Banner Corp (BANR) 2009 Q1 法說會逐字稿

Good morning ladies and gentleman. Thank you for standing by. Welcome to the first quarter of 2009 conference call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions. (Operator Instructions).

I'd now like to turn the conference over to Mr. Mike Jones, President and CEO of Banner Corporation. Please go ahead.

Thank you, David. I'm sitting here in our office in Belgue and it's a nice sunny day and that's kind of the way we think things are going here right now.

In all seriousness, I'm sitting here with Lloyd Baker, our Chief Financial Officer and with Rick Barton, who is our Chief Credit and Lending Officer of the Bank and Al Marshal, who is the Secretary of the Corporation. And what we want to do as a process is to have the disclaimer paragraph read by Al Marshall and then we'll have some comments on the quarter performance from Lloyd Baker.

So with that, Albert, I'll turn it over to you.

Thank you. Good morning, our presentation today discusses Banner's business outlook and will include forward-looking statements. Those statements include descriptions of management's plans, objectives or goals for future operations, products or services, forecasts of financial or other performance measures and statements about Banner's general outlook for economic and other conditions. We also may make other forward-looking statements in the question and answer period following management's discussion.

These forward-looking statements are subject to a number of risks and uncertainties and actual results may differ materially from those discussed today. Information on the risk factors that could cause actual results to differ are available from the earnings press release that was released yesterday and our recently filed Form 10-K for the year ended December 31, 2008. Forward-looking statements are effective only as of the date they are made and Banner assumes no obligation to update information concerning its expectations. Thank you.

Thanks Albert and with that, Lloyd Baker.

Thanks Mike. Good morning everyone. The sun is shining here this morning and it feels better, but we are going to talk about the first quarter. And as our press release indicated, we were dealing with further deterioration in the economy. We described the quarter is unusually challenging. That was the kindest language we could come up with that we could put in print.

As you all know, the first quarter was one where we were continuing to deal with declining property values, declining employment rates, declining business activity which was certainly evident in payment processing and business loan demand. Declining stock prices, declining investment yields, but ironically that normally would mean you would have some favorable mark to market, but that was not the case in the first quarter.

And asset base that was shrinking a little bit as well. All of that economic stress of course showed up in terms of increasing delinquencies and non-performing assets and net charge-offs, which continued to be the main story in terms of the effect on the quarter's results.

So for the quarter, we reported $9.3 million loss and was driven by a $22 million provision and that fair value adjustments, which were down to $3.2 million and just for a little added kicker we got $655,000 charge from the state of Washington dealing with public funds deposit.

So with all of that sort of unusually challenging environment, I was trying to look through the release this morning and pick out what I think are some of the positive things, the good things that were going in the quarter. And I think that without a doubt, the first and foremost the funding cost decline, now reflected better deposit pricing and cheaper borrowings.

In the deposit pricing aspect that's pretty important. Last fall, as you recall, we were along with most in the industry wrestling with some pretty intensive deposit pricing pressure at the same time that asset yields were being driven down.

That situation righted itself significantly in the first quarter, actually started late in the fourth quarter and as I indicated, funding costs were down 27 basis points, 20 basis point decline in deposit pricing and deposit costs were dropping every month in the quarter.

So, that was clearly a positive and being in contributed to a net interest margin that was couple of basis points wider than the prior quarter. First quarter, a number that we have been able to see that the margin was expanding, rather than contracting, certainly another positive.

Cheaper borrowing cost is being contributed to that, as the Federal Reserve, we don't know pushed short-term interest rate very low and that was reflected in borrowing costs.

Another fairly good thing is happened during the first quarter with mortgage banking revenue were exceptionally strong, not only did the short end of the interest curve drop, but the actions to push down mortgage rates that the Fed engineered had a big impact on this financing activity and the result on mortgage banking revenue is doubled from the fourth quarter. Our pipelines were full and that certainly made things feel a little bit better.

Another good thing in the first quarter was that, we had pretty good success with manageable expenses, particularly in areas like compensation and data processing, that we actually have been attracting control those expense were very well behaved.

Now we had some outliers, as you'd expect collection costs are up and FDIC insurance and then as I mentioned the charge associated with the public funds deposit issue here in the State of Washington, most of you are aware of.

What else can I say, well, I think that the other thing that I would say is about the quarter, it feels about itself, a lot better in March than it did in January and as Mike is indicated, he is feeling better here in April and that's certainly a good thing.

We had our Great Northwest Home Rush that I know Mike is going to want to tell you about. That was a good thing in the quarter. And finally we finished the quarter, we still very strong capital ratio and well position to deal with, unfortunately it looks like, a few more unusually challenging quarters going forward. So, I look forward to everyone's questions.

Mike, probably you'd like to expand on that for a few minutes and then we'll get to questions.

There are two fundamental things that I think are really changed in our financial performance and during the first quarter and frankly spilling into the second quarter, because the real impact of what we call the Great Northwest Home Rush is really going to be shown in the financials in the second quarter.

To-date we have -- our builder borrowers have sold about 25% of our completed unsold houses in the market plus or minus of 150 homes in that particular area and that number will continue to grow, as we're taking this program into the Boise and future [sound] market place. And we did it first in a greater Portland market place and had very much great success in that particular area.

As I say, that we will get, we reduce our completed unsold home inventory of our builders by approximately 25% of what was available. And I think it really has reenergized the number of our builders into to realizing, what they need to do to sell homes in this kind of a market, and so we're looking for even more success, as we go forward into the second quarter.

Lloyd talked to you briefly about the $650,000 charge we got in the State of Washington. We were the only bank we got it. All banks that were depositories of public funds received it because of a bank that bailed in the State of Washington and when the FDIC closed it they did not allow the purchasing bank to buy the public funds.

And because of that, some changes are taking place, as it relates to public fund deposits for financial institutions and which instead of 10% collateralization they're going to want a 100% collateralization of those deposits, which frankly takes the profitability of that away from it.

And so, we've had significant, we made a decision to begin to quietly reduce our exposure to that part of the market and we've had significant deposit outflow from public entities of our customers.

Now, we have a complete customer relationship with the public entity. We were going to stay in the relationship, but otherwise, if it's just a purchase fund from them, that we're going to, but that has a big impact on what was happening in the liability side of our balance sheet. And will continue to have a big impact in the second and third quarter going forward.

So, why don't we get to, if you all would like to talk about, David at this time, kind of open it up, to some questions?

Thank you, sir. We will now begin the question-and-answer session. (Operator Instructions). Our first question comes from the line of Matthew Clark with KBW. Please go ahead.

Hey, good morning, guys.

Hi, Matthew.

On the Home Rush promotion. Can you give us more color on that in terms of whether or not you're keeping that product and portfolio, whether or not you're selling any of it? Also I believe in most cases and correct me if I'm wrong, but it's no money down product, right?

You get the interest rate it's a 20% down.

Okay. Can you just discuss that again though, in terms of portfolio and any more details on that in terms of rate and?

Well, at the end of March, we'd actually closed about 20 of those homes, now since then in April we have closed considerably more of them. Some of those homes we've sold into the secondary market. And in the end of the day, we'll sell more of those into the secondary market. Some of them will keep particularly with their Banner Bank customers in our portfolio.

And so, at this point in time its hard to say Matthew, it depends on where interest rates go, but as rates have kind of come towards us. We were a little bit ahead of the rate structure at that time. My guess is we'll sell more than we originally thought we were going to. So, I'm going to guess plus or minus. We're going to keep 60% and sell 40% at the end of the day-- the end of this year.

And we were offering a rate of 3.875% in the marketplace, which now were being copied by everyone -- every market behind us. But -- and we were able to, in some cases builders buying down that rate, some cases we did that to move inventory, and of course when we closed he loan, we've recognized a loss on that loan to bring it up to market rates of interest.

However, that has not been that great of a problem for us, because only about 50% of the homes that were purchased took advantage of that lower rate and others made lower down payments into a higher rate, which was 4.875% which frankly today is probably slightly above the market.

But its -- it has been extremely helpful not just for those houses, but it's been helpful to builders to realize that they have to do to sell homes, and we actually just more than, if you want to know Matthew, but we actually took in Portland 35 of our builders and went through everyone of their houses with them and made suggestions to them in terms of landscaping, fencing, and in some cases, not all of these a carpet in a room that we think had very poor color and asked them to change those if they wanted to participate and then to spiff the house up off a lot of builders when the homes don't sell -- don't keep them in show condition.

And we require them to do that during the weekend home rush sales. We asked our builders to be on site so they could talk to perspective buyers. We also require them to have their realtors' onsite. And lastly, we committed to have our people onsite and/or in a very near vicinity of that home, so we could help facilitate the financing at the time that was going -- that the negotiation was going on.

It's been a real, real success for us in terms of not only just the houses themselves, which at the end of the day, currently probably takes about 55 million of our inventory off our books plus or minus. And, but also in terms of energizing our builders going into the building season this year. So, we're very pleased with how that has gone.

Okay. And then in terms of the order that you have, can you give us a sense for the turnover in that portfolio and whether or not you've and what the kind of a average mark or write-downs been or even the aggregate dollar amount it has been in terms of subsequent sales?

Sure, Ken. But I'm going to ask Rick Barton to answer that question. But I think you've met Rick, he's our Senior Credit Officer and Senior Lending Officer.

Sure.

Yeah at the end of the quarter we had approximately $39 million in the REO account. And that was the combination of lots, some land and homes. We write that down fairly aggressively at the time that we bring it into REO based on current appraisals. I think we have had really particularly with the homes, good success in moving them out. And our experience is that, we are able to sell them at or in some cases slightly above the REO carrying value.

We're finding that probably one of the bigger impediments to selling some of these homes is not so much the home itself, and that is the builder not keeping it, as Mike said, in show condition. And we have a very good team of people working these assets to do exactly that. To get them on the market in a short period of time and we are having really very good success in those sales.

Okay. And just to kind of reiterate what he just said. Once you get the builder out of the way and you lose his love affair with his house and what he think is really worth, and market to the market which we do. Those homes were very quickly. There are a lot of buyers out there looking for homes right now. We have great traffic going through the properties as we speak.

Okay and then finally on the non-accruals. Can you give us the percent mark that you were in those down to in terms of existing non-accruals that are on your books?

Rick mention, go ahead with that too.

This is very difficult question to give a overall answer to, because each individual situation is different. What I can say and maybe this will be helpful is out of the approximately $224 million plus or minus in non-accruals. We've done specific FAS 114 analysis on 90% of them based on good, hard appraisal data. And all of that is reflected in our provisioning and in the write-downs we have taken.

Okay. Thank you.

Thank you, sir. And our next question comes from the line of Jeff Rulis with D.A. Davidson. Please go ahead.

Good morning.

Good morning, Jeff.

The fall off in loan servicing fees, is that -- was that the accelerated termination of the MSR's this quarter?

That's exactly right, Jeff. As loans paid off the unamortized balance is accelerated into charge against home servicing and then we also put up a $300,000 impairment charge on top of that.

Expect that line item to be negative going forward or?

No, not negative, but I suspect as you've already heard or said, it feels like mortgage activity is going to continue here for a while. That being the case, that line item would probably be pretty minimal. But I don't -- I would don't anticipate as much write-down as we had in this current quarter.

Okay. And then on the competition expansion at 15.5 have you squeezed or you came out of there. What you think you grow from this level?

Actually, we're expecting and tend to have our operating expenses be flat throughout the year with the exception of what the FDIC does with this charge. And the way we're doing that are several ways, but we actually we have shrunk some of our staff during last year. That shrinking is where we see it individually through the company will continue, as we go through the rest of 2009.

And so between those two factors, we believe competition expense will be flat, if not lower than it was in the first quarter. First quarter has some fairly large commissions that were paid out and loan origination closing that we paid to our loan officers and also and if that continues, I'll be very happy to have that compensation, because I got to a gain on the other side of it, but other than that, it will be down.

Got you.

If you knock out FDIC insurance in the nice little charge we've got in the State of Washington for that sales bank problem. Operating expenses in the first quarter would be down 5% versus the first quarter a year ago and we expect to continue that trend.

Thank you. And then the delinquency levels, I guess the 30 to 89 day bucket, if you had those at the Q4 timeframe and then also Q1?

Rick?

Well, you know, the 30 to 89 day delinquencies did spike somewhat in the first quarter. There are, were a number of reasons that you could point to for that and nothing that I would consider to be any kind of systemic problem or any kind of really full order of significant problems in other parts of the portfolio.

The bulk of the change continues to come in the construction/land portfolio. One thing that I'm hopeful of, as we go through for the next quarter, is that many of the builders are going to realize a liquidity event in the form of tax returns or tax refunds for taxes paid in the past and that should help many of them, cure some of their delinquency problems and give them some additional staying power.

Okay. But actual figures are not, you don't release those?

Well, actually Jeff, what we released is total delinquencies and also non-performing. So, you can do the math.

Okay.

With those two numbers.

Got you. Then lastly on the total public deposit balance at quarter end was, what was that amount?

Sorry, what was the question again?

The total public deposit balance you mentioned you're going to run that down, but what was it at Q1 end?

$130 million less than it was in December 30. Let me, it's down around $200 million.

Yes.

About $200 million and we won't run all $200 million off. We're working with several programs to convert certain deposits into fully insured accounts, which under the new rules, will not need to be collateralized. But in our expectation right now, is it between now and let say the end of the third quarter that will probably see those balance decline $75 million to $100 million more.

Alright, thank you.

Thank you, sir. And our next question comes from the line Brett Rabatin with Sterne Agee. Please go ahead.

Hi, good morning. I was hoping that you guys, might able to provide some color on what you are seeing for lot sales in your markets, so far this year, particularly, vis-a-vis what they were maybe a year ago?

Rich, you want to talk about that?

You know, that's $64,000 question. And now that we're coming out of the doldrums of the weather around here, which was pretty bad. We are seeing some activity and I'd say that, we've seen quite of uptick in activity particularly in the Portland market, where consumers are coming out and purchasing spot lots to build custom homes on.

And probably more significant than that is that, we can point any number of instances across our footprint were builders have begun to redesign the product that they are building, in a flat on lots that they own. Getting the price point down to the levels that are having people come in and buy the homes from them.

And I think that, as we go forward, we will see more and more of that and that's going to be one of the keys to chewing through the lot inventory that exit in all of the markets in the Northwest. Having said all that, I characterize myself is being cautiously optimistic that we will see an acceleration of absorption as we go through the next 18 months.

And I'm curious it sounds like that the buyers that are buying the lots right now are mostly consumers looking to build maybe they have some customs back if they want to -- that they want to build. I'm curious if you see any other buyers in the markets and how they -- how they model their properties i.e. to what kind of discount rates do they assume and how long of a period to breaking ground do they assume. It seems like in some areas, it's pretty short, but in another areas, its as long as seven years just giving up the amount of lots that are out there.

Well, I think that varies from market to market, sub-market to sub-market. Our time frames are not anywhere near that extended, probably the area that has the largest overhang is Boise and its going to be a longer period of time before that inventory is absorbed there particularly in the undeveloped our land category of which we have very little. There aren't very many bulk buyers of lots right now that actually have the intent of short term construction projects.

The people who are looking to buy bulk are more of the bottom fishers who would like to take some product in and hold it for a while waiting for recovery. We feel that we can execute other plans from that and be more successful than having them be the buyer with the inventory that we have.

Now we fully expect as inventory builds up, most of these builders that they'll start building some homes. They are going to build a different kind of a home for quite a period of time. If you try to hit the right price points, but that's the way we think we're going to through the bulk of our inventory.

And the matter of fact, as we speak sitting here today, we have very strong builders building through a couple of our projects we have in the REO at the present time. So, we don't think that there are going to be a lot of bulk sale.

Now, if we have a lot of property up North in this Snohomish County area or we have a lot of property South in the Pierce County area, we could probably have a different answer for you. We just don't happen to have very much in those areas.

Okay, that's good color. And then the other question, I was curious about was -- is it just to look at the breakdown of deposits. And yeah, I think you explained some, but I'm not sure if I quiet understood. The interest bearing checking was down a little bit, but the savings accounts and obviously the money markets were much better this quarter. Was there a change in behavior or is it's just a function of what you guys were doing or can you provide some additional clarity on that?

And we need a little change in behavior. First, as you note the interest-bearing checking is down, but $74 million of that was a special interest-bearing public funds account.

That's right.

So if you factor that out. Money seems to move around from in various accounts based on pricing between savings, money market and alike. I think, and certificates at times, but generally the deposit gathering felt a little bit better again particularly as the quarter progressed.

At the same time, we were working fairly hard to bring rates down on some of those accounts and that going to effect the movement there as well. So, it was a decent quarter when you extract from the quarter. The effect of the public funds knowing that there's still stress in this system. People still have some concerns.

Okay. And I think you guys addressed the public funds. Thanks, I understand that. Okay, great. Thanks for all the color.

Thank you, sir. And our next question comes from the line of [Casey Ambrecht] with MLP. Please go ahead.

Hi, thanks very much for taking my question. Could you just walk us through the OREO here, it looks like the OREO doubled over the course of the quarter. What's your average write-down of your OREO assets versus your NPAs?

I think we just addressed that.

Could you just go through it again quickly?

Rick?

Well, there is not a single answer to that. And I never have looked at it on what the average is, I must take them case by case. And do what is appropriate based on the appraisals that we get back and let go with that. And it varies between finished houses and lots and subdivisions. So there is not a single crisp answer that I can give to that question.

Okay. And then, I'm sorry if you somebody asked this question before on this conference call. What is the average write-down of your constructional land NPAs?

Pretty much the same answer there. What I've mentioned before is that, of the non-performing assets that approximately $224 million we've done FAS 114 analysis on 90% of that. So that, what we've done is based on current appraisal data and again it varies from instance to instance as to what the write-down is.

So, if you have a $175 million of NPAs in your constructional land book, like what's the mark on that?

Well the mark on...

And you write-down 50%...?

Pardon.

If you write them down to $175 million from $200 million?

That's probably not far off.

Okay.

Because that's probably not far off.

Do you think about in that will be about a 10% mark right?

Well, on an aggregate total?

Yes.

The demand understate a little bit.

Understated.

The point is this, those -- that $175 million represents in most cases the impaired value of the loan today. Well, what I -- what we don't have there is what the value, you know, where we came off of to get to that and may be, the other thing that you're looking for I mean property values obviously have continued to decline in the Northwest.

And I guess what I'm concerned about those that, even though you're building a lot of reserves, which is really good. What -- I think one question I have for a lot of regional banks up in your neck of the country is what's going to be the disposition strategy this $175 million loans because we're marking that like you can't sell these things down 12%. So, how are you going to work them out of the bank, that's why I was asking about OREO, what's your discounted OREO. So, I just -- it seems like--

JC, you are a little late to our call. We had a very long discussion about our Great Northwest Home Rush sale.

Okay.

We sold 150 houses, which represents plus or minus $55 million. You know that less than 10 of those houses were short sales to what we had a marked down over the loans on the books.

Okay.

So, we do not expect a big write-down taking place in the latter part of the fourth quarter.

Okay. One last--

The real issue is in the whole area, we will remain how we worked through the land and frankly, we're probably going to work through it with the builders and/or another builder building through those lots.

Okay, perfect. And one last question, totally separate conversation. I'll think anybody can address this. Is it right you guys have 5, 4, so called $5 million reserves against your $1.36 billion of CRE, give about 50 basis points of reserves if I book.

I have to look at the.

The page 7 and 8 of your press release, $4.972 million of reserves against $1.36 billion of CRE.

To-date the performance of the CRE portfolio has been very good. There are, obviously has shown some non-accruals in that, but most of that non-accrual amount and delinquency amount is for reasons that are not generated by the CRE market itself. They're tied to specific anecdotal events or to in some cases commercial customers, who have experienced problems and as those problems arise, we've been working through them very efficiently.

All right something to keep an eye watch because it looks like your CRE NPAs are up 500% in a year and you're reserves are flat in that space. Okay, thank you very much.

Thank you sir. And our next question comes from the line of [Brent Christ] with Sirius Capital.

Good morning guys.

Hi Brent.

Just a kind of a follow-up on the Great Northwest Home Rush question that you just addressed. Could you give us a sense in terms of the homes that you've actually moved through that program of kind of what the cum. loss has been versus the original loan amount?

And then kind of secondly, when you are just disposing of them, is that at a price above or generally in line or below where you had to mark to prior to that. I guess, what I'm trying to get is, it seems like this program is certainly helping to move some inventory and just is there some incremental credit costs or not associated with homes that you are moving?

Rick, you want to take that?

As Mike mentioned earlier, the vast majority of those homes that have been sold, have not involved short sales, so that incremental credit costs associated with the program have really been very minimal.

And what would you say, I know that's going to vary significantly by home, but the average kind of loss had been with respect to you moved so far?

Well, most of them, there have been no loss.

Okay.

And ones that, there have been some short sales on at them. You know have varied with the home, but I can not recall a short sale that resulted in an incremental cost of more than $30,000 or $40,000. I mean, it may have been an out buyer from there, but really very modest.

And the bulk of those homes are still, the builders, owned by the builders, they are not OREO properties, is that correct?

There has been a few OREO sales out of there, but the vast majority is then out of the builders in Detroit.

Okay, great. Thanks a lot guys.

Thank you, sir. And our next question comes from the line of Kipling Peterson with Columbia Ventures Corporation. Please go ahead.

Good morning. Just wanted to first, congratulate and applaud you on the Home Rush and for basically getting ahead of the market and trying to make your own luck. And I know you mentioned that on some of the loans, you've had the book losses due to lower rates.

But I'm wondering, with all of the press coverage both locally and nationally I would guess if you put a number on what the free PR was. You are not doing so poorly on the losses?

And I think you're exactly right.

And also I think you maybe the only bank in the country that has had some positive remarks about having taking the TARP. At least from what I see there's been a lot of positive comments and I'm wondering has that perhaps helped some of your other relationships or helped other commercial accounts want to do business with you because they see you're proactive?

Good point, we have had some people who actually come over and do business with us because of the Great Northwest Home Rush, it's a programs we are doing. But I can't say it's been a stampede towards our branches at this point. So, we have that customer move towards, because of the things we're doing.

Great and I'm just wondering with the Pacific Northwest and the Oregon in particular having either being number one or number two as far as unemployment goes. Are you surprised that things aren't worse?

Rick, do you want to talk about that?

Well not worse in terms of general economic activity or...

Correct.

Well, I guess a little bit. One thing that is continuing to happen that dampens that a little bit is that there is still some in migration going on. And there are important still a number of very vibrant companies that served the economic engines down there. Companies like Intel has a very big presence, Nike and alike.

Okay. And I noticed you were able to raise $50 million using a TLGT. Do you foresee doing anything additionally there?

Probably not. We have a little more capacity under that program, about $30 million. We just thought that that was a very prudent liquidity management action to take particularly in light of what we were doing with the public funds deposits and there was some advantage to getting it done before March 31 in terms of pricing. So we did that and it's an alternative out there, but not too large degree going forward and not likely that we will do more.

Okay. And then last one, it appears that some of your competitors are sharply pulling back and trying to raise capitals in order to stay viable. Do you see any opportunities there outside of FDIC assistance, because I have seen where some of them are looking to move branches or move assets of one type or another?

Yes we do and we seek opportunities of us and to. First, the basic meat and potatoes of this thing; we have had a number of customers come over to us business customers where other entities who are unfortunately are not in a position to be able to renew or extend additional credit to those borrowers or even service their existing loans and so forth. So, as a result we've had customers come to us from that way and that's been very helpful to us. And in the long run will put us in a much better place.

Secondly, we are in a position of several offering books from other financial institutions wanting to sell their whole bank or certain parts of their branches and we are looking at particularly branches that would improve our deposit franchise across our footprint. We do not want to go out of our market area.

Great. Thank you very much.

Thank you, sir. And our next question comes from the line Mathew Clark with KBW. Please go ahead.

Hey, just a quick follow-up. In terms of Home Rush product, in terms of -- I'm sure, what you guys have originated there, hasn't really seasoned yet. So, there is probably no issue of re-default risk, just the re-default rates obviously, probably negligible.

But just curious, what you're seeing there, if you have seen some of your non-accruals increase there in the wonderful family, because in that product or not, just yet. And then as a follow-up, in terms of what you sell, do you retain any recourse risk?

No. And I know we all overstate Matthew. We've only at March 31, we've closed about 20 of those loans, most of my closing -- we started the program in March, okay. And so, it's the most of those loans are closing in April and early May, as we go forward.

So, its really too early to say anything about people not making their house payments and so forth, their mortgage payments at this point in time. And we will just have to see, but that is not why, we had an increase in our one-to-four in loan portfolio. You want to add something to that, Rick.

Well, in terms of the Home Rush, loans, they're underwritten to market standard so that people have the right kind of ratios and the right kind of credit scores, before we will make those loans. And in the amount that we've got in the one-to-four family finals existing portfolio, really what we have seen a modest uptick in delinquency rates there, by and large then well below national averages.

Okay. Thank you.

Thank you, sir. And we have no further questions in the queue. I would like to turn back the call to management for any closing remarks.

Thank you, David. We appreciate you all taking the time to listen to our not very good results in the first quarter, but we really do believe that in the Pacific Northwest, as I sit here and look we think the second and third quarter are going to be considerably better, particularly and what much more upbeat about future sound than the last time I talked with you.

We have issues here of course with Boeing and airplanes and some other things, but boy you can see it in this economy that people are much more upbeat and its going forward. And we really see traffic through the homes for our builders really increasing and we really expected this is a perhaps not in the second quarter, but the third and fourth quarter is going to be considerably better than what we reported to you in the first quarter.

So, we look forward to talking to all you again, and we will want to participate in the July timeframe. And thanks again for listening in.

And ladies and gentlemen, this concludes the first quarter 2009 conference call. You may now disconnect and we thank you for using AT&T conferencing.