Mechanics Bancorp (MCHB) 2014 Q2 法說會逐字稿

Good day and welcome to the HomeStreet second quarter 2014 earnings conference call. (Operator Instructions). I would now like to turn the conference over to Mark Mason, President and CEO. Please go ahead, sir.

Hello, and thank you for joining us for our second-quarter earnings call. Before we begin I would like to remind you that our earnings release was furnished this morning with the SEC on Form 8-K and is available on our website at www.ir.homestreet.com. In additional a recording of this call will be available today at the same address.

On today's call we will make some forward-looking statements. Any statement that isn't a description of historical fact is probably forward-looking. These statements are subject to many risks and uncertainties. Our actual performance may fall short of our expectations or we may take actions different from those we currently anticipate.

Factors that may cause actual results to differ from expectations or that may cause us to deviate from our current plans are detailed in our SEC filings including our quarterly reports on Form 10-Q and our annual report on Form 10-K for 2013, as well as our various other SEC reports.

Additionally, information on any non-GAAP financial measures referenced in today's call ,including a reconciliation of those measures to GAAP measures, may be found in our SEC filings and in the earnings release available on our website.

Today I would like to update you on recent events, talk about our progress and executing strategy, and highlight key financial results. I will also share a few thoughts about current market conditions. Please refer to our earnings release for a more detailed discussion of our financial condition and results of operations.

In the quarter we successfully executed three important transactions. First, we sold approximately $211 million of single family mortgages as part of our efforts to reduce the mortgage concentration of our loan portfolio, recognizing the $3.9 million pre-tax net gain. We have included this gain in our commercial and consuming banking segment, as the loans were previously in our held for investment consumer loan portfolio.

We also completed the sales of two pools of non-conforming jumbo mortgage loans totaling $84 million. These sales marked the first executions from our non-conforming HomeStreet Select mortgage loan program. Today the non-conforming jumbo loan space is the most competitive part of the mortgage market with large balance sheet lenders offering the lowest rates and fees in the market.

Last year we took the necessary steps to become a rated originator and servicer to enable us to sell our loans to securitization aggregators. For example, our loans comprise over 20% of Redwood Trust's most recent non-agency jumbo loan securitization.

And finally, as part of our capital management measures in preparation of Basel III we sold the right to service approximately $3 billion of single family mortgage loans at a very attractive price resulting in a net pre-tax gain of $4.7 million. This gain is included in mortgage servicing income for the quarter. The strong interest in the secondary market for our loans and our mortgage servicing rights is gratifying. It reflects the quality of our lending and the superior value of our servicing assets.

We also continue to improve our team, last week we announced that we appointed financial services veteran, Tim Chrisman, to the Board of Directors of our Company and our bank. Many of you know Tim from his 40 plus years in the industry. Tim's depth of experience and perspective are a great addition to our Company.

And in June HomeStreet received a superior rating for service in the Consumer Reports Checkbook placing second overall among 16 banks in savings and loans. Our focus continues to be on business diversification, building mortgage market share in existing and new markets, and growing our commercial and consumer banking business both in our core region and in markets where we are expanding our mortgage presents.

This quarter our mortgage banking business returned to profitability benefiting from significant increases in closed loans and interest rate lock commitments. Our strategy will continue to grow our retail mortgage banking franchise and mitigating the effects of a constrained market through this growth helped us increase our closed loan production at 2 times to 3 times the rate of the industry as a whole in the second quarter. We continue to believe that this is the right strategy for our Company.

Many consider this to be the slowest recovery since post-World War II though you wouldn't necessarily know it in our core market area of greater Seattle. Building cranes are everywhere you look. In June downtown Seattle had 100 projects actively under construction permitted or recently completed. Of those, 64 residential projects reflect the strong employment and population growth in this area.

Payroll employment in Washington state returned to pre-recession levels in the first quarter with employment in Oregon and Idaho on track to obtain the same in the near future. Average employment growth rates are expected to be 2.3% in Washington and 2.6% in Oregon and Idaho through 2015. Construction, manufacturing, and professional and business services sectors will leave the Northwest economies this year and next accounting for a disproportionately high percent of job creation.

However, even with our strong local and regional economic fundamentals and a robust labor market housing activity still lags the long-term averages. According to the MBA, mortgage applications are about 15% below last year. And both existing and new home sales have contracted compared to the same period. The MBA issued a new forecast recently for the remainder of this year lowering its estimate of overall mortgage originations for 2014 to $1.02 trillion, down some 42% from 2013, the lowest annual total since 1997. Forecasts for 2015 are better with purchase originations expected to increase about 25% and housing starts expected to mirror that increase.

The MBA has estimated the second quarter mortgage originations increased 18% over first quarter. Inside mortgage finance estimates an increase of 25% over the same period. By contrast, are originations were significantly higher increasing 63% over the prior quarter. Nationally, purchases comprised 59% of originations and 64% in the Pacific Northwest in the second quarter. HomeStreet continues to perform above the national and regional averages with purchases accounting for 80% of our closed loans and 78% of our interest rate lock commitments in the quarter.

We continue to believe our Company is on track to meet or exceed last year's origination volume despite the significant contraction of the mortgage market. We are maintaining our growing market share in many of our regions including Puget Sound, the Boise, Idaho area, Spokane market in eastern Washington, Clark County in Southwest Washington, California which accounted for 20% of our closed loan and interest rate lock volume in the second quarter.

Obviously new housing will play a critical role in the much-needed recovery. Still very much of an up one month, down the next story at this point. Housing permits still lag the 25 year average in Washington and Oregon though they're expected to edge closer to that average by the end of 2015. Idaho is another story where permits are expected to exceed the long-term average by about 30% by the end of 2015.

I would like to now share some key metrics from the quarter. Our second-quarter net income was $9.4 million or $0.63 per diluted share compared to $2.3 million or $0.15 per diluted share for the first quarter. Tangible book value per share increased to $18.42 per share as of June 30 compared to $17.47 per share at March 31. Year-to-date return on average tangible equity is 8.82%.

Excluding acquisition related expenses of $606,000 in the second quarter and $838,000 in the first quarter, net income for the quarter was $9.8 million or $0.65 per diluted share compared to net income of $2.8 million or $0.19 per diluted share in the prior quarter. Our net interest margin was 3.48% on a tax equivalent basis compared to 3.51% in the first quarter.

The change from first quarter was primarily the result of higher levels of interest received on nonaccrual loans paying off during the first quarter versus the second quarter. Net interest income was $23.1 million an increase of approximately 2% from the prior quarter. Total average interest earning assets increased 2.6% to $2.72 billion as strong growth in loan balances was partially offset by lower balances in our investment securities portfolio.

Noninterest income was $53.7 million an increase of approximately $19 million or 55% from the first quarter. This was primarily due to a $16 million increase in net gain on mortgage origination and sales activities from a significantly higher level of interest rate lock commitments as well as increased mortgage servicing income which benefited from the gain we realize from our sale of mortgage servicing.

Additionally, as I mentioned earlier, we recognized $3.9 million of pre-tax gain from the execution of portfolio loan sales closed in the second quarter. Noninterest expense was $63 million for the quarter ,compared to $56.1 million in the first quarter. This increase was primarily due to increased salaries and related costs including commissions from the increase in closed mortgage loans as well as other expenses related to acquisitions and organic growth.

During the quarter we had net growth of 55 full-time equivalent employees. These personnel increases were primarily the result of opening 1 new retail deposit branch in Seattle and four new home loan centers, 2 in the Puget Sound region, and 2 in California. At June 30 the bank's tangible book value per share was $18.42. Our Tier I leverage ratio was 10.17% and the total risk-based capital ratio was 14.84%.

I would like to speak now about our commercial and consumer banking business results. Our commercial and consumer banking business continues to expand with strong loan production and net loan portfolio growth of nearly 9% for the quarter. We continue to see growth in our loan sales for investment portfolio of at least 5% or more per quarter subject to liquidity and capital constraints. Segment net income was $3.8 million compared to $4.1 million in the first quarter, these results included the $3.9 million net pre-tax gain on the sale of portfolio mortgage loans in the quarter.

Our first quarter results included a pre-tax $1.5 million reversal of loan loss reserves primarily associated with the transfer of approximately $300 million in mortgage loans from our held for investment portfolio into our loans held for sale portfolio. Due to a significant decrease in classified loans and lower charge-offs we did not record a loan-loss provision in the second quarter.

The total aggregate impact in net interest income of our portfolio mortgage loan sales, most of which closed in the second quarter, was $1.2 million, pre-tax. Going forward this impact will quickly be mitigated by new commercial lending and expected prepayment of those loans sold. Excluding acquisition related expenses, segment net income was $4.1 million compared to $4.7 million for the first quarter.

As I mentioned, our loans held for investment portfolio grew 9% in the quarter to $1.81 billion with new loan commitments of $272 million with the greatest activity in single family residential construction and commercial real estate.

Deposit balances grew 2% in the second quarter to $2.42 billion. Transaction and savings deposits rose 6% in the quarter now comprising 71% of total deposits. Non- interest-bearing deposits increased over 7% in the quarter comprising 9.8% of total deposits at the quarter end, well certificates of deposit balances fell by 14.4%.

In addition to the new retail deposit branch opened in the second quarter we also opened a second new deposit branch on July 17 and have 2 more opening in the second half of this year, putting us on target to open four de novo branches in Seattle in 2014. Upon completion of these openings we will have substantially achieved our goal of branching to every community of deposit concentration in Seattle.

We are happy to report that the core deposit growth trajectory for these de novo branches opening since the end of 2012 continues to exceed our expectations. Classified assets ended the quarter at 1.24% of total assets compared to 1.5% last quarter. And nonperforming assets decreased to 1% of total assets from 1.12% at March 31.

Now, let's talk about our mortgage banking results. Seasonality plays a role in loan volume in the mortgage market nationally and more significantly in the Pacific Northwest. As anticipated, interest rate lock commitments and closed loans both increase in the quarter.

The additional loan volume in conjunction with our efforts to improve production efficiency resulted in a substantial decrease in the cost to produce loans. In the second quarter our mortgage banking segment recognized net income of $5.6 million compared to a net loss of $1.8 million in the prior quarter. Interest rate lock commitments totaled $1.2 billion an increase of approximately 50% from the first quarter. Locks increased month by month throughout the second quarter but have slowed month-to-date in July to below June levels.

Total applications increased 6% quarter-over-quarter though applications with property are now 44% of total applications, down from 50% of total applications last quarter. Clearly, demand is much stronger than available housing stock can support still. Closed loan volume designated for sale was $1.1 billion an increase of 63% from the first quarter.

The combined pipeline of locks and closed loans was $953 million at June 30, 46% over that at March 31 of this year. And our average loan amount has increased 9% to $292,500 in June compared to December of last year. This growth in average loan size is attributable to a number of factors including the growth in jumbo non-conforming loans as a percent of our total, our growing franchise and market share in California, and overall home price appreciation in all of the markets that we serve.

Net gain on single family mortgage loan origination and sale activities was $37 million in the quarter, approximately 50% above that in the first quarter. We experienced some pressure on margins this quarter due primarily to increased origination of non-conforming jumbo loans which made up 20% of commitments in the quarter.

The composite profit margin was 321 basis points compared to 323 basis points in the first quarter. Given our expectation that going forward the composition of our lending will include a larger proportion of non-conforming jumbo loans we are expecting our composite margin to decline slightly going forward. Single family mortgage servicing income was $9.6 million in the quarter compared to $7.5 million in the first quarter.

Mortgage servicing income for the quarter includes the pre-tax net gain of $4.7 million I referenced earlier related to the sale of a portion of our single family mortgage servicing rights. Segment noninterest expense of $42.5 million increased $5.7 million, or just over 15% from the first quarter. This was primarily due to higher commissions related to higher closed loan production. Notwithstanding the increased in overall expenses, our direct cost to originate a loan decreased approximately 81 basis points from the first quarter.

In the quarter we added a net of 52 production and operations personnel in mortgage banking, this net number includes the reduction, both voluntary and involuntary, of 42 production and 30 operations personnel as part of our ongoing effort to upgrade production performance and improve operating efficiency.

We maintained our position as the top originator by volume of purchase mortgages in the Pacific Northwest. During the quarter we continued to expand our network of mortgage loan production offices. Today we have 51 standalone home loan centers, opening 2 new locations in Washington and 3 in California during the quarter.

Now, I would liked to make a few closing comments. The second quarter marks the first quarter in which we made a profit in our mortgage banking operations since the second quarter of last year. The past year has been a challenging time for all companies in the mortgage business and these challenges continue. Other lenders continue to suffer the impact of regulatory and investor claims and settlements, HomeStreet fortunately has not incurred these types of claims due to our long history of ethical, compliant, and credit worthy loan origination.

Our strategy of mortgage loan origination expansion during the downturn is showing results. Loan origination's growing 2 times to 3 times the industry rate in the second quarter. We believe the industry origination volumes are at their lowest level, subject to seasonality, and that we will experience going forward growth, that while a challenging market today reminds us that this is a business that is going to get better over the longer-term.

In our traditional banking business or loan originations continue to grow at a multiple of the growth levels achieved by peer institutions. And we're supporting that loan growth with strong deposit generation. We remain optimistic of achieving a balance contribution to our bottom line in a reasonable timeframe. Overall, despite the headwinds of a slow mortgage market, low interest rates, and weak economic recovery, we believe our strategy is the right one for HomeStreet at this time. We look forward to making more progress the remainder of this year.

We appreciate your time and attention today. I would be happy to answer any questions you may have at this time.

Thank you. (Operator Instructions). Our first question comes from Paul Miller of FBR Capital. Please go ahead, sir.

One quick maintenance question. Of the $900 million and so loans that you sold, did that include the legacy jumbo loans that were sold during the quarter?

The loans sold during the quarter that are disclosed in the tables in the back?

Yes.

You know, that is a good question, I don't believe so. I think that those are the loans sold in the normal course in our mortgage banking activities.

Okay. That is why I just wanted to double check with that. The mortgage bank did well but as we always know, is that when the rate -- you're rate locks are up 60%, can you replicate your second quarter with those rate locks? Or will it be tough because -- it will be tough to increase your rate locks by 60% again? Like, how much noise is created by those rate locks?

It does help the quarter quite a bit. We have been suffering the opposite impact of declining locks and rising closings toward the end of last year. Because we have continued to hire and grow capacity, what we see is a leveling out of the difference between rate locks and closing. We don't expect to see that type of increase in volume between the second quarter and the third quarter, though we are expecting a meaningful impact of increased volume between second and third quarters. And we're also, at this point, expecting to see a flattening of volume from the third to the fourth quarter which, historically would have been unusual due to the seasonality of loan production per producer. But given our growth in personnel and offices through year end we are expecting to mitigate somewhat that expected seasonality. It remains to be seen if that is actually going to occur, but that is our current expectation.

So you think that given the new hires that you brought on, I just want to make sure that I'm clear, you believe that production can remained relatively flat going into the third quarter?

Or better.

Or better. And then on the MSR sales, do you foresee any more sales like that or was that just an opportunity, a one-time opportunity, that you had to jump on, or is it something that you would explore going forward to lessen the capital strains that it brings on relative to Basel?

We intend that to be a one-time sale. We obviously are doing other things to help mitigate the impact of the Basel III changes like the sale of portfolio mortgage loans. You know, I guess I can never rule out another transaction if servicing values were to reach levels that we thought were abnormally high that would mitigate the very negative affects of selling servicing on our system. And believe me, they are negative. Part of our business relies on the continuing relationship between us and our customers. Historically, we have had an industry-leading level of self-refinanced loans and the best way to maintain that relationship is to continue the servicing relationship. Beyond which we think that we are in a better position to service the loans we originate in our markets. So having said that, we don't.

seek to execute any more of these sales. I always hesitate saying never to anything because the world changes so quickly, but that is not in our current hands.

Hey, guys, thank you very much.

Thanks, Paul.

And our next question comes from Tim Coffey of FIG Partners. Please go ahead, sir.

Thank you. Good morning, Mark.

Good morning. How are you, Tim?

I am doing great, thanks.

The jumbo production you saw in the quarter, and I apologize if I missed this in your comments, what was the geographical dispersion of that jumbo production?

That is a good question, without checking the data my expectation is that by total dollar amount, the preponderance will still be in Puget Sound, just given where the aggregate levels of lending are. But on a per office or per originator basis you will see higher levels of jumbo productions in some areas of California and some of the closer in areas of Seattle.

Okay. California, specifically, was that your expectation that that would be more of a jumbo market for you?

Well, we had to come to terms with that when deciding to enter California. Now that we are there we are as focused on the non-jumbo markets, the interior markets which tend to have higher levels of government loan origination, government loans continue to have the highest profit margins and the highest servicing value in the market today. So now that we are established in Northern and Southern California we are more focused on areas with smaller levels of jumbo production. Having said that, we are prepared to operate in any of those markets very competitively and that is why we went through all of the steps necessary to become a rated seller servicer to be able to pool and sell these loans to securitization aggregators. So our program is competitive today but those loans, by profit margin, are the lowest in the market today.

And turning to the commercial loan growth during the quarter. Obviously construction was really good, and not to put too much pressure on you, but is that kind of performance repeatable?

We think we are just getting started, honestly. Yes, it was a strong quarter for construction but the pipeline is stronger. We have had a significant proportion of commercial construction activity in the first part of this year. The latter part of the year we're going to be emphasizing permanent loans and Fannie Mae loans more, and increasing our required ROEs on construction because we think we have a significant pipeline of commercial construction. On the residential construction side, that pipeline is just beginning to grow to levels that we expect. And I would expect to see those balances grow dramatically with commitments over the remainder of this year. You may remember that we hired 2 teams in the first quarter, 1 in Salt Lake City, Utah and 1 in Southern California to expand the footprint of our residential construction business. And those groups are doing well and I expect to see that business grow more significantly in the near term.

Okay. And so that is where your growth would come from, geographically speaking, from Southern California and Salt Lake City in the near term?

It will, though we have been hampered in the Puget Sound area by a lack of buildable land and it is not that the demand hasn't been there or that our customer base, the local regional builder, isn't ready to expand their business, finding entitled land or getting new land entitled is today a four-year process. So that is going to build slower locally but the housing demand is clearly there.

What are some of the characteristics on the financial side do these borrowers exhibit in terms of construction? What do their financial positions look like?

They are much stronger than they were pre-recession, a combination of factors contribute to that. One, all of the weaker builders didn't really survive the recession. So the builders that are in the market today are to be characterized by being substantially more liquid, lower levered, and I will repeat that, much lower levered and subject to lending underwriting requirements in the industry, not just with us, that require real equity in the projects. And we get between 10% and 20% cash equity on cost in our projects today. Of course, as you know, that is much different than how this industry operated pre-recession when there was not much real equity in most of the projects.

Our borrowers today are very strong and it is gratifying to see who we are working with because I would characterize them, again, as being more liquid, much less levered, and much more concerned about the level of spec homes and lots they are carrying and their net absorption duration. We are very concerned about that absorption duration, today we will not allow absorption or building of spec homes larger than a six-month duration by project. And lot inventories of more than 18 months to 24 months. The key for us in risk is duration, leverage, and liquidity and we try to watch those very carefully today.

All right. How competitive is that market? Are we going to see compression in loan yields?

I think it is inevitable. Today the returns on these loans, all of them exceed 30% ROE. That means we are getting prime plus 1.5%, 1% to 1.5% and fees of approximately 1.5% on these loans. Today that creates pretty substantial ROEs. Contributing to that number, though, is the short duration. To put that into perspective, our construction loans in the Puget Sound area are averaging lives of around 200 days and even faster in Boise. Today they are averaging about 100 days of life. So inventory because of the scarce inventory condition is turning over quickly. And it is sort of a good bad, right? It makes your ROE on these loans spectacular but it makes it very hard to hold balances.

I'm sorry, I missed that last part. It makes it very hard to what?

To hold balances because they prepay, the homes sell so quickly as soon as they're built they're gone. And so holding balances at levels is hard. Historically, these loans have carried about a 60% utilization rate on the total commitment. They have been running in the low 40% range from most of the time we have been back in the business since the recession.

And then I just have another quick question about deposits. Your non-interest-bearing deposits have been growing faster than the total deposit portfolio. Given the renewed focus on commercial credit do you expect that trend to continue?

Well, we sure hope so. Obviously, it is the most competitive part of the marketplace and it is entirely relationship riven. We compete on the basis of service, to a lesser extent on the price of some service items. As an example we have a very fine treasury and commercial cash management group that we have built here, but we sell those services at a lower price than most institutions. So we commonly save businesses who are net payers on analysis somewhere between 30% and 50% of what they're paying to other institutions for those services. I can't say that that doesn't help competitively. At the end of the day, though, it is service and their relationship with you. And so as our commercial lending increases I would expect to see balances come with that. But we are also focused on non-borrowers, people who have positive cash flow that need investment services and cash management services. So we're very focused on that and it has been gratifying to see the balances come.

Great. Okay, well, thanks. Those were all of my questions.

Thanks, Tim.

(Operator Instructions). Our next question comes from Chuck Griege from Blue Lion Capital. Please go ahead, sir.

Good morning, guys.

Good morning, Chuck.

Just a couple of questions here. So, you've got the mortgage bank back to profitability, you are doing a very good job growing the commercial side of the business. How do you see the development and growth on the overall assets side of the book? Are you going to fund it with securities, et cetera? That is the first question. And if you were to look out 12 to 18 months, how would you expect the balance sheet to look relative to today? And then the second question is, obviously trading -- you actually traded discounts to your tangible book value at present, what do you think are the obstacles to get a fair valuation given the returns you are generating both on assets and on equity?

Well, thanks for the good questions, Chuck. Our asset growth we expect to come primarily from growth in our loan portfolio. We do need to maintain us a securities portfolio that is somewhere between 13% and 15% of total assets. We need most of those securities as collateral for our hedging activities. A little different than some commercial institutions which keep these portfolios exclusively for liquidity purposes. We have the dual challenge of sufficient on balance liquidity and having sufficient collateral with trading activities surrounding hedging.

So expect that 13% to 15% asset competition and securities. And the remainder is straight portfolio growth, honestly, we have been a little disappointed we haven't been able to grow faster because our prepayment speeds in our portfolio have been a lot faster than we expected. We have been running about 5% per quarter in scheduled and unscheduled paydowns of loans. Much faster than you would expect in the normal course. And so a little help we think will come simply from slowing prepayment speeds. With respect to stock price obviously we are a little frustrated.

The second question was how would you expect the balance sheet to look 12 to 18 months from now? And kind of the returns from the 2 different sides of the house as a percentage of your net income, how much more balance might we see?

Sure. So we expect total assets to grow this year by maybe $400 million over the year, roughly, and we have already done some of that. The next year we hope to grow assets a little faster, maybe $600 million to $700 million or more. That is going to be regulated by our earnings and our ability to grow capital to support that number. The returns --

That would be the governor?

Yes, because right now we're not quite fully levered, right? We are running 10% Tier I, we are going to run that down to about 9%. So combination of earnings growth, capital growth, and a little more leverage on capital should allow was to grow. If we are growing well and our stock price supports it we may even raise some capital next year. But that is subject to a lot of considerations including stock price. Returns on those businesses as a contribution to the total, we don't quite expect to be in a position where we have an equal contribution next year. The total income from the mortgage bank we expect to increase substantially next year, that would be consistent with increasing volume, larger footprint, greater efficiency of our operations. The bottom line next year will still be more than half mortgage banking.

I don't think that the absolute contribution should be as important as what is the dollar contribution of commercial banking, standard traditional banking, and what does that imply to our valuation if you were to value these segments separately. We understand that the market is going to value mortgage earnings, at least historically, at about half of the multiple of traditional bank earnings and that is due to the volatility, sycilcality, durability of those mortgage earnings. What we're hoping is that people are going to start paying attention to the absolute returns on the commercial segment, valuing those at a reasonable multiple related to those operations, and accordingly mortgage. And so we expect next year's earnings in the commercial and consumer segment to be substantially higher than this year as we build those portfolios at a much higher pace than operating expenses. Getting that operating leverage we've been looking for.

I would concur wholeheartedly with that and given consensus, earnings right now are about 280, the extent you can get more coverage that will broaden your -- likely lead to a broader investor base, I think the valuation will be appropriately reflected in the stock.

Well, we hope so. I mean, it is very frustrating to be trading below tangible book value. I believe it is an [inappropriate] valuation in light of peer institutions and in light of the historical and future profitability of this institution, but I don't make the market. All we can do is commute a business plan and try to execute it well. We have had some significant headwinds in the mortgage market and I think our stock price today reflects general concern about the mortgage market, the fact that our earnings today are still dependent on mortgage earnings for some significant amount of the earnings. And so until there is stabilization into the mortgage market, and in our mortgage earnings, I guess I have to except the market's concern as reflected in our stock price. I think over the next several quarters that should be mitigated by our performance on the mortgage side.

I agree. Best of luck.

Thank you, sir.

(Operator Instructions). It appears that we have no more questions. So this will conclude our question and answer session and I would like to turn the conference back over to Mr. Mark Mason for any closing remarks.

Again, we appreciate your attendance and listening to our presentation today, all of the great questions. We are looking forward to a great quarter this quarter. Thank you all.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect your line.