WaFd Inc (WAFD) 2006 Q2 法說會逐字稿

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the First Mutual Bancshares second-quarter conference call. At this time, all participants are in a listen-only mode. Following today's presentation, instructions will be given for the question-and-answer session. As a reminder, today's conference is being recorded Thursday, July 20th of 2006. At this time, I would like to turn the conference over to Mr. John Valaas, President and CEO. Please go ahead, sir.

Good morning, everybody. I also have with me today Roger Mandery, our Chief Financial Officer, Scott Harlan, who is an Executive Vice President and in charge of Residential and Consumer Lending and Charles Smith, Vice President and Financial Analyst at the bank. It's a pleasure to have you all with us.

I will begin by reading the forward-looking statements 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 purposes of the 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 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, I'm just going to briefly summarize the quarter and make a few observations and then turn it over to questions. I will assume that you have all read the 20-page press release by now.

The earnings, we're very pleased with our growth in earnings per share, up 11% over the same quarter a year ago. As with most financial institutions in the U.S. today, credit quality remains excellent. Our nonperforming assets were at 3 basis points at the end of the second quarter. Return on equity, 17.3%. So the benchmarks we tend to look at in terms of how we manage the institution, all very strong -- that is earnings per share, quality of earnings and how efficiently we will use shareholder capital.

I will make a note on a couple of things. One, we received life insurance proceeds of $400,000 during the quarter and that was a keyman life policy on a valued employee and friend. That policy was obtained quite some time ago. He ran the Eastern division of our sales finance operation. It was obtained at the time that was being set up. That division has now been in place for a number of years and is mature. The Bank currently owns no other keyman life insurance. We own no BOLI either.

I'd like to point out that also, contrary to the outlook we gave you for the second quarter where we said that we would be selling 14 to $18 million in sales finance loans during the second quarter, we chose only to sell 10 million in sales finance loans during the second quarter.

Also, I'd draw your attention to a note in the press release, picking up the topic again of credit quality. We noted that we took a $100,000 impairment charge in the second quarter. We just recently after the end of the quarter, just a few days ago sold the property for more than expected and we noted that we expect a recovery on that in the third quarter of $82,000. I'd also draw your attention to the chart in the press release that discusses the charge-offs on sales finance loans and I think we had actually, on the uninsured portion of the portfolio, recoveries of $55,000 in that portfolio in the second quarter. It's the first time we've had recoveries certainly in the records that we are showing you there in the press release, going back to a year ago.

Next note would be I want to comment on the continued shift in our portfolio mix. Income property or commercial real estate segment of the portfolio is down to 28% of the loan portfolio versus 37% a year ago and business banking has grown to 16% of the portfolio, up from 13% a year ago. We're very pleased with that growth. They had a very strong second quarter in Business Banking and that's an objective of ours, to see that particular business line continue to grow.

It would not be appropriate to end the conversation without talking about the margin. We experienced a decline in margin during the quarter and it was actually a sharper decline in the margin than we anticipated in our outlook that we gave you at the last press release at the end of the first quarter. And we are anticipating continued margin pressure. I know this is not a surprise to all of you since you all follow financial institutions.

We are staying very focused on our core business lines, which are income, property, business banking, our retail banking group, residential real estate and consumer lending. Those of you who have followed us historically know that we have never been an aggressive lender in the construction area, particularly single-family spec construction and land development. I would point out that single-family spec construction remains at 3% of our portfolio. There is intense demand for that type of financing in our marketplace today. We are not aggressively pursuing that. We continue to remain focused on those core business lines and we have some very good relationships with developers and builders on the spec and land development side but they're very select and we're choosing not to aggressively expand those. Certainly in an era of margin compression like this, it would be an easy route to follow but it's just not the strategy that we are choosing to undertake but rather to stay focused on those other business lines, including custom construction in the single-family residential area as opposed to spec construction.

So all in all, we're very pleased with our growth in earnings per share. Pleased with the credit quality and pleased with our results and where we are headed. At that point, Matt, I will turn the conference call back to you for questions.

(OPERATOR INSTRUCTIONS). Jim Bradshaw, D.A. Davidson.

John, the growth in held for sale loans this quarter, to 20 million or so, is that part and parcel of your decision on consumer finance stuff to not sell quite as much? Is that build really consumer finance?

Good morning, Jim. This is Roger. Most of the held for sale right now is sales finance. We anticipated selling a little more in the second quarter than we actually did and we're beefing up to have comparatives to what we have done in prior quarters, a big sale in third quarter somewhere in the 18 to $21 million range. So loans that are coming in are being classified today as held for sale in anticipation of those sales.

Was the decision not to sell just a timing issue or was it pricing related or what was behind it?

We had the unexpected $400,000 in insurance proceeds. So --

Yes, I guess that explains it, yes.

Call it a timing issue, Jim.

Perfect. Is that taxable revenue for you guys?

No, that's non-taxable. Although the -- it's kind of a quirk in the accounting rules but the tax benefits are spread out throughout second quarter as well as the remaining third and fourth quarters. We went from about 35% tax rate down to just under 34%.

In your press release, John, you talked about a number of cost initiatives that you're contemplating or in process of implementing. Can you talk a little bit about what those are?

We are working with an outside consulting firm to look at the origination and processing and servicing aspect of all our commercial business, both commercial real estate loans and business banking loans. We began in the first quarter with a study of benchmarking against peers, against -- these are core businesses that we're committed to and we needed first of all to determine how we stacked up against similar sized peers. And then secondly, if the comparison was unfavorable and it was somewhat unfavorable to determine what we needed to do to improve the efficiency in those operations. So that is a significant effort and a lot of time has been spent on that throughout the second quarter and mat runs on into the third quarter as we expect in the middle of the third quarter at the output of that. And then of course from there, it's up for us to take action.

And then in other areas, we continue to look at ways to cut costs. And I know that you wouldn't necessarily know that by looking at the efficiency ratio, although I will continue to point out every quarter that a fairly important piece of the efficiency ratio is our credit insurance costs, or our credit insurance costs. But we are looking at things as trivial, as eliminating the glossy annual report and just going to the tissue paper version of a 10-K and the proxy and all of that to other ways that we can cut expenses on the operating side of the bank.

Okay, thanks. And then the last I had was could you elaborate a little bit more on the pretty solid success you had in Business Banking? Is that new customers or draws on lines or mix of both? But if we could get your color on that, that would be helpful.

Jim, it's mix of both. Again, we are continuing to devote a fair amount of resources to that area because in our view, a relationship business like that that's an important source of core deposits for us as well as asset growth is something over the longer-term horizon, is going to pay much more in the way of dividends to the bank and its shareholders than what we view as kind of more transitory investments in say spec single-family building.

Are you up to speed on the text side of Business Banking with cash management products and remote deposit and things like that or is there some tax spending you need to do down the road?

We have the basic suite of cash management products that we need to serve the customer segment that we're after, and that is companies that typically have credit needs of 5 to $10 million; I guess we've got a couple that are up in the $15 million range that we've participated out pieces of that credit.

But we have got the basic set of cash management products. We will be in beta testing the first week of August, I believe, on the we call it remote capture, the thing where you have the scanner in your customer's office and they deposit the checks there instead of bringing them into the banking center. And we think that's going to be a very key product in deposit growth in particular, deposit development in particular.

That's it for me and my sympathies on your guys' personal loss this quarter.

Thank you, Jim. And Jim I might just circle back to your first question about loans held for sale. Just kind of a gratuitous remark on my part perhaps. But those of you who have followed us for a long time know that we're very, very focused on growing earnings per share and quality of earnings. And we're certainly less focused on the size of the bank and a retention of asset than we are on the primary objective, which is growth in earnings per share. Next question?

Louis Feldman, Hoefer Arnett.

Yes, we are a bunch of hosers.

Better to be that or a hoosier?

No, no, no, no, no. Never send a badger to Indiana. Couple of questions for you. One, at this point in time, last quarter, you talked about the fact that wholesale funding was less expensive than borrowings from the FHLB. Is that still true?

We consider FHLB to be wholesale funding.

Well, you are talking about tapping the wholesale markets -- because last quarter you did make a differentiation between borrowing from the FHLB and tapping the wholesale market -- the institutional CD market, which is more wholesale.

Lou, you're talking about broker deposits, I think?

Yes, that's wholesale funding.

We look at that and FHLB borrowings together as wholesale funding and I think last quarter when we had this conversation, broker deposits were 10 to 15 basis points less for the same maturity than a [FLB] borrowing. That's narrowed, I think, and I'd look at Charles Smith, who follows that daily for us.

Yes, it kind of varies from week to week. It's not uncommon for broker deposits to run a few basis points less than where the Seattle Home Loan Bank has been. But it hasn't been the kind of differences like you were seeing in the past.

At that point, what becomes your preference for funding the shortfalls?

Checking accounts. (multiple speakers)

And then we come back to the real world and you answer --?

Well, in a broad sense, Lou, the appeal of retaining an asset on our books at today's marginal cost of funding is not great. So, obviously, if we have asset growth or we have to look at whether we want to retain that in our portfolio or sell it. The retention issue being at the marginal cost of funding at wholesale rates is it a really attractive use of capital for us today.

As opposed to the timing issues you were just talking about?

Right.

Lou, I would just add that the spread difference between federal loan bank advances and brokered retail deposits -- or broker deposits, it's so thin, it's not to be real meaningful. It makes a difference to us because we're scrambling for every nickel. But in terms of adding serious value, it all comes from retail deposits. We are able to raise money down in the 4's, as opposed to the mid 5's or somewhere between there, I'd say 5.8% for wholesale money.

Moving on, in the press release, you talked about you ran this simulation -- your most recent simulation on May 31, so this did not take into account the Fed action at the end of June. Have you run another simulation since then?

The June numbers have been submitted to the consulting firm that runs the model for us -- it's outsourced. And we are awaiting those results. We will have the June results in the 10-Q but they (multiple speakers) yet for the press release.

One last question for me. Can you touch on this increased use of the derivative hedges on the commercial real estate loans?

Hi, Lou, this is Roger. Because of the flat yield curve, the borrowers are really interested in longer-term fixed rate loans. And the only way we can accommodate that is to do an interest rate swap. And so what we are currently exploring and we have done a little bit of it up to about 3 million so far is to have what we call offsetting derivatives and so we fixed a rate to the borrower with a interest rate swap. And then the offsetting sort of synthetic hedge if you will to that is the prepayment penalty, which is classified the way we work it right now as a derivative. So, and we found out at the end of the second quarter that one offsets the other within just a few dollars.

However, the way the accounting treatment is, the interest rate swap ends up being an expense item, stuffed down in other expense and the offsetting derivative to that ends up being an income item and both of them are around $50,000. So in terms of the impact on the P&L, it was nil, but non-interest income got bumped up by $50,000 and interest expense was bumped up by $50,000. And that's how we ended up putting together that interest rate swap on about 3 million of loans.

And if I read this correctly, you anticipate increasing that amount as demand for this product continues?

That's kind of our thought at this point in time.

Who is handling that operation? Is that Charles, is that you, is that Scott?

Charles actually handles that for us.

Sarah Hasan, McAdams Wright Ragen.

Just thinking back, you've been talking about selling chunks of your commercial portfolio I believe for some time now but it seems like it hasn't really materialized to the level that maybe you had expected and I'm just wondering, is there less demand out there or do you prefer to sell participations instead of the whole chunk? Or is it still just a timing issue?

Sarah, our preference certainly historically has been to sell participations and we have done it as much to manage risk or exposure as anything. So we've only been doing it historically as we have a very large credit opportunity with a good relationship, usually where we have existing exposure and we have to sell down. And I think as we have noted, that is somewhat episodic and so that's why you have seen the behavior that you have.

Chris Stulpin, Cohen Brothers.

My question has been asked and answered. Thank you.

Porter Robinson, FTN Financial.

John, I think my question has been answered also but just a comment or a question about your portfolio makeup, commercial real estate and C&I. Given you have seen a slowdown or a drop in commercial real estate assets on the books and more C&I product, is that also a function of perhaps what you're seeing in your market footprint or is that a conscious decision just to not book as many commercial real estate assets?

Porter, we like commercial real estate assets. It's been a very important part of our portfolio over the years and at one point, if you go back almost exactly five years ago, it was 63% -- commercial real estate was 63% of our loan portfolio.

Two things have happened. One, we've been very focused on [heading], over that time period, growing two new business lines, the relatively new business lines, Business Banking and our Consumer Lending operation. So as they have grown the portion of the portfolio, the other business lines, residential and commercial real estate hold have -- certainly commercial real estate has declined; residential has grown.

But we still like good, well-priced commercial real estate loans. It's an area we have expertise in. But what has also happened is as Roger was mentioning earlier, the flat yield curve, or currently modestly inverted yield curve. And our bread and butter products in commercial real estate has been the one year adjustable loan and today that is priced well above what a borrower with a good property can obtain from a conduit loan. Our focus is on maintaining the relationships and growing the relationships that we have with commercial real estate borrowers, but not using our balance sheet to please their desires in terms of pricing and maturities. They want a ten-year fixed rate loan, we want to be able to broker that out to a conduit for them and keep their relationship, keep control of the relationship and maintain a fee on that.

So we have had prepayments in the perm part of that loan portfolio as borrowers have shifted toward those longer-term fixed rate loans and that has caused the commercial real estate segment of the portfolio to decline. But we remain very committed to that business line and again want to maintain those relationships with those borrowers because over time we don't think the inverted or flat yield curve is going to obtain for a real long period of time.

Bill Dezellem.

Yes, we had a couple of questions. First of all, circling back to the cost cutting measures and the comments in the release there, did we understand your answer to a prior question that you would not anticipate taking any action in the third quarter; that is what -- the third quarter is when you will receive the results of the consultants' activities and then you'll begin evaluating what if any actions that you take; is that the (technical difficulty) to have interpreted your answer?

I think you'll see some actions taken in the third quarter, but it's not going to move the needle a lot, Bill.

(technical difficulty) things today that the needle will be moved, that we as shareholders will be able to see some benefit in the fourth quarter?

I would say modest -- focus is more on containing costs and growing the bank without adding to costs.

All right, so you are not anticipating an actual outright reduction as much as you are margin improvement, basically, where you can get more work done with the same staff that you currently have?

I think that there will be marginal -- marginal -- improvement in terms of expenses, but the goal is more to have more throughput with the same or lesser -- maybe slightly fewer staff. But I would not stay tuned to this station for announcements of waves of terminations of employees.

That is very helpful. And then walk us through the credit insurance changes that you are anticipating or coming as of July 1 that you referenced in the release?

Go ahead, Roger --

No, I was going to say the [2002] pools he's talking about --

Right -- Bill, can you be just a tad more specific on exactly what you are looking at?

Sure. In the release on page 15, the second-to-last paragraph, the second-to-last sentence reads that the cost of this policy was competitive with the premiums that you were paying insurer number one. However, beginning July 1, those premiums have been raised by 60%. And then you went on in the final paragraph to say because of the increase in premiums for the pool, you have entered into some negotiations. And I just don't think I am assimilating all that is going on here as well as we would like to.

(multiple speakers) That's good, Bill, because we have written the press release perfectly.

Well, you don't have to try very hard with folks like us.

You are far too modest.

The story generally in all respects on this question has to do with that first year pool that we have with insurer number one, where the liability limit that was part of that original policy was maxed out. And as we talked about in the press release, we went out about a year ago and purchased backup insurance on that policy -- or on that pool year to provide additional coverage.

And what happened there was all of the short of the actuarial assumptions that were in place for that backup insurer did not anticipate the effects of the change in the bankruptcy law that hit in October. So what happened was when we -- and as far as that negotiation, there was at that point a certain amount of limit left with insurer number one. And so they calculated their premium based on what over time would build them an appropriate cushion to absorb the impact. And then when the bankruptcy law unchanged, that limit went away much, much, much faster than anybody had anticipated.

So they came back to us effective in July and said, as part of the policy, we have the ability to change the premium to give them the appropriate amount of return. And indeed, that's what you see in the first policy year, starting in July, with that backup insurance.

And then as you point out, we have looked at options for that first policy year to include potentially selling those loans out, servicing released, and which would relieve -- the loans would be sold servicing released without the encumbrance of the insurance. So essentially, that expense should go away if the loans are sold servicing release. Does that help at all?

So this entire aspect of the discussion in the release solely relates to the 2002-2003 policy year, when you realistically -- and correct me if you would disagree -- were still really getting your arms around underwriting process (multiple speakers) -- it had no impact on the 2003-4 or 4-5 or, I guess, 5-6 policy years?

Yes, correct.

And does insurer number two have the right to raise their premium on future pools -- not just the 2002-2003 pool?

The 2002-2003 pools did not have something -- the language in the policy allowing them to change the rates was very different than what we have on existing policy for the current production, where there is indeed -- without getting into too much detail, there's sort of a range of premium with a cap and a minimum and a maximum that is somewhat driven by their claims experience. And the policy year that we are currently in has that cap in place.

Bill, this is Roger. I'd just add one footnote to Scott's comments. When we are accrued the expense for credit insurance, we assume the worst-case scenario. So at the end of the policy period and all the loans have eventually been paid off and there is a windfall, and that experience is less than a maximum, we might possibly have a little pleasant surprise from all that.

And Roger, does that imply then that you have been accruing -- not paying, but been accruing at that -- what's a 60% increase in the actual premium?

Well, on that particular pool, which is about 8 million -- on that particular pool, that just started July 1. So we will have to bump the accrual starting this month, as a matter of fact, on that.

But on all of the other insurance that we currently have in place, there is a -- you nailed it, Bill; there is a pay-in rate, and then there is the cap that I referenced earlier. And we accrue -- we pay, and then we accrue the difference between what we pay and that cap.

That is helpful. And then finally, given that the bankruptcy law changes would have had impact on all the other pools, not just the '02 and '03 pools, what is your view of how insurer number two is looking at their actuarial assumptions versus what they had originally anticipated, given the bankruptcy law changes?

I am going to be just a tad vague and my answer here, but I think it will be appropriate, and that is that insurer number two came into the picture -- the first loans that we insured with them were in August of 2005. So the policy that we have with them and the experience that we have with them has had the -- bankruptcy -- other than that first policy year, where they did the backup insurance, has had no effect on the loans that they have insured.

That is helpful. And then one final question here. If you do not sell the 2002-2003 policy year, what impact would you anticipate on earnings?

Roughly what, about --

Versus the run rate prior to July, I want to say 10, 15,000 a month.

Okay. So it is by no means something that will be moving the needle drastically enough that we will be shocked externally?

No, no -- that's a good point.

Louis Feldman.

I want to beat Bill's dead horse a little bit. In terms of -- and this is directed toward Scott. I guess in looking at this, the fact that you had a net recovery in June of '06 -- is this more reflective of the underwriting standards that you have tried to put in place for these pools from about -- you talked about the change in '04 and '05. Is this more reflective of those changes and the way you feel you are going to be underwriting these loans going forward?

The net recovery in the second quarter of 2006 is the culmination, I think, of three things. One is the thing that you mentioned. And I am not going to necessarily put any weight on any of these three. I think a few more quarters will really tell us more. We had a -- I believe sort of an inverse of the echo effect of the bankruptcy law change, in that a lot of the activity that would have normally happened in second quarter got accelerated into the third and fourth quarter of 2005 and, frankly, the first quarter of 2006. So there was a definite kind of a shadow effect in terms of charge-offs that we saw in the second quarter. That, I would suggest (multiple speakers)

You mean in the first quarter?

In second quarter, I think.

(multiple speakers) when you are saying shadow effect, what you are saying is that -- a rebound, so that charge-offs were lessened because most of the impact went through in Q3, Q4, and Q1?

Yes, sir. And so that I would suggest is probably not sustainable, other than the overall positive effect of the change in the bankruptcy law on bankruptcy filings in general. I think we are starting to see some very early signs that loans that maybe would have been -- had gone bankrupt before under the old law currently or not, or they are filing a 13 rather than a 7. So that is a potential positive that we are crossing our fingers on.

The third element is we have an unusual level of recoveries in second quarter, but that is the result of some systemic collection changes that were made in the middle of -- well, early in the middle of last year that will continue to pay dividends into the future. The effect of those collection changes has started slow, and is building and building and building. And we saw obviously a good effect of that in the second quarter. And while it may not be at that same level third, fourth quarter, and into the future, I would suggest that the positive effects of that are definitely being felt. So it's really kind of a combination of all three of those things.

So the assumption then here is that what we're going to see is an overall smaller loss exposure on the uninsured portion due to the changes and improved collection?

I would suggest at the minimum that we have seen at least a plateau of -- and not using second quarter as a benchmark, but we have seen certainly in the short term a plateau of in terms of the overall gross charge-offs and net recoveries.

But that is not a forecast. (multiple speakers)

No.

And that would be a forward-looking statement to be taken with the greatest of caution. (laughter)

If I thought I heard something material, I was clearly mistaken. (laughter)

(laughter) Very good -- right answer, Lou. We remain very, very pleased with what I would characterize as considerably more sophisticated underwriting and considerably more sophisticated collection efforts.

Now, you had a net recovery in the quarter -- can you break this down by the pools? Was there some recovery from the '02-'03 pool, or was it more recent product that you were getting these recoveries from?

Well, first of all, the recoveries would be on the bank's portfolio, so (multiple speakers)

So there's no pool.

(multiple speakers) charged off and that were recovered. And no, I don't have any specific data in terms of the timing on that. But they were not all loans that had just been immediately charged off and then we got a recovery 30 days later. It was a combination of recoveries over many loans that had been charged off over a long period of time.

Bill Dezellem.

I would hope that you could detail some of these changes in the collection methods that you implemented here a couple of quarters ago, if you would please?

We added a couple of -- maybe one, perhaps two staff members in the collections area to focus more attention on the very early delinquencies -- those who had just missed their first payments -- or not the first payments, but their payments -- to attack those situations a little bit earlier than we had -- not that they weren't being very aggressive prior to that. But by adding a person to kind of specifically focus on that, that has helped.

In addition, they are doing do more activity on the post charge-off loans to do a better job of getting the tools in place so that when a borrower is in a situation where they can pay back what was originally charged off, then we can do that. So kind of -- the legal work kind of being done post charge-off to get ourselves in line for a recovery.

And Bill, just to follow-up on that, that legal work that Scott is referring to usually would only bear fruit at the time when that borrower -- because, remember, they own a house -- goes to sell their house or refinance their house or something like that. And then they have got to deal with us.

So basically (multiple speakers) the way to think about it is that if someone -- a loan that you write off, you would go ahead and sue those individuals, and then basically would have a lien as a result. And if and when they ever wanted to do any sort of issues that would impact the title on the home, whether it be a refinancing or outright sale or otherwise, then you need to get paid off before they can move forward with their transaction?

That is a generally good description of what is going on -- yes, sir.

So we could see literally loans that you have written off today or a year ago or two years ago that ten years from now that you will actually get recoveries on?

Yes, sir.

Great -- thank you both.

Bill, this is Roger. I'll just add a comment. That is why sometimes those recoveries kind of bunch in any given period, because we may suddenly have a flurry of people that sold their home. Typically, they've sold their home is what is creating that event for us. And as you point out, in order to clear a title on that process, they need to take care of the lien that we filed against their home. So sometimes you get this stuff bunched. And so we will have good quarters and bad quarters in terms of recoveries.

And then in addition to that in dealing with the written-off loans, it sounds like you are also working more proactively earlier on after the first payment that they do miss -- but you let them know that you really are interested in receiving that payment, and therefore maybe move up further in their thought process for who they are going to pay, if they are not going to pay everybody?

That's correct.

Yes -- Bill, we are also in terms of risk management now just [beginning] -- well, kind of been beta testing it the over the last quarter or so, but starting to -- I don't know if we have done it in sales and finance yet, but we have done in some of our other business segments -- starting to download quarterly credit scores on all of our borrowers so that we can look at the shape of risk by business line. The goal is to be able to look at shape of risk and how it changes quarter to quarter in business line as measured by credit scores.

But if we see -- the goal ultimately is to get to the point where -- say, in a consumer or a small-business loan or something like that, we'd see a deterioration in the business's credit score or the guarantor's or the borrower's credit score as an individual that we will be able to the give that relationship extra special attention before they have even missed a payment.

(OPERATOR INSTRUCTIONS) And gentlemen, there appear to be no further questions. Please continue with any additional comments.

All right, thank you, Matt. Ladies and gentlemen, thank you for calling in on our quarterly conference call. We appreciate your time and attention and interest, and look forward to talking to you in another quarter, if not before. Have a good day.

Ladies and gentlemen, that does conclude our conference call for today. If you would like to listen to a replay of today's teleconference, you may do so by dialing 303-590-3000 and entering access code 1106-4027. (OPERATOR INSTRUCTIONS). Thank you all again for your participation. You may now disconnect.