Heartland Financial USA Inc (HTLF) 2012 Q3 法說會逐字稿

Greetings and welcome to the Heartland Financial USA, Inc. third-quarter 2012 conference call. This afternoon, Heartland distributed its third-quarter press release, and hopefully you have had a chance to review the results. If there is anyone on this call who did not receive a copy, you may access it at Heartland's website at www.htlf.com.

With us today from management are Lynn Fuller, Chairman, President, and Chief Executive Officer; John Schmidt, Chief Operating Officer and Chief Financial Officer; and Ken Erickson, Executive Vice President and Chief Credit Officer. Management will provide a brief summary of the quarter, and then we'll open up the call to your questions.

Before we begin the presentation, I would like to remind everyone that some of the information management will be providing today falls under the guidelines of forward-looking statements as defined by the Securities and Exchange Commission. As part of these guidelines, I must point out that any statements made during this presentation concerning the Company's hopes, beliefs, expectations, and predictions of the future are forward-looking statements, and actual results could differ materially from those projected. Additional explanation on these factors is included from time to time in the Company's 10-K and 10-Q filings, which may be obtained on the Company's website or the SEC's website.

(Operator Instructions). As a reminder, this conference is being recorded. At this time, I will now turn the call over to Mr. Lynn Fuller at Heartland. Please go ahead, sir.

Thank you and good afternoon, everyone. We certainly appreciate everyone joining us this afternoon as we review Heartland's excellent performance for the third quarter of 2012.

For the next few minutes, I will touch on the highlights for the quarter. I will then turn the color over to John Schmidt, our Chief Operating Officer and CFO, who will provide additional color on Heartland's quarterly results. Then Ken Erickson, our EVP and Chief Credit Officer, will offer insights on credit-related topics.

Well, Heartland has continued its streak of excellent quarterly earnings, reporting our second-best quarter in our 31-year-history, nearly double last year's third quarter. While we just missed setting a new record, our exceptional quarterly earnings of $13.6 million was 85% over last year's third-quarter earnings of $7.3 million.

Year-to-date, net income stands at $40.4 million, once again nearly double the $21.8 million earned through three quarters of 2011. On a per-share basis, Heartland earned $0.75 per diluted common share in the third quarter compared to $0.20 per share in the third quarter of 2011. Year-to-date, Heartland has earned $2.24 per diluted common share compared to $0.92 per share for the first nine months in 2011.

Heartland's annualized return on average common equity for the quarter was a superb 16.8% and stands at 17.4% year to date.

As we had expected, Heartland's net interest margin slipped below 4% in the quarter to 3.84%. Our margin reflected the realities of this low rate environment; however, net interest income in dollars remains solid, topping both the third quarter and nine months of operations last year.

Our pretext preprovision earnings were also very strong at $64.9 million year-to-date compared to $52 million for 2011.

One of the factors contributing to Heartland's earnings momentum is loan growth, which continued in the third quarter. Despite a slight dip in commercial outstandings, our pipeline is strong as we expect to maintain a year-over-year increase in the area of 11%. Our growth strategy emphasizes proactive business development, calling on potential commercial, agribusiness, and small-business clients.

It is also worth noting that with $87 million of net growth in qualifying small-business loans, we have nearly achieved our goal of approximately $92 million. At this level, our preferred dividend rate drops to 2% and, upon achievement of our goal, 1% through 2015.

Mortgage loan originations continued to provide a significant positive impact to Heartland earnings. With interest rates remaining at historic lows, refinance activity dominates with an origination mix of 64% refi and 36% purchased.

While we welcome the refi business, our Heartland mortgage unit is building programs to attract more purchase business. We believe our longer-term success in residential real estate financing depends on our continued shift towards purchase originations, which will drive revenue when the refi boom comes to an end.

Currently Heartland Mortgage is operating in all nine Heartland subsidiary banks with our National Residential Mortgage unit serving San Diego from four locations, along with Reno, Nevada; Minot, North Dakota; Boise, Idaho; and Buffalo, Wyoming. Year-to-date, mortgage banking revenue, the combination of gain on sale of loans and loan servicing income was $41.3 million versus $8.1 million for the first three quarters of 2011.

Now, that's an increase of 410% year over year. Discussion of Heartland's exceptional year would not be complete without favorable comments on our steady improvement in credit quality. I am extremely pleased to report more good news on that front as our nonperforming loans have been reduced by nearly $32 million from last year's third quarter, a 44% reduction.

Over the last 12 months, the percentage of nonperforming loans and leases to total loans and leases has been reduced from 3.1% to 1.5%. With this reduction, our allowance as a percent of nonperforming loans has increased to 99%. We feel very good about our reserve position and with the continued sale of OREO very close to our marks.

Now that being said, net loss on repossessed assets did increase this quarter, mostly as a result of lower appraisals on two properties.

Looking at the balance sheet, total assets increased by $166 million in the third quarter to $4.6 billion at quarter end. This increase was driven in part by both the acquisition of Liberty Bank branches and loan growth.

In terms of deposits, we experienced growth in all categories, partly as a result of the Liberty acquisition, as well as excellent results from our calling efforts. Year-to-date deposits have increased by $293 million with demand deposits growing by $140 million.

At September 30, demand deposits, savings and money markets represented 77% of total deposits.

Now moving on to capital, our tangible capital ratio increased to 6.18%. Our regulatory capital ratios and risk-based capital and tier 1 capital continue well above required levels, and again, I would emphasize our very shareholder-friendly equity structure.

John Schmidt will provide more details on our balance sheet and income statement in his comments.

Well, possibly the biggest story of Heartland's third quarter would be our growth initiatives. During the quarter, we closed on the branch purchase from Liberty Bank FSB, adding three offices and over $50 million in deposits to our flagship bank, Dubuque Bank and Trust.

Subsequently we consolidated one of the Liberty offices into a nearby DB&T location. Soon after the Liberty closing, we announced the acquisition of First Shares Inc. That's the parent company of First National Bank of Platteville, Wisconsin. This transaction will add three more locations and over $130 million in assets to our Wisconsin bank and trust subsidiary.

We began the fourth quarter with our third M&A announcement for 2012, the acquisition of Heritage Bank in Phoenix, Arizona. This transaction is scheduled to close in December and will add over $100 million to our Arizona Bank & Trust subsidiary when the merger is completed in March of 2013.

During the third quarter, we also added two branch locations to our footprint. In early August, Rocky Mountain Bank opened its new main banking office in downtown Billings, Montana. That's its 10th location, and in early September, Arizona Bank & Trust added its seventh location, opening up the attractive Scottsdale market.

We continue to seriously evaluate multiple M&A opportunities within all of our markets. Now that being said, we would consider attractive transactions that open new and attractive geographic markets in the Midwest and the West.

Moving on to our consumer finance subsidiary, Citizens Finance Company continued at an impressive pace in the third quarter, with net earnings of $695,000.

Year-to-date, Citizens' return on equity is a lofty 23.6%, with year-to-date net income of $2.3 million compared to $1.8 million for the first three quarters of 2011.

In concluding my comments today, I am pleased to report that at its October board meeting the Heartland Board of Directors elected to maintain our dividend at $0.10 per common share payable on December 7, 2012.

I will now turn the call over to John Schmidt for more detail on our quarterly results, and then John will introduce Ken Erickson, who will provide commentary on the credit side. John?

Thanks, Lynn, and good afternoon. In my remarks today, I would look to add depth to the press release relative to third-quarter results. Additionally I will provide estimates on some key operating metrics for the fourth quarter.

To reiterate Lynn's comments, we are very pleased with this quarter's results and feel very positive about the operating strength of the Company.

Let's look at the balance sheet. During the quarter, while investments were flat, cash and cash equivalents increased by $108 million as we continue to look for the best opportunities to deploy more overnight money into investments.

As a reference point, the duration of the portfolio currently sits at 4.16 years versus 3.88 years at the end of the second quarter.

Relative to the loan side, loans held for sale increased by $26 million during the quarter. This is consistent with the increased production throughout the quarter.

Starting in the fourth quarter, our holding period and average balance were increased by as much $75 million as we intend to create mortgage-backed securities prior to delivering production into the secondary market.

The held to maturity loans were up $167 million year-to-date and $18 million for the quarter continues to evidence one of the core competencies of Heartland. We remain confident that we will reach our estimate of $200 million of loan growth in 2012.

Let's move on to the income statement. Consistent with last quarter's forecast, we saw our net interest margin fall below 4%, dropping 21 basis points from 4.05% down to 3.84%. This change is generally related to the investment portfolio performance and specifically the aforementioned growth in cash, combined with the sale of a portion of securities that have become increasingly more susceptible to prepayment risk.

At the same time, even with this reduction in the net interest margin percentage, total margin dollars decreased by only $365,000 quarter over quarter. As we have discussed in the past, our focus has been upon to fund loan growth from the investment portfolio. However, we continue to see opportunities to expand and improve our already granular deposit base.

As a result, the investment of these new low-cost deposits, combined with the runoff of the existing investment portfolio, will have the obvious effect of reducing return on that portfolio.

Relative to our cost of funds, we continue to see some incremental pricing opportunities in our non-maturity deposits. Additionally our CD book continues to reflect some larger opportunities with $121 million of CDs maturing in the next six months at an average rate of 1.07%.

We typically model a 60 to 70 basis point reduction in our CD pricing.

Much as I mentioned last quarter, we are cognizant that our CD portfolio needs to remain a reasonable part of our funding structure, which is best evidenced by the expansion of balances this quarter.

In summary, we anticipate some modest further reduction in the margin, but would still anticipate it remaining around a 3.8% level in the fourth quarter. However, we see the margin holding very flat in terms of dollars.

Additionally loan growth would serve to boost the margin as would an increase in rates.

We experienced a provision recovery for the quarter of $500,000. While this quarter's results was in large part driven by the payoff of one loan deviously classified as impaired, we would expect that a majority of our provision expense on a go forward basis would be driven by loan growth.

Relative to noninterest income, non-interest income totaled $30 million for the quarter. Excluding security gains, non-interest income increased by $1.2 million quarter over quarter. Gain on sale of loans continues to be the largest contributor to noninterest income at $13.8 million for the quarter. This number has continued to improve due to increased mortgage production and improved margins on that production.

Importantly, we see the pipeline continue to expand consistent with what we experienced in the third quarter.

Additionally we continue to adhere to our previous estimate of $2.1 billion of production in 2013. This is in part driven by the increase in the number of mortgage loan originators which totaled 141 producers at 9/30/2012 versus 73 a year ago at this time.

We experienced a $493,000 mark-to-market charge on our mortgage servicing rights in the third quarter. Relative to the servicing portfolio, 78% of our production in the quarter was done on a servicing retained basis.

As a result, we feel the current level of mortgage servicing income will continue through the rest of the year.

Also of note during the quarter was $5 million of bond gains. A majority of these gains are directly attributable to the movement out of investments I mentioned earlier.

Focusing on non-interest expense, total non-interest expense increased $5.7 million quarter over quarter. The largest component of noninterest expense continues to be in the salaries and employee benefits area, which increased by $1.7 million.

Contained in this total is $5 million of commissions associated with mortgage production. This figure includes $470,000 of sign-on guarantees associated with new mortgage loan originators. This compares a $4 million in the second quarter with $621,000 representing sign-on costs.

You will note that we recorded losses in other real estate of $3.7 million during the quarter, which was attributable to two properties, one in Montana and one in Colorado. We would anticipate a reduced level of write-downs on a go forward basis.

Finally, we substantially increased our accrual rate of mortgage repurchase obligations by $1.5 million. This increase reflects our continuing effort to estimate the potential loss exposure on any claims made prior to the final negotiation of a settlement. We would not anticipate additional accruals of this size on a go forward basis.

Given the current level of earnings, we feel the effective tax rate will be in the 32% to 33% range.

Lynn mentioned our success in developing SBLF qualifying loans. To confirm the dollar impact of this effort, the dividend for the next two quarters will be $408,000.

In closing, I would provide the following relative to anticipated performance metrics for the remainder of 2012. We will see reduced investment portfolio returns. Provisioning costs continuing to moderate, net interest margin dollars remaining relatively constant, gains on sale of loans continuing at roughly the same level as the Q3 total. SBLF loan growth reduces the annual payment starting in 2013 by $2.4 million. We will see the close of First National Bank of Platteville and Heritage Bank in Phoenix, Arizona, which will add $230 million of assets to the Company.

With that, I would turn it over to Ken Erickson, our Executive Vice President and Chief Credit Officer.

Thank you, John, and good afternoon. It is my pleasure to report continued improvement in the credit quality within Heartland's loan portfolio.

As shown on the earnings release, we continued the reduction in both nonperforming loans and other real estate owned, with nonperforming loans reduced to 1.54% of total loans and nonperforming assets reduced to 1.68% of total assets.

We completed the sale on $3.9 million of properties in the second quarter, 10% of the assets owned at the beginning of the quarter.

As of September 30, we had $2.5 million contracted for sale to be delivered in the fourth quarter.

Updated appraisals on OREO properties resulted in two significant write-downs this quarter, $986,000 on bare land and $1.2 million on an industrial building.

A review of properties that are scheduled for appraisals in the fourth quarter has been made, and it does not appear that significant risk of reduced value is present in these properties. At September 30, we owned 25 residential properties with an aggregate book value of $5.7 million. We owned a total of 112 commercial properties with an aggregate book value of $30.5 million. Of the commercial properties, 47 are individual residential lots with a value of $3.3 million and 35 are land or lot developments with a value of $14.7 million.

Our loan growth, excluding those covered by lost share agreement, was $18 million in the third quarter. Loans year over year are up $274 million. The third quarter had some portfolio activity that mask the continued success our banks have had with expanding their commercial portfolios.

Two larger relationships were paid off this quarter when the businesses were sold. These two businesses had $10.8 million in loans outstanding at June 30.

In addition, another $5.7 million was paid down as expected from the receipt of funds from the sale of tax credits related to the loan transaction.

Finally, we received payoffs from competitors in the amount of $9.6 million on a few credits we were choosing to exit due to increased credit risk evidenced in these relationships. Excluding these one-time events, loan production continues this positive trend over the past several quarters.

$5.7 million of recoveries on previously charged-off loans have been received in 2012. This puts our banks in a net recovery position year-to-date, and when including Citizens Finance, our consumer finance company, the net loan losses were $536,000 in the third quarter and $1.3 million year-to-date.

Our allowance for loan and lease losses as a percent of loans and leases decreased from 1.58% to 1.53%. This quarter a negative provision of $502,000 was recorded. This was primarily the result of the collection in full of a loan that had an impairment that is a specific reserve of $1.28 million that had been previously established in a prior quarter.

Offsetting this was the $536,000 of net loan losses and provision expense of a new loan growth of approximately $225,000. The allowance has been reduced by 33 basis points over the last 12 months from 1.86% to 1.53%.

So a proportion of the allowance maintained for impaired loans has gone down by 31 basis points during the same period, therefore leaving our allowance on nonimpaired loans relatively unchanged, reducing from 1.34% to 1.32% year over year.

The drought has certainly been a leading story for the past several months. It is too early to estimate the impact it could have on our agricultural portfolio.

Feedback from our agricultural lenders is that yields so far from this fall's harvest are mixed with some being surprisingly better than expected.

As I stated last quarter, most of our grain producers carry crop insurance that will protect them from a catastrophic loss for those that end up with reduced yields. Our agricultural lenders have reviewed their portfolios, and we expect limited increased risk exposure due to the drought of 2012.

All of our banks completed their annual examinations from the FDIC and/or their respective state examination teams during the past quarter. These examinations went well as expected with no changes noted in classified credits.

The fourth quarter is expected to show continued improvement in credit quality with limited risk to any significant charge-offs and continued sale of all the real estate loans. Pipelines are relatively solid, so we expect to end the year with solid loan growth.

With that, I will turn the call back to you, Lynn, and remain available for questions.

Thank you, Ken. Now we will open the phone lines for your questions.

(Operator Instructions) John Rowan, Sidoti.

Good afternoon, guys. Just one quick question, John. Were there any mark-to-market gains for mortgage banking this quarter?

There were some. I think, actually there may have been a -- there was a slight adjustment down over quarter over quarter. It wasn't -- either way it wasn't material. Let me put it that way.

Okay. Well, what happens going into 2013? If you guys have -- obviously you've guided for relatively flat mortgage banking income into the fourth quarter. But what happens in 2013? If volumes stay flat, you have to reverse out any of the first half of this year mark-to-market gains, or do they stay flattish? I am just trying to understand how 2013 works from the perspective of mark-to-market gains.

If our production remains at that $1.5 billion, we don't see that the mark-to-market rolling back out, to answer your question. So we would anticipate the same level mark-to-market at this point as our production stayed at $1.5 billion.

But if production goes down, you will have to reverse out some, correct?

There will be some reversal out of that. As much as there would be I think you need about it, there would be reversal out, and there would be some reduction in the overall income associated with the mortgage activities.

We are actually expecting, John, for the production to go up. Didn't you mention, John, that $2.1 billion?

$2.1 billion.

$2.1 billion for 2013. One of the things that we've been looking at is there are an awful lot of homes that would be happy to refi as long as they can get the value of their home up. A lot of homeowners were still underwater, but we have seen improving pricing on homes, and as that continues, it will open up a new sector of homeowners to refis. So we think the refi is going to continue on through 2013.

Okay. But, again, there was no material mark-to-market gains just in the quarter, and you're not -- I just want to make sure I understand that it doesn't include an adjustment to the prior year quarter, correct?

It doesn't include, I'm sorry? I didn't get the last part.

There were no major mark-to-market gains in the quarter, correct?

That is correct.

All right. Thanks a lot.

Jon Arfstrom, RBC Capital Markets.

Great. Thanks. Good afternoon, guys. I've got a couple of questions, but just to follow-up on mortgage. That $2.1 billion, I know the goal is to drive more purchase volume through your channels, but how are you thinking about mortgage -- or refi versus purchase in that $2.1 billion number?

Assuming rates stay where they are, Jon, I think we're still anticipating ideally in this environment it would probably be 50-50 -- 50% refi and 50% purchase.

And so I think we still have an opportunity to ramp up both because what I was alluding to in my comments, we have nearly doubled the number of mortgage loan originators over the last year, and many of those are still ramping up. For instance, we have over 20 MLOs in Minnesota now where we had one or two last year at this point. So I think that is in part why we feel confident we can continue to ramp up that overall amount of production. There's going to be some new market entry as well, but bottom line, think about the production for 2013 at 50-50. As rates go up, that's going to -- we will probably see some incremental increase in purchase price, some decrease in the overall volume, but regardless we still feel confident that it will be beyond what we are even experiencing this year.

Okay. That's helpful. Then maybe a question for any of you, but maybe Ken or Lynn, but the C&I balances were relatively flat sequentially, but it still sounds like you are optimistic in terms of the pipeline and the activity and the commitments. Ken, you kind of alluded to some of the one-time items that impacted the quarter, but other banks have talked about a bit of a slowdown in commercial demand or at least decision-making. Are you seeing that, or is it kind of a different story for you?

Our pipelines are relatively full. Like I said, I wanted to point out that our growth was mapped a little bit by those events that I mentioned.

Now we do have some of our commercial bankers mentioning that they are hearing some conversations in their commercial customer groups of some money sitting on the sidelines waiting to see what happens in the election, waiting to see what happens with taxes before they dive into acquisitions or other growth modes of their own. But, as Lynn mentioned, with our commercial bankers now, we've got an active pipeline that they are calling on customers outside of our normal customer base. So we can try to expand who we are dealing with. So that's where the majority of our growth is coming from.

Okay. Then, Ken, just one more question for you about it seems like about half of your real estate owned is lots and lot development if I'm doing the math correctly. And I know you have a lot of the values baked into your reserving, but are you seeing any lift in some of those values or any kind of loosening in the market for the lots and lot development?

Yes, we are probably. In New Mexico we are still seeing a relatively slow recovery for values there. We have seen the most in Arizona where they really seem to bottom out and than a fair amount of activity over the last three to six months. So it appears that those properties are -- they are starting to move almost slowly. We certainly expect that that portion of our other real estate portfolio will start to find buyers relatively soon.

Okay. Thank you.

Chris McGratty, KBW.

Good afternoon. John, on the securities portfolio, can you help me with the size going forward? Obviously I think there will be maybe some cash coming in over with these deals. I am just trying to frame out where I should think about the investment book maybe in Q4 and then maybe looking ahead and what you see as this kind of direction of the books.

Currently just over $1.2 billion. It's incrementally going to grow probably by as much as $100 million in the coming quarter. That's probably a not unreasonable estimate as we move some of that cash off, as we move the excess deposits over launch and these acquisitions into the investment portfolio. I think $100 million is a fair estimate.

Okay. Then maybe next year, your comment on the marginal health for the fourth quarter? Like most banks, the margin outlook is getting tougher. I guess are you guys contemplate anything you hear from anything you may be acquiring with these acquisitions or maybe on your own to maybe protect the margin next year in terms of your liabilities?

Are you thinking about on the asset side or the liability side?

I'm thinking is there anything on, I guess, in a broad question, are you considering anything on your own liability structure that might be higher cost of debt or --?

Like restructuring some FHLB advances, things of that nature?

Exactly.

We do look at some of that as an alternative right now. The good news, we have a pretty good chunk of -- which I should have mentioned in my comments, a pretty good chunk of FHLB maturing in the first quarter of 2013. It is also an opportunity for us. We are looking and have looked at some scenarios relative to early termination on some FHLB advances. We aren't that far down the pike with that, but it is a consideration as well that could occur in the fourth quarter. It wouldn't be huge, but it would be material if we decided to do it.

But other than that, just to reiterate, we do see some opportunities on the asset side, and just to try to get some additional color on the benefit of securitizing that mortgage loan pipeline, that, again, will add as much as $75 million of investable funds or dollars and loans that will go on their books at the total. So the average will be somewhat less than that, but that, again, is an asset that will be a contributor to our margin on a go forward basis.

Just a question on the deals, last one. Can you help us with the additional goodwill intangibles? Or maybe asked a different way, what pro forma tangible common equity ratio might be at year-end? Obviously there are a lot of moving pieces.

You mean relative to the acquisitions?

Exactly. So what's the goodwill? Can you help us with the goodwill for --?

In aggregate, we are probably at this point given everything we know on mark-to-market is very preliminary. It is around $4 million add to the goodwill and all intangibles.

Okay. Thank you very much.

Stephen Geyen, Stifel Nicolaus.

Good afternoon. Maybe a question for Lynn. You've been busy with, I guess, you had three acquisitions in the not so recent past, and just curious kind of what your appetite is and if you anticipate taking a breather here. I'm just curious the capability of the closing team and how quickly they can put these deals together.

I think historically we thought maybe one or two deals a year was our capacity, but we think we can probably handle -- depending on the complexity of the deals, we can probably handle one per quarter. We have a number of deals in the queue, and so we would be thinking of approximately one per quarter.

Now that doesn't mean it will happen, but we think we are capable of doing that. We have done a nice job of formalizing our process. It's well documented, and the people that are working on these merger integrations are doing a great job. Dubuque went well. So far Wisconsin has gone very well, and we're in the process now of working with Arizona. So we are pretty comfortable that we can do about one a quarter.

Now there again, if it's a much larger transaction, that's going to be a little more challenging. But I guess as we've talked internally, the smaller deals are almost as much work as a larger deal.

I think the advantage of multiple charters also helps in regard that we can do some decentralized integration, if you will, and that we are relying on the member bank to help us -- some of the back and obviously the front-end. So the model does contribute to some benefit in that regard as well.

I think they especially help when they come to the human side of the transaction where we are integrating cultures and bringing new personnel on board and wrapping them into our way of banking.

Okay. And a question for Ken. You had given a ratio of the reserves for non-impaired loans, I think [134 to 132], somewhere in there. Just curious that new credits that are coming on, is that kind of a good reserve ratio for us to think about?

I would think so. That's really the non-impaired side of our portfolio, and in a much better economic environment, I would think that that would drive a little bit lower. But when we're still running in that 7.5%, 8% unemployment some sluggish business out there, I think that's a fair number to look on new production.

Okay. Great. Thanks for your time.

(Operator Instructions).

I just want to double back to John Rowan's question relative to the mark-to-markets on the mortgage production, and add production should trend back. We will see a reduction in that mark-to-market about $12 million currently. That would trend back to maybe $10 million, so there would be some peel back. But again, as Lynn pointed out, we do not anticipate our mortgage production going the other way.

We have no further questions in the queue at this time.

Okay. Well, thank you, all. In closing, then, I can say I am really pleased with Heartland's record financial performance for 2012. There have been several contributing factors, including strong organic deposit and loan growth, continued reduction in nonperforming assets, excellent noninterest income growth, and the potential for future growth in both earnings and assets as we expand both through acquisition and new bank locations. I speak for our entire management team when I say we are delighted with our progress and really excited about the future for Heartland.

I would like to thank everyone for joining us this afternoon and hope you can join us again for our next quarterly conference call, which will be in January 2013. Thanks, again, and have a nice evening.

Thank you. Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.