Michelle Debkowski – IR
Glenn Moyer – President and CEO
Michael Reinhard – CFO
Scott Fainor – COO
National Penn Bancshares, Inc. (NPBC) Q3 2008 Earnings Call Transcript October 23, 2008 5:00 PM ET
Good day, everyone, and welcome to today's program, titled National Penn Bancshares Incorporated third quarter earnings webcast. At this time, all the participants are in a listen-only mode. Later you will have the opportunity to ask questions during our Q&A session. (Operator instructions). This call is being recorded.
And I would now like to turn the call over to Ms. Michelle Debkowski. Please go ahead.
Thank you and good afternoon. And welcome to National Penn Bancshares third quarter 2008 earnings webcast. Questions will be accepted up to the conclusion of our prepared remarks via e-mail. Please use the e-mail button located on the conference call screen to ask your question. Due to time constraints, we may not be able to answer all of your e-mail. Additionally, as we review questions received, we may combine questions that raise similar issues or can otherwise be combined for comments.
As part of our webcast presentation, you will see that there are slides with financial highlights available for your independent review. The presentation and slides will be available on our Web site as well as filed on Form 8-K with the Securities and Exchange Commission following our webcast. This presentation contains forward-looking information that is intended to be covered by the Safe Harbor for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995. Many of these factors are listed on the slide on your screen. I will give you a moment to review the slide.
I will now turn today's presentation over to Glenn Moyer, our President and Chief Executive Officer. Glenn?
Thank you, Michelle. Also joining us today is Scott Fainor, our Chief Operating Officer, and Michael Reinhard, our Chief Financial Officer.
I will start the call today by noting that our third quarter 2008 earnings release is available on the investor relations section of our Web site. Earlier today we included the press release in a report on Form 8-K that we have filed with the Securities and Exchange Commission.
Mike Reinhard will provide an overview of our financials. Scott Fainor will review our loan and deposit growth asset quality and our merger integrations. I will then wrap up with some concluding comments.
Our overall message today is one of continuing steady core earnings despite modestly increased credit costs over the past quarter. Our third quarter results also include two noncore items, a positive fair value mark on NBP Capital Trust II and an other than temporary impairment charge on our only synthetic CDO investment. We have tried to be realhstic in communicating the nature of this investment and our approach toward other than temporary impairment. Unfortunately, events unfolding in the national and international credit markets make this impairment charge necessary at this time. But the good news is that our company continues to produce core earnings at the level expected of us and by us.
Mike Reinhard will provide the details.
As we discussed last quarter, continuing a strong capital position is high on our list of priorities. In that regard, our board of directors at their regularly scheduled meeting yesterday authorized the following actions.
First, they approved enhancements to the company's dividend reinvestment and stock purchase plan to provide a 10% discount on dividends reinvested as well as for new cash purchases made under the plan.
Optional cash contributions may now be made in amounts up to $50,000 per month, an increase from the prior monthly limitation of $10,000, thus providing an attractive incentive to increase participation in the plan and they authorized management to complete due diligence and if satisfactory, apply for participation in the U.S. Treasury's capital purchase program up to the maximum allowable amount of approximately $200 million.
If approved and funded, this unique source of cost effective new capital will further bolster National Penn's balance sheet and will provide additional resources for the growth opportunities National Penn is currently seeing in its core markets.
Capital enhancement is important, at this time from both an offensive and defensive perspective. From a defensive perspective, these actions will eliminate the question of whether we have sufficient capital to absorb various stress scenarios. However, we are much more excited about the offensive need for capital to support the growth that we expect due to the current market disruption.
We expect accretive opportunities in the form of whole bank acquisitions, branch purchases, or outsized asset growth due to our ability to attract significant new clients from our challenged competitors. We began to see higher than normal account growth late in the quarter due to the publicized problems of some of our larger competitors. What we found was that we already knew many of these customers, but they may have only had a small relationship with National Penn. Now with the challenges of their other bank, they are now ready to build a fuller relationship with National Penn.
In addition, our board of directors also approved an increase in our cash dividend to $0.1725 per share which equates to an annual dividend of $0.69 per share. Based on roughly 80 million shares outstanding, the cost of this increase is approximately $800,000 per year. You may ask why on one hand we are raising new capital and on the other hand, we're paying out higher cash dividends.
Our philosophy is that National Penn has a proud history of 31 consecutive years of cash dividend increases. We believe strongly in rewarding our loyal shareholders for our core strong -- core earning performance, and feel that it also serves as an incentive for continued and additional investment in our company. The amount of this increase is rather small compared to the capital that we need to support the growth discussed above that will build the future earning power of our company.
I will now turn the presentation over to Mike Reinhard who will provide the details about our third quarter and year-to-date 2008 financial results.
Thank you, and good afternoon. Let me begin by noting that this presentation contains the non-GAAP financial measures, return on average tangible equity, and core earnings.
Due to a number of acquisitions in recent years, purchase accounting rules have negatively impacted our GAAP return on equity. The non-GAAP return on tangible equity ratio excludes the impact of acquisition related goodwill and intangibles and inducted by National Penn's management for comparative purposes in its analysis of the company's performance.
Core earnings exclude the impact of the two material non-core items this quarter. Reconciliations of our GAAP and non-GAAP return on equity ratios and core earnings are included in our presentation today for your review.
I would also like to note that our financial results for year-to-date 2008 include Christiana Bank & Trust as of January 4 and KNBT Bancorp as of February 1st. The addition of Christiana and KNBT has significantly changed our financial statements.
Our third quarter 2008 results under accounting principles generally accepted in the United States referred to as GAAP reflect net income for third quarter 2008 of $19.23 million, a 14.4% increase over third quarter 2007.
Diluted earnings per share of $0.23 compared to $0.34 per diluted share earned during the third quarter last year. As Glenn mentioned, we experienced a $7.64 million pretax or $4.97 million after-tax gain related to NBP Capital Trust II under the fair value option guidelines of FAS 159 and FAS 157 adopted for this financial instrument.
The positive impact of this fair value mark was $0.06 per share. The impairment charge on the synthetic CDO was $20.0 million pretax or $13.0 million after tax. The negative impact of this impairment charge was $0.17 per share.
Excluding these two non-core items, core earnings for the quarter was $0.34 per diluted share, equal to last year's third quarter and to the prior quarter of this year.
For the first nine months of 2008, National Penn earned $68.04 million of net income, compared to $48.52 million for the same period of 2007. Diluted earnings per share for the nine month periods are $0.90 for 2008, and $0.97 for 2007.
Our return on average assets for the nine months ending September 30, 2008 was 1.04% and return on average equity was 9.34% as compared to 1.17%, and 11.94% respectively for the same period of 2007.
Net income return on average tangible equity was 20.62% in the first nine months of 2008 compared to 24.72% in the same period of 2007. This non-GAAP financial measure is computed by dividing annualized net income by average equity that is reduced by average acquisition related goodwill and intangibles.
A provision for loan losses of $6.88 million was made in the third quarter 2008 as compared to a provision of $3.71 million in the second quarter 2008 and $1.42 million in the third quarter of 2007.
Total net charge-offs for the third quarter 2008 of $4.82 million compared to $3.70 million in the second quarter 2008 and $2.13 million of net charge-off in third quarter 2007. The provision for loan losses for the first nine months of 2008 was $14.00 million versus $4.03 million for the same period in 2007 while net charge-offs were $11.08 million, and $6.05 million for the same period of 2008 and 2007 respectively. The larger dollar amount of net charge-offs in both the third quarter of 2008 and year-to-date 2008 is the result of a larger amount of loans outstanding as well as current economic conditions.
Net charge-offs were eight basis points non-annualized of average loans in the third quarter 2008 versus six basis points non-annualized in 2007. Net charge-offs were 19 basis points through September 30, 2008 compared to 16 basis points in the same period last year.
Scott will discuss credit quality in more detail in his remarks.
However, an important point to make in this earnings review is our solid core earnings performance during the quarter despite provisioning levels that exceeded net charge-offs by approximately $2 million.
Our net interest margin decreased in the third quarter 2008 by 3 basis points to 3.52% from 3.55% in the second quarter of 2008. The net interest margin was 3.52% for the first nine months of 2008 compared to 3.39% for the first nine months of 2007. Absent the positive effect of the amortization of the fair value marks for KNBT which we fully described during our first quarter earnings release we had expected the net interest margin for the first nine months of 2008 to be 3.27% which was simply the weighted average net interest margin of National Penn, Christiana and KNBT combined without any consideration of interest rate movements or shifts in earnings assets.
The positive effect of the amortization of the fair value marks was 17 basis points during this period. Therefore, without the benefit of the fair value marks, the net interest margin would have been 3.35%. We attribute this positive 8 basis point difference from internal expectations primarily to increased credit spreads on new loans with stable to lower funding costs. However, we recognize that we are in a dynamic and competitive market for both loans and deposits where pricing can change quickly.
Non-interest income was $16.85 million in this year's third quarter. As previously noted, this year's third quarter non-interest income includes pretax income of $7.64 million related to NBP Capital Trust II under the fair value option guidelines of FAS 159 and 157 adopted for this financial instrument. This compares to pretax income of $1.19 million for the same instrument in the third quarter of 2007.
Non-interest income also includes the $20 million pretax charge on the synthetic CDO. Absent these non-core items, non-interest income was $29.21 million compared to $18.61 million in last year's third quarter. Our wealth management business and our insurance business lines are significant contributors to non-interest income.
Total assets under management or administration in our collection of boutique wealth management companies totaled $8.32 billion at September 30, 2008.
Non-interest expense of $54.09 million in this year's third quarter is $260,000 higher than second quarter 2008 non-interest expense.
As we mentioned during the Q&A section of the second quarter webcast, we believe that this is a reasonable run rate for expenses, considering continuing KNBT cost save offsetting the naturally increasing expenses of a growing company. We are pleased to report that we remain on target to achieve the previously disclosed cost saves from the KNBT acquisition.
In this economic and operating environment, managing overhead costs continues to be a high priority. As a result of our efforts in cost control, our efficiency ratio adjusted for both non-core items improved to a level of 54.42% for the first nine months of this year.
Regarding the balance sheet, total assets grew $75.44 million or 3.27% annualized during third quarter 2008 to $9.32 billion. Earning assets actually grew $110.16 million and non-earning assets declined $34.72 million.
At September 30, 2008 National Penn was in compliance with all applicable regulatory capital requirements. National Penn, National Penn Bank and Christiana Bank & Trust are all considered well-capitalized as defined by banking regulators.
All of our capital ratios held fairly steady during the third quarter. Total risk-based capital to assets was 10.56% compared to 10.59% at the end of June. Tangible equity to tangible assets was 5.28% compared to 5.32% at June 30 and tangible book value per share was $5.77 at September 30, compared to $5.79 at June 30.
On a pro forma basis, assuming that we are approved and funded for $200 million in the U.S. Treasury Capital Purchase Program, our total risk-based capital to assets is projected to exceed 12%.
Last quarter we discussed our synthetic CDO investments. Our only investment of this type was a $20 million AA rated CDO that references 100 investment grade credit. During the third quarter, we experienced four credit events in this portfolio, and subsequent to September 30, 2008, our portfolio experienced an additional three credit events.
At this point, in accordance with GAAP, we determined that this investment was other than temporarily impaired and due to the severity of the impairment we made the judgment to take a non-cash charge on the entire amount of the investment. We believe that this was the right thing to do at this time and this action effectively puts this investment behind us.
Last quarter, we also discussed in some detail our portfolio of bank and insurance company trust preferred investments. We have completed our assessment of this portfolio as of September 30, 2008, and have concluded in accordance with GAAP as reaffirmed by the SEC and their communication at September 30 that National Penn had no other than temporary impairment in this segment of our investment portfolio at that date.
That said, as you might expect given the challenges in the banking industry and the increasing number of bank failures as well as banks on the FDIC's problem bank list, our portfolio showed continued deterioration during the third quarter. However, we still have a range of credit quality on the individual bonds that we own. While we still foresee the ultimate collectability of our principal, as we have been saying, we cannot rule out the potential for some of these investments degrading into a non-accrual of interest status.
Despite the fact that we had no other than temporary impairment within this portfolio at September 30, 2008, we cannot rule out a potential charge on any individual pool in the future. We still believe that if the banking industry continues to deteriorate other than temporary impairment charges would occur pool by pool over a period of time and in that manner, would be manageable.
Ultimately, the quality of these CDO investments will depend on the financial strength of the individual banks and insurance company who issued debt into these pools coupled with the protections afforded to the rated class holders within the structure of the CDO. Obviously, we will continue to monitor this situation very closely and communicate material developments as warranted.
I would now like to introduce Scott Fainor, our Chief Operating Officer.
Thank you, Mike. I would like to take a few moments to comment on our loan and deposit growth and our credit quality and then I will address the Christiana and KNBT integration processes.
With respect to our loan portfolio at September 30, 2008, total loans and leases outstanding are $6.21 billion. Organic loan growth was 1.21% non-annualized on a linked quarter basis during the third quarter of 2008. This $74 million net increase in loans for the quarter was reflected in an $82 million increase in C&I loans, a $7 million increase in consumer loans, a $5 million increase in residential mortgages and a $20 million decline in commercial real estate loans. All regions across our company remain fully engaged in increasing customer relationships while maintaining quality loan growth.
Our loan pipeline is strong as we continue to see loan demand in our market. As reflected in our lower than normal loan growth for the third quarter, however, we are most interested in quality full customer relationships. We continue to see the opportunity to bring those type of relationships to National Penn as clients of our larger competitors seek to establish a meaningful relationship with a quality regional financial institution that can serve their needs into the future.
Regarding the composition of our loan portfolio, we have provided an expanded breakdown in the financial data included with our earnings press release. Nonperforming assets plus loans over 90 days delinquent for our combined company totaled $30.36 million at September 30, 2008, up from $22.63 million at June 30, 2008. Notwithstanding the increase from June, we believe our ratio of nonperforming assets to total loans of 49 basis points is better than industry averages, and speaks highly of our credit culture.
We also believe we remain appropriately positioned in our overall loan and lease loss reserve at $83.70 million or 1.35% of total loans and leases as of September 30, 2008.
Our loan loss provision was more than $2 million greater than third quarter net charge-offs of $4.82 million, allowing for the growth in reserves. Based on the current reserve, our coverage ratio of nonperforming assets is 275.6%. Net charge-offs were 8 basis points non-annualized in the third quarter 2008 versus 6 basis points in the second quarter and 5 basis points in the first quarter.
Based on the strength of this coverage, our review of overall credit quality indicators and our own ongoing loan monitoring processes, we feel we have adequately provided for loan and lease losses during the third quarter of 2008. This is a dynamic process, and we will continue to evaluate the appropriate level of provision on a quarterly basis.
On a positive note, we are encouraged that despite the increased levels of nonperforming loans and charge-offs, we experienced a decline in our total delinquency ratio from 33 basis points at June 30, 2008 to 31 basis points at September 30, 2008.
We continue to monitor the slow sales pace of both new and existing homes, and the resultant economic drag that impacts business owners and residential developers. It is important to note that while we have seen increases in nonperforming assets during the third quarter, the increases have occurred across the portfolio and not in one segment of the portfolio.
To illustrate, nonperforming assets in the commercial loan portfolio was 40 basis points of loan outstandings at 6/30/08 and increased to 50 basis points at 9/30/08. Nonperforming assets in the retail and mortgage portion of the portfolio were 33 basis points of the portfolio outstandings at June 30, 2008 and reached 46 basis points of the portfolio at 9/30/08. Charge-off rates year-to-date have similar performance trends as our nonaccrual experience.
The commercial portfolio experienced an annual charge-off rate year-to-date of 19 basis points and the retail and mortgage area experienced an annualized charge-off rate of 26 basis points through nine months. These levels of performance are consistent with the trends in our slowing economy. All our banking teams are aware of the impact of the current economic slowdown and changes in our credit cycle. And we will continue to monitor our portfolios risk and concentration exposure diligently.
Total deposits were $6.22 billion at September 30, 2008, up 2.25% non-annualized or $137 million from $6.0 billion at June 30, 2008. The primary reasons for this growth were the seasonal influx of school district deposits from real estate taxes, a CD promotion to attract new customers and retain maturing deposits, and a net inflow of deposits from customers of other banks who were concerned about the safety of their funds over the FDIC insurance limit.
The takeaway from our earnings report today is that National Penn continues to generate respectable loan and deposit growth with solid credit quality. For the first nine months of the year, organic loan growth was $324 million and organic deposit growth was $221 million. In addition, we are encouraged by the linked quarter increases in fees from deposits, fees from cash management, and fees from electronic banking as a testament to National Penn's relationship based business model.
Before I conclude, I will comment briefly on Christiana and KNBT. Last weekend, we completed the core banking systems conversion of Christiana Bank & Trust. The conversion went smoothly and we are now prepared to offer the full compliment of National Penn products and services to the Christiana banking clients.
Regarding KNBT, we are now actively engaged in cross-selling all the products and services that were not previously available to KNBT customers. We are also pleased to report that to-date, our customer retention statistics exceed 97% for both consumer and business clients.
I will now turn the presentation back to Glenn Moyer.
Thank you, Scott. We are pleased to report solid earning asset and deposit growth, and core earnings despite the current troubling times. In addition to all the progress being made at National Penn, Scott and Mike also reported on our outlook for loan quality and discussed the bank trust preferred portfolio.
As we reported last quarter, we have devoted significant energies to these areas and continue to believe that they are manageable. We are energized by the actions authorized by our board of directors to take advantage of the U.S. Treasury Capital Purchase Program. We see the potential for significant growth in this market and want to be adequately positioned from a capital perspective to act on the opportunities that become available.
This ends our planned remarks and we will now address questions that have been received to this point. Questions that may be received after this point will be addressed as possible in the public filing of the transcript of our question-and-answer segment. Michelle?
Thank you, Glenn. We have several questions presented during the webcast. And Mike, I'll begin with you, with a few questions related to the synthetic CDO. Why did the bank buy the $12 million synthetic collateralized debt obligations that had to be written off? Who was responsible for purchasing this financial instrument? And did the CDO come with one of our recent mergers?
For this investment purchase, we followed our normal process where our finance area analyzes and recommends investment purchases to our assets liability committee for approval. At the time this was purchased, it provided diversification for the investment portfolio, was a floating rate instrument and was highly rated at AA. Unfortunately, the global financial crisis caused this investment to very quickly lose its value.
Thank you, Mike. Why do our highly paid officers keep dumping large blocks of stock in the market?
While not being aware of the specifics that this question raises, we encourage stock ownership by our executive officers through board approved ownership guidelines. These guidelines are evaluated annually and we believe, in fact, most if not all executive officers are in compliance. Notwithstanding that, assuming that an executive officer meets these ownership guidelines, we believe that the purchase or sale of National Penn stock beyond those guidelines for personal reasons is acceptable.
Mike, continuing with you. There was a question that came in I said I do not understand the unrealized gain on the NBP Capital Trust II preferred securities. Please clarify.
NBP Capital Trust II is a debt instrument for which we elected the fair value option of FAS 157 and 159. When the market value of a debt instrument declines as occurred in the third quarter this creates a gain through the income statement.
Mike, what is the cost and fair market value of your holdings of the Trust CDOs and how are you calculating fair market value?
Our entire portfolio of trust preferred CDO investments are in our held to maturity portfolio and are not presented at fair value on our balance sheet. Since there currently is no trading market for these securities, we utilize estimated pricing indication from several sources, including our bond accounting system provider, brokers and internal cash flow models as specified for level III investments under FAS 157.
If you decide to participate in the capital purchase program, do you anticipate that you would apply for the maximum amount?
Yes. As approved by our Board of Directors, we intend to apply for the maximum amount.
Scott, a few questions for you. Please provide some color regarding your participation in national shared credit.
Our national shared credit program based on the shared national credit report of May of '08 this year had $145 million of outstandings, of which $9.8 million are special mentioned credits and $8.4 million are substandard with no delinquency within the portfolio. We need to make that comparison of those $145 million of outstandings against our $6.2 billion total loan portfolio. We limit our exposure on a transaction level to be not more than $20 million. A mixture of local borrowers in our regions and national level credits that are cash flow based repayments versus second source refinance of payments makes up the majority of these credits.
Thank you, Scott. How did the 30-day to 89-day delinquencies compare on a linked quarter basis?
Delinquency at June 30, 2008 was $20.2 million or 33 basis points versus at 9/30/08, $19.5 million or 31 basis points as we stated in our presentation.
And how would you describe the strength of the loan pipeline?
The loan pipeline for all of our geographic regions and all of our commercial and retail loan areas, for the first and second quarters of this year, remained very strong at increased record levels. For the third quarter, in the beginning, we saw a softening of the loan pipeline. But at the end of the third quarter, we ended up seeing an increase in the loan pipeline back to strong levels based on relationships that are now coming to National Penn to do business, not only on the loan and deposit side, but from the standpoint of all of our other products and services that we offer to our relationship banking clients.
Scott, could you please provide some color on the increase in non-accrual loan?
Yes. The nonaccrual loans for 9/30/08 increased $2.6 million in the commercial real estate area, $1.7 million in the construction and industrial portfolio, $1.1 million in the residential mortgage area and $500,000 in our consumer loan area.
Thank you, Scott. Glenn, is the decline in FTE employees related predominantly to acquisition cost saves?
I would say generally, yes. Plus we have continued to closely monitor all open positions as part of our overall cost containment efforts. And I think those efforts get reflected in our again improved efficiency ratio.
Thank you. Scott, one question coming back to you. Please provide some color on the sequential increase in construction and development loans, and is it related to interest reserves, new business development or what is it attributable to?
In this loan category, we had limited new business that made up the increase. And we did have draw downs on existing projects throughout all our geographies.
Mike, what will the tax rate be going forward?
We expect an annual affective tax rate of 24% to 25% going forward.
And the big increase in the equity and undistributed net earnings of unconsolidated investments line. Why is that up so much and is it sustainable?
This represents earnings from our investments in an SBIC venture capital fund, and while results are recurring, they are not predictable.
Another question for you, Mike. Big move in the CD portfolio we're seeing, is pricing getting less competitive?
We are hopeful that CD price competition will abate somewhat as some key large participants in our market resolve some of their liquidity issues.
Scott, can you please answer, are you seeing more stress in the KNBT portfolios than the legacy NPBC portfolios?
We've seen an even amount of softening in the portfolios across all current geographic regions that we're doing business in at this time.
And Glenn, a question for you. How are real estate values holding up in your market?
Michelle, in general, our part of the country did not experience the very high appreciation levels of some other areas, nor are we experiencing the low value points of others. Clearly, things have slowed down more in the higher priced residential units, say above a quarter of a million dollars. Generally, commercial appraisals are down as well, but not what I would call deeply down. So overall, the real estate market values whether you're looking at residential or commercial are down. But again, I think the mid-Atlantic area and in specific, our primary market areas are faring better than most.
Thank you. Scott, can you please discuss to what extent the slow down in the economy has affected the lending dynamics, for example, competition, pricing and demand?
Yes, Michelle. Competition and pricing as we see it in our community banking business remains very aggressive and continues to be very dynamic. In the middle market, high dollar transactions, we see less competition and we see improving margins which we believe will continue throughout year-end.
Glenn, do you expect to build the loan loss reserve in 2009?
We feel, as we said earlier, that we are adequately reserved. Clearly, we talk about our dynamic process and evaluating this quarterly. I can tell you without being able to give a specific answer on this that we certainly are going to continue to strive to keep our coverage ratios of non-performers above peer average.
Mike, back to you for a question. Regarding other earning assets totaling $63.117 million, could you please go in to further detail? Is the $63.117 million up from $31.686 million last quarter, entirely interest-bearing deposits at banks similar to previous quarters? If so, could you explain where the quarterly sequential gain came from?
This difference represents an increase in Fed funds sold at quarter-end.
Okay. And is the fact that your trust preferred securities are in health maturity have anything to do with the conclusion that there was no impairment?
No, not at all. Impairment may occur in either health maturity or available for sale portfolios.
Glenn, would we expect to see a provision at this quarter's current level next quarter?
Of course That is something to be determined in the quarter, but I would say, overall, we expect loan and lease charge-offs and provision expense to be similar to the third quarter in the fourth quarter of '08.
Thank you, Glenn. Mike, what percentage of TRUP [ph] issues are experienced interest deferrals?
The specific credit quality varies pool by pool. For instance, we still have a pool that has no interest deferrals by the company that issued debt into the pool. But we also have a pool where five of the companies that issued debt into the pool are deferring their interest payments. As reported in prior quarters, we have a methodology to assess other than temporary impairment that we believe, along with our accountants, is consistent with GAAP as reaffirmed by the SEC and we plan to continue using that methodology.
Thank you, Mike. Scott, how much of the C&I loan growth was due to increased draw rates versus new customer growth?
Our line usage level has been relatively stable. So most of the growth is through new commitments to current customers and new customer relationships through those customers that have now joined National Penn.
And Glenn, the last question that I have for you I think is the toughest one we've got today. Will the Phillies win the World Series and if so, how many games?
Michelle, I have been waiting for this question. And I want to remind the listeners that at the last webcast I was asked something about the Phillies and I was looking forward to a Philadelphia-Boston World Series where we got the best part of the 50% of that and I am simply saying it will be the Phillies in six.
Thank you very much. This ends our webcast for today. Thank you for joining us.
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