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Greetings, ladies and gentlemen. Welcome to the Home Bancshares, Inc. Second Quarter 2026 Earnings Call. The purpose of this call is to discuss the information and data provided in the quarterly earnings release issued after the market closed yesterday. The company presenters will begin with prepared remarks then entertain questions. Please note if you would like to ask a question during the question and answer session, please press star, then 1 on a touch tone phone. If you decide you want to withdraw your question, please press star, then 2 to remove yourself from the list. The company has asked me to remind everyone to refer to their cautionary note regarding forward-looking statements. You will find this note on page 3 of their Form 10-K filed with the SEC in February 2026. At this time, all participants are in a listen-only mode. This conference is being recorded. If you need operator assistance during the conference, please press star, then 0. It is now my pleasure to turn the call over to Donna J. Townsell, Director of Investor Relations.
Thank you. Good afternoon, and welcome to our second quarter conference call. With me for today's discussion are our Chairman, John W. Allison; Stephen Tipton, Chief Executive Officer of Centennial Bank; Kevin D. Hester, President and Chief Lending Officer; Brian S. Davis, our Chief Financial Officer; Christopher C. Poulton, President of CCFG; and Scott Walter of Shore Premier Finance. Home Bancshares reported another solid quarter, generating a record net income as adjusted of $128 million while significantly expanding our balance sheet and maintaining strong profitability. Loan growth, stable margins, and improving book value underscore the strength of our franchise. Most importantly, we accomplished all of this while maintaining strong credit discipline and preserving the profitability that has long differentiated our company. Our team is prepared to provide you with more details about the quarter, with our opening remarks today coming from our Chairman, John W. Allison.
Well, thanks, Donna. It has been another quarter come and gone. The second quarter of 2026 was full of records. For the record—excuse me—there were a couple of items that I think we should talk about. Number one is our merger with our friends at Mountain Commerce. It is evident that some of our merger earnings came through a little earlier and a little stronger than we anticipated. We felt some of the earnings impact in the first quarter. Because this trade was non-dilutive, therein lies the benefit of a non-dilutive transaction. A successful merger is where the two companies should be creating more value together than either company can achieve separately. Our view of that meaning is one plus one should equal three, not 1.75. With our deal being a three, both groups immediately started sharing the benefits of their union. In this merger, Mountain Commerce and Home Bank shareholders will equally enjoy the ride together. Perhaps the biggest surprise of the quarter, though, was the surprising loan growth within our legacy footprint. We were forecasting a negative $600 million in loans and actually had a plus $26 million. That is a $626 million swing on the loan side. As a result, we will no longer forecast next quarter's loan growth. Obviously, we do not do a very good job of that. The problem is that our customers are a group of outstanding, loyal entrepreneurs that are constantly looking for opportunities; we only learn about most of them when they need funding. Many of them do a deal on the spot, commit to do a deal on Monday, and say we will close on Thursday with cash. The good news is we know their limits, and they know our limits. Second quarter performance speaks for itself. During the quarter, we incurred approximately $12.7 million of merger-related expenses. Excluding these expenses, the earnings were—and you are going to hear it again—EPS is $0.64 and earnings of $128.1 million after tax. That is an 8.4% increase from the last quarter and almost 12% from 6/30/25. Additionally, revenue of $295 million was up 10.6% from the prior quarter's $266.7 million. Adjusted pre-tax, pre-provision net revenue reached a company record of $171 million. When you adjust for the efficiency ratio, it came out to 40.46. Good job by both teams, Mountain Commerce and Home Bancshares, on the expense side. Adjusted ROA was 2.09. Net interest margin was stable at 4.51%, the same as last quarter, up 6 basis points from the prior period. On a pro forma basis, these performance numbers are some of the best our company has ever run. I want to thank all our associates for an amazing quarter. That includes our new partners, Bill Edwards and his outstanding Tennessee team. We have completed the conversion of our legacy company in June and I think it went as smooth and as good as could be expected. Now on to Mountain Commerce. We stepped up stock repurchases during the quarter. From first quarter, we repurchased 500 thousand shares. This quarter, we repurchased 1.5 million. I said our goal was to repurchase over a short period of time the shares that we issued in the Mountain Commerce transaction, and we are already approaching the halfway mark. On M&A, we are looking at some other opportunities. But with the nonperforming loans that we told you about last quarter, our stock took a drop even though it was a 2% plus ROI. Again, Home remains one of the top most profitable banks in America—the top 10. We have been presented opportunities, but because our stock was temporarily depressed, and we hold our standards high because we do not dilute our shareholders, our bid was not acceptable to that opportunity. We will hope to revisit that company as soon as our stock recovers. As to the large nonperformer, there has been significant movement since last quarter's report, and we stand by our comments that we expect no further loss. The loan was non-performing and no income was recognized in this quarter for that loan; otherwise this would have been an even stronger quarter. While work remains, we are encouraged by the progress made this quarter. I have to say here that Kevin D. Hester, David Carter, and Mike Cook deserve special thanks. They spent a lot of time on this nonperformer. They took the bull by the horns and protected the shareholders and Home Bancshares—thank you guys for a great job. That is a solid testament to the quality commitment and standards of our people. Mike Cook, now taking over leadership a while back of the Dallas region, has that region reflecting Home's credit culture and underwriting standards. It is certainly nice to have those loan problems, for the most part, behind us now, but there is some work to be done. However, I think we see the light at the end of the tunnel. In our environment where industry loan growth remains challenging, exceptional loan growth should always be examined carefully. Growth generally comes from a combination of pricing, structure, terms, or credit standards. When there is robust standout extraordinary loan growth in an environment that does not support that kind of loan growth, you need to look closely at structure and terms. It is extremely important that your team from the top down to the junior lender have lending experience—and not only lending experience but quality lending experience with skin in the game. At Home, that starts with me at the top as an asset-quality person who has spent a sixth decade in the lending process. We believe in quality lending. I have been involved in over 50 M&A deals; this was certainly one of the most difficult. But even with all the problems associated with the acquisition, we have worked our way through those problems with a good partnership of Mountain Commerce and Home employees together. We opened a new branch in Rockwall, Texas, led by Cain Pierce. We are excited about that—this is a new branch, not a replacement. New events included hiring our first in-house counsel, Mr. Jeff Campbell, who will fill the role of corporate counsel. We want to welcome Jeff to the family and look forward to working with him. Donna, I just want to make a quick recap of the quarter, if you will allow me. Record adjusted income, record revenue, loan growth from a negative $600 million to a $26 million increase—a $626 million swing—stepped up repurchases from 500 thousand to 1.5 million, PPNR a record $171 million, an adjusted efficiency ratio of 40.46, stable margin of 4.51, and Mountain Commerce already being a contributor sooner than expected. Continued confidence in Home's credit culture. When you look at the adjusted earnings, the profitability metrics, the efficiency ratio, stable margin, elevated share repurchase, and strong balance sheet growth, I believe Home's second quarter once again produced one of the strongest banking performances in America. I rest my case. Back to you, Donna.
Okay. Well, thank you, John. It was another amazing quarter. Our next report will come from Steven Tipton.
Thanks, Donna. As John mentioned, the second quarter of 2026 was a strong showing with the inclusion of Mountain Commerce Bank in Tennessee and a little organic loan growth from Legacy Centennial Bank. Adjusted earnings, excluding merger expenses, were $128.1 million, producing a 2.09% return on assets, the same as last quarter, and a 16.82% return on tangible common equity, which is on a TCE ratio of 13.22%. The reported net interest margin was 4.51% in line with Q1, all while adding $1.5 billion in loans and deposits from Tennessee. The core margin, excluding event income, was 4.47% and in line with where we guided to on the call in April. The overall loan yield excluding event income averaged 6.96% and exited the quarter at 6.99%. Interest-bearing deposit costs averaged 2.38% and exited the quarter the same at 2.38%. Total deposit costs were 1.85% in Q2 and exited the quarter at 1.84%. Strong noninterest income was a highlight for the quarter at over $53 million. Higher loan recovery income, fee income at CCFG, and increases from our SBIC investments were the primary drivers and got us back to levels we saw in quarters 2, 3, and 4 of 2025. Switching to the balance sheet: Legacy deposit balances declined in Q2 by $179 million as a result of tax payments and seasonal outflows in April. Worth noting, deposit balances increased by $86 million in May and over $200 million in June to end the quarter at $19.1 billion. Loan production rebounded in the second quarter to just over $1.4 billion with nearly $1 billion of that production coming from the Community Bank footprint. Switching to capital, we repurchased 1.5 million shares of stock during the quarter for a total of $40.4 million. As of June 30, we have over 15 million shares remaining available for repurchase under our current authorization, and nearly $450 million in cash at the parent company. Tangible book value per share grew $0.45 to $15.32 or an annualized increase of 12.1%. Capital levels remain extremely strong, common equity Tier 1 capital ending at 16.4% and total risk-based capital at 19%. And reserve to total loans of 1.92%. We are proud of the second quarter results here at Home, particularly with the inclusion of our partners at Mountain Commerce, and look forward to the second half of 2026. With that said, I will turn it back over to you, John.
Thank you, Steven. And to close out our prepared remarks, Kevin D. Hester has a lending report.
Thanks, Donna. As John noted, we found a way to post marginal organic growth in loans in the second quarter, which looked very difficult when we talked 90 days ago. This included flipping what was an anticipated large payoff early in the quarter into a hold with even a slight increase, which put us on a good path for the rest of the quarter. In last quarter's remarks, I mentioned that Q3 payoffs appeared high as well, and that is still the case. In fact, the gap is higher now than it was 90 days ago. John joked about us not being very good at forecasting and we discussed on the last call some of the reasons why early projections can be skewed toward declines. That said, we have work to do in order to post loan growth in the next quarter. Regarding John's comments about loan growth in general, we are seeing loan rates from competitors creep lower and lower while probabilities for the next Fed interest rate move are up rather than down. We will continue to maximize loan opportunities while trying to protect our strong NIM so that we can continue to post best-in-class profitability. Asset quality remains solid, with an 8-basis-point drop in nonperforming loans and a 4-basis-point drop in nonperforming assets. Early-stage past dues remained under 50 basis points, and loan loss reserve coverage of nonperforming loans improved to 177%. As others have said, we began the quarter with the Mountain Commerce Bank acquisition. From a lending perspective, the combination has gone very smoothly. The similarity of their markets and their lending philosophy to ours will result in a shorter learning curve and earlier meaningful contribution. On that note, Donna, I will send it back to you.
Thank you, Kevin. John, unless you have additional comments, I think we are ready for Q&A.
Well, I do want to talk about loans a little bit. At Wednesday's loan committee, we approved about $350 million worth of loans. That primarily came from our South Florida group that really have a lot of things going on. Our JC, David, and their teams are doing an outstanding job in Florida. So there is $350 million worth of work—some of those I knew were coming, I did not know they were coming this quarter. One of them we have been working on for several years, and it is going to be one of the best and most fabulous projects ever built in Miami. We are excited about being in that loop with that team of people; it is a fantastic facility that is being constructed, and it is one of our customers. They have lots and probably in the second half they are going to bring even more. Some of this is construction, so they put their money in first, but it is loan growth that is coming down the pike for us before long. You never know from one day to the next. As I said, we had a customer buy another asset; we did not know it was in that transaction. Kevin just visited with another one. We are working on it. It is hard—as I said, it is like catching a greased pig in a ditch. You think you got him and he gets away from you. Maybe we will catch him this quarter. That is all I have to say, Donna. I am ready for Q&A if the rest are.
Operator, we will turn it back over to you.
分析師問答
We will now begin the question and answer session. If you would like to ask a question, please press star then 1 to raise your hand. To withdraw your question, press star then 2. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Jon Arfstrom with RBC Capital Markets.
Hey. Thanks. Good afternoon.
Good afternoon, Jon.
I know you guys just gave us a bunch of information on loan growth—or not loan growth—so I am a little bit confused on it. What does your gut tell you today on it? Kevin, you talked about maybe more paydowns expected in Q3 than you expected in Q2, so maybe the indication is down. But then John, you are talking about a bigger pipeline. I know you said it is hard to predict, but what does your gut tell you for loan balances in the near term?
Well, we have probably more going on in the Florida market right now than we have ever had. It is quite explosive. We have been working on some big projects—basically billions of dollars worth of opportunities that are going to come our way. It may be the next 60 days; it may be six months, but they are coming from our long-term customers in that market. It is just hard to tell when they pull the trigger. Overall, I am pretty optimistic. You know, we were going to be down $600 million; we ended up up $26 million. That happened suddenly and was surprising. We are not very good at projecting future loan growth. It seems like when I say we are going to have declines, we do not; when we say we are going to have growth, we do not. I think it is going to be more about maintaining where we are. We have to work hard, but I do not think it is a problem. At our lenders conference in Florida recently, I told the group after we were projected down a number of dollars, 'I need y'all to step up.' I do not know if they reached in their pockets and brought some stuff that they were going to bring next quarter in, but it all came in pretty fast, including a $100 million piece and another $40 million piece, some really good customer credits. We did not sacrifice quality or margin for loan growth. We are not going to do that, and we did not in this cycle. Kevin, you gotta call me.
No, that is fair. We will continue to look for opportunities and try to outrun paydowns. We outran them this quarter, and we will continue to try to do that. Will that happen every quarter? We do not know until it happens.
Okay. So the answer is you could see some growth, but you are still confused. I will probably hold it flat in the model—that is my guess. Christopher Poulton, last quarter you talked about maybe some paydowns in Q2 and Q3. Those balances are a little bit lower; any help on what you are seeing in the pipeline there and expectations for activity in your business?
Sure, Jon. It is Christopher. We did get the paydowns this quarter that we had anticipated, and yet we were still kind of flat, which means we had good production. I think we have originated $8.9 billion so far this year, which is a pretty good run rate for us. Some things come and go—sometimes we let them go and they come back. We are seeing a number of things come back. If you love somebody, set them free: you let them test the market and sometimes they come back and we can work a transaction out. I will be making a West Coast swing next week and have a bunch of things lined up that we probably worked on several months ago and now they want to sit down and talk. I feel good about opportunities out there. Will they come in the next couple of weeks or the next couple of months? We will see. I do not see anything different now than before about our opportunity to get transactions that are on our terms if we are patient. It is always about being patient. It is hard to predict loan growth when your goal is not loan growth.
Alright. I will step back. Thanks, guys.
Your next question comes from the line of Brett Rabatin with Stonex.
Hey, guys. Good afternoon.
Hi, Brett.
Wanted to start on the margin. It sounds like you are being able to grow core deposits. Wanted to see if those were sticky and if you can hold the loan yields and not see too much matriculation on the deposit side. It seems like the margin on a core basis could hold up pretty well. Any additional color on how you see things playing out? Also, you have typically been a bit asset sensitive; if you get a rate hike, what does that mean for you?
Hey, Brett. Our ALCO model shows almost a 6% increase in net income in an up 100 basis point environment—so a Fed move higher would be a net positive for us. On the deposit side, our folks have done a great job negotiating rates on money markets and CDs. We are seeing competition in the 4%-plus range. Recently, about half of our CD maturities automatically renewed at our lower rates and the other half negotiated around the 3.5% range. We have done a good job working relationships with our customers and through loan committees and our presidents to push opportunities for deposit growth on the loan side. If we can keep core margin in the 4.47% range excluding event income, we would be pleased.
That is helpful. Then around noninterest income: you had strong growth in fees—service fees, trust, and mortgage. Any of those impacted by seasonality or can those levels be sustained? Any thoughts on the outlook there?
As I mentioned earlier, there were a handful of items that were up in Q2 versus Q1. Last quarter, noninterest income was about as low as it could be at $44 million adjusted for marketable securities. This quarter, adjusted it was about $52.5 to $53 million. Some of that is wealth management—trust and financial services—aligning well with Veritex and hitting their stride. Loan recoveries and fee income at CCFG depend on payoffs and will bounce around. Our view is that over the last five quarters, noninterest income averages about $50 million, and that is kind of where we would expect things over the long term.
Last quarter was somewhat anomalous—first quarter was lower than normal. We normally have more income there; we just did not get it last quarter. So $50 million is a reasonable number—give or take.
Okay. Appreciate all the color. Congrats on the quarter.
Your next question comes from the line of Michael Edward Rose with Raymond James.
Hey, good afternoon, guys. Thanks for taking my questions. John, regarding Mountain Commerce, you said it is contributing earlier and stronger than expected. Can you give greater color on what you mean—expense savings, revenue synergies, or other items that qualify that statement?
As we went through the quarter month by month, I could feel the income by looking at the income statement. They were getting extra income from somewhere; some of it was improvement at Home, but a lot of it was coming from Mountain Commerce. I did not expect that quick of a kick. We will convert in November and expect about $5.5 million to $6 million of savings to the company that will pick up at that point. I was not prepared for the speed of the contribution, and I saw the numbers and the revenue coming together. We run daily P&L statements here—you begin to see it and ask where that would come from; it was all positive throughout the quarter.
Appreciate that color. Maybe going back to loan growth: you do have pretty good momentum here. With Mountain Commerce in the fold and bridging into higher growth economies, and what is going on in Texas, could we think about structurally better loan growth from Home than recent years, or is the competitive environment going to make that harder?
We could have better loan growth, but I do not want to comment on others' actions. We are seeing some ridiculous structures and terms in the marketplace and we are not going to do that. We have all the capital and a powerful earnings machine. We will continue to do what is right and not chase growth at the expense of standards. You can get loan growth by lowering standards and giving away returns, but that is not how we run the company. If people want to take more risk after I am gone, that is their choice. We will stay disciplined.
One follow-up: in the absence of loan growth, given how profitable you are, how should we think about buybacks—could you move that higher just given profitability and the shares you issued in Mountain Commerce?
We will do what we said—repurchase the shares we issued in Mountain Commerce. If opportunities arise, we will be aggressive. We stepped up this quarter when the share price dropped and bought at attractive levels—averaging about $25 or $26. That was a great opportunity. It is our intention to buy those back because we also intend to do another M&A deal on the heels of Mountain Commerce.
Alright. Makes sense. I will step back. Thanks, guys.
Your next question comes from the line of Stephen Scouten with Piper Sandler.
Can you hear me? Appreciate it, guys. Following up on M&A comments: with bank stocks up across the board, is that making conversations more palatable or are seller expectations going higher because the group trades up? How are those dynamics playing out?
A rising tide raises all ships. We are seeing that in the marketplace. We are not seeing a lot of M&A right now; people are looking at balance sheets and asking whether a deal would be dilutive. We are not going to dilute. Some people tell us to take a little dilution and you could do more deals, but we do not dilute. Timing matters a lot. Our stock is close to two times tangible book now, which gives us ability to be flexible. Deals either work or they don't—they are either accretive or they are not. We will hold tight and continue to do what has worked for us for the last 25 years: underwrite, hold tight on acquisitions, and do the right thing.
That is helpful. On expenses: last year and into early this year you pinged around $113–$114 million a quarter. What is the number you would like expenses to stabilize at today and what can you achieve?
Somewhere in that $1.20 billion annualized run-rate region is fair—let's keep it in that range. We have some one-time items this quarter like merger-related expenses, but overall we think we can hang in that range.
If you take out the $12.07 million in merger-related expenses, the run-rate is about $122.7 million, which is around where we said we would land with Mountain Commerce included. Once we get conversion in November, we will begin to realize a good portion of those cost savings, with more benefit in Q4 and then in 2027.
Got it. Last clarifying question on payoffs: last quarter you talked about expecting perhaps $1 billion in payoffs—curious where that came in and whether that magnitude is the right way to think about it going forward?
Last quarter's number was a little over $1 billion. The current quarter could be similar; it is early, but they can be scheduled for that magnitude.
Okay. So that magnitude is a useful reference and then production versus payoffs and timing determine whether you see growth. Thanks and congrats on a great quarter.
Your next question comes from the line of Matthew Covington Olney with Stephens.
Thanks, guys. Going back to competition for loans, Kevin, you mentioned pricing is getting tighter—any more numbers you can put behind that in the market, and for Home, any color on production yields you've seen more recently?
I'll let Steven cover yields since he tracks those closely in our meetings. But we are seeing some pricing in the mid-5s in certain spots.
As John said, it's not just rate—it's rate and structure. We saw production yields around 6.75% to 6.76% on production in the second quarter.
Great. Christopher, your borrowing base is unique and differs from Kevin's space—what are you seeing on competition, pricing, and structure?
We do not see much on structure because our deals are more bespoke. Over the last couple of years we've seen price come down maybe 50 basis points overall in the market. Construction is where we sometimes see folks step in and get aggressive for a few months, and on facilities you see structure play a bigger role. Folks getting into facility space might underestimate needed structure. Overall, you see occasional pockets of aggressiveness, but they tend to be short-lived.
Okay. Thanks, guys. That is all for me.
Your next question comes from the line of Brian Joseph Martin with Bryn Capital.
Good afternoon, everyone.
Brian, over to you.
Maybe one last on expenses, Steven. If you think about 2027 and you get savings post conversion, is it best to look at the run-rate where you end the year as similar to what we look like going into 2027? Or will merit increases and inflation offset the savings so that run-rate holds relatively steady into the start of next year?
That is fair. We modeled roughly 20% cost savings from the Mountain Commerce transaction—about $5.5 million annually. We will see some of that in Q4 once we convert in November and more in 2027. Merit increases and normal inflation will offset some, but the net benefit should be evident heading into next year.
Thanks. On M&A, it sounded like there was a trade you guys were on, now you are off and maybe could come back. Are discussions ongoing? Any change in sizing or geography of interest?
I like the people and the company and their geography. I will go back and revisit if they are interested and see if we can put something together that makes sense. The last time our stock was down and we bid and the seller's shares have done well since then. Timing matters and we will revisit if the opportunity is right. I am not going to get into specifics on sizing or geography beyond saying it appears to be a nice, well-run bank.
Understood. On nonperforming assets and credit quality: can you frame up the outlook—pace of NPAs and charge-offs over the next 6 to 12 months? How do you see improvement unfolding?
We see a path of improvement and stand by our prior comments—there is no loss expected on the large item we discussed. We cleaned up some items this quarter and are mostly through the larger problems. I do not see any changes that would cause concern. Charge-offs were roughly $5 million this quarter, with about $3 million of that being specific reserves on loans we charged off; we had matching reserves. If you take that out, it was a normal quarter. This quarter marks real improvement in asset quality.
Could we see a significant decline in nonperforming loans over the next 6 to 12 months or is it more of a slow grind?
It might get better from here. We expect to collect what we can and we are not planning to accept losses on the large item. There may be a gradual improvement; the pace depends on borrowers and situations, but the trend is positive.
Remind me: the size of the largest credit you talked about last quarter—where does that stand today?
It is a little less than $100 million and remains where it was. We have seen movement and if reasonable heads stay together we will wrap it up; if not, we will fight the battle.
Last question—on margin, what are the puts and takes that could make it better or worse? Any opportunities on the Mountain Commerce book to pick up loans or deposits?
There is opportunity on the deposit side with Tennessee—about $300 million in CDs that mature in the second half of the year where we can mark improvement on yield or get roll-off. Competition on deposits is probably the biggest threat to margin. We have about $1.25 billion in CDs that mature in the second half at mid-threes; our teams have done a good job negotiating and we expect that to continue. On the asset side, structure and rate competition are the main risks, but we expect to manage those carefully.
Got it. Thanks, and congrats on a great quarter.
Your next question comes from the line of Catherine Mealor with KBW.
Thanks, everyone. Good afternoon. Two model questions. First on fees: you beat expectations and mentioned a BOLI gain and higher SBIC investment income. Can you quantify how much that increase was in SBIC and how we should think about a normalized run rate going into next quarter?
That increase was about $2.4 million for those equity investments that we have.
Okay. Anything else in noninterest income that you felt was artificially elevated?
We did have purchase accounting accretion go up $2.5 million, with about $1.5 million related to Mountain Commerce. The rest would be from older loans paying off. There was also about $900 thousand of early payoff recognition on PAA that is not part of scheduled accretion; that can vary quarter to quarter.
That is helpful—about $900 thousand was early payoff-related rather than scheduled PAA accretion. Everything else was asked and answered. Great quarter.
We have reached the end of the Q&A session. I will now turn the call back to Mr. Allison for closing remarks.
Thanks everyone for your participation today and for supporting Home Bancshares. We worked hard this quarter. Even though we had a 2% ROA and were one of the top 10 in the nation in the first quarter, we felt we could do better, so we worked at it and will continue to. Hopefully things will settle down in the marketplace and we will have more loans and generate more income. Our game is to continue to grow the company over time through both organic growth and M&A. We hope to be able to tell you about another deal before long. Thanks, everyone. We look forward to visiting with you in the future.
This concludes today's call. Thank you for attending. You may now disconnect.