Operator: Good day, ladies and gentlemen, and welcome to the People's United Financial Inc., Second Quarter Earnings Conference Call. My name is Patrick, and I'll be your coordinator for today. At this time, all participants are in listen-only mode. Following the prepared remarks, there will be a question-and-answer session. As a reminder, this conference is being recorded for replay purposes.
I would now like to turn the presentation over to Mr. Peter Goulding, Senior Vice President of Corporate Development and Investor Relations for People's United Financial, Inc. Please proceed, sir.
Peter Goulding - Corporate Development and IR: Good afternoon, and thank you for joining us today. Jack Barnes, President and Chief Executive Officer; Kirk Walters, Chief Financial Officer, along with Jeff Hoyt, our Controller, are here with me to review our second quarter results. Please remember to refer to our forward-looking statements on Slide 1 of this presentation, which is posted on our website peoples.com under the Investor Relations.
With that, I'll turn the call over to Jack.
John P. Barnes - President and CEO: Thank you, Peter, and good afternoon, everyone. I appreciate you joining us today. Before we get into the details of the quarter, I'd like to share my views on our recent – on our current strategic positioning.
As has been the case, since I took over as CEO three years ago, we are, consistent with our conservative approach, building this franchise for the long term. We are forming new relationships and deepening existing relationships across our geographic footprint, while providing our customers with a broad set of solutions to their financial needs. Ultimately, we are shareholders and our choices are designed to maximize shareholder return, not only in the near term but over the medium and long-term. We feel good about the progress we've made and the opportunities for future progress.
Now, with respect to our second quarter results, on Slide 2, operating earnings were $62.4 million and net income was $62.1 million, each equating to $0.20 per share. The net interest margin declined by 5 basis points to 3.33% compared to 3.38% in the first quarter. As I mentioned last quarter, we believe that our net interest margin has now largely stabilized. The margin for the first six months was 3.35%, which was in line with our full year margin guidance that we provided in January of 3.30% to 3.40%. This should allow net interest income to grow at a pace similar to our growth in earning assets.
We are very pleased that the end of period loans grew at 13% annualized rate in the second quarter. This marks our 11th consecutive quarter of loan growth and is a testament to both our relationship managers and our customers. Further, our pipelines remain strong and run-off in the acquired portfolios has slowed as we predicted in January.
The efficiency ratio for the quarter improved to 62.7% from 64.1% in the first quarter, primarily due to revenue growth. Expected growth in net interest income combined with fee income expansion and expense control will produce efficiency ratio progress in the quarters ahead.
Asset quality remains strong, with net charge-offs below 20 basis points. As mentioned before, we firmly believe that sound underwriting is the only way to confidently grow a balance sheet. We continue to optimize capital through share repurchases and dividend payments. We were, once again, opportunistic this past quarter, repurchasing 11.2 million shares at a weighted average price of $13.63.
During the first six months of 2013, we repurchased 22.4 million shares of common stock at a weighted average price of $13.30 per share. We believe we have captured compelling returns with these repurchases, with a tangible book value dilution earn-back period of approximately five years.
In addition, the repurchases have improved our future dividend payout ratio, return on average tangible equity and earnings per share. Capital ratios remain solid, especially in light of our relatively low-risk business model and are now close to peer median levels on a tangible equity to tangible asset basis.
With that, I'll pass it to Kirk to discuss the quarter in more detail.
Kirk W. Walters - SEVP and CFO: Thank you, Jack. On Slide 3, you can see a breakdown of the elements contributing to our 3.33% margin results for the quarter. As you'll recall, first quarter operating net interest margin was 3.38%. New loan volume impacted our margin by 5 basis points. Loan repricing and amortization as well as increased borrowings each had a negative impact of 1 basis point. This was offset by one more calendar day in the second quarter, which benefited the margin by 2 basis points.
In the quarters ahead, we'll be working hard to increase the mix of demand deposit accounts to help offset some of the decline in loan yields. As Jack mentioned earlier, we anticipate that our net interest margin has now largely stabilized, having worked through significant levels of acquired loan run-off and over four years of repricing on the originated portfolio.
Slide 4 provides a breakdown in the elements contributing to our net increase in loans. The loan portfolio grew $705 million, or 12.7% annualized. This is a testament to our expanded footprint, as well as progress in our heritage markets and strengthened product lineup. We experienced acquired loan runoff of $201 million this quarter compared to $155 million in the first quarter of 2013. The acquired loan portfolio run-off is expected to remain at these lower levels for the balance of the year given our resolution of significant problem assets, continued portfolio seasoning and longer duration on the remaining assets.
Originated loan growth for the quarter totaled approximately $906 million. As in prior quarters, growth came from a variety of products and geographic areas. Commercial real estate contributed 66% of total originated loan growth, or $595 million, including $515 million from New York commercial real estate. The portfolio remains broadly diversified, with most relationships well below $25 million.
C&I contributed 9%, or $78 million. Within C&I, we saw strength across many categories, including asset-based lending, mortgage warehouse lending and equipment finance. Our municipal business tends to be seasonally lower in the second quarter as fiscal year end activity negatively impacts loan and deposit balances. The actual business fundamentals within this customer base remained strong and it is merely a timing issue. Excluding the change in municipal loans, C&I would have contributed $134 million or 14% of total originated loan growth.
Residential mortgages contributed 16% or $145 million of originated loan growth in the second quarter. Approximately 94% of the residential mortgage originations held for investment were hybrid, adjustable rate mortgages. The residential mortgage pipeline is up 5% quarter-over-quarter and 69% of the pipeline is jumbo product. New home equity commitments totaled $225 million compared to $182 million in the first quarter of 2013. It is important to note that 100% of home equity loans are retail originated, with 65% in a first lien position.
You can see on Slide 5, a breakdown of the elements contributing to our net increase in deposits; retail deposits increased by $18 million, while commercial deposits increased $172 million. It should be noted that we typically see lighter retail balances in the second quarter, primarily due to customer tax payments. As mentioned earlier, the seasonality in our municipal business has negative impact on commercial deposits in the second quarter. If we exclude the change in municipal deposits, total deposits would have increased $267 million or 5% quarter-over-quarter annualized.
We continue to focus on improving the mix of our deposit base, efforts throughout our franchise, lower deposit cost, particularly in acquired markets, contributed to further decline in deposit cost of 38 basis points. The larger deposit opportunities relate to acquired deposits, continuing to increase our deposit mix in favor of noninterest-bearing deposits and a better utilization of our Southern New York branches.
Acquired deposits represent 14% of total deposits. The weighted average cost is 71 basis points. Over time, the rates and mix of deposits and acquired markets will benefit from our franchise-wide emphasis on growing demand deposits. Over the last year, our acquired deposit costs have declined 17 basis points or approximately 20%.
On Slide 6, we provide a brief update on the Southern New York branches that we acquired from Citizens on June 25, 2012. Average in-store deposits per branch have more than doubled, from $4 million at close to $9 million in the second quarter of 2013. Originally, we anticipated these branches would reach the breakeven point of $10 million of deposits in June 2014. We see a significant opportunity to bring the average deposits per branch up to the levels in our Connecticut in-store branches.
On an activity basis, meaning from the customer's physical banking location, our Connecticut in-store branches average approximately $44 million in deposits per branch. This transaction has benefited more than just our deposit-gathering capabilities. The branches provide significant support to our commercial lending efforts and strengthened brand awareness in the New York metro area. The income businesses, such as wealth management, brokerage, insurance, merchant and payroll services, have all benefited from our expanded presence in this market.
For the New York market as a whole we have generated $46 million of mortgage loans and $70 million of home equity loans year-to-date, which represent approximately 40% and 200% improvement, respectively, over the prior year period. We currently have approximately 240 mortgage certified and 300 consumer loans certified branch employees in New York.
Noninterest income grew 13.7% over the prior year period as business leaders and relationship managers continue to bring our customer focused banking model to our expanded geographic footprint. As mentioned before, we believe we are in the early stages of this process. As shown on Slide 7, on a linked quarter basis noninterest income increased $3.2 million from an already strong first quarter level. Bank service charges were seasonally stronger adding $2 million to the growth this quarter while customer derivative income increased $1.1 million.
Loan prepayment fees and gains on loan sales decreased by $3.2 million and $1.5 million, respectively. Gain on acquired loan sales contributed $5.8 million to the growth this quarter which is partially attributable to three loans in the Smithtown portfolio. Insurance revenue decreased $1.2 million. As a reminder, the second and fourth quarters tend to be seasonally weaker for this business.
On Slide 8, we illustrate the key components of our changes in noninterest expense. From an operating expense perspective, compensation and benefit expenses decreased $2.8 million, primarily due to lower payroll taxes, while occupancy and equipment costs fell $1 million. Net REO costs were higher by $2 million, primarily due to one large single-family residence in Fairfield County. Advertising and promotion expenses increased $1.9 million, which is driven by the timing of advertising campaigns. We also experienced higher professional and outside services costs. The net impact was nominal $1.4 million increase on operating expenses for the quarter.
The next slide details our progress on the efficiency ratio since the first quarter 2010. As you can see, we have made significant progress over this time period.
Slides 10 and 11 are reminder of our excellent credit quality. Once again, we did see an improvement in nonperforming assets this quarter from already industry-leading levels. Originated nonperforming assets at 1.33% of originated loans in REO, remain well below our peer group and top 50 banks and are down from 1.67% in the second quarter of 2012.
Acquired nonperforming loans are not included in these calculations due to the accounting rules. However, it is worth noting that we are very pleased with our performance as we have seen these balances declined $78 million or 33% to $159 million in the current quarter from $237 million a year ago.
Looking at Slide 11, net charge-offs remain low at 19 basis points compared to 24 basis points last quarter and 26 basis points one year ago. Excluding acquired loan, charge-offs, net charge-offs, this quarter were 18 basis points. These levels continue to reflect the minimal loss content in the nonperforming assets and are well below peers. Over the last four quarters, charge-offs in specific reserves represent approximately 54% of total charge-offs. As such, we understand our credit issues well and typically have very few new credit events each quarter.
Now, I'll pass it back to Jack.
John P. Barnes - President and CEO: Thank you, Kirk. Slide 12 highlights our ability to grow both sides of the balance sheet. We continue to make progress on loan and deposit growth on a per share basis while maintaining excellent asset quality.
Over the past two years, loans per share and deposits per share have grown at compound annual rates of 19% and 15%, respectively. Operating return on average assets for the second quarter was 81 basis points, up from 77 basis points in the prior quarter. Our return on average assets continues to be impacted by our larger balance sheet, particularly our investment portfolio. Progress will be driven by loan and deposit growth, fee income growth and a disciplined approach to expenses.
As rates begin to return to more historical normal levels, our asset sensitive balance sheet is expected to positive impact future earnings.
Slide 14 illustrates the improvement and our return on average tangible equity from the low levels of 2010. We expect to see continued progress in this metric as we improve profitability and thoughtfully deploy capital. Still, our capital levels remain approximately 70 basis points over peers on a tangible common equity tangible asset basis. Normalizing our equity base to be consistent with our peers shows that our return on average tangible equity is 11%.
On Slide 15, we see that capital levels at the Holding Company and the Bank remain strong, with a tangible common equity ratio at 8.7% and Tier 1 common at 10.8%, which compares well to our peers at 8% and 10.2%, respectively.
We continue to take actions to grow relationships, increase fee income, reduce costs and return capital to shareholders, while we strategically invest in the business for the years ahead. Our robust pipelines and strong originated loan growth contribute to the continued momentum of our franchise. The strength of our platform allows us to attract and retain exceptional talent and provides a sustainable competitive advantage. In addition, we are well positioned to benefit from increasing interest rates.
This concludes our presentation. Now, we'll be happy to answer questions you may have. Operator, we are ready for questions.
Operator: Mark Fitzgibbon, Sandler O'Neill & Partners.
Mark Fitzgibbon - Sandler O'Neill & Partners: First question I have relates to the buyback. Assuming you were to complete your buyback in the next quarter or so, your TCE ratio would be sort of hovering around 8%. Are additional buybacks likely in your mind at that point?
Kirk W. Walters - SEVP and CFO: The guidance that we've been giving, I think, consistently throughout the year has been that we are not expecting additional buybacks after this one is completed.
Mark Fitzgibbon - Sandler O'Neill & Partners: Then, secondly, Jack, you had said the earn-back on the buyback was about five years, but I'm having trouble reconciling these numbers a little bit it. If for simplicity, you sort of said this quarter, tangible book went down by $0.34, almost entirely due to the buyback, that would imply almost $0.07 of earnings pickup from this and that would suggest that earnings go up by almost 10% as a result of the buyback you did this most recent quarter, that seems like a very high number. What am I missing?
John P. Barnes - President and CEO: We've spoken about this a little bit in the past. I think your horizon is a little bit shorter than ours. We're looking at the earnings pickup over a couple of year period.
Mark Fitzgibbon - Sandler O'Neill & Partners: So, you would earn back to $0.34 in tangible book dilution within five years?
John P. Barnes - President and CEO: That's right.
Kirk W. Walters - SEVP and CFO: The calculation we use is consistent with what we would use for acquisitions and that we've consistently used in prior acquisitions. So, we'll be happy once the call gets done today to go through that with you.
Operator: David Darst, Guggenheim Securities.
David Darst - Guggenheim Securities: Kirk, could you walk through Slide 18 with us on your interest rate profile and maybe kind of tell us what changed this quarter in reducing the benefit under the twist? Then, where in the balance sheet, with the loan portfolios, we are seeing the most benefit right now as the curve steepens?
Kirk W. Walters - SEVP and CFO: The primary reason for the change in the reduced value from the twist is the fact that interest rates are up as of 6/30. I mean this is, as you remember, this is information that we've given in our 10-Q, historically we did move it up here. This is not – this is runoff of the rates at 6/30. So, embedded in that is already the higher interest rate curve, which means that when you're shocking rates again that the benefit's a little less in terms of what comes through. So, for the twist, we do this twist of increase of rates of 100 basis points at the 18-month point on the yield curve. In general with where rates have moved. We do believe that there will be some additional benefit, but that is more back loaded as we project out 12 months and it's really more of a positive for '14 versus '13. And we think we're still a little early in this rate rise in terms of what's occurred with it.
David Darst - Guggenheim Securities: So, I guess, as you are thinking about your margins stabilizing, are you getting most of your benefit from CDs? Because I guess it looks like you still probably have a fair amount of risk or – or roll down in your CRE and C&I yields.
Kirk W. Walters - SEVP and CFO: Well, now we've – I think we've been pretty clear on this in the past. Really the biggest impact of driving loan yields down at this point is the fact that we've had terrific success at originating loans and they are coming on at a rate that is still slightly less than where the portfolio is. So, you've got to remember in our portfolio, we have the acquired loans in there that are in there at a higher rate. So, that's why we break out in the waterfall the impact of repricing and amortization, which is only 1 basis point. So, continued success, which we're expecting to have on the ability to originate loans and grow loans, will continue to put some level of pressure on the margin to a point.
Operator: Collyn Gilbert, KBW.
Collyn Gilbert - KBW: Kirk, just to follow up on the comment. So I just wanted to try to reconcile the comments in the press release of large – the NIM largely stabilizing but yet sort of continued downward pressure. So are you suggesting a couple of basis points a quarter?
Kirk W. Walters - SEVP and CFO: I think we're basically talking about that we gave guidance of 3.30% to 3.40%, right, in January. We publicly came out and gave guidance. So far, that's for the year and we're at 3.35% through the first six months, so we're right square in the middle of that range. For the quarter itself, it's around 3.33%. We do expect to – as I just mentioned in the prior question, as we continue to have good success in the loan front that we could see that drift a little lower from where it's at currently as we go into the third and fourth quarters. In the third quarter, you have an additional day, so you pick up a little bit there. But the primary driver of any pressure on that is really coming from our success at growing loans.
Collyn Gilbert - KBW: Just the – you had mentioned that the new loan originations are coming in a little bit lower than your portfolio yield. Can you give a little bit more color on the structure and the rate on your new CRE credits?
Kirk W. Walters - SEVP and CFO: We haven't publicly put numbers out in terms of the new loan originations in terms of overall yields. Like I say, we do put information out regarding the accretion, the amount of accretion that's coming through that you can adjust yields for, and it gets you relatively close to where stuff is coming on at. In the case of structure, I'm not quite sure what your question is there.
Collyn Gilbert - KBW: I guess, is it five-year paper, is it – that amortizes over 30-year and the pricing resets every five years? Is it seven year – I'm just trying to, I guess, get a sense more on term, maybe is the better question than structure.
John P. Barnes - President and CEO: Well, I'll answer that, Collyn. It's Jack. So I would say in terms of our approach to the business, things haven't changed not only recently, but they haven't changed over quite some time. So the types of commercial real estate deals we're doing and our normal approach to structure and term are consistent. The market is certainly competitive for sure. If there is pressure – if there had been pressure in the last six months or so, it would be on rate mostly. We don't compromise our underwriting, but we'll see what happens with the rate term in terms of the intermediate rates changing here in the last month and a half months or so and what that means on the pricing.
Kirk W. Walters - SEVP and CFO: Collyn, back to your question on overall yields. I mean we have in the past talked a little bit about spreads because commercial bankers, it's the way we think. If you look at overall spreads on the new originations increase, they're probably around 2.25 over whatever is the matched term in terms of mid-swaps, that kind of thing. So, it has gotten a little tighter, as Jack indicated, but still all in all, a reasonable number.
Collyn Gilbert - KBW: Are you still comfortable with the 55% efficiency target by the end of the fourth quarter of next year?
Kirk W. Walters - SEVP and CFO: Yeah, that's the guidance that we gave in January and we continue to work very hard to get to that. That's a 55% on a run rate in the fourth quarter.
Collyn Gilbert - KBW: Just a final question on capital. You guys will be at a point where you've probably, by the end of the year, have levered – fully leveraged your excess capital. How are you thinking about capital management going into 2014? I mean, do you want to get into a position or do you want to start to build again? Just sort of trying to think – understand how you think about capital from that point? Funding of future growth, I guess, at the same time, too, and expanding balance sheet, does that come out of the securities portfolio or do you – or you focused on rebuilding capital? Just curious about that.
Kirk W. Walters - SEVP and CFO: Let me answer, you have multiple questions there. So, let me try to hit upon a couple and then I'll have to go on to somebody else's questions. I think to the first question of capital that we are very happy to see that we are finally getting close to being normalized. We do expect that when we finish this buyback coupled with the growth that we're experiencing in the balance sheet, that we will be normalized with the peer group that we've defined in terms of capital. Capital management from there forward, I think, is still the many levers that we always talked about and we think about. First and foremost, it's about growing loans and deposits, growing our balance sheet, building customer relationships; second, continuing a strong dividend; third, that we always think about that if we don't have needs for the capital about how and what's the most efficient way to return it to the shareholders; and probably the last or possibility is smaller M&A stuff, different things around there. So at this point, I think we feel good about getting the capital normalized in a way that we've done it in a thoughtful, careful way that we've deployed it over time and then we'll manage it in the same group of levers as we go forward.
Operator: Matthew Kelley, Sterne Agee.
Matthew Kelley - Sterne Agee: I was wondering if you could talk about – I know you don't want to give specific pricing updates on commercial real estate or multi-family. But we basically had a move in the tenure here since April of 60 or 70 basis points. Just how much of that benefit has passed through on incremental commercial real estate, multi-family loan pricing have you seen?
Kirk W. Walters - SEVP and CFO: Well, as I've mentioned in the past, I mean, we're really very focused at spreads over whatever is the underlying maturity. So if it's a five-year and the five-year moved X basis points, we would be looking to pass that through no different than if there was a seven or a 10. So we'd really think about it in terms of spreads and wherever the underlying indices are, if they moved up and such, that we would be looking to pass the bulk of that through.
Matthew Kelley - Sterne Agee: Where is the warehouse loan balanced in now, and what's your outlook for that business? Are you still adding relationships and how should we be thinking about that?
Kirk W. Walters - SEVP and CFO: Yes. Our warehouse loan balance grew a little bit from first quarter. It's about $750 million at this point, up from just a little under $700 million at the first quarter. We continue in that business to add commitments and add new customers, and also working on and expanding lines to existing customers. We know at this point the utilization rate is relatively high. In the business, we would expect that to moderate down as the business slows. In general, we feel pretty good that as the new customers are coming in, that they're making up for some of that what we'll probably give up in utilization rate as we get later in the year and into next year and mortgage refinancing slows down.
Matthew Kelley - Sterne Agee: You've had some borrowings during the quarter. What types of borrowings, term and rate, did you get?
Kirk W. Walters - SEVP and CFO: We haven't put the rate out there, but in general, the borrowings we're doing are either FHLB borrowings or, in some cases, Fed funds and shorter borrowings.
Matthew Kelley - Sterne Agee: Last question, what should we be using for tax rate? Any changes as you've added more business in New York and some higher state-tax-rate locations?
Kirk W. Walters - SEVP and CFO: Yes. We generally view you should use a tax rate around 33%.
Operator: Bob Ramsey, FBR.
Tom - FBR Capital Markets: This is (Tom) for Bob. I just I want to circle back to Collyn's question about the efficiency ratio. On the 55% efficiency target, kind of given where we stand today with the economic environment and where rates are, how much of that improvement in efficiency is going to be revenue enhancements versus kind of cost saves?
Kirk W. Walters - SEVP and CFO: The bulk of the improvement in the efficiency is in fact, driven by revenue enhancements and it really comes from what we've talked about at length, which is growing a bigger balance sheet by continuing to grow loans and deposits, which we've had very good success in terms of the loan growth. There will be some continued – we'll be always working on it. It's our life's work in terms of reducing our absolute level of cost and we'll continue to be working on that, but more of its coming from the revenue side and really our belief that we can continue to grow our loan portfolio at a good solid rate.
Tom - FBR Capital Markets: Then kind of switching gears and moving over to the provision. I would've thought that provision would have been a little higher this quarter in light of the strong growth that you had. I mean, how should we kind of think about reserves to loans going forward, now that it's kind of hovering around the 80-basis-point level?
Kirk W. Walters - SEVP and CFO: Well, I think what you have to do, we give information in our slide deck, and I'm sure you have that really looks at the loan portfolio broken down or the allowance broken down between commercial and retail, because it's very different. And I think there's a couple of factors going on. I would remind everybody that the first quarter, and we clearly called it out, that we had an impairment charge flow through on the acquired loan, which cost us about $2.6 million. So really our provisioning in terms of our basic portfolios is basically flat quarter-to-quarter. What we see happening right now is, first, we continue to see non-performers going down. So we have excellent coverage in terms of our allowance. We're also continuing to see, as the economy improves, overall loan credit rating improving and that coupled with the NPLs going down, in fact, provides some additional allowance that can go to the loan growth. So we do factor in every quarter when we do the allowance, we go through a pretty detailed process. We're factoring in all of the new loans coming on and what loan ratings and everything they're at. So I think the fact that we continue to see improvement in quality, not only in NPLs but also in the overall credit ratings on the portfolio as a whole, is what provides the – a little bit of room in terms of the provisioning.
Tom - FBR Capital Markets: Then one last quick one. How much of your warehouse is purchase versus refi?
Kirk W. Walters - SEVP and CFO: I don't – Bob, I don't have that number right off in terms – right off my head. I mean, obviously, the warehouse portfolio is one, as mentioned before, this is where, on a commercial basis, we are lending to mortgage companies. So your questions have to go to the companies as to how much of those particular companies are underlying refi purchase, and I don't have that in front of me.
Operator: Casey Haire, Jefferies & Co.
Casey Haire - Jefferies & Company: Just a quick question on the fee side of things and on the expense side, the other lines, both kind of went the wrong the way, a little bit. It worked against you this quarter. I was just wondering what was the driver and what kind of run rate can we expect from those lines, both the other fees and other expenses?
Kirk W. Walters - SEVP and CFO: I think we've pointed it out in the other noninterest income, that's where the prepayment fees roll up into. We…
Casey Haire - Jefferies & Company: That's the 3.5?
Kirk W. Walters - SEVP and CFO: Yeah. We don't include prepayment fees in our margin. I know some people do, but we don't. So, the drop there is really just the prepayment fees quarter-over-quarter. And down under other noninterest expense, the overall numbers that we have there, the drop – are you referring to the drop in $38 million to $35 million?
Casey Haire - Jefferies & Company: Right. But wasn't there a write-down in the last quarter that really inflated that number?
Kirk W. Walters - SEVP and CFO: We had additional REO this quarter. REO expenses quarter of a couple million and then we, this line is made up of full kind of items, but in particular, if you look back to last quarter, we did have the one-time charges that we took for the non-operating that flowed through, and I think that's back. If you go all the way in the press release back to – I think, it'd be around 17 where we reconciled our efficiency ratio, you'll see the write-down of the banking house assets, about $6.2 million. So, if you take the $6.2 million there and offset the $2 million in REO, it's about $4.2 million in round numbers, and that's the reasons for the drop.
Casey Haire - Jefferies & Company: Just lastly, any update on what you're seeing in terms of M&A chatter in your footprint? Any – has the bid ask between buyers and sellers narrowed at all?
John P. Barnes - President and CEO: Really no update. Our perspective – things haven't changed for us.
Operator: Thomas Alonso, Macquarie.
Thomas Alonso - Macquarie: Just real quick on the buyback in terms of sort of pacing. You were obviously more opportunistic here in the second quarter and got in ahead of what has been a pretty good rise in the stock price. Are you sort of – is your intention to just buyback – to finish that buyback this year, almost irregardless of price or will you continue to be opportunistic?
Kirk W. Walters - SEVP and CFO: No, we'll continue to be opportunistic. I mean, we – in general, believe that we will – and continue to believe that we'll finish the buyback this year, but it will clearly be subject to the market conditions. We need to remember, we're doing the buyback for a variety of reasons. I mean, obviously, the financial returns where we have been able to buy back or the tangible book value of around five years has been certainly compelling. But, and also what was driving it was to get a lower dividend payout ratio. Obviously, it helps on the earnings side and really getting our capital normalized to the peers in terms of helping you in the market trading. So no different than any other capital strategy we would use. We will be very thoughtful about how we continue to finish the existing authorization for the 11 million shares.
Thomas Alonso - Macquarie: Then just two quick questions on the fee side. The customer derivatives, the increase that you guys called out, is that something that you expect to see continue given the move in rates? Maybe you have some guys who had floating rate loans that now suddenly want to convert to fixed because there's a fear that that rates are going to move away from them? Then just secondly, kind of similar on the pace, do you think the rise in rates has an impact on that, and maybe that other line continues to trend down a little bit?
Kirk W. Walters - SEVP and CFO: On the customer derivative income, to be honest, the activity has just been better really over the last year and particularly better this year. I think it's – the reality of that we've moved into these geographies and the Boston market, the New York market, that you tend to have a little bigger loans, you probably tend to have a little more sophisticated customers or customers that are used to using interest rate swaps on their loans, and there's been more demand for them. So I don't think it's, in particular, a customer running out of concern of rate rises right now. But it's been more that we have seen more demand for it in the flow and we've been much more actively marketing our capabilities here.
John P. Barnes - President and CEO: Yes, totally.
Thomas Alonso - Macquarie: Then just on prepays, any – I mean any sort of impact that you expect from the move in rates there?
Kirk W. Walters - SEVP and CFO: I'm sorry, you cut out there.
John P. Barnes - President and CEO: I think on prepayment fees and any change in pace that we would affect. I really don't see any. I think a lot of folks that are – that have gone through the exercise of thinking about whether they were willing to absorb the prepayment fees and refi in the market has started to move through the cycle here. There certainly continues to be some activity, but it doesn't feel like it'll change too much to the upside. It may slow down.
Operator: Ladies and gentlemen, since there are no further questions in the queue, I'd now like to turn the call over to Mr. Goulding for closing remarks.
Peter Goulding - Corporate Development and IR: Thank you for joining us today. We appreciate your interest in People's United. If you should have any questions, please feel free to contact me at 203-338-6799.
Operator: Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.