WaFd Inc (WAFD) 2005 Q2 法說會逐字稿

Good morning, ladies and gentlemen. Welcome to the First Mutual Bancshares' second quarter 2005 conference call. [OPERATOR INSTRUCTIONS] I would now like to turn the conference over to John Valaas, CEO and President of First Mutual Bancshares.

Thank you. Good morning, everyone. Joining me on the call are Roger Mandery, our Chief Financial Officer and Scott Harlan, head of Residential and Consumer Lending.

I'll begin by reading our forward-looking statement disclaimer. This presentation may include some statements regarding the Company's trends objectives, anticipated growth, credit quality and other expectations which will be forward-looking statements for the purposes of Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from those expressed or implied in this presentation.

Additional information concerning the risks and uncertainties are discussed from time to time in filings made by the Company with the Securities and Exchange Commission. These risks and uncertainties should be considered in evaluating the forward-looking statements and undue reliance should not be placed on such statements. The Company does not have any obligation to update any such forward-looking statements.

Well, the highlights I'll go through quickly of the quarter. It was a very good quarter for us. Earnings per share were up 13%. We continue to have excellent credit quality -- our non-performing assets were at 8 basis points at the end of the quarter.

I think the one thing I would comment on is the shift in mix in the loan portfolio that continues to occur in the Income Property area that is now 37% of the portfolio, down from 42% at the end of the first quarter. As I remarked I think in other quarterly earnings calls, it's been as high as 65% if you go back several years ago. What is going on there is what we see as a deterioration in the credit structure in that market both in terms of credit risk and in pricing, and we have pulled back somewhat from portfolioing loans in that segment. That's been countered by excellent growth in our Residential area, Consumer area, and in Business Banking.

So, good performance in terms of growth of the bank's earnings in the context of the local economy here. The economy is doing very well. Solid growth. The state economic forecast office has increased it's revenue estimates for the state, largely built on increased tax revenues, which of course is their major source of income. Some of that driven by real estate excise taxes but just the general overall business climate has produced increased tax revenues from sales taxes to other types of transaction taxes.

Boeing is back in a hiring mode. Their newest plane, the 787, has received very strong orders after it's launch. And Microsoft has announced 20-year plans to add 12,000 employees here at its campus in Redmond, which is about 10 miles from our headquarters here in Bellevue. So we are experiencing good growth in earnings, good quality in earnings, and it's in the context of very good economic growth in this marketplace here in the Central Puget Sound where our 12 banking centers are located. At that point I think I'll stop and turn it over to any questions.

[ OPERATOR INSTRUCTIONS ] This is Louis Feldman. Please state your company name followed by your question.

Hoefer & Arnett. Good morning gentleman.

Good morning Lou.

I have bunches of questions but I'll limit this round to just two. John, can you comment on this change in policy for sales finance, what you foresee the potential risks to be and what you see the potential benefits to be? I mean we have talked about this almost ad-nauseum over the past couple of years about the fact that you stated you would limit it to no more than 10% of the portfolio. Now you seem to be moving away from that.

Also what you hope to gain from this when your production levels were essentially flat with last year. Are you talking about ramping up production in this area? That's the first question.

Okay let me go in reverse order. In terms of ramping up, you're absolutely right. The production in the first six months of this year was flat with the first six months of last year. The difference in terms of increasing what we portfolio is simply that we are suggesting that we may well sell less than we have out of our production in the past and that will allow the portfolio to grow.

As far as the 10% limit of the portfolio that's -- you know we're at 9% I believe at the end of the second quarter of this year. Even though we sold less in the second quarter by than we did in the first quarter, natural growth in the portfolio means that 10% level will increase in absolute dollars terms. Also it's something that we can and do review with our Board in terms of what our overall exposure is.

You asked what we expect to gain. The yields on these loans are attractive compared to many other loan assets that are available to us in the market today, particularly in commercial real estate. They do have a short average life. Portfolio turns over fairly quickly. We've had good experience, very good experience I might add, with the uninsured portfolio in terms of credit quality and the insured loans, of course the credit experience has been good because of the insurance feature on those loans. So the gain is building a few more assets that have significantly higher net interest margins.

Hopefully that responds to your questions, Lou.

In terms of the charge-offs -- I mean in other words you feel very comfortable with a 33 basis points charge-off level, which could potentially go significantly higher if you increase this percentage.

Well I don't know that the basis point level would go any higher.

Okay. So you feel that the 35 that you experienced last quarter and going back it's ranged somewhere -- you know in the worst -- I think the worst was somewhere around 42. But you feel that those are acceptable charge-off levels on the uninsured?

Oh yeah, and I might ask Scott Harlan, who runs that area who is with us on that conference, to add anything if he would like to.

Yeah, Lou, as you pointed out it's been fairly persistent going back -- I believe in the press release we have five quarters and in that range it's been 18 to 35 I believe. The 42 you mentioned I think is in previous orders. Yes it's been fairly consistent because it is higher credit quality -- 720 plus scores on the program where we originate loans nationally and that also applies to the program that we run locally in Washington, Oregon, where we get a UCC filing. So I think on that particular program we have seven or eight years of history and it has been extremely consistent.

Okay. Then the other question I had in terms of loan portfolio growth, given the fact that sales finance has been essentially flat in terms of production, you know similar to last year, and you're backing away from the investment CRE and CRE in general. You talk about in one portion of the press release, you talk about the fact that you expect very reasonable growth in your loan portfolio going forward yet in the forward-looking statements back at the back you're saying the overall portfolio is likely to grow 0 to 5 million which is virtually no growth. I'm wondering what you're looking at in terms of Q3 and where the differences are.

Lou, this is John. You would want to look at the numbers in the forecast at 0 to 5 million, which we think in the context of this marketplace is very reasonable. But you should account in that 0 to 5 million, you have to account for that in the commercial real estate or income property arena that portfolio will likely be stable or shrinking but we're experiencing very reasonable or good growth in our other business lines that is specifically the consumer residential, including customer construction and business banking.

Okay. I'll step back. Thank you.

Jim Bradshaw. Please state your company name followed by your question.

Good morning. D.A. Davidson.

Good morning Jim.

Hi John, Roger. A couple of questions on the consumer retention. Are you going to change the mix or are you going to retain mostly insured and sell the uninsured still, or is there a philosophy switch there?

Typically what we do is when we do sell, we sell in as close as you can get on this exact proportion to the originations that we make during that quarter. So the mix shouldn't change. What goes into the portfolio should represent our overall origination mix and what we sell should be the -- represent the overall origination mix.

And it's still basically FICO scores the de-limiting factor there.

Yes.

Okay.

By the way, I think we indicated in the second quarter our origination mix was 35% insured.

Right. On the commercial sales, your intention isn't to sell anything out of portfolio, right? It's just really to defend sort of weird market conditions but continue to originate for customers but sell stuff that you consider to be a mediocre risk/reward standards. And that wouldn't suggest anything in the portfolio's going out the door, right?

Exactly right. There's no intention to sell out of portfolio. If we've got a portfolio loan and the borrower approaches us and says, "We've seen some of this 5%, or 5 year or 10 year 2% money..." and it's clear they are on the way out the door, we are going to want to help them and obtain a fee in the process because we want to maintain the customer relationship. But we don't want to actively farm the portfolio and sell loans out.

The last thing I had -- otherwise your guidance was particularly clear this quarter -- is the provision, what your thinking is. It sounds like modest loan growth but some mix shift within the portfolio. What's your thinking on what the provision for the third quarter might look like?

Hi Jim, it's Roger Mandery. I don't think we've given any indication on the provision but I think you could probably draw a reasonable conclusion that if we're seeing you know slower loan growth that would certainly affect what's occurring here. Other than that, I don't know what else to comment in regards to provision.

Well, I sort of had a mental debate about that, at least with myself, and wonder as the mixed shift changes that suggests you put more under reserves even though you have a flat to maybe slightly down loan portfolio. And certainly credit quality is not the issue but it's more the pace of growth and risk in the portfolio.

There's quite bit that goes into determining the reserve for loan loss. A big piece of it is the composition of the portfolio, how it's acting, how non-performing loans are compared to where they were in the previous quarter. Another piece that goes into it, a significant piece, is the bank's evaluation of how the economy is doing, what direction we think it's going, how is the local economy compared to the national economy, is there anything going on that's unique? Are we having a large employer in our area that's struggling? There's certainly nothing of that going on right now.

But there's a whole lot of stuff that goes into over and above just loan growth and the composition of the portfolio as it changes and the composition of portfolio changes glacially. For example, the sales finance portfolio is only 9% of the entire portfolio. So If we change our direction in that area, it would take a long time before you would see that percentage ratio change much compared to the total portfolio.

Do you have an allocated piece in the reserve, Roger, for the lifetime cap on the older pools of sales finance stuff?

The portfolio is stripped down and look -- in the case of large loans they actually look at them loan by loan. In smaller loans, they do aggregate them and look at them in pools so there would be an allocation specifically for different pieces of any of the portfolios.

Jim, with respect I think you're referring to that first pool.

Right.

The insurance coverage, if you will, is now down to 5% at the end of the second quarter. We also noted in the press release that we're in active discussions with the insurer about continuation of insurance on that pool.

And John is that just for that pool or are you trying to figure out a way to wrap all the pools together to in some way to use what probably looks like better performance in the second and third year pools?

This is a Scott. I'm going to give you a very general answer. We are looking at a variety of different options. I have five, six, seven different scenarios in front of me at this point so that's about as specific I can be about that.

Perfect, I appreciate it, guys. Thanks a lot.

[ Operator Instructions ] Louis Feldman, please go ahead with your follow-up question.

Thank you. It is now July/August and the insurance policy is coming up for review again. Has the insurance companies shown any hesitancy at potentially renewing the contract with you for the future next year?

Lou, I don't think -- I think anything we would say there would be a forward-looking statement and I'm not inclined to make that kind of statement today. I just point out we've had, not just with you but with other individuals had similar discussions as we approached the anniversary of each of our policy years, and each year the insurance has always been renewed.

Okay, in the press release you talk about having a negative gap. But through the interest rate simulation it looks like you're in a more of a neutral position. Can you comment on if rates continue to -- if the short-end rates continue to rise and the longer end stays where it's at, can you give us some guidance on what your expectations are here?

The interest margin has been almost flat-line for a number of years at around 4%. That seemed to be the case here in second quarter. We are looking for it to improve a little bit in the third quarter, glacially if you will, a few basis points.

The simulation, as you pointed out, indicates that if rates were to rise 200 basis points from where we are today we wouldn't expect much of a change, in fact less than 1% of the impact on net interest income. We're reasonably comfortable with that simulation because in the last year or so we've been through 200 and some basis point changes of short interest rate and we've seen the yield curve move from a steep yield curve, which is probably the most favorable position, at least for us and most banks, down to a flat yield curve.

So we've been through all of that and the net interest margin has been rock solid at around 4%. So we're not looking for a whole lot of change. Certainly not in the third quarter.

I might also add, Lou, we don't--we--we're not inclined to take a view on where rates are going to go and therefore we are generally looking to try to position ourselves to, as you put it, stay relatively neutral.

Okay, two more questions. Can you touch on what you're seeing in terms of deposit pricing in any level of irrationality? You talk -- you touch on a few times within the mini-MDNA about the competition pricing pushing rates up at a faster pace than what you had expected. Do you continue to see that? And can you also touch on your shift, you know, essentially -- slightly away from the low-cost DDA's back towards the time deposits from a funding standpoint with the change that took place in Q1.

I'll respond first and Scott might want to add something. Scott chairs our pricing committee and they meet weekly and I've missed the last couple of meetings. First of all, you're absolutely right. In Q1 of this year we did see some erosion and the demand deposits were down about 12 million or something like that from the end of 2004. We pretty much re-gained all of that in the second quarter in the transaction account area. I think we came in maybe a million dollars short of that or something.

So a good reversal of the consumer deposit behavior that we saw happening in the first quarter. There was quite a ramp-up, particularly in the course of the first quarter into last year and in the course of the first quarter in terms of the competition for deposit pricing in the marketplace. My impression is -- and Scott is closer to this than I am -- is that has, at least in terms of increase in deposit rates, that growth has slowed down a little bit and even leveled off in the last few weeks.

Scott, do you want to add to that?

It's been surprising to us a little bit over the last month as wholesale rates as a bench marks has risen a few basis points every week. All of the competition that we track, which is a fairly large list, have all, not all but in general, been pretty stable in rates. Rates have -- there has been very little movement amongst other banks on a weekly basis and I would -- the rates that we publish have been essentially in that same mode where they have been flat for the last three or four weeks. So at least on a very, very micro-level basis it's been somewhat encouraging as opposed to the ramp-up that we saw in the first quarter.

Do you feel there's a potential for a lag/catch up requirements? Is that potential growing?

You mean a potential for deposit prices to increase again?

What I'm saying, in terms of the competition and therefore you since you're trying to remain essentially in the middle of the pack, is there a lag now where all of a sudden there might have to be a pop sometime in Q3 as rates continue to move up. Several institutions have spoken about the fact that they have tried to hold the line on the deposit costs as long as possible and finally when they start to lose business they have to pop them up. I'm wondering if you feel that -- is the feeling you're getting is that a pop is coming, potentially coming, because the trend -- since the wholesale rates continue to move up but the competition has remained essentially flat, could there be a pop coming, a catchup pop?

That's tough to tell Lou. I think we can only comment on what we're seeing right now and as Scott suggests it's been relatively stable. In terms of other bankers I have talked to, I have not heard anybody suggesting that they're desperately trying to figure out ways to raise deposits so it may be that we're in a zone where, who knows?

I couldn't predict whether or not we're going to have a pop or not. I hate to extrapolate from the present on an item like that because it's just so hard to predict.

Lou I might be able to add a little bit more to that.

We kind of committed I think in first quarter and again in this press release here that we were a little surprised in the first quarter that we didn't receive the lag. We actually kind of budgeted for it and anticipated that the wholesale money would move up sharply, which it did, and that there would be a lag effect on retail deposits. That didn't occur. For whatever reason the historical patterns of retail money sort of lagging up when rates go up and lagging in the wrong way when rates come down just didn't occur and that was one of the reasons that we saw low pressure on the margin in first quarter.

We are hopeful, because wholesale money and retail money seems to be pretty close to one another right now, that we won't see that action in third quarter, certainly not to the degree that we saw it in first quarter. So I guess time will tell on this but we're certainly not benefiting as much as we had in prior cycles with this lagging effect.

Okay I've got another question but I'll step back in case someone else wants to ask one.

[Ben Collins], please state your company name followed by your question.

Hi this is [Ben Collins] at Delphi Management. Hi, guys, looks like you've done very well. Very impressed. Easy question, kind of general. Can you comment on your fixed rates versus your adjustable rate ratios in some of your portfolios, your loan to value qualification ratios? And your ROE is tending down slightly, do you see that trend continuing, not that it's dramatic? Thank you.

Hi Ben this is Roger Mandery. Our portion of adjustable-rate loans to fixed-rate loans in our portfolio is around 90% and it's been in that range for a long time so we're not seeing a whole lot of change in that area. What was the second part?

90% adjustable, 10% fixed.

Right.

Loan to value ratios in some of your portfolio pools?

We indicated in the press release -- let's talk about income property to begin with -- that average loan size in that portfolio is about $753,000 and I think we said that the average LTV was about 63%. That tells you about history.

Current underwriting standards in that business line are in terms of loan-to-value we prefer not to exceed 75%. We occasionally go to 80% on something compelling. But we really like to be in the 70 to 75% range. I would add, though, that from our point of view, while loan-to-value is important, what's more critical is the debt coverage ratio.

When we underwrite, we underwrite assuming an interest rate that's higher than current market conditions. We're not sure all our competitors do that. We're looking for a debt coverage on multifamily of about 1.15 and 1.20 on commercial properties, again underwritten at an assumed higher rate than current market rates are.

I have to say, going back to my earlier comments about the credit conditions in that marketplace, it's been a long long time since we've done a multi-family deal because we find that there are lenders out there who are extremely aggressive on what they want to do in terms of debt coverage ratios. In our view, those are the more important metric to look at than loan-to-value. I don't think we publicly announced on the residential side what our loan-to-value standards are, but we generally, if we exceed 80% either in residential or on our home equity lines of credit, we -- not generally -- we always require mortgage insurance or credit insurance in excess of 80% or in some cases 70% LTV, if that helps you.

Thank you, that's great. Your ROE tending down slightly, not significantly, is that kind of a continuation you see into the future because of -- I don't know, it sounds to me like the loans are -- it's getting very competitive for loans, deposit rates are creeping up, and those factors are driving down your ROE slightly?

Ben, this is a Roger again. I knew that was a second part of the question. Thanks for reminding me.

The ROEs have tended down a little bit because our capital ratio's have been creeping up here. One of the things that we like to think that we pay attention to is capital management. So I think maybe again that's an area that we need to spend some time on in the future. When we manage our capital well, then our ROE stays in the range we're looking at. Our target is 15%. We feel if we can stay north of that somewhere that we're being successful.

I agree with you 100%, you're doing a nice job with that. Just an easy comment about -- I mean it looks like the loan environment is getting more difficult in the future. There's more aggressive lenders around there and they are doing narrower loan-to-value ratios and such, do you see that you're going to be able to maintain your credit standards. Obviously you'll be able to maintain your credit standards, but will you be able to maintain lending with those credit standards or is lending going to kind of shrink in the future?

Well where we're seeing the most competitive pressure is commercial real estate. I think it's attractive to lenders because it goes onto the portfolio in such large chunks. You've probably seen the commentary by the FDIC, particularly the San Francisco office, about their concerns in the growth of commercial real estate, which they define fairly broadly. In the western region of the FDIC, and they are focused on that and they're focused on that in their examinations.

Again, there is a tremendous amount of liquidity sloshing around right now. It's sloshing around in terms of buyers of commercial real estate. It's sloshing around in banks and it's sloshing around in start-up banks. We've had two new banks in Belleview start up in the last six months. I guess one is yet to open it's doors but it will shortly. Both raised $20 million in capital very quickly. Well, they need to leverage that up to about $300 million in assets fairly quickly and for start-up banks commercial real estate is a very quick way to leverage up because, as I said, the loans come in such large chunks. That's income property or commercial real estate.

So, competitive there, but we believe and found to be true that the niches that we are in in consumer lending and residential lending still offer pretty good growth prospects, as does business banking at acceptable credit structures and acceptable pricing. I don't want to sound doom-and-gloom other than expressing concerns about what's going on in the commercial real estate market.

You're comments are very well made. Thank you very much.

Ross Haberman, please state your company name followed by your question.

Good morning, gentleman. Nice seeing you in New York again.

Good morning, Ross, how are you?

Good. A quick question for Roger. In prior press releases, or it might be in your 10Qs, you broke out the operating divisions and my recollection is the business banking division was losing money at the operating level. I was wondering if that is still the case today or are there any other drags, whether they're new marginal branches or any other items which might be buried in sort of the quarterly numbers, the aggregated numbers. Thank you.

Hi Ross. It's Roger again. It was good to see you. It was nice to visit with you earlier this week.

As you point out, we have four segments. Actually John committed on it. We have four segments here in the bank: Consumer, Residential, Income Property, which is commercial real estate, and Business Banking. Of those four segments, the Business Banking segment right now is not hitting the profit levels that we would like.

A couple of years ago we had two business segments that were profitable -- Residential and, ironically, the Income Property division, which is still profitable. It's just under some stress now with the pricing and credit pressures. But at that point in time the Consumer Lending division and the Business Banking segments were struggling.

The good news is now that the consumer segment is profitable and one of our premiere segments. We expect that to happen with Business Banking.

In the press release we don't break out the segments. That will be following shortly when we put out the 10Q, which I believe will probably be late next week or early the following week and we'll have a complete breakdown of segments.

Certainly through first quarter all the factors that you point out are such that the Business Banking segment, although it was essentially flat on earnings, the fact that it was using capital at a large rate, the returns were poor. The issue we feel there in that segment is simply one of critical mass and at some point in time we would hope that we get enough critical mass on board that that will be one of our success stories.

Ross, this is John. I would just add a comment on Business Banking. We made some significant investments in that business line over the last several years. New management, a few additional account officers, significant additions to the support staff area, including things like treasury management, which effects not only directly to Business Banking but the Operation's side of the bank.

Those investments were pretty much completed by the middle to end of last year. We have capacity there now. We don't see that we're going to be needing to add particularly in the area of high-priced talent either on the marketing side or the support side so as Roger says, it's a question now of building the mass.

As a follow-up if I may, in terms of building that mass, is that -- is that more of a function of you hiring one or or two or three additional commercial lenders who will bring in the loans as well as the, knock-on-wood, the company checking accounts, which we would all love to see? Or what sort of the -- the ingredients you need to do to build that mass?

At this point, well it's possibly we might add a loan officer, we're not currently planning on it. We're not looking for one. And we do believe we have unused capacity and we are very confident with the originators we have on staff that we will be able to build that portfolio.

This is Roger Mandery again. I would just add, because it is a relationship business, it takes a long time to build a rapport with a new book of business, with a new customer, to have them change their relationships and then move over to First Mutual. The good news is that once their on board it's very difficult for someone to move them to another bank.

Just by way of example, we recently added relationships to Business Banking that we've been working on for three or four years. Three or four years of consistent calling. As Roger suggested, it takes time. The availability of credit is so critical for the small to mid-sized business that even though they may be really unhappy with their current bank, they don't like to put their company at risk until they are really comfortable that they know the institution that they might be leaning toward going to.

Just one quick point about that. It sounds like -- is price an issue in terms of your product and there's just other [inaudible] or more aggressive shop -- I'll throw out banner as one example -- who is just really outpricing you in that line.

I think in the Business Banking line -- the pricing discipline among all the banks has generally held pretty well. Typically at your traditional margins over prime floating, that does not -- does not seem to be an issue. Every once in awhile you'll see a wild card on an owner-occupied piece of real estate but as often as not that's something that's from a non-bank lender.

Again we'll stay in touch. Good seeing you. Nice quarter. Thank you.

Thanks Ross.

Louis Feldman, please go ahead with your follow-up question.

Thank you. The gentleman from Delphi asked the one, but I do have another one which is in terms of can you comment more on the interest-only mortgages that you're making and your efforts to dispose of that portfolio?

I think the only thing we'd say is that, is what was in the press release Lou. We believe we have a well-underwritten product that we offered there. We're not sure that the -- how can I put this -- the analysts world necessarily would look at it the same way.

Got that right.

When we underwrote those loans we underwrote them at full PITI. We see so many lenders today underwriting at the interest-only rate in order to qualify people for the loans. That was not our philosophy.

Because of that, we felt that we would pull away from that market and consequently made the decisions that we pointed out in the press release that we would look at selling those portfolio loans, although we were pretty happy with what we had underwritten. And in addition, see if there was an ongoing market for loans like that that we could possibly originate and just sell without retaining it in our portfolio.

In terms of CRE and investment property, you've talked about this and you talked about the fact that you're trying to keep the relationships to a great extent. Is there tremendous demand, is their tremendous turn-over on some properties? Are people taking these low rates as an opportunity to try and pick up some properties even, as one bank put it, at ridiculously low cap rates?

I would certainly echo the ridiculously low cap rates. When you see multi-family cap rates in the 4 and a half to 5, 5 and a half region, you've got to think that's pretty absurd. I think, however, we also need to keep in mind and Roger and Scott sitting here with me will probably both start rolling their eyes when I say this.

But we're in -- I don't want to call it unique because it's happened before -- but if you look at shape of the yield curve, if you're a borrower, if you look at a one-year adjustable and a 10-year fixed is about the same cost as a one-year adjustable, and you tend to be a buy-and-hold property owner, you're going to naturally want to go for the 10-year fixed, which doesn't really suit our book. Going to the other part of your question, there's a tremendous amount of liquidity sloshing around right now chasing real estate, whether it's single family, second homes, or condos in Miami to flip or commercial real estate property.

There's liquidity but are the opportunities out there? Are the sales out there?

The opportunities are hard to find. You find people who are doing 1031 exchanges where they are selling one property and they are trying to flip the gain tax-free through a 1031 exchange into another property. They're having difficulty finding properties to acquire, but that is what's driving up the prices for those properties and driving down the cap rate. The more disciplined of those people are choosing to pay their taxes if they can't find a property that makes sense to them. In other words, the more disciplined of them are not willing to overpay.

Of course there are less disciplined buyers of properties out there who are willing to pay pretty much anything because short-term in their tiny little minds they think they are saving something on taxes but long-term they are probably -- arguably -- over-paying for an asset that they probably shouldn't be paying that much for.

Okay. Thank you.

[OPERATOR INSTRUCTIONS] At this time there are no further questions.

Seeing that there are no further questions, I think that wraps us up. Thank you very much for joining us today. Again, we thought we had an excellent quarter and look forward to talking to you all again in three months. Bye now.

Ladies and gentleman, this concludes First Mutual Bancshare's conference call.