Heritage Financial Corp (HFWA) 2014 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Heritage Financial first quarter 2014 earnings conference call.

(Operator Instructions)

As a reminder, this conference is being recorded. I would now like to turn the conference over to our host, CEO, Brian Vance. Please go ahead.

Thank you, Ryan. I'd like to welcome all who have called in and also who may listen later in our recorded version. Attending with me this morning is Don Hinson, our Chief Financial Officer, Jeff Deuel, President and Chief Operating Officer of Heritage, as well as Bryan McDonald, President and CEO of Whidbey Island Bank.

Our earnings press release went out yesterday afternoon. Hopefully, you've had an opportunity to review the release prior to the call. As we go through the prepared comments as well as a later Q&A version, please refer to the forward-looking statements in the press release that went out yesterday.

I'll just start with some brief highlights of our first quarter. Diluted earnings per share were $0.16 for the quarter ended March 31, 2014, compared to $0.04 per share for the linked quarter ended December 31, 2013, and $0.19 for the prior-year quarter ended March 31, 2013. Shareholders of both Heritage Financial Corporation and Washington Banking Company approved the merger of the two Companies during this past quarter. Also, we opened a de novo branch in East Vancouver, Washington in January of 2014. I'll now turn the call over to Don Hinson who will take a few minutes and cover our balance sheet and income statement changes.

Thanks, Brian. I'll start with the balance sheet. Total assets increased $3.4 million from the prior-quarter end, and were $1.66 billion at March 31. Net aggregate loans including both originated and purchased loans increased $4.6 million during the quarter.

Net originated loans increased $16.2 million or 6.8% annualized. The increase from the prior period was primarily due to increases in: non-owner occupied commercial real estate loans, $7.2 million; construction loans related to five or more family residential and commercial properties, $4.7 million; and consumer loans, $2.5 million. Net purchased loans decreased $11.7 million during the quarter. Purchased non-covered loans decreased $9 million while purchased covered loans decreased $2.7 million.

Total investment securities decreased $21.3 million during the quarter. The decrease is due to a sale of $40.3 million of investment securities as well as maturities and repayments of $7.6 million, partially offset by purchases of $27.7 million. A net gain of $180,000 was recognized on the sale of investment securities. The purpose of the sale of the securities was to clean up small positions in the portfolio. A total of 178 securities were sold with an average balance of $226,000 and many positions were much smaller than that size.

Total deposits increased $5 million during Q1. Deposit retention from consolidated or closed branches from last year is generally meeting or exceeding original projections. Our non-maturity deposit ratio continues to be a very strong 78.8% of total deposits, and our percentage of non-interest demand deposits to total deposits was 25.1% at quarter end.

Total stockholders' equity increased slightly to $216.4 million. The ratio of tangible common equity of tangible assets increased slightly to 11.4% from 11.3% in the prior quarter. Our tangible book value per common share increased slightly to $13.35 at March 31 from $13.31 at December 31. During Q1 2014, there were no shares repurchased under the current repurchase program.

Moving on to the net interest margin, our net interest margin for Q1 was 4.48%. This is a 10 basis point decrease from 4.58% in Q4. The decrease is due to lower contractual loan note rates, as well as lower effects of discount accretion. The effect on the net interest margin of incremental discount accretion over stated note rates on the acquired loan portfolios was 25 basis points for Q1 2014 compared to 38 basis points for Q4 2013. Without the effects of incremental discount accretion, the net interest margin increased 3 basis points to 4.23% in Q1 compared to 4.20% in Q4.

The cost of funds for Q1 remain the same at 33 basis points when compared to Q4. Likewise, the cost of all deposits remain the same quarter-over-quarter at 25 basis points. Due to the continued low rate environment we expect core margins to continue their declining trends in the near future; however due to the merger with Washington Banking we are expecting to experience increases in discount accretion.

Moving on to non-interest expense, non-interest expense was $14.8 million in Q1 compared to $18.5 million for Q4. During Q1 there were approximately $793,000 in initiative costs related mostly to the Valley Bank integration and the proposed Washington Banking merger. This is a decrease from approximately $3.2 million of costs in Q4 2013. The after-tax Q1 earnings impact of these initiative costs were $581,000 or $0.03 per share.

Moving to the effects of the initiative costs, remaining non-interest expense decreased $1.3 million in the prior quarter. As a result of prior-year initiatives, our ratio of non-interest expense to average assets continues to improve. Adjusted for initiative costs, the ratio decreased to 3.38% in Q1 2014 compared to 3.63% in Q1 2013. Jeff Deuel will have an update on overall loan growth as well as some comments on current initiatives.

Thanks, Don. With regard to loan growth during first quarter 2014, we booked a total of $40.8 million in new loans compared to $63.2 million in Q4 2013 and $59.2 million in Q1 2013. These totals represent new loans to new borrowers, and new loans to existing borrowers. The average note rate for new loans was 4.88% in Q1 2014 compared to 4.69% in Q4 2013 and 4.53% in Q1 2013.

Loan production was down in the first quarter which is consistent with historical experience. Fourth quarter is generally stronger as customers move to wrap up loan closings prior to year-end. First quarter 2013 was stronger than normal due to a special loan promotion that lifted loan production for the first and second quarters of last year. Generally, loan production tends to pick up in the latter part of the first quarter, and our average pipeline at the end of the first quarter increased about 9% over fourth quarter levels, so we are trending in the right direction.

With regard to current initiatives, as you all know, we had a very busy 2013 managing a variety of strategic initiatives across the bank, including two acquisitions, the charter collapse of our sister bank in the Yakima region, several branch closures, and of course, system conversion. We began planning for the integration of Heritage and Whidbey late in the fourth quarter of 2013, and representatives from both banks made extremely good progress during the first quarter.

The new organizational structure has been developed and although there are some decisions still to be made, for the most part, the heavy lifting is done, and the teams are working well together. I believe our similar cultures have helped to make the integration process easier. The conversion is scheduled to occur in the fourth quarter and at that time the Whidbey core system will be converted to the Heritage core system. Now, Brian will have an update on loan quality, capital management, and some closing comments.

Thank, Jeff. I'll start first with loan quality comments. Non-accrual originated loans increased $3.7 million from the prior quarter. The increase in non-accrual originated loans is due to an addition of $4.4 million in new non-accrual loans, partially offset by $629,000 of net principal reductions, and $88,000 in transfers to other real estate owned.

The increase is due substantially to one residential construction borrower relationship in the amount of $4.2 million that was downgraded during the quarter ended March 31, 2014. We are confident with this legacy relationship that goes back many years. There will be little to no loss exposure with this relationship.

OREO decreased $275,000 during Q1 to $4.3 million. The decrease was due primarily to the disposition of two properties totaling $520,000 which sold for a small gain, partially offset by the addition of two properties totaling $218,000. The ratio of the allowance for loan loss to non-performing originated loans decreased to 199% from 329% at the prior quarter end. Even though our overall allowance for originated loans has been decreasing we still maintain a very healthy allowance at 1.76% to originated loans.

Some comments on capital management, we have continued our $0.08 quarterly cash dividend. However during Q1 we declared an additional dividend in March. Let me back up here. We changed the timing of our first quarter dividend where we would typically declare in April, and declared it in March, in result of the anticipated merger with Washington Banking. As a result of the pending Washington Banking Company merger it is not likely we'll engage any special dividends or stock buybacks until we reassess our capital strategy some time after merger closing. As a reminder, when we announced the proposed merger we indicated our pro forma TCE was estimated to be above 9% following closing.

Our focus for the remainder of 2014 are of several points here. We continue to see general economic improvement across the Pacific Northwest region, and we continue to believe 2014 will show improvements over 2013. We will continue our earlier guidance on 2014 originated loan growth in the 5% to 7% growth area. Q1 annualized originated loan growth was 6.8%. We will continue to focus on efficiency improvements.

I'd like to reiterate a metric that Don shared with you earlier. Improving our adjusted non-interest expense to average asset ratio from 3.63% in Q1 2013 to 3.38% in Q1 of 2014 represents significant progress. We are continuing to focus on improving this important metric.

As you will remember, we are concentrating on assets per employee for two primary reasons. This metric focuses on growth in assets while also focusing on improvement in FTE to achieve desired levels. We improved assets per employee at Heritage from $3.707 million at the end of 2012, to $4.448 million as of December 31, 2013, and further improved assets per employee to $4.644 million at end of Q1. Assets per employee at Washington Banking Company at the end of Q1 2014 was $3.834 million and by the end of this year, we would like to see the combined Company back to where Heritage Financial ended 2013 in relationship to assets per employee.

We intend to focus on increasing our SBA loan originations and with our knowledge and support, Washington Banking Company recently hired a team of SBA lenders and support staff. We are optimistic that we can achieve the cost saves we originally announced with the Washington Banking Company merger by the end of 2014. We also believe we can achieve growth synergies from the merger.

Additionally, we believe we're off to a very positive start to our integration efforts and are confident we can have successful systems conversions in October. Tomorrow, May 1, marks the official and legal merger of Heritage Financial Corporation and Washington Banking Company, and we're truly excited about the opportunities of the go-forward combined Company.

That completes our comments, and I would welcome any questions you may have and would once again refer to our forward-looking statements in our press release, as we answer any of the questions dealing with forward-looking comments. Ryan, if you'd please open the call for questions, we'd be happy to take some.

(Operator Instructions)

Jeff Rulis, D.A. Davidson.

Thanks, good morning.

Good morning, Jeff.

Brian, just on that loan growth guidance 5% to 7% versus 7% this quarter of growing pipeline, and I guess Washington Banking Company's 11% growth in Q1. Is that suggesting that the back half or some slowing down of current activity? What's embedded in that guidance number?

Yes, Jeff, I guess we might be a little conservative with our guidance and what we achieved in Q1, as well as what would be achieved in Q1 as you noted. I think as we bring the Companies together, I truly am excited about the synergies that I think that we will build as a result of the two Companies coming together. Also I made some comments about an increasing an important SBA strategy as we move the Companies together. We have those folks in place currently. I think I would just say that I think there's a good chance that we could exceed guidance. I guess maybe a little bit of under promise and over deliver, but I certainly understand your point. While I say that, I do remain optimistic about growth potential for the last half of the year.

Great. Then if you can, a lot of moving pieces on the expense front, but if I were just to exclude close to the $800,000 in expenses this quarter, is that a good legacy run rate? I don't even know if you could touch on additional merger costs maybe in Q2 that you may incur?

Sure. I will ask Don maybe to give you some details. Before he weighs in here, I understand the noise that we've had for the past several quarters of acquisition related expense as well as expense initiatives that we undertook last year. I fully understand and appreciate that. To me, I think because we've been growing the Company with two acquisitions last year, and the announced merger with Washington Banking Company, one of the important metrics that show the improvement that we've made in non-interest expense is that adjusted non-interest expense to average assets. Q1 of last year was 3.63%. Q1 of this year is 3.38%.

That takes into account of the asset growth as well as the expense improvement initiatives, adjusted for the noise that you're referring to. I think that's an important number to keep in mind as I've said a couple times now. I think it does show some very significant improvement, realizing that we still have improvement yet in front of us. With that as maybe just a big picture comment, I'll ask Don to maybe give a little more color.

Sure. Again, just as a reminder the $793,000 that we've listed here is somewhat limited to some specific types of expenses. There are third-party costs that are related to specific retention bonuses and severance amounts paid, so I wouldn't call them necessarily all-inclusive of other maybe cost savings that we may get.

At the same time, when you're talking about a core run rate, I think that we're pretty focused on this merger at this point. I think as a standalone, I think we would -- possibly managing a little bit differently if we weren't going through a merger. I think it's a decent proxy for our run rate but I think it could be lower as we get into the combined organizations.

Brian, I appreciate the commentary. I think the progress is encouraging, despite the noise. Given that progress, and circling back to the guidance on I think you had combined 10% cost saves, does that include the progress that you've made since deal announcement? You're moving the bar a little bit, but do we assume 10% from completion of the merger tomorrow? Or is it from the cost levels on announcement?

Maybe just to clarify, the cost efficiencies -- excuse me, the efficiencies of the cost reductions was 20% total Company. Just as a point of reference there, you could break that down and 10% cost efficiencies will come from either side of the Company, but 20% on a combined basis. I think that's an important number to make sure that we clarify going forward. I think just in terms of again getting back to a number -- of not only the merger related expense, but the expense initiatives that we had in place last year that spilled over a little bit into Q1. Again, I understand the difficulties in establishing run rate.

I think probably when we to just go back and to clarify that 20% was against the combined non-interest expense of the Company at the time that we announced the merger which was using Q3 data. In terms of that focal point, and how you would calculate that expense save, I think that's where you should focus. Don?

Yes, we announced, I think, it concluded in Q3, but it was a run rate I think by calculation.

Okay, thanks for the clarification. That's it for me.

Thanks, Jeff.

Jacque Chimera, KBW.

Hi. Good morning, everyone.

Good morning, Jacque.

Looking to the improvement, that you had on the average rates on new loans booked, was that mix issue -- or not, issue is the wrong word. But was that a mix generation, or was it just you're booking loans at higher rates now?

Maybe a little bit of both. Again, it might depend on what you're comparing that to. The 4.88% in Q1 of 2014, if we're comparing that to the 4.53% of same quarter last year, Q1 of 2013, there's a substantial improvement there. I will note, as Jeff, noted in his comments and he can add color as well. Last year we had, and you'll recall that we were booking some fixed rate loans which I think pulled that Q1 yield down a little bit last year. So had we not been booking those fixed rate loans last year, I think it probably would have been closer to the 4.88% that we experienced in Q1. Jeff, anything you want to add? Hopefully that helps, Jacque.

No, it does. What ratio is fixed versus variable rate loans did you book in 1Q?

Let me start first with defining fixed rate loans. When we talk about fixed rate loans, we do book fixed rate loans today and have throughout the history of our Company, generally with fixed rates, fixed for no longer than 5-year terms. Last year at this time, we were doing some 7- and 10-year fix, so when we're talking about fix this year, or at this point, it's back to our traditional definition of 5 years and less.

That's what we're doing. We're booking very few, if any, loans that would exceed the five-year fixed. As to a split, I don't have that information in front of me, Jacque, I'm just anecdotally going to probably say that it's about a 50/50 split of variable rate versus fixed of new production going into the portfolio. I could be off a little bit, but I think that's going to give you a good proxy.

Okay. That's probably pretty similar to fourth quarter's production?

Yes, it would be.

Okay. Then you mentioned that the pipeline was up 9% from last quarter. Is that just seasonality, or is some new initiative starting to pay off in there?

It's primarily seasonality, Jacque.

Okay, and I guess is there any category in particular that you think growth may have been a little bit slow in fourth quarter -- not in fourth quarter but all of 2013 where you think 2014 you could really see a pick-up?

I guess the only thing that I can say is that we worked really hard to get our lenders organized in the right way, and with the right reporting structure, and with the right focus. We continued to see that getting better and better each year. I think if there's some efficiency that's going to come out of it that will help us, it will come from a more mature team or a better organized team. We've been working on that for two or three years now.

That's just basically, Brian, in the past you've talked about lenders that you've acquired, lenders that have a legacy, and then just the ones that come over from the FDIC are just getting traction, and it's all becoming one fluid team now?

I think that's a fair statement. I would add to that -- and we've talked about this in previous calls, is we've really focused on improving the average outstanding loans per lender, in a variety of ways through growth, et cetera. As we look at those numbers that has proved substantially over the last several quarters, helping the efficiencies of not only the lenders and their portfolios but the overall efficiency of the organization.

Okay, great. Thank you very much for the color.

Tim O'Brien, Sandler O'Neill.

Good morning, gentlemen. Can you hear me?

We can hear you fine, Tim. Thank you.

Thanks, Brian. A question, you hinted that you're looking to do more line lender originations this quarter?

I'm sorry, more?

Operating line? C&I?

Just to clarify I think that our focus from a general production point of view with the combined Companies going forward is not going to change from what either one of us have done individually or collectively. I think we've had a very similar cultures and strategy in that regard. I think where we will see some potential of nice increased activity is in the SBA lending, and that's 7(a) and 504 lending. That's typically C&I lending that could involve some lines of credit, some term credits for equipment, that sort of thing. I think probably the single most greatest opportunity for growth for the balance of the year might come out of that SBA portfolio.

Remind me, Brian, did you say the plan is to retain that, or would you look to monetize?

Yes, again, as a clarification we have both organizations that have active SBA origination strategy in the past. This is not a new focus or paradigm for us; however, there is one distinct difference. Heritage would originate and keep to the portfolio, whereas Whidbey would originate and sell. I believe while we haven't made a decision and final form yet, I believe that we are going to adopt Whidbey's originate and sell strategy going forward which has the potential of giving us some lift on the non-interest income side. If you were to go back and look historically at Whidbey, and I don't know how Whidbey has stated this, but they get gain on sale from both mortgage and SBA lumped together. Bryan, is that correct?

They're separate.

Okay, it is separate. If you want to look at what they've generated on the SBA side of things, you might look at their history and look at the synergies growth of both Companies, and I'll ask Bryan to maybe speak to that a little bit.

Hi, Tim.

Hi, is that Jeff?

Bryan McDonald.

Hey, Bryan.

Tim, they're segregated separately on our income statement, so you can go and look at the history. As Brian noted we're expanding that strategy which again both banks have had, and entering the second quarter with a really nice pipeline separately, and a very strong pipeline together. We've got a great team and some new folks aboard on the Whidbey side to help continue to build out this business line, so we're optimistic.

Thanks, Bryan. Then one other question that I have for Brian Vance. Brian, can you give us a little market color? We've heard rumblings about improvement in the economy, incrementally relative to last year. What's your take? Is the pie growing again? Is there more demand from businesses to invest in their own companies, and does that bode well for you guys?

It does, and I will ask Bryan McDonald to give some perspective from the Seattle North Markets as well. I think that we're seeing good, steady improvement across the footprint whether it be in Central Washington with our Central Valley branches, or up and down the corridor from Bellingham to Portland. We are seeing, I won't say pockets of weakness, but we are seeing pockets that may not be experiencing the growth that we'd see in Harrison and King and Snohomish.

For instance, Thurston County, Olympia, continues to show some softness. That's not the right word. We're not seeing the growth in Thurston County that we're seeing in some of the other markets. I sense that, certainly as we've talked before, the King County market is really strong. I sense that Snohomish County, Everett, is maybe coming back stronger. I'll ask Bryan to comment to that.

I would agree with Brian. Certainly our more rural markets have been a little bit slower to recover, but speaking generally our customers have more loan demand than they had a year ago. They've just been on a steady improvement, Snohomish County quite strong, King County quite strong. We're seeing some very good loan opportunities coming out of those markets and some improvement in the Northern counties just at a little bit slower pace.

Thanks for answering my questions.

Brett [Villaume].

Good morning.

Good morning, Brett.

Hey. I wanted to ask a question about merger accounting. You mentioned the increase in the yield accretion after the Washington Banking Company merger going to increase. Do you have a ballpark estimate as to what degree that might be?

Brett, I don't at this point. We're going to be going through as soon as this merger closes tomorrow, we'll start our process of fair valuing the portfolio. Then as a result of that, that will result in the calculations for the accretion, so I really am hesitant to give you any guidance on that. I made the comment it's going to increase because, again, it's going to be fair valued.

Again, Washington Banking has a higher balance of covered loans than we do as far as the two FDIC deals that they acquired back in 2010, or still have higher balances than ours. That's why I bringing up a comment that there's going to be more discount accretion on that. Having a percent or a number at this point is a little premature for me.

Okay, fair enough. Then I wanted to ask on the purchased loans that came down, do you see that rate decreasing sequentially going forward, the amount of purchase loans that run-off?

If you looked at the history, yes, they continuing to decline. Although our covered portfolio didn't decline very much this last quarter. I think they're slowing somewhat, but I think we're also going to get to a point where some of this, if they're good borrowers, they will work their way through some of the more problem loans. Some of the good borrowers may rewrite their loans. The loans may be such that they could be actually put into, you might call it, old originated portfolio. You might see transfers there, but I think that you'll see it go down but it may stabilize and not go down as much as it has been.

That's helpful. Thank you. I wanted to ask about the substandard construction loan, the $7.8 million loan. Were there other changes that took place in, say, substandard loans, maybe some improvement that was offsetting to that?

I'll ask Don maybe to look at those numbers, and give you a little more color. But while he's doing that, I'll comment to, again, I made a comment in my opening remarks about the non-accrual increase to one relationship. That is one legacy relationship that goes back probably 25 years with the organization, and the borrowers are very cooperative. The borrowers understand and agree that they need to sell some of the properties that are being held for development.

We're confident that we can work through that relationship as I said earlier with little to no loss. So we've got a very cooperative borrower and a strategy in place. What lead to the downgrade was new appraisals coming in with reduced valuations, but we still believe we have appropriate collateral coverage overall with [their relationship]. Don, any additional color?

Again, the one that went non-accrual as Brian just discussed that. Again, there were two different loans that were downgraded that made up most of the increase in potential problem loans. Brett, I think you're discussing the one that's more construction loan. We downgraded that substandard, but we don't see any loss in that relationship. It's more of just a performance, a little concerned about financials, so that's why that was downgraded.

Okay, good. Finally, I wanted to ask I notice that you're going to keep some branches branded as Whidbey Island Bank. Do you care to express any rationale behind that?

Certainly, I will. I'll ask Bryan McDonald to comment to it as well. He's much more familiar with that market than I. That was an agreement we made early on with the Whidbey Island Bank is to protect the Whidbey Island name on the Island. Bryan will discuss some strategies as we are prepared to roll that out tomorrow, and it's a strategy that we have some experience with. I remind you that we have done something similar with Central Valley Bank when we collapsed their charter last year, and we retained the Central Valley Bank in that marketplace because it's a well known marketable name. We've had some experience with that, but I'll ask Bryan to give you a little more color.

Yes, Brett. Bryan McDonald. The original business decision was based on the bank, Whidbey Island Bank's longevity on the Island, and customer loyalty, and some very significant market shares that we were looking to protect with the combination of the two Companies and the merger. As we move forward, I think we've got a very nice blend of maintaining the Whidbey Island Bank name while still making it obvious to the customers that it's part of the Heritage network. So when they are off the Island, they'll be able to use all of the other network up and down the I-5 corridor which is going to be a real benefit to those customers. I think we've struck a real nice balance in terms of how we're going to roll out that DBA after close.

Thank you, gentlemen. I hope I'm not jumping the gun here, but congratulations on the closing.

Brett, thank you, and you might be jumping the gun but by about 12 hours. It's been fully approved by the shareholders, and we're looking forward to accomplishing that at 12:01 AM tonight.

Don Worthington, Raymond James.

Good morning, everyone. Are you able to assume the loss share agreements related to covered loans of Washington Banking?

Yes, we are, and that has already been approved.

Okay, great. Then I just noticed, it's a small item, but it looked like service charges presumably primarily on deposits were down about 9% linked quarter. Is that something you expect to rebound, or is that where you expect it to go? This would be exclusive of course of the merger but just the run rate for deposit charges.

Yes, I would expect it to bounce back some. We have had again a little bit of a run-off in some of the consolidated branches. Overall, our deposit balances are earning steady, but I would expect it to bounce back some over the course of the year.

Okay, thank you.

Tim O'Brien, Sandler O'Neill Partners.

A quick follow-up. Brian, what's your baseline house limits at HFWA for lending?

Currently, we're at, in-house is $20 million. I think as we look at combining the Companies, one of the things we announced when we announced the merger was the opportunity and the desire to go upscale. Upscale meaning essentially ticket size, especially as we really focus on a concentrated effort in the King County markets, and to maybe a little bit lesser extent, in the Snohomish County markets. I think we will be revisiting the in-house limit to increase that. We haven't decided on a level yet that's appropriate.

I think we're going to have a combined legal of somewhere around $80 million, but we will be nowhere near that level. I think that for a community bank roughly $3.5 billion in assets, I think our ability to go upscale in ticket size, certainly our desire is there, and I think that we have the lending teams, and probably just as importantly the credit administration teams in place to go up market, and maybe into that $30 million-plus in-house level. That is something that we're currently analyzing, Tim.

In your past, Brian, you've done those larger ticket items in your younger days, correct?

Yes, and I think that probably a number of us, Bryan McDonald included, Dave Spurling, our Chief Credit Officer, was with BofA for a number of years in the mid-market range in Seattle and Tacoma. Combined in the organization, there's a good deal of expertise, Tim, that can comfortably take on increased ticket size. At the same time, we've both Companies have been very steady with overall credit quality over the last six-, seven-year cycle. As I like to say, when it comes to credit, we're down the middle of the fairway. I know Whidbey has, and Heritage has, so even if we go up-market, we're stay in the middle of the fairway, Tim.

Thanks a lot. Thank you.

At this time, we have no further questions.

Ryan, I appreciate you hosting the call and appreciate everyone that has called in. As I indicated in my prepared remarks, we're very excited about what we will soon be accomplishing in bringing these two Companies together. The synergies we create in the combined Company, and as Jeff indicated, we've done a lot of heavy lifting in bringing the Companies together. We largely have our Management structure in place to be implemented tomorrow, and I think both organizations are looking forward to bringing the Companies together. I think the next time we'll see you, whether it be at Investor Conferences or this call, we'll be a combined Company and executing on our strategies. We appreciate your interest, appreciate your support, looking forward to seeing everybody in the future. Thank you.

Ladies and gentlemen, the Heritage Financial first-quarter 2014 earnings call will be made available for replay after 3 PM Central today until May 14, 2014, at midnight. You may access the AT&T Executive Playback Service at any time by dialing 1-800-475-6701 and entering the access code 323877. International participants may dial 1-320-365-3844. That does conclude our conference for today. Thank you for your participation and for using AT&T Executive Teleconference Service. You may now disconnect.