People's United Financial, Inc.
Q4 2009 Earnings Call Transcript

Published: 22 Jan 2010

[Operator:]

Good day, ladies and gentlemen, and welcome to the People’s United Financial, Inc. fourth quarter earnings conference call. My name is Fwanda and I will be your coordinator for today. At this time, all participants are in a listen-only mode. Following the prepared remarks, there will be a question-and-answer session. (Operator instructions) I would now like to turn the presentation over to Mr. Philip Sherringham, President and Chief Executive Officer of People’s United Financial, Inc. Please proceed, sir. Mr. Sherringham, you may proceed. Mr. Sherringham, your line is open. Ladies and gentlemen, please standby. Mr. Sherringham, you may proceed.

[Philip Sherringham:]

Yes, thank you. Good morning, everyone, and welcome to the fourth quarter 2009 earnings conference call of People’s United Financial. I’m Philip Sherringham, President and CEO, and I will be presenting our results this morning with Paul Burner, our CFO. Other members of our management team are here with us and may answer questions as appropriate. I will be speaking from our quarterly slide deck, which is available under Investor Relations at www.peoples.com. Before we move on to the presentation, I would like to remind you all to be sure to read our forward-looking statements on slide one. Now I would like to start with a few comments about the current banking sector landscape prior to discussing the quarter’s results. Against the backdrop of a painful multi-year global deleveraging process, the banking industry continues to be under pressure and additional consolidation can be expected. The reasons for this are clear and as follows. As we all know, of the approximately 8,500 banks in the United States, only 11 have total assets greater than $100 billion. The approximately 300 banks with assets between $1 billion and $100 billion generally share the following characteristics. Assets consist primarily of loans and securities. Approximately 70% of the loan book is secured by real estates and in the midst of a long deleveraging cycle, housing remains depressed despite unprecedented government intervention and commercial real estate problems are just now beginning. Consumer loans represent approximately 11% of the average portfolio and commercial loans on average 19%. Today both of the asset classes are generally impacted by higher credit cards as well as reduced demand for credit. Borrowings represent 15% of liabilities on average. Non-interest revenue is just 22% of operating revenue and capital markets activities are light to non-existent. Securities portfolios make up 25% of total assets on average, and as the weakness of the economy persists, total returns will come under pressure. And last but not least, the return to average equity for the group in the third quarter of 2009 was a negative 14%. In the context with this environment, our earnings remained stable this quarter. Nonetheless, we are continuing to grow our commercial footings while actively managing risk. Add to this mixture a much more active regulatory environment, a forecast of hundreds of additional bank failures along with increased willingness on the part of management teams of healthier banks to consider the merits of combinations and more M&A activity seems likely. Again, as I noted earlier, consolidation within the banking industry is clearly necessary. The survivors will benefit from their low-cost deposit funding basis and the ability to write loans that are repaid. We continue to believe that we are well positioned for this once in a generation opportunity. And so now on to slide two. Operating net income for the fourth quarter was $28 million or $0.08 a share, excluding $4.5 million pretax or $0.01 per share after-tax, of non recurring charges related to systems conversions and acquisition-related expenses. The quarter’s results reflect continued growth in our core loan portfolios and deposits despite the challenging environment. The margin held steady at 3.19% compared to the third quarter, which was up 7 basis points from the second quarter of 2009. We’ll speak to that in greater detail a bit later. Net loan charge-offs for the quarter decreased to 38 basis points of average loans on an annualized basis from 44 basis points in the third quarter of 2009 and were only 29 basis points for the full year. Our ratio of NPAs to loans, REO and repossessed assets modestly increased to 1.44% from 1.35% in the third quarter. I would note again that our asset quality has held up remarkably well on both the relative and absolute basis through this most recent recession recycle that we continued to enjoy limited lost content in our loan portfolio and that most of the bad news is substantially behind us. We are pleased that our industry-leading tangible equity ratio remains strong at 18.2%. Pro forma for the pending acquisition of Financial Federal, this will increase again to 18.6%. And of course, we announced during the fourth quarter our acquisition of Financial Federal, a very attractive transaction that is immediately accretive and which we expect to close on February 19th. With that, I hand over to Paul to provide you with the details of the quarter. Paul?

[Paul Burner:]

Thank you, Philip, and good morning, everyone. Our net interest margin remained stable in the fourth quarter at 3.19%. Improvement in the spread was offset by growth in deposits. Our interest spread increased by 3 basis points, as liability costs decreased by more than the yield on earning assets. Higher average deposits of $236 million were invested in Fed funds, which increased assets and offset the increase in spread causing the margin to remain unchanged. We had a slight increase in non-performing assets in the quarter. NPAs increased 9 basis points to 1.44%. Our experience is much better than others, and in fact, our fourth quarter NPAs are roughly a third of those of our peers in the top-50 banks as of the third quarter. We continue to feel comfortable with our asset quality in the current environment because of the strength of our initial underwriting as well as our monitoring resolution and loss control practices. Slide five provides a deeper dive into our C&I asset quality when the level of non-performers decreased somewhat during the quarter though we saw an increase in charge-offs for the quarter. The portfolio is well diversified and continues to focus on core middle market customers where we are able to provide better service than larger banks. Additionally, PCLC, our equipment finance business, finance’s mission critical equipment that maintains value. Coupled with our workout resolution processes, we’ve been able to limit losses in this portfolio. By the way, this loss would be shared by Financial Federal as well. On slide six, you can see a breakout of our commercial real estate credit performance. NPAs dropped by 15 basis points to 1.34%, which is about one-third of the top-50 banks. And net charge-offs dropped back down to 12 basis points for the quarter. We remain comfortable with the overall quality of our commercial real estate portfolio. The next slide shows a slight increase in NPAs for our mortgage portfolio to 2.07%. The charge-offs have dropped by 50% in the fourth quarter. Of the $52.7 million in mortgage NPLs, around 70% have current LTVs of less than 90%, suggesting minimal loss content for the overall portfolio. Our practice is to obtain updated appraisals in 90 days past due. Generally we had low average loan-to-values at origination and current FICO scores of 724. And again I’d remind you that we stopped portfolioing residential loans at the end of 2006. Slide eight illustrates the credit quality transfer of home equity for the fourth quarter of 2009, which remained flat compared to the third quarter. As you can see on the left of the page, the fourth quarter's 29 basis points of NPAs for us compares very favorably to the top-50 and our peer banks last quarter. Our net charge-offs were up in the quarter about 15% of the level of the top-50 and 20% of our peer group. Utilization rates are relatively steady at 48%, and we remain comfortable with this portfolio, which is an important part of our retail customer relationships. The next slide reflects our charge-off experience over the past few years. Our loss ratio dropped to 38 basis points in the fourth quarter of 2009 from 44 in the third. This is about 20% of both the top-50 banks and our peer group as of last quarter. We are also happy to point out that our full year charge-offs were 29 basis points. Due to our strong underwriting, we expect to continue to see minimal loss content overall. On slide 10, we take a look at our taxes ratio, and if you look at us relative to the industry, there continues to be no comparison. And now I'll hand it back to Philip.

[Philip Sherringham:]

Thanks, Paul. As we’ve done traditionally in January, we want to provide you with some thoughts on what we expect in the coming year, taking into account of course the FIF, Financial Federal acquisition. We expect Financial Federal, or FIF, to close on February 19, 2010, which is three days after their special shareholder meeting. We are looking at the core incremental commercial and consumer loan growth of $1 billion in the year, which will be offset by an estimated $100 million of shared national credit run-off and an additional $430 million of residential loan amortization. Adding FIF will not significantly change our earning asset total, as those loans will be funded with what is currently cash or investments. On the deposit front, we’ve had strong trends at the end of 2009 with growth exceeding our expectations. For 2010, we feel we’ll retain these balances. So looking at period-end over period-end, growth will be modest, but full year average growth is expected to be approximately 4%. Additionally, we expect to see a continued slight reduction in our cost of deposits during the course of the year. Now to the margin. As we mentioned, we expect a flat rate environment for the year. However, there should be some modest benefit for the net [ph] pricing of both assets and deposits, as well as significant benefit from the addition of FIF to the loan mix. Overall, we would expect the margin for the year to increase in this scenario by about 45 basis points. But if we are wrong and rates do rise at some point, we are very well positioned to reap further benefits. For every 100 basis points increase in Fed funds, our net interest income will increase by $50 million on an annualized basis. Regarding asset quality, we see our current allowance level is appropriate for the portfolio and that we will continue to cover our charge-offs for the provision. With the closure of our Financial Federal acquisition, that portfolio will come over with a full purchase accounting mark and should not incur therefore any additional losses. Incremental growth in FIF's portfolio post closing would incur provision expense in line with our existing methodology. We would expect our coverage ratio to remain approximately at 120 on the legacy portfolio. Now please keep in mind that when we announce first quarter earnings, the entire FIF portfolio would have been marked under FAS 141(NYSE

[Operator:]

Thank you. (Operator instructions) Your first question comes from the line of David Hochstim with Buckingham Research Group. You may proceed, sir.

[David Hochstim:]

Hi, good morning.

[Philip Sherringham:]

Good morning, David.

[David Hochstim:]

Could you give us an update on what you are seeing the way of commercial – C&I loan demand? Is there any -- are there any pockets of or signs of pick up in particular geographies? And then sort of as a follow-up to that, just kind of what was in the uptick in C&I charge-offs this quarter?

[Philip Sherringham:]

Yes. In terms of the loan demand by geography, I would say if you look at our franchise, overall, we got stronger points and weaker points. The states of Vermont and Maine have been fairly quiet in terms of new activity, a reflection of their local economies, if you will. And things have been bubblier, shall we say, in Connecticut and New York. So that’s the story there. In terms of the uptick on charge-off, there is really nothing particular -- no particular sector or anything. Charge-offs in terms of C&I loans, as you know, tend to be lumpy.

[David Hochstim:]

Right. And on the residential originations for sale, have you seen any change in customer volume recently?

[Philip Sherringham:]

Not particularly. Customer volume is down from the first half of the year -- first half of 2009, I’d say, last year. But mortgage rates are still fairly low. Activity is moderate I’d say.

[David Hochstim:]

And in terms of the fees you can get from the buyers, are those holding up, are they --?

[Philip Sherringham:]

Yes, they’re holding up. So the decline in gains on sale is a function of lower volume really.

[David Hochstim:]

Yes, okay. Thanks.

[Philip Sherringham:]

Sure.

[Operator:]

Your next question comes from the line of Collyn Gilbert with Stifel Nicolaus. Please proceed.

[Collyn Gilbert:]

Thanks. Good morning, guys.

[Philip Sherringham:]

Good morning, Collyn.

[Collyn Gilbert:]

I'm going to come out of the gate, so up with the M&A questions. In terms of -- obviously, if you look at the landscape of potential deals, when we look at the banks that are on the troubled list, it seems as if the flurry of potential FDIC deals that are going to come through the pipe, and I’m talking not obviously in the Northeast, but nationwide, will more than likely be smaller banks. I mean, the size of transactions that we’ve seen in the last -- the latter part of the year, maybe the supply of larger FDIC deals is not necessarily there. So given that, number one, you can dispute that point that I just made, but number two, how are you weighing what’s going on within your own market? And do you see now that we’ve seen moderate stabilization of credit among some of the smaller regional banks, does that give you kind of the comfort and the confidence you needed to sort of expedite a potential end market transaction? And I’ll stop there and let you answer.

[Philip Sherringham:]

All right. Yes, it’s a long question. Let me start with the fact that we are not entirely focused on FDIC assisted transactions. Okay? I mean, clearly you’re right. In terms of FDIC assisted transactions, I think we’ll still see a couple, maybe more than that. Obviously, large banks somewhere in the country failed this year. Obviously, I am not going to give you names here, but you can probably come up with some candidates if you’d like to. And those may not be -- probably north or in the Northeast. So we’ll see when that happens. They are still -- having said -- this is likely a slew of medium-sized institutions that will encounter severe problems and we could be looking at some of those. Having said this, I would like to point out that we are not just looking at FDIC assisted transactions. There are quite a few other banks of reasonably good size, I’d say, that are actually interested potentially in talking to us about a combination. So I won’t commit myself to the FDIC situation. And we’re talking to some of those.

[Collyn Gilbert:]

Okay. That’s encouraging. Then in terms of just other deployment potentials for the capital, obviously, we’ve got organic growth and you’ve share buybacks. And I think when you guys initially did the raise in 2007 or did the conversion, you had said two to three-year timeline for starting to deploy some of that, and maybe if not, by then, you would think about buybacks. Where -- what is your view on buybacks?

[Philip Sherringham:]

Well, I want to go back to what you just said. When we raised the capital, if I recall it correctly, at that time we said, we'd take three to five years to deploy the capital.

[Collyn Gilbert:]

To deploy it all. But I thought that you put a different timeframe in terms of -- if there was no deals to be done in that shorter timeframe that you would think about doing a buyback.

[Philip Sherringham:]

Right. After the five years, that’s probably true. Having said this, we’ve done two deals already. We’re working on others. And I think we’ll -- I'm fairly confident we’ll be able to do one or more deals before the expiration of the five-year timeframe, if you’d like. Having said this, obviously buybacks is always an option in terms of returning capital. I do want to point out that we have a very healthy dividend, as you know. We’re one of the few banks to actually increase their dividends last year, and that’s another way of returning capital. I believe our shareholders generally appreciate it.

[Collyn Gilbert:]

Okay. And then just one final question, and if you’ve covered this in your initial comments, I apologize. But again, if we’ve seen moderate stabilization in the Northeast in the economy, did this change your view and your appetite for risk as it relates to organic growth?

[Philip Sherringham:]

Not necessarily. I mean, our appetite for risk, our underwriting criteria have been very stable over time. And that’s -- as you know, of course, put us in this great position. I think it’s frankly a bit premature at this point given what we see in the economy to declare victory and loosen up dramatically. I just don't think it's reasonable -- I also don’t think it’s necessary because frankly we are getting a slew of opportunities in terms of loans, very attractive pricing, very attractive credits. We don’t particularly need to loosen underwriting to get more volume. I don’t think it would be wise yet.

[Collyn Gilbert:]

Okay. Okay, that’s helpful. Thanks.

[Philip Sherringham:]

Sure.

[Operator:]

Your next question comes from the line of Richard Weiss with Janney. Please proceed.

[Richard Weiss:]

Good morning.

[Philip Sherringham:]

Hello, Rick, good morning. How are you?

[Richard Weiss:]

Good, thank you. I want to ask you about the pending acquisition of FIF. And let me first start, is there any different kind of cultural issues with regard to the lending standards that they have compared to the People’s franchise?

[Philip Sherringham:]

Well, one of the strengths of that franchise, as you know, is historically their great asset quality. They have survived the turmoil in their industry by sticking to their knitting and focusing on credit very heavily. I think the way they approach the business is a little different from the way we do. And general I’d say that they tend to take a bit more credit risk and they get higher returns. But the trade-off works. And so when we close the deal, the plan is to keep them operating just the way they are essentially on a decentralized basis, if you will.

[Richard Weiss:]

Okay. The second question is, when you brought up 141(R) brought so you mark them to fair value. What do you expect the margin to do as a result of that?

[Philip Sherringham:]

The mark is basically a credit mark in this case. Okay? So the impact is that if we got the mark right -- this applies to everyone in the industry, by the way, in terms of acquisition and in terms of the accounting standard. If we got the mark right, that particular portfolio should not have any more losses in it. And in fact, if we are overly conservative, over time we will get it back, of course. The impact on the margin of the FIF acquisition, I highlighted in my comments, we expect the margin to go up about 45 basis points as a result of the acquisition.

[Richard Weiss:]

That’s because the yield is higher right now and --

[Philip Sherringham:]

Well, it’s because --

[Richard Weiss:]

Not because of the purchase accounting adjustments then.

[Philip Sherringham:]

That’s correct. Two things. The yield on the asset is higher. And of course, we are substituting our cost of funds for their cost of fund, which is a pretty significant difference. I’d point out by the way that our cost of deposits in December was 85 basis points, which is lower than the average for the quarter, which is 94 basis points. So their cost of funds last time I checked was about 360 or 370 at Financial Federal. So that’s going to go when we replace it with our cost of fund. You can see a huge pickup there, which helps the margin of course along with the high yields on the asset side.

[Richard Weiss:]

Was your funding relatively short, will rollover quickly?

[Philip Sherringham:]

Yes, we are going to pay it off almost immediately.

[Richard Weiss:]

Okay. And one final question, Philip, if you could. I noticed in the press, transcripts, wherever you’ve said it, you expect significant earnings accretion from this deal. Was that ever quantified?

[Philip Sherringham:]

Yes. It’s about 25%.

[Richard Weiss:]

25%? Okay, got it. Okay, thank you very much.

[Philip Sherringham:]

Sure.

[Operator:]

Your next question comes from the line of Matthew Kelley with Sterne Agee. Please proceed.

[Matthew Kelley:]

Hi, guys.

[Philip Sherringham:]

Hi, Matt, how are you?

[Matthew Kelley:]

Good. On the -- just staying with the FIF for a minute, if you look at the loan balances there, they have been coming down 7% or 8% a quarter. I mean, where do you expect the final acquired loan balance to be relative to the $1.5 billion that was modeled in your announcement in November?

[Philip Sherringham:]

Well, we expect it to be somewhat lower. I’d say probably about close to $1.4 billion.

[Matthew Kelley:]

Okay. So the pace of decline begin to moderate, I mean, are you stepping in to kind of reinforce --?

[Philip Sherringham:]

(inaudible) the pace of the decline was a function I think of the economy itself. The fact that many of those OEMs, people like Caterpillar and so on, saw reduced sales and therefore reduced need for financing the equipment obviously. So I think as the economy eventually picks up, you will see a turnaround there. I’d also like to suggest that obviously in their prior environment Fin Fed had funding constraints. And they managed that situation pretty well. Having said this, if you remove the funding constraint, our transaction will do it for them, they will have more opportunity to grow the business clearly without being concerned about us, finding the funding or guaranteeing the funding and so on.

[Matthew Kelley:]

Okay. And then on the expense guidance, the $185 million, what is the full year expense load that you are including for FIF? They were running about $10 million a quarter. So is it a full $40 million or is there any synergies at all?

[Paul Burner:]

$30 million corresponds with the $185 million. There may be a little opportunity there, but really the acquisition synergies aren’t built on expense reductions.

[Matthew Kelley:]

Right. Okay. So it implies kind of a $20 million -- $30 million -- actually $30 million to $40 million increase in kind of core People’s expenses and it’s embedded in that $185 million guidance?

[Philip Sherringham:]

Yes, that’s probably right. Yes.

[Matthew Kelley:]

Okay. Just want to make sure I’m clear on that. Thank you very much.

[Philip Sherringham:]

Sure.

[Operator:]

(Operator instructions) You next question comes from the line of Damon DelMonte with KBW. Please proceed.

[Damon DelMonte:]

Hi, good morning. How are you, guys?

[Philip Sherringham:]

Hello, Damon. How are you?

[Damon DelMonte:]

Good, thanks, Philip. Philip, could you just talk a little bit about the increase in OREO this quarter and what led to that?

[Philip Sherringham:]

Yes. It’s basically migration in the portfolio. We had a large non-performing loan, which became OREO, accounts for the bulk of increase, actually $10 million.

[Damon DelMonte:]

Okay. Great. And then could you just give us a little color on your strategy of should an FDIC assisted opportunity arise outside of the Northeast, kind of what your strategy would be for running that franchise?

[Philip Sherringham:]

Yes. The point I’d like to make here is that we currently run a multi-state franchise. And candidly, if you think about, say, Bangor, Maine, that's probably the distance from our head office here. So we feel that we have the bandwidth to manage a franchise from anywhere at this point, and that’s what we do. It’s difficult to be specific because it depends of course on the situation, the geography, so on and so forth, the existing management, if any, and other considerations like that obviously.

[Damon DelMonte:]

Okay, great. Thank you. And then lastly, while you guys continue to look for potential acquisitions, any thought on opening new branches in some of the more metropolitan areas in New England, like Boston or Providence?

[Philip Sherringham:]

Yes. I mean, that’s all the fall-back position, if you will. We actually have plans to open a branch in the Boston market in Wellesley this year. So that’s an example of that. As we’ve said many times before though, it usually takes a while for branches to come up and become profitable. And it’s not a preferred way of deploying the capital, just because it would take too long.

[Damon DelMonte:]

Okay, great. Thank you very much.

[Philip Sherringham:]

Yes. As you know, we’ve been successful opening a new branch in Westchester County, for instance. So, we’ll see.

[Damon DelMonte:]

Great. Thank you.

[Operator:]

Your next question comes from the line of Bob Ramsey with FBR Capital Markets. Please proceed.

[Bob Ramsey:]

Hey, good morning.

[Philip Sherringham:]

Good morning.

[Bob Ramsey:]

Just -- I'm not sure if I caught it correctly. But in the introductory comments, did you all say that there would be also $15 million of one-time non-operating expenses in 2010 that are not part of that $185 million core run rate?

[Philip Sherringham:]

Yes, that’s correct.

[Bob Ramsey:]

Okay. And are those expenses related to FIF? Are those still Chittenden or --?

[Philip Sherringham:]

No, no, no. Those expenses are solely related to our conversion to the Metavante system.

[Bob Ramsey:]

Okay. Okay. With -- as far as you all did have some conversion expenses this quarter, was that Chittenden or is that sort of part of this Metavante conversion as well?

[Philip Sherringham:]

It’s part of the Metavante conversion as well.

[Bob Ramsey:]

Okay. Are the Chittenden expenses all sort of done in the past in that case?

[Philip Sherringham:]

Well, the Chittenden expenses, as long as some internal expenses, legacy People will be coming down as we complete the conversion over time. Is that your question?

[Bob Ramsey:]

I guess I was asking about are there any more one-time expenses related to that or has that all been worked through.

[Bob Ramsey:]

No, that’s all been worked through as far as Chittenden is concerned yes.

[Bob Ramsey:]

Okay. And just sort of if you look at the operating expenses, I mean as you all said, they will be $30 million to $40 million higher this year for the core People’s, not including the systems conversion. Why not be a little more aggressive on the expense front and look for sort of offsets for that expense to increase?

[Philip Sherringham:]

Well, we always do. And frankly at this point, we think our budget is reasonably tight. That’s something we monitor on an ongoing basis. If we find opportunities to reduce expenses, we will.

[Bob Ramsey:]

Okay. And then maybe last question, as you all mentioned in the intro too, cash balances seem to be up pretty significantly in the quarter. Is that just a factor of sort of timing of flows or is there any reason or any trend to detect there?

[Philip Sherringham:]

No, it’s just timing of flows. We’ve had very good deposit growth all year. As at many [ph] banks, part of this of course as you know, due to very low interest rate environment we are in, which doesn’t give our folks many options when it comes to what to do with your money. As we said, the stock market is not all that attractive to many people still. That’s what you get, I guess.

[Bob Ramsey:]

Okay. Thank you very much.

[Philip Sherringham:]

Sure.

[Operator:]

Your next question is a follow-up from the line of Matthew Kelley with Sterne Agee. Please proceed.

[Matthew Kelley:]

Actually, that answered my last question. But one other different question, getting back to deals, I mean, how many deals have you guys actually bid on in the FDIC assisted arena?

[Philip Sherringham:]

Two.

[Matthew Kelley:]

Okay. Got you. And any thoughts on what other companies paid for some larger transactions and how deals are being structured and just what you are observing on each of these bids?

[Philip Sherringham:]

My sense, the FDIC does publish the winning bid at least at this point. So you can get an idea what was paid for some of those. Again it’s a situation that could be very attractive. We are monitoring it carefully. But non-assisted deal can be attractive too.

[Matthew Kelley:]

Sure, sure. All right. Thank you.

[Philip Sherringham:]

Sure.

[Operator:]

Your next question comes from the line of Mark Fitzgibbon with Sandler O' Neill. Please proceed.

[Mark Fitzgibbon:]

Good morning.

[Philip Sherringham:]

Hello, Mark.

[Mark Fitzgibbon:]

I wonder if -- first, you could share with us, Philip, the 30 to 89-day delinquencies.

[Philip Sherringham:]

Hang on a second.

[Mark Fitzgibbon:]

Sure. Maybe while you’re getting that, I can ask my second question, which is related to Financial Federal. I’m wondering how big a percentage of the total portfolio, you will likely let equipment financing become over time.

[Philip Sherringham:]

Well, obviously, it’s a significant growth in that portfolio as well as the acquisition. And we are comfortable with that business. We have a track record ourselves over the 10 years in the business. We like it. We are not overly concerned about the business growing too much or anything I guess at this point. I don’t want to be able be specific. We don’t have a limit on their business is what I’m saying.

[Mark Fitzgibbon:]

Okay.

[Paul Burner:]

Mark, it’s Paul. I’m actually looking at -- for each of our product lines, our 30 to 90-day delinquencies. And they remained stable. I don’t have them converted to percentages because that’s not something we’ve disclosed. But we do have, I mean, really good stability with regard to the trends. They are down from the beginning of the year.

[Mark Fitzgibbon:]

Okay. And then the last question I had, I think it was a quarter or two back, Philip, you had made a comment that you thought that the hybrid mortgage market was starting to look interesting again. I’m wondering if you have any plans to sort of reengage in this kind of business, given the excess capital that you have.

[Philip Sherringham:]

I mean, again, we are very engaged in the mortgage business in terms of originations. It’s something we don’t portfolio the stuff. And our position really hasn’t changed on that so far. We still don’t think they are attractive enough.

[Mark Fitzgibbon:]

Fair enough. Thank you much.

[Operator:]

Sir, please proceed to closing remarks.

[Philip Sherringham:]

All right. Well, thank you all for your questions, and I guess we’ll see you next time.

[Operator:]

Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect. Good day.