Webster Financial Corp (WBS) 2006 Q1 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Webster Financial Corporation's first-quarter earnings conference call.

At this time, all participants are in a listen-only mode.

Later we will conduct a question and answer session, and instructions will follow at that time. (OPERATOR INSTRUCTIONS) As a reminder, ladies and gentlemen, this conference is being recorded.

Also, this presentation includes forward-looking statements within the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 with respect to Webster's financial condition, results of operations, and business and financial performance.

Webster has based these forward-looking statements on current expectations and projections about future events.

These forward-looking statements are subject to risks, uncertainties, and assumptions as described in Webster Financial's public filings with the Securities and Exchange Commission which could cause future results to differ materially from historical performance and future expectations.

I would now like to introduce your host for today's conference, Mr. James C. Smith, Chairman and Chief Executive Officer.

Thank you, sir; you may now begin.

Good morning, everyone, and welcome to Webster's first-quarter '06 investor call and webcast.

Joining me today are Bill Bromage, our President; our Chief Financial Officer, Bill Healy; and Terry Mangan, Investor Relations.

Others are here as well to respond to your questions after our formal remarks, which should take about 25 minutes.

I will provide the highlights and strategic context for the quarter; and then Bill Healy will provide details on our performance.

Webster's first-quarter results can be characterized as solid operating performance in a challenging interest rate environment.

In our earnings release earlier this morning, we reported $0.82 in diluted earnings per share compared to $0.88 a year ago; cash EPS of $0.90 compared to $0.96 a year ago.

The $0.08 difference between cash and GAAP EPS reflects stock-based compensation of $0.03 a share and intangible amortization of $0.05 a share Webster has expensed stock-based compensation costs since 2002, so there is no incremental effect to us under FASB 123 when you compare our results to 2005.

EPS this quarter included $0.04 of wholesale spread compared to $0.15 a share a year ago.

So EPS from core banking activities were $0.78 a share compared to $0.73 a share a year ago for an increase of about 7%.

Seen another way, core banking activities represented 95% of EPS compared to 83% a year ago.

This underscores the improved quality of earnings coming from adherence to our core operating principles that we have spoken about over the past 18 months, and it's the key point.

Franchise earnings are strong, and wholesale spread contribution is weak and increasingly less of a factor in earnings performance.

It is also clear that when the yield curve slope improves we will have a strong wind at our backs.

The net interest margin was 324 in the quarter compared to 332 a year ago.

The decline was centered on a 97 basis point decrease in what we call the wholesale spread, as an increase of 24 basis points in yield on the securities portfolio was more than offset by an increase of 121 basis points in the cost of borrowings.

As a result, the wholesale spread declined to 32 basis points in Q1 '06 compared to 129 basis points a year ago.

In light of the past year's flattened yield curve environment, Webster's security portfolio has declined by 6% from a year ago.

This reduction largely reflects the non-reinvestment of portfolio cash flows that we announced toward the end of last year.

As a result, the securities portfolio represented 20% of total assets at March 31 compared to 22% a year ago and 31% at the end of 2002.

We expect further reduction in the securities portfolios during the remainder of this year as we continue to pay down wholesale borrowings with maturing cash flows.

Despite the challenging interest rate environment, we're pleased with the expansion of the spread between the yield on loans and the cost of deposits, or what we call the retail spread, which represents the largest component of franchise earnings.

The retail spread increased by 9 basis points from a year ago to 4.16%, with almost all of the increase coming since Q4 '05.

Combined with over $700 million of growth in average loans year-over-year, we generated $0.13 per share of incremental loan spread, which is 9% higher than a year ago.

This performance clearly demonstrates our momentum in executing our strategic plan for growth.

Credit performance remained strong with a 5 basis point charge-off ratio in the quarter.

The provision of $2 million once again exceeded net charge-offs, which totaled $1.7 million, resulting in a slight increase in the allowance for credit losses from December 31.

You have probably noted that we now show the allowance for credit losses in accordance with SEC guidance in two components on the balance sheet, the allowance for loan losses and the reserve for unfunded commitments.

Combined, these two reserves were 1.24% of total loans.

Nonaccrual assets declined by $11 million from December 31 and now total $62 million.

Our 47 basis point nonaccrual ratio [and our minuscule] net charge-off ratio continue to compare quite favorably to our peer group.

Our loan portfolio totals $12.6 billion and grew by 8% over the past year, with C&I up 14%, CRE up 9%, and consumer loans up 8% for a combined rate of 10% over the past year, while resi's increased by a smaller 4% as planned.

Commercial and consumer loans represent over 60% of total loans, with strong performance reflecting solid organic growth in our core franchise and our segment focus on the commercial side.

Our deposits totaled $12.1 billion at March 31 and grew by 9% from a year ago.

Deposit growth in excess of loan growth and reduction of the securities portfolio during the quarter contributed to a $600 million reduction in wholesale borrowings from a year ago, which now represent 22% of total assets compared to 27% a year ago and 33% at the end of 2002.

The loan to deposit ratio improved to 104% compared to 106% a year ago.

Demand and NOW deposits grew by 6% compared to a year ago.

Like the rest of the banking industry, we have seen significant recent growth in CDs as consumer preferences has shifted to this higher yielding category over the past year.

We opened one new de novo branch in New Canaan, Connecticut, during the first quarter, which is the first of the six branches that we expect to open during 2006.

With New Canaan we have now opened 20 branches under our de novo expansion program.

So now one out of every eight of our 158 branches systemwide is less than four years old.

The de novo program has total deposits of $625 million at March 31 compared to $572 million at December 31 and $352 million a year ago.

Our earliest de novo branches already have a track record of improving their deposit mix over time, which we think indicates opportunity for ongoing strength in Webster's overall core deposit generation, as well as growth in revenue from all of our lines of business.

In other words, strong organic growth.

The net expenses related to our de novo branching program were $0.02 a share in the first quarter of '06, about the same as a year ago.

We now have $266 million of total deposits at HSA Bank compared to $211 million at December 31 and $169 million a year ago.

We also have more than $20 million in brokerage accounts.

We continue to expect about $300 million in deposits apart from brokerage accounts by the end of '06.

The CEO of our HSA Bank division, Nat Brinn, recently met with President Bush and other HSA industry executives at the White House to discuss legislative issues.

The Bush administration's healthcare agenda includes many items that would be beneficial to the development of the HSA market, including increasing the maximum annual contribution and allowing firms to roll over HRAs and FSAs into Health Savings Accounts.

Fee-based revenue increased 3.5% from a year ago.

Deposit service fees grew 14% on increased contribution from HSA Bank and growth in retail banking activities.

Wealth Management fees increased 18% from a year ago, as we have seen strong performances from both trust fees and investment product sales.

Our total core revenues, consisting of net interest income and non-interest income and excluding securities gains, were $184 million in the quarter, up 2% from a year ago.

Adjusting for $9.1 million less of spread income from securities compared to a year ago, revenues from core banking activities increased by 8%.

Core expenses, adjusting for investments in de novo branch expansion, HSA Bank, the higher net cost of our new core systems, and noncomparable items, grew by 5% from a year ago.

Included in this growth are continuing investments in revenue-producing personnel.

You can see from the adjusted 8% core banking revenue growth these investments are worthwhile.

Our capital position has strengthened noticeably over the past year.

Tangible common equity grew by 11%, and our tangible equity ratio improved to 5.48% at March 31 compared to 5.08% a year ago, even as we have been buying back our stock in connection with the non-reinvestment of securities portfolio cash flows.

Rating agencies have taken note of our progress [incurred] with improvement in our balanced sheet and earnings.

As you probably saw, S&P upgraded its ratings on Webster in late March, (inaudible) the long-term senior debt of Webster Financial Corporation now rated at triple-B.

S&P cited Webster's strong Connecticut franchise among other factors behind the upgrade.

S&P's upgrade was preceded a few weeks earlier by Fitch revising its rating outlook on Webster to stable.

Fitch specifically cited Webster's improved and solid capital base, good liquidity position, sound asset quality, and improved financial flexibility.

The highlights of Webster's first-quarter performance that I have reviewed fit well into the context of my recent letter to shareholders in our 2005 annual report.

In the letter, I told our shareholders to expect more and better in 2006 than what we achieved in 2005.

More loans and deposits, fewer securities and borrowings, more franchise earnings, and less wholesale contribution, and an even stronger balance sheet and earnings stream.

This is what I mean by Webster's first-quarter results representing solid operating performance in a challenging interest rate environment.

I will now ask Bill Healy to expand on the financial report.

Thank you, Jim, and good morning.

Webster's first-quarter results reveal continued solid core growth, strong asset quality, and a strengthened balance sheet impacted by the challenging effects of the continued flat rate environment on our wholesale spread.

Particular positives in the quarter included strength in net interest margin; continued growth in the loan portfolio; and a reduction in nonperforming assets.

But further compression of the wholesale spread, which we expected and planned for, made for another challenging earnings quarter and accounts entirely for the decline in EPS.

We define wholesale spread as the yield on securities and short-term investments less the cost of borrowings.

In reviewing our results, I will focus my comments for the most part on our linked-quarter performance. $0.82 of diluted EPS in the first quarter compares to $0.84 in the fourth quarter.

The first quarter included $0.04 of EPS from the wholesale spread compared to $0.07 in the fourth quarter.

Subtracting wholesale spread from each period results in EPS from core banking activities of $0.78 in the quarter, up slightly from $0.77 in the fourth quarter.

The $0.03 decline in wholesale spread revenue from the fourth quarter relates entirely to a 24 basis point decline in the wholesale margin.

Underlying performance in our core bank remained strong.

As Jim mentioned, subtracting the $0.15 of wholesale spread earnings from our '05 EPS of $0.88 and the $0.04 from '06 reveals year-over-year growth in core performance of about 7%.

During the quarter, we had a number of items that just about offset one another, bringing our earnings back to $0.82.

These items totaled about $2.5 million in both revenues and expenses.

I mention this in our ongoing desire to provide you with transparency into our results.

I will provide more detail on individual items later, but remind you that it's not unusual to have these kind of items in any given quarter.

Net interest income was up slightly from the fourth quarter.

Growth in loan volume, particularly higher yielding commercial loans, offset the impact of rising interest rates quarter to quarter.

The net interest margin was 3.24% compared to 3.22% in the fourth quarter and was favorably impacted in the quarter by two items.

The first was $800,000 from the recapture of premium on a Federal Home Loan advance that was called.

The second was a $225,000 reduction related to the fourth-quarter premium amortization on mortgage related loans as a result of lower prepayment speeds.

These two items plus an adjustment to the prepayment speeds in the quarter resulted in the net interest margin being about 4 basis points higher than it otherwise would have been.

Our outlook for the second quarter is for the net interest margin to be in the 3.15% to 3.20% range as we continue to experience the effects of rising short-term rates and the flat yield curve on the wholesale spread and competitive pricing pressures on our deposits.

Non-interest income of $54.2 million in the quarter was down 5% on a linked-quarter basis.

However, apart from $3.2 million of a loan prepayment and a direct investment gain that were particular to the fourth quarter, non-interest income was flat.

A $1 million linked-quarter seasonal decline in deposit service fees, mostly as a result of lower NSF fees, was largely offset by increased revenue from gains on the sale of loans.

We saw a pickup in Wealth Management fees, with strong performances in trust fees and investment product sales.

In fact, this income was up 12% annualized for the linked-quarter.

Insurance revenues were flat with the fourth quarter, as contingent payments paid in the first quarter of each year were not as strong as in the past.

Insurance revenues declined 9% year-over-year for the same reason.

Security gains, which are included in the offsetting revenue and expense items, were $1 million in both the first and fourth quarters, and were $800,000 in the first quarter a year ago.

Total expenses were $119.2 million in the quarter.

We mentioned on our fourth-quarter call how we entered 2006 with a quarterly expense run rate of about $116 million, to be adjusted for expected growth for the year in the low single digits.

The first-quarter difference to the run rate is explained by a direct investment write-down of $900,000; temporary health and overtime of $800,000 related to final wrap-up efforts to ensure the successful completion of our recent IT conversion; and an incentive compensation adjustment of $800,000 that when adjusted will get us back on track to the overall expense growth rate of around 3% over the remainder of the year.

This would be in line with the guidance we provided you earlier in the year.

Total expenses of $119.2 million in the quarter represent an increase of $11.4 million from a year ago.

This increase consists of the following. $1.3 million of higher de novo expenses representing full year of newly opened branches. $1.6 million of increased expenses at HSA Bank, which was acquired in March of a year ago. $900,000 from the buildout of our compliance function. $1.7 million from a higher run rate of our new IT systems.

$2.5 million of items particular to the quarter which I mentioned above, related to direct investments, temporary staffing costs, and incentives.

Then there is another $1.5 million of growth from a year ago which includes investments in new personnel in commercial lending, Wealth Management, and retail to support our growth.

Turning to a review of the balance sheet, total assets of $17.9 billion at March 31 were essentially flat with December 31.

Loans increased by 2.5% from December 31, while securities declined as we continued our previously announced plan of using cash flows to reduce borrowings, thus further reducing our exposure to the wholesale spread compression.

As a result, the securities portfolio declined to 20% of total assets at March 31 compared to about 21% at December 31; and borrowings were 22.5% of assets, down from 24.5% of assets last quarter.

The average duration of the $2.5 billion available for sale portfolio remained short at 1.9 years at March 31, the same as at year-end.

For the entire portfolio, including $1.1 billion of held to maturity securities, the duration was 2.7 years compared to 2.8 years at December 31.

The portfolio yielded 4.77% during the quarter, up 1 basis point from the prior quarter.

Available for sale unrealized losses pretax at March 31 were $55 million compared to a loss of $41 million at December 31.

Total loans had strong growth of 2.5% or $305 million from December 31 to March 31.

Middle market and asset based loans contributed most of the commercial growth, with strong performances also registered in small business and equipment finance.

Commercial real estate was up 2.5% for the quarter from new business activities and less pressure from prepayment activity.

Nonperforming assets declined during the quarter by $11 million or 15%, and are now back close to their September '05 levels.

We mentioned on our fourth-quarter call in January that we expected over 10 million of resolution on larger credits; and this did in fact happen.

A little over $7 million represents two credits returning to accrual status during the quarter, while another $6.7 million results from cash settlement on another credit.

We also had a settlement in full on principal back interest and expenses on a $4.5 million OREO property in the quarter.

The balance of the activity represents (indiscernible) new activity during the quarter.

Total deposits of $12.1 billion increased by $447 million or 4% during the quarter.

This deposit growth more than funded $305 million of loan growth and, along with a $110 million reduction in securities, contributed to a $355 million reduction in borrowings.

As a result, our loan to deposit ratio has now improved to 1.04%, down from 1.06% at December 31.

Our tangible capital ratio declined by 6 basis points from December 31 to 5.48% at March 31, largely reflecting the effect of 686,000 shares repurchased during the quarter and resulted in a reduction of 17 basis points in our tangible capital ratio.

The tangible capital ratio is likely to remain in the 5.5% territory over the remainder of the year as we continue to repurchase shares with freed-up capital from the expected ongoing decline in the securities portfolio.

There has been no material change in our interest sensitivity position since December 31, and our exposure of tangible capital to an upward shock in interest rates of 200 basis points is 33 basis points at March 31.

It summary, our aggregate first-quarter performance, even given the challenging yield curve environment, fit well within our overall expectations.

We see our guidance for the rest of the year in accordance with what we outlined in our conference call in January, including the expectation for pressure on the net interest margin from rising rates and flattening of the yield curve.

The only area that could change is the growth in non-interest revenue; so that we now see growth over the full-year '05 in the mid single digits instead of the high single digits.

I will now turn the program back to Jim for his closing comments.

Thanks, Bill.

We have been working hard at Webster to grow our business organically by providing more services to more customers in our expanding markets.

As the home-grown choice and the largest independent bank based in New England, clearly, we have momentum.

We have also dedicated ourselves to strengthening the balance sheet and improving the quality of our earnings.

We believe that investors have taken note of our achievements, as Webster is beginning to close the valuation gaps to the mid-cap commercial banks to whom we compare ourselves.

We hope to see many of you at our fourth annual investor day event on June 8 here in Connecticut.

You should receive preliminary details in February, and we plan to send out the full details for the event later this week.

We look forward to this event each year, consistent with our oft-stated philosophy that the more of us you know and the more you know about us, the more confidence you will have in our ability to achieve our ambitious goals.

Thank you for your interest in Webster and for participating in today's call.

We would now be pleased to respond to your questions.

(OPERATOR INSTRUCTIONS) Andrea Jao with Lehman Brothers.

A couple of questions.

First on your net interest margin assumptions, your forecast for the remainder of the year is a little lower than you originally thought.

What specifically has changed?

Andrea, I don't think anything has changed.

I think in our original guidance back in the first quarter, we had said that we saw continued pressure in the margin through the third quarter.

That is consistent with, I think, what I just said.

You know, the margin going down to 315 to 320 in the second quarter; and we see it going down maybe a little bit further than that in the third quarter.

Then our expectation for interest rates was that the Fed would probably stop raising rates sometime later in the year.

And when it did, we saw our margin improving and coming back in the fourth quarter.

Okay, got you.

In terms of credit costs, I believe your original forecasts were for loan loss provisioning to be in the area of '05's $9.5 million.

Given credit in the first quarter, do you think that will inch lower?

I think, Andrea, that our outlook was more like $14 million for the full year.

I thought we were looking at overall somewhere around $10 million of net charge-offs for the year.

It remains $14 million for the full year?

Yes.

It was $9.5 million in '05.

I think that we were looking for about $14 million in the full year of '06.

We were looking for net charge-offs to be somewhere around 10 basis points for the full-year '06.

We did make the proviso, though, that if the experience continued as strong as it was, that it was possible we would not reserve at that rate.

We had anticipated that the reserve would increase quarter-over-quarter.

At this point, we would say we are pleased with the performance, and it is possible that the reserve for the year could be slightly less than originally anticipated.

Great, this helps.

Thank you.

Tom Doheny with Sandler O'Neill.

I apologize, but Bill, when you were going through the impacts on the margin this quarter, I did not get some of the items you threw out there.

I wonder if you can go through those again.

Sure.

There were two items, Tom.

There was an $800,000 recapture of a premium on a Federal Home Loan advance that was called during the quarter.

Then we had an adjustment of $225,000 that related to the fourth quarter of '05 on prepayment speeds on mortgage related assets.

Then we adjusted the speeds in the fourth quarter downward to reflect what we had seen in the fourth quarter, which is lower than what we were using in the fourth quarter.

So the combination of those items pushed the margin up about 4 basis points in the quarter.

You know, going forward, we said that we did not think that those adjustments or the margin would sustain at that level.

Because of pricing pressures and the onetime $800,000 impact -- you know, that was about 2 basis points -- the margin would be down in the second quarter.

Okay.

Then, so net-net this quarter it was just over $1 million in onetime impact?

Yes.

Okay, great.

Then on the deposit service charges you mentioned the decline there is seasonal.

I just wanted to ensure there is nothing else in that number, that basically what you're seeing is kind of the normal seasonality this quarter (multiple speakers).

That's right.

Great.

Finally on the pace of buyback, and correct me if I am wrong here, but I guess based on your prior assumptions at the year-end for the overall balance sheet, we could see some -- continuing some acceleration in the shrinkage of the securities portfolio.

If that is the case, should we be assuming that the buyback would kind of be picking up from the pace in this quarter as well?

I don't see any acceleration, Tom, in the prepayment speeds in the portfolio.

In fact, we're seeing them slow down.

They were a little over $100 million this quarter, which was lower than what they were last quarter.

So I would not see any acceleration in our buyback activity in the second quarter from where we were in the first quarter.

Okay, great.

Thanks a lot, guys.

But we would continue to expect that we would use the cash flows from those security paydowns to pay off the borrowings; and with the freed-up capital we would be buying back stock.

I think the original estimate was somewhere around 50 to $55 million anticipated in '06.

Thank you.

Laurie Hunsicker with Friedman, Billings, Ramsey.

You said 686,000 shares were repurchased?

686 were repurchased in the first quarter.

Okay, and so that leaves 2.1 then in your authorization?

No.

We just finished up one of our authorizations; and I think we have got remaining about 1,650,000 in our new authorization.

In your new?

Okay, okay, great.

Then just to go back to Andrea's question on the loan loss provision, I guess based off your comments from fourth quarter, where you did say that, give or take, charge-offs would probably be in the 10 basis point range, and we cover for that; and to the extent that we saw such dramatic improvement this quarter, can you fine-tune that a little bit in terms of where we might see loan loss provision for '06?

Not at this point.

A lot of that goes with the loan growth that we see during the quarter.

Because I mean we're not only looking to cover charge-offs; we need to provide for the credits that we're also putting on.

We saw some pretty good volume growth in the commercial and the CRE portfolio in the first quarter.

So I think right now it is a little bit too early in the year to refine that.

Maybe next quarter.

Okay, so just still using a full-year run rate of $14 million?

Again, I didn't hear that.

Yes.

Okay.

Bill, I missed some of this.

If you can take me through, I got the $2.5 million of nonrecurring expenses.

Can you take me through the $2.5 million of non-recurring income? $1 million of it was securities gains; $1 million of it was in the net interest income.

Where was the other $0.5 million?

I said it was just about, so it did not exactly offset.

So it really comes out to about $2,025,000.

Okay, got it.

It was $800,000 from the call, and $225,000 in the prepayment speeds, and then the $1 million that you had in the security gains.

In securities?

Okay.

Then this direct investment write-down for $900,000, what exactly was that?

It was a write-down of direct investments really to reflect our equity in the undistributed investments in some of these funds that we hold.

We noticed that, in one fund in particular at the end of the year, there was an adjustment in the fund as a result of the audit for the adoption of FAS 115 and to how they recorded their liabilities.

So I think that is what is driving this write-down during the quarter.

Okay.

Then just to go back up to non-recurring income, the securities gains obviously offsetting the non-recurring expense.

Are you still of the stance that securities gains will be very nominal for the rest of the year?

Yes, we are.

Okay.

Then just a few quick other questions.

The tax rate for the quarter at 31.7%, lower than expected; what should we be using for the rest of the year?

I would say somewhere around there, to 32%.

To 32?

Okay.

Then the last thing.

Can you just comment on the change of the commercial non-performing category breakdown?

I can go back and read what I gave you.

We had in the quarter two credits for $6.7 million.

I think the total decline in the non-performing was 14 -- $12 million in commercial.

There was one credit for 6.7 -- two credits for $6.7 million that were returned to full performing; and another credit for $6.7 million that was paid in cash.

I mean I guess specifically how you categorized it.

It looks like you changed it.

What was previously under C&I, some of that moved down to commercial real estate, and vice versa.

In other words, how you are actually categorizing commercial non-performers has changed with how you were historically; yet the commercial loan balances have not changed, the C&I versus commercial real estate.

I would have to go back on that.

I am looking at December '05 of approximately $36 million of commercial, down to $23 million in March.

So that is about a 12, $13 million reduction.

I am looking at commercial real estate going from $23 million to $24 million.

Commercial real estate previously at December was showing up at $12 million; and then the C&Is were showing up at 43.

So it looks like there was a change in category for how you are doing it?

There may have been a reclassification of a loan that was in commercial that should have been in CRE.

Okay, and I can talk to you more about this off-line.

Yes, I think we should, actually.

I am sure we can resolve that.

Okay, thank you very much.

Jared Shaw with KBW.

Just a couple of follow-up questions.

On the securities gains this quarter, was that related to the balance sheet restructuring?

Or what type of securities gains were those?

Were those on the MBS side or --?

They are all equities, Jared.

Okay, seeing $1 million a quarter, is that something that we could sort of count on?

Or is that just more of an opportunistic gain this quarter?

It is pretty much opportunistic.

You know, our thinking is you would not see more than $1 million.

If it were more than a penny that would be unusual.

So for planning you could think somewhere in the range of a little more or less than a penny.

Okay.

Then in terms of the commercial loan portfolio, what percentage of that is variable, either like tied to prime or LIBOR?

Just give me a minute, Jared.

Of the commercial portfolio, about 23% floats immediately; and the other, there's another 43% that reprices periodically.

So it's 23%, then an additional 43%?

23% floats immediately, and another 43% is periodic.

So it could be every three months or six months.

Right, okay.

Great.

Then just finally you said that with one of the loans that you cleared up, the $4.5 million real estate that had full resolution with back interest, how much interest was recorded on that for the quarter?

Not a material amount, Jared.

Great, thank you very much.

(OPERATOR INSTRUCTIONS) Chip Rewey with CRM.

Can you give the number of HSA accounts?

You gave the assets.

Actually, could you repeat the asset number?

I am not sure I heard it correctly.

Secondly, can you just comment on your CRE quality?

What are you seeing in the market?

Are you still pretty confident in growth in that category putting out new money there?

Sure, I will just say we have a little over 20,000 new HSA accounts in the quarter.

Net-net, I think it was in the 10 to 15 range.

Okay.

I will ask Bill to comment on the other question.

It's Bill Bromage.

On the CRE performance, our performance remains very, very strong in that portfolio, as it has for a number of years.

We had one [inflow] this year; and it was as much a borrower challenge as it was a quality of the underlying real estate challenge.

So as we look at our portfolio today, we don't see any storm clouds on the horizon in that portfolio.

I would offer that the marketplace, as I am sure you have heard from others, is extremely competitive on virtually all sectors.

But commercial real estate being one of those sectors that is very competitive.

On pricing and on structure, we are maintaining our discipline, especially on the structure side, and on the discipline in underwriting the quality of the credits that we're willing to take.

So that we, I think, have maintained our portfolio and the quality of the portfolio.

It puts pressure on the ability to achieve the growth targets that we have achieved in the past, as the market gets, I guess, stronger from a competitive -- more competitive, if you will.

But we are not seeing a fall off at this point in production, albeit it is extremely competitive and that could happen.

Thanks a lot.

(OPERATOR INSTRUCTIONS) Ladies and gentlemen, there are no further questions at this time.

I would now like to turn the floor back over to management for closing comments.

I just want to say thank you all for joining us today.

Ladies and gentlemen, this does conclude today's teleconference.

You may disconnect your lines at this time.

Thank you for your participation.