Valley National Bancorp (VLY) 2011 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by.

Welcome to the first quarter earnings conference call.

(Operator Instructions) As a reminder, the conference is being recorded.

I'd now like to turn the conference over to our host, Ms.

Dianne Grenz.

Please go ahead.

Good morning.

I'd like to thank everyone for participating in Valley's First Quarter 2011 Earnings Conference Call, both by telephone and through the webcast.

If you have not read the earnings release we issued yesterday, you may access it, along with the financial tables and schedules, from our website at ValleyNationalBank.com and by clicking on the Shareholder Relations link.

Also before we start, I'd like to mention that comments made during this call may contain forward-looking statements relating to the banking industry and to Valley National Bancorp.

Valley encourages participants to refer to our SEC filings, including those found in Forms 8-K and 10-K, for a complete discussion of forward-looking statements.

Now I'd like to turn the call over to Valley's Chairman, President, and CEO, Gerald Lipkin.

Thank you, Dianne.

Good morning, and welcome to our First Quarter Earnings Conference Call.

We're pleased to report strong operating results for the quarter.

During this recent period of economic distress, Valley maintained the core characteristics of traditional banking by upholding a strict credit underwriting philosophy and a common-sense approach to management.

We believe this prudent tactic enabled Valley to preserve shareholder value and will lay the foundation for sustained earnings growth as the economy begins to improve.

Our earnings in the first quarter manifest just this belief, as Valley generated net income of $36.6 million, or $0.22 per diluted share, an increase of over 30% from the same period one year ago, when Valley earned $27.4 million, or $0.16 per diluted share.

The growth in earnings is attributable to a multitude of factors, with an emphasis on revenue expansion.

Loan growth in Valley's noncovered loan portfolio was over $200 million from the prior quarter, or nearly 9% on an annualized basis.

Strong growth was generated in nearly every quadrant of Valley's loan portfolio as both commercial and residential lending activity accelerated.

Many of Valley's commercial customers remain guarded when it comes to investing in new equipment and inventory as they wait for further reassurance that the economy has stabilized and growth prospects have improved.

Within our New Jersey footprint, our borrowers' sentiment is heightened to these concerns as line usage and borrowings for new investments remain flat as compared to prior periods.

However, within our New York marketplace, line usage has begun to increase as borrowers' confidence expands and various businesses begin to grow inventory levels.

In the aggregate, C&I line usage increased significantly from the prior quarter even as the total amount committed declined.

First quarter line usage was 40% compared to 38% in the prior quarter and 36% in the same period one year ago.

The linked quarter growth in line usage equaled $35 million, nearly equal to the net growth in total C&I loans.

Prevalent in both our C&I and commercial real estate portfolios, many of Valley's larger borrowers continue to pay down lines and accelerate prepaying loans with their own excess liquidity.

However, our commercial lenders are very active in pursuing new business opportunities, which during the quarter proved extremely promising and mitigated the entire decline in balances attributable to pay-downs from our larger customers.

Total new commercial real estate originations for the quarter were over $150 million, nearly equal to the entire amount originated in all of 2010.

On a sequential-quarter basis, our total commercial real estate portfolio grew approximately $70 million despite a $10 million contraction in the construction portfolio.

Much of the growth in CRE portfolio was the result of growth in owner-occupied businesses in our New Jersey marketplace coupled with an expanded emphasis on co-ops and multi-family loans within our New York footprint.

Although these loans provide thinner rate spreads than our historical transactions, they still offer sound credit metrics.

We anticipate significant new opportunities to grow the balance sheet as Valley's commitment to this line of business expands.

The linked-quarter decline in construction loans, which I previously mentioned, was mainly due to a decline in line usage, as commitments increased 3% and much of which we anticipate being drawn down in future quarters.

The residential mortgage portfolio increased $122 million from the prior quarter, even after selling nearly $90 million of our first quarter originations, as activity continued to be brisk due to historically low level of interest rates that led many consumers to refinance their existing residential mortgages.

Our one-price refinancing program, as low as $499 including title fees, continues to generate strong volume.

For the quarter, we processed nearly 2,000 applications, at a time when seasonal activity is typically light.

This program has the added benefit of generating significant cross-sell opportunities, as approximately 65% of these applications are to refinance non-Valley loans.

Valley's decision to sell or portfolio each loan is based on many factors, primarily based on credit and further determination based on the Bank's asset/liability mix and Valley's interest rate exposure.

As part of the Bank's macro strategy to manage interest rate risk, Valley at times utilizes derivatives to convert fixed rate loans to floating rate instruments.

While the initial impact may negatively affect the portfolio yield, the long-term benefits are immense.

The automobile portfolio contracted $23 million from the prior quarter, although activity was excellent on a relative basis as we booked over 4,000 new auto loans, representing a 240% increase from the same period one year ago.

Application volume was strong at over 18,000.

However, many of the applications failed to meet our strict credit thresholds.

We rejected over $250 million of auto loan applications during the quarter, a significant portion of which were due to unacceptable loan-to-value requests.

It is our philosophy that all borrowers must have skin in the game in order for us to maintain the historical strength of our portfolio and long-term returns to our shareholders.

We continue to witness an attempt to build market share by some of our larger lenders within our marketplace as our competition's buy rates for auto loans hover around 2%.

We like the auto lending business.

Nevertheless, when the competition sometimes creates an environment where we are unable to generate a reasonable return, our volume will remain constrained.

During the quarter, Valley's credit quality metrics improved from the prior quarter.

Net interest charge-offs to average loans for Valley's non-covered loan portfolio declined on an annualized basis from 0.18% in the fourth quarter to 0.17% in the first quarter.

Actual absolute net charge-offs for loans not covered under the FDIC loss share were only $3.8 million for the quarter versus $4.3 million for the prior quarter, and $11 million during the same quarter just one year ago.

Total nonaccrual loans as a percentage of total loans declined 6 basis points from the prior quarter to 1.06%.

On an absolute basis, total nonaccrual loans declined $3.8 million from the prior quarter to just over $101 million.

Included in this figure is approximately $29 million of residential mortgages, of which $18.2 million are situated in New Jersey and in various phases of foreclosure.

Unfortunately, in New Jersey the foreclosure process has become chaotic.

From the date a borrower becomes delinquent, on average it takes over 900 days to when the property is repossessed compared to the national average of approximately 200 days.

By postponing the foreclosure process and adding to the number of distressed properties on the market, the state is prolonging the return to a normal housing market, pulling down prices and potentially inducing potential buyers to wait for lower prices.

Until such time as the state of New jersey accelerates the foreclosure process, we anticipate the balance of Valley's nonaccrual loans to be artificially escalated.

Although the total nonaccrual balance is negatively impacted by the state's failure to properly facilitate the liquidation of these properties, under Valley's loan impairment analysis, all anticipated write-downs have been accounted for and we do not anticipate additional material charges to the loan loss provision when the properties are eventually foreclosed upon and sold.

In summary, we are extremely pleased with our operating results for the quarter.

Strong loan growth experienced during the quarter, combined with an expansion of the net interest margin, provided the catalyst to a discernable increase in Valley's operating revenue.

The Bank is well positioned to capitalize on the strengthening economy and provide positive returns in 2011 and beyond.

Alan Eskow will now provide some more insight in to the financial results.

Thank you, Gerry.

My comments this morning and the press release from yesterday reflect the 5% stock dividend declared on April 13, 2011, to be issued May 6, 2011.

As a result, all per-share data has been adjusted.

For the first quarter, Valley reported net income available to common shareholders of $36.6 million, or $0.22 per share.

As Gerry mentioned earlier, we are pleased with our financial results for the quarter.

Total pre-provision revenues, consisting of both net interest income and noninterest income, excluding the noninterest income from the change in the FDIC loss share receivable, increased to $145.4 million from $142.7 million on a linked-quarter basis, representing an 8% annualized increase from the prior quarter.

The growth is largely attributable to the increase in Valley's net interest margin from 3.63% in the fourth quarter to 3.71% in the most recent quarter.

The margin expansion and the resulting increase in net interest income recognized during the quarter is mainly due to growth in the average earning assets outstanding, combined with a shift in the composition of assets.

During the first quarter, Valley was able to reinvest much of the overnight excess liquidity brought on in the fourth quarter, due in part from the sale of residential mortgages and investment securities.

On a period-end basis, gross loans increased $180 million from December 31, 2010.

Loans on average during the quarter remained relatively flat, as most of the growth in new loans was not recognized until the month of March.

We anticipate realizing the full benefit of these balances and continued loan growth in the second quarter.

In addition, accretion income on covered loans, those acquired by the two FDIC acquisitions, was greater by approximately $2.7 million from the linked quarter as the portfolio, on aggregate, continues to perform better than Valley's original estimate.

Valley's cost of funds declined 4 basis points from the fourth quarter to 1.59% as approximately $116 million of high-cost long-term borrowings matured during the quarter.

In addition, another $90 million of long-term borrowings matured in April, which should benefit the net interest income in the second quarter and beyond.

As an alternative to replacing these advances, Valley elected to obtain approximately $102 million of brokered certificates with a weighted average life of four years at all-in rates significantly less than that of comparable borrowings.

Valley maintains a large percentage of its funding base in fixed long-term borrowings as a means to mitigate future interest rate risk.

As this portfolio matures, Valley may look to alternative funding sources which minimize Valley's cost of funds yet preserves Valley's desired duration targets.

New certificates of deposit continue to be originated at rates lower than the portfolio average cost.

While the cost of certificates of deposit will likely continue to decline, we see little opportunity to further reduce Valley's other interest-bearing deposit accounts, as the absolute rates being paid for many accounts are already quite low.

Additionally, during the period Valley originated approximately $300 million of contractual short-term interest-bearing deposits from other financial institutions.

As of quarter end, the balances had declined to $220 million, and as currently structured, will continue to contract in accordance with the maturity schedule, which terminates in October of 2011.

The additional liquidity generated from these deposits was in part invested in the securities portfolio, with similar duration and a positive net interest spread.

The provision for loan losses on both covered and noncovered loans and unfunded letters of credit increased $9.5 million from the prior quarter, entirely attributable to an increase in the provision for covered loans of $12.5 million.

In accordance with GAAP, for Valley's covered loans potential credit impairment is recorded on a pool-level basis irrespective of the performance of other pools.

Accordingly, Valley recorded the $18.9 million in provision for losses on covered loans during the quarter.

As a direct result of this credit impairment, and because the loans are guaranteed by the FDIC, Valley increased the FDIC loss share receivable and recorded approximately $17.7 million of noninterest income.

On a net pre-tax basis, the credit impairment on covered loans negatively impacted income before income taxes by approximately $1.2 million.

Of the $18.9 million in provision recognized, approximately 91%, or $17.2 million, is attributable to primarily C&I loan pools.

For these impaired pools in general, the loss severity recognized is greater than our original estimate.

Conversely, many loan pools are performing far greater than initial expectations in both the absolute number of loans performing and the loss severity.

Ironically, on an aggregate basis the construction and fixed commercial mortgage portfolios at both acquired institutions are performing significantly better than expected and Valley anticipates recording additional future accretion as credit marks established at acquisition are not required and begin to be prospectively recognized through interest income.

Total noninterest income for the quarter of $44.8 million includes the change in the FDIC receivable mentioned earlier in addition to a few other infrequently recurring items.

On the face of Valley's consolidated statement of income, which accompanied our press release, the change in the FDIC receivable reflects noninterest income of $6.2 million, which is $1.5 million less than the amount I previously referenced when discussing the credit impairment on covered loans.

The variance of $1.5 million is largely attributable to a $2.4 million prospective decline in the FDIC receivable, related to loan pools performing better than anticipated, partly mitigated by an increase in the FDI receivable of approximately $900,000 for expenses incurred collecting covered loans.

Other noninterest income items worth mentioning include nearly $3.4 million of trading gains, largely attributable to the fair value mark-to-market gain on Valley's own trust-preferred debentures.

Gains on sale of loans of $3.6 million related to mostly residential mortgages sold in the early part of the quarter.

We anticipate fluctuations in future gains as ALCO decisions will drive the level of sales of residential mortgage originations.

Operating expenses increased approximately $3.4 million from the prior linked quarter.

Contributing to the growth in noninterest expense were the following items, many of which Valley does not anticipate recognizing to the same degree in future quarters.

Occupancy expenses largely associated with snow removal increased $2 million from the fourth quarter.

Additionally, legal and REO expenses related to the collection of covered loans increased nearly $900,000 from the prior quarter, most of which was offset by an increase to the FDI receivable in noninterest income.

We anticipate operating expenses for the remainder of 2011 to decline slightly from those reported this quarter.

The credit quality metrics reported with our press release, and for which I'm about to discuss, do not reflect the loans acquired via the LibertyPointe and Park Avenue Bank FDIC acquisition-assisted transactions.

These loans are reported as covered loans on our financial statements as we have entered into loss-sharing agreements with the FDIC on both transactions.

Credit quality for the quarter remained relatively in line with the prior three quarters as from a macro perspective credit appears to have stabilized and has begun to improve.

Total nonaccrual loans, as of March 31, were $101 million, approximately $4 million less than the amount reported in the prior period.

Over $82 million, or 81% of these nonperforming loans, are comprised of construction, residential mortgage, and commercial real estate loans, categories in which Valley has historically had very low loss rates.

For all of 2010 and the first quarter of 2011, total gross charge-offs within these categories were $8.9 million.

For the most part, we are comfortable with our collateral position and the prospect of collection.

In conjunction with our quarterly impairment analysis, we analyzed our nonaccrual and troubled debt restructured loans in determining the appropriate required reserve.

Based on this analysis, we have established a reserve of $15.7 million against principal balances of $152 million, comprising the majority of our nonaccrual loans and troubled debt restructured C&I and CRE portfolios.

The $15.7 million reserve has been allocated to each loan category on the allocation tables within our press release.

Valley's first quarter provision for losses on noncovered loans and unfunded letters of credit was $5.3 million, roughly $1.5 million greater than net charge-offs.

Valley's allowance for noncovered loan losses, including the reserve for unfunded letters of credit as a percentage of noncovered loans, increased to 1.32% from 1.15% in the same period one year ago.

The quarterly provision expense is largely a result of the reserve analysis less the prior-period reserve balance.

If the level of net charge-offs and total delinquent loans, including nonaccrual loans, continues to stabilize and potentially improve, we anticipate the future provision expense to be in line with the amount recognized in the first quarter.

Valley's capital ratios for the quarter remain strong.

For the period our Tier One common capital ratio was 9.32%, an increase of 7 basis points from the prior quarter and 42 basis points from the same period one year ago.

We are comfortable with our capital ratios and believe they provide a solid base with which to grow the organization.

This concludes my prepared remarks and we will now open the conference call to questions.

(Operator Instructions) Craig Siegenthaler, Credit Suisse.

Thanks.

Good morning, everyone.

Morning.

Morning.

First question, just here on loan growth.

When you think of poor loan growth, you're really excluding covered loan run-off.

Should we expect to see improvement in growth given what you're seeing in your core markets in April?

Or is the first quarter rate positively benefited from some of the higher retention of the conforming mortgages?

It's very hard to predict future loan growth.

We have seen brisk activity in our commercial areas.

We continue to see it right through the beginning of April.

Hopefully it will continue.

We have focused a lot of attention on it.

We've got our branch managers, our branch salespeople, out aggressively bird-dogging as a further assist to our commercial lenders to find prospective commercial loan borrowers.

We've added some additional commercial lenders to our staff over the last year or so, and as a result we're starting to see more activity.

We are hopeful that that will continue.

We have not seen strong residential mortgage activity in the purchase market, but I think that's to be anticipated when you see the low volume of homes that have been selling in our area.

But hopefully that will also improve over the late spring and early summer as the weather gets nicer and people go out and start looking to buy homes.

We are still seeing a brisk business coming through our residential refinance area.

We are optimistic as to the future of loan growth.

I think just to add to what Gerry said, just one quick comment, and that's that we're seeing a lot of activity, but it's always hard to predict when loans are going to close.

So the activity is there, the people are knocking on doors, we're talking to a lot of people.

But to time closings and final originations is difficult.

Thanks.

I realize it was a pretty broad question there, but I appreciate the color.

Second question -- how do you think about the FDIC assessment fee coming up?

There's going to be some changes there and I was wondering, as you look at your balance sheet structure, what do you anticipate?

What do I?

(Laughs) I wish they would have raised the cutoff point from the $10 million to something more realistic, like $50 million or $75 million, when they talk about the large bank assessments.

But we were put into that bucket so we have to live with it.

The quality of our assets has been quite strong, and if they're going to tier it based upon quality, then I guess we'll do a little better in the future.

I mean, it's kind of hard for me to predict what the government's going to get into their head as to how they're going to assess us, though.

They just seem to be arbitrarily charging more without any necessary rhyme or reason.

So we continue to review it as they come out with their changes to what the structure will be.

Got it; thanks, guys.

Jason O'Donnell, Boenning & Scattergood.

Good morning.

Morning, Jason.

Nice quarter.

Thank you.

With respect to the CRE growth you're experiencing, can you just give us some sense of the granularity of recent originations?

I'm just really wondering whether there was some lumpiness in the first quarter that supported the growth.

We continue to see activity.

It's mostly not construction, it's mostly owner-occupied buildings.

People are looking to solidify their banking relationship, not necessarily with us; we're getting a lot from some of our competition.

We are seeing some activity in the co-op market that is -- that's very strong.

So we're actually seeing it all over the place, not in one particular area.

Okay, great; so it's not really a function of just a handful of credits.

Oh, no; no, no, no, no.

And we try to shy away from making gigantic credits.

Our legal lending limit is probably at least 10 times the size of the maximum that we like to put on a loan.

Okay, great.

And then, just switching to asset quality.

I'm just wondering -- and this is more of a general question -- but just given the improvement in asset quality you're seeing and the potential for further improvement, I'm just wondering what your appetite is to release reserves going forward or potentially take negative provisions down the road.

Okay.

Historically it has been our philosophy not to release reserves.

We may not add more to the reserve account but we have never, to the best of my recollection, ever released earnings coming out of the -- build our earnings by pulling money out of the reserve.

In fact, we actually built our reserve this past quarter, as you see, because of the fact we actually added more to the loan loss reserve than our losses.

That takes into account the fact that we've got loan growth in addition to anything else.

So as loans are growing, even if credit quality improves, you're still going to have to be mindful of providing for future losses.

So we pretty much are bound by the kind of model we use, which takes into account all those various pieces and it takes into account loan growth.

So we're not anticipating at this point any reserve releases.

Lower provisions could possibly happen but that will really, as I said, depend on credit quality and loan growth.

Great; that's helpful.

And then just finally, I'm just wondering what drove the linked-quarter decline in salaries and benefits expense, if I saw that correctly.

I'm just wondering how much we should be backing out in the second quarter as well, just given the impact of payroll taxes, etc.

What really happened, the fourth quarter we had some stock awards which were expensed earlier because of retirement-eligible people.

So the requirements are that you have to do that.

So it's not so much that salary expense declined per se, but overall expenses declined from the fourth quarter because of mostly that.

Okay.

And then going into the second quarter -- so the run rate that's posted in the first quarter looks good to you?

Yes.

Okay, great.

Thanks a lot, guys.

Collyn Gilbert, Stifel Nicolaus.

Thanks.

Good morning, gentlemen.

Good morning.

Morning, Collyn.

Another question, of course, on the loan growth, because I think this perhaps surprised a handful of us.

And I'm talking nonresidential for now.

The loan growth that you saw -- what would you say the split was between current customers and new customers?

The growth?

Yes.

It was pretty heavily toward new customers.

Okay.

And I think the intriguing thing here is the fact that you guys did see growth in all categories.

And it seems as if -- I mean, my thought would be that the markets may not be necessarily giving you growth in all categories, but it's more something that you-all have done differently internally.

And Gerry, you mentioned that -- you talked about the branch managers, you talked about new lenders.

I mean, is that sort of a fair assessment, that you've kind of stepped it up a bit to try to get the growth, or is the market --?

Yes, it's been happening -- I think we have stepped it up; I know we have stepped it up.

We've got a real strong and spirited quarter in running of -- throughout our staff running around trying to look to generate business.

It's also a little bit of the fact that we're the type of bank that we are -- our commercial says for a residential refinance, we're the right size.

We're not gigantic, we don't push people down the food chain to deal with some junior officer who used to deal with a senior, senior executive in the bank.

And yet we're big enough to meet all their needs.

Okay.

And then, on the residential mortgage side -- and Alan, you talked about this -- that you kind of turn the spigot on or off relative to where your interest rate risk positioning lies.

But how are you thinking about that?

And maybe your appetite for future residential mortgages and tie that in to just how you're thinking about interest rates in general at this point.

We always want to make them.

We're never out of the market; we're always in the market to make them.

We've got a very nice $499 program going on, it's spurring an awful lot of activity.

We continue to look at, as you said, our interest rate position and are we comfortable at various levels of interest rates, putting on volumes, or are we happier selling them?

And we continue to monitor that.

On an ongoing basis, I think Gerry's talked before, we meet ALCO every single week.

We review it, we review where we are and what we want to do.

And if we're uncomfortable that interest rates have declined too low, then we're going to get rid of the loans.

If we're comfortable at a certain level, we'll keep them.

In addition, we do put on swaps in which we convert some of these from fixed to floating, and which that makes us more comfortable holding certain loans that we might not otherwise hold.

Okay.

But as you're planning and budgeting, what are your internal projections for what rates do?

You know what?

I don't think we want to go through where we think rates are going to go at this point and what our internal budgeting is, Collyn.

Okay.

All right, well then, one follow-up.

Maybe could you just give a little bit of color as to your outlook for the margin?

Part of that margin is still being affected by the accretion and what's going on in the loans that came from the acquisitions.

I think as I mentioned, I don't see time deposits really moving dramatically down but they could go down slightly from quarter to quarter.

I think yields on loans are holding their own at this point.

If rates do happen to go up, we'll see some increases there.

But we don't see any major increase in the margin.

I would tend to think it'll be relatively flat.

Okay, that's all I had; thanks.

Okay.

David Darst, Guggenheim Securities.

Good morning.

Morning, David.

I guess to follow up on the margin, you mentioned that you're expecting some increased amortization.

Could you quantify that for us, and how much that may add to the margin?

It's accretion, not amortization.

And it's based on the good pools, if you will, that are performing better than we anticipated.

I think it's very hard for us to tell you exactly what that's going to look like.

As I think we've indicated, the portfolio is performing better than we anticipated.

That being said, that means we get some added benefit down the road, but it really depends on the cash flows we receive from those loans.

And so we continually monitor that every quarter, and to the extent the cash flows come in greater than we had projected, we will have additional accretion.

Okay.

Was the larger provision that you took for the covered portfolio this quarter related to any action that you did based on reappraisals or anything specific to this quarter?

Yes, we're required to look at these and change assumptions as need be, and I think we did look at it very closely and we had some assumption changes based upon what we thought we were experiencing in cash flows on those particular pools.

And based on that, we decided to -- and we looked at the severity of the losses.

And that obviously increased to some extent on those pools and therefore we had to take an increased provision.

Okay.

Then, I think you're walking through some of your expectations for funding maturities this year.

Anything on the FHLB side within the next couple of quarters?

Nothing other than what I've actually told you thus far.

We did have some maturing in this current month; they've been paid off.

Okay, great; thank you.

You're welcome.

(Operator Instructions) Nancy Bush, NAB Research, LLC.

Good morning, gentlemen; how are you?

Good morning, Nancy.

Hi, Nancy.

A few questions for you.

Gerry, you said -- I think you called the foreclosure process in New Jersey quote chaotic.

And I think you pretty much made your point of view known.

I'm assuming that the choke point is the courts.

And can you just tell me if you see any kind of movement to get this unchoked and to get the foreclosure situation sort of more rectified here?

The New Jersey Bankers Association has been working quite diligently with the legislature and the courts to try to see if we can't get this thing moving, to get people to understand.

They're trying to get a bill, for example, through the legislature separating commercial foreclosures and abandoned property foreclosures separated from those homes where people are living there.

I think there's just a great deal of misunderstanding on the part of the folks down in Trenton and in the courthouse as to what they're doing by not allowing the foreclosures to take place in an orderly manner.

Okay.

Might there be legislation this year aimed at getting this rectified?

I've got my fingers crossed but I just couldn't predict anything.

Okay.

And on top of that, you made some comments about the guarded outlook in New Jersey for loan growth as opposed to the outlook, or what you're experiencing, in New York.

Could you just add some color to that as well?

Well, employment -- in the articles I'm reading in the paper, even as recently as today, employment in New Jersey -- I saw an article in the paper today, they expect it to be another five years before unemployment levels get down to more the normalized levels.

That's unfortunate.

We do have a good governor who is working hard at trying to rebuild the finances of the state to bring industry into the state.

Hopefully that'll all click together in the near future, and our performance, our loan growth, will improve in the state.

There's very little new construction taking place in New Jersey.

If you live there, and I do, when we drive around the state, you don't see very much of it.

There's a lot more activity, from what we see, in New York, and we've been taking advantage of that.

And on that note, don't forget to vote in your school board elections today.

Thank you.

(Laughs)

Thanks, guys.

Thanks.

And there are no further questions.

Well if that's the case, we want to thank everybody for tuning in and we'll look forward to speaking to you next quarter.

Thank you.

Ladies and gentlemen, this will conclude our conference call for today.

We thank you for your participation and for using AT&T Executive Teleconference Service.

You may now disconnect.