equity Tier 1 but on noncommon Tier 1.

The next question comes from Joe Morford from RBC Capital Markets.

I just, I guess, circling back, just wanted to confirm on this guidance for relatively stable net interest income does include kind of all the capital refinances actions you've done and the planned issuance in the second or the third quarter, whatever. And will that $12 million sub debt amortization start to tail off at some point?

The subordinated debt. So as the subordinated debt is cold -- or matures, not cold. But as that matures, it will go to 0. But between now and then, it actually increases ever so slightly every quarter. Probably, it goes from $12 million this quarter to $13 million next quarter, and $14 million this quarter after that and so forth.

It was not a straight line amortization. It was -- what is that, the level of yield and method of amortization. So it kind of starts off lower and then ends up higher.

And the stable net interest income outlook is -- we still do, based on all the modeling that we've done, we still expect a significant amount of -- well, we've given you what the loan yields are coming on at, and you know what the loan yields are on the average balance sheet. So you can see some of the pressure that we're facing there.

The next question comes from Paul Miller from FBR. Thomas LeTrent - FBR Capital Markets & Co., Research Division: This is Thomas on behalf of Paul. Doyle, I know you guys talked about liquidity on the CDOs, but can you talk a little bit about the pace at which you've seen banks sort of buying back their own TruPS, and whether you think the pace of that sort of continues to increase from here as the economy improves.

What we've actually -- we've seen the large banks where the TruPS are being phased out as Tier 1, certainly that's picked up. Among the small banks, we did see some uptick over the last year, but it's not consistent, and we would actually expect, given the final rule does not phase out Trust-preferred as Tier 1 capital for smaller banks that, that rate of redemption might well slow down, meaning more which -- it has mixed impact on us, but it basically means more cash flow for longer, which means the mezzanine tranches that we own probably do somewhat better than we might have otherwise forecast.

The last question comes from Ken Usdin from Jefferies. Kenneth M. Usdin - Jefferies & Company, Inc., Research Division: James, just the last thing on that front, on the point you just made a little bit ago about where loans are coming on versus where they're coming off. Can you give us an update of kind of where the floors are? How much of the book still has floors against it and how much of that is that burden of the higher versus lower?

That's not a number I have at my fingertips right now. My best guess will be about 5 -- sorry, between 10 and 15 basis points of margin support right now, and that's a very significant portion of what we -- when we model these loans running off or running down or resetting that's a big piece of it. The loans are going away or the floor is going away. Kenneth M. Usdin - Jefferies & Company, Inc., Research Division: So is it fair to say -- do you have a line of sight on at what point you're think that crossover point happens?

You mean at what point the floors are no longer supporting the margin? Kenneth M. Usdin - Jefferies & Company, Inc., Research Division: Well, at what point do you kind of get even on what's coming on versus what's coming off because knowing you're still down 12 basis points this quarter because of this burden, so I'm just wondering kind of how much longer do we have until that -- forgetting the spread side of it, just on the asset yield side of it, when you get to that bottoming out point naturally.

Well, the models are -- is doing -- these are very expensive models and they've got thousands of assumptions in them and every quarter, they spit out basically sometimes different numbers. And so prior to the pricing competition we saw in January, February time frame, we thought the margin would trough in the third quarter thereabouts. And the models are now looking at basically fourth or first quarter trough at this point. Okay. Well, thank you for all of you for joining us today. Thanks, Jamie, for managing the call for us as well, and we will be in touch with you throughout the quarter at conferences and whatnot, and feel free to give us a call at any time and we'll try to answer your questions. Thank you very much.

Ladies and gentlemen, that does conclude the conference for today. Again, thank you for your participation. You may all disconnect. Have a good day.