Washington Trust Bancorp Inc (WASH) 2009 Q1 法說會逐字稿

Hello and welcome to the Q1 2009 Washington Trust Bancorp Inc. earnings conference call and webcast. All participants will be in a listen-only mode. There will be an opportunity for you to ask questions at the end of today's presentation. (Operator Instructions) Please note this conference is being recorded.

Now I would like to turn the conference over to Elizabeth Eckel. Ma'am, please begin.

Thank you. Good morning and welcome to the quarterly earnings conference call for Washington Trust Bancorp Inc., National Global Select Market symbol WASH.

This morning's conference call is being recorded. It is being webcast live and a webcast replay of the conference call will be available shortly after the conclusion of the call through the Corporation's website at www.washtrust.com in our Investor Relations section under the subtext Presentations. However, the information we provide during today's call is accurate only as of this date and you should not rely on these statements after the conclusion of today's call.

Hosting this morning's discussion is John C. Warren, Chairman and Chief Executive Officer, and David V. Devault, Executive Vice President, Chief Financial Officer, and Secretary. Now I am pleased to introduce Washington Trust's Chairman and CEO, John C. Warren. John?

Thank you, Beth. Good morning and thank you all for joining us here today. Earlier this morning we released our earnings for the first-quarter ended March 31, 2009. After David and I have provided an overview of the quarter's results we will be happy to answer any questions you may have.

As we entered 2009 there continued to be a great deal of disruption and dislocation in our industry, particularly amongst Wall Street and the big banks. During this period of unrest we had one consistent message, Washington Trust is strong and stable and ready to meet the borrowing investment and deposit needs of the community. This message resonated with consumers and businesses as they turned to Washington trust.

As a result we had good growth along all core business lines during the first quarter of 2009. However, this momentum was dampened by continued weakness in the national and local economy and had an adverse effect on our overall corporate earnings. For the first quarter net income totaled $2.7 million or $0.17 per diluted share compared to $5.8 million or $0.43 per diluted share earned a year ago.

Earnings during the quarter were impacted by impairment losses on securities of $2 million, increased FDIC deposit insurance premiums of $395,000, a loan loss provision of $1.7 million, a decrease in wealth management revenues of $3.1 million from the first quarter of last year, and elimination of the dividend paid by the Federal Home Loan Bank of Boston which the prior year had been $445,000.

Washington Trust remains a well-capitalized, strong, and stable financial institution. As you will recall in 2008 we raised $57 million in capital financing and chose not to accept government funding under the TARP program. This proved to be a wise decision. As a testament to our strong capital position and commitment to shareholder value, we declared a $0.21 dividend during the quarter. This is consistent with the amount paid last quarter and will be paid on April 14.

Our liquidity levels are healthy. We have good funding sources and have had solid deposit growth during the first quarter. Our asset quality remains good, although like everyone else we are experiencing the effects of both the weakened regional and national economies. We continue to maintain a disciplined credit culture. And as a result of double-digit commercial loan growth and the economy, we are prudently taking additional loan loss provisions this quarter.

As I mentioned earlier, there continues to be a great deal of disruption in our market area and it has provided many opportunities for us. Let me elaborate.

We had another solid quarter of commercial loan growth primarily in our C&I lending portfolio. This was our tenth straight quarter of growth and in February we reached a corporate milestone of over $9 million in commercial loans outstanding. Our growth has come at the expense of our larger competitors who are either distracted with their corporate matters and restructurings or who have just stopped lending altogether.

I want to be very clear that while we have experienced excellent commercial loan growth over the past year we aren't taking any unnecessary risks. We are growing within our defined market area using disciplined credit quality metrics. We are getting a chance to look at a lot of new business opportunities and we are being selective. There is still good credit quality credits out there and we are adding to our market share.

We can't predict how long the demand will last, but at this point the pipeline is healthy. We are seeing a slowdown on the commercial real estate front but our C&I activity is good and contains many new customers. In recent months we have had an increased demand for cash management services. Again, we are meeting with good-sized businesses that are tired of the poor service and fees of the larger banks.

These new relationships offer additional business opportunities for us along all business lines. Many of these referrals are coming to us from accountants, attorneys, brokers, and existing clients. We value their relationships and thank them for the confidence they have placed on us.

While our wealth management revenues continue to be negatively affected by declines in the financial markets, our story is still a good one. We are seeing more new business opportunities as a result of the fallout of the major Wall Street money centers and continued disarray at Bank of America and Merrill Lynch. When the larger firms downsize or restructure they disenfranchise clients by turning them over to an 800 number or to a stockbroker.

Washington Trust Wealth Management has been there to pick up the pieces. We have won some excellent new business from the larger institutions because we can provide the expertise and investment solutions combined with personal service.

Another benefit of the disruption at the larger institutions has been a great opportunity to attract talented professionals. Recently we did just that when we hired Kent Gladding, former chief investment officer at Citizens Bank, who joined our Wealth Management Group in Providence. He is well respected, known within the industry, and we are very pleased to have him joining our team.

Turning the retail banking, low-interest rates led to a huge surge in mortgage refinancing during the quarter. In fact it was the busiest time we have had since 2003. Again, there has been so much disruption in the mortgage arena. Many brokers are gone; borrowers turn to us because we have the right product, the right pricing, and they trust us.

We had some consumer growth during the quarter as well, primarily in home equity lines of credit. Our retail banking area also had good growth as well. In market deposits increased during the quarter as consumers sought the safety and security of a local bank. Our Providence office, which relocated to the financial district of the city last quarter, has been well received and we are moving ahead on our second Warwick branch, which after receiving the necessary regulatory approvals we expect will be opening later this year.

At this point I would now like to ask David to provide more detail on our first-quarter financials.

Thank you, John. Good morning, everyone. Thank you for joining us on our call today. I will review the first-quarter operating results and financial position as described in our press release this morning.

Net income for the first quarter of 2009 was $2.7 million or $0.17 per diluted share compared to $5.8 million or $0.43 per diluted share reported for the first quarter of 2008. The return on average equity for the first quarter was 4.5% compared to 12.22% for the same period last year.

Earnings in the first quarter were influenced by several systemic factors including the following. Net impairment losses of $2 million were charged to earnings for investment securities deemed to be other-than-temporarily impaired.

On an after-tax basis this amounted to $1.3 million, or $0.08 per diluted share. The loan loss provision charged to earnings was $1.7 million compared to $1.85 million in the fourth quarter of 2008 and $450,000 in the first quarter of 2008.

No dividend was received from the Federal Home Loan Bank of Boston in the first quarter of this year. Dividend income on our investment in FHLB stock was $264,000 in the fourth quarter of 2008 and $445,000 in the first quarter of last year.

Largely due to higher assessment rates, FDIC deposit insurance premiums were up $395,000 from the first quarter a year ago. In the first quarter of this year we also recognized a $250,000 charge classified in other non-interest expenses in connection with the repositioning of investment options in our 401(k) plan.

With that I will now comment further on the results of operations. Net interest income for the first quarter of this year was $16 million, down $1.6 million from the fourth quarter of 2008 and up $883,000 or 6% from the first quarter a year ago. The net interest margin for the first quarter was 2.39%, down 26 basis points from the fourth quarter of last year and down 20 basis points from the first quarter of 2008.

The decrease in the margin reflects the elimination of the FHLB dividend and margin compression resulting from a lagging effect of downward pricing of deposit rates in response to the Federal Reserve's actions to reduce short-term interest rates in the latter part of last year and the beginning of this year.

Non-interest income for the first quarter increased by $586,000 from the fourth-quarter level, but was $3.1 million or 28% lower than the first quarter of 2008. Declines in wealth management revenues and the recognition of net impairment losses on securities were the most significant reasons for the decrease in non-interest income.

I will comment on the impairment losses in a few moments, but first let me address some of the non-interest income business lines. Wealth Management revenues, the largest source of non-interest income, are dependent to a large extent on the value of assets under administration and closely tied to the performance of the financial markets. Wealth Management revenues were down 12% from the fourth quarter of 2008 and down $1.8 million or 25% compared to the first quarter of 2008.

Assets under administration stand at $2.958 billion and were down 6% in the first quarter and down 24% from the balance at March 31, 2008. This clearly reflects the influence of declines in the financial markets. For example, the S&P 500 Index dropped by 39% in the 12 months ended March 31.

Meanwhile, we saw strong residential mortgage refinancing and mortgage sales activity in the first quarter of this year with net gains on loan sales and commissions on loans originated for others totaling over $1 million for the first quarter of 2009, up $811,000 from the fourth quarter and up $553,000 for the first quarter a year ago.

Non-interest expenses were $18.4 million in the first quarter of this year, up 2% from the fourth quarter last year and up $1.2 million or 7% from the same quarter in 2008. The increase in non-interest expenses on both a linked quarter and year-over-year basis is largely due to higher deposit insurance costs and the $250,000 charge associated with our 401(k) plan.

FDIC deposit insurance premiums were $379,000 above the fourth-quarter level and $395,000 above the first-quarter level last year. The effective tax rate for the first quarter of this year was 29.3%. That was also our full-year 2008 rate on a core basis, excluding some non-core tax items in that year.

I will turn now to the balance sheet. Total loan growth was $26.8 million or 1.5% in the most recent quarter led by commercial loan growth of $28 million or 3% in that category. Most of the first-quarter growth was in the category of commercial and industrial loans, and commercial loans were up by 25% in the last 12 months. Residential mortgages declined by 1% in the quarter and consumer loans were up by 1% in the quarter.

The investment securities portfolio was $834 million at March 31 of this year, down $32 million in the quarter largely due to $28 million in maturities and pay downs on mortgage-backed securities. The single-largest category of securities in our portfolio is mortgage-backed securities, representing 79% of total footings. All of these mortgage-backed securities are issued by US government agencies or US government-sponsored enterprises. There are no private issuer mortgage-backed securities in our portfolio.

As I mentioned earlier, during the first quarter of 2009 we recognized $2 million of net impairment losses charged to earnings, the securities deemed to be other-than-temporarily impaired. These first-quarter impairment charges included $1.35 million on a pooled trust preferred debt security and $641,000 on common and perpetual preferred stocks.

We elected to early adopt the recently issued FASB staff position on recognition and presentation of other-than-temporary impairment as of March 31, 2009. Pursuant to this pronouncement the $1.35 million net impairment loss on the pooled trust preferred debt security represents the credit-related portion of the impairment loss on this security and an additional non-credit related impairment loss of $2.3 million on this security was recognized in other comprehensive income.

Also in accordance with this accounting pronouncement, we reclassified the non credit-related portion of an other-than-temporary impairment loss on a security previously recognized in earnings in the fourth quarter of 2008. This reclassification was reflected as a cumulative affect adjustment of $1.2 million after taxes with an increase to retained earnings and a decrease in accumulated other comprehensive loss at the beginning of the first quarter of 2009. This reclassification had a positive impact on regulatory capital, but no impact on tangible equity or net income.

Total deposits increased $93.5 million or 5% in the first quarter. In market deposit growth was $119 million or 7% led by an $84 million increase in money market and savings balances. Included in this increase was the addition of $48 million in wealth management client funds into the money market deposit category. This represents the successful first-quarter transition of balances previously held in outside money market funds into fully-insured and collateralized deposits on our balance sheet as a number of other financial institutions have done.

We also benefited from growth in consumer time deposits and NOW account balances in the first three months of this year.

Let's turn to asset quality. The level of non-performing assets and loan delinquencies increased in the first quarter of this year. We believe that this credit quality trend is primarily related to a general weakening in national and regional economic conditions, and this trend may continue throughout 2009. Non-performing assets include non-accrual loans, non-performing investment securities, and assets acquired through foreclosure or repossession.

Non-performing assets stood at $17.5 million or 0.6% of total assets at March 31 this year compared to $8.8 million at the end of 2008 and $5.7 million at March 31, 2008. Non-accrual loans stood at $15.4 million at the end of the first quarter up from $7.8 million at the end of December and $5.7 million a year ago.

Non-accrual commercial loans rose by $5 million in the latest quarter with four commercial loan relationships representing $4.8 million of that increase. Non-accrual residential mortgages rose by $2.3 million in the first quarter. Non-accrual investment securities were at $1.9 million at the end of the first quarter of this year compared to $633,000 at the end of 2008 and there were none at March 31, 2008.

Assets acquired through foreclosure or repossessions consisted of a single property with a carrying value of $170,000 at the end of the first quarter compared to balances of $392,000 at the end of 2008 and zero at March 31, 2008. At the end of March of this year total loan delinquencies of 30 days or more amounted to $22.1 million or 1.18% of total loans, up $4.5 million in the quarter and up $11.7 million from the balance a year earlier.

Commercial loan delinquencies were $14.9 million or 1.64% of total commercial loans, up $3.4 million in the quarter. In the residential mortgage and consumer loan categories delinquencies stand at $7.2 million or 0.75% of those combined categories at the end of March, up $1.1 million in the first quarter.

As I indicated earlier, our loan loss provision charge to earnings for the first quarter of this year was $1.7 million. Net charge-offs were $927,000 in the first quarter compared to $756,000 in the fourth quarter and only $3,000 in the first quarter a year ago. Most of the first quarter 2009 charge-offs were in the commercial category. The ratio of net charge-offs to average loans in the first quarter was 0.05%.

Our allowance for loan losses was $24.5 million or 1.31% of total loans at the end of March compared to $23.7 million or 1.29% of total loans at the end of December and $20.7 million, 1.3% of total loans at March 31 a year ago. Total shareholders equity was $239 million at the end of March of this year compared to $235 million at the end of December of 2008.

The Corporation and its subsidiary bank are well capitalized. The estimated total risk-based capital ratio for the Corporation is 12.25% at March 31. In March we declared a dividend of $0.21 per share paid on April 14. At this time I will turn the call back to John.

Thank you, David. It's a difficult economy out there and that includes many systemic issues. We had solid growth across key business lines, controlled our asset quality, and maintained our strong capitalization -- all good signs in a difficult economy. But each day brings new challenges as the market reacts dramatically to news reports and sound bites out of Washington.

The Treasury, the Fed, and the president continue to present and implement new financial programs. While it's too early to tell what effect these plans will have on the economy, we believe it's going to take some time for the country to work itself through this recession. Historically, once a recession is over unemployment continues to grow for several quarters, none of which is good for banking.

That would take us at least into 2010. But we are confident that Washington Trust is well-positioned to meet the challenges that lie ahead. We have a history of success, strong core values, and an experienced leadership team. We have a proven track record of capitalizing on market opportunities. We will continue to stick to the principles that have guided us for more than two centuries.

Thank you for your time this morning. And now David and I will be happy to answer any questions you might have.

(Operator Instructions) Damon DelMonte, KBW.

Good morning. A couple of questions on the margin. Can you guys give us a little color as to how the repricing of upcoming CDs looks, kind of help us frame out when we think the margin might bottom out?

There is a fair amount of CD repricing that is going to take place in the next several months. We are trying to walk a fine line between competitive pressures and trying to manage those rates downward to improve the margin. Our outlook is that we believe that those efforts should over the next few quarters have somewhat of a positive impact on margin.

Okay. And on the asset side, have pretty much all of your loans repriced and are they now currently reflecting the cuts by the Fed earlier this year?

Well, certainly a fair amount of loans, home equity lines, and commercial loans that are tied to prime or LIBOR have repriced downward. There are also some that are periodically repricing, maybe on an annual basis or some term like that. So they will continue to reprice as we go throughout the year, but the bulk of that has certainly been reflected.

Damon, what we are actually looking at is we think we are pretty well at the bottom. And barring some strange competitive behavior as we go forward into the second quarter and the rest of the year, we think we will see a slight uptick from here on the margin.

Okay. Do you know what the margin was as of 3/31?

The --

The quarter ending.

The quarter was 239, the month was 234.

I am sorry, that is what I meant, the month. Okay, so it's 234. Okay. Then just lastly, how does the pipeline look for mortgage banking business as we head into the second quarter?

It's still trucking along pretty well.

Okay, great. Thank you very much.

Frank Schiraldi, Sandler O'Neill.

Just a couple of questions. I wondered if you could give some additional color as far as the non-performing growth; I know in the release the four commercial loan relationships equaling about $5 million. Is there any further color you can give on just geography and specifics on those loans?

The increase in non-accrual loans in commercial of $5 million in total concentrated in four large relationships. The largest one, I think we have mentioned this before, is a hotel in our area that has gone into non-accrual status in the first quarter. The others are C&I loans in the $500,000 to $600,000 range. We are staying on top of those in terms of appraisals and work out efforts, and we believe we are appropriately reserved on all of these relationships.

Geographically, they are all in Rhode Island.

Oh, yes.

Okay, thanks. Then on the hiring of Kent Gladding from Citizens, what are your thoughts, John, in terms of what that is going to do for growth in the Wealth Management business in this quarter and just immediate new business wins?

Well, certainly part of the reason for bringing him over is to take advantage of the opportunities that might be there with some of the things that are going on and some of the layoffs and restructuring that Citizens is going through internally. So we are very hopeful that he can bring many of his customer relationships over with him and basically have structured the compensation package accordingly.

Is there -- and maybe I missed this -- is there somewhere where you disclose what number, dollar number of assets under his management or under his administration?

No, no, we didn't. He had direct rapport with a number of clients there, but he was also, because of his presence and his position, involved with probably a larger percentage of the wealth management clients than somebody at a different level otherwise would have been. So great visibility, great recognition, and I think with some of what is going on we, hopefully, will have a very open mind on their clients part as far as moving across to say hi to us.

And is there any plan or thoughts of expansion of the mortgage banking business given the refi boom here?

We have hired a couple of people to take advantages of some of the geographic location and we are talking to some others. As I think we mentioned in the presentation that compared to 2003 a huge percentage of the broker, the freestanding broker industry has moved on. Whatever they are doing, they are out of the mortgage banking business and unlikely to resurface in this in any near-term manner.

So we are talking to people and taking it to the extent that we find a couple of very attractive individuals we will add them. And once again they will be done on just some of the classic mortgage origination basis, which is pretty much when they come on board if they are successful, it works for everybody. And if they are not successful, it won't cost us much at all.

Great. Thanks.

Laurie Hunsicker, Stifel Nicolaus.

Good morning, John and David. I am just wondering if we can go back to Damon's question about margin, just looking at this year. If I back out the FHLB just linked quarter, it looks like that was only four basis points of your 26 basis points of contraction. So I just wonder if you can kind of take us back through roughly how we are bottoming.

Obviously I realize that as non-performers increase that is going to hit your margin too. But x-ing that out, just where we stand in terms of what is repricing in the coming quarters as we forecast margin for the rest of this year?

Well, of course you had the immediate impact early in the quarter of hundreds of millions of dollars of home equity lines and commercial loans repricing downward.

Right.

There is a lagging effect as to how quickly you can get a commensurate benefit on the deposit side and the funding side. And as I mentioned, it will be CDs maturing over the next several months that are going to be repricing at lower rates.

We are selectively and conservatively managing the money market and savings rates in a commensurate manner as well, and also look at the funding mix to make sure that we are getting the best cost benefit with net -- interest rate risk. So our forecast is that we will be able to improve margin over the next few quarters.

So, for example, if you are $1 billion or so in CDs at around, whatever, 3.5%, how much of that is repricing in the next two quarters and where are you estimating that is going to go to?

I don't have that with me this morning. But, again, our forecast is for margin improvement as we manage the deposit rates downward.

Okay. Okay, great. Just kind of touching back on some of the things that Frank asked with respect to your commercial non-performers, I wondered -- and I love this breakdown you give, so thanks for that. But within your total past-due loans, the commercial category was $14.9 million at March, up from $11.5 million at December. Of the $14.9 million, do you know what the split is between commercial real estate and C&I? Or maybe asked another way, is more of that C&I?

C&I is $8.5 million of the total. CRE is $6.5 million of the total.

And so to the extent that you have seen C&I deteriorate, and certainly this has more to do with what is going on within the economy, is there any thought of slowing your C&I growth or how are you all looking at that?

What we are looking at, Laurie, is really that the loans that are coming in the door that we are approving are probably some of the highest quality loans and best customers we have seen in years. Some of the larger institutions have pretty well shut off lending. Some have shut it off by just saying they are not doing it and others have shut it off by dramatically increasing the rates, but it has put us in a position that we have actually increased the credit quality of our overall loan portfolio as we have added to the C&I loans.

And not to put you on the spot here, but as we look at that portfolio, $446 million at March, how much of that is -- of the C&I is actually tied to real estate?

A classic lender such as ourselves uses -- we get personal guarantees from most of our C&I customers. We also wrap together just about anything we can including business real estate if it's there and personal real estate if it's there as well. So if you actual looked at it, the answer would probably be a lot of it.

Okay.

In fact David as --.

Well, as John mentioned, when we are making C&I loans we will certainly try to obtain as much collateral as possible, and in many cases that is the real estate of an operating business. You are not looking to income generate it from the real estate as the source of repayment on the loan, it's really the operating business that is generating the cash flow for the repayment of the loan. But we will have wherever we can certainly obtain collateral and in many cases that is real estate.

So we think it's an added strength to the C&I portfolio, but you have to recognize it for what it is. There is a large portion of the C&I portfolio that does have, among other things, real estate as collateral.

Okay. So, I mean, would you guess that is half or three quarters or --?

I believe it's more than half. I don't know the specifics.

More than half, okay. Okay, great. And then just two last questions. The Warwick branch that you plan to open, given where we are now with interest rates and everything going on, how soon does that break even and how do you look at breakeven now on a new branch?

In today's environment it is going to take probably longer than some of the very good success stories that we have had with recent branch openings. We view that as a very good extension of our presence. It fills in a gap in our market area. It's a location that has a lot of households and small businesses within a very close radius and we are optimistic for the success of that location.

Okay, great. Then just one last question, John, can you comment a little bit to succession plans?

Sure. As we disclosed with the earnings at the end of the year, Jack Treanor will be retiring in October of this fall, and then actually there is still a full year plus a few days away before I will hit 65. So Jack will be around for five or six more months and I will be around for at least a year.

But the Board has -- we have worked from probably the day I arrived here and the Board has always had a well-established succession plan in process. We have some very talented individuals in house and the Nominating and Corporate Governance Committee of the Board is working through that process right now and doing a very thorough job at it.

Okay, great. Thank you very much for the detail.

Keith LaRose, Bradley, Foster & Sargent.

Good morning. Within the C&I growth that you are experiencing, you like the quality, you like the collateral terms; can you give some color on the pricing environment and your views on that?

Well, the pricing is certainly better by a lot than it was a year ago. I guess we are reflecting that in the pricing that we see with the clients and the customers.

How aggressive are you being on the pricing side because obviously the big players are not? The pricing structure is much less aggressive, I assume, than yours. Can you kind of put some bands around that?

Well, I think for the same quality of credit a little over a year ago you might have been looking at something perhaps spread to LIBOR of 150 basis points. Today that same credit in many cases is 250 basis points or more, so it has certainly been a positive impact in that respect.

Are any of your stuff, your pricing outside of LIBOR or any of that? Do you think LIBOR is the right thing to be using in your portfolio currently in some of these new loans?

A lot of what we do is LIBOR, some of it's actually prime. Several of the loans are actually fixed base loans on a spread basis; typically off home loan cost of funds.

Just within the C&I and in general in the economy there with the unemployment, I think in Rhode Island is 10%, leading --

10.5% actually.

-- leading the rest of the country. But can you give some color on kind of your general views on the macro stuff you are seeing in your operating areas?

At 10.5% we actually stayed unchanged over the last month, so I think we have got -- there are at least a half-dozen states that have successfully passed us in this tough economic time. I think the challenge that is out there is really a large part one of rebuilding consumer confidence. And I think that is true in Rhode Island as well as all of New England and as well as the rest of the country.

We don't have the overhang on the real estate side that you see down in the Southeast or out in Arizona or out in Nevada and Southern California, but things are slow at this point. Really the turn will come -- Rhode Island will probably turn as the national economy turns and that is going to --.

As I indicated in my comment, we don't know if the recession is starting to see the green sprouts that Mr. Bernake is talking about. Maybe we are on the tail end or at least have bottomed from a recessionary point of view, but you have to figure there are multiple quarters after that that unemployment typically continues to rise. And that doesn't help anybody in a banking point of view or doesn't help the economy at all.

Within areas of your portfolio that you see weakening, whether the consumer side or C&I, on a heat map basis do you have any geographic concentrations or things that jump out at you?

No, our geographic concentration is obviously primarily Rhode Island.

I am aware of that, but within that structure.

No, probably the biggest problem you have seen on the residential side has been in the inner cities, largely Providence. We just didn't have the kind of lending in Providence that -- when you read about it in the national periodicals you are reading some statistics that are pretty much based on loans that were done by brokers that got funneled into Wall Street that got securitized that got divvied up.

So when you are talking about foreclosures, you are not talking about the foreclosures that Washington Trust is seeing. You are seeing foreclosures that maybe Freddie or Fannie are getting involved in or some of the servicers that are handling the mortgage-backed securities have to deal with.

So sort of a long answer to say we don't -- on a heat map basis we don't see any specific area either industry-wise or sector-wise that is having more trouble than another. It's just a general slowdown and it's an expanding and long-standing slowdown. We just have to hope that all of the money that Washington is throwing at the problem sooner or later will begin to have an effect.

Thanks, gentlemen.

At this time we show no other questions. I would like to turn the conference back over to Mr. John Warren for any closing remarks.

Thank you very much. We thank you all for joining us for the comments. As always, at any point feel free to pick up the phone and give David, myself, or Beth a call. We will be happy to chat with you and keep you plugged in.

On occasion -- you don't like to talk about politics, but all I can say is that I hope Washington figures out what they are doing and doing it well and hope they are successful getting this economy going back again. Thank you all very much and have a great day. Bye-bye.

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