Hancock Whitney Corp
NASDAQ:HWC
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Hancock Whitney Corp
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Good morning, and welcome to Hancock Whitney Corporation's Third Quarter 2018 Earnings Conference call. As a reminder, this call is being recorded. I would now turn the call over to Trisha Carlson, Investor Relations Manager. You may begin.
Thank you, and good morning. During today's call, we may make forward-looking statements. We would like to remind everyone to review the safe harbor language that was published with yesterday's release and presentation and in the company's most recent 10-K, including the risks and uncertainties identified therein. Hancock Whitney's ability to accurately project the results or predict the effects of future plans or strategies or predict market or economic developments is inherently limited. We believe that the expectations reflected or implied by any forward-looking statements are based on reasonable assumptions, but our actual results and performance could differ materially from those set forth in our forward-looking statements.
Hancock Whitney undertakes no obligation to update or revise any forward-looking statements, and you are cautioned not to place undue reliance on such forward-looking statements.
In addition, some of the remarks this morning contain non-GAAP financial measures. You can find reconciliations to the most comparable GAAP measures in our earnings release and financial tables. The presentation slides included in our 8-K are also posted with the conference call webcast link on the Investor Relations website. We will reference some of these slides in today's call.
Participating in today's call are John Hairston, President and CEO; Mike Achary, CFO; and Sam Kendricks, Chief Credit Risk Officer. I will now turn the call over to John Hairston.
Thanks, Trisha, and thanks, everyone, for joining us today. I'll begin today's call by saying our thoughts and prayers are with the residents and first responders addressing the aftermath of Hurricane Michael. I want to share how exceptionally proud we are of our associates and leaders in those impacted markets. They opened locations the day after the storm in highly adverse conditions, caring for clients and their communities, not only addressing financial services, but providing food and water to those in need. I spent Friday with the management team at Ground Zero, and it was certainly heartwarming to see the commitment and compassion evidenced by my colleagues, as by now they have fed over 4,000 hungry persons out of our banking locations. So I'm truly proud to serve at their side.
Moving on to third quarter. I'm pleased to report the attainment of another of our CSOs. Operating EPS was $1.01 for the quarter. And we have now achieved 3 of our objectives: operating EPS, ROA and ROTCE. We are pleased with the progress so far against the fourth quarter '19 objectives, but we still have work to do. We remain relentlessly focused on achieving the upper end of those ranges, potentially exceeding them. We completed the Capital One trust and asset management acquisition on July 13. The operating leverage from this transaction was positive, with trust fees of $5.5 million and expenses totaling $4 million. Loan growth was solid this quarter, and we topped $28 billion in assets. Net loan growth did fall a little short of our expectations as we received $89 million in loan payoffs in the 2 days prior to quarter end. Over half these payoffs were in energy and nondrilling services. You can see the impact from these payoffs on the waterfall chart on Slide 6.
While loan production levels are up year-over-year and, in some desirable categories, significantly higher, the third quarter did see a slight reduction coupled with the aforementioned late-term payoffs. Our main focus today in the balance sheet is NIM improvement. We reported 4 basis points of compression in the margin for the quarter. Deposit betas were higher than expected this quarter, and coupled with a shift in our funding mix and a lag in LIBOR, our NIM compressed just a bit. We expect deposit betas could remain higher for the near future and are keenly focused on improving our loan yields to drive margin expansion. Notably, criticized and nonperforming loan metrics improved again this quarter. Criticized energy loans were down $51 million or 13% linked, while nonenergy criticized loans were down $12 million or 2%. On the nonperforming side, energy loans were down $17 million or 7%, and nonenergy was down $13 million or 8%. We would be disappointed should we not see continued improvement in the fourth quarter.
Before I turn the call over to Mike, I would like to point out Slide 9. Almost 4 years after the energy cycle began, we have exceeded our goal of bringing our energy portfolio from a high of over 13% down to under 5% of total loans. We ended the quarter at $927 million or 4.7% of loans and no energy charge-offs in this quarter. As you can see in the pie chart on this slide, the mix is shifting from a concentration in services to a more balanced portfolio with upstream, reserve-based lending and midstream. With the aforementioned like-quarter payoff in energy services, we are nearing balance within the energy portfolio as a whole, which in turn dampens a full year contra to loan growth. With oil prices approximating $70 a barrel and stabilization in price ranges, we anticipate the cycle for us could end soon. There are a very few problem energy credits from which we anticipate potential future charge-offs, and we are highly confident the energy reserve is ample to cover that potential. I will now turn the call over to Mike for a few additional comments.
Thanks, John, good morning, everyone. As John mentioned just a minute ago, the third quarter reflects the achievement of 3 of our CSOs with operating EPS of $1.01, ROA of 1.24% and ROTCE at 16.11%. As we discussed in the past, our plan is to update those targets each January and until then, we will continue to execute our plan and achieve our goals. So excluding $4.8 million of costs related to the trust acquisition, operating earnings for the company were up $4 million from last quarter and reflects improvement in net interest income, a lower provision for loan losses, the addition of Capital One's trust and asset management business and a lower overall effective tax rate.
The trust acquisition also impacted our capital this quarter. TCE was 7.67% for the quarter. That was down 9 basis points from June 30. The ratio declined 27 basis points related to the acquisition and also reflected the increase in the quarterly dividend. We hope to bring that ratio back to the 8% level by mid-2019.
As for capital management, our top priorities are organic growth, potentially stock buybacks and, of course, dividends. M&A is more opportunistic in our view. We are not looking at large bank or strategic deals. Anything we would look at would need to be infill or smaller deals and meet strict financial metrics. And finally, as a reminder, we do not need M&A to achieve our CSOs. John also mentioned that our primary focus is NIM improvement. We have previously indicated that a typical 25 basis point rate hike would deliver a 2 to 4 basis point increase in our NIM. So what happened in the third quarter? The short answer is a perfect storm of higher deposit betas, shifts in our funding mix and the spread compression in 1-month LIBOR. All those factors together proved to be pretty significant headwinds against our NIM this quarter. Our total deposit beta jumped to 35% in the third quarter from 17% last quarter, partly due to the higher-cost Capital One trust deposits, a 24 basis point jump in the cost of our roughly $1.4 billion of brokered CDs and a 14 basis point jump in our public fund deposit book that totals about $2.7 billion. The spread compression in 30-day LIBOR negatively impacted the third quarter NIM by about 2 basis points.
We also saw a shift in the funding mix during the quarter with an increase in our home loan advances of $615 million with an all-in cost of 2.11%. Both quarters included about 2 basis points of interest recoveries.
Our near-term guidance for NIM and other items is on Slide 17 of the deck and reflects the comments we've made this morning. In the fourth quarter, we don't expect our funding mix to get any worse. And in fact, with the usual inflow of seasonal deposits we typically get in the fourth quarter, we could see that mix improve. That will help a lot. We also have a full quarter's impact of the September rate hike. So our overall loan yield will be up. The wild card, we think, continues to be deposit betas. Assuming our deposit beta remains in the 35% range and no impact from interest recoveries or reversals, our reported NIM could be up between 1 and 3 basis points. The most significant update on Slide 17 is the fourth quarter effective tax rate. Previously, we had guided to a 15% tax rate for the fourth quarter. That was lower than current levels due to annual stock compensation vesting, and that remains the same, which driving the projected rate lower is the implementation of additional tax reform strategies. These will impact the fourth quarter only, and after that, we expect to return to a more normal effective tax rate of about 18% or so for 2019.
Loan growth guidance reflects a slight slowdown in production when we reduce the expected provision for loan losses to between $6 million and $8 million for the quarter. Guidance for noninterest income and operating expenses are unchanged. At this point, I'll turn the call back over to John.
Okay, thank you, Mike. Chris, let's just go ahead and open the call for questions.
[Operator Instructions] And our first question comes from Catherine Mealor with KBW.
Mike, you mentioned your capital management strategy is -- and you mentioned growth first and buyback second. Just interested in how you're thinking about opportunistically buying back stock just with the pullback in your stock, but also as you're managing your goals for your TCE ratio.
Sure, glad to, Catherine. So obviously, how we manage capital remains and will always be a little bit of a balancing act between all the items you just mentioned. We have talked about buybacks as being more opportunistic in the past. And I think, based on where our stock price is today, that kind of represents the poster child of what we view to be opportunistic. So I think, in coming quarters, that's something we're, obviously, going to take a very, very close look at.
Got it, okay. And then one -- moving on to margin. I mean, would you say -- it feels like it was a perfect storm. But it feels like the LIBOR move, or the limited LIBOR move this quarter, that didn't give you the boost in the loan yields feels like the more surprising piece of the margin, given where you probably entered the quarter. I mean what would you say that the deposit beta increase was fairly in line with expectations? Or was that still a deposit beta that you feel like -- is it appropriate for you to see and where you could still kind of get that 2 to 4 bps increase in your margin per a 25-bp rate hike?
Yes, again, on the comments we just made, we talked about, certainly, looking into the fourth quarter and seeing our NIM potentially improve by 1 to 3 basis points. So you're correct. The lag in the 30-day LIBOR certainly had an impact on our overall NIM this quarter. And with respect to deposit betas, we've been talking for the last, really, 3 or 4 quarters around this notion of pretty significant volatility quarter-to-quarter with deposit betas. A lot of that has to do with competitive pricing, promotional pricing and just the nature of how the interest rate environment that we're in now has kind of matured, I think, over the last couple of quarters. But one thing, though, that I do think is encouraging. On Slide 11 in the deck, in the bottom left-hand corner, we have a little table that shows our deposit and loan betas. We show our total deposit beta, but we also show that deposit beta, backing out the higher-cost deposits that we acquired with the Capital One trust acquisition, but then also backing out our brokered CDs, which are probably the more -- one of the more higher-costing deposits we have on our balance sheet. And when you look at those trends, certainly, the third quarter is elevated compared to the second quarter. But you don't see that extreme volatility that you do when you kind of add in into the deposit mix the higher-costing deposits that we acquired as well as our brokered. So I do think that we're doing a good job of pricing our core deposits. It's basically, all the deposit beta jump this quarter really is pointed at the trust deposits that we acquired along with the jump in our brokered CDs.
Got it. And so then the volatility of these expected moving forward, is that more of a factor of your loan growth? I mean, as you kind of look at your loan growth, if the loan growth really does improve in the fourth quarter then, I guess, the wild card too in the deposit cost is how much pressure that puts on your funding base.
That's part of it. But I think the biggest part of -- or the biggest thing that kind of drives this volatility in our deposit betas really is the competitive factors across the markets that we operate in, both from larger banks that tends to be more on the money market side and then smaller community banks. We feel pressure from that sector mostly with CD pricing.
And our next question comes from David Feaster with Raymond James.
I'd like to start on loan growth. You talked about that you're seeing slower production and that you're expecting some pressure in the fourth quarter there. And I just wanted to -- is there anywhere where you're seeing the most weakness? Could you give us some detail there? And whether you're assuming that payoffs remain elevated in the fourth quarter?
That's a good question, and there's -- there may be a few answers to it. First, when you mentioned pressure, non-bank lending comp has been challenging, I think, for the industry for the better part of the year. That primarily shows itself in CRE permanent financing terms and structure. We have lost some of that money to life insurance companies, who are prepared to do it with much less structure and a much skinnier price than we feel is prudent. Hedge funds and private equity are primarily on operating cash flow as primary source of repayment and secondary repayment something other than real estate. So that's where the non-bank competition is coming from. And then you have your typical pressure that's been adding on digital offerings to the consumer side, which is why we've invested so much and continue to invest in developing those tools to compete digitally. But in terms of just conventional loan competition from the banks we compete with, I don't think it's necessarily any more or less competitive than it has been in the last couple of years. It's an environment that everyone's in hand-to-hand combat for a good high-quality deal with a decent yield. And we're competing there. The loan growth picture for the third quarter was driven lower, primarily, because of a desirable payoff in the offshore services area plus one other one right there at the end of the quarter. So we're disappointed to miss the guidance, obviously, but about half of that miss was in the reduction of energy services, which is something we've been talking about for quite some time. And so we still feel good about the ability to produce a more granular portfolio, and the amount of business we're doing at the smaller segments is pretty dramatically up year-over-year. And we would expect to continue making progress in that space.
Okay, that's helpful. And as we look out to next year, how do you think about loan growth? I mean, should we expect something greater than the 4% that we're effectively looking at this year as energy headwinds abate, somewhat offset by the continued competitive environment and heavy pay down?
It's a fair question. And I think -- and not to be coy, but we'd probably defer a 2019 conversation toward the end of the year, when we're restating the CSOs. I think having met 3 of the 5, it's a -- as we always do at the end of the year we reconsider them. And in that context, we'll talk about loan growth guidance for next year. But I will say that as we go through the next several quarters, our desire to do a little bit better job on the NIM, deposit betas notwithstanding, is really on credit yields. The market is still allowing, I think, credit prices to be a little less than they should be relative to the rising cost of funds. And I think as banks face that pressure on NIM compression, their desire to get a little bit more on the credit side will facilitate maybe a little bit better NIM over the course of next year. So that said, we're focused more on replacing very large, skinnier deals with smaller, more granular but higher-yielding business as the year goes by. So if I could trade a little growth for a better NIM, I think we'd take it. That doesn't signal anything. It's just where our intention and our focus is.
Okay. That's helpful. Last one from me. As you know with the Capital One deal closed, it didn't have a full quarter this quarter, it sounds like things are going better than expected there. Could you talk about maybe a run rate for trust fees in the fourth quarter and in the next year? And maybe whether there's any more specifics or updates with regard to the conversion in the first half of '19 and quantification of cost-saving potential?
Yes, David, this is Mike. And we haven't talked yet about what we believe the cost savings will be to come out of that transition. So that's something I think we'll save until we get to the point we're a little bit closer to the actual conversion date. At this point, it looks like the conversion date will be in the second quarter. And I think you're right. I think, overall, we're absolutely thrilled with how that transaction has gone so far and certainly expect big things related to that relationship going forward.
And our next question comes from Ebrahim Poonawala with Bank of America.
One -- I think, if we could just start with -- from an expense growth standpoint. One, like looking at your fourth quarter guide, I think, Mike, you had mentioned last quarter biased towards being at the lower end of that 3% to 4% range. So just trying to understand where we are at. $176 million run rate this quarter. Where -- how much higher or inflation should we expect going into 4Q? And whether you still expect to be at that lower end of the range?
Yes, Ebrahim, so the guidance really hasn't changed. We do expect to be somewhere in the lower end of the range, potentially around the midpoint or so. And then going forward, for 2019, as John mentioned, we're really going to talk about the targets and goals for 2019 and for 2020 after we release earnings in the fourth quarter. So we'll do that on the January call.
Understood. And I'm not asking about 2019 guidance. But when you look at your CSOs and trying to get to a sub-56% efficiency ratio, can you at least talk about philosophically how much of that do you expect to come from the revenue side versus just holding the line on expenses from where we end 2018?
Well, again, I think, we'll talk about 2019 in January. But just to give you some color, I mean, certainly we're looking for and expect revenue to be a big contributor to helping us achieve our goals in 2019 and beyond. We're cognizant of the need to control expenses and -- for any investments that we make in the company, and we are making significant investments in the company. That's a combination of achieving the revenue that's expected from those investments and then also finding prudent ways to make room for those investments by reducing costs elsewhere in the company. So again, it's a little bit of a balancing act for between those 3 or 4 different items.
Understood. And just switching for a second to loan growth. When I look back the last 4 to 6 quarters, it seems like about 1/3 of the growth has come from resi mortgage loans. If you could give us a sense of -- the portfolio's about 15% of the loan book, do you see that book growing? And are these 5-year adjustable ARMs that we are adding? Just if you could give any color on that?
Ebrahim, you broke up just a little bit toward the front end of your question. Which category of loans? Mortgage, yes.
Yes. So the mortgage portfolio, which has contributed roughly about 30%, 35% to loan growth over the last year. And is there a target where you see how big that portfolio can get as an overall book? And what's the nature of the loans we are adding?
Ebrahim, this is John. We haven't talked about the segments inside the mortgage book, but it has been a good growth engine. But right now, the spreads that we're able to achieve out of mortgage are not terribly desirable in the long term. So what we're interested in doing there, if we do any growth at all, is going to be on rates that we expect to adjust. And those typically have a shorter duration. So you don't necessarily see the lift in the rates as time goes by because they typically refinance off to some other purpose.
But just to add on to that. I think it's fair to say that going forward overall mortgage loans in terms of what we put on the balance sheet will be less of a factor going forward than they have been in the past.
Yes. Driven entirely by the desire to get paid a more reasonable price, I would look to mortgage and indirect to be less of a growth driver in the future than the last year or so. Mortgage driven by rate and indirect by composition. And then see the lower categories in business banking, commercial banking and the lower and the middle market should be outperformers in the future versus the last couple of years.
And our next question comes from Casey Haire with Jefferies.
Mike, I want to follow up on your comments on Slide 11, the deposit betas. Have you guys -- what's the appetite to take advantage of what's a pretty good liquidity profile with a loan-to-deposit ratio at 87%? If you were to let that migrate up a little bit obviously, you could lean on some of your -- the core deposit side of your franchise and show, obviously, lower betas. Just curious as to if there is any appetite to take that higher?
Absolutely, there is. And that's something that will be currently is and continues to be part of our business planning for 2019 and 2020. And in fact, we actually have taken that up just a little bit and are around the 88%, 89% range. So, no issues whatsoever with elevating that ratio a bit.
Okay, I mean, would you -- is 89%, 90% like a ceiling? Or I mean -- you could -- I mean, some of your peers are above that.
Right. We understand that. And look I don't think you'll see our company in the 95% range or anything approaching that. But certainly, something higher than where we are now is certainly feasible and what we're looking at.
Got you. Okay. I guess just switching to credit quality. Another good -- some progress in this quarter. Sounds like it's continuing. Just curious is there -- what sort of magnitude -- could you put some numbers around how much it could cure versus that 2% NPA level?
Say the last part, Casey.
So -- like NPA is at 2% of loans, and it sounds like it's improving. Like is there an expectation that, that number could be meaningfully lower in the coming quarters? Or is it going to level off around this -- in this neighborhood?
Yes, we continue to be focused on reducing both our criticized, our energy as well as nonenergy along with our NPA. So we're not looking at a leveling off of those numbers and continue to intend to drive those lower.
Sam, anything to add to that?
No. It's a continuing focus for us. We're working that portfolio in terms of remediation every day. And so we will have, as you do, through cycles, some adds and some subtracts, but that's just part of managing the portfolio. But our focus is continuing to drive that number down to more acceptable levels that we're more accustomed to seeing in our portfolio.
Yes, this is John. Just for clarity, the energy portfolio remains the more elevated criticized categories and classifieds, and that's the portfolio that we expect to see the most meaningful reduction in. And that trend has been going on now for the better part of 2 years, and we think it will continue.
And our next question comes from Jennifer Demba with SunTrust.
It's actually Steve Stone on for Jennifer. Just wanted to kind of follow up on asset quality, maybe, ask you a little differently. But can you give us some granularity in the nonenergy NPAs and criticized loans? What's there? And then what's kind of a realistic time frame for you guys to reduce these 2 to more of a peer level, I guess, energy and nonenergy? Any different strategies or time lines, energy, nonenergy, looking at it?
Well, we can -- again, we've made substantial progress as you can see about the charts in the deck. If you look at the nonenergy criticized segments, there's no single segment that is the key driver there. We don't have an industry segment that contributes more than 6% of that total in the nonenergy criticized. And you take our top 4 industry concentrations in those nonenergy segments, and they don't constitute more than 20% of the total nonenergy criticized loan. So there is no systemics or concentration in that portfolio, it is just taking it credit by credit, working with the management team of those respective clients, finding a remediation plan and continue to work through it. So that is our -- as John likes to say, our unrelenting focus.
And Steve, if you go back in prior years prior to the energy cycle and just look at those overall percentages, that's more what we think our norm really is. And if you measure the gap between where we are today and those percentages, you ought to be able to derive a tone of sort of where we believe we're headed.
And our next question comes from Christopher Marinac with FIG Capital Partners.
Do you think the onetime items in the fourth quarter for office relocations, et cetera, are anything significant? Just curious on a little more color there?
No, Chris, this is Mike. So we had $4.8 million in the third quarter. That was almost completely related to the Capital One transaction. So in the fourth quarter, we probably will have some onetime expenses potentially related to the storm. And then also some potentially related to the move. But taken together at this point, we don't view those to be significant or will be significant.
Okay, great. That's helpful. And just a follow-up on the overall energy exposure. As we look out 4, 6 quarters, could that level go back up as business trends improve? Is there anything that would suggest that you might think that to slightly higher?
It's a good question. This is John. We have not set a hard concentration limit as it pertains to capital but are kicking around, around 65% of capital in commitments. We're a hair below that right now. So we still have some mixing change to do. We're probably -- and these are very general numbers. We're probably $50 million to $75 million heavy in services and $50 million to $75 million light in the combination of RBL and midstream. So as those remix, we're going to get down to well under half the total energy portfolio in services. And at the point that mix is attained, which we're really -- at the pace we're on, we're really a quarter or 2 away from that, is not a very, very long-term objective. So some time certainly in '19, we'll hit that. And then I expect to hover right around 65% in commitments, and that would go up as capital goes up. So I don't think we're ready to say we're growing the energy book. If it grows, it will be simply because we found a very high-quality client to add maybe in a quarter where we didn't exit one of the ones that we have on the exit strategy list. Does that answer your question enough to be definitive?
Yes. No, it does. That's great, John.
And our next question comes from Matt Olney with Stephens.
On the Capital One deposits. Any more details you can provide as far as what category those came in, in? And what was the average cost of those deposits in the third quarter?
Sure, I'd be glad to, Matt. So those were money market accounts, basically. And the average for the third quarter was about $240 million. The cost related to those deposits was about 186 basis points.
Okay, perfect. And then also sticking on the liabilities side. There were some interesting migrations. The public fund balance got hit quite a bit. It seems like it was maybe more than any kind of seasonality. So can you kind of speak to what you saw there? And then also on the short-term borrowings, those increased considerably on the average balance? Anything you can tell us about there.
Sure, I'll be glad to. On public funds, as you know, we have about a $2.7 billion public fund deposit book. And the seasonality with that book is pretty significant. So we normally see the inflows of those deposits really late in the fourth quarter. That continues into the first quarter. And it begins to kind of trail off in the second and third before it builds up, again, in the fourth. So what we saw in the third quarter was probably a little bit more of an outsized outflow than what we'd normally see in our typical third quarter for public funds. Some of that had to do with some bond issues and the money related to those bond issues being dispersed. So that really kind of speaks to the unusual event in the third quarter related to that book.
As far as our advances, you're right. And when we refer to shifts in our funding mix, we did have an increase in our advances of about $600 million between the third -- the second quarter and the third quarter. And again, we spoke on the call, or the prepared comments, going forward, around that funding mix, really not getting any worse and potentially getting better as we head into the fourth quarter as we have our typical inflow of both public fund deposits but then also nonpublic fund deposits. That, again, typically happens in the fourth quarter.
Okay, that's helpful. And then I appreciate the commentary on M&A in the prepared remarks. But it still seems like there's some confusion in the market. So help us understand for Hancock Whitney is M&A a primary or a secondary growth strategy right now.
Well, again, as we've said and we continue to say, we're not interested in large bank or strategic deals. And I'm not sure how else we can say that other than to say we have no interest in those kinds of transactions. Potentially, we describe it as opportunistic. We would look at smaller infill deals. But again, those transactions have to fit pretty stringent financial criteria for us to advance on any of those deals. And as of now, there's absolutely nothing that we're looking at. So hopefully, that's helpful and kind of puts a little bit of an exclamation point on that topic.
Yes, and Matt, this is John. You used the terms primary and secondary. I think we've always said, organic is primary. It is now and will remain so.
Okay. And my last question. In the presentation, you mentioned the operating leverage in the third quarter was about $1.5 million compared to 2Q. It looks like that was mostly driven by the Capital One acquisition, added about $1.4 million. So how should we think about how much more incremental operating leverage can we expect from the bank organically, assuming no more M&A from here?
That's what we're focused on. We had in the second quarter pretty significant level of operating leverage. That did drop in the third quarter for reasons, I think, we've talked about on the call today. And going forward, the objective is to move that operating leverage back up. So that's absolutely what we're focused on. And we do that through increasing revenue, primarily.
And we do have a follow-up with Ebrahim Poonawala from Bank of America.
Just very quick question, in terms of the discount accretion on purchase accounting, it's been fairly consistent over the last several quarters. Any color around that in terms of how we should expect that to trend? Or is there a drop-off coming over the next couple of quarters?
No, I don't think so, Ebrahim. I think what you see in terms of our accretion over the past couple of quarters is what you potentially see going forward.
Got it. And just following up on -- in your comments earlier around opportunistic buybacks. Is the message there that if the stock looks attractive to you, which you said it does here, you are okay buying back stock even if you've not hit your TCE target. Is that the right way to think about it?
That's exactly the right way to think about it. Yes.
This does conclude today's question-and-answer session. I would now like to turn the call back to John Hairston for any further remarks.
Thank you, Chris, and thanks for moderating this call. And thanks, everyone, for your interest. We look forward to seeing you on the road.
Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect, and everyone, have a great day.