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Doral Financial (NYSE:DRL)

Q3 2012 Earnings Call

November 09, 2012 10:00 am ET

Executives

Glen R. Wakeman - Chief Executive Officer, President, Director, Chief Executive Officer of Doral Bank PR and President of Doral Bank PR

Enrique R. Ubarri-Baragano - Chief Compliance of Doral Financial Corp, Executive Vice President of Doral Financial Corp and General Legal Counsel of Doral Financial Corp

Robert E. Wahlman - Chief Financial & Investment Officer, Executive Vice President and Director of Doral Bank

Christopher C. Poulton - Chief Business Development Officer and Executive Vice President

Analysts

Joseph Gladue - B. Riley & Co., LLC, Research Division

Operator

Ladies and gentlemen, thank you for standing by, and welcome to Doral Financial Corporation's Earnings Conference Call. [Operator Instructions] And as a reminder, your conference is being recorded.

I would now like to turn the conference over to your host, Mr. Glen Wakeman, CEO of Doral Financial Corporation. Please go ahead.

Glen R. Wakeman

Thank you, and good morning. Thank you all for joining us. I'm Glen Wakeman, the CEO of Doral Financial Corporation. Today, we will discuss the results for the third quarter. You will hear from me; Bob Wahlman, our CFO; and Chris Poulton, our Head of U.S. Operations. We will discuss financial results with a specific focus on the provision charge for the third quarter. We will be referring to the investor presentation we filed as an 8-K this morning. But before we get started, I would like to ask Enrique Ubarri, our General Counsel, to explain some disclosure matters.

Enrique R. Ubarri-Baragano

Thank you, Glen. This presentation today may include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. This includes comments with respect to our objectives and strategies and the results of our operations and our business. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words such as expects, anticipates, intends, plans, believes, seeks, estimates or words of similar meaning or future or conditional verbs such as will, would, should, could or may. We intend these forward-looking statements to be covered by the Safe Harbor provisions of the Private Securities Litigation Reform Act. Glen?

Glen R. Wakeman

Thank you, Enrique. While the third quarter results are disappointing, there's really no other way to say it, we are reporting a $32.5 million loss that's driven by the volatility in the TDR portion of our mortgage book. We will address this matter in more detail today, but we want to ensure that our investors better understand our balance sheet.

To be clear, we're not satisfied with the quarter. Our loss was largely driven by provisions of $34 million. And as we will discuss later in the presentation, residential mortgages accounted for 85% of the provisions this quarter, primarily driven by our TDR portfolio. The volatility in our provisions and overall higher credit costs are overshadowing some continuing improvements in our revenues that, from our point of view, remain positive. Our mortgage originations were up, and since we sell 94% of our volume, this drove higher gain on sale for the quarter. It's an important part of our company because mortgages also enable the sales of the insurance product that also drives our fee income. U.S. growth platform continues to perform well, and during the quarter, it generated some $12.4 million of pre-tax revenue.

Now residential mortgages in Puerto Rico, they make up just over half of our loans. And although the $629 million of TDRs that we've articulated for you on page – our Investor deck, they have demonstrated volatility, the core $2.5 billion portfolio is stable. We continue to shrink our commercial exposure in Puerto Rico while expanding our high-margin, low delinquency commercial lending business located in the U.S. The U.S. now constitutes fully 1/3 of our total loan portfolio.

Although the U.S. business helped generate higher revenues, the benefits were more than offset by credit costs, specifically, in our residential mortgage portfolio. So from a P&L point of view, the cost of credit is broader than just the provision number. Our total credit costs exceeded $50 million for the quarter. And embedded in our operating expenses is $15 million of OREO, foreclosure, appraisal, property preservation and other period expense. But by far, the biggest impact on the quarter was our provision expense of $34 million.

The volatility in this number comes from 2 sources: Number one, newly appraised assets as we revalue our mortgage book; and number two, re-defaults in our residential TDR portfolio. You might recall that in 2010, in particular, in order to help our customers manage the economic shocks in Puerto Rico, loss of job and unemployment levels, we provided temporary relief to enable them to find a way to balance their payments, stay in their homes, keep paying us. Well, some of that volume is flowing through and there are -- they're considered TDRs. Some of that volume is now flowing through our P&L as they hit their reset dates and some of our borrowers are unable to make those reset payments. And that, in part, drove a substantial amount of the volatility in the quarter.

Bob will cover the provisions in more detail for you on the next few slides. Bob?

Robert E. Wahlman

Thank you, Glen. As Glen described in reviewing the Q3 results, Doral reported a Q3 2012 provision for loan and lease losses of $34.4 million. The commercial loan portfolio, with assets totaling over $3 billion, behaved close to expectations with the provision of $5.2 million. Of that $5.2 million commercial loan provision, $2 million resulted from growth in U.S. commercial loans, and $3.2 million resulted from increased delinquency or other performance issues in the Puerto Rico portfolio.

The U.S. loan portfolio, now $2.1 billion, is especially strong credit quality, with only 0.24% of the balance nonperforming. It is -- as Glen noted, it is Doral's intention to continue liquidating the Puerto Rico commercial loan portfolio and building the U.S. commercial loan portfolio.

The residential loan portfolio Q3 provision was $28.8 million. The mortgage loan provision resulted from $12 million from writing down or charging off loans upon receipt of new appraisal valuations when they reach 180 days past due, and then annually thereafter, unless the loan returns to performing status. That charge off is required by bank regulation.

The $9.8 million deterioration in the loans portfolio is from deterioration in the loans portfolio. Changes resulting in this charge included migration of approximately $64 million of loans into the 180 day past-due classification, where our models provide an additional charge. As loans become more delinquent, a greater amount of reserve is required. An additional $7 million provision was taken because of how a particular segment within this portfolio was performing and other loans that are like that.

Before examining the underlying causes of each of these provision contributors in more depth, I did want to point out that with the provisions, and this is on Slide 6, that Doral's allowance for loan lease losses provides strong coverage for losses that reasonably could be expected to arise in the portfolio.

To explain briefly, the modified coverage ratio shown in the lower right-hand corner of Page 6, shows the percent of nonperforming loans unpaid principal balance that has either been charged off or is covered by the total portfolio allowance for loan lease losses. In the case of the residential mortgage loan portfolio, the modified coverage ratio is 40.1%. Doral believes this is a very strong coverage ratio for a residential mortgage loan portfolio. With these provisions, the modified coverage ratio for the commercial real estate portfolio was nearly 29%, and for land loans it's 52%, and is nearly 40% in total for the loan portfolio.

Drilling down further on Page 7, on the residential mortgage loan loss provisions. It's important to note, and I repeat some of Glen's comments here, but it's important to note that the loss provisions on the $2.4 million core residential portfolio, $2.4 million which is performing, was -- the provision was $6.8 million in Q3. Of those Q3 $6.8 million provision, $5.6 million were for appraisals received during the period on that $142 million of nonperforming loans, and only $1.2 million was for increased delinquency and other matters within the portfolio.

The core portfolio nonperforming loans of $142 million is 5.6% of the $2.5 million balance. This core portfolio has behaved in a stable fashion, and because Doral is only retaining approximately $100 million of originated loans annually, that means that this $2.5 million of loans in this category have largely continued to pay throughout Puerto Rico's 13% economic contraction since 2006. The portfolio was also high-yielding with the average contractual yields in excess of 6%. So this is a very strong performing or it's a good performing portfolio with a good yield.

The segment of the mortgage loan portfolio that produced the $22 million reserve is the TDR portfolio. The TDR loans are those loans which have been modified because the borrower was experienced difficulties meeting their previous loan obligations, perhaps it defaulted, and Doral temporarily made changes to those loans that reduced the borrower's payments, with the expectation that the borrower's financial problems were temporary and that they would resume servicing their loan as the temporary adverse circumstances improve. If one of their working numbers of the family lost their job, that they would be able to find a new job and replace that income, would be an example.

The loans reported as TDRs which totaled $629 million at September 30, 2012, included $267 million of nonperforming loans. The TDR nonperforming loans include loans which are past due, as well as loans which are current in their payments, but have high debt service requirements, high loans to values relative to income or have been modified in the past 6 months or are paying. About 20% of the nonperforming loans are actually performing.

The TDR loan portfolio is also affected by whether -- the TDR loan portfolio performance is also affected by whether the modifications which provided for the temporary lower interest rates, which reduced the borrower's loan payment, sometimes significantly, have had the interest rate reset to the original loan interest rate. Doral's modification programs provided for a one-year reduction in interest rate, as opposed to, for instance, the HAMP program which provided a 5-year.

Many of Doral's modifications provided for that one year lower interest rate, reset interest rate. When the interest rates reset, many of the borrowers or some of the borrowers' circumstances had not changed sufficiently for them to absorb the interest rate reset shock. And as a result, those borrowers who did not have sufficient change ended up defaulting on their modified loans. Approximately $8.1 million of the $9.8 million of the Q3 residential mortgage loan provision for delinquency resulted from the $374 million of TDRs that have reached their reset payment.

The $7 million additional provision recorded in Q3 is related to $96 million of those $384 million which have reset. These resetting loans, which have reached their reset date and the interest rates have increased, have not yet reached 6 months of delinquency. Six months of delinquency is the danger zone for loans defaulting and the provision having to be increased to reflect their performance. And based upon the recent performance of like-loans, Doral expects the adverse performance of these $96 million to be an additional 7 -- to require an additional $7 million of provisions. There are $162 million of loans that are yet to reset, but have not yet reached their reset period, but will reset over the next few years. Doral maintains its normal provision calculation for resetting the TDR of those loans. The vintage of the modified loans from February 2011 through August of 2012 were subject to different terms and conditions from -- in terms of their loan characteristic, they did not have as low of an interest rate reset, and also of their underwriting, they were more scrutinized at the timing of the underwriting. And the management estimates that their performance characteristics will be different from those that we saw resetting over the past 6 months.

Quickly going back to the valuation issue related to the $12 million provision. As previously noted, Doral is required to obtain valuations on residential real estate when loans reach 180 days past due, and reduce the recorded value of the loans to the property cost -- to the property value less cost of sale, and then annually, they need -- we need to continue obtaining new valuations and making adjustments.

During the third quarter, Doral received 1,000 -- nearly 1,200 appraisals for nearly $150 million. 91% of Doral's residential nonperforming loans received an updating appraisal over the past year, indicating that Doral is current on obtaining appraisals in compliance with policy and regulation. 81% of those appraisals received in 2012 over the past year covered a period of greater than one year, indicating that, in terms of the valuation adjustment, that a significant number of the appraisals in the valuation adjustment covered more than just the one-year gap, so there's -- they cover more than one year depreciation value of the properties.

So I've covered a lot of detail in a compressed discussion. Let me step back and recap what I think are the significant provision matters. Of the loan population, provisions for nearly $3 billion of commercial loans totaled $5.2 million, of which $2 million was for growth in the U.S. portfolio, and performance of this portfolio appears stable at this point in time.

Of the $3.2 billion residential loan portfolio, the $2.4 billion core portfolio provisions totaled just $1.2 million for delinquency deterioration and performance also appears stable. There was a $5.6 million charge for the new valuations received.

Of the $629 million TDR portfolio, more specifically, the $374 million resetting portfolio, provisions totaled $22 million; $6.4 million for the new valuations, $8.1 million for increased defaults on reset loans, $7 million in anticipation of this particular -- of new defaults in this particular segment of that portfolio and a few -- and about $0.5 million of other charges.

These facts lead me to the view that the high Q3 provision level is driven by the resetting modified loans. The number of resetting modified loans peaked in Q3 of 2012, driven by the high level of modifications from September of 2010 through February of 2011. And the effect of the resetting loans on the provision, I expect will ease in future quarters as the volume of resetting loans declines, and the amount of interest rate shock at reset declines because of the program changes made in February 2011.

With that, I'll turn this over to Chris.

Christopher C. Poulton

Thank you, Bob. I'm pleased to report another strong quarter for the U.S. business segment. Pre-tax income grew to $12.4 million on solid loan and deposit growth. In 2008, Doral launched the U.S. business, and you may recall that at the fourth quarter of last year, we made the choice to merge our U.S. thrift charter into our Puerto Rico-based bank in order to alleviate growth constraints, improve tax efficiency and reduce administrative costs. This change has led to significant improvements on our operating performance. In the one year since the merger, we generated $44 million of pre-tax income by successfully growing loans 50%, adding over $500 million of deposits and improving our expense productivity to achieve an operating efficiency of below 40%.

Today, we have a diversified scale platform, highlighted by excellent credit quality that's capable of generating significant earnings power for Doral. Going forward, we'll continue to explore ways to leverage these capabilities.

In 2009, we created Doral Leveraged Asset Management to expand into the midmarket broadly syndicated corporate loan business. Since then, we've built a diversified high-yielding, billion-dollar portfolio of syndicated corporate loans, but we also built a significant asset management component to this business. Recently, we entered into a partnership agreement with Mead Park to create a new, independent asset management company, Redan Park Asset Management. Under this agreement, Redan Park will combine Doral's asset management capabilities with Mead Park's industry experience to create a growing third-party asset manager. To be clear, Doral continues to invest in the syndicated loan market, we will retain all of our existing loans and we will continue to manage our existing CLOs. However, this transaction allows Doral to increase fee income and monetize our existing capabilities by growing a third-party asset management business without additional capital investment.

We see excellent opportunities in each of our U.S. segments and we continue to explore new ways to grow earnings power by leveraging the capabilities we've developed over the past several years.

Glen R. Wakeman

Thank you, Chris. I'll wrap up. Our U.S. platforms really have some exciting potential, and the earnings and earnings power that the U.S. team is developing, is helping to offset our credit costs in our economically challenged Puerto Rico market. Some of our Puerto Rico homeowners struggle to make their monthly payment, as unemployment grew and income is reduced in the last few years. And we believe that keeping these customers in their home and making payments is the best solution for everyone, both for them and for us. This temporary relief has helped a majority of these customers rebalance their household income and their obligations. But unfortunately, some cannot make the numbers work, and they are re-defaulting. And that's one part of the mortgage story. But I have to point out that new volume is another. Doral benefits and profits from originating and selling conforming loans. Doral has been, and continues to be, a leader in this space. Our mortgage franchise is strong and growing. Mortgage production reached its highest level in over 5 years. And remember, we sell and service about 94% of what we originate.

From a lending point of view, we've chosen to redeploy our capacity away from Puerto Rico and into the U.S. And as you have seen from our results, this asset substitution strategy has added substantial earnings. Now personally, I have to tell you, I'm upbeat about our prospects. We've isolated our problem assets, we've reenergized our mortgage franchise, we are adding healthy assets in the U.S., we have substantial excess capital, and we have the potential to add to our book value per share by realizing the allowance on our deferred tax asset. So for these reasons, I'm optimistic about our prospects.

Thank you for listening, and we are now open for your questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question is from Joe Gladue from B. Riley.

Joseph Gladue - B. Riley & Co., LLC, Research Division

Yes. I guess I'd like a little more color on the appraisals. I guess I'm a little -- still -- yes, a little puzzled there. You had a big slug of reappraisals about a year ago, and it had some sense. And I guess I'm not seeing real big changes from some of the -- your competitors in Puerto Rico when they get things. Maybe you could just tell us what sort of additional declines you're seeing and what your outlook is for further declines in valuations as new appraisals come in?

Glen R. Wakeman

Well, Joe, we have a pretty rigorous process where we have predetermined dates that we require our assets to be revalued and we use, as you know, certified appraisers on the island. The appraisals come back and we qualify them, and then we make appropriate entries and revalue our assets as it's appropriate. The origination -- sorry, the foreclosure cycle in Puerto Rico by law is lengthy, and so our assets will sit in a foreclosure cycle of 24 months or so. And there are particular points in time where based upon the number of payments past due and the time lapse, we will revalue those assets. This quarter -- and this year, we processed thousands. And this quarter, in particular, as Bob mentioned, well over 1,000, and there was a multi-year catch-up factor or multi-year adjustment factor. So we're at 91% of revalued NPLs, and we believe those values are sturdy. And as we see a time lapse every quarter, we will incorporate more revaluations. But we think that the assets -- our asset valuations are appropriately marked in where they should be.

Operator

[Operator Instructions] And we'll go to the line of Dean Keaton [ph] with Kobe IT [ph] Investment.

Unknown Analyst

Got a question for you. I see that you contributed $65 million in capital from the holding company to the bank to comply with the capital requirements of your cease-and-desist order. What do you have in terms of liquid assets at the holding company to continue to be able to do that?

Robert E. Wahlman

The amount of -- we continue to believe that the holding company will serve as a source of strength to the bank. There are in excess over $100 million that we have in terms of assets that can be moved down to the bank should it need the additional support.

Unknown Analyst

So if you got over $100 million, you contributed $65 million already, you can only do that once or twice more, and you're out of money, isn't that right?

Glen R. Wakeman

No, we have a remaining $100 million, over and above the $65 million we contributed already.

Unknown Analyst

And how much of that money is gone?

Glen R. Wakeman

We have a $100 million remaining, over $100 million remaining.

Unknown Analyst

How much of the $65 million is gone though?

Glen R. Wakeman

It's embedded in the ratios right now. And I think our bank ratio was at 8.3% leverage ratio, if I'm not mistaken.

Robert E. Wahlman

Yes. The bank continues to exceed all of the capital ratios that are required by the consent order. And we continue to expect that they will continue to exceed all the capital ratios of the consent order. It is not a matter of, it is gone. It is -- the capital levels have to remain over a certain amount.

Unknown Analyst

Okay. Do you have time for another question?

Glen R. Wakeman

Sure.

Unknown Analyst

In your press release, you indicated that losses were tied to updating valuations on residential real estate. Is it your viewpoint that residential real estate prices are still declining or was this a catch-up on your appraisals due to the issues cited by the cease-and-desist order?

Glen R. Wakeman

Well, this -- as I mentioned, this is in part a catch-up because there's a multi-year effect. The -- certainly, the appraisals within the 12-month mark had less devaluation than the multi-year appraisals. And from here going forward, we're at 91%, so the changes from here should only reflect one year of change.

Unknown Analyst

Okay. And the regulatory order requires the Board to increase its involvement in management of the company. How long do you think the Board members are on the island to do that?

Glen R. Wakeman

Well, we're fully compliant with the orders. And we are, line-by-line, very actively managing to the orders. And we believe that we have nothing to report in terms of being noncompliant.

Unknown Analyst

Okay. Can you tell me, in the second and third quarter of 2011, there was a spike in noninterest expenses due to your, what you called rightsizing the company and a reduction in the workforce. In the last 2 quarters of this year, you cited increased expenses in terms of salary and recruitments of new personnel. Was the rightsizing in 2011 premature?

Glen R. Wakeman

No. There are different needs in the company. And the rightsizing in the company is essentially migrating employees from one unit to another unit. We -- remember, we added employees because our U.S. business is substantially bigger than what it used to be.

Unknown Analyst

And so -- all right. In terms of -- looking back over the last 6 quarters, the provision's seen some high peaks and pretty low valleys. There's a high provision in the third quarter of 2011 due to a new methodology driven by the regulators. Then there was an extra 100 -- an extraordinary $100 million-plus proviso in the first quarter of this year. What's driving those inconsistent spikes?

Glen R. Wakeman

There will be different factors at different points in time that will affect the allowance for loan lease losses. As you noted, there have been 3 particular spikes over the last 6 quarters. During the third quarter of 2011, we did change methodologies, particularly as it -- well, we did change methodologies and clean up -- and apply that to our residential mortgage loan portfolio. During the first quarter of 2011, there was, as we have described in our 10-Q, there were a number of adjustments, changes in the assumptions that underline our calculation for the allowance loan lease losses that were incorporated into the model and a generally gravitation towards a more conservative set of assumptions. And that drove that particular item as disclosed in the Q -- as disclosed in Q1. In this particular quarter, as we've just disclosed, it's kind of a mixed bag of thing. None of the same drivers as what we had last quarter. And the drivers this time are the 34 -- was the residential mortgage loan portfolio, and in particular, the driver this quarter was the TDR loans, where we had some -- where we had a segment of those TDR loans that did not perform at the level that we had expected and that had previously been built into the model. And so as we put through the actual performance, we ended up with an increase in reserve. And as we understand that, we provide an additional $7 million for those loans of similar characteristics. So it's really a different story for each quarter.

Unknown Analyst

All right. And you just talked a little bit about my last question on the TDRs for this third quarter.

Robert E. Wahlman

Would you like a...

Glen R. Wakeman

Mr. Keaton [ph], I apologize. We do have a number of people in queue. We're happy to answer your question, but I would like to let a couple of other people go. I'm happy for you to rejoin the queue. Thank you.

Operator

The next question is from Don Hepi [ph] from Merrion Capital Group.

Unknown Analyst

What percentage of the overall mortgage origination market in Puerto Rico do you think you have?

Glen R. Wakeman

22%.

Operator

Your next question is from Greg Greenbow [ph], private investor.

Unknown Attendee

Yes, in regards to the preferreds, in some years past, you've done a few exchange offers for equity that of course, doesn't make too much sense right now. But assuming you weren't under a consent order, would you be able to do a tender offer for some of those preferreds in cash?

Glen R. Wakeman

We have that as an option. We have no plans to make any changes to what we're doing with our preferreds at this point.

Operator

[Operator Instructions] And our next question is from John Martin [ph] from Broadview [ph].

Unknown Analyst

Yes. I had a question about the Doral Levered Asset Management. In your new joint venture, where, I guess, Mead Park is getting roughly 75% of the economic and Doral keeping 25%, is that split only applied to new assets raised going forward or is that split applied to the existing CLO assets?

Glen R. Wakeman

Generally, that split's on new assets going forward. It's actually on the profitability of that enterprise, and so the profitability of the enterprise is really driven by the new assets going forward.

Unknown Analyst

Okay. And that business is owned by the bank, it's not a holding company asset, if you will, right?

Glen R. Wakeman

That's correct.

Unknown Analyst

Okay. All right. And can you give me some sense as to, in the last quarter, how much of the U.S.-based income was derived through levered asset management?

Glen R. Wakeman

The asset management portion that's going into the JV would have been a couple hundred thousand dollars. The assets themselves, which we're retaining, of course, generate a higher amount. But the part that's going into the JV, which is just the third-party asset management piece, was fairly de minimis.

Unknown Analyst

Okay. So CLO 1 and CLO 2 then, you're saying are not going into the JV?

Glen R. Wakeman

That's correct.

Operator

And a follow-up from the line of Dean Keaton [ph].

Unknown Analyst

This is my last question, guys. In the third quarter, this past quarter, it's the third one in a row where we've had either a change in definition on TDRs or a sizable amount of re-defaults on TDRs. Can you speak to the quality of underwriting when these issues are going on, and when these TDRs were modified?

Glen R. Wakeman

Sure. The TDR portfolios have been -- there are a number of years of TDRs. But the bulk, as Bob had mentioned, were between 2010, 2011. There was a shock to the unemployment in Puerto Rico at that time and this was a resizing. So we got somewhere around 65% of this continues to perform and pay, and roughly 35% doesn't, which is about the inverse of the relationship, I think on the mainland. So I think at the end of the day, we would consider this to be successfully. However, as they reach the $600-plus million, parts of them reached their reset dates. Some don't -- aren't able to make it, and of course that drives the volatility in the provision. But in general, I think that we made a good choice by giving a year of relief, as opposed to 5 years of relief. And I think the numbers have borne out that it's been effective. But unfortunately, there is some noise and what we try to do today is very specific about how big this block of assets is relative to the size of our entire business. And also point out that $2.5 billion of our resi book is stable and continues to perform, we think, pretty well. So we think that we need to continue to work through this book. We still have roughly $170 million or so that has not yet reset, and we will be seeing that over the next couple of quarters. We've got appropriate resourcing and management focused on that, as you would expect. But some of the borrowers are just in the difficult situations and the only answer for us is to proceed with foreclosures and so forth. But the block of the activity is centered around the $600-or-so million. It's from originations in -- restructures we did '10 or '11. We're through the bulk of them now. We have some to go, and we think that in general, we consider the program a success.

Operator

And we also have a follow-up from the line of John Martin [ph].

Unknown Analyst

No. I'm fine, questions have been answered.

Operator

Thank you. And at this time, there are no further questions in queue.

Glen R. Wakeman

Well, we'd like to thank you again for listening in to the information, and we'll be speaking after our fourth quarter results. Thank you.

Operator

Thank you. And ladies and gentlemen, this conference will be made available for replay after 12:00 today through December 9. You may access the AT&T Executive replay system at any time by dialing 1 (800) 475-6701 and entering the access code 270528. International participants can dial (320) 365-3844. That does conclude our conference for today. Thank you for your participation, and for using AT&T Executive Teleconference. You may now disconnect.

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