Associated Banc-Corp's CEO Presents at Bank of America Merrill Lynch Banking and Financial Services Conference (Transcript)

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Associated Banc-Corp (ASBC) Bank of America Merrill Lynch Banking and Financial Services Conference November 14, 2012 8:50 AM ET


Phil Flynn - President and CEO


Erika Penala - Bank of America Merrill Lynch

Erika Penala - Bank of America Merrill Lynch

Good morning everybody in the room and on the webcast. A gross and capital recurring story sounds like an unlikely combination that Associated Banc Corp may be it. Since President and Chief Executive Officer Phil Flynn took the reins during in 2009, he has aggressively tackled by legacy credit issues, strengthened the balance sheet and has surpassed loan growth expectations and yesterday Associated announced an increase in dividend of $0.08 and $125 million buyback. Also with Phil today is Chief Financial Officer, Chris Niles and with that I’m going to turn over the stage to the company.

Phil Flynn

Thanks Erika. Good morning everybody. So I’d like to start for those of you who aren’t real familiar with Associated with just a little bit of background information on the company. We operate in the upper Midwest. We have branch network that covers the area from Twin Cities all through Wisconsin, into Chicago and then down through Illinois to East St. Louis. We have about 250 branches currently and we are very active in all types of lending in the upper Midwest. In particular in Wisconsin we are the number mortgage originator in the State and we’re also the number one SPA lender in the State.

I came to Associate as Erica mentioned back in December ’09. So it’s just shy three years right now and what I didn’t know about the Midwest since I was in Californian and actually this part of the world is really good place to operate in, whether you’re a business or a bank.

And interesting statistic we came across when you look at the cities with the highest average FICO scores in the country five of the 10 are in the areas where we operate, mostly in Wisconsin. So one of the nice things about that part of the world is people tend to pay their bills. That’s one of the reason why we didn’t have, throughout the crisis a big problem with our mortgage book. Generally speaking we didn’t have the price spikes that you saw on the coast during the south. Generally speaking people are conservative and make sure that when they borrow money, they are capable of paying it back.

We continue in Wisconsin and Minnesota to generally track somewhat better the national unemployment rates, particularly up in Minnesota and we are a manufacturing state, particularly in Wisconsin and we’ve continued to have good results from the manufacturing sector.

The chart there on the slide gives you a sense of where our deposit concentrations are. They are where you would expect in the larger cities and towns in our footprint. We’ve got good stories as far as deposit growth which we’ll talk about in a minute. So some highlights from the third quarter, we continue to have increasing net income over the past several years. We made about $45 million or $0.26 share in the third quarter and our return on tier 1 common equity is just shy of 10%, nothing to be terribly proud of, but we are working to improve that number overtime.

We have had a good loan growth story now for a good probably two years. Loans were up about 2% in the third quarter. That was actually a lower pace of growth than we have seen for the preceding four or five quarters. Not too surprising. As a person who has been in the business for a long time and with a lot of credit background, I’m not necessarily comfortable with continued clips of double digit loan growth.

So a 2% quarterly loan growth is fine. We’re not getting a lot of help from the economy obviously so most of what we’re doing is taking market share or growing some new businesses that we’ll talk about in a minute. So that type of growth is just fine. But we have had over the past year over 11% loan growth.

Deposit growth has been very good. I’m still a believer even in this low rate environment that a core-funded deposit franchise ultimately determines the value of the regional bank and we put a lot of emphasis in growing our granular core deposit business. We have put a lot of time and energy and money into improving our treasury management and corporate deposit offerings and are starting to see traction there. In fact we had in the third quarter particularly good results on the commercial side.

Net interest margin has been a real challenge for the entire industry. We have done a good job for the past year of defending our net interest margin at around that 325 to 330 level and we did that again in the third quarter and we increased net interest income because we actually expanded the balance sheet of debt. In the third quarter previous to that we saw our balance sheet been fairly static and the loan growth was offsetting the rundown in our securities book which had been planned, but we’re at the point now where the securities book is about where it’s going to be and so the loan growth now will tend to expand the balance sheet a drive a little in of NII growth.

And on capital, we have extremely strong capital levels. We are very well prepared for Basel III as we said here today. We’re compliant with Basel III levels. We are well capitalized and in fact arguably have plenty of capital to think about returning to shareholders as well as support an acquisition strategy in the future.

So, our capital priorities, you’ve heard me say many times that they are in this order. We use capital to fund our organic growth, we've been doing that. We're looking to pay a competitive dividend. Yesterday after the market closed, we announced a 60% increase in our common dividend for $0.05 to $0.08, so we're going to slowly growing our dividend over the coming years.

We look for and we think that in the coming year, there will be opportunities for us to deploy some capital into acquisitions and in particular, we are focused on in market transactions where we can take costs out of the acquired branches or institution. We believe that’s the best course for us today rather than do a franchise extending acquisition. That’s not to say, we would never do that but our priority today is to look for those end market cost take out transactions.

You’ve also heard me say that buying back share is not necessarily my favorite use of capital but considering where we and the rest of the industry is trading today and considering the level of capital we have, we decided it was the right thing to do to announce a significant buyback, which we announced yesterday, as well $125 million and we would anticipate deploying that at a clip of about of 1 million to 2 million shares per quarter over the coming quarters.

So, we’ve got a little bit of information on the portfolio. Next you can see the loan growth that I spoke about 11% year over year, a little slower pace in the third quarter and we expect somewhere around that sort of pace in the fourth quarter as well and some detail on what actually grew during the third quarter.

Residential mortgages have continued in this environment to grow at a nice steady clip, and we’ve open up a number of new channels in the mortgage lending business over this past couple of years and in particular we have built a capability to source larger adjustable rate mortgages that we can hold on our balance sheet, typically 51 arms and we do not keep long dated mortgages on our balance sheet, although we did make a decision sometime over a year ago to retain about $1 billion of 15 year mortgages.

We've opened a couple of new specialty lending groups. Since I got there, I have an energy background from the bank I previously worked at. We hired a number of people from that bank who are specialists in that space. So we're growing a reserves secure oil and gas business out of an office in Houston, Taxes and likewise we hired some folks in the Power and Utility space who worked out of Chicago. Those are both in my experience through many cycles, a prudent sound way of getting some diversification into an otherwise commercial book that’s focused on the upper Midwest with loss rates to the cycles that are lower in general commercial lending as long as you stick to your netting, particularly in oil and gas business which is what we are doing.

Our commercial real estate business has been rebuilt with a number of new folks, mostly hired from previously dominant banks in the Chicago and upper mid-west area and we’re getting good solid growth there. And then, the mortgage warehouse business has been very interesting off late as you would expect. We have done a nice job of expanding that business and in fact selling a lot of cash management services for those companies as well.

So the loan mix, as we said today is getting toward the preferred loan mix of about a third retail oriented being mortgages, about a third commercial and about a third commercial real estate. You can see we’re generally in that area with still a little bit overweighting on the retail side.

We talked about the net interest margin. You can see our yield like everybody’s is slowly grinding down, quarter-to-quarter, three basis points, five basis points a quarter. We have done a good job of managing down the cost of deposits while growing deposits, and you can see that we have reduced our cost of earning interest bearing deposits by 23 basis points over the past year, while growing the deposit book and maintaining generally a pretty stable net interest margin. So we have done a good job of pulling the leverage that we have to defend that net interest margin.

So let me give you in the next few slides a little detail on the books themselves. If you go back in time Associated Banc, before I got there, had about a $16 billion loan portfolio. That shrunk down to about $12 billion after the crisis and we have been re-growing since then. So this slide shows you what’s going on in the general commercial businesses. Over the last two years, it’s grown nicely from a low of about $4 billion back up to about $5.5 billion and will continue to grow over time.

The pie-chart shows you a little bit of the mix there. Folks are curious as to what’s going on with the Specialty businesses and both Power and Utilities and Oil and Gas make up 5% or 6% of the commercial book. So at this point they are still relatively small compared to the rest of the balance sheet.

Likewise, our commercial real estate business had peaked back at the end of ‘08, early ‘09 at about $4.5 billion, shrunk all the way down to under $3 billion and has been growing at a steady clip since then. In particular you should note that the company into the crisis was way overexposed in the construction lending space, both in places like Chicago as well as all over the country frankly. That’s where most of the problems in that ‘08 and ‘09 period came from. We shrunk back our construction exposure quite dramatically and have maintained the construction loan book better at much more reasonable level of the overall commercial real estate book.

This gives you a graph of that, if you go back to the third quarter of ‘09, our construction book was almost 40% of the total CRE. Now it’s down substantially, down to 120%. We have relatively low exposure to multifamily which is generally the safest asset class in the commercial real estate book. We have grown that part of the book quite a bit everybody has multifamily activity around the country.

And as far as where our commercial real estate lending is happening back in the third quarter of ‘09, you can see we had a fairly substantial amount of out of footprint commercial real estate lending about a third of the book and now we are over 90% in footprint. In footprint being the upper mid-western stakes.

We have opened loan production offices in Cincinnati, Indianapolis and outside of Detroit. Hiring experienced teams of people who had worked with (inaudible) our manager of commercial real estate to expand our commercial real estate business in those markets and they are doing well.

Detroit recently opened Cincinnati, Indianapolis a little longer and both of them have been getting good results from the best developers in those locations. We put a lot of effort in growing our private bank and institutional services. Clients, in particular we have hired, and you had a press, and you had a private banking.

We've hired some teams of folks from one of our big competitors in the upper mid-west. We were talking earlier this morning with some folks that, in the commercial space when you hire a commercial banker, you can’t really expect that book of business to follow that person quickly. It might follow but it takes time because people don’t really want to change their bank if you run a business, that’s a big deal.

However, a personal banking relationship tends to move more quickly because people put their trust and faith in any person rather than an institution typically. So, hiring teams of wealth management folks has generally given us little more fast-lift than the commercial bankers, not that we are not getting with that commercial bankers. It’s just a longer sales cycle.

In the mortgage business, we've enjoyed quite a boom as have many over the past three quarters. In the first quarter, we made as much money in mortgage banking as we did all of 2011 and then we did it again in the second quarter and we did it again in the third quarter. And we’ll probably have very pretty good results again in the fourth quarter and hopefully in the next year. So, that’s been a great lift for us. You can see the slow growth of our residential mortgage book that we hold on balance sheet, the grey bars at the bottom there are roughly 1 billion to a 2 billion, depending on paybacks of 15 year paper that we hold and everything on top of that is the adjustable rate book that's been growing.

You've seen us taking some pretty serious looks at expenses, in this very revenue challenged, low interest rate environment that we operate in. We have to look hard at expenses. Earlier this year we announced the consolidation of more than 20 branches and the results from that have been very good.

We have a very dense branch network in Wisconsin, so the 21 branches that we consolidated were generally within two or three miles of other associated branches and as we sit here about nine, ten months later, we've retained more than 90% of the deposits from customers from those consolidated branches.

So we just announced that we're consolidating another 12 branches, that will occur in the first quarter and we expect similar results because those branches again are in close proximity to other associated facilities. We generally figure on average that we pick up about $300,000 per branch of expense saves annually when we do this. So although, no one likes to shrink their company in this environment where deposit gathering at least for now has been devalued. You got to be very discipline and try to get efficiency out of these big networks that we operate.

So that's something we'll continue to look at. In addition to the branch consolidations, we've changed our small business lending philosophy, we had in our larger branches, branch managers charged with going out and generating small business loans and we have backed behind them with assistant managers and we recently changed that model and eliminated generally speaking assistant manager position at these branches that was almost 60 folks there. We've been doing some efficiency work around our commercial bank and we're also consolidating some facilities, we bought an old building in Greenbay, which we're doing some renovations on right now and we'll consolidate five different leased locations into that building and likewise we're going to be consolidating three or four locations in Chicago into one space.

So we're doing quite a bit to try to work on efficiency. And one thing I would mention, a lot of you know that we've been operating under a consent order for some DSA, and no problems, we've been in that situation now for going on year. We're frequently asked what's the costs of that. The cost of that we estimate is going to be about $15, $20 million. So a very significant cost for a company like us. Most of that we've already seen flow through our income statement and the amount of that will be finished this year. So going forward next year you won’t see those expenses flowing through.

At the same time that we’re looking to consolidate branches, we’re still investing in technology to continue this industry wide reality the people come into bank branches less and less and less, so we’re in the process in our major markets, I’m swapping out our ATMs to image enabled ATMs so that people can feel more comfortable making deposits in an ATM where they get a picture of their text or cash that they deposit into ATM on their receipt.

We will continue to enhance our online and mobile offerings. We’ll have the capability of letting people take pictures with their smartphones next year. We expect all of that will continue to drive foot traffic out of the branches and continue frankly to give us the opportunity to look for efficiencies. So we’re not just closing stuff down, we’re also investing technology wise to serve our customers better.

We also as you know have been in a situation where Associated, although it was a very efficient bank in the past, one of the reasons it was an efficient bank is that it didn’t invest a whole lot in the franchise. So we had branches that were extremely rundown and poorly maintained. So over the past couple of years, at a time when we didn’t necessarily really want to be doing this, we’ve been investing significant money into refurbishing branches.

So we’ve been closing branches, but we’ve also been making the remaining branches more consistent with look and feel and these are some examples of pictures of the remodels that we’re doing so that we get a consistent look across the franchise. We touched about 30% branches. Last year, we’ll do about 50, this year and we’ll be at that pace for another year or so and then we will have a branch network that’s got consistent signage and a consistent look and feel which will be attractive to our customers and new customers.

On credit quality has been something that we've focused on from the day that I walked in there in December ’09. In the past, our bank was in poor shape. Credit wise we were operating under regulatory agreements with the Fed and OCC, those are now long behind us and credit continues to improve. We’ve had, I think its 10 or 11 quarters straight now of continuing positive credit indicators, pretty much on any line you want to measure. So our potential problem loans now are about 20% of what they used to be not too long ago not accruals, we’re more than $1 billion at one time so they are about a quarter of the peak. Our provisioning now has come down quite dramatically where we haven’t been providing now for some quarters and charge-offs have been trending down as well.

We don’t expect to see any changes in that although, it’s likely as we get into next year and we’ll give more detail when we do the fourth quarter earnings call in January. At some point in the coming quarters, you are going to start to us providing for loan losses. The benefit of all these problems going away and the reserves that go with those has been offsetting the loan growth we have, the reserve that you have to put up against new loans. But that’s going to come to an end here and we will have to start providing to recognize the fact that we've been growing the loan book pretty substantially. So, that will be something that we’ll deal with sometime next year for sure.

So, overall, we think we've got a very good story here. We've lighted the ship, we've been growing. We are defending on net interest margin. We are deploying capital back to shareholders. We think in the coming year it’s highly likely there will be acquisition opportunities for Associated in the market, where we can do a transaction that we feel very good, about getting cost out of. And we think that with the capital profile and with the area that we operate in, we are a good play in the regional banking space.

So with that I’ll be happy to answer any questions. I know Erika has plenty.

Question-and-Answer Session

Erika Penala - Bank of America Merrill Lynch

Before we start, we could just see the results from the poll on for Associated. So while the polling folks are pulling that up, maybe I'll start off with the first question. Is the buyback authorization and a dividend increase, is that reflective of the level of payout that you are going to ask for in the small bank or mid-size bank (inaudible)?

Phil Flynn

From a dividend perspective, yes, from a total payoff perspective, I think we benefit from having a level of capital that exceeds the average bank and so I think we’ll have more flexibility than others in general going forward.

Erika Penala - Bank of America Merrill Lynch

Got it.

Phil Flynn

It’s one thing if you are operating perhaps at or below (inaudible) authorization. It’s another thing if you have perhaps 300 or 400 basis points above (inaudible). So we can be at more flexible.

Erika Penala - Bank of America Merrill Lynch

And you mentioned that, I think there were investors that saw the flow of growth rates in the third quarter and you mentioned during your remarks that it will probably see more of the same in the fourth, but if you look underneath the commercial loan growth, it’s still at a 12% annualized clip, could you give us an update on the commercial side and whether or not this fiscal cliff issue that everybody likes to talk about is a real impact on your business.

Phil Flynn

Yes. I think it becomes very anecdotal when you answer questions like that, but I spent a lot of time making calls with our officers around the walking, the rest of our footprint. And there was clearly leading up to the election more uncertainty out there amongst business owners and folks who operate businesses. And I think we saw some of that slowdown, there is a lot of worry about the fiscal cliff, there is a lot of worry about the impact of the affordable healthcare act on making investments in companies right now.

On the other hand, we are seeing year-end deal activity right now with folks who are looking to recapitalize or sell companies in anticipation of higher rates and perhaps changes in capital gains rates. So we may see a little benefit from that. But in general, just like any market, the commercial banking market does not thrive on uncertainty and we are in uncertain times.

So, I think for a variety of reasons, a high single digit, loan growth for our company across the board in something maybe even slightly smaller than that in the commercial banking space is what we can expect and it’s probably okay. As I said, double digit consistent loan growth is pretty high loan growth and you need to be careful as to what you really putting on your balance sheet when you’re growing that cliff.

Erika Penala - Bank of America Merrill Lynch

Questions from the audience?

Does part of that loan growth for next growth involve a similar level of retention on the hybrid ARMS?

Phil Flynn

Yes. We are happy to retain the 51 ARMS and you saw the growth rate, we would expect that to continue, we're very comfortable putting that on balance sheet. We're not anticipating growing the 15 year bucket that we originate; we continue and have them selling that on into the market. We’re really reticent and we may be proven right or wrong about this. We're very reticent to bake a lot of elongated fixed straight assets into our balance sheet. We're clearly giving up some amount of yield today, by taking that stance. But, if and when rates do go up, we're going to own, anyone who is putting 30 years stuff on their balance sheet is going to own those loans for a long, long time.

Erika Penala - Bank of America Merrill Lynch

So, speaking of that maybe let’s the turn the discussion over to the margins, not a fun topic for anybody at this point. Could you give us a sense of, if we’re really in this prolonged low rate environment, but you’re still seeing consistent loan growth? How we think about where the margin can bottom out? And what are the major dynamics that we should think about when forecasting over the next two years?

Phil Flynn

From a general perspective we’ve been pretty consistent about defending the margins at around the trend levels. We had the benefit of having securities portfolio to provide funding for the first leg of that growth. As we look forward, we've taken a number of initiatives in the third and fourth quarter to essentially take up some of our higher cost liabilities.

And as we look into the fourth quarter and into 2013, we see continued ability, sort of pull on the liability levers to both reduce our cost of CDs which continue to come down. It came down 14 basis points in the third quarter. We have $0.5 billion of very high cost federal home loan bank advances, all of which will insure in the next fiscal year. And those two levers will carry us well into 2013, relative to the (inaudible).

Now there will be asset compression and that will be sort of the trend that we’re buckling. I think one of the folks on our last conference asked, if it was a mirage that our yields were holding up and we articulated that no, that we had the benefit of a number smaller sized loans in our markets that have reasonable spreads on them, that are renewing at a fairly good cliff, as well as the benefit of some preexisting floors that are working still to our advantage; longer and better than we thought, which are helping bolster our commercial margins.

And if can retain those relationships and those clients at those trend levels, we think we will be able to defend it for a couple more quarters into 2013. And going beyond that into 2014 clearly becomes much more subjective to the roll over. I don’t know where the CD market will bottom out. That will be a continuing source of opportunity. But if rates remain low, we also expect that we then see further action from the other larger banks on money markets and saving products. And currently we are essentially priced in our markets to be on par with US Bank and JPMorgan from a pricing perspective which puts us at the low end of market but to the extent other banks begin to move further down, we’ll have more room to move down as well.

Erika Penala - Bank of America Merrill Lynch

Good, off the top of your head, how many CDs from a dollar number is maturing in 2013 and at what rate?

Phil Flynn

The weighted average ratio is less than a year, so essentially the entire book we priced at about $2 billion at a roughly 86 basis points and the new one year CDs would be in the 50 basis points.

Unidentified Analyst

[Question Inaudible]

Phil Flynn

Sure. It’s a business that I personally have been in for about 30 years. So, most of what we are doing there is on the independent power site or power plants in the industry site. A combination of traditional natural gas fired plants and some renewable in the wind space. Pretty traditional stuff, but these loans tend to have an investment grade profile because you have got the uptake from a utility and we’re only advance in proven technologies. It is a low risk business from a credit point of view.

We are not a leader in that space. The bank I came from was one of the largest financers. So we tend to participate in that space. So, as time goes on, may be we’ll worry about the competition right now, it’s an opportunity to diversify our assets.

Unidentified Analyst

Okay. Can I head back to assets yields real quick? I try to (inaudible) all the time and don't necessarily have the granularity to do it but if you think about prepaid stay where they are, rates spread where they are and all of your loan categories, you kind of continue to grow the same categories you are growing at the same pace. Have you guys done the math on when the assets yields were bottomed, so like when does your securities portfolio roll to where we are now and sort of when have all your kind of higher yielding loans rolled off?

Phil Flynn

2015 to 2016.

Unidentified Analyst


Phil Flynn

Yes. It’s the latter. I think the opportunities for us in the short to medium term are on smaller institutions that probably don’t see a way to a robust future, or pieces of institutions. You know someone who wants to diversify away from a cluster or branches that happens over (inaudible) are the type of transitions that are significant interest to us. There is clearly more talk and more activity starting to pick up over this past quarter or two than what we'd seen previously. And I think the combination of Basel III coming along even though that there's a bit of a reprieve there, since last week but that combination as well as just the overall level of regulatory burden coupled with a prolonged low interest rate environment is causing these smaller companies to really do some self-examination.

Erika Penala - Bank of America Merrill Lynch

So let me follow up with that. The buyback that you announced today, is not necessarily an indication that conversations are slowing down, in fact you mentioned they could be picking up.

Phil Flynn

That's right. We're sitting here with 12% Tier 1 common equity, with the buyback and the dividend increase, with our projected earnings into the future, we're pretty much holding steady at about 12% Tier 1 common. So we have plenty of room to both do this 1 million or 2 million shares at quarter buyback and have a lot of capital for the right opportunity, that might come along.

Erika Penala - Bank of America Merrill Lynch

So maybe now is an appropriate time hopefully we could pull this up, if we could look at the poll results in terms of payout and the results would be nice, please.

And Chris maybe this going to what you were saying about maybe banks with your capital levels outperforming. But everybody that responded in the room does agree with you and believes that Associated can outperform all the banks in the above the 2 billion. And if we could have the results for the second poll please in terms of what we investors in the room prefer associated to do with capital deployment, so the choices were, one, do a special cash dividend; two, buyback stock aggressively; three, input M&A; four, footprint extent the M&A; and five, just focus on organic growth. We're not with investors (ph) right now? So if we could have the results, I think it'll be interesting.

What do you think of that, so, interesting to me that we had no responses on M&A.

Phil Flynn

Yes. Well there hasn't been much. So I'm probably not surprised with that. And given the overall level of capital that we have, I certainly appreciate investors wanting some of that and we're giving some back.

Erika Penala - Bank of America Merrill Lynch

And it’s feels like and obviously your announcement yesterday does count with this but it seems like the theme of this conference, no matter where the currency is, all investors are clamoring for the capital back?

Phil Flynn

The currency is all pretty low.

Erika Penala - Bank of America Merrill Lynch

Right, right. But even though it’s trading at a premium tangible book. So I guess maybe a final question if you look at consensus numbers, it’s pretty consistent over the next year or two as they say you can earn a $1, that you’re earning power level is a $1. What can you do and obviously the rate environment is a headwind for everybody but what can you do to accelerate the EPS power from the $1 consequently, if you can earn over the next two years?

Phil Flynn

Sure over two years, I think you should expect to see us be very discipline on the expense side. Our efficiency ratio is not satisfactory and we have to work on that, there is a revenue piece to that but we can’t count on interest rates bailing us out on our efficiency rate and we’re not. So a lot of things that we’re doing right now are focused on getting more efficient on the expense side. I’ll be surprised over the next two years, if we don’t find some opportunities to deploy capital through an acquisition that gives us good opportunity to take significant cost out of the acquired institution or the acquired operation. That should help drive as well and in addition, I mean over the last couple of years we’ve proven that we have a good organic growth engine at Associated and we have a good deposit gathering franchise to fund that low cost. So we will get organic growth and we will drive NII. The trade-off will be what does the NM look like along the way and we’re cognizant at that, but we’re still actually running the place to try to generate earnings on the bottom line.

Erika Penala - Bank of America Merrill Lynch

For 2013 should we expect dollar expenses to actually be down or can dollar expenses actually be down year-over-year?

Phil Flynn

Let’s tune back in January and we’ll give more specific guidance on that because we haven't done all work yet, we’re still in the final throws of working with our board on our financial outlook for the next year or two, but we’re very focused on the fact that we’ve got to despite the fact that we have to make and are making significant investment into the franchise, we’ve got to do that efficiently and manage our expenses.

Erika Penala - Bank of America Merrill Lynch

Let me ask this way, I like the slide that you put out in terms of updating us on your refurbishment of the branches, where are you in the investment cycle, sort of when you took over and said, well, this won’t do?

Phil Flynn

Right, what would you say by the end of this year, 60% two thirds of the way through?

Erika Penala - Bank of America Merrill Lynch

Thanks so much for your time gentlemen. I appreciate it.

Phil Flynn

Thank you.

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