First Interstate Bancsystem Inc (FIBK) 2010 Q4 法說會逐字稿

Good morning and welcome to the First Interstate BancSystem fourth-quarter call. All participants will be in a listen-only mode. (Operator Instructions). After today's presentation there will be an opportunity for you to ask questions. (Operator Instructions). Please note that today's event is being recorded. I would now like to turn the conference call over to Miss Marcy Mutch. Miss Mutch, please go ahead.

Thank you, Jamie. Good morning. Welcome and thank you for joining us for our fourth-quarter investor conference call. Before we begin I'd like to remind everyone that some of today's remarks may constitute forward-looking statements, particularly regarding quarterly provisions for loan losses, net interest margin, income from the origination of residential real estate loans, loan growth and non-performing assets. We may also make other forward-looking statements including statements about our plans, strategies and prospects.

I would remind you that all forward-looking statements are subject to various risks and uncertainties and that our actual results may differ materially from those expressed or implied by such statements. For a full discussion of the risks and uncertainties associated with our forward-looking statements, please refer to our securities filings, in particular the risk factor section of our most recently filed forms 10-K and 10-Q.

Joining us from management this morning are Lyle Knight, our Chief Executive Officer, and Terry Moore, our Chief Financial Officer. Lyle will begin by giving you a general overview of this quarter's results along with observations about our year and strategies for 2011. Terry will follow up with more specific information behind the quarterly results and provide a general review of credit quality information.

Also with us this morning is Bob Cerkovnik. Bob is our Chief Credit Officer and will be available during the question-and-answer time to address specific questions concerning our loans and asset quality. At this time I'd like to turn the call over to Lyle Knight. Lyle?

Thanks, Marcy, and good morning. Thanks to all of you for joining us on the call. Last night we reported earnings for the fourth quarter of $10 million compared to $7.9 million for the third quarter of 2010. This equates to diluted earnings per share of $0.23 for the quarter compared with $0.18 for the third quarter.

We're pleased with this level of profitability in the current environment of low interest rates and low loan demand. From our perspective this was a quarter of solid execution with no big surprises. Despite a 1.9% drop in loans during the quarter, total revenues remained flat. The decline in spread income was offset primarily by increased revenues from the origination and sale of residential real estate mortgages.

I wrapped up our call last quarter stating that we were on a long-term modest growth cycle and that, while we are bullish in regards to our long-term general market economies, we weren't seeing enthusiasm from our borrowers that would drive loan demand. Well, that certainly carried over into the fourth quarter of 2010, which is historically a weak quarter for loan growth.

While we don't generally begin to see much loan activity until late in the first quarter or early in the second quarter, we are cautiously optimistic about 2011. Now that the elections are behind us and the new tax legislation has been passed we feel there is a little more certainty to the next couple of years.

Additionally, within our footprint, Montana, Wyoming and South Dakota, we are not facing drastic state budget shortfalls and the increased taxes that go along with that, which many states across the nation face today. We think unemployment in our footprint peaked during 2010 and will continue its downward trend. From August to December of 2010 the unemployment rate declined from 7.4% to 7.2% in Montana and from 6.8% to 6.4% in Wyoming. It was up a tick in South Dakota to only 4.6%, still among the lowest rates in the nation.

We also had a record-setting year for visitation to the national parks in our area. And as I said last quarter, we had a robust year in agriculture which now is evidenced by pay downs we're seeing in the ag lines of credit. We think these factors impact consumer confidence and should help abate some of the consumer paralysis that we've seen over the last couple of years.

This should allow individuals and small businesses to begin making longer-term plans. So we believe the foundation is in place for the pace of economic recovery to pick up and we are well positioned to help our customers with the credit demands they will have.

We continue to make credit and credit quality our number one focus during 2011. According to the Small Business Survival Index, South Dakota has been identified as having the best business climate of any state in the nation. Additionally, South Dakota's overall tax burden is among the lowest in our country. Couple these factors with an already low unemployment rate and we see great opportunities for growth in South Dakota.

Under the First Interstate brand we've introduced new product lines and services into our South Dakota market. Examples of this would be credit card services, indirect consumer lending, cash management and wealth management services. We think this will help us gain market share over the long-term. We particularly see growth potential in the Rapid City area.

Now while ag lending is a small part of our total portfolio, agriculture is a big piece of our economy. We are committed to serving the agricultural sector with competitive products and services.

Evaluations are holding steady on real estate with the exception of the Flathead and Jackson areas. We are aggressively marketing our other real estate and seeing some movement there. We've had modest gains in disposing of our OREO properties and believe this demonstrates our practice of recognizing losses as they surface. We are comfortable regarding the valuation of our OREO inventory.

While we have not changed our expectations that we'll see increased NPAs and elevated levels of provision into the middle of 2011, we feel comfortable that we have a good handle on our credit costs and they will continue to be manageable as this credit cycle plays out. We are not anticipating a kitchen sink quarter where we would have any extraordinary amount of losses and believe that we have adequately provided for all of our losses along the way.

The changes our industry is going to face on the regulatory front are going to be time-consuming and expensive; I think you all know that. It's intended that the Durbin amendment would have a carve-out for community banks. However, mortgage pressures will limit the benefit a community bank might see. While the federal reserve has issued draft rules of the legislation, there are still unanswered questions.

In 2010 we had gross revenues of $10.2 million in debit card income. There's speculation that under the current big bank rules the impact to gross revenues could be as high as 75% beginning in the second half of 2011. Well, it's a great bit premature to estimate what the impact of this legislation may have on us this year; however, we are ready to adjust our strategies and pricing to mitigate the degree to which the amendment may affect us.

What we do know for certain is that these additional pressures on revenue mean that we must perform at a higher level of productivity and efficiency. Therefore our second focus -- remember first focus was credit quality -- our second focus for 2011 will be our cost structure.

Now what I'm speaking about here is more than what you would remember as cost-cutting; we're actually looking to implement processes that will change the way we currently do business. We are actively identifying areas within our organization in which we can be more effective and more efficient in what we do while still maintaining or even improving the high level of service our customers have come to expect.

So in 2011 our strategic priorities are improving credit quality and cost structure. In the short term we believe that achieving these two objectives will provide the greatest potential to add shareholder value from an organic standpoint.

Now in addition, while we will consider and respond to any acquisition opportunities that may come our way this year, we don't anticipate actively pursuing acquisitions until 2012. Well, with that high-level interview, let me now turn it over to Terry Moore for the details. Terry?

Thanks, Lyle, and thanks to all of you joining us this morning. As Lyle reported, earnings for the third quarter were $10 million with diluted earnings per common share for the quarter of $0.23. I'd like to first focus on our income statement.

First, a particularly bright spot was that our cost to funds declined a significant 16 points or basis points from Q3. We had said our focus was going to be on reducing cost of funds and for the first time we've seen our cost of funds dip below 1%. This is encouraging and we continue to see an improvement in our deposit mix with a shift out of higher cost time deposits into savings and demand deposits.

We think we have a little more room to improve on the 95 basis point cost of funds, specifically in our cost of time deposits. We have identified strategies to reduce the cost of funds of selected specific deposits which will help us continue this positive trend over the next couple of quarters. But as we discussed last quarter, as loans go so will the margin.

And as you can see from our earnings release last night, average loans decreased about $100 million from Q3 and our loan to deposit ratio declined 1.7% to 73.7% from the end of the third quarter. Approximately 9 basis points of the decline in the net interest margin is due to decreasing outstanding loan balances. Combine this with the 38 basis point decrease in the investment yield and the 4 basis point decline in the loan portfolio yield and that explains most of the net interest margin change for this quarter.

During the fourth quarter more than $350 million of investment securities were purchased resulting in a net increase in the portfolio of $104 million. The duration of the investment portfolio extended beyond the two year mark due to the uptick in rates and the resulting longer estimated lives in our mortgage-backed securities.

We're continuing our consistent, conservative investment strategy and have invested principally in US agency debentures and mortgage-backed securities. We are unwilling to extend maturities to pick up minimal yield improvement.

As far as looking at what we can expect from net interest margin in the future, everyone realizes that we will continue to experience net interest margin pressure until we see an increase in loan demand. As we begin to see some activity in our footprint and more demand for loans the challenge is going to be on pricing.

There was a lot of competition out there for business and we are seeing that some haven't learned from the past and are offering what we would consider an unacceptable level of return for the risk involved. Our strategy will be to aggressively pursue new business while continuing to be disciplined to follow our strong credit policies. Aside from that, if loans and deposits were even to stabilize at current levels we would anticipate the net interest margin ratio to stabilize as well.

Non-interest income increased by 2.6% to over $25 million from $24.9 million in Q3. Once again this quarter the increase was primarily due to an increase in residential origination income. Low interest rates resulted in higher revenues and origination income than we had anticipated earlier in the year.

Purchased home origination income was about 40% of the total origination income for the year of 2010. Both strong refinance and purchase activity reflect stable values of residential homes in most of our markets. Obviously residential origination income from refinancing is highly dependent upon loan rates and future income will reflect this volatility.

Total non-interest expense decreased $3.2 million or 5.5% from Q3, the largest components of the decrease in the fourth quarter include the reversal of previously recorded mortgage servicing rights impairment of $3 million and a decrease in other real estate costs of $1.1 million. As residential rates increased near the end of the year, prepayment speeds of the mortgage servicing portfolio have obviously slowed.

The increase in wages, salaries and benefits this quarter is largely associated with increasing group medical costs in our self-insured medical plan. We have been and continue to be committed to wellness with our employees and their dependents. Yet we've experienced claim increases of over 30% the past couple of years.

Now let's turn our attention to credit. As expected, non-performing assets continued to increase as reflected by a 9 basis point increase to 3.33% of total assets as of December 31. The fourth-quarter provision for loan loss of $17.5 million remained elevated which is equivalent to a 1.58% annualized provision to average loans. Of the $17.5 million provision approximately 50% of the total fourth-quarter provisions were attributable to the Flathead, Gallatin and Jackson markets which we have discussed the past several quarters.

Charge-offs increased this past quarter with 68% being directly related to these same three markets. We've seen a reduction in other real estate of $1.7 million since September 30. We continue to be pleased that this number declined and remains at a modest level. This change is reflective of sales of $4.7 million closed in Q4, further write-downs of $1.2 million, and additions to OREO of $4.2 million. Of the $1.2 million in write-downs in Q4, 76% is within the three distressed markets.

Good news is that we continue to have sales activity. Activity in the Jackson and Flathead markets totaled 28% of our OREO sales this quarter. Again, as Lyle said, with the exception of the Flathead and Jackson markets we are beginning to see some stabilization of values as new appraisals come in.

With the abundance of property for sale in and around Flathead and Jackson there is still weakness in values, but we see some bargain hunters and we are hopeful that this will generate further sales activity. In the meantime we continue to focus on selling OREO, valuing OREO on new appraisals, as well as taking into account on a quarterly basis declines in real estate values within the depressed markets.

A continued increase in non-accrual loans this quarter was expected. Non-accrual loans totaled $195 million as of December 31, an increase of $21 million over Q3. Approximately 45% of the increase was attributable to one borrower in the Jackson market.

Of total non-accrual loans approximately 74% reside in the commercial real estate and construction real estate portfolios. Also of total non-accrual loans 53% are in our Jackson, Flathead and Gallatin markets. Worth noting is that as of December 31, approximately 76% of non-accrual loans are current.

The decrease in TDRs this quarter was mainly due to a $4.8 million pay down on one credit plus two commercial real estate borrowers moving to non-accrual. This decreased our owner occupied commercial real estate to only 13% of total TDRs. 37% of the TDRs are commercial loans and virtually all of our accruing TDRs are performing as agreed as of December 31.

As Lyle stated, our biggest driver in improving net income in 2011 is going to be effectively dealing with our credit challenges. A reduction of OREO property will help and we're encouraged by the movement we've had this past year, even over the winter months.

But clearly the largest challenge and our primary focus is resolving through charge-offs or pay downs our non-accrual loans which will ultimately result in a lower provision for loan losses. Now with that we'll open it up for questions and following the questions Lyle will have a wrap-up.

(Operator Instructions). Brett Rabatin, Sterne, Agee.

Hi, good morning. I wanted to ask about the two things that you're focused on in 2011, credit and expenses. Can you give us a little more color maybe around the expense discussion in terms of maybe quantifying how much you think you'll be able to reduce expenses this year or if you have specific goals in terms of efficiency ratios, whether it be in the next two quarters or longer term in nature, I guess would be the first thing I wanted to ask.

Well, I'll start it at a higher level, this is Lyle. While we're looking at what can be accomplished this year, and Terry can give you closer numbers on that, I would tell you that we're looking to redo the way in which we conduct business, looking for permanent cost structuring changes that will carry forward.

And I think the best example is that if we were able to convert our customers from receiving paper statements to receiving electronic statements, we feel that would provide a higher level of service for them because they'll get the statements on demand, provide safety because it's not sitting in their mailbox. For us it would save us over $2 million a year.

We think there are many such structural opportunities for us and we're on the front end of this initiative. So Terry will talk about 2011, but I want you to know that this is longer and more permanent than 2011 and we'll share more with you as we develop more of our strategies.

Brett, in terms of specific numbers, the reality is that some of these cost structure modifications and implementations will cost us money, so we will not necessarily recognize all of those expense savings this year, perhaps later in the year. So I think if you were looking at the fourth quarter of 2010 is probably a reasonable run rate to move forward with. And we would hope to contain our expense growth to approximately zero on a go-forward basis for 2011.

Okay that's good color around that. And then the other question I wanted to ask was just related to asset quality. And just given the inflow and the NPAs look to be primarily a focus of movement from potential problem loans, does that mean if potential problem loans is not refilling and therefore maybe NPAs are close to peaking, if not this quarter, next quarter as we were originally sort of thinking about?

Yes, Brett, this is Bob Cerkovnik. What we still contend based upon our analysis of the ongoing portfolio is that we anticipate that the middle part of 2011 is when we'll see the peak in the non-performings. We are encouraged by the level of the slowdown in that, but the charge-offs were pretty high this last quarter.

Okay, great. Thanks for the color.

Brad Milsaps, Sandler O'Neill.

Hey, guys, just a quick question on provisioning. I know you talked about you expected to be elevated in the near term. Just curious kind of your thoughts on charge-offs. At this point can you begin to potentially draw down your reserve some if NPAs are in fact beginning to peak or getting closer to that?

Brad, this is Terry. I'll respond to the question, initially here at least. In terms of provisioning we'd be hopeful that we would have lower provisioning in 2011 than we had in 2010, but we also recognize that they're -- it's not always smooth in this journey and that through the credit cycle there may be a couple of bumps up and down. But overall we would be hopeful that we'd begin to recognize as we peak in NPAs that our provisioning would be starting to move down.

As it relates to net charge-offs we would -- there certainly is an inflection point out there where charge-offs are likely to exceed our provision and I would suggest, although who knows exactly what quarter that will be, but before the end of this year that there would be a quarter or two of where we're reporting more charge-offs than provision.

Okay. And then maybe just a second question in terms of a loan portfolio review. Just trying to get a handle on how much of the portfolios were ring fenced in 2010 and maybe what you have maturing in 2011 in terms of the construction book and the CRE book. I'm just trying to get a sense of, again, how much you kind of went through last year versus what you potentially could have coming down the pike in 2011?

I can tell you that right now if you look at our A&D book we have about $330 million in lend A&D, about 14% of that is the non-performing. And if you go back and look at our A&D book, we're on a quarterly basis where we're reviewing those credits for impairment or whatever situations from sales, comparable sales or anything. So an evaluation is done on a quarterly basis. I don't know if I'm answering your direct question, if you can help me out there a little bit if I did answer it or I did not?

No, I think that's helpful, I just kind of curious in terms of commercial real estate as well, maybe an amount that you have actually maturing in 2011?

When you talk about maturing credit, about a little over a half of our portfolio is on a variable rate so we're looking at those. All of our loans in our CRE portfolio are looked at on an annual basis because if it's a term loan it's looked at -- it's required to be looked at on an annual basis doing an annual term loan review. And then most of our construction loans or real estate, other real estate deals that are construction are looked at either on a six-month or annual basis -- annual renewal.

Okay, great. Thank you very much.

Thanks, Brad.

Matthew Clark, KBW.

Hey, good morning, guys. Just a follow-up question on that last question. Can you give us sense for I guess how much of your land development and the resi construction and commercial I guess are criticized, just to try to get a sense for -- I think last quarter the land development was -- I think 40% of that had been criticized. I was just curious trying to track that trend a little bit if possible?

We typically -- we have not given out our criticized and classified numbers, although I can tell you that all of our loans -- we have a very robust credit review function that is done. And especially in our problem markets, our credit review group is going in there at least annually and on most cases they're going in there semi-annually.

Again, if you look at our A&D portfolio, 14% of that is non-performing, as I said before. If you look at our overall market, that's where our bigger problems lie in, in those particular markets, those three markets, Jackson, Gallatin and Flathead.

Okay, and then on interchange revenues, I guess annually. Can you size that up for us as to how much you generate in interchange income I guess annually?

Yes, I think I said during my comments that it was over $10 million.

I must have missed it, okay. Sorry about that.

(multiple speakers) revenue.

Yes, thanks.

Sure.

Thanks, Matt.

Jeff Rulis, D.A. Davidson.

Good morning.

Good morning, Jeff.

A follow up on the expense expectations. I guess one factor you've got limited control on is the OREO cost. I was hoping that maybe you could tell us your forecast for the year on that front given the -- maybe characterize the sales experience you had this quarter and carry that forward for the year if you could?

That's a tough question, we're all sitting here staring at each other for a moment because speculating what took place in the fourth quarter of 2010 as to all of next year, challenging. One of the things we did say is that we have marked our OREO book and continue to mark it on a continual basis and we've actually seen modest gains as we've liquidated properties this past year from the OREO book.

We think that's important for everyone to understand. That we're taking our losses as they surface. That gets back to the comment I made about no kitchen sink quarter. That our culture is to take the losses on a monthly basis as they surface.

Is it safe to say the gains are more back-end loaded in the year? If you look at your -- review your sales for 2010, were you booking more modest gains on those sales toward the back half of the year?

No, I think it's just been that way for the past several quarters. Obviously, Jeff, we could have a small gain or a small loss on any sale of property. But I think what's noteworthy is that they've all been in the last year small and so that would just reflect that our valuation approach is effective and working.

In regards to what we might expect for 2011, clearly a significant factor will be what the inflow might be into other real estate ultimately. But we would be hopeful that our total impairment, if you will, or write down that we reported in 2010 would be our high watermark and that we would be seeing at least some further reduction in that actual expense when we tally the whole year up for 2011.

Okay, appreciate it, thanks. And then just one other one. Any other thoughts or plans or discussions of retiring long-term debt any further than -- you had a chunk after your offering last year in the spring, any other thoughts there?

Jeff, there's no plan to do anything in 2011 and the only long-term debt that we have from a corporate perspective of any magnitude is in subordinated debt, which is a term arrangement, as well as about $120 million of trust preferred. And so in that we were grand-fathered on trust preferred, we are leaving our options open at this point in time so we -- we may do it some other day, but it will not be in 2011.

Okay, thanks.

Tim Coffey, FIG Partners.

Good morning, everybody.

Good morning, Tim.

A few questions about the mortgage business. Has that run its course given that refinancing is such a significant part of the 4Q sales or is there still more in the [tank for that]?

No, we've had very, very strong years in real estate lending in the last three or four years and we asked ourselves that question each time during the budgeting process. And felt this year that it was going to -- and we felt that 2010 was going to be a soft year because of the strong years we had preceding that, but it turned out to be one of our best.

So it's really hard to anticipate. So much of it is driven by interest rates and so much of our activity this year was refi. But Terry's numbers talked about the amount of purchase business still going on in Montana and Wyoming and South Dakota and the fact that we continue to gain market share. So we're going to perform better than what the general economy would show, but there's still some life left in the real estate business and we're going to still put energy behind it in 2011.

The medical costs included in the SG&A for the fourth quarter, is that a one-time item?

I didn't hear it?

The additional medical insurance costs that were in the salaries and expenses, is that one-time cost or is that ongoing?

We would hope that that is one time. There's been -- we've actually added more accruals for that self-insured medical plan over prior years as well as needed. We added $750,000 in fourth quarter and we're anticipating that we would not have to add more in future quarters.

Okay. And then whatever terms you can tell me whether it's general or specific. If you look at the non-accruals that are currently current, how does borrower liquidity look?

Borrower -- we're expecting in our -- this is Bob Cerkovnik, sorry. We're seeing our borrower liquidity increase. We would expect as we look over our commercial borrowers where we're seeing their financial information, we expect that to improve in 2010 as our customers adjust to the lower revenues that are coming in or the new normal, I guess if you will, is what we're seeing and that's where we expect we'll see 2010 financial information as it comes in to look a little better with increased liquidity.

Okay, great. Thanks, that was all my questions.

Bill Tierney, RBC wealth management.

Good morning. A question we've heard a lot about, the focus on credit and credit quality and redo the way business is done going forward to be more efficient. With the challenges that exist on quality loans and the net spread to make them profitable can be expanded a little bit on the opportunities in South Dakota. But what opportunities do you see to grow the main loan portfolio with good credit quality?

Bill, remember that we have commanding market shares in almost every community where we do business. And as these communities pick up in loan demand we're going to be the recipient of that because they're primarily our customers.

The areas of focus that we have selected to put our efforts behind this year involve the energy sector because much of the Wyoming economy is driven by energy and a portion of the Montana economy. And as the general economic conditions improve nationwide, the demand for energy will improve. 40% of the power plants that are burning coal are getting that coal from the state of Wyoming.

So we're looking at suppliers and providers to the mines and to the oil fields and to the energy industry and calling on them -- beginning to call on them directly for business. So we think there's some upside for us in that sector.

Secondly, we know we have an aging population, it's forecasted that we'll be the oldest states in the country over the next decade and we know there will be an increased demand on healthcare. We have a very large presence in healthcare today, we're putting even more investment behind that and looking to market to healthcare providers, which would be hospitals, clinics, looking at suppliers to the healthcare industry as well as the individual doctors and other employees themselves. So those will be our two areas of focus for 2011 and 2012.

Okay, thanks for expanding on that.

Sure, Bill.

Matthew Keating, Barclays Capital.

Hi, thank you. I just had a quick follow-up question on the debit card interchange risk. In light of the fact that the regulation excludes banks with less than $10 billion in assets, could you discuss in what manner you're likely to see an impact from this regulation?

They did a carve-out and we think we had some role in that because one of our senators sits on the banking committee. But as this plays forward we're not sure yet just how much relief we're going to get from that carve-out, so we're already looking at pricing strategies and other means by which to recoup whatever our loss would be. We don't anticipate we're going to get hit as hard as the big banks, but we don't think we're going to be sitting on the sidelines without any impact either. We're going to fall somewhere in between.

As we talk to Visa and MasterCard and those that are providers, they've yet to say how they're going to calculate what our revenues will be. So it's too early for us to say where we land, we just wanted to ensure the investors that we're looking at it, we're following it and we're already crafting strategies to mitigate it whenever we get that hard number.

Great, thank you. And I guess also you mentioned in the prepared remarks that you saw some additional room for improvement in funding costs. With those costs now below 1% what order of magnitude of improvements might you might see over the course of 2011?

I think rates will continue to be soft this year, that's all the forecasts and we have commanding market shares. So in many ways we control the rate market, or at least we have a large amount of influence in the rate market.

We still have some CDs that are coming due that were priced a year or two ago, so they're being repriced at today's rates. And we still have a lot of energy with our banks behind moving the cost of funding down. So I can't tell you in basis points what it will amount to, but I can tell you that we're going to bend that curve down continually throughout 2011.

Great, thank you.

(Operator Instructions). Brett Rabatin, Sterne, Agee.

Yes, thank you. I wanted to just follow up on the percentage of non-performing assets. You provided good color on the fact that 76% of non-performing loans are still current on principal. What does that number include if you were to also include interest? Is that a much different number?

That's really difficult to calculate, Brett, since we don't keep that. What we do is we just look at what's paying according to the restructured terms or conditions that are set out there. It may be interest only, it may be just a new P&I or re-amortizing of a particular loan. So to give you more color on that, that's about as much as I can at this time.

Okay.

I can get back to you.

Okay. And then I was just curious on TDRs, can you give a little color on inflow to that this quarter? And I missed the total number, you may have had it somewhere, but I can't seem to pick it up.

Yes, we're down to $13 million. And as we talked about that, we had a significant pay down on one credit in South Dakota of $4.8 million. And then we moved two more loans which was a casino and an income-producing property that we moved from accruing TDR into non-accrual.

Okay, great. Thank you.

Yes.

(Operator Instructions). At this time I'm showing no additional questions and would like to turn the conference call back over to management for any closing remarks.

Well, thank you. As I've said in the past, and please let me emphasize again, we take a long-term view of creating and protecting shareholder value. This has meant that we work with our customers during these trying economic times. I don't want this to be interpreted to mean that we're hesitant to take action where action is required. But it has prolonged our credit cycle and may lead to elevated levels of restructured debt.

But you know, we're willing to accept this trade off and believe this strategy is in the best long-term interests of the Bank, the communities we serve, as well as the Company's shareholders. We feel we are well positioned to capitalize on organic growth opportunities which will occur as our economies continue to improve because our people have continued to devote themselves to maintaining close relationships with our existing customers.

And you know, that's just part of our culture. That's how we've grown these huge market shares that we command today. It's part of our culture to seek out new relationships so we're increasing our calling efforts, as I said, on businesses that supply services to the energy sector while maintaining our focus on healthcare providers as well as the agricultural sector.

We are committed to the well-being of our communities because we know we're only as good as the communities that we serve. We have a strong sense of obligation to generate long-term growth and long-term franchise value as well as earnings and dividends. In our mind these components equate to shareholder value.

Thanks again for joining us this morning. We look forward to speaking with you again next quarter. Operator, you can now disconnect the call.

The conference has now concluded. We thank you for attending today's presentation. You may now disconnect your telephone lines.